SB2062 SD1.DOC

SECTION 1. Chapter 103, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§103‑ Public works construction; preferences. (a) A governmental body, as defined in section 103D-104, that, under this chapter or chapter 103D, enters into a public works contract having an estimated value of not less than $250,000, shall decrease the bid amount of a bidder by five per cent for each preference under paragraphs (1) to (4) for which the bidder meets the criteria specified:

(1) A documented history indicating zero incidences of noncompliance by the contractor, subcontractor, or the executive management of the contractor or subcontractor, with applicable federal, state, and local labor, wage, health, safety, and environmental protection laws;

(2) A documented history indicating zero incidences of noncompliance by the contractor, subcontractor, or the executive management of the contractor or subcontractor, with government agencies, unions, and other agencies or bodies that perform regular inspections of construction sites and relevant records;

(3) A record of zero outstanding judgments or liens against the contractor, subcontractor, or the executive management of the contractor or subcontractor; and

(4) An audited statement indicating that no project revenues derived from government tax revenues will be exported out-of-state through foreign ownership or employees of the contractor or subcontractor.

(b) Should more than one preference allowed by statute apply, the evaluated price shall be based on the application of all applicable preferences. The sum of the preferences shall be subtracted from the original contract price.

(c) The lowest total bid, taking into consideration all applicable preferences in this section and the preference awarded for participation in an apprenticeship program under Act 17, First Special Session Laws of Hawaii 2009, shall be awarded the contract unless the invitation for bids provides for additional award criteria. The contract amount awarded shall be the amount of the original contract price offered, exclusive of any applied preference.

(d) At the time of submission of a competitive sealed bid or a competitive sealed proposal by a bidder, the bidder shall furnish written proof of eligibility for each claimed preference and, if awarded the contract, shall continue to certify monthly in writing that the bidder or offeror remains eligible for each claimed preference for the entire duration of the bidder's work on the project. This subsection shall be deemed to be incorporated into a public works contract.

(e) A bidder who is awarded a contract shall be subject to the following sanctions if, after commencement of work, the bidder at any time during the construction is no longer eligible for any claimed preference:

(1) Temporary or permanent cessation of work on the project, without recourse to breach of contract claims by the bidder; provided that the governmental body that entered into the contract shall be entitled to restitution for nonperformance or liquidated damages, as appropriate; or

(2) Proceedings to debar or suspend under section 103D‑702.

(f) For purposes of this section, "bidder" means an entity that submits a competitive sealed bid under section 103D-302 or submits a competitive sealed proposal under section 103D-303."

SECTION 2. The Hawaii Revised Statutes is amended by adding a new part to chapter 103D to be appropriately designated and to read as follows:

"PART . RESPONSIBLE CONSTRUCTION CONTRACTOR LAW

§103D-A Applicability. This part shall apply to public works contracts under chapter 103 and to procurements for construction under this chapter, if the general contract amount is $250,000 or more, and to any subcontract of $50,000 or more in connection with any general contract. The requirements of this part shall be incorporated by reference into every invitation for bids to which this part is applicable.

§103D-B Prerequisites for award of contract. (a) A contractor who submits a bid for a contract for construction shall show proof of compliance with subsection (c) to the comptroller or county counterpart for contracts under chapter 103, or to the procurement officer for contracts under this chapter, as applicable, as a prerequisite to being awarded a construction contract; provided that the requirements of this subsection shall be deemed incorporated by reference in any contract between the contractor and subcontractor.

(b) A subcontractor who subcontracts with a contractor submitting a bid under subsection (a) to perform work under the contract shall show proof of compliance with subsection (c) to the comptroller or county counterpart for contracts under chapter 103 or to the procurement officer for contracts under this chapter, as a prerequisite to being awarded a subcontract; provided that the contractor shall be primarily responsible for presentation of the show of proof under this subsection; and provided further that the requirements of this subsection shall be deemed incorporated by reference in any contract between the contractor and subcontractor.

