HomeMy WebLinkAboutCOM 0226.000 1996-1998
r Y
STAND. COM. REP. NO. ~ / /
Honolulu, Hawaii
t ~ ~ 19 9 7
RE: H.B. No/. 1686
H.D. 1 '
F RECEIVED 'r
(R+~ By
Honorable Joseph M. Souki n~M. : l vl ~-i_.__
Speaker, House of Representatives Counry Cow,cil
Nineteenth State Legislature
Regular Session of 1997
State of Hawaii
Sir:
Your Committee on Finance, to which was referred H.B. No.
168u entitled:
"A BILL FOR AN ACT RELATING TO PROCUREMENT,"
begs leave to report as follows:
The purpose of this bill is to make the state procurement
system more efficient by, among other things:
(1) Allowing the Director of Taxation to waive the federal
tax clearance requirements in certain cases to expedite
the procurement process;
(2) Clarifying that the procurement preference is to be
applied during the bid or proposal process, and not to
small purchases that would delay procurement action
because of the qualification process;
(3) Providing for the in-state preference on public works
projects currently found in section 103-45.5, Hawaii
Revised Statutes (HRS);
(4) Changing the name of the "policy office" to .:e "policy
board" to eliminate the confusion that currently exists
because section 103D-204, HRS, provides for a
procurement office;
r;!-: r~o.___-.LEC~^
HSCR FIN HB1686 HDl ~,P. Presented- p{~,n,u~
STAND. COM. REP. NO.
Page 2
(5) Changing the designation of Chief Procurement Officers
for the Office of Hawaiian Affairs, the University of
Hawaii, and the Department of Education;
(6) Excluding the public library system from University of
Hawaii's procurement system;
(7) Establishing the Office of the Administrator to be
placed in the Department of Accounting and General
Services ;
(8) Increasing the small purchase threshold for goods and
services from under $10,000 to under $25,000;
(9) Changing the "policy council" to the "policy board" for
consistency;
(10) Allowing a claimant to file a claim against a payment
bond within two months from final settlement and not
completion of the contract; and
(11) Making various housekeeping amendments.
The State Procurement Office, the State Attorney General,
the Board of Education, the State Librarian, and the National
Association Credit Management-Hawaii, Inc. testified in support
of this measure. The Hawaii Operating Engineers Industry
Stabilization Fund and the Hawaii Surety Association submitted
comments .
Your Committee amended this measure to:
(1) Require all state and county procurement officers or
agents to withhold final payment of a contract until
the receipt of tax clearances from the Director of
Taxation and the Internal Revenue Service;
(2) Allow a preference if a bidder has:
(A) Filed state tax returns for two successive years
before submitting a bid that is $5,000,000 or
less; and
(B) Filed state tax returns for four successive years
before submitting a bid that is more than
$5,000,000;
HSCR FIN HB1686 HD1
STAND. COM. REP. NO.
Page 3
(3) Change the Chief Procurement Officer for the Office of
Hawaiian Affairs from the Administrator to the
Chairperson of the Board;
(4) Delete the provision changing the Chief Procurement
Officers of the University of Hawaii and the Department
of Education;
(5) Delete the provision regarding the payment of bonds for
subcontractors because this matter has already been
addressed by your Committee in H.B. No. 1287, H.D. 1,
which has already been transmitted to the Senate; and
(6) Make technical, nonsubstantive amendments for purposes
of style and clarity.
As affirmed by the record of votes of the members of your
Committee on Finance that is attached to this report, your
Committee is in accord with the intent and purpose of H.B. No.
1686, as amended herein, and recommends that it pass Second
Reading in the form attached hereto as H.B. No. 1686, H.D. 1, and
be placed on the calendar for Third Reading.
