STAND. COM. REP. 962

Honolulu, Hawaii

, 2003

RE: S.B. No. 1262

S.D. 1

H.D. 1

 

 

 

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Consumer Protection and Commerce, to which was referred S.B. No. 1262, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO PROCUREMENT,"

begs leave to report as follows:

The purpose of this bill is to increase fairness and openness in the procurement process and ensure that in-state contractors win state contracts by:

(1) Requiring contractors to be incorporated or organized under the laws of the State of Hawaii;

(2) Leveling the playing field between local contractors and out-of-state contractors by requiring all offerors on state contracts to demonstrate compliance with all state employment laws;

(3) Making a related amendment that repeals section 103D-1007, Hawaii Revised Statutes (HRS), the so-called state taxpayer preference;

(4) Mandating the establishment of a Hawaii Procurement Institute in cooperation with the University of Hawaii William S. Richardson School of Law, to among other things, improve the procurement laws and provide education and training for Hawaii’s contractors;

(5) Amending section 103D-304, HRS, relating to procurement of professional services by:
    1. Specifying that the names of members of the review committee that prepares a list of qualified professional services providers shall be public information placed in the contract file;
    2. Requiring that an independent selection committee rank professional service providers according to specified criteria, and that the head of the purchasing agency negotiate with providers according to that ranking;
    3. Requiring an equal distribution of work among providers that have the same qualifications; and
    4. Providing that services of design professionals such as architects and engineers shall only be procured under the section or through emergency procurement procedures;

and

(6) Requiring that a pre-bid conference be held for every construction or design-build project with an estimated contract value of $100,000 or more.

Testimony in support of this bill was provided by the American Society of Civil Engineers, Pacific Structural Consultants, Inc., Pacific Geotechnical Engineers, Inc., and a concerned individual.

Testimony in support of the bill and requesting amendments was submitted by the American Council of Engineering Companies, Dennis K. Hanatani, Inc., American Public Works Association, Tanimura & Associates, Inc., Parsons Brinckerhoff, Masa Fujioka & Associates, Moss Engineering, Miyasato Kuniyoshi Engineers, LLC., Delwin Ching, Austin, and Tsutsumi & Associates, Inc.

Testimony in support of the intent of the bill and requesting amendments was provided by the Department of Accounting and General Services and the State Procurement Office.

The County of Hawaii Department of Finance and the City & County of Honolulu Department of Budget and Fiscal Services provided testimony in opposition to this bill.

The County of Kauai Department of Water commented on the bill.

Your Committee heard testimony that administrative rules already allow for optional pre-bid and pre-proposal conferences that may be made mandatory depending on the procurement. Those testifying stated that requiring pre-bid and pre-proposal conferences for all contracts with a total estimated value of $100,000 or more would represent a large segment of projects and would burden government agencies. Amendments to restrict applicability of the provision were requested.

Other concerns were voiced that limiting acquisition of design professional services to only sections 103D-304 and 103D-307, HRS, might limit procurement of these services to "nonbid" contracts, and that allegations of abuses in the nonbid procurement of these services had recently generated controversy.

Your Committee also finds that many companies that have been doing business in the State for a long time are incorporated or organized under the laws of a state other than Hawaii. In addition, your Committee recently received an opinion from the Department of the Attorney General raising concerns about the legality of requiring a business to be incorporated or organized under the laws of the State of Hawaii.

Your Committee finds that small business, qualified rehabilitation programs (QRPs) and other similar groups should be extended a preference under the Procurement Code (Code). However, your Committee realizes that it is unclear what groups will be positively or negatively affected by these set-asides and preferences.

Upon consideration of these and other matters, your Committee has amended this bill by replacing its contents with the substance of H.B. No. 1103, H.D. 1. The amendments made to this bill:

(1) Remove, among other things, the requirement:

(A) Of a pre-bid conference;

(B) That offerors be organized under and in compliance with state law;

(C) That design services be procured only under section 103D-304, HRS, or emergency procurement procedures; and

(D) That the selection committee ensure equal distribution of contracts among professional services providers that have the same qualifications;

(2) Mandate a study by DAGS, in cooperation with the State Procurement Office, Procurement Policy Board, and representatives of business, county procurement agencies, QRPs, and other groups potentially suitable for and interested in being provided preferences under the Code, that would, among other things:

(A) Define "small business" and "preference";

(B) Determine whether groups including but not limited to small businesses, QRPs, native Hawaiians, women-owned businesses, veterans and minority-owned businesses, should be included in any preference under the Code;

(C) Determine the impact of any proposed preference or set-aside on other potential Code contractors; and

(D) Result in the development of proposed legislation to be submitted to the Legislature prior to the Regular Session of 2004;

(3) Remove architects, landscape architects, professional engineers, and land surveyors from the definition of "professional services" under the Code, and designate them instead, "design professional services";

(4) Establish separate procurement procedures for design professional services that are similar to those under section 103D-304, HRS, and meet federal procurement standards for these services;

(5) Allow nonselected professional service providers and unsuccessful competitive sealed bid offerors to request a debriefing; and

(6) Change the effective date to July 1, 2050 to encourage further discussion of the issues.

As affirmed by the record of votes of the members of your Committee on Consumer Protection and Commerce that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1262, S.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1262, S.D. 1, H.D. 1, and be referred to the Committee on Finance.

Respectfully submitted on behalf of the members of the Committee on Consumer Protection and Commerce,

 

____________________________

KENNETH T. HIRAKI, Chair