REPORT TITLE:
State procurement code; protes

DESCRIPTION:
Proposes revisions to the State procurement code to clarify
protest procedures and other remedies available.

 
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THE SENATE                              S.B. NO.           
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO REMEDIES OF PART VII, CHAPTER 103D, HAWAII REVISED
   STATUTES. 



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

 1      SECTION 1.  Section 103D-701, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "[[]103D-701[]]  Authority to resolve protested
 
 4 solicitations and awards.(a)  Any actual or prospective bidder,
 
 5 offeror, or contractor who is aggrieved in connection with the
 
 6 solicitation or award of a contract may protest to the chief
 
 7 procurement officer or [the head of a purchasing agency. The] a
 
 8 designee as specified in the solicitation.  A protest shall be
 
 9 submitted in writing within five working days after the aggrieved
 
10 person knows or should have known of the facts giving rise
 
11 thereto[.]; provided that a protest of an award or proposed award
 
12 shall in any event be submitted in writing within five working
 
13 days after the posting of award of the contract either under
 
14 section 103D-302 or section 103D-303, as applicable; and provided
 
15 further that no protest based upon the content of the
 
16 solicitation shall be considered unless it is submitted in
 
17 writing prior to the date set for the receipt of offers.
 
18      (b)  The chief procurement officer[, the head of a
 
19 purchasing agency,] or a designee [of either officer], prior to
 

 
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 1 the commencement of an administrative proceeding under section
 
 2 103D-709 or an action in court [concerning the controversy,]
 
 3 pursuant to section 103D-710, may settle and resolve a protest
 
 4 [of an aggrieved bidder, offeror, or contractor, actual or
 
 5 prospective,] concerning the solicitation or award of a contract.
 
 6 This authority shall be exercised in accordance with rules
 
 7 adopted by the policy board.
 
 8      (c)  If the protest is not resolved by mutual agreement, the
 
 9 chief procurement officer[, the head of a purchasing agency,] or
 
10 a designee [of either officer] shall promptly issue a decision in
 
11 writing[.] to uphold or deny the protest.  The decision shall:
 
12      (1)  State the reasons for the action taken; and
 
13      (2)  Inform the protestor of the protestor's right to
 
14           [review] an administrative proceeding as provided in
 
15           this part[.], if applicable.
 
16      (d)  A copy of the decision under subsection (c) shall be
 
17 mailed or otherwise furnished immediately to the protestor and
 
18 any other party intervening.
 
19      (e)  A decision under subsection (c) shall be final and
 
20 conclusive, unless [fraudulent, or] any person adversely affected
 
21 by the decision commences an administrative proceeding under
 
22 section 103D-709.
 
23      (f)  In the event of a timely protest under subsection (a),
 

 
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 1 no further action shall be taken on the solicitation or the award
 
 2 of the contract until the chief procurement officer[, after
 
 3 consultation with the head of the using agency, or the head of
 
 4 the purchasing agency,] makes a written determination that the
 
 5 award of the contract without delay is necessary to protect
 
 6 substantial interests of the State.
 
 7      (g)  In addition to any other relief, when a protest is
 
 8 sustained and the [protesting bidder or offeror] protestor should
 
 9 have been awarded the contract under the solicitation but is not,
 
10 then the [protesting bidder or offeror] protestor shall be
 
11 entitled to the [reasonable] actual costs reasonably incurred in
 
12 connection with the solicitation, including bid or proposal
 
13 preparation costs [other than] but not attorney's fees."
 
14      SECTION 2.  Section 103D-702, Hawaii Revised Statutes, is
 
15 amended to read as follows:
 
16      "[[]103D-702[]]  Authority to debar or suspend.(a) After
 
17 reasonable notice to the person involved and reasonable
 
18 opportunity for that person to be heard, the chief procurement
 
19 officer [or the head of the purchasing agency], after
 
20 consultation with the using agency and the [department of]
 
21 attorney general[,] or corporation counsel, may debar a person
 
22 for cause from consideration for award of all public contracts[.]
 
