HOUSE OF REPRESENTATIVES	H.B. NO.	2057
TWENTY-FIFTH LEGISLATURE, 2010		H.D. 1
STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO PUBLIC PROCUREMENT.

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

     SECTION 1.  Section 103D-103, Hawaii Revised Statutes, is amended to read as follows:

"[[]§103D-103[]]  Retention of written determinations.  Written determinations required by this chapter shall be retained in the appropriate official files of the chief procurement officer or in the case of delegated authority, in the files of [that purchasing agency.] the procurement officer."

     SECTION 2.  Section 103D-104, Hawaii Revised Statutes, is amended as follows:

(1)  By adding a new definition to be appropriately inserted and to read as follows:

     ""Subcontractor" means any person who enters into an agreement with the contractor to perform a portion of the work for the contractor."

(2)  By amending the definitions of "contractor" and "procurement officer" to read as follows:

     ""Contractor" means any [person] individual, partnership, firm, corporation, joint venture, or other legal entity having a contract with a governmental body[.] to undertake the execution of the work under the terms of the contract with the State and acting directly or through its agents or employees.

     "Procurement officer" means [any] a person [authorized] delegated the authority in writing to enter into and administer contracts and make written determinations with respect thereto.  The term also includes an authorized representative acting within the limits of authority."

(3)  By repealing the definition of "purchasing agency".

     [""Purchasing agency" means any governmental body which is authorized by this chapter or its implementing rules and procedures, or by way of delegation, to enter into contracts for the procurement of goods, services, or construction."]

     SECTION 3.  Section 103D-110, Hawaii Revised Statutes, is amended by amending subsections (c), (d), and (e) to read as follows:

     "(c)  Each [state] procurement officer of a department of the executive branch shall attend a mandatory fundamental training and development session within sixty days of being appointed or named to the position of procurement officer.

     (d)  Each [state] procurement officer of a department of the executive branch whom the state procurement office determines is in need of further training and development based upon:

     (1)  The history of procurement compliance to this chapter by the agency to which the particular procurement officer is attached; or

     (2)  Any other need for training and development,

shall attend follow-up training and development sessions.

     (e)  Attendance by [state] procurement officers at the follow-up training and development sessions, other than as required under subsection (d), and by county procurement [officials] officers at the fundamental and follow-up training and development sessions is optional, though encouraged."

     SECTION 4.  Section 103D-207, Hawaii Revised Statutes, is amended to read as follows:

"[[]§103D-207[]]  Centralization of procurement authority.  Except as otherwise provided in [sections] section 103D-208, [103D-209, and 103D-210,] all rights, powers, duties, and authority relating to the procurement of goods, services, and construction, and the management, control, warehousing, sale, and disposal of goods, services, and construction now vested in, or exercised by, the governmental bodies of the State and counties are hereby transferred to the respective chief procurement officers."

     SECTION 5.  Section 103D-301, Hawaii Revised Statutes, is amended to read as follows:

"[[]§103D-301[]]  Methods of source selection.  [Unless otherwise authorized by law, all contracts shall be awarded by competitive sealed bidding pursuant to section 103D-302, except] Contracts shall be awarded as provided in:

(1) Section 103D-302 (Competitive sealed bidding);

    [(1)] (2)  Section 103D-303 (Competitive sealed proposals);

    [(2)] (3)  Section 103D-304 (Professional services procurement);

    [(3)] (4)  Section 103D-305 (Small purchases);

    [(4)] (5)  Section 103D-306 (Sole source procurement); and

    [(5)] (6)  Section 103D-307 (Emergency procurements)."

     SECTION 6.  Section 103D-302, Hawaii Revised Statutes, is amended to read as follows:

     "§103D-302  Competitive sealed bidding.  (a)  [Contracts shall be awarded by competitive sealed bidding except as otherwise provided in section 103D-301.] Awards [of contracts by competitive sealed bidding] may be made after single or multi-step bidding.  Competitive sealed bidding does not include negotiations with bidders after the receipt and opening of bids.  Award is based on the criteria set forth in the invitation for bids.

     (b)  An invitation for bids shall be issued, and shall include a purchase description and all contractual terms and conditions applicable to the procurement.  If the invitation for bids is for construction, it shall specify that all bids include the name of each person or firm to be engaged by the bidder as a joint contractor or subcontractor in the performance of the contract and the nature and scope of the work to be performed by each.  Construction bids that do not comply with this requirement may be accepted if acceptance is in the best interest of the State and the value of the work to be performed by the joint contractor or subcontractor is equal to or less than one per cent of the total bid amount.

