Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred H.B. No. 620, H.D. 2, S.D. 1, entitled:

begs leave to report as follows:

The purpose of this measure is to allow for the privatization of certain government services. The bill also defines the terms "state contractor", "state subcontractor", and "state resident", and increases bid preferences in favor of state contractors.

In particular, part I of this bill allows any state or county official in whom appropriate authority is vested by law to enter into a publicly-funded contract with a private entity to obtain certain services, when there is a reasonable basis to believe that the service can be provided at lower costs and with equivalent or better quality than that which could be provided by a government agency.

Part II of this bill defines "state resident" to provide a clear, measurable standard in the state procurement code that can be easily followed, copied, and enforced by federal contracting officers in enforcing the preference provisions in federal law. Part II also defines "state contractor" and "state subcontractor" to provide state contracting officers with clear definitions, and increases the bid preference in favor of state contractors from seven to thirteen per cent on state public works contracts for $10,000,000 or less.

Your Committee finds that part I of this bill will help to resolve uncertainties generated by the Hawaii Supreme Court's 1997 decision in Konno v. County of Hawaii, regarding the government's ability to rely upon the private sector for services that the government needs or is required to provide. Your Committee further finds that part I of this bill will also help to make government more efficient and economical and will renew efforts to revitalize Hawaii's economy.

Your Committee further finds that part II of this bill will help to assure compliance with federal and state laws regarding employment and bid preferences for state residents, and will provide an objective definition of "state resident" in the state procurement code. Your Committee finds that although the federal government is not bound by this definition in interpreting federal law, this amendment provides clear guidance to federal contracting officers that will assist in keeping profits and wages from military construction projects in the State.

Your Committee further finds that the definitions of "state contractor" and "state subcontractor" in part II of the bill will help to ensure that contractors who are granted a bid preference are those that have fully availed themselves of the laws of the State, and committed themselves to contributing to the economy of the State by establishing and maintaining a business within the State and employing state residents.

In order to promote continuing discussion of this measure, your Committee has made a technical amendment to the purpose section of part II of the bill to establish the Legislature's intent to require the Chief Procurement Officer to conduct a review of the bid preference law by June 30, 2006, separate from and in addition to the requirement in section 7 of the bill that the Comptroller evaluate that law to be submitted to the Legislature in 2099.

As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 620, H.D. 2, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as H.B. No. 620, H.D. 2, S.D. 2.