RESOLUTION

WHEREAS, trade missions to China and Korea in 2005 were pursued by the Department of Business, Economic Development, and Tourism to encourage economic and tourism-related partnerships with these two countries and thus are considered to be state-related business; and

WHEREAS, the state procurement laws are intended to ensure that the State receives the best value for its money through a competitive selection process with vendors; and

WHEREAS, according to an article dated February 12, 2006 in the Honolulu Advertiser, the Department of Business, Economic Development, and Tourism may have violated state procurement laws when the department selected a nonprofit organization to handle the finances for the Governor's trade mission to China and Korea in 2005; and

WHEREAS, concerns have been raised as to whether the department circumvented the procurement code, due to the fact that the department entered into "protocol and procedural framework," which is in essence a procurement contract for services; and

WHEREAS, the "protocol and procedural framework" resulted in compensation and realization to the parties who were part of the trade mission; and

WHEREAS, the department approached the Hawaii District Export Council, a nonprofit organization, to jointly organize with the department the Governor's China trade mission; and

WHEREAS, the department conceived of the trade mission, solicited all of the private funding, and executed the planning and scheduling of the trade mission, including all the decisions concerning the subcontractors, financing, and organization of the mission, notwithstanding the advice of the Attorney General to take precautions as described below; and

WHEREAS, the amount of $268,637 was raised by the department from private sector sponsors to support the mission; and

WHEREAS, the department received a letter dated April 5, 2005 from the Department of the Attorney General cautioning that if the director or someone from the department was assisting in making decisions about how money is spent at the nonprofit in charge of organizing the state trade mission, the department may be violating procurement law; and

WHEREAS, on March 8, 2005, the State Procurement Office notified the department that it would constitute a potential violation of the procurement code to hire Events International to help organize the trade mission without going through the competitive selection process because there was a potential for a contractor to derive benefits as a result of receiving the trade mission contract; and

WHEREAS, the department still received services from Events International because the company assisted in the planning of the trade mission without solicitation of bids or proposals; and

WHEREAS, there remains important questions regarding the department's use of such a structure involving nonprofit organizations; and

WHEREAS, the Attorney General in his letter warned the department that any state employee whose trip is paid by private funds received from the sponsors and participants of the trade mission should receive prior approval from the State Ethics Commission; and

WHEREAS, a genuine issue of concern arises as to whether it is permissible under ethics law to solicit private funding to finance activities that are essentially a government function; and

WHEREAS, in 1997 the Office of the Auditor performed a procurement code audit of the department and recommended that the department develop a procurement manual for use by all operating units and ensure that all project managers are properly trained in contracting policies and procedures; now, therefore,

BE IT RESOLVED by the Senate of the Twenty-third Legislature of the State of Hawaii, Regular Session of 2006, the House of Representatives concurring, that the State Procurement Office and State Ethics Commission are requested to separately review this matter for possible procurement code and ethics code violations committed by the Department of Business, Economic Development, and Tourism; and

BE IT FURTHER RESOLVED that the State Procurement Office and State Ethics Commission are requested to separately report their respective findings and recommendations to the Legislature no later than September 1, 2006; and

BE IT FURTHER RESOLVED that certified copies of this Concurrent Resolution be transmitted to the Administrator of the State Procurement Office, the Executive Director of the State Ethics Commission, and the Director of Business, Economic Development, and Tourism.

Report Title:

Procurement Code, Department of Business, Economic Development, and Tourism.