Report Title:

Hawaii Procurement Code

Description:

Revises statutory provisions to prevent the practice of "bid shopping" on Hawaii contracts for the construction of public works. Makes technical Revisions to the Hawaii Procurement Code.

THE SENATE

S.B. NO.

2823

TWENTY-SECOND LEGISLATURE, 2004

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO PROCUREMENT.

 

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

SECTION 1. The purpose of this Act is to prevent the practice of "bid shopping" on Hawaii contracts for the construction of public works and make technical corrections to the Hawaii Procurement Code.

(1) The legislature finds that some construction firms engage in the practice of submitting bids or proposals for government construction contracts either:

(A) Without firm bids from subcontractors properly licensed to perform all contract work; or

(B) With firm bids from properly licensed subcontractors but with the intent of disclosing the subcontractor bid price upon or after award of the prime contract and then offering the subcontracted work to another subcontractor at a lower subcontract price.

(2) The legislature finds that this practice of "bid shopping" is used by prime contractors solely for the purpose of coercing subcontractors to undercut initial bids of others and maximizing profit of the prime contractor at the expense of honest subcontractors. As such, "bid shopping" is unethical and destructive to the integrity of the Hawaii public procurement system.

(3) The legislature has previously sought to eliminate "bid shopping" by requiring the listing of subcontractors in all sealed bid procurements for construction. However, the current statutory "anti-bid shopping" provisions are inadequate because (A) they do not prevent "bid shopping" in procurements awarded through sealed proposals; (B) they impose no sanction against prime contractors who engage in ″bid shopping″; and (C) they result in numerous protests that unnecessarily delay the award of needed construction work.

(4) To remedy these deficiencies, the legislature hereby amends the Hawaii Procurement Code to provide for:

(A) Creation of standard clauses for incorporation into all solicitations and contracts that give all contractors clear notice of the Hawaii "anti-bid shopping" law;

(B) Mandatory submission of subcontractor lists with all bids and best and final offers;

(C) Due process that allows bidders and offerors, who may have inadvertently omitted required subcontractor names, to demonstrate the omission was inadvertent and not for the purpose of evading the listing requirement;

(D) Disqualification of bidders and offerors from contract award as not responsible for failing to comply with the "anti-bid shopping" laws;

(E) Potential debarment of bidders and offerors who engage in "bid shopping" in competitive procurements for construction work; and

(F) Recovery of cost savings to taxpayers from any contractor who engages a subcontractor different from a listed subcontractor at a lower subcontract price.

SECTION 3. Section 103D-310, Hawaii Revised Statutes, is amended to read as follows:

§103D-310 Responsibility of bidders and offerors. (a) Unless the policy board, by rules, specifies otherwise, before submitting a bid or an offer, a prospective bidder or offeror, not less than ten calendar days prior to the day designated for bid opening or submission of offers, shall give written notice of the intention to bid or submit an offer to the procurement officer responsible for that particular procurement.

(b) Whether or not an intention to bid or submit an offer is required, the procurement officer shall determine whether the prospective bidder or offeror has the financial ability, resources, skills, capability, and business integrity necessary to perform the work. For this purpose, the officer, in the officer's discretion, may require any prospective bidder or offeror to submit answers, under oath, to questions contained in a standard form of questionnaire to be prepared by the policy board. Whenever it appears from answers to the questionnaire or otherwise, that the prospective bidder or offeror is not fully qualified and able to perform the intended work, a written determination of nonresponsibility of any bidder or offeror shall be made by the head of the purchasing agency, in accordance with rules adopted by the policy board. The unreasonable failure of a bidder or an offeror to promptly supply information in connection with an inquiry with respect to responsibility may be grounds for a determination of nonresponsibility with respect to such bidder or offeror. The decision of the head of the purchasing agency shall be final unless the bidder or offeror applies for administrative review pursuant to section 103D-709.

(c) For the purposes of further evaluating the responsibility of construction contractors, each invitation for bids and each request for proposals for construction work shall also specify that all bids or, in the case of requests for proposals, all best and final offers include the name of each person or firm to be engaged as a subcontractor in the performance of the contract and the nature and scope of the work to be performed by each. In accordance with rules adopted by the policy board, contractors submitting bids or best and final offers that do not conform to this requirement shall be provided a reasonable time to submit evidence showing any omission of any subcontractor name to perform necessary work was inadvertent and that the contractor had a firm agreement to perform the relevant contract work with a properly licensed subcontractor prior to the time for submission of bids or best and final offers. Contractors that cannot show the inadvertence of such omission and cannot demonstrate a prior firm agreement to perform the relevant work shall be determined to be not responsible for award of the contract and shall be considered for debarment under rules adopted by the policy board.

(d) Contractors shall engage and use all listed subcontractors in the performance of the contract without change, except upon default of the subcontractor. In the event the contractor receiving contract award proposes to use any subcontractor not listed in the contractor′s bid or best and final offer to perform work on the contract, the contractor shall notify the responsible procurement official of the substitution and disclose to the responsible procurement official both the subcontract price bid or offered by the listed subcontractor and the subcontract price bid or offered by the replacement subcontractor. If the replacement of the subcontractor operated to reduce the subcontract price to the contractor, the responsible procurement officer shall reduce the contract price to the contracting agency in same amount as the price reduction realized by the contractor on the subcontract. If the contractor cannot produce documentary proof of the originally listed subcontractor′s bid price, the procurement officer shall assess such liquidated damages as are set out in the mandatory standard construction contract clauses issued by the policy board. The replacement of a subcontractor at a higher price shall not result in any increase in contract price to the contracting agency.

(e) The policy board shall adopt rules to implement the requirements of this section and shall prepare mandatory standard contract clauses to be included in all construction contract solicitations so as to provide all bidders and offerors notice of these requirements.

[(c)] (f) All bidders or offerors, upon award of contract, shall comply with all laws governing entities doing business in the State, including chapters 237, 383, 386, 392, and 393, and shall:

(1) Be incorporated or organized under the laws of the State; or

(2) Be registered to do business in the State as a separate branch or division that is capable of fully performing under the contract.

[Offerors] Bidders or offerors shall produce documents to the procuring officer to demonstrate compliance with this subsection. Any bidder or offeror making a false affirmation or certification under this subsection shall be suspended from further offerings or awards pursuant to section 103D-702.

[(d)] (g) Information furnished by a bidder or an offeror pursuant to [this section] subsections (a) and (b) shall not be disclosed to any person except to law enforcement agencies as provided by chapter 92F."

SECTION 2. Section 103D-302, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

(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.]"

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect upon its approval.

INTRODUCED BY:

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BY REQUEST