HOUSE OF REPRESENTATIVES

H.B. NO.

1180

TWENTY-EIGHTH LEGISLATURE, 2015

H.D. 1

STATE OF HAWAII

S.D. 1

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO PROCUREMENT.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 


PART I

     SECTION 1.  The purpose of this part is to improve transparency and efficiency in the procurement system by:

     (1)  Requiring the administrator of the state procurement office to establish an inadequate performance database to identify contractors that habitually perform poorly to help ensure that the public receives a completed project that is delivered on time, on budget, and of acceptable quality;

     (2)  Transferring authority for the compliance audit unit to the state procurement office;

     (3)  Requiring the compliance audit unit to establish a database of meaningful statewide procurement contract data to be made accessible to each governmental entity and selected non-confidential data to be made accessible to the general public to further transparency and accountability;

     (4)  Authorizing the compliance audit unit to conduct audits and have authority to access statewide public contract information; and

     (5)  Establishing a procurement task force to define past performance, create criteria for adverse performance, and develop associated rules and processes required for statewide implementation.

     SECTION 2.  Chapter 103D, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§103D-    Inadequate performance database; contractors.  (a)  The administrator of the state procurement office shall develop and administer a searchable electronic database to record instances of inadequate performance by contractors for public works contracts under chapter 103 and construction procurement contracts under this chapter.

     (b)  The administrator of the state procurement office shall establish criteria for the listing of contractors in the inadequate performance database, which shall include the name and other relevant information of contractors on projects that:

     (1)  As a result of the contractor:

         (A)  Were over budget;

         (B)  Were not completed as scheduled; or

         (C)  Involved substandard construction; or

     (2)  Involved any other criteria of inadequate performance of the contract, as determined by the administrator of the state procurement office.

     (c)  The inadequate performance database shall be accessible to all procurement officers listed in section 103D‑203.  The administrator of the state procurement office may make the inadequate performance database accessible to the public.

     (d)  At the completion of any construction contract under this chapter, the procurement officer shall review the project to determine if the project met any of the criteria in subsection (b).  If the procurement officer determines that any of the criteria in subsection (b) have been met, the procurement officer shall audit the contractor's performance of the contract.  The contractor shall have the opportunity to respond to any matter of issue during the audit or before the procurement officer's final determination.  If, after reviewing the audit and the contractor's response, if any, the contracting officer determines that any of the criteria in subsection (b) have been met, the contracting officer shall make a final determination of inadequate performance.  The procurement officer shall notify the administrator of the state procurement office of the final determination, and the administrator of the state procurement office shall enter the contractor and any other relevant information in the inadequate performance database.

     (e)  The administrator of the state procurement office shall establish by rule pursuant to chapter 91:

     (1)  Criteria for the removal of a contractor from the inadequate performance database, including the length of time that a contractor may be listed in the database; and

     (2)  Procedures to appeal any final determination by a contracting officer to list a contractor in the inadequate performance database.

     (f)  Before the award of any contract under chapter 103 or a construction contract under this chapter, the procuring officer shall consult the inadequate performance database.  If a potential awardee appears in the database, the procuring officer may decide to either accept or reject the potential awardee based on the procurement officer's evaluation of the facts contained in the database and any additional information the procurement officer may gather, including an interview with the potential awardee.  Any determination to award the contract to the potential awardee or reject the potential awardee's bid shall be made in writing and shall include the reasons for making the determination.  A copy of the written determination shall be sent to the administrator of the state procurement office and the accepted or rejected awardee."

     SECTION 3.  Section 103D-107, Hawaii Revised Statutes, is amended to read as follows:

     "[[]§103D-107[]]  Compliance audit unit; establishment and purpose.  There is established a compliance audit unit within the [office of the auditor.] state procurement office.  The purpose of this unit shall be to:

     (1)  Periodically review and audit procurement practices within government to ensure compliance with this chapter and all applicable rules; and

     (2)  Advocate competition, fairness, and accountability in the procurement process.

Reports made by this unit shall be a matter of public record.  This unit shall utilize as part of the review process, a review of records and activities specifically for trends and patterns of occurrence."