(c) As a prerequisite to the award of any contract under this chapter or chapter 103, a contractor or subcontractor, as applicable, shall:

(1) Classify all workers of the contractor or subcontractor as employees;

(2) Adhere to proper job classifications for all laborers and mechanics employed as workers by the contractor or subcontractor;

(3) Comply with the requirements of section 103-55.5 by certifying compliance with the prevailing wage and overtime requirements of section 104-2 and all other applicable federal and state laws relating to workers' compensation, unemployment compensation, payment of wages, and safety;

(4) Provide prepaid health care benefits to all employees in compliance with chapter 393;

(5) Provide reasonable paid sick leave to all employees;

(6) Provide records indicating the history of compliance of the contractor or subcontractor and the contractor or subcontractor's executive management with all applicable federal, state, and local labor, wage, health, safety, and environmental protection laws;

(7) Provide records indicating the contractor or subcontractor's record of compliance with government agencies, unions, and other agencies or bodies that perform regular inspections of construction sites and relevant records;

(8) Provide employees with a fair and neutral process for resolving work-related issues that does not force the employee to waive statutory remedies and rights;

(9) Secure and maintain appropriate licensure for the contractor and all subcontractors;

(10) Provide documentation of any past or outstanding judgments or liens against the contractor or subcontractor and the contractor or subcontractor's executive management, along with documentation of steps taken to satisfy those judgments or liens;

(11) Provide documentation of financial stability necessary for a determination under section 103D-310(b) that the contractor or subcontractor has the financial ability, resources, skills, capability, and business integrity necessary to perform the contracted work;

(12) Provide documentation of the contractor or subcontractor's ability to provide security as required under sections 103D-323 and 103D-324;

(13) Provide an audited statement of the percentage of total project revenues derived from government tax revenues that will be exported out-of-state through foreign ownership or employees of the contractor or subcontractor; and

(14) Provide references from all government agencies for which the contractor or subcontractor has previously performed work.

§103D-C Compliance duration; compliance officer. Each contractor and subcontractor shall:

(1) Comply with section 103D-B for the entire duration of the contract of construction;

(2) Certify compliance with section 103D-B, under oath, by an officer of the contractor or subcontractor, respectively, to the comptroller, county counterpart, or procurement officer, as applicable, on a monthly basis;

(3) Maintain compliance with all applicable local, state, and federal laws relating to labor, wages, health, safety, and environmental protection; and

(4) Take reasonable steps toward satisfying any outstanding judgments or liens against the contractor, subcontractor, and the contractor or subcontractor's executive management.

§103D-D Failure to comply; sanctions. A contractor who submits a bid under section 103D-B(a) or a subcontractor who agrees to subcontract under a contract referenced in section 103D-B(a) and who fails to comply with section 103D-B, shall be subject to sanctions, which shall include any or all of the following, at the discretion of the comptroller, county counterpart, or procurement officer, as applicable:

(1) Temporary suspension of work on the project until the contractor or subcontractor complies with section 103D-B;

(2) Withholding of payment on the contract or subcontract, as applicable, until the contractor or subcontractor complies with section 103D-B;

(3) Permanent disqualification of the contractor or subcontractor from any further work on the project;

(4) Recovery by the State or county, as applicable, of any moneys expended on the contract or subcontract, as applicable; and

(5) Proceedings for debarment or suspension of the contractor or subcontractor under section 103D-702."

SECTION 3. Section 103D-102, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(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] are available from multiple sources but for which procurement by competitive means is either not practicable or not advantageous to the State;

(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; and

(6) With a bidder or offeror who is a United States General Services Administration-approved sole source vendor, who shall be exempt from complying with section 103D-302, 103D-303, or 103D-304, as applicable, in any procurement funded by state and federal matching funds, if the bidder or offeror was responsible for obtaining and was the recipient of the federal funds."

SECTION 4. 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 5. Section 103D-104, Hawaii Revised Statutes, is amended as follows:

1. By adding two new definitions to be appropriately inserted and to read:

""Executive management" means any person who is an owner, general partner, limited partner, or officer of a contractor or subcontractor.

"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:

""Contractor" means any [~~person having~~] individual, partnership, firm, corporation, joint venture, or other legal entity who is or seeks to be a party to 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 the contractor's agents or employees.

"Procurement officer" means [~~any~~] a person [~~authorized~~] delegated in writing the authority 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 deleting 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 6. 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 7. 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 8. 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~~] Procurement of professional services [~~procurement~~]);

[~~(3)~~] (4) Section 103D-305 (Small purchases; prohibition against parceling);

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

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

SECTION 9. 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~~] The 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[.], and shall be subject to written public comment submitted to the chief procurement officer. Bid results for procurements conducted on an electronic procurement system shall be available on the system.