     (c)  Adequate public notice of the invitation for bids shall be given a reasonable time before the due date set forth in the invitation for [the opening of] bids.  The policy board shall adopt rules which specify:

     (1)  The form that the notice is to take;

     (2)  [What constitutes a reasonable interim] Minimum period between [publication] notice and bid [opening;] due date; and

     (3)  How notice may be [published,] provided, including publication in a newspaper of general circulation, notice by mail to all persons on any applicable bidders mailing list, [publication] notice by any public or private telecommunication information network, or any other method of [publication] notice it deems to be effective.

     (d)  [Bids] Except for invitation for bids conducted on an electronic procurement system, bids shall be opened publicly in the presence of one or more witnesses, at the time and place designated in the invitation for bids.  The amount of each bid and other relevant information specified by rule, together with the name of each bidder, shall be recorded[.  The record] and [each bid] shall be open to public inspection.  Bid results for procurements conducted on an electronic procurement system shall be available on the system.

     (e)  Bids shall be unconditionally accepted without alteration or correction, except as authorized in this chapter or by rules adopted by the policy board.

     (f)  Bids shall be evaluated based on the requirements set forth in the invitation for bids.  These requirements may include criteria to determine acceptability such as inspection, testing, quality, workmanship, delivery, and suitability for a particular purpose.  Those criteria that will affect the bid price and be considered in evaluation for award shall be stated in the invitation for bids and objectively measurable, such as discounts, transportation costs, and total or life cycle costs.  [The invitation for bids shall set forth the evaluation criteria to be used.] No criteria may be used in bid evaluation that are not set forth in the invitation for bids.

     (g)  Correction or withdrawal of inadvertently erroneous bids before or after award, or cancellation of invitations for bids, awards, or contracts based on such bid mistakes, shall be permitted in accordance with rules adopted by the policy board.  After bid [opening] due date no changes in bid prices or other provisions of bids prejudicial to the interest of the public or to fair competition shall be permitted.  Except as otherwise provided by rule, all decisions to permit the correction or withdrawal of bids, or to cancel awards or contracts based on bid mistakes, shall be supported by a written determination made by the chief procurement officer or head of a purchasing agency.

     (h)  The contract shall be awarded with reasonable promptness by written notice to the lowest responsible and responsive bidder whose bid meets the requirements and criteria set forth in the invitation for bids.  In the event all bids exceed available funds as certified by the appropriate fiscal officer, the head of the purchasing agency responsible for the procurement in question is authorized in situations where time or economic considerations preclude resolicitation of work of a reduced scope to negotiate an adjustment of the bid price, including changes in the bid requirements, with the low responsible and responsive bidder, in order to bring the bid within the amount of available funds.

     (i)  When it is not practicable to initially prepare a purchase description to support an award based on price, an invitation for bids, which requests the submission of unpriced offers to be followed by an invitation for bids limited to those bidders whose offers have been qualified under the criteria set forth in the first solicitation, may be used.  If a multi-step sealed bidding process is used, the notice and the invitation for bids shall describe each step to be used in soliciting, evaluating, and selecting unpriced offers.

(j)  At the time a bid is submitted, the bidder shall provide evidence of:

(1) Tax clearances from the director of taxation and the Internal Revenue Service to the effect that all tax returns due have been filed and all taxes, interest, and penalties levied against the bidder or accrued under title 14 that are administered by the department of taxation and under the Internal Revenue Code have been paid; and

(2) Valid licensure or certifications, as required by law, to provide the goods, services, or construction described in the invitation for bids; provided that this requirement shall not include bonding."

     SECTION 7.  Section 103D-303, Hawaii Revised Statutes, is amended as follows:

(1)  By amending subsection (a) to read:

"(a)  Competitive sealed proposals may be utilized to procure goods, services, or construction [designated in rules adopted by the procurement policy board as goods, services, or construction which] that are either not practicable or not advantageous to the State to procure by competitive sealed bidding.  [Competitive sealed proposals may also be utilized when the head of a purchasing agency determines in writing that the use of competitive sealed bidding is either not practicable or not advantageous to the State.]"

(2)  By amending subsection (d) to read:

     "(d)  Proposals shall be opened so as to avoid disclosure of contents to competing offerors during the evaluation process [of negotiation].  A register of proposals shall be prepared [in accordance with rules adopted by the policy board] and shall be open for public inspection after contract award."

