Establishes the types of programs or projects, and the procedure
by which the programs or projects, may be privatized by the
state or county government, including services, by grants,
subsidies, and purchases of services pursuant to chapters 42D,
42F, and 103F, and incidental to purchases of goods and
construction of facilities awarded under chapters 103 and 103D,
which have been customarily allowed in the past and currently
existing.  Provides that services previously contracted under
law, charter or ordinance, or under chapters 42D, 42F, and 103F,
and chapters 103 and 103D may be certified if the contract were
executed in good faith and would have been qualified and
authorized under this Act.

HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            

                     A BILL FOR AN ACT



 1      SECTION 1.  The State and its counties have looked to the
 2 private sector to ensure that public services are available to
 3 meet the needs of Hawaii's citizens.
 4      The culture of the State is one of cooperation, with a long-
 5 standing history of reliance on public-private partnerships to
 6 provide public services.  The State has appreciated the benefits
 7 of economies of scale, and has used resources that are owned, or
 8 that have been developed by the private sector, to achieve
 9 savings and the long-term good.  When time and need suggested
10 that opportunities would be missed or that expenses that might be
11 avoided or minimized would be incurred, the State has used
12 services and expertise already available in the private sector
13 rather than "begin from scratch."  When expertise or technology
14 was already available in the private sector, the State has taken
15 a hard look at whether it was more economical to "reinvent" or
16 "duplicate the wheel" or to use "theirs" instead.  When the
17 private sector was willing to "experiment" at their risk,
18 particularly for new capital intense services, the State asked
19 whether existing dollars might be more effectively spent on
20 making basic services available to more citizens.  Finally,

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                                     H.B. NO.           

 1 because most of the State's contracts are competitively let, the
 2 State has enjoyed the benefit of lower prices or costs that
 3 competition engendered.
 4      For more than a quarter of a century, through laws like
 5 chapter 42D (grants, subsidies, and purchases of services),
 6 chapter 42F (grants and subsidies), and chapter 103F (purchases
 7 of health and human services), Hawaii Revised Statutes, the State
 8 and the counties have looked to private profit and non-profit
 9 organizations and their respective staffs to deliver culture and
10 arts, and educational, health, recreational, nutritional,
11 transportation, and social services, on the State's behalf, to
12 members of the general public.
13      State and county public works, including repairs and
14 maintenance, have always been designed and constructed through
15 contracts with private professionals, artisans, and craftsmen,
16 pursuant to the procurement laws.
17      The legislature has authorized contracts for services from
18 the private sector.  The State's school transportation law
19 (sections 302A-406 and 302A-407, Hawaii Revised Statutes), takes
20 as a given that school bus transportation will be arranged and
21 provided by the department of education through contracts with
22 private providers.  Similarly, without reference to the civil
23 service laws, the legislature has provided that the counties may

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                                     H.B. NO.           

 1 establish and maintain volunteer fire stations, subject to the
 2 full authority and control of each county's fire chief but
 3 staffed by uncompensated volunteers.  In like fashion, the
 4 State's corrections system is authorized by statute to contract
 5 with public or private correctional facilities in other states to
 6 alleviate overcrowding by housing and delivering appropriate
 7 correctional services to Hawaii's inmate population.  Other
 8 examples of statutes enacted by the legislature that directly or
 9 indirectly rely upon these public-private partnerships to respond
10 to the needs of the State's citizenry include:
11      (1)  Concession for services at the airports;
12      (2)  Contracts for minor repairs and maintenance of school
13           facilities;
14      (3)  Contracts to acquire school facilities on terms deemed
15           appropriate by the department of education and
16           department of accounting and general services;
17      (4)  Authorization for school/community-based management
18           schools to clean classrooms;
19      (5)  The State's affordable housing projects;
20      (6)  Federally assisted rental housing projects;
21      (7)  Business and economic development programs;
22      (8)  Developer constructed schools; and
23      (9)  Commercial developments like the Aloha Tower
24           Marketplace.

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                                     H.B. NO.           

 1      This historical backdrop of reliance on public-private
 2 partnerships to provide needed services to the public,
 3 notwithstanding the State's long-standing and continuous policy
 4 to provide public services through a strong and viable civil
 5 service complemented by a vigilant collective bargaining system,
 6 must also be reaffirmed.
 7      The Supreme Court's recent decision in the consolidated
 8 cases Konno v. County of Hawaii, S. Ct. No. 18203, and UPW v.
 9 Yamashiro, S. Ct. No. 18236 (2/28/97), has "emphasize(d) that
10 nothing in this opinion should be interpreted as passing
11 judgment, one way or the other, on the wisdom of privatization,"
12 and acknowledged that "(w)hether or not, as a policy matter,
13 private entities should be allowed to provide public services
14 entails a judgment ordinarily consigned to the legislature(,)".
15 Noting that "the civil service encompasses those services that
16 have been customarily and historically provided by civil
17 servants," the court concluded absent legislative authority to
18 obtain services from other sources, civil servants must provide
19 these services.
20      The scope of "public service" in the context of the civil
21 service laws that the State is required to provide is now in
22 question because of the Konno decision.  On one hand, proponents

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                                     H.B. NO.           