Respectfully submitted on
behalf of the members of the
Committee on Finance,
/ ~~~V
CALVIN K.Y. SAY, Chair
HSCR FIN HB1686 HD1
State of Hawaii
House of Representatives
The Nineteenth Legislature
Record of Votes of the Committee on Finance
BilUResolution No.: I~~ / pem; I~
C/J
Committee F~rarral: ~ ? .The committee is reconsidering its
previous decision on this measure.
The recommendation is to: O Pass, unamended Pass, with amendments
? Hold O Recommit
FIN Members Ayas Ayes (WR) Nays Excused
1. SAY Calvin K.Y. C 370 ?
2. KAWAKAMI Bertha C. VC 290 ?
3. ABINSAY Feli P. Jr. 201
4. AHU ISA Lsi 205 1/
5. CHANG Je L. 230
6. GOODENOW Kenn 241
7. HAMAKAWA Erie G. 250
8. ITO Ken 270 i/
9. KAHIKINA Michael Puamamo 280 ?
10. KANOHO Ezra R. 285 ~
11. NAKASONE Bob 330 ?
12. SUZUKI Nathan 390 ?
13. WHITE Michael 435 ?
14. FOX Gabn 235 ?
15. MARUMOTO Barbara 305 ?
16. MEYER Colleen 320 ?
17. WARD Gene 430
TOTAL / /
The measure is: O Passed, unamended Passed, with amendments
? Recommitted
O Held If joint referral, did not support rewmmendation.
oommiCw acmnym(s)
Vice Chair's or designee's 'nature:
t~
Oistrbution: ? If passed, attach to Comm ee Report ? Data EMry
Record or Voses FIN
HOUSE OF REPRESENTATIVES 11. U. I V O. H D61
NINETEENTH LEGISLATURE, 1997
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO PROCUREMENT.
BE TT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
1 SECTION 1. Chapter 103D, Hawaii Revised Statutes, is
2 amended by adding a new section to part III to be appropriately
3 designated and to read as follows:
4 •5103D- Tax clearancesr setoff for due and unvaid taxes.
5 (a) Unless the director of taxation determines that waiver of
6 the Internal Revenue Service tax clearance requirement is
7 necessary to expedite or facilitate the procurement process and
8 is in the best interest of the State. and waives the Internal
9 Revenue Service tax clearance requirement, no contract shall be
10 binding or effective until the contractor secures and the
llpurchasing agencv receives a tax clearance from the director of
12 taxation and the Internal Revenue Service to the effect that all
13 tax returns due have been filed, and all taxes, interest, and
14 penalties levied or accrued, under the provisions of title 14
15 that are administered by the department of taxation and under the
16 Internal Revenue Code, against the contractor have been uaid.
17 (b) During the term of a contract, if a lien is imposed
18 against the contractor for a tax debt under section 231-33 or the
19 contractor fails to timely file all tax returns and pav all
HB1686 HD1
Page 2 I ~ LJ ~ N 0 . H D61
1 taxes, interest, and penalties due to the Internal Revenue
2 Service, the comptroller or respective county director of
3 finance, upon reguest of the director of taxation, shall set off
4 the amount of the tax debt against any payment due to the
5 contractor until the tax debt is paid in full.
6 {c) All state and county procurement officers or agents
7 shall withhold final payment of a contract until the receipt of
8 tax clearances from the director of taxation and the Internal
9 Revenue Service.
10 (d) The provisions of this section shall not apply to
llcontracts entered into pursuant to section 103D-305 or 103D-307.
12 (e) The provisions of this section shall not apply to a
13 contractor who the director of taxation certifies is:
14 Contesting the validity of a tax debt, or that any tax,
15 penalty, or interest is due and owing the Internal
16 Revenue Service in an administrative or iudicial
17 appeal; or
18 ~2 In good standing, having entered into a plan or plans
19 in which the tax debt, or any tax, penalty, or interest
20 due and owing the Internal Revenue Service is being
21 paid to the department of taxation or the Internal
22 Revenue Service."
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Page 3 H~ U~ I V O" H.D61
1 SECTION 2. Chapter 103D, Hawaii Revised Statutes, is
2 amended by adding two new sections to part X to be appropriately
3 designated and to read as follows:
4 "S103D- ADDlication of this Dart. The preferences in
5 this part shall only apply to procurements made pursuant to
6 sections 103D-302 and 103D-303.
