HB723

SECTION 1. The legislature finds that supporting local businesses strengthens Hawaii's economy, creates jobs, reduces the carbon footprint associated with importing goods and services, and promotes food and resource security. Despite these benefits, local businesses often face barriers to competing for large state contracts due to their size and capacity.

The purpose of this Act is to amend the Hawaii public procurement code to:

(1) Mandate state agencies to prioritize purchasing from local vendors whenever feasible;

(2) Allow state agencies to split contracts across multiple local vendors to enhance participation and competitiveness; and

(3) Specify when contracts may be awarded to multiple vendors.

SECTION 2. Chapter 103D, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§103D- Local vendors; preference; multiple awards. (a) All state agencies, when expending public funds for goods, services, or construction, shall give preference to local vendors; provided that the goods, services, or construction meet the specifications and standards required by the agency and are available at a reasonable cost. In evaluating bids, agencies shall apply a fifteen per cent preference to bids submitted by local vendors.

(b) Agencies may split contracts into smaller parcels to allow multiple local vendors to bid for and secure portions of state procurement contracts; provided that:

(1) Splitting contracts does not significantly compromise project efficiency or increase costs beyond reason;

(2) A procurement officer certifies that splitting the contract aligns with the purpose of this section; and

(3) Any split contract complies with applicable legal and ethical standards.

(c) Each state agency shall submit an annual report to the legislature, no later than twenty days prior to the convening of each regular session, detailing:

(1) The percentage of goods, services, or construction procured from local vendors;

(2) Challenges encountered in implementing this section; and

(3) Recommendations for further legislative action to enhance local procurement.

(d) For purposes of this section, "reasonable cost" means costs that do not exceed fifteen per cent more than the lowest responsible bid from a non-local vendor, subject to review by the procurement officer."

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

""Local vendor" means a business that is headquartered in Hawaii and primarily employs Hawaii residents."

SECTION 4. Section 103D-302, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Contracts shall be awarded by competitive sealed bidding except as otherwise provided in [~~section 103D-301.~~] this chapter. 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."

SECTION 5. Section 103D-322, Hawaii Revised Statutes, is amended to read as follows:

"§103D-322 Multiple awards. (a) Contracts may be awarded to multiple vendors if the procurement officer determines that the award:

(1) Promotes efficiency and competition;

(2) Expands opportunities for local vendors; and

(3) Supports the goals of this chapter to ensure the best value for public funds.

(b) The policy board [~~may~~] shall adopt rules authorizing the use and prescribing the manner in which goods, services, or construction may be procured through multiple awards."

SECTION 6. The procurement policy board shall adopt rules pursuant to chapter 91, Hawaii Revised Statutes, to implement this Act. The rules shall include guidance on contract splitting, vendor certification, and reporting requirements.

SECTION 7. This Act shall not be applied so as to impair any contract existing as of the effective date of this Act in a manner violative of either the Constitution of the State of Hawaii or the United States Constitution.

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, 2025.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	723
THIRTY-THIRD LEGISLATURE, 2025
STATE OF HAWAII