HOUSE OF REPRESENTATIVES

H.B. NO.

1385

THIRTY-FIRST LEGISLATURE, 2021

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

rELATING TO PROCUREMENT.

 

 

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

 


PART I

SECTION 1. The legislature finds that House Resolution No. 142, adopted during the regular session of 2016, requested the state procurement office to review Hawaii's procurement process in comparison with the federal government's procurement process. The purpose of the review was to examine ways that the State could improve its procurement process by better understanding the efficient and effective ways in which the federal government conducts procurement.

The state procurement office contracted with an independent third party to conduct the requested review, which was submitted to the legislature in January 2020. In conducting the review, the independent contractor completed a detailed document review, interviewed a diverse group of stakeholders, and conducted a thorough analysis of the data collected. The report identified sixteen recommendations to closer align the state procurement process to the federal procurement process.

Accordingly, the purpose of this Act is to:

(1) Enact statutory changes to implement certain recommendations made by the state procurement office's review of Hawaii procurement laws conducted pursuant to House Resolution No. 142, Regular Session of 2016; and

(2) Require the state procurement office to submit a report to the legislature regarding the progress it has made toward addressing certain recommendations made by the review.

PART II

SECTION 2. The legislature finds that while the federal and state procurement laws and rules regarding the procurement of design professionals use the same criteria, the state procurement process ranks these criteria by importance while the federal process does not. The ranking has purportedly caused some agencies to repeatedly award contracts to the same firms at the expense of new entrants that may be equally qualified.

The purpose of this part is to implement recommendation I-2 of the state procurement office's review of Hawaii procurement laws by amending the language of section 103D-304(e), Hawaii Revised Statutes, to allow selection committees the same flexibility afforded to their federal counterparts to weigh the selection criteria in the order of importance relevant to their agency and project.

SECTION 3. Section 103D-304, Hawaii Revised Statutes, is amended by amending subsection (e) to read as follows:

"(e) The selection criteria employed [in descending order of importance] shall be:

(1) Experience and professional qualifications relevant to the project type;

(2) Past performance on projects of similar scope for public agencies or private industry, including corrective actions and other responses to notices of deficiencies;

(3) Capacity to accomplish the work in the required time; and

(4) Any additional criteria determined in writing by the selection committee to be relevant to the purchasing agency's needs or necessary and appropriate to ensure full, open, and fair competition for professional services contracts."

PART III

SECTION 4. The legislature finds that the federal government routinely captures vendor performance in a structured and uniform way. This information can be accessed and utilized when future procurements need to assess a vendor's responsibility. The State does not have a comparable system.

The purpose of this part is to implement recommendation II‑2 of the state procurement office's review of Hawaii procurement laws by requiring the state procurement office to develop a vendor performance tracking system.

SECTION 5. Chapter 103D, Hawaii Revised Statutes, is amended by adding a new section to part III to be appropriately designated and to read as follows:

"103D- Past performance database. (a) The state procurement office shall implement and administer a past performance database with regard to state contractors.

(b) The state procurement office shall adopt rules pursuant to chapter 91 to establish:

(1) Information required to be included in the past performance database; provided that the information shall include:

(A) The name of the state contractor;

(B) The date of the project;

(C) The size of the project;

(D) A brief description of the project;

(E) The responsible managing employees for the project;

(F) Whether the project was timely completed or not;

(G) The project's authorized budget; and

(H) The positive or negative difference between the final cost of the project and the project's authorized budget, if any;

(2) Procedures to inform a contractor of the information contained in the past performance database about that contractor; and

(3) Procedures for a contractor to contest the information contained in the past performance database about that contractor."

SECTION 6. Section 103D-104, Hawaii Revised Statutes, is amended as follows:

1. By adding a new definition to be appropriately inserted and to read:

""Past performance" means available recent and relevant performance of a contractor on state contracts that shall be considered in a responsibility determination within the relevance of the current solicitation, including the considerations of section 103D-702(b)."

2. By amending the definition of "responsible bidder or offeror" to read:

""Responsible bidder or offeror" means a person who has the capability in all respects to perform fully the contract requirements, and the integrity and reliability [which] that will assure good faith performance[.], pursuant to the responsibility determination standards adopted by the policy board."

SECTION 7. Section 103D-302, Hawaii Revised Statutes, is amended by amending subsection (f) to read as follows:

"(f) Bids shall be evaluated based on the requirements set forth in the invitation for bids. These requirements may include criteria to determine acceptability such as inspection, testing, quality, workmanship, delivery, and suitability for a particular purpose. Those criteria that will affect the bid price and be considered in evaluation for award shall be as objectively measurable[,] as possible, such as discounts, transportation costs, [and] total or life cycle costs[.], and the bidder's past performance on state contracts of similar scope, including but not limited to notices of deficiencies and failure to complete a procurement contract. The invitation for bids shall set forth the evaluation criteria to be used. No criteria may be used in bid evaluation that are not set forth in the invitation for bids."

SECTION 8. Section 103D-303, Hawaii Revised Statutes, is amended by amending subsection (g) to read as follows:

"(g) Award shall be made to the responsible offeror whose proposal is determined in writing to be the most advantageous, taking into consideration price and the evaluation factors set forth in the request for proposals[.], which shall include the offeror's past performance on state contracts of similar scope, including but not limited to notices of deficiencies and failure to complete a procurement contract. No [other factors or] criteria [shall] may be used in the evaluation[.] that are not set forth in the request for proposals. The contract file shall contain the basis on which the award is made."

