Report Title:

Procurement; Hawaii Products; Preference



Allows for persons desiring a Hawaii product preference when submitting bids to self-certify as an alternative to registration on the Hawaii products list. Amends the definition of a Hawaii product by revising the product classes. (SD1)



S.B. NO.



S.D. 1
















SECTION 1. Approximately ninety per cent of Hawaii's food is imported from the continental United States or foreign countries. This equates to an exportation of over $3,000,000,000 annually to places outside of Hawaii.

But, this practice does not occur only on a public commercial level. Even the State of Hawaii and its political subdivisions, as large purchasers and consumers of agricultural products, procure agricultural products outside the State of Hawaii. However, this is contrary to the intent of the procurement laws.

In 1994, Act 186 created a "preference" for purchase of Hawaii products, which was codified into part X of chapter 103D, Hawaii Revised Statutes. The purpose was to provide Hawaii businesses a procurement preference similar to the federal government's "Buy American Act" under Federal Acquisition Regulation 52.225-1.

SECTION 2. Section 103D-1001, Hawaii Revised Statutes, is amended as follows:

1. By adding two new definitions to be appropriately inserted and to read:

"Hawaii input" means the part of the cost of a product having a Hawaii component that is attributable to production, manufacturing, or other expenses arising within the State. "Hawaii input" includes but is not limited to:

(1) The cost to mine, excavate, produce, manufacture, raise, or grow the materials in Hawaii;

(2) The added value of that portion of the cost of imported materials that is incurred after landing in Hawaii, including but not limited to other articles, materials and supplies added to the imported materials;

(3) The cost of labor, variable overhead, utilities, and services incurred in the production and manufacturing of materials or products in the State; and

(4) Fixed overhead cost and amortization or depreciation cost, if any, for buildings, tools and equipment situated and located in the State and utilized in the production or manufacturing of a product.

"Hawaii component" means those articles, materials, supplies and labor incorporated directly into the products acquired for public use under the contract."

2. By amending the definitions of "Hawaii products", "products", and "qualified community rehabilitation program" to read:

""Hawaii products" means products that are mined, excavated, produced, manufactured, raised, or grown in the State and where the [input constitutes no less than twenty-five] cost of the Hawaii input towards the product exceeds fifty per cent of the [manufactured] total cost[;] of the product; provided that:

[(1) Where the value of the input constitutes twenty-five per cent or more, but less than fifty per cent, of the manufactured cost, the product shall be classified as class I;

(2)] (1) Where the value of the input [constitutes] exceeds fifty per cent [or more, but less than seventy-five per cent,] of the [manufactured] total cost, the product shall be classified as class [II;] I; and

[(3) Where the value of the input constitutes seventy-five per cent or more of the manufactured cost, the product shall be classified as class III.]

(2) Where any agricultural, aquacultural, horticultural, silvicultural, floricultural, or livestock product is raised, grown, or harvested in the State, the product shall be classified as class II.

"Products" include materials, manufactures, supplies, merchandise, goods, wares, products, and foodstuffs[.] acquired for public use under the contract.

"Qualified community rehabilitation program" means a nonprofit community rehabilitation program for persons with disabilities that:

(1) Is organized and incorporated under the laws of the United States or this State, and located in this State;

(2) Is operated in the interest of and [[]employs[]] persons with disabilities;

(3) Does not inure any part of its net income to any shareholder or other individual;

(4) Complies with all applicable occupational health and safety standards required by the federal, state, and county governments; and

(5) Holds a current certificate from the United States Department of Labor pursuant to the Fair Labor Standards Act, Title 29 United States Code section 214(c), and is certified by the state department of labor and industrial relations under section 387-9 and applicable administrative rules relating to the employment of persons with disabilities."

SECTION 3. Section 103D-1002, Hawaii Revised Statutes, is amended to read as follows:

"103D-1002 Hawaii products. (a) A purchasing agency shall review all specifications in a bid or proposal for purchase from [the] Hawaii products [list] where these products are available[; provided that the products:

(1) Meet the minimum specifications and the selling price f.o.b. jobsite;

(2) Unloaded including applicable general excise tax and use tax does not exceed the lowest delivered price in Hawaii f.o.b. jobsite; and

(3) Unloaded, including applicable general excise tax and use tax, does not exceed the lowest delivered price of a similar non-Hawaii product by more than:

(A) Three per cent where class I Hawaii products are involved;

(B) Five per cent where class II Hawaii products are involved; or

(C) Ten per cent where class III Hawaii products are involved].