7 5103D- Preference to bidders on state agenci+ contracts.
8 (a) The requirements in this section are in addition to any
9 other applicable requirements provided in this chapter.
10 (b) The preference in this section may not be utilized in
Ilcombination with anv other preference otherwise available to a
12 bidder under state or federal law.
13 (c) In anv contract for a public works proiect, a state
14 agency shall award the contract to a bidder who has filed all
15 State tax returns due to the State and paid all amounts owing on
16 such returns for two successive years prior to submitting the
17 bid• provided that the amount of that bid is not more than seven
18 per cent higher than the amount bid by any competing contractor
19 who has not filed or paid all applicable State taxes, and the
20 amount of the bid by the state tax paving bidder is $5,000,000 or
21 less .
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Page 4 ~ ~ ~ N O ~ H D61
1 (d) In any contract for a public works proiect, a state
2 aaencv shall award the contract to a bidder who has filed all
3 State tax returns due to the State and paid all amounts owing on
4 such returns for four successive years prior to submitting the
5 bid; provided that the amount of that bid is not more than seven
6 per cent higher than the amount bid by any competing contractor
7 who has not filed or paid all applicable State taxes, and the
8 amount of the bid by the state tax paving bidder is more than
9 S5,000,000.
10 (e) If two or more contractors who have paid state and
llcounty taxes or were required to submit a filing regarding state
12 and county taxes are bidding on a public works contract, and
13 those contractors meet the criteria outlined in subsection (c) or
14{d) the state aaencv shall award the contract to the contractor
15 among them who has submitted the lowest bid.
16 (f) If any federal statute or regulation precludes the
17 granting of federal assistance or reduces the amount of that
18 assistance for a particular public works proiect because of
19 preference awarded by this section, this section shall not apply
20 insofar as its application would preclude or reduce federal
2l assistance for that work."
HB1686 fIDl
Pages ~"~~B, NO, HD.I
1 SECTION 3. Section 103D-201, Hawaii Revised Statutes, is
2 amended to read as follows:
3 '[[]S103D-201[]] Creation aad membershiy of the Drocuramant
4 Dolicy [office.] board. (a) There is hereby created an
5 autonomous state procurement policy [office.] board. The policy
6 [office] board shall be assigned, for administrative purposes
7 only, to the department of accounting and general services.
8 (b) The policy [office] board shall consist of [a board of]
9 five members. Notwithstanding the limitations of section 78-5,
10 the members of the board shall include:
11 (1) The comptroller;
12 (2) A county employee with significant high-level
13 procurement experience; and
14 (3) Three persons who shall not otherwise be full-time
15 employees of, or contractors with, the State or any
16 county; provided that at least one member shall be a
17 certified professional in the field of procurement and
18 at least one member shall have significant high-level,
19 federal procurement experience.
20 Each appointed member shall have demonstrated sufficient business
21 or professional experience to discharge the functions of the
22 policy [office.] board. The initial and subsequent members of
HB1686 HD1
Page 6 I" ( ~ ~ ~ N O . H D61
1 the policy (office,] board, other than the comptroller, shall be
2 appointed by the governor from a list of three individuals for
3 each vacant position, submitted by a nominating committee
4 composed of four individuals chosen as follows: two persons
5 appointed by the governor; one person appointed by the president
6 of the senate; and one person appointed by the speaker of the
7 house. Except as provided in this section, the selection and
8 terms of the policy [officej board members shall be subject to
9 the requirements of section 26-34. No member of the policy
10 [office] board shall act concurrently as a chief procurement
llofficer. The members of the policy [officej board shall devote
12 such time to their duties as may be necessary for the proper
13 discharge thereof.