     SECTION 4.  Section 103D-108, Hawaii Revised Statutes, is amended to read as follows:

     "§103D-108  Compliance audit unit; duties and responsibilities.  The compliance audit unit shall:

     (1)  Review and assess applicable innovations in procurement methods or processes in other governmental jurisdictions or as described in national or regional publications;

     (2)  Review current or proposed statutes and rules to determine whether they promote fairness, efficiency, and accountability in the procurement process;

     (3)  Review selected contracts awarded pursuant to section 103D-304;

     (4)  Conduct studies, research, and analyses, and make reports and recommendations with respect to existing and new methods of procurement and other matters within the jurisdiction of the policy board;

     (5)  Establish and maintain a procurement library;

     (6)  Establish and maintain a database of meaningful statewide procurement contract data; provided that all data on the database shall be made accessible to each governmental entity and selective non-confidential data may be made accessible to the general public to further transparency and accountability, as determined appropriate by the administrator;

    [(6)] (7)  Report to the appropriate agency and the chief procurement officer stating the areas of noncompliance and recommendations for remedial action; and

    [(7)] (8)  [Be present at] Participate in legislative hearings and policy board meetings to present the findings of the unit."

     SECTION 5.  Section 103D-109, Hawaii Revised Statues, is amended to read as follows:

     "[[]§103D-109[]]  Compliance audit unit; government officers and employees to cooperate.  The officers and employees of the State and of each county shall cooperate with this unit and furnish to them such information related to procurement activities as may be called for in connection with the information gathering and research activities of this unit[.], including by reporting contract data pursuant to requirements and procedures established by the administrator, for inclusion in the database established under section 103D-108(6).  The information shall be provided in a timely manner pursuant to procedures established by the administrator and shall be free of charge."

     SECTION 6.  Section 103D-205, Hawaii Revised Statues, is amended by amending subsection (a) to read as follows:

     "(a)  For their respective jurisdictions and unless otherwise specifically provided in this chapter, each chief procurement officer shall serve as the central procurement officer for the officer's respective jurisdiction and:

     (1)  Procure or supervise the procurement of all goods, services, and construction;

     (2)  Exercise general supervision and control over all inventories of goods;

     (3)  Sell, trade, or otherwise dispose of surplus goods; [and]

     (4)  Establish and maintain programs for the inspection, testing, and acceptance of goods, services, and construction[.];

     (5)  Coordinate with the administrator regarding procurement policies, opportunities for statewide innovation implementation, and concerns; and

     (6)  Report procurement contract data pursuant to requirements established by the administrator, in the form and manner prescribed by the state procurement office, for inclusion in the database established under section 103D-108(6)."

     SECTION 7.  Section 103D-206, Hawaii Revised Statutes, is amended to read as follows:

     "§103D-206  Additional duties of the administrator of the procurement office.  In addition to the duties referred to in section 103D-205, the administrator shall:

     (1)  Perform periodic review of the procurement practices of all governmental bodies;

     (2)  Assist, advise, and guide governmental bodies in matters relating to procurement;

     (3)  Determine corrective actions; provided that if a  procurement officer under the jurisdiction of the administrator of the state procurement office or a chief procurement officer of any of the other state entities under section 103D-203, fails to comply with any determination rendered by the administrator within thirty days from the date of the issuance of the determination, or longer if permitted by the administrator upon request by the procurement officer or a chief procurement officer, the procurement officer or chief procurement officer shall be subject to an administrative fine under section 103D-106, for every day of noncompliance;

     (4)  Develop and administer a statewide procurement orientation and training program;

     (5)  Develop, distribute, and maintain a procurement manual for all state procurement officials; [and]

     (6)  Develop, distribute, and maintain a procurement guide for vendors wishing to do business with the State and its counties[.]; and

     (7)  Develop and administer an inadequate performance database pursuant to section 103D-  ."

     SECTION 8.  (a)  The comptroller shall convene a procurement task force to examine the cost impacts that the procurement process has had for public works construction projects, and specifically to examine and recommend past performance standards and statewide processes in order to promote economy, efficiency, effectiveness, and impartiality in procurement for state and county governments.