(3)  By amending subsection (h) to read:

     "(h)  In cases of awards made under this section, nonselected offerors may submit a written request for debriefing to the [chief] procurement officer [or designee] within three working days after the posting of the award of the contract.  Thereafter, the [head of the purchasing agency] procurement officer shall provide the [requester] nonselected offerors a prompt debriefing [in accordance with rules adopted by the policy board].  Any protest by the [requester] nonselected offerors pursuant to section 103D-701 following debriefing shall be filed in writing with the [chief] procurement officer [or designee] within five working days after the date that the debriefing is completed."

     SECTION 8.  Section 103D-303.5, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a)  At least fifteen days prior to submission of bids pursuant to section 103D-302 for a construction or design-build project with a total estimated contract value of $500,000 or more, and at least fifteen days prior to submission of proposals pursuant to section 103D-303 for a construction or design-build project with a total estimated contract value of $100,000 or more, the [head of the purchasing agency shall hold] procurement officer shall conduct a pre-bid conference [and shall invite] for all potential interested bidders, offerors, subcontractors, and union representatives to attend."

     SECTION 9.  Section 103D-305,Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c)  Procurements of $25,000 to less than $100,000 shall be made in accordance with small purchase procedures[; provided that small purchase procurements through an electronic system shall be required after the policy board has adopted rules for electronic procurement and provided training to the affected agency]."

     SECTION 10.  Section 103D-306, Hawaii Revised Statutes, is amended to read as follows:

     "§103D-306  Sole source procurement.  (a)  A contract may be awarded for goods, services, or construction without competition only when the head of a purchasing agency [determines]:

(1) Determines in writing that there is only one source for the required [good, service,] goods, services, or construction[, the];

(2) Was previously unable to award a contract for the required goods, services, or construction due to the absence of an offer or offeror qualified under section 103D-302(h) or 103D-303(g), as applicable; and

(3) Provides thirty days public notice of the intent to award a contract by sole source procurement.

The written determination [is] shall be reviewed and approved by the chief procurement officer[, the written determination is] and posted in the manner described in rules adopted by the policy board[, and no objection is outstanding].  Previous offerors pursuant to paragraph (2) may file an objection to the written determination within five days of the issuance of the determination under paragraph (1).  The written determination, any objection, and a written summary of the disposition of any objection shall be included in the contract file. 

     (b)  The written determination shall contain [such] information as required by the rules of the policy board [require].  Persons may file written objections to a written determination pursuant to subsection (a) or to the issuance of a contract pursuant to this section.  Rules of the policy board shall provide for the disposition of objections[, including] in the same manner as protests under section 103D-701; provided that the rules shall require a written summary of the disposition.  No contract shall be awarded pursuant to this section while an objection is outstanding.

     (c)  The rules of the policy board shall include [a non-exhaustive list of procurements which constitute sole source procurements and] criteria for determining when a particular procurement may be determined to be a sole source.  The rules shall also prescribe when cost or pricing data must be considered and how they are to be used in establishing the price, terms, and conditions, if any, for a contract awarded pursuant to this section.

(d)  The auditor shall conduct an annual audit of contracts awarded pursuant to this section and the procedures used to award those contracts."

     SECTION 11.  Section 103D-312, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) to read as follows:

"(a)  [A contractor, except as provided in subsection (c), shall submit cost or pricing data and shall certify that, to the best of the contractor's knowledge and belief, the cost or pricing data submitted is accurate, complete, and current as of a mutually determined specified date prior to the date of:

(1) The pricing of any contract awarded by competitive sealed proposals or pursuant to the sole source procurement authority, where the total contract amount is expected to exceed an amount established by rules adopted by the policy board; or

(2) The pricing of any change order or contract modification that is expected to exceed an amount established by rules adopted by the policy office.]

The procurement officer may request data or factual information reasonably available to the offeror to substantiate that the price offered is reasonable.  Submission of data is limited to that normally kept by the offeror and shall not require extensive effort to gather data not reasonably available.

     (b)  Any contract, change order, or contract modification [under which a certificate is required] shall contain a provision that the price to the State, including profit or fee, shall be adjusted to exclude any significant sums by which the State finds that the price was increased because the contractor furnished cost or pricing data that was inaccurate, incomplete, or not current as of the date agreed upon between the parties."

     SECTION 12.  Section 103D-316, Hawaii Revised Statutes, is amended to read as follows:

"[[]§103D-316[]]  Right to inspect plant.  The State[,] or the procurement officer, at reasonable times, may inspect the part of the plant or place of business of a contractor or any subcontractor that is related to the performance of a contract awarded or to be awarded by the State."