14 (c) The policy [office] board shall be assisted by
15 employees of the department of accounting and general services,
16 which shall provide at least one full time support staff and
17 funding necessary to support the policy [office.] board.
18 (d) Members of the policy [officej board shall be
19 reimbursed for any expenses, including travel expenses,
20 reasonably incurred in the performance of their duties. [During
21 the first year of the existence of the policy office, members who
22 are not otherwise employees of the State or a county shall be
HB1686 FID1
Page 7 H. B. N O. D61
lallowed compensation at a rate of $100 per day for each day's
2 actual attendance at meetings.]
3 (e) The chairperson of the policy [office] board shall be
4 elected annually by a majority of its members from among all of
5 its members; provided that the state comptroller shall not be
6 eligible to serve as the chairperson. [If the chairperson is not
7 a county officer or employee, the chairperson shall be allowed an
8 additional compensation of $50 per day for each day of actual
9 attendance at board meetings.]"
10 SECTION 4. Section 103D-203, Hawaii Revised Statutes, is
llamended to read as follows:
12 "[[]S103D-203[]] Chief Drocurement officers. (a) The
13 chief procurement officer for each of the following state
14 entities shall be:
15 (1) The judiciary the administrative director of the
16 courts;
17 (2) The senate the president of the senate;
18 (3) The house of representatives the speaker of the
19 house of representatives;
20 (4) The office of Hawaiian affairs [its board of
21 trustees;] the chairperson of the board;
HB1686 HD1
Page 8 I"
I~ B~ N O, H.Db)
1 (5) The University of Hawaii the president of the
2 University of Hawaii;
3 (6) The department of education, excluding the Hawaii
4 public library system the superintendent of
5 education; and
6 [(7) The division of community hospitals within the
7 department of health the deputy director for
8 community hospitals; and
9 (8)] ~Z The remaining departments of the executive branch
10 of the State and all governmental bodies
11 administratively attached to them the administrator
12 of the state procurement office of the department of
13 accounting and general services.
14 (b) The chief procurement officers for each of the several
15 counties shall be:
16 (1) The executive branch the respective finance
17 directors of the several counties; and
18 (2) The legislative branch the respective chairpersons
19 of the councils of the several counties;
20 provided that the chief procurement officers designated under
2l paragraphs (1) and (2) shall not exercise their powers or duties
HB1686 HD1
Page 9 H. B. N O. Dbl
1 over contracting in a manner contrary to the respective county's
2 charter, ordinances, or rules adopted in accordance with chapter
3 91.
4 (c) For purposes of applying this chapter to the judiciary,
5 houses of the legislature, office of Hawaiian affairs, department
6 of education, [division of community hospitals within the
7 department of health,] University of Hawaii, remaining
8 departments of the executive branch and all governmental bodies
9 administratively attached to them, and the several counties,
10 unless otherwise expressly provided, "State" shall mean
11"judiciary," "state senate," "state house of representatives,`
12"office of Hawaiian affairs," "department of education,"
13 [`division of community hospitals within the department of
14 health,"] "University of Hawaii," "executive branch," and
15"county," respectively."
16 SECTION 5. Section 103D-204, Hawaii Revised Statutes, is
17 amended to read as follows:
18 "5103D-204 [Admiaistrator] Establishment of the Drocurement
19 office[.]Z administrator. (a) There shall be a procurement
20 office placed for administrative purposes only, within the
2l department of accounting and general services, which shall be
22 headed by the administrator of the procurement office. The
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Page 10 H ~ B ~ N O ~ H.DbI
1 administrator shall be the chief procurement officer for [the]
2 those governmental bodies of the executive branch (other than the
3 University of Hawaii, the department of education, and the
4 division of community hospitals within the department of health,
5 and those governmental bodies administratively attached thereto.]
6 as provided in section 103D-203(a)(7). The administrator shall
7 be a full-time public official. The administrator shall serve a
8 term of four years, and shall be paid the salary established for
9 deputies or assistants to department heads under section 26-53
10 without diminution during the administrator's term of office
llunless by general law applying to all deputies or assistants to
12 department heads.