     (b)  The comptroller, or the comptroller's designee shall serve as the chair of the task force and the comptroller shall solicit representatives from the following entities to serve on the task force, provided that those persons designated shall be knowledgeable of procurement procedures and issues within their respective organizations:

     (1)  The state procurement office;

     (2)  The University of Hawaii;

     (3)  The department of education;

     (4)  The office of Hawaiian affairs;

     (5)  The department of transportation;

     (6)  A county procurement department;

     (7)  A county board or department of water supply;

     (8)  The semi-autonomous public transit agency of the City and County of Honolulu;

     (9)  The Subcontractors Association of Hawaii;

    (10)  The General Contractors Association of Hawaii;

    (11)  The Hawaii Building and Construction Trades Council;

    (12)  AFL-CIO;

    (13)  The Hawaii Construction Alliance; and

    (14)  Any additional representatives deemed necessary by the comptroller.

     (c)  The task force shall define past performance, create criteria for adverse performance, and develop associated rules and processes required for statewide implementation.

     (d)  The task force shall submit its definition of past performance, criteria, and rules to the procurement policy board no later than one hundred eighty days after the effective date of this Act.  In the event that the task force fails to submit its definition, criteria, and rules no later than one hundred eighty days after the effective date of this Act, the procurement policy board shall define past performance, create criteria for adverse performance, and develop associated rules and processes required for statewide implementation.  The procurement policy board shall enact permanent rules no later than January 1, 2018.

     SECTION 9.  There is appropriated out of the general revenues of the State of Hawaii the sum of $3,000,000 or so much thereof as may be necessary for fiscal year 2015-2016 for the compliance audit unit to establish a procurement database pursuant to section 4 of this Act.

     The sum appropriated shall be expended by the state procurement office for the purposes of this Act.

     SECTION 10.  There is appropriated out of the general revenues of the State of Hawaii the sum of $780,000 or so much thereof as may be necessary for fiscal year 2015-2016 and the same sum or so much thereof as may be necessary for fiscal year 2016-2017 for operation and maintenance of the compliance audit unit's procurement database, including one full-time equivalent (1.0 FTE) position to conduct database operations and maintenance.

     The sums appropriated shall be expended by the state procurement office for the purposes of this Act.

     SECTION 11.  There is appropriated out of the general revenues of the State of Hawaii the sum of $260,000 or so much thereof as may be necessary for fiscal year 2015-2016 and the same sum or so much thereof as may be necessary for fiscal year 2016-2017 for staffing and operation of the compliance audit unit within the state procurement office, including three full-time equivalent (3.0 FTE) positions.

     The sums appropriated shall be expended by the state procurement office for the purposes of this Act.

PART II

     SECTION 12.  The legislature finds that creative problem solving is necessary to address growing concerns arising from the State's fiscal deficit.  Hawaii is responsible for unfunded liabilities totaling billions of dollars.  Like many states, Hawaii must balance its budget while managing the demands of infrastructure maintenance and public service needs.  Budget shortfalls result in postponed maintenance and reduced social services despite a growing population driving the demand for services and adding stress to the public infrastructure.

     The legislature finds that the State's process of acquiring goods and services must be flexible to accommodate circumstances where other than full competition is necessary to address a unique need, such as local food purchasing, or where nontraditional procurement practices, such as public-private partnerships, can help government maintain infrastructure, provide services, and operate more efficiently.

     A public-private partnership is a contractual agreement between a public agency and a private sector entity where skills and assets of each sector are combined to deliver services to the public.  Both entities share in the risks and rewards of the venture.  A public-private partnership is not a privatization of a government function.  The partnership provides for a level of public control and oversight of operations not typical of privatization.

     While public-private partnerships are widely employed around the world, only five states have adopted comprehensive legislation authorizing governmental entities to contract with private partners to design, build, finance, operate, and maintain public facilities.  Public-private partnerships have been created to address social infrastructure, transportation, water treatment, energy, and financial management concerns.  The private sector contributes management efficiency, technology, cash flow management, and personnel development to complement the government's legal authority, capital resources, procurement policies, and broad perspective.

     The purpose of this part is to provide the State greater flexibility in procurement by establishing a process for special innovative procurement and generating a framework for public-private partnerships in Hawaii.

     SECTION 13.  Chapter 103D, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§103D-    Special innovative procurement.  (a)  Contracts for supplies, services, professional services, or construction may be awarded with other than full competition using a special innovative procurement process in accordance with this section and procedures set forth in rules adopted by the procurement policy board.  The special innovative procurement process authorized by this section shall only be used when the chief procurement officer determines in writing that it is advantageous to the State to use the process for procurement of new or unique requirements of the State, new technologies, or to achieve best value.