23 and from performance on any public contract.  The debarment
 

 
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 1 period shall not [be for a period of more than] exceed three
 
 2 years.  The same officer, after consultation with the using
 
 3 agency and the [department of the] attorney general[,] or
 
 4 corporation counsel, may suspend a person from consideration for
 
 5 award of all public contracts and from performance on any public
 
 6 contract if there is probable cause for debarment.  The
 
 7 suspension period shall not [be for a period exceeding] exceed
 
 8 three months.  The authority to debar or suspend shall be
 
 9 exercised in accordance with the procedures prescribed by rules
 
10 adopted by the policy board.
 
11      (b)  The causes for debarment or suspension include the
 
12 following:
 
13      (1)  Conviction for commission of a criminal offense as an
 
14           incident to obtaining or attempting to obtain a public
 
15           or private contract or subcontract, or in the
 
16           performance of the contract or subcontract;
 
17      (2)  Conviction under state or federal statutes relating to
 
18           embezzlement, theft, forgery, bribery, falsification or
 
19           destruction of records, receiving stolen property, or
 
20           any other offense indicating a lack of business
 
21           integrity or business honesty which currently,
 
22           seriously, and directly affects responsibility as a
 
23           contractor;
 

 
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 1      (3)  Conviction under state or federal antitrust statutes
 
 2           arising out of the submission of bids or proposals;
 
 3      (4)  Violation of contract provisions, as set forth below,
 
 4           of a character which is regarded by the chief
 
 5           procurement officer [or the head of a purchasing
 
 6           agency] to be so serious as to justify debarment
 
 7           action:
 
 8           (A)  Deliberate failure without good cause to perform
 
 9                in accordance with the specifications or within
 
10                the time limit provided in the contract; or
 
11           (B)  A recent record of failure to perform or of
 
12                unsatisfactory performance in accordance with the
 
13                terms of one or more contracts; provided that
 
14                failure to perform or unsatisfactory performance
 
15                caused by acts beyond the control of the
 
16                contractor shall not be considered to be a basis
 
17                for debarment;
 
18      (5)  Any other cause the chief procurement officer [or the
 
19           head of a purchasing agency] determines to be so
 
20           serious and compelling as to affect responsibility as a
 
21           contractor, including debarment by another governmental
 
22           entity for any cause listed in the rules of the policy
 
23           board; and
 

 
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 1      (6)  Violation of the ethical standards set forth in chapter
 
 2           84 and its implementing rules, or the charters and
 
 3           ordinances of the several counties and their
 
 4           implementing rules.
 
 5      (c)  The chief procurement officer [or the head of a
 
 6 purchasing agency] shall issue a written decision to debar or
 
 7 suspend.  The decision shall:
 
 8      (1)  State the reasons for the action taken; and
 
 9      (2)  Inform the debarred or suspended person involved of its
 
10           rights to review as provided in this part.
 
11      (d)  A copy of the decision under subsection (c) shall be
 
12 mailed or otherwise furnished immediately to the debarred or
 
13 suspended person and any other party intervening.
 
14      (e)  The chief procurement officer shall transmit a copy of
 
15 the decision to debar or suspend a contractor to the state
 
16 procurement office, which shall distribute a list to all
 
17 governmental bodies containing the names of persons or firms
 
18 debarred or suspended from consideration for award of all public
 
19 contracts [by the State.] and from performance on any public
 
20 contract.
 
21      (f)  Upon written notification under subsection (e), the
 
22 chief procurement officer shall make a written determination
 
23 whether to allow the debarred or suspended person or firm to
 

 
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 1 continue performance on any contract awarded prior to the
 
 2 effective date of the debarment or suspension.
 
 3      [(f)] (g)  A decision under subsection (c) shall be final
 
 4 and conclusive, unless [fraudulent, or] the debarred or suspended
 
 5 person commences an administrative proceeding under section
 
 6 103D-709."
 
 7      SECTION 3.  Section 103D-703, Hawaii Revised Statutes, is
 
 8 amended to read as follows:
 
 9      "[[]103D-703[]]  Authority to resolve contract and breach
 
10 of contract controversies.(a)  This section applies to
 
11 controversies between a governmental body and a contractor which
 
12 arise under, or by virtue of, a contract between them, including,
 
13 without limitation, controversies based upon breach of contract,
 
14 mistake, misrepresentation, or other cause for contract
 
15 modification or rescission.
 
