SB882

SECTION 1. Hawaii is faced with limited if not declining government funding. This trend is expected to continue, making it more important to partner with the private sector and leverage limited governmental resources. Public-private partnership projects will help the state and local governments undertake certain capital improvement projects in a more cost-effective and efficient manner.

A public-private partnership is a contractual agreement between a public agency and a private entity that allows for a greater risk transfer to the private sector in the delivery and financing of a public project in a manner that creates greater value for the public than traditional delivery methods. In a public-private partnership project, the public agency retains ownership and substantial control but transfers responsibility to the private partner under a single contract, which often is a long-term contract involving lifecycle cost risk. The focus of a public-private partnership is to provide the best value and performance in its delivery of assets and services for the benefit of the general public.

SECTION 2. Chapter 201, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"Part . office of public-private partnership

§201- Office of public-private partnership; established. There is established within the department of accounting and general services an office of public-private partnership to support state and local government utilization of best practices in contracting for public-private partnerships so that the life cycle cost of a project can be delivered at a lower cost than traditional delivery processes.

§201- Duties. The office of public-private partnership shall:

(1) Create a strategic plan for providing advisory services to state and county agencies that includes:

(A) Objectives and goals for the office and criteria to measure the objectives and goals;

(B) A website for maintaining the pipeline of public-private projects and best practice resources that meet the office of public-private partnership's objectives and goals;

(C) A framework for retention of qualified legal, financial, and technical advisors that can assist in the delivery of services contemplated by this part; and

(D) The necessary finances to establish fee structures for advisory services to maintain the office;

(2) Coordinate collaboration among state and county agencies to analyze the value of potential public-private partnership delivery over other delivery methods permitted in chapter 103D and other needs and goals of the state and county agency or using agency;

(3) Provide to the purchasing agency best practice processes for analysis of and contracting for public-private partnerships, including modeling the potential economic benefits and financial outcomes and contract terms and conditions that will achieve those economic benefits and financial outcomes;

(4) Create and maintain an analysis report of the value of public-private partnership delivery over traditional delivery for each public-private partnership project. The analysis report shall include:

(A) Proposed economic benefits;

(B) Potential financial outcomes;

(D) Social benefits;

(5) Assist those state and county agencies and their respective purchasing agencies or using agencies having an interest in public-private partnership projects with the legal authority to coordinate activities that involve responsibilities of multiple governmental agencies or using agencies, and encourage the timely and effective implementation and completion of project milestones and objectives among multiple governmental agencies;

(6) Develop educational and advisory programs that enhance the public-private project procurement process to continuously encourage best practice procurement of public-private partnership projects that will result in improved infrastructure and government services in the Hawaii;

(7) Assist state and county agencies and using agencies in formulating specific program and procurement documents to solicit public-private partnerships; and

(8) Undertake the program established in section 26-6 relating to centralized engineering and office leasing services, to facilitate facility agreements between the State and private investors for the sale of facilities including operation and maintenance of public buildings for departments of the State."

SECTION 3. Section 103D-104, Hawaii Revised Statutes, is amended by adding four new definitions to be appropriately inserted and to read as follows:

""Design-build-finance-operate-maintain" means a project delivery method in which the purchasing agency enters into a single contract for design, construction, financing, operation, and maintenance of an infrastructure facility over a contractually defined period.

"Design-build-operate-maintain" means a project delivery method in which the purchasing agency enters into a single contract for design, construction, operation, and maintenance of an infrastructure facility over a contractually defined period.

"Independent peer reviewer services" means additional professional services provided to the purchasing agency in design-build-operate-maintain or design-build-finance-operate-maintain procurements to confirm that the key elements of the professional engineering and architectural design provided by the contractor conform to the applicable standard of care.

"Infrastructure facility" means a building, structure, or network of buildings, structures, pipes, controls, and equipment that provide transportation, utilities, public education, or public safety services. "Infrastructure facility" includes government office buildings; public schools; courthouses; jails; prisons; water treatment plants, distribution systems, and pumping stations; wastewater treatment plants, collection systems, and pumping stations; solid waste disposal plants, incinerators, landfills, and related facilities; public roads and streets; highways; public parking facilities; public transportation systems, terminals, and rolling stock; and rail, air, and water port structures, terminals, and equipment."

SECTION 4. Section 103D-303, Hawaii Revised Statutes, is amended by amending subsection (i) to read as follows:

"(i) In addition to any other provisions of this section, construction projects may be solicited through a request for proposals to use the design-build [~~method;~~], design-build-finance-operate-maintain, or design-build-operate-maintain project delivery method; provided that:

(1) A request for proposals is issued to prequalify offerors to select a short list of no more than three responsible offerors, prior to the submittal of proposals; provided that the number of offerors to be selected for the short list shall be stated in the request for proposals and prompt notice is given to all offerors as to which offerors have been short-listed;

(2) A conceptual design fee may be paid to non-selected offerors that submit a technically responsive proposal; provided that the cost of the entire project is greater than $1,000,000; [~~and~~]

(3) The criteria for pre-qualification of offerors, design requirements, development documents, proposal evaluation criteria, terms of the payment of a conceptual design fee, or any other pertinent information shall be stated in the request for proposals[.]; and

(4) Each request for proposals to use the design-build-operate-maintain or design-build-finance-operate-maintain project delivery method shall:

(A) State the relative importance of:

(i) Demonstrated compliance with the design requirements;

(ii) Offeror qualifications;

(iii) Financial capacity;

(iv) Project schedule;

(v) Price or lifecycle price for the design-build-operate-maintain and design-build-finance-operate-maintain procurements; and

(vi) Other factors, if any; and

(B) Require each offeror for a project to identify qualified and competent independent peer reviewer services, which shall be an additional evaluation factor in the award of the contract:

(i) If the contract price is estimated to exceed $10,000,000;

(ii) If the contract period of operations and maintenance is at least ten years; or

(iii) In other circumstances established by rule."

SECTION 5. Section 103D-323, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) 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 or, if the contract is for goods or services, the purchasing agency secures the approval of the chief procurement officer. 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[.] and shall be in an amount equal to at least five per cent of the amount of the bid.

(b) [~~Bid security shall be in an amount equal to at least five per cent of the amount of the bid.~~] In addition to other requirements of this section, one or more of the following forms of security shall be required to assure the timely, faithful, and uninterrupted provision of operations and maintenance services as elements of design-build-finance-operate-maintain or design-build-operate-maintain services:

(1) Operations period surety bonds that secure the performance of the contractor's operations and maintenance obligations;

(2) Letters of credit in an amount appropriate to cover the cost to the purchasing agency of preventing infrastructure service interruptions for a period of up to twelve months; and

(3) Appropriate written guarantees from the contractor or, depending upon the circumstances, from parent corporations to secure the recovery of re-procurement costs to the purchasing agency in the event of a default in performance by the contractor."

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 2019-2020 to establish and operate the office of public-private partnership.

The sum appropriated shall be expended by the department of accounting and general services for the purposes of this Act.

SECTION 7. This Act is not intended to modify and shall not be construed to expand or limit any rights and duties of any laws relating to the subject of this Act, unless expressly stated herein.

SECTION 8. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 9. This Act shall take effect on July 1, 2019.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	882
THIRTIETH LEGISLATURE, 2019
STATE OF HAWAII