 1 for privatization of public services argue that if privatization
 2 improves efficiency and reduces the cost of government for the
 3 public good, then public service should not be a restraint on
 4 privatization.
 5      On the other hand, opponents of privatization of public
 6 services argue that privatization is nothing more than a
 7 management strategy designed to cut labor costs by circumventing
 8 the rights of public employees, and that a consequence of
 9 privatization is that it substitutes private employees for public
10 employees when it is cheaper to use private employees.
11      This Act recognizes that the legislature has specifically
12 established programs or projects that can be privatized, and that
13 many services, by grants, subsidies, and purchases of services
14 pursuant to chapters 42D, 42F, and 103F, and incidental to
15 purchases of goods, real property, and construction of facilities
16 awarded pursuant to chapters 103 and 103D or any other law,
17 charter, or ordinance  have been customarily allowed in the past
18 and are currently existing.  This Act specifically provides that
19 those services that are found to have been contracted out
20 pursuant to law, charter, or ordinance, or previously by custom
21 and practice pursuant to chapters 42D, 42F, and 103F, or
22 temporary and incidental to the purchase of goods and
23 construction of facilities pursuant to chapters 103 and 103D, may

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                                     H.B. NO.           

 1 be certified if the contract was executed in good faith and would
 2 have been qualified and authorized pursuant to this Act.
 3      The purpose of this Act is to establish a reasonable balance
 4 to accommodate the purposes of privatization without undermining
 5 basic merit principles and the policies of civil service.
 6      SECTION 2.  Chapter 103, Hawaii Revised Statutes, is amended
 7 by adding a new section to be appropriately designated and to
 8 read as follows:
 9      "103-    Contract with private provider for services.
10 Nothing in chapters 76 and 77, and section 46-33, including the
11 merit principles, the classification system, or historical past
12 practices, shall be deemed to prevent, restrict, diminish,
13 condition, limit, or otherwise qualify the authority of a
14 department or agency of the State or a county to enter into a
15 contract with a private provider to obtain services historically
16 performed by persons or positions in the civil service, or
17 functionally attributed to a government agency or program,
18 including contracts:
19      (1)  To disburse appropriations for grants, subsidies, or
20           purchases of service as those terms are defined in
21           chapters 42D, 42F, and 103F, pursuant to chapters 42D,
22           42F, and 103F or any other law, charter, or ordinance
23           authorizing grants, subsidies, or purchases of service,

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                                     H.B. NO.           

 1           as those terms are defined in chapters 42D, 42F, and
 2           103F;
 3      (2)  For goods and real property or for construction entered
 4           into pursuant to this chapter or chapters 103D or 107,
 5           or any other law, charter, or ordinance where services
 6           are provided incidentally to the acquisition of the
 7           goods or real property, or for construction;
 8      (3)  For services which the department or agency is
 9           otherwise authorized by statute, charter, or ordinance
10           to obtain or provide without regard to the provisions
11           of chapter 76 or 77, or section 46-33; or
12      (4)  For services performed by an independent contractor;
13           provided that no person in the civil service shall be
14           discharged solely as a result of the service being
15           performed by the contractor, and provided further that
16           the department or agency certifies that:
17           (A)  The service is special and unique or is essential
18                to the public interest and, because of
19                circumstances surrounding its fulfillment, a
20                person or persons to perform the service cannot be
21                retained through normal civil service recruitment
22                procedures;
23           (B)  The service is of a temporary nature or required

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                                     H.B. NO.           

 1                for a limited period of time, and it would be
 2                impracticable to utilize the normal civil service
 3                recruitment procedures to retain a person or
 4                persons to perform the service;
 5           (C)  Substantial capital outlay or operating costs, or
 6                both, can be avoided or minimized, if the service
 7                is obtained from a contractor rather than through
 8                the recruitment and hire of additional civil
 9                service personnel; or
10           (D)  The service is a service provided in a public
11                health facility."
12      SECTION 3.  A department or agency of the State or a county
13 may certify that the services obtained from a current or prior
14 contract were obtained in good faith, prior to the effective date
15 of this Act, under one or more of the circumstances specified in
16 the amendment to chapter 103, Hawaii Revised Statutes, made in
17 section 2 of this Act.
18      SECTION 4.  New statutory material is underscored.
19      SECTION 5.  This Act shall take effect upon its approval.
21                           INTRODUCED BY:_________________________