13 (b) The administrator shall be appointed by the governor
14 from a list of no less than three and no more than five names
15 submitted by the policy [office.] board. The appointment of the
16 administrator shall require the advice and consent of the senate.
17 The administrator may only be removed from office by the
18 governor, provided the governor shall give prior notification of
19 such removal to the chairperson of the policy [office,] board,
20 the president of the senate, and the speaker of the house of
2l representatives.
22 (c) The administrator shall have:
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Page 11 ~"'I ~ B ~ N O , H.D61
1 (1) A minimum of five years experience in public
2 procurement within twelve years preceding the date of
3 appointment; and
4 (2) Demonstrated executive and organizational ability.
5 (d) [The procurement office shall be assigned for
6 administrative purposes to the department of accounting and
7 general services; provided that the] The administrator shall
8 operate independently of the comptroller. The administrator may
9 appoint and dismiss a private secretary without regard to chapter
10 76 or 77, who shall serve at the administrator's pleasure. The
Ilcomptroller shall provide support to permit the administrator to
12 satisfy all of the administrator's responsibilities as the chief
13 procurement officer for those governmental bodies of the
14 executive branch of the State for which a chief procurement
15 officer is not otherwise designated."
16 SECTION 6. Section 103D-304, Hawaii Revised Statutes, is
17 amended by amending subsection (f) to read as follows:
18 "(f) Contracts for professional services of less than
19($10,000] 2$ 5,000 maY be negotiated by the head of a purchasing
20 agency, with any two persons who appear on the list of qualified
2l persons established pursuant to subsection (c). Negotiations
22 shall be conducted in the manner set forth in subsection (e) but
23 without establishing any order of preference."
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Page 12 ~'-I ~ ~ ~ N O , H.D61
1 SECTION 7. Section 103D-305, Hawaii Revised Statutes, is
2 amended to read as follows:
3 "S103D-305 Small purchases; Drohibition ngainst parceling.
4 Procurements of
5 (1] Less than $10,000 for goods or services; or
6 (2) Less than $25,000 for construction;]
7 less than $25 000 for aoods services or construction shall be
8 made in accordance with procedures set forth in rules adopted by
9 the policy [office] board that are designed to ensure
10 administrative simplicity and as much competition as is
Ilpracticable; provided that multiple expenditures shall not be
12 created at the inception of a transaction or project so as to
13 evade the requirements of this chapter; and provided further that
14 procurement requirements shall not be artificially divided or
15 parceled so as to constitute a small purchase under this
16 section. "
17 SECTION 8. Section 103D-308, Hawaii Revised Statutes, is
18 amended to read as follows:
19 "[[]5103D-308[]] Cancellation of invitations for bids or
20 raQueats for proposals. An invitation for bids, a request for
2l proposals, or other solicitation may be canceled, or any or all
22 bids or proposals may be rejected in whole or in part as may be
HB1686 HD1
Page 13 H ~ U " 1 V O " D6 ]
lspecified in the solicitation, when it is in the best interests
2 of the governmental body which issued the invitation, request, or
3 other solicitation, in accordance with rules adopted by the
4 policy [council.] board. The reasons therefor shall be made part
5 of the contract file."
6 SECTION 9. Section 103D-321, Hawaii Revised Statutes, is
7 amended by amending subsection (a) to read as follows:
S "(a) The chief procurement officer shall maintain a record
9 of all procurements for goods, services, or construction of
10 525,000 or more made under sections 103D-102(b)(4), 103D-304,
11103D-306, and 103D-307 for a minimum of five years. The record
12 shall contain:
13 (1) Each contractor's name;
14 (2) The amount and type of each contract; and
15 (3) A listing of the goods, services, or construction
16 procured under each contract."