     (b)  The head of the purchasing agency shall submit a procurement plan developed pursuant to this section to the attorney general for review and approval as to form before issuing the notice required under subsection (c).

     (c)  Notice of the invitation for bids shall be given in the same manner as provided in section 103D-302(c).

     (d)  Nothing in this section shall preclude the adoption of rules providing for the use of bonuses instead of preferences in a procurement of construction.

     (e)  A written determination of the basis for the procurement and for the selection of the particular contractor shall be included by the head of the purchasing agency in the contract file, and a report shall be made by the head of the purchasing agency at least annually describing all determinations made since the last annual report.  The report shall be transmitted to the administrator of the state procurement office who shall make the report publicly available."

     SECTION 14.  Section 103D-301, Hawaii Revised Statutes, is amended to read as follows:

     "§103D-301  Methods of source selection.  Unless otherwise authorized by law, all contracts shall be awarded pursuant to the following sections, as applicable:

     (1)  Section 103D-302 (Competitive sealed bids);

     (2)  Section 103D-303 (Competitive sealed proposals);

     (3)  Section 103D-304 (Professional services procurement);

     (4)  Section 103D-305 (Small purchases);

     (5)  Section 103D-306 (Sole source procurement); [and]

     (6)  Section 103D-307 (Emergency procurements)[.]; and

     (7)  Section 103D-    (Special innovative procurement)."

     SECTION 15.  (a)  The procurement policy board shall draft rules for special innovative procurements, including but not limited to public-private partnership contracts.

     (b)  The rules for public-private partnerships shall include but not be limited to the following:

     (1)  A requirement that a public-private partnership contract include a long-term maintenance and operations scope;

     (2)  Provisions that require a suitability test wherein a centralized governmental entity with expertise in public-private partnership delivery and financial modeling compares the value of long-term leases to existing project delivery models before issuing any requests for qualifications or proposals, which would be triggered after satisfaction of basic threshold requirements for public-private partnerships;

     (3)  Provisions that require the government to have an independent consultant or in-house expert in facilities planning, design, and construction assess the long-term projected needs of the government before considering the use of a public-private partnership; advise the government prior to solicitation; and continue serving as advisor to the government throughout the planning, design, and construction phases;

     (4)  Comprehensive statutory guidelines that apply to all state entities to provide a uniform, fair process that enables private developers to properly assess the risks and rewards of engagement;

     (5)  Provisions that encourage communication between design professionals and the end user during the request for proposals phase so the government end user is empowered to provide direct, meaningful input to the competitor design teams developing the proposed designs; and

     (6)  Provisions that enable small businesses to compete.

     (c)  The procurement policy board shall submit a report on its draft rules for public-private partnerships and any proposed legislation to the legislature no later than twenty days prior to the convening of the regular session of 2017.

     SECTION 16.  There is appropriated out of the general revenues of the State of Hawaii the sum of $65,000 or so much thereof as may be necessary for fiscal year 2015-2016 for a temporary position within the department of accounting and general services, not to exceed two years from the effective date of this Act, with duties to include but not be limited to assisting the procurement policy board in the research and development of special innovative procurements and public-private partnership rules.

     The sums appropriated shall be expended by the department of accounting and general services for the purposes of this part.

     SECTION 17.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 18.  This Act shall take effect on July 1, 2030.


 


 

Report Title:

Procurement; Inadequate Performance; Procurement Database; Compliance Audit Unit; Procurement Task Force; Special Innovative Procurement; Public-Private Partnership; Appropriation

 

Description:

Requires the state procurement office to establish a database to record inadequate past performance by contractors on public works projects.  Requires the compliance audit unit to establish a database of meaningful statewide procurement contract data.  Transfers authority for the compliance audit unit to the state procurement office and authorizes the compliance audit unit to conduct audits and have authority to access statewide public contract information.  Establishes a procurement task force.  Appropriates funds for the compliance audit unit to establish a procurement database; operations and maintenance of the procurement database, include one full time equivalent (1.0 FTE) position; and staffing and operation of the compliance audit unit within the state procurement office, including three full-time equivalent (3.0 FTE) positions.  Establishes a process for special innovative procurement and requires the procurement policy board to draft rules for special innovative procurements, including rules regarding public-private partnerships.  Appropriates funds for a temporary position within the department of accounting and general services.  Takes effect on 7/1/2030.  (SD1)

 

 

 

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