SECTION 13.  Section 103D-317, Hawaii Revised Statutes, is amended to read as follows:

"[[]§103D-317[]]  Right to audit records.  (a)  The [purchasing agency,] procurement officer or the auditor, at reasonable times and places, may audit the books and records of any person who has submitted cost or pricing data pursuant to section 103D-312 to the extent that such books and records relate to such cost or pricing data.  Any person who receives a contract, change order, or contract modification for which cost or pricing data is required, shall maintain such books and records that relate to such cost or pricing data for three years from the date of final payment under the contract, unless another period is otherwise authorized in writing.

     (b)  The [purchasing agency] procurement officer or the auditor shall be entitled to audit the books and records of a contractor or any subcontractor under any negotiated contract or subcontract other than a fixed-price contract to the extent that such books and records relate to the performance of such contract or subcontract.  The books and records shall be maintained by the contractor for a period of three years from the date of final payment under the prime contract and by the subcontractor for a period of three years from the date of final payment under the subcontract, unless another period is otherwise authorized in writing."

     SECTION 14.  Section 103D-320, Hawaii Revised Statutes, is amended to read as follows:

"[[]§103D-320[]]  Retention of procurement records.  All procurement records shall be retained and disposed of in accordance with chapter 94 and records retention guidelines and schedules approved by the comptroller[.] or similar authority of procuring governmental bodies not subject to the record retention jurisdiction of the comptroller."

     SECTION 15.  Section 103D-323, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a)  Unless the policy board determines otherwise by rules, bid security shall be required [only] for construction contracts to be awarded pursuant to sections 103D-302 and 103D-303 and when the price of the contract is estimated [by the procurement officer] to exceed [$25,000] $100,000 or, if the contract is for goods or services[,] and the value of the contract is greater than $50,000, the [purchasing agency secures the approval of the chief] procurement officer[.] includes a requirement for bid security in the solicitation.  Bid security shall be a bond provided by a surety company authorized to do business in the State, or the equivalent in cash, or [otherwise supplied] in a form [specified in rules.] pursuant to section 103D-325.  Solicitations for contracts that require bid security shall state this requirement in the solicitation."

SECTION 16.  Section 103D-324, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a)  Unless the policy board determines otherwise by rules, the following bonds or security shall be delivered to the [purchasing agency] procurement officer within ten days of the contact award and shall become binding on the parties upon the execution of the contract if the contract [which] that is awarded exceeds [$25,000] $100,000 and is for construction[,] or the [purchasing agency secures the approval of the chief] procurement officer[:] includes a requirement for the bonds in the solicitation:

     (1)  A performance bond in a form [prescribed by the rules of the policy board,] pursuant to section 103D-325, executed by a surety company authorized to do business in this State or otherwise secured in a manner satisfactory to the [purchasing agency,] procurement officer, in an amount equal to one hundred per cent of the price specified in the contract;

     (2)  A payment bond in a form [prescribed by the rules of the policy board,] pursuant to section 103D-325, executed by a surety company authorized to do business in this State or otherwise secured in a manner satisfactory to the [purchasing agency,] procurement officer, for the protection of all persons supplying labor and material to the contractor for the performance of the work provided for in the contract.  The bond shall be in an amount equal to one hundred per cent of the price specified in the contract; or

     (3)  A performance and payment bond which satisfies all of the requirements of paragraphs (1) and (2).

Solicitations for contracts that require a performance and payment bond shall state this requirement in the solicitation."

     SECTION 17.  Section 103D-406, Hawaii Revised Statutes, is amended to read as follows:

"[[]§103D-406[]]  Specifications prepared by [architects and engineers.] persons other than governmental personnel.  The requirements of this part regarding the purposes and nonrestrictiveness of specifications shall apply to all specifications, including, but not limited to, those prepared by [architects, engineers, designers, and drafting] professionals, consultants, and any other individual for public contracts."

     SECTION 18.  Section 103D-410, Hawaii Revised Statutes, is amended by amending subsections (b) and (c) to read as follows:

"(b)  In implementing life-cycle costing, the purchasing agency shall be guided by energy efficiency standards and policies for purchasing various items developed and promulgated by the United States Department of Energy and other federal agencies, and nationally recognized trade associations, including but not limited to the National Association of State Purchasing Officials, the National Institute of Governmental Purchasing, Inc., the National Association of Purchasing Management, and the Air Conditioning and Refrigeration Institute.  The [purchasing agency] procurement officer shall notify bidders of information, procedures, and forms required in implementing energy efficiency standards and policies.  The information required shall include purchasing standards and policies developed by federal agencies and by nationally recognized agencies and associations, as well as energy consumption and life-cycle cost data.