(e) When a written public comment presents a credible allegation of a fact that, if true, would render the bid nonresponsive or ineligible under sections 103D-A through 103D‑C, the chief procurement officer shall audit the books and records of the bidder that submitted the bid for the purpose of determining the truth or falsity of that allegation. If, after reasonable notice to the bidder and reasonable opportunity to be heard, the chief procurement officer, after consultation with the using agency and the attorney general or corporation counsel, as applicable, finds that the bid is nonresponsive or ineligible under sections 103D-A through 103D-C, the bidder shall be subject to penalties under section 103D-106 and section 103D‑D.

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

[~~(f)~~] (g) 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 bid and be 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.~~] incorporate by reference the requirements of sections 103D-A through 103D-C. No criteria [~~may~~] that are not set forth in the invitation for bids shall be used in bid evaluation [~~that are not set forth in the invitation for bids~~].

[~~(g)~~] (h) 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.~~] procurement officer.

[~~(h)~~] (i) 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 that 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)~~] (j) When it is not practicable to initially prepare a purchase description to support an award based on price, an invitation for bids[~~, which~~] may be used that 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."

SECTION 10. Section 103D-303, Hawaii Revised Statutes, is amended to read as follows:

"§103D-303 Competitive sealed proposals. (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.]

(b) Proposals shall be solicited through a request for proposals.

(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[.], and be subject to written public comment submitted to the chief procurement officer.

(e) When a written public comment presents a credible allegation of a fact that, if true, would render the proposal nonresponsive or ineligible under sections 103D-A through 103D‑C, the chief procurement officer shall audit the books and records of the offeror that submitted the proposal for the purpose of determining the truth or falsity of that allegation. If, after reasonable notice to the offeror and reasonable opportunity to be heard, the chief procurement officer, after consultation with the using agency and the attorney general or corporation counsel, as applicable, finds that the proposal is nonresponsive or ineligible under sections 103D-A through 103D‑C, the offeror shall be subject to penalties under section 103D-106 and section 103D-D.

[~~(e)~~] (f) The request for proposals shall state the relative importance of price and other evaluation factors[.] and shall incorporate by reference the requirements of sections 103D-A through 103D-C.

[~~(f)~~] (g) Discussions may be conducted with responsible offerors who submit proposals determined to be reasonably susceptible of being selected for award for the purpose of clarification to assure full understanding of[,] and responsiveness to[,] the solicitation requirements. Offerors shall be accorded fair and equal treatment with respect to any opportunity for discussion and revision of proposals, and revisions may be permitted after submissions and prior to award for the purpose of obtaining best and final offers. In conducting discussions, there shall be no disclosure of any information derived from proposals submitted by competing offerors.

[~~(g)~~] (h) Award shall be made to the responsible offeror whose proposal is determined in writing to be the most advantageous, taking into consideration price and the evaluation factors set forth in the request for proposals. No other factors or criteria shall be used in the evaluation. The contract file shall contain the basis on which the award is made.

[~~(h)~~] (i) 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 offeror a prompt debriefing [~~in accordance with rules adopted by the policy board~~]. Any protest by the [~~requester~~] nonselected offeror 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 11. Section 103D-303.5, Hawaii Revised Statutes, is amended to read as follows:

"[[]§103D-303.5[]] Pre-bid conference. [~~(a) At~~] For a construction or design-build project, 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~~] and 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~~] the procurement officer may conduct a pre-bid conference [~~and shall invite~~] for all potential interested bidders, offerors, subcontractors, and union representatives to attend.

[~~(b) The procurement policy board shall adopt rules under chapter 91 to effectuate this section.~~]"

SECTION 12. Section 103D-305, Hawaii Revised Statutes, is amended by amending subsections (b) and (c) to read as follows:

"(b) Procurements of greater than $50,000 for construction under subsection (a) shall require security by a performance bond delivered to the [~~purchasing agency~~] procurement officer that is:

(1) In a form prescribed by the rules of the policy board;

(2) Executed by a surety company authorized to do business in this State; and

(3) In an amount equal to one hundred per cent of the price specified in the contract,

or shall otherwise be secured by a performance bond in a manner satisfactory to the [~~purchasing agency.~~] procurement officer.

(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 13. 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 board.~~]

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 14. Section 103D-313, Hawaii Revised Statutes, is amended to read as follows:

"[[]§103D-313[]] Types of contracts. (a) Subject to the limitations of this section, any type of contract that will promote the State's best interests may be used.

