Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Tourism, to which was referred S.B. No. 1460 entitled:

begs leave to report as follows:

The purpose of this measure is to require the Hawaii Tourism Authority (HTA) to include in its contracts certain provisions to ensure accountability and efficient use of public funds.

Testimony in opposition to this measure was received from the HTA.

Although the HTA objected to this measure, its oral testimony admitted to its effort to include all of the provisions in its larger contracts, ranging from $3,500,000 to about $6,000,000. The HTA's concern was that requiring the inclusion of the provisions in a contract might defeat the consummation of a contract, particularly with sophisticated "New York" lawyers representing the other side.

Your Committee notes that there was no strenuous objection to any of the specified provisions in the measure. A moderate objection was raised with regard to requiring the contractor to obtain prior permission from the HTA to subcontract, because a big contractor such as the National Football League might subcontract for the performance of a part of the contract.

The executive director of the HTA characterized his objection as "philosophical" because contract matters should be left to the discretion of the executive director or the administrator of the contract. The concern was that requiring the provisions in a contract, particularly a complex contract, might defeat contract negotiations if the other side does not agree to include the provisions. The point was that flexibility in negotiating a contract is necessary.

Your Committee is concerned that while the current executive director may be forthright in striving to include the provisions in the larger contracts, there is no assurance that the practice would continue with the next executive director. Therefore, your Committee finds that enacting the requirements into statute is the best means of ensuring the accountability and efficient use of public funds in future contracts.

The testimony of the executive director of the HTA was that the two variables for a threshold at which a contract would be required to include the provisions are amount and complexity of the contract.

Your Committee has considered the comments of the HTA and has amended this measure as follows:

As affirmed by the record of votes of the members of your Committee on Tourism that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1460, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1460, S.D. 1, and be placed on the calendar for Third Reading.