SECTION 9. Section 103D-306, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) A contract may be awarded for goods, services, or construction without competition when the head of a purchasing agency determines in writing that there is only one source for the required good, service, or construction, the determination is reviewed and approved by the chief procurement officer, the written determination is posted in the manner described in rules adopted by the policy board, a review of past performance has been conducted, and no objection is outstanding. The written determination, any objection, past performance evaluations relied upon, and a written summary of the disposition of any objection shall be included in the contract file."

SECTION 10. Section 103D-310, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) Whether or not an intention to bid is required, the procurement officer shall determine whether the prospective offeror has the financial ability, resources, skills, capability, and business integrity necessary to perform the work. For [this] the purpose[, the] of making a responsibility determination, the procurement officer shall possess or obtain available information sufficient to be satisfied that a prospective offeror meets the applicable standards. The procurement officer shall consider past performance of the offeror as it applies to a responsibility determination for the current solicitation. The officer, in the officer's discretion, may require any prospective 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 offeror is not fully qualified and able to perform the intended work, a written determination of nonresponsibility of an offeror shall be made by the head of the purchasing agency, in accordance with rules adopted by the policy board. The unreasonable failure of 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 offeror. The decision of the head of the purchasing agency shall be final unless the offeror applies for administrative review pursuant to section 103D-709."

PART IV

SECTION 11. The legislature finds that the State allows for price negotiations only when all bids exceed available funds and a re-solicitation with revised scope is not possible. In contrast, the federal government has a broader scope for price negotiations. Specifically, the federal process allows negotiations to occur for construction bids when the winning bid is higher than the price the government believes it should be based on its internal estimate.

The purpose of this part is to implement recommendation II‑3 of the state procurement office's review of Hawaii procurement laws by giving the head of a purchasing agency the option to negotiate an adjustment of an otherwise successful bid for construction procurements to closer align with an internal project price estimation.

SECTION 12. Section 103D-302, Hawaii Revised Statutes, is amended as follows:

1. By amending subsection (a) to read:

"(a) Contracts shall be awarded by competitive sealed bidding except as otherwise provided in section 103D-301. 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[.], except for construction procurement that meets the criteria in subsection (h)(2). Award is based on the criteria set forth in the invitation for bids."

2. By amending subsection (h) to read:

"(h) The contract shall be awarded with reasonable promptness by written notice to the lowest responsible and responsive bidder whose bid meets the requirements and criteria set forth in the invitation for bids[. In the event all]; provided that if:

(1) All bids exceed available funds as certified by the appropriate fiscal officer, the head of the purchasing agency responsible for the procurement in question is authorized in situations where time or economic considerations preclude resolicitation of work of a reduced scope to negotiate an adjustment of the bid price, including changes in the bid requirements, with the low responsible and responsive bidder, in order to bring the bid within the amount of available funds[.]; and

(2) The lowest responsive and responsible bid for a construction procurement significantly differs from the amount estimated by the State for that project, and the estimated amount was developed prior to the opening of any bids for that project, the head of the purchasing agency may engage in negotiations with the low bidder to ensure the bid amount is reasonable and realistic for the scope of the construction project. The negotiations may include the reduction of the bid amount or an increase in the bid amount to align with the State's estimate; provided that the bid does not raise the low bidders' bid to an amount that makes it no longer the low bid. If the negotiation with the low bidder does not result in any change to the bid amount, the original bid amount shall continue to be used."

PART V

SECTION 13. The legislature finds that the Hawaii public procurement code currently requires general contractors to disclose the subcontractors they intend to use on a project. The intent of this requirement is to deter bid shopping (the practice of low-bidding general contractors unethically extracting lower prices from subcontractors under threat of replacement). Although stakeholders agree that the disclosure requirement accomplishes this goal, the legislature notes that the federal government and a vast majority of states do not have a similar disclosure requirement in their procurement processes.

The legislature also finds that this disclosure requirement has the unintended consequence of increasing the number and complexity of construction protests. The state procurement office's review of Hawaii procurement laws found that most protests allege issues stemming from the subcontractor listing requirement. The review recommended that the State amend its disclosure requirement to require disclosure of only the name of a subcontractor and not repeal the requirement that the bid disclose what a subcontractor will do. This change would substantially reduce the risk of protests while continuing to protect subcontractors from the undesirable practice of bid shopping.

The purpose of this part is to implement recommendation III-2 of the state procurement office's review of Hawaii procurement laws by eliminating the requirement that bidders disclose the nature and scope of work expected to be performed by a subcontractor.

SECTION 14. 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."

PART VI

SECTION 15. The state procurement office shall submit a report to the legislature no later than twenty days prior to the convening of the regular session of 2022 regarding the progress it has made toward addressing recommendations from parts I, II, III, V, and VI of the procurement policy review conducted pursuant to House Resolution No. 142, Regular Session of 2016, and include any proposed legislation necessary to implement those recommendations.

PART VII

SECTION 16. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 17. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 18. This Act shall take effect on July 1, 2021.

 

INTRODUCED BY:

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Report Title:

Procurement; State Procurement Office; Construction Procurement Policy Review

 

Description:

Implements certain recommendations of the procurement policy review conducted pursuant to House Resolution No. 142, Regular Session of 2016. Requires the state procurement office to submit a report to the legislature regarding its progress in implementing the procurement policy review recommendations.

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.