(b) Cost-reimbursement and cost-plus-a-percentage-of-cost contracts may be used only when the chief procurement officer determines in writing that such a contract is likely to be less costly than any other type of contract or that it is impracticable to obtain the goods, services, or construction required except by means of such a contract. Cost-reimbursement and cost-plus-a-percentage-of-cost contracts shall not be used if their use would jeopardize the receipt of federal assistance moneys or reduce the amount of such assistance under any applicable federal statute or regulation.

[~~(c) In addition to the requirements of subsections (a) and (b), a cost-plus-a-percentage-of-cost contract may not be awarded unless:~~

~~(1)~~ Notice is given to the head of the compliance audit unit, president of the senate, speaker of the house of representatives, and the chairpersons of the senate ways and means and house finance committees; and

~~(2)~~ ~~Notice is conspicuously posted in an area accessible to the public in the office of the chief procurement officer and available for public inspection during normal business hours.~~

~~(d) The policy board shall adopt rules to implement this section.~~]"

SECTION 15. Section 103D-314, Hawaii Revised Statutes, is amended to read as follows:

"[[]§103D-314[]] Approval of accounting system. Except with respect to firm fixed-price contracts, no contract shall be used unless it has been determined in writing by the chief procurement officer, [~~the head of a purchasing agency~~] procurement officer, or a designee of either officer that:

(1) The proposed contractor's accounting system will permit timely development of all necessary cost data in the form required by the specific contract type contemplated; and

(2) The proposed contractor's accounting system is adequate to allocate costs in accordance with generally accepted accounting principles."

SECTION 16. Section 103D-316, Hawaii Revised Statutes, is amended to read as follows:

"[[]§103D-316[]] Right to inspect plant. The [~~State,~~] 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 17. Section 103D-317, Hawaii Revised Statutes, is amended to read as follows:

"[[]§103D-317[]] Right to audit records. (a) The [~~purchasing agency,~~] procurement officer, 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 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 18. 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 19. 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~~] $50,000 or, if the contract is for goods or services, 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."

SECTION 20. 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 and shall become binding on the parties upon [~~the~~] execution of the contract if the contract which is awarded exceeds [~~$25,000~~] $50,000 and is for construction, or if the [~~purchasing agency secures the approval of the chief~~] procurement officer[:] includes a requirement for such bonds or security 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)."

SECTION 21. 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 22. 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~~] procurement officer 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 23. Section 103D-701, Hawaii Revised Statutes, is amended by amending subsection (f) to read as follows:

"(f) [~~In the event of~~] If a timely protest under subsection (a)[,] occurs, no further action shall be taken on the solicitation or the award of the contract until the chief procurement officer makes a written determination that the award of the contract without delay is necessary to protect substantial interests of the State. Notwithstanding section 103D-709 and any law to the contrary, a decision under this subsection shall be final, conclusive, and not subject to appeal."

SECTION 24. Section 103D-709, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) The several hearings officers appointed by the director of the department of commerce and consumer affairs pursuant to section 26-9(f) shall have jurisdiction to review and determine de novo, any request from any bidder, offeror, contractor, person aggrieved under section 103D-106, or governmental body aggrieved by a determination of the chief procurement officer, [~~head of a purchasing agency~~] procurement officer, or a designee of either officer under section 103D-310, 103D-701, or 103D-702."

SECTION 25. Section 103D-710, Hawaii Revised Statutes, is amended by amending subsection (e) to read as follows:

"(e) No later than thirty days from the filing of the application for judicial review, based upon review of the record the circuit court may affirm the decision of the hearings officer issued pursuant to section 103D-709 or remand the case with instructions for further proceedings; or it may reverse or modify the decision and order if substantial rights may have been prejudiced because the administrative findings, conclusions, decisions, or orders are:

(1) In violation of constitutional or statutory provisions;

(2) In excess of the statutory authority or jurisdiction of the chief procurement officer or [~~head of the purchasing agency~~] procurement officer;

(3) Made upon unlawful procedure;

(4) Affected by other error of law;

(5) Clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record; or

(6) Arbitrary, or capricious, or characterized by abuse of discretion or clearly unwarranted exercise of discretion;

provided that if an application for judicial review is not resolved by the thirtieth day from the filing of the application, the court shall lose jurisdiction and the decision of the hearings officer shall not be disturbed. All time limitations on actions, as provided for in section 103D-712, shall remain in effect."

SECTION 26. Section 103D-1001, Hawaii Revised Statutes, is amended by deleting the definitions of "Hawaii software development business" and "software development".

