SB2896

Report Title:

Procurement Code

Description:

Requires exempt agencies to have written procurement policies, procedures, and ethics. Requires exempt agencies to document purchases for audit. Requires a legislative bill exempting an agency to contain legislative findings of necessity. Allows an agency to supplement procurement training if there is no effect on budget.

THE SENATE	S.B. NO.	2896
TWENTY-THIRD LEGISLATURE, 2006
STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO PROCUREMENT.

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

SECTION 1. The purpose of this Act is to amend the Hawaii public procurement code, as follows:

(1) Agencies which are exempt from chapter 103D should be required to have (not merely "encouraged to adopt" as under current law), and submit, written procurement policies, and procedures to the state procurement office, which does not presently have knowledge of the procurement practices of exempt agencies;

(2) Any exempt purchases should be documented for later audit. There is a general lack of documentation of exempt purchases, beyond minutes of board meetings and the like;

(3) Future bills that would exempt agencies from the procurement code should be required to include a legislative finding that that the exemption is necessary and in the public interest, including the reasons therefor, and not for the administrative expediency of the agency. This amendment would ensure that agencies comply with chapter 103D, Hawaii Revised Statutes, which legitimizes government procurement by providing a definitive process that is open and transparent; and

(4) Duplicative training on procurement is common and should be eliminated. The state procurement office and the various departments such as the department of human resources development, department of labor and industrial relations, and the department of budget and finance all conduct training sessions for employees which causes unnecessary budgetary expense. The primary responsibility for training should be vested with the state procurement office, subject to supplemental agency training as appropriate that require more specialized knowledge if the additional training does not add to the budget costs.

SECTION 2. Section 103D-102, Hawaii Revised Statutes, is amended to read as follows:

"§103D-102 Application of this chapter[.]; exemptions; necessity of exemptions. (a) This chapter shall apply to all procurement contracts made by governmental bodies whether the consideration for the contract is cash, revenues, realizations, receipts, or earnings, any of which the State receives or is owed; in-kind benefits; or forbearance; provided that nothing in this chapter or rules adopted hereunder shall prevent any governmental body from complying with the terms and conditions of any other grant, gift, bequest, or cooperative agreement.

(b) Notwithstanding subsection (a), this chapter shall not apply to contracts by governmental bodies:

(1) Solicited or entered into before July 1, 1994, unless the parties agree to its application to a contract solicited or entered into prior to July 1, 1994;

(2) To disburse funds, irrespective of their source:

(A) For grants or subsidies as those terms are defined in section 42F-101, made by the State in accordance with standards provided by law as required by article VII, section 4, of the State Constitution; or by the counties pursuant to their respective charters or ordinances;

(B) To make payments to or on behalf of public officers and employees for salaries, fringe benefits, professional fees, or reimbursements;

(C) To satisfy obligations that the State is required to pay by law, including paying fees, permanent settlements, subsidies, or other claims, making refunds, and returning funds held by the State as trustee, custodian, or bailee;

(D) For entitlement programs, including public assistance, unemployment, and workers' compensation programs, established by state or federal law;

(E) For dues and fees of organizations of which the State or its officers and employees are members, including the National Association of Governors, the National Association of State and County Governments, and the Multi-State Tax Commission;

(F) For deposit, investment, or safekeeping, including expenses related to their deposit, investment, or safekeeping;

(G) To governmental bodies of the State;

(H) As loans, under loan programs administered by a governmental body; and

(I) For contracts awarded in accordance with chapter 103F.

(3) To procure goods, services, or construction from a governmental body other than the University of Hawaii bookstores, from the federal government, or from another state or its political subdivision;

(4) To procure the following goods or services which are available from multiple sources but for which procurement by competitive means is either not practicable or not advantageous to the State:

(A) Services of expert witnesses for potential and actual litigation of legal matters involving the State, its agencies, and its officers and employees, including administrative quasi-judicial proceedings;

(B) Works of art for museum or public display;

(C) Research and reference materials including books, maps, periodicals, and pamphlets, which are published in print, video, audio, magnetic, or electronic form;

(D) Meats and foodstuffs for the Kalaupapa settlement;

(E) Opponents for athletic contests;

(F) Utility services whose rates or prices are fixed by regulatory processes or agencies;

(G) Performances, including entertainment, speeches, and cultural and artistic presentations;

(H) Goods and services for commercial resale by the State;

(I) Services of printers, rating agencies, support facilities, fiscal and paying agents, and registrars for the issuance and sale of the State's or counties' bonds;

(J) Services of attorneys employed or retained to advise, represent, or provide any other legal service to the State or any of its agencies, on matters arising under laws of another state or foreign country, or in an action brought in another state, federal, or foreign jurisdiction, when substantially all legal services are expected to be performed outside this State;

(K) Financing agreements under chapter 37D; and

(L) Any other goods or services which the policy board determines by rules or the chief procurement officer determines in writing is available from multiple sources but for which procurement by competitive means is either not practicable or not advantageous to the State; and

(5) Which are specific procurements expressly exempt from any or all of the requirements of this chapter by:

(A) References in state or federal law to provisions of this chapter or a section of this chapter, or references to a particular requirement of this chapter; and

(B) Trade agreements, including the Uruguay Round General Agreement on Tariffs and Trade (GATT) which require certain non-construction and non-software development procurements by the comptroller to be conducted in accordance with its terms.

(c) [~~Governmental bodies~~] Each governmental body making procurements which are exempt from this chapter [~~are nevertheless encouraged to adopt and use provisions of this chapter and its implementing rules as appropriate;~~] shall adopt a written procurement procedure that serves the same purpose as this chapter and shall file the procurement procedure with the state procurement office; provided that the use of one or more provisions shall not constitute a waiver of the exemption conferred and subject the procurement or the governmental body to any other provision of this chapter[.]; and provided further that all purchases made under this subsection shall be sufficiently documented, including but not limited to board approval, for purposes of subsequent audit.

(d) A legislative bill to provide an exemption from this chapter to a governmental body shall contain a legislative finding that the exemption is necessary in the public interest and is not for purposes of administrative expediency of the agency."

SECTION 3. Section 103D-206, Hawaii Revised Statutes, is amended to read as follows:

"§103D-206 Additional duties of the administrator of the procurement office. In addition to the duties referred to in section 103D-205, the administrator shall:

(1) Perform periodic review of the procurement practices of all governmental bodies;

(2) Assist, advise, and guide governmental bodies in matters relating to procurement;

(3) Develop and administer a statewide procurement orientation and training program; provided that a governmental body may supplement the orientation and training with more specialized procurement education geared to the subject matter of particular goods or services, including specifications of the procurement, if the supplementation does not entail additional budgetary costs;

(4) Develop, distribute, and maintain a procurement manual for all state procurement officials; and

(5) Develop, distribute, and maintain a procurement guide for vendors wishing to do business with the State and its counties."

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________