Report Title:

Performance Information Purchase System; Auditor Review

WHEREAS, the State of Hawaii’s Department of Accounting and General Services (DAGS) administration and management of the State’s public works projects is critical to the health and welfare of the State; and

WHEREAS, two years ago, DAGS moved from the low-bid system for public procurements on re-roofing construction projects to a performance based procurement system, which it has designated as PIPS or Performance Information Procurement System; and

WHEREAS, it was hoped that PIPS would address DAGS’ concerns about accountability, control of project costs and change orders, and provide greater protection to the State; and

WHEREAS, the successful proposal is selected by DAGS based upon a performance rating for the contractor and manufacturer; and

WHEREAS, contractors and manufacturers are eligible to participate in the program only if they receive a performance rating from DAGS; and

WHEREAS, the performance rating is derived from an inspection and evaluation of pre-selected job references submitted by the contractor/manufacturer to DAGS; and

WHEREAS, during the beginning stages of implementing the PIPS program, contractors and manufacturers moved cautiously and responded to the new program influenced by their prior experiences under the low-bid system, resulting in the cost proposals for these early awards being close to the budget amount on the projects; and

WHEREAS, however, over the past two years, participating parties learned that the system gave an advantage to those who had previously been awarded a contract under the program; and

WHEREAS, contractors found that teaming up with a roofing manufacturer who received an earlier contract award under PIPS would increase the contractor’s chance of being selected the next time; and

WHEREAS, all these projects are constructed without the supervision of a licensed architect and without building or construction permits; and

WHEREAS, since its inception, it has been reported that a number of contracts awarded under PIPS have exceeded the amounts budgeted for the projects; and

WHEREAS, it has been reported that the PIPS program has many flaws; and

WHEREAS, one of the flaws is that the performance rating criteria includes subjective issues, such as a contractor’s honesty or ability to communicate, which are open to abuse and collusion; and

WHEREAS, another is that the architect, who under the low-bid system, would create and design the initial specifications and plans for the project, was removed from the process, leaving the design issues to the contractor and manufacturer submitting the proposal; and

WHEREAS, it has also been alleged that inexperienced and unqualified persons have performed the evaluations, producing inaccurate and inequitable results, that conflicts of interest between DAGS and various parties who have received contracts under the program were ignored, and that the program gives preferential treatment to vendors who support the program; and

WHEREAS, more importantly, since the PIPS allows for an increase in initial project cost, which may have no correlation to the work performed or cost incurred by the contractor, there is an alleged increase in the contractor’s profit margin; and

WHEREAS, each of these flaws or abuses, by itself or collectively, calls for an investigation of the program; now, therefore,

BE IT RESOLVED by the Senate of the Twenty-First Legislature of the State of Hawaii, Regular Session of 2001, that the Auditor is requested to conduct a review on the fairness and efficacy of the Department of Accounting and General Services' Performance Information Procurement System; and

BE IT FURTHER RESOLVED that the Auditor submit to the Legislature not later than twenty days prior to the convening of the 2002 Regular Session, a report that includes a review of other jurisdictions that utilize a procurement system similar to PIPS, and if there are, if these programs are successful in achieving its stated purpose, and any other findings and recommendations the Auditor deems appropriate; and

BE IT FURTHER RESOLVED that certified copies of this Resolution be transmitted to the Auditor and the Comptroller.