REPORT TITLE:
Best Value


DESCRIPTION:
Requires the legislature and government bodies to assure that the
State receives the best value for all expenditures; eliminates
requirement that government bodies award contracts to the lowest
bidders; requires contracts afford the best value to the
purchasing agency; exempts preferential bids from best value
analysis.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           962
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO STATE GOVERNMENT. 


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

 1      SECTION 1.  Chapter 103, Hawaii Revised Statutes, is amended
 
 2 by adding a new section to be appropriately designated and to
 
 3 read as follows:
 
 4      "§103-    Best value policy.  Every governmental body as
 
 5 defined in section 103D-4 shall ensure that it receives the best
 
 6 value for its expenditures by considering the best interests of
 
 7 the State, the quality of the service, product, or construction,
 
 8 the integrity and reliability of the service, product, or
 
 9 construction provider, and other relevant factors and not
 
10 necessarily focusing primarily on the lowest price or lowest
 
11 responsible and responsive bidder or offeror.  If an award of
 
12 contract is made after a best value analysis to a bidder or
 
13 offeror other than the lowest responsible and responsive bidder
 
14 or offeror, then a written analysis and justification shall be
 
15 made and kept on file."
 
16      SECTION 2.  Chapter 103D, Hawaii Revised Statutes, is
 
17 amended by adding a new section to part X to be appropriately
 
18 designated and to read as follows:
 
19      "§103D-    Preferences; best value exemption.
 
20 Notwithstanding any section that requires the award of a contract
 

 
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 1 by the purchasing agency pursuant to the best value, where a
 
 2 purchasing agency receives a bid on a contract that is entitled
 
 3 to a preference pursuant to this part, the purchasing agency
 
 4 shall award the contract to the lowest responsive and responsible
 
 5 bidder."
 
 6      SECTION 3.  Section 37-63, Hawaii Revised Statutes, is
 
 7 amended to read as follows:
 
 8      "[[]§37-63[]]  Statement of policy.  It is the purpose of
 
 9 this part to establish a comprehensive system for state program
 
10 and financial management which furthers the capacity of the
 
11 governor and the legislature to plan, program and finance the
 
12 programs of the State.  The system shall include procedures for:
 
13      (1)  The orderly establishment, continuing review and
 
14           periodic revision of the state program and financial
 
15           objectives and policies.
 
16      (2)  The development, coordination and review of long-range
 
17           program and financial plans that will implement
 
18           established state objectives and policies.
 
19      (3)  The preparation, coordination and analysis, and
 
20           enactment of a budget organized to focus on state
 
21           programs and their costs, that authorizes the
 
22           implementation of the long-range plans in the
 
23           succeeding budget period.
 

 
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 1      (4)  The evaluation of alternatives to existing objectives,
 
 2           policies, plans and procedures that offer potential for
 
 3           more efficient and effective use of state resources.
 
 4      (5)  The regular appraisal and reporting of program
 
 5           performance.
 
 6      (6)  The assurance that the State receives the best value
 
 7           for all expenditures."
 
 8      SECTION 4.  Section 37-66, Hawaii Revised Statutes, is
 
 9 amended to read as follows:
 
10      "[[]§37-66[]]  Responsibilities of the legislature.  The
 
11 legislature shall:
 
12      (1)  Consider the long-range plans, including the proposed
 
13           objectives and policies, the six-year state program and
 
14           financial plan, and the budget and revenue proposals
 
15           recommended by the governor and any alternatives
 
16           thereto.
 
17      (2)  Adopt programs and the state budget, and appropriate
 
18           moneys to implement the programs it deems appropriate. 
 
19      (3)  Adopt such other legislation as necessary to implement
 
20           state programs.
 
21      (4)  Review the implementation of the state budget and
 
22           program accomplishments and execution of legislative
 
23           policy direction.  Implementation of the state budget
 

 
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 1           and program management, execution, and performance
 
 2           shall be subject to post-audits by the auditor who
 
 3           shall report the auditor's findings and recommendations
 
 4           to the legislature as provided in chapter 23.
 
 5      (5)  Ensure that the State receives the best value for its
 
 6           appropriations and expenditures by taking into
 
 7           consideration the best interest of the State and the
 
 8           benefits to the State in relation to the expenditure of
 
 9           state resources."
 
10      SECTION 5.  Section 103D-104, Hawaii Revised Statutes, is
 
11 amended by adding a new definition to be appropriately inserted
 
12 and to read as follows:
 
13      ""Best value" means the most advantageous and beneficial bid
 
14 or offer for the purchasing agency after evaluating and
 
15 considering factors in addition to cost or price, for example,
 
16 the quality of the service, product, or construction, the
 
17 integrity and reliability of the service, product, or
 
18 construction provider, and other relevant factors."
 