(b) All invitations for bids and requests for proposals shall [include a description]:

(1) Include a description of the products that are listed in the Hawaii products list established pursuant to this section, [and their established classes,] which may be used to complete the scope of work specified in the invitation for bids or request for proposals[, where the products are]; or

(2) Allow self-certification as part of the offer that the Hawaii products qualify for preference;

provided that the offer can be evaluated along with any other published criteria in the solicitation, including but not limited to considerations such as specific nutritional content or equivalent, timing of delivery, quality or freshness, and past performance, if applicable.

All Hawaii products in any bid or request for proposal shall be made available [and meet] for inspection or additional information may be requested to verify that the Hawaii product meets the minimum specifications.

(c) All persons submitting bids or proposals to claim a Hawaii products preference shall designate in their bids which individual product and its price is to be supplied as a Hawaii product.

(d) Where a bid or proposal contains both Hawaii and non-Hawaii products, then for the purpose of selecting the lowest bid or purchase price only, the price or bid [or] offered for a Hawaii product item shall be decreased by subtracting [therefrom: three per cent, five per cent, or] ten per cent for [the] class I[, class II, or class III] Hawaii product items bid or offered[, respectively.] or fifteen per cent for class II Hawaii product items bid or offered [respectively]. The lowest total bid or proposal, taking the preference into consideration, shall be awarded the contract unless the bid or offer provides for additional award criteria. The contract amount of any contract awarded, however, shall be the amount of the bid or price offered, exclusive of the preferences.

(e) Upon receipt and approval of application for Hawaii products preference, the administrator shall include within the Hawaii products list, the names of producers and manufacturers in the State who are authorized to supply locally manufactured soil enhancement products to state agencies under subsection [(h).] (k). The administrator of the state procurement office shall maintain and distribute copies of the list to the purchasing agencies of the various governmental agencies.

(f) Any person, not on the Hawaii products list, desiring a preference pursuant to this section shall certify the Hawaii product when submitting a response to a solicitation, provided that the person certifies under penalty of sanctions that the offered Hawaii products meet the requirements for the preference.

The procurement officer may request additional information deemed necessary in order to qualify a product and shall have sole discretion in determining qualification for the preference.

Any offeror whose product is deemed not qualified for the preference may appeal by filing a written request for reexamination of facts to the procurement officer. Upon determining that the offeror is qualified for the preference, the procurement officer shall notify the administrator to place the offeror on the Hawaii products list.

(g) Solicitations shall contain a provision notifying offerors who request application of the preference that in the event of any change that materially alters the offeror's ability to supply Hawaii products, the offeror shall immediately notify the chief procurement officer in writing and the parties shall enter into discussions for the purposes of revising the contract or terminating the contract for convenience.

(h) Nothing in this section shall limit, restrict, or preclude a Hawaii product from any preferences, set-asides, or criteria that may be applied under section 103D-906, and this section shall operate instead to mutually enhance the purposes of both this section and section 103D-906.

[(f)] (i) This section shall not apply whenever its application will disqualify any governmental agency from receiving federal funds or aid.

[(g)] (j) Any purchase made or any contract awarded or executed in violation of this section shall be void and no payment shall be made by any purchasing agency on account of the purchase or contract.

[(h)] (k) For the purposes of this section, "soil enhancement product" means any nonchemical soil preparation, conditioner, or compost mixture designed to supplement aeration or add organic, green waste, or decaying matter to the soil; provided that the term does not include any plant fertilizer intended to stimulate or induce plant growth through chemical means. All state agencies shall include in their solicitations, when required, the soil enhancement products identified on the Hawaii products list pursuant to subsection (e)."

SECTION 4. Chapter 103D, Hawaii Revised Statutes, is amended by adding a new section to part X to be appropriately designated and to read as follows:

"103D-   Failure to adequately verify, deliver, or supply Hawaii products. If the administrator or procurement officer who has awarded a contract under section 103D-1002, finds that in the performance of that contract there has been a failure to comply with section 103D-1002, the contract shall be voidable and the findings shall be referred for debarment or suspension proceedings under section 103D-702."

SECTION 5. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.

SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 7. This Act shall take effect on July 1, 2009.