16      (b)  The chief procurement officer[, the head of a
 
17 purchasing agency,] or [a] the chief procurement officer's
 
18 designee [of either officer] is authorized, prior to commencement
 
19 of an action in a court [concerning the controversy,] brought
 
20 pursuant to section 103D-711, to settle and resolve a controversy
 
21 described in subsection (a).  This authority shall be exercised
 
22 in accordance with rules adopted by the policy board.
 
23      (c)  If such a controversy is not resolved by mutual
 

 
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 1 agreement, the chief procurement officer[, the head of a
 
 2 purchasing agency,] or the designee [of either officer] shall
 
 3 promptly issue a decision in writing.  The decision shall:
 
 4      (1)  State the reasons for the action taken; and
 
 5      (2)  Inform the contractor of its right to initiate a
 
 6           judicial action as provided in this part.
 
 7      (d)  A copy of the decision under subsection (c) shall be
 
 8 mailed or otherwise furnished immediately to the contractor.
 
 9      (e)  The decision under subsection (c) shall be final and
 
10 conclusive unless [fraudulent, or] the contractor commences a
 
11 judicial action in accordance with section 103D-711.
 
12      (f)  If the chief procurement officer[, the head of the
 
13 purchasing agency,] or the designee [of either officer] does not
 
14 issue the written decision required under subsection (c) within
 
15 ninety days after written request for a final decision, or within
 
16 such longer period as may be agreed upon by the parties, then the
 
17 contractor may proceed as if an adverse decision had been
 
18 received."
 
19      SECTION 4.  Section 103D-705, Hawaii Revised Statutes, is
 
20 amended to read as follows:
 
21      "[[]103D-705[]]  Solicitations or awards in violation of
 
22 law.  The provisions of section 103D-706 and section 103D-707
 
23 apply where it is determined [administratively] by the chief
 

 
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 1 procurement officer or a designee under sections 103D-701[,] or
 
 2 103D-703[, and] or where it is determined administratively under
 
 3 section 103D-709, or upon judicial review [or action] under
 
 4 [sections] section 103D-710 [and] or judicial action under
 
 5 section 103D-711, that a solicitation or award of a contract is
 
 6 in violation of the law."
 
 7      SECTION 5.  Section 103D-707, Hawaii Revised Statutes, is
 
 8 amended to read as follows:
 
 9      "[[]103D-707[]]  Remedies after an award.  If after an
 
10 award it is determined that a solicitation or award of a contract
 
11 is in violation of law, then:
 
12      (1)  If the person awarded the contract has not acted
 
13           fraudulently or in bad faith:
 
14           (A)  The contract may be ratified and affirmed, or
 
15                modified, provided it is determined that doing so
 
16                is in the best interests of the State; or
 
17           (B)  The contract may be terminated and the person
 
18                awarded the contract shall be compensated for the
 
19                actual expenses, other than attorney's fees,
 
20                reasonably incurred under the contract, plus a
 
21                reasonable profit, [prior to the] with such
 
22                expenses and profit calculated not for the entire
 
23                term of the contract but only to the point of
 

 
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 1                termination;
 
 2      (2)  If the person awarded the contract has acted
 
 3           fraudulently or in bad faith:
 
 4           (A)  The contract may be declared null and void; or
 
 5           (B)  The contract may be ratified and affirmed, or
 
 6                modified, if the action is in the best interests
 
 7                of the State, without prejudice to the State's
 
 8                rights to such damages as may be appropriate."
 
 9      SECTION 6.  Section 103D-708, Hawaii Revised Statutes, is
 
10 amended to read as follows:
 
11      "[[]103D-708[]]  Interest.  Interest on amounts ultimately
 
12 determined to be due to a contractor or the [State] agency shall
 
13 be payable at the statutory rate applicable to judgments against
 
14 the State under chapter 662 from the date the agency receives
 
15 notice of the written claim [arose] through the date of decision
 
16 or judgment, whichever is later[.]except that if an action is
 
17 initiated in circuit court pursuant to section 103D-711, interest
 
18 under this section shall only be calculated until the time such
 
19 action is initiated."
 