19      SECTION 6.  Section 103D-302, Hawaii Revised Statutes, is
 
20 amended as follows:
 
21      1.  By amending subsection (a) to read:
 
22      "(a)  Contracts shall be awarded by competitive sealed
 
23 bidding except as otherwise provided in section 103D-301.  Awards
 

 
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 1 of contracts by competitive sealed bidding may be made after
 
 2 single or multi-step bidding.  Competitive sealed bidding does
 
 3 not include negotiations with bidders after the receipt and
 
 4 opening of bids.  Award is based on the criteria set forth in the
 
 5 invitation for bids[.] and the award affording the purchasing
 
 6 agency the best value."
 
 7      2.  By amending subsection (f) to read:
 
 8      "(f)  Bids shall be evaluated based on the requirements set
 
 9 forth in the invitation for bids.  These requirements may include
 
10 criteria to determine acceptability such as inspection, testing,
 
11 quality, workmanship, delivery, and suitability for a particular
 
12 purpose.  Those criteria that will affect the bid price and be
 
13 considered in evaluation for award shall be objectively
 
14 measurable, such as discounts, transportation costs, and total or
 
15 life cycle costs.  The invitation for bids shall set forth the
 
16 evaluation criteria to be used.  [No criteria may be used in bid
 
17 evaluation that are not set forth in the invitation for bids.]
 
18 Bid evaluation shall assess whether the bid affords the
 
19 purchasing agency the best value."
 
20      3.  By amending subsection (h) to read:
 
21      "(h)  The contract shall be awarded with reasonable
 
22 promptness by written notice to the [lowest] responsible and
 
23 responsive bidder whose bid meets the requirements and criteria
 

 
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 1 set forth in the invitation for bids[.] and affords the
 
 2 purchasing agency the best value.  In the event all bids exceed
 
 3 available funds as certified by the appropriate fiscal officer,
 
 4 the head of the purchasing agency responsible for the procurement
 
 5 in question is authorized in situations where time or economic
 
 6 considerations preclude resolicitation of work of a reduced scope
 
 7 to negotiate an adjustment of the bid price, including changes in
 
 8 the bid requirements, with the [low] responsible and responsive
 
 9 bidder, in order to bring the bid within the amount of available
 
10 funds."
 
11      4.  By amending subsection (i) to read:
 
12      "(i)  When it is not practicable to initially prepare a
 
13 purchase description to support an award based on [price,] the
 
14 best value to the purchasing agency, an invitation for bids,
 
15 which requests the submission of unpriced offers to be followed
 
16 by an invitation for bids limited to those bidders whose offers
 
17 have been qualified under the criteria set forth in the first
 
18 solicitation, may be used.  If a multi-step sealed bidding
 
19 process is used, the notice and the invitation for bids shall
 
20 describe each step to be used in soliciting, evaluating, and
 
21 selecting unpriced offers."
 
22      SECTION 7.  Section 103D-303, Hawaii Revised Statutes, is
 
23 amended by amending subsections (e) to (g) to read as follows:
 

 
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 1      "(e)  The request for proposals shall state the relative
 
 2 importance of price and other evaluation factors[.] that will be
 
 3 considered in ensuring that the purchasing agency is afforded the
 
 4 best value.
 
 5      (f)  Discussions may be conducted with responsible offerors
 
 6 who submit proposals determined to be reasonably susceptible of
 
 7 being selected for award for the purpose of clarification to
 
 8 assure full understanding of, and responsiveness to, the
 
 9 solicitation requirements.  Offerors shall be accorded fair and
 
10 equal treatment with respect to any opportunity for discussion
 
11 and revision of proposals, and revisions may be permitted after
 
12 submissions and prior to award for the purpose of obtaining best
 
13 and final offers[.] that afford the purchasing agency the best
 
14 value.  In conducting discussions, there shall be no disclosure
 
15 of any information derived from proposals submitted by competing
 
16 offerors.
 
17      (g)  Award shall be made to the responsible offeror whose
 
18 proposal is determined in writing to be the most advantageous and
 
19 to provide the purchasing agency the best value taking into
 
20 consideration not necessarily price [and] but the evaluation
 
21 factors set forth in the request for proposals[.  No other
 
22 factors or criteria shall be used in the evaluation.] and other
 
23 relevant factors.  The contract file shall contain the basis on
 
24 which the award is made."
 