[""Hawaii software development business" means any person, agency, corporation, or other business entity with its principal place of business or ancillary headquarters located in the State and that proposes to obtain eighty per cent of the labor for software development from persons domiciled in Hawaii.

"Software development" means any work related to feasibility studies, system requirements analysis, system design alternatives analysis, system external specifications, system internal specifications, programming, testing, debugging, or implementation for an electronic data processing system."]

SECTION 27. Section 103D-1002, Hawaii Revised Statutes, is amended as follows:

1. By amending subsection (a) to read:

"(a) A [~~purchasing agency~~] procurement officer shall review all specifications in a bid or proposal for purchase of Hawaii products where these products are available."

2. By amending subsection (j) to read:

"(j) Any purchase made or any contract awarded or executed in violation of this section shall be void and no payment shall be made by any [~~purchasing agency~~] procurement officer on account of the purchase or contract."

SECTION 28. Section 103D-1005, Hawaii Revised Statutes, is amended as follows:

1. By amending subsections (a) and (b) to read:

"(a) To encourage the use of recycled products, contracts [~~shall~~] may be awarded to the lowest responsible and responsive bidders, with preference being given to the products containing recycled material. The policy [~~board shall adopt rules in accordance with chapter 91 governing preference for recycled products. The~~] board's rules shall establish percentages of preference and the method of determining the contents of recycled material to qualify various products for preference.

(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 29. 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 procuring agency;

(2) Negotiate the conditions and terms for the purchase, including the price of the offer, between the procuring 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 30. 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 31. 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 32. 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 33. Section 103D-1003, Hawaii Revised Statutes, is repealed.

["~~§103D-1003 Printing, binding, and stationery work.~~ (a) All bids submitted for a printing, binding, or stationery section 103D-302 contract in which all work will be performed in-state, including all preparatory work, presswork, bindery work, and any other production-related work, to include storage and shipping costs, shall receive a fifteen per cent preference for purposes of bid evaluation.

(b) Where bids are for work performed in-state and out-of-state, then for the purpose of selecting the lowest bid submitted only, the amount bid for work performed out-of-state shall be increased by fifteen per cent. The lowest total bid, taking the preference into consideration, shall be awarded the contract unless the solicitation provides for additional award criteria. The contract amount awarded, however, shall be the amount of the price offered, exclusive of the preference."]

SECTION 34. Section 103D-1006, Hawaii Revised Statutes, is repealed.

["~~§103D-1006 Software development businesses.~~ (a) In any expenditure of public funds for software development, the use of Hawaii software development businesses shall be preferred. Where a package bid or response to a request for proposal contains both Hawaii and non-Hawaii software development businesses, then for the purpose of selecting the lowest bid or purchase price only, the bid or offer by a non-Hawaii software development business shall be increased by a preference percentage pursuant to rules adopted by the policy board.

~~(b) This section shall not apply when precluded by federal requirements for competitive bidding.~~"]

SECTION 35. The comptroller shall submit a report to the legislature no later than sixty days before the commencement of the 2011 regular session on the implementation of sections 1 and 2 of this Act. The report shall include a listing of all contracts awarded under sections 1 and 2 of this Act by the State from the effective date of the Act and progress reports for those contracts, data on total state revenues spent on contracts awarded subject to sections 1 and 2 of this Act, data on employment and wages under contracts subject to sections 1 and 2 of this Act, data on preferences awarded under section 1 of this Act, the number of challenges to bids or offers made under sections 9 and 10 of this Act and the disposition of each challenge, information on the implementation of sections 1 and 2 of this Act, and recommendations for further legislation to better effectuate the purposes of sections 1 and 2 of this Act.

SECTION 36. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 37. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 38. This Act shall take effect on January 1, 2010; provided that:

(1) Sections 1 and 2 shall take effect on January 1, 2011;

(2) Amendments made to sections 103D-102(b) and 103D-305, Hawaii Revised Statutes, by this Act shall not be repealed when sections 103D-102 and 103D-305, Hawaii Revised Statutes, are reenacted pursuant to section 14(1) of Act 175, Session Laws of Hawaii 2009; and

(3) Amendments made to section 103D-710, Hawaii Revised Statutes, by this Act shall not be repealed when section 103D-710, Hawaii Revised Statutes, is reenacted pursuant to section 14(2) of Act 175, Session Laws of Hawaii 2009.

THE SENATE	S.B. NO.	2062
TWENTY-FIFTH LEGISLATURE, 2010		S.D. 1
STATE OF HAWAII