17 SECTION 10. Section 103D-325, Hawaii Revised Statutes, is
18 amended by amending subsection (a) to read as follows:
19 "(a) The policy [office] board shall [adopt rules
20 specifying] specifv the form of the bonds required by this
2l chapter[.] by procurement directive."
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Page 14 ~"i , B , N O , H.D61
1 SECTION 11. Chapter 103D, Hawaii Revised Statutes, is
2 amended by amending the title of part VIII to read as follows:
3 "PART VIII. [INTERGOVERNMENTAL] GOVERNMENTAL RELATIONS AND
4 COOPERATIVE PIIRCHASING"
5 SECTION 12. Section 103D-801, Hawaii Revised Statutes, is
6 amended by adding two definitions to be appropriately inserted
7 and to read as follows:
8 ""External procurement unit" means anv buvincx orcanization
9 not located in this State which, if located in this State, would
lOctualifv as a public procurement unit An aaencv of the United
11 States is an external procurement unit.
12 "Nonprofit private procurement unit" means a nonprofit
13 health or human services organization that receives public funds
14 to provide services to the public."
15 SECTION 13. Section 103D-801, Hawaii Revised Statutes, is
16 amended by amending the definition of "cooperative purchasing" to
17 read:
18 ""Cooperative purchasing" means procurement conducted by[,
19 or on behalf of, more than one public procurement unit, or by a
20 public procurement unit with an external procurement activity.] a
2l public or external procurement unit with one or more public
HB1686 HD1
Page 15 H , B , N O , H.D61
lprocurement units external procurement units or nonprofit
2 private procurement units pursuant to this chapter."
3 SECTION 14. Section 103D-802, Hawaii Revised Statutes, is
4 amended to read as follows:
5 "[[]5103D-802[]] Cooperative purchasing authorized. A
6 public procurement unit may either participate in, sponsor,
7 conduct, or administer a cooperative purchasing agreement for the
8 procurement of goods, services, or construction with one or more
9 public procurement units, external procurement [activities,]
10 units, or nonprofit private [health and human services
llorganizations] procurement units pursuant to rules adopted by the
12 policy [office] board and an agreement entered into between the
13 participants. The cooperative purchasing may include, but shall
14 not be limited to, joint or multi-party contracts between public
15 procurement unitsl and [open-ended] state public procurement unit
16 requirements contracts which are made available to local public
17 procurement units. Cooperative purchasina aareements may be
18 exempt from preferences pursuant to part x."
19 SECTION 15. Section 103D-1002, Hawaii Revised Statutes, is
20 amended to read as follows:
21 'S103D-1002 Hawaii products. (a) (In any expenditure of
22 public funds, a] A purchasing agency shall review all [purchase]
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Page 16 H ~ ~ ~ N O ~ D61
lspecifications in a bid or proposal for purchase from the Hawaii
2 products list where these products are available; provided that
3 the products:
4 (1) Meet the minimum specifications and the selling price
5 f.o.b. jobsite;
6 (2) Unloaded including applicable general excise tax and
7 use tax does not exceed the lowest delivered price in
8 Hawaii f.o.b. jobsite; and
9 (3) Unloaded, including applicable general excise tax and
10 use tax do not exceed the lowest delivered price of a
11 similar non-Hawaii product by more than:
12 (A) Three per cent where class I Hawaii products are
13 involved;
14 (B) Five per cent where class II Hawaii products are
15 involved; or
16 (C) Ten per cent where class IZI Hawaii products are
17 involved.
18 [(b) Where a package bid or offer contains both Hawaii and
19 non-Hawaii products, then for the purpose of selecting the lowest
20 bid or purchase price only, the price bid or offered for a non-
21 Hawaii product item shall be increased by adding thereto: three
22 per cent, five per cent, or ten per cent where similar class I,
HB1686 HD1
Page 17 H ~ B ~ N O ~ H.D61
lclass II, or class III Hawaii product items have been bid or
2 offered by another party pursuant to this section. The lowest
3 total bid or offer, taking the preference into consideration,
4 shall be awarded the contract unless the bid or offer provides
5 for additional award criteria. The contract amount of any
6 contract awarded, however, shall be the amount of the bid or
7 price offered, exclusive of the preferences.]