 
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 1      SECTION 8.  Section 103D-304, Hawaii Revised Statutes, is
 
 2 amended as follows:
 
 3      1.  By amending subsection (a) to read:
 
 4      "(a)  Professional services shall be procured in accordance
 
 5 with sections 103D-302, 103D-303, 103D-305, 103D-306, or
 
 6 103D-307, or this section.  Contracts for professional services
 
 7 shall be awarded on the basis of demonstrated competence and
 
 8 qualification for the type of services required[, and at fair and
 
 9 reasonable prices.] and a determination that the purchasing
 
10 agency is afforded the best value."
 
11      2.  By amending subsection (c) to read:
 
12      "(c)  The head of the purchasing agency shall designate a
 
13 review committee consisting of a minimum of three employees from
 
14 the agency or from another governmental body, with sufficient
 
15 education, training, and licenses or credentials for each type of
 
16 professional service which may be required.  The committee shall
 
17 review and evaluate all submissions and other pertinent
 
18 information, including references and reports, and prepare a list
 
19 of qualified persons to provide these services[.] and who afford
 
20 the purchasing agency the best value.  Persons included on the
 
21 list of qualified persons may amend their statements of
 
22 qualifications as necessary or appropriate.  Persons shall
 
23 immediately inform the head of the purchasing agency of any
 

 
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 1 change in information furnished which would disqualify the person
 
 2 from being considered for a contract award."
 
 3      3.  By amending subsection (e) to read:
 
 4      "(e)  The head of the purchasing agency shall evaluate the
 
 5 summary of qualifications for each of the persons provided by the
 
 6 screening committee and may conduct additional discussions with
 
 7 any of them.  The head of the purchasing agency shall then rank
 
 8 the persons in order [of preference.] based on which person
 
 9 affords the purchasing agency the best value.  The head of the
 
10 purchasing agency shall negotiate a contract with the first
 
11 person, including a rate of compensation which is fair and
 
12 reasonable, established in writing, and based upon the estimated
 
13 value, scope, complexity, and nature of the services to be
 
14 rendered.  If a satisfactory contract cannot be negotiated with
 
15 the first person, negotiations with that person shall be formally
 
16 terminated and negotiations with the second person on the list
 
17 shall commence.  Failing accord with the second person,
 
18 negotiations with the next person on the list shall commence.  If
 
19 a contract [at a fair and reasonable price] that affords the
 
20 purchasing agency the best value cannot be negotiated, the
 
21 screening committee may be asked to submit a minimum of three
 
22 additional persons for the head of the purchasing agency to rank,
 
23 and resume negotiations in the same manner provided in this
 
24 subsection.  Negotiations shall be conducted confidentially."
 

 
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 1      SECTION 9.  Section 103D-305, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "§103D-305  Small purchases; prohibition against parceling.
 
 4 Procurements of less than $25,000 for goods, services, or
 
 5 construction shall be made in accordance with procedures set
 
 6 forth in rules adopted by the policy board that are designed to
 
 7 ensure administrative simplicity [and], as much competition as is
 
 8 practicable[;], and that the purchasing agency is afforded the
 
 9 best value; provided that multiple expenditures shall not be
 
10 created at the inception of a transaction or project so as to
 
11 evade the requirements of this chapter; and provided further that
 
12 procurement requirements shall not be artificially divided or
 
13 parceled so as to constitute a small purchase under this
 
14 section."
 
15      SECTION 10.  Section 103D-306, Hawaii Revised Statutes, is
 
16 amended as follows:
 
17      1.  By amending subsection (a) to read:
 
18      "(a)  A contract may be awarded for goods, services, or
 
19 construction without competition when the head of a purchasing
 
20 agency determines in writing that there is only one source for
 
21 the required good, service, or construction, awarding the
 
22 contract without competition affords the purchasing agency the
 
23 best value, the determination is reviewed and approved by the
 

 
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 1 chief procurement officer, the written determination is posted in
 
 2 the manner described in rules adopted by the policy board, and no
 
 3 objection is outstanding.  The written determination, any
 
 4 objection, and a written summary of the disposition of any
 
 5 objection shall be included in the contract file."
 
 6      2.  By amending subsection (c) to read:
 
 7      "(c)  The rules of the policy board shall include a non-
 
 8 exhaustive list of procurements which constitute sole source
 
 9 procurements and criteria for determining when a particular
 
10 procurement may be determined to be a sole source.  The rules
 
11 shall also prescribe when cost or pricing data must be considered
 
12 and how they are to be used in establishing the price, terms, and
 
13 conditions, if any, for a contract awarded pursuant to this
 
14 section[.]; provided that the rules shall ensure that any
 
15 contract awarded pursuant to this section affords the purchasing
 
16 agency the best value."
 
17      SECTION 11.  Statutory material to be repealed is bracketed.
 
18 New statutory material is underscored.
 
19      SECTION 12.  This Act shall take effect upon its approval.
 
20 
 
21                           INTRODUCED BY:  _______________________
 
22