SB2824 SD1

PART I.

SECTION 1. Section 103D-201, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) The state procurement policy board shall consist of seven members. Notwithstanding the limitations of section 78-4, the members of the board shall include:

(1) The comptroller[;] as an ex-officio nonvoting member;

(2) A county employee with significant high-level procurement experience; and

(3) Five persons who shall not otherwise be full-time employees of the State or any county; provided that at least one member shall be a certified professional in the field of procurement, at least one member shall have significant high-level, federal procurement experience, and at least two members shall have significant experience in the field of health and human services.

Each appointed member shall have demonstrated sufficient business or professional experience to discharge the functions of the state procurement policy board. The initial and subsequent members of the state procurement policy board, other than the comptroller, shall be appointed by the governor from a list of three individuals for each vacant position, submitted by a nominating committee composed of four individuals chosen as follows: two persons appointed by the governor; one person appointed by the president of the senate; and one person appointed by the speaker of the house. Except as provided in this section, the selection and terms of the state procurement policy board members shall be subject to the requirements of section 26-34. No member of the state procurement policy board shall act concurrently as a chief procurement officer. The members of the state procurement policy board shall devote such time to their duties as may be necessary for the proper discharge thereof."

PART II.

SECTION 2. The Hawaii public procurement code was originally enacted by Act 8, Special Session Laws of Hawaii 1993, codified as chapter 103D, Hawaii Revised Statutes. Since 1993, only one audit has been performed on the State's procurement practices. That audit in 1995, Auditor's Report No. 95-8, states in pertinent part in the summary:

We found that the administration has been slow in implementing the procurement code and has not taken the necessary steps to ensure effective implementation. The late start of the Procurement Policy Office without appropriate staff has limited the ability of the policy board to carry out its responsibilities. Furthermore, the late appointment of the interim administrator of the Procurement Office delayed development of an on-going training program, procurement manual, and a periodic review of the procurement process. Because rules were issued late and insufficient attention was paid to interpreting the law and communicating the rules clearly, we found a number of instances of noncompliance and confusion about the law and rules. . . .

The new procurement organization structure is ineffective with conflicting and unclear roles and responsibilities. The division of responsibility and authority between the administrator and the policy office is not clear in law or practice. Both have a responsibility to audit procurement practices. In addition, we found that the administrator has conflicting roles as the chief procurement officer (CPO) for the Executive Branch and as the individual responsible for reviewing procurement practices of all governmental agencies.

The legislature finds that a new audit is timely and necessary, given that thirteen years have elapsed since the 1993 audit and the recent problems in state procurement practices brought to light during the interim hearings by the senate committee on tourism and government operations. One of the concerns is the apparent noncompliance with procurement laws in the award of contracts, which is a critical element of public procurement.

The purpose of this part is to require the auditor to conduct a compliance, performance, and management audit of compliance with chapter 103D, Hawaii Revised Statutes, and the administrative rules adopted thereto.

SECTION 3. The auditor shall conduct a compliance, performance, and management audit of chapter 103D, Hawaii Revised Statutes, and the administrative rules adopted pursuant to chapter 103D. The audit shall be limited to the state procurement office and the purchasing agencies, as defined in section 103D-104, Hawaii Revised Statutes, of the State, not including the legislature, judicial branch, office of Hawaiian affairs, and the several counties.

The purpose of the audit, among other relevant issues as determined by the auditor, shall be to determine the implementation and compliance with chapter 103D, Hawaii Revised Statutes, including but not limited to:

(1) Compliance with requirements that contracts be awarded to the highest ranking bidder;

(2) The use of an evaluation committee by a procurement purchasing agency to score proposals based on evaluation criteria;

(3) Whether awards are based solely on qualifications, and not on other considerations such as personal judgments and biased preferences when selecting another bidder with a lower score;

(4) The proper documentation of each step of the procurement process by a purchasing agency and its chief procurement officer, including but not limited to, decisions and justifications to select a bidder and to award a contract;

(5) Whether adequate procurement practices training is made available to and regularly attended by appropriate procurement officials of state agencies; and

(6) The proper usage of an alternative procurement method.

SECTION 4. The auditor may contract with a private entity for purposes of conducting the audit and studies as may be required under this part.

SECTION 5. The auditor shall make an interim report of findings and recommendations to the legislature no later than twenty days prior to the convening of the regular session of 2009, and a final report on findings and recommendations, including proposals for statutory amendments, to the legislature no later than twenty days prior to the convening of the regular session of 2010.

SECTION 6. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2008-2009 for the auditor to contract for an audit pursuant to section 4 of this part.

The sum appropriated shall be expended by the office of the auditor for the purposes of this part.

PART III.

SECTION 7. This Act shall take effect upon its approval; provided that section 6 shall take effect on July 1, 2008.

THE SENATE	S.B. NO.	2824
TWENTY-FOURTH LEGISLATURE, 2008		S.D. 1
STATE OF HAWAII