Enacts the Public-Private Fair Competition Act.

THE SENATE                              S.B. NO.           864
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT


 1      SECTION 1.  Chapter 103D, Hawaii Revised Statutes, is
 2 amended by adding a new part to be appropriately designated and
 3 to read as follows:
 5      103D-A  Findings and purpose.  The legislature finds that
 6 state and county governments must operate more efficiently and
 7 economically.  The legislature further finds that private
 8 business enterprise should be encouraged and promoted to further
 9 economic development of the State.
10      The purpose of this part is to protect economic
11 opportunities for private industry by ensuring balanced
12 competition from government agencies. 
13      103D-B  Definitions.  As used in this part:
14      "Commercial activity" means buying, manufacturing,
15 processing, managing, selling, advertising, offering for sale,
16 purchasing, renting, leasing, delivering, dispensing,
17 distributing, in whole or in part, or otherwise acquiring any
18 good or service that can normally be obtained from private
19 enterprise.
20      "Competitive impact statement" means a cost analysis using

Page 2                                                     
                                     S.B. NO.           864

 1 uniform accounting standards accepted by private enterprise to
 2 determine the total cost of a commercial activity.
 3      "Government body" shall have the same meaning as provided in
 4 section 103D-4.
 5      "Private enterprise" means an individual, firm, partnership,
 6 joint venture, corporation, limited liability corporation,
 7 association, or other legal entity engaging in the manufacturing,
 8 processing, sale, offering for sale, rental, leasing, delivery,
 9 dispensing, distributing, or advertising any goods or services
10 for profit.
11      "Uniform accounting standards" means an accounting method,
12 as determined by the department of accounting and general
13 services, that allows a government body to identify the true and
14 total cost of government to supply goods and services in the same
15 manner as private enterprise does.
16      103D-C  Competitive impact statement required.  A
17 government body shall perform one competitive impact statement a
18 year, applying uniform accounting standards, for each commercial
19 activity involving a good or service.  The statement shall be
20 filed with the state procurement policy board established under
21 section 103D-201.
22      103D-D  Cost analysis.  A cost analysis to perform a
23 competitive impact statement, a government body shall, at a

Page 3                                                     
                                     S.B. NO.           864

 1 minimum:
 2      (1)  Consider a comparison of the impact of a commercial
 3           activity on state and county tax revenues; and
 4      (2)  Determine private enterprise costs by obtaining one or
 5           more purchase bids.
 6      103D-E  Identifying costs.  True and total cost of
 7 government, for purposes of applying uniform accounting
 8 standards, shall include but is not limited to:
 9      (1)  Labor expenses, including direct wage and salary costs,
10           training costs, overtime costs, and supervisory
11           overhead;
12      (2)  Total employee fringe benefits and other personnel
13           expenses;
14      (3)  Operating costs, including vehicle maintenance and
15           repair, and costs involving marketing, advertising,
16           sales, billing, insurance, and office expenses;
17      (4)  Real estate and equipment costs, debt service costs,
18           and a proportionate amount of overhead and capital
19           expenses, including vehicle depreciation and fixed
20           asset depreciation;
21      (5)  Contract management costs;
22      (6)  Impact of imputed taxes that a government body would
23           pay on performing a commercial activity if it was a

Page 4                                                     
                                     S.B. NO.           864

 1           private enterprise; and
 2      (7)  Any other costs particular to a private enterprise that
 3           would perform the commercial activity.
 4      103D-F  Permissible commercial activities.  A government
 5 body may engage in commercial activity only if:
 6      (1)  The activity is authorized by state or county law, as
 7           applicable;
 8      (2)  Use of a private enterprise would cause unacceptable
 9           delay or disruption of an essential service or program;
10           or
11      (3)  The state procurement policy board approves the
12           commercial activity by the government body pursuant to
13           section 103D-202 upon a determination that the
14           government body can provide it at a lower cost than
15           private enterprise could provide it as determined
16           through a competitive impact statement.
17      103D-G  Adoption of rules for grievances.  The state
18 procurement policy board shall adopt rules for grievance
19 procedures arising under this chapter, pursuant to section 103D-
20 202."
21      SECTION 2.  Section 103D-202, Hawaii Revised Statutes, is
22 amended to read as follows:
23      "103D-202  Authority and duties of the policy board.

Page 5                                                     
                                     S.B. NO.           864

 1 Except as otherwise provided in this chapter, the policy board
 2 shall have the authority and responsibility to [adopt]:
 3      (1)  Adopt rules, consistent with this chapter, governing
 4           the procurement, management, control, and disposal of
 5           any and all goods, services, and construction[.],
 6           including rules governing grievance procedures under
 7           section 103D-G; and
 8      (2)  Approve or deny a commercial activity by a government
 9           body under section 103D-F(a)(3).
10 All rules shall be adopted in accordance with chapter 91;
11 provided that the policy board shall have the power to issue
12 interim rules by procurement directives, which shall be exempt
13 from the public notice, public hearing, and gubernatorial
14 approval requirements of chapter 91.  The interim rules shall be
15 effective for not more than eighteen months.  The policy board
16 shall consider and decide matters of policy within the scope of
17 this chapter including those referred to it by a chief
18 procurement officer.  The policy board shall have the power to
19 audit and monitor the implementation of its rules and the
20 requirements of this chapter, but shall not exercise authority
21 over the award or administration of any particular contract, or
22 over any dispute, claim, or litigation pertaining thereto."
23      SECTION 3.  Section 103D-209, Hawaii Revised Statutes, is

Page 6                                                     
                                     S.B. NO.           864

 1 amended to read as follows:
 2      "103D-209  Authority to contract for certain services.
 3 Except as provided in section 28-8.3 with respect to agencies of
 4 the State of Hawaii, any governmental body of this State may act
 5 as a purchasing agency and contract on its own behalf for
 6 professional services subject to this chapter and rules adopted
 7 by the policy board.  The purchasing agency may consult with the
 8 chief procurement officer or the officer's designee when
 9 procuring these services.
10       A procurement of a commercial activity, as defined in
11 section 103D-B, shall be made under this chapter only upon
12 approval of the state procurement policy board under section
13 103D-202."
14      SECTION 4.  In codifying the new sections added by this Act,
15 the revisor shall substitute the appropriate section numbers for
16 the letters used in designating the new sections of this Act.
17      SECTION 5.  Statutory material to be repealed is bracketed.
18 New statutory material is underscored.
19      SECTION 6.  This Act shall take effect on July 1, 1999.
21                           INTRODUCED BY:  _______________________