Report Title:

Contract and Procurement Fraud; Bid Rigging

 

Description:

Creates the offenses of bid rigging in the first, second, and third degrees as class A, B, and C felonies, respectively.

 

THE SENATE

S.B. NO.

1612

TWENTY-FIRST LEGISLATURE, 2001

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to Contract and Procurement Fraud.

 

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

SECTION 1. The Hawaii Revised Statutes is amended by adding a new chapter to read as follows:

"Chapter 708B

CONTRACT AND PROCUREMENT FRAUD

708B-1 Short title. This chapter shall be known and may be cited as the "Bid Rigging Act".

708B-2 Definitions. As used in this chapter, unless the context otherwise requires:

"Benefit" means advantage, profit, fruit, privilege, gain, or interest. Benefit can be made directly to a person or entity, or indirectly to an entity, associate, or person in the line of consanguinity, or affinity.

"Bid" means an offer by an intending purchaser to pay a designated price for property which is about to be sold at auction, or an offer to perform a contract for work and labor or supplying materials or goods at a specific price.

"Bidder" means one who makes a bid, including one who offers to pay a specified price for an article offered for sale at a public auction or to perform a certain contract for a specific price.

"Bid price" means the amount specified in a bid as the amount for which the bidder will perform the work or buy the property.

"Bid rigging" means a collusion between bidders competing during the bidding process so that one or more bidders will benefit from the awarded bid.

"Bid rotation" means collusive bidding when two or more prospective bidders exchange information on contract solicitations, taking turns at submitting the low or high bid.

"Bid suppression" means the collusion of one or more bidders agreeing with at least one or more other bidders to refrain from bidding or agree to withdraw a submitted bid, the act of fabricating bid protests, or the coercion of others not to deal with non conspirators who submit bids.

"Collusion" means an agreement between two or more persons to defraud a person or entity of rights by the forms of law, or to obtain an object forbidden by law, and includes a secret combination, conspiracy, or concert of action between two or more persons for fraudulent or deceitful purpose.

"Competitive bidding" means bids which are submitted as the result of public notice and advertising of an intended sale or purchase.

"Conflict of interest" means an unethical relationship with public officials and fiduciaries and their relationship to matters of private interest or gain to them, including a clash between public interest and private interest and the private pecuniary interest of the individual concerned.

"Contract" means an agreement between two or more persons which creates an obligation to perform or not to perform a particular action.

"Contractor" means a person who, in the pursuit of any independent business, undertakes to perform a specific work for another, using the contractor's own means and methods without submitting to the other person's control in respect to all details of the project, and who renders service in the course of an independent occupation representing the will of the employer only as to the result of the work and not as to the means by which it is accomplished.

"Defective pricing" means the failure of a person or entity to disclose accurate cost or pricing data in its price proposal, resulting in an increased contract price, including a deviation from a regulated price schedule established by a regulatory agency of this State or any county of the State.

"Participate" means to receive or have a part or share of, to partake of, experience in common with others, to have or enjoy a part, or share in common with others.

"Phantom bid" means the formulation, creation, or fabrication of a bid from non-existing entities or person for the purpose or giving the appearance of vigorous competition.

"Procurement" means the act of obtaining, attainment, acquisition, bringing about, or effecting goods and services that are obtained through a bidding process.

"Product substitution" means the substitution of contract-specified materials, goods, products, or services in quality or quantity.

"Subcontractor" means one who takes a portion of a contract from the principal contractor or another subcontractor, including one who has entered into a contract, either express or implied, for the performance of an act with the person who has already contracted for its performance.

708B-3 Bid rigging in the first degree. (1) A person commits the offense of bid rigging in the first degree if, being an employee of the state or county government who is involved in a procurement process with competitive bidding in which that person manages, supervises, controls, participates in, or is involved directly or indirectly, and with the intent to defraud the government or another bidder:

(a) Solicits two or more bidders to participate in a scheme or conspiracy to obtain benefits;

(b) Knowingly benefits by submitting a bid which that person knew to have bid rotation, bid suppression, or collusion;

(c) Submits false information of bid price, defective pricing, phantom bids, or product substitution;

(d) Allows the winning bidder to subcontract with another competitive bidder that had lost a bid against the winning bidder in the same contract; or

(e) Fails to disclose a conflict of interest with a private interest with a bidder pursuant to section 84-14.

(2) Bid rigging in the first degree is a class A felony.

708B-4 Bid rigging in the second degree. (1) A person commits the offense of bid rigging in the second degree if, with the intent to defraud another bidder, the person:

(a) Solicits two or more bidders to participate in a scheme or conspiracy to obtain benefits;

(b) Knowingly benefits by submitting a bid which that person knew to have bid rotation, bid suppression, or collusion;

(c) Submits false information of bid price, defective pricing, phantom bids, or product substitution; or

(d) Allows the winning bidder to subcontract with another competitive bidder that had lost a bid against the winning bidder in the same contract.

(2) Bid rigging in the second degree is a class B felony.

708B-5 Bid rigging in the third degree. (1) A person commits the offense of bid rigging in the third degree if, being an employee of the state or county government, the person recklessly:

(a) Solicits two or more bidders to participate in a scheme or conspiracy to obtain benefits;

(b) Submits a bid rotation, bid suppression, or bid collusion;

(c) Submits false information of bid price, defective pricing, phantom bids, or product substitution;

(d) Allows the winning bidder to subcontract with another competitive bidder that had lost a bid against the winning bidder in the same contract; or

(e) Violates or disregards any administrative directives, internal policies, or written or verbal instructions concerning documents involved in the bidding process.

(2) Bid rigging in the third degree is a class C felony.

708B-6 Prima facie evidence. A person's status as an officer or employee of the government is prima facie evidence that the person knows the person's legal obligations with respect to making payments and other dispositions. If the officer or employee fails to account for the employee's conduct upon lawful demand, or if an audit reveals a falsification of a bid, it shall be prima facie evidence that the officer or employee has intentionally committed bid rigging."

SECTION 2. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.

SECTION 3. This Act shall take effect upon its approval.

INTRODUCED BY:

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