20      SECTION 7.  Section 103D-709, Hawaii Revised Statutes, is
 
21 amended by amending subsection (c) to read as follows:
 
22      "(c)  Only parties to the protest made and decided pursuant
 
23 to section 103D-701 may initiate a proceeding under this section.
 

 
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 1 The party initiating the proceeding shall have the burden of
 
 2 proof, including the burden of producing evidence as well as the
 
 3 burden of persuasion.  The degrees or quantum of proof shall be a
 
 4 preponderance of the evidence.  All parties to the proceeding
 
 5 shall be afforded an opportunity to present oral or documentary
 
 6 evidence, conduct cross-examination as may be required, and
 
 7 argument on all issues involved.  The rules of evidence shall [be
 
 8 strictly adhered to.] apply."
 
 9      SECTION 8.  Section 103D-709, Hawaii Revised Statutes, is
 
10 amended by amending subsection (f) to read as follows:
 
11      "(f)  [Hearings officers] The hearings officer shall decide
 
12 whether the determinations of the chief procurement officer or
 
13 the [head of the purchasing agency, or their respective
 
14 designees] chief procurement officer's designee were in
 
15 accordance with the Constitution, statutes, [regulations,] rules,
 
16 and the terms and conditions of the solicitation or contract[.],
 
17 and shall order such relief as may be appropriate in accordance
 
18 with the provisions of this chapter."
 
19      SECTION 9.  Section 103D-710, Hawaii Revised Statutes, is
 
20 amended by amending subsection (a) to read as follows:
 
21      "(a)  [Any person or governmental body] Only parties to
 
22 proceedings under section 103D-709 who are aggrieved by a final
 
23 decision of a hearings officer under that section [103D-709] may
 

 
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 1 apply for judicial review of that decision.  The proceedings for
 
 2 review shall be instituted in the supreme court."
 
 3      SECTION 10.  Section 103D-711, Hawaii Revised Statutes, is
 
 4 amended to read as follows:
 
 5      "[[]103D-711[]]  Judicial action.(a)  [A person] Only
 
 6 parties to the contract aggrieved by a decision issued pursuant
 
 7 to section 103D-703 by a state chief procurement officer or [head
 
 8 of a purchasing agency] a designee may initiate an action under
 
 9 section 661-1.
 
10      (b)  A person aggrieved by a decision issued pursuant to
 
11 section 103D-703 by a county chief procurement officer or [head
 
12 of a purchasing agency] a designee may initiate an action under,
 
13 or by virtue of, the contract in controversy in the circuit
 
14 court.
 
15      (c)  A governmental body aggrieved by a decision issued
 
16 pursuant to section 103D-703 by a state or county chief
 
17 procurement officer or [head of a purchasing agency] a designee
 
18 may initiate an action under, or by virtue of, the contract in
 
19 controversy in the circuit court.
 
20      (d)  To the extent the remedies provided in this part,
 
21 including provisions for interest, differ from the remedies
 
22 available against the State under chapter 661, the remedies shall
 
23 be as provided in this part.  Only the attorney general may
 

 
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 1 settle and resolve a matter filed in the courts against the State
 
 2 pursuant to this section."
 
 3      SECTION 11.  Section 103D-712, Hawaii Revised Statutes, is
 
 4 amended by amending subsection (a) to read as follows:
 
 5      "(a)  Requests for administrative review under section
 
 6 103D-709 shall be made directly to the office of administrative
 
 7 hearing of the department of commerce and consumer affairs within
 
 8 seven calendar days of the issuance of a written determination
 
 9 under [sections] section 103D-310, 103D-701, or 103D-702."
 
10      SECTION 12.  Statutory material to be repealed is bracketed.
 
11 New statutory material is underscored.
 
12      SECTION 13.  This Act shall take effect on July 1, 1999. 
 
13 
 
14                           INTRODUCED BY:  _______________________
 

 
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