     (c)  The [purchasing agency] procurement officer shall consider purchasing via the life-cycle costing method those classes of items for which nationally recognized energy efficiency data have been developed.  These items shall include but not be limited to automobiles and air conditioning systems.  The watt-saving variety of common-sized fluorescent lamps shall be purchased except where standard wattage of those lamps is specifically required by the using agency."

     SECTION 19.  Section 103D-1005, Hawaii Revised Statutes, is amended as follows:

     (1)  By amending subsection (b) to read:

     "(b)  The state procurement office, with the assistance of the office of solid waste management in the department of health as provided in section 342G-42, shall develop a recycled product procurement program that shall require state [purchasing agencies] procurement officers and urge county [purchasing agencies] procurement officers to:

     (1)  Apply preference to the purchase of products with recycled content before purchasing products without any recycled content;

     (2)  Be consistent with applicable federal specification standards incorporated in Executive Order No. 12873, signed by the President of the United States on October 20, 1993, and any subsequent amendments to that order; and

     (3)  Ensure, to the maximum extent economically feasible, the purchase of materials that may be recycled or reused when discarded, and to avoid the purchase of products deemed environmentally harmful."

     (2)  By amending subsection (e) to read:

     "(e)  When purchasing office paper and printed material, state [purchasing agencies] procurement officers shall, and county [purchasing agencies] procurement officers are urged to, purchase only office paper and printed material with recycled content, except when statutory, regulatory, or contractual requirements preclude the purchase of office paper or printed material with recycled contents of the same type and quantity as the office paper or printed material without recycled content."

     SECTION 20.  Section 103D-1010, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b)  The [purchasing agency] procurement officer shall:

     (1)  Receive and review proposals submitted by qualified community rehabilitation programs to provide goods or services and determine if they are suitable for purchase by the agency;

     (2)  Negotiate the conditions and terms for the purchase, including the price of the offer, between the agency and the qualified community rehabilitation program; provided that the price of the offer shall not exceed the fair market price and there is assurance that the qualified community rehabilitation program proposal is in compliance with all administrative rules related to purchasing; and

     (3)  Ensure that any goods or service purchased from a qualified community rehabilitation program shall not be placed on the Hawaii products list under section 103D-1002."

     SECTION 21.  Section 103D-1011, Hawaii Revised Statutes, is amended to read as follows:

"[[]§103D-1011[]]  Qualified community rehabilitation program; proposal to provide goods and services.  A qualified community rehabilitation program shall be allowed to sell only goods or services, also to include building custodial and grounds maintenance services, to a governmental body.  A proposal shall be submitted to the [purchasing agency] procurement officer containing the following information:

     (1)  A description of the goods or service;

     (2)  The price of the goods or service; and

     (3)  Documents and information necessary to qualify as a qualified community rehabilitation program under section 103D-1001."

     SECTION 22.  Section 103D-209, Hawaii Revised Statutes, is repealed.

     ["§103D-209  Authority to contract for certain services.  Except as provided in section 28-8.3 with respect to agencies of the State of Hawaii, any governmental body of this State may act as a purchasing agency and contract on its own behalf for professional services subject to this chapter and rules adopted by the policy board.  The purchasing agency may consult with the chief procurement officer or the officer's designee when procuring these services."]

     SECTION 23.  Section 103D-403, Hawaii Revised Statutes, is repealed.

     ["[§103D-403]  Exempted items.  Specifications for goods, services, or construction items procured under section 103D-209, or those exempted pursuant to section 103D-210 may be prepared by a purchasing agency in accordance with this chapter and rules adopted hereunder."]

     SECTION 24.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 25.  This Act shall take effect on January 1, 2011; provided that amendments made to section 103D-305, Hawaii Revised Statutes, by this Act shall not be repealed when section 103D-305, Hawaii Revised Statutes, is reenacted pursuant to section 14(1) of Act 175, Session Laws of Hawaii 2009.

Report Title:

Procurement Code; Streamline

Description:

Amends various sections of the Hawaii Public Procurement Code, Chapter 103D, Hawaii Revised Statutes, to simplify and streamline procurement processes to enable agencies to expeditiously acquire the resources or services they need to perform their missions.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.