$ (b) All invitations for bids and requests for proposals
9 shall include a description of the products that are listed in
10 the Hawaii products list established pursuant to this section
lland their established classes, which may be used to complete the
12 scope of work specified in the invitation for bids or request for
13 proposals where the products are available and meet the minimum
14 specifications.
15 (c) All persons submitting bids or [offers based on non-
16 Hawaii products to any purchasing agency) proposals to claim a
17 Hawaii products preference shall designate in their bids which
18 individual product and its price is to be supplied as a (non-
19 Hawaii] Hawaii product. (All bidders shall list the price of the
20 non-Hawaii product in their bid.
21 (d) In all public works and any repair or maintenance
22 contracts, a purchasing agency or any person employed by a
HB1686 HD1
PagelB NO, ND61
lpurchasing agency, including architects and engineers, shall
2 describe in all specifications, products, and their established
3 classes listed in the Hawaii products list established under this
4 section which may be used, where the products are available and
3 meet the minimum specifications.]
6 (d] Where a bid or proposal contains both Hawaii and non-
? Hawaii products then for the purpose of selecting the lowest bid
8 or purchase price only the price bid or offered for a Hawaii
9 product item shall be decreased by subtracting therefrom: three
10 per cent five per cent or ten per cent for the class I class
111I or class III Hawaii product items bid or offered,
12 respectively The lowest total bid or proposal taking the
13 reference into consideration shall be awarded the contract
14 unless the bid or offer provides for additional award criteria.
15 The contract amount of any contract awarded, however. shall be
16 the amount of the bid or price offered, exclusive of the
17 preferences.
18 (e] [The policy office shall adopt rules in accordance with
19 chapter 91 for the establishment and administration of a Hawaii
20 products list.] Upon receipt and approval of application for
21 Hawaii products preference, the administrator shall include
22 within the Hawaii products list, the names of producers and
HB1686 HD1
Page 19 H . B . N O . D6 )
lmanufacturers in the State who are authorized to supply locally
2 manufactured soil enhancement products to state agencies under
3 subsection [(i).] (h)• The administrator of the state
4 procurement office shall maintain and distribute copies of the
5 list to the purchasing agencies of the various governmental
6 agencies.
7 (f) This section shall not apply whenever its application
8 will disqualify any governmental agency from receiving federal
9 funds or aid.
10 (g) Any purchase made or any contract awarded or executed
llin violation of this section shall be void and no payment shall
12 be made by any purchasing agency on account of the purchase or
13 contract .
14 [(h) Any person, or any officer or employee of any person,
15 who violates this section shall be fined not more than $1,000 or
16 imprisoned not more than one year, or both. In addition, any
17 person who is awarded a contract or given an order for purchase
18 as a result of misrepresentation in the person's bid or offer or
19 makes a claim in the person's bid or offer that the person will
20 purchase xawaii products, but fails to do so:
21 (1) Shall be fined the difference between the price the
22 person would have paid for Hawaii products and the
23 actual price; and
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Page 20 , ~ , N O , H.D6 ]
1 (2) Shall not be awarded any contract or be given any order
2 for purchase or be eligible for bidding until one year
3 after the date of the payment of fines.
4 (i)] ih~ For the purposes of this section, "soil
5 enhancement product" means any nonchemical soil preparation,
6 conditioner, or compost mixture designed to supplement aeration
7 or add organic, green waste, or decaying matter to the soil;
8 provided that the term does not include any plant fertilizer
9 intended to stimulate or induce plant growth through chemical
10 means. All state agencies shall include in their solicitations,
]]when required, the soil enhancement products identified on the
12 Hawaii products list pursuant to subsection (e)."
13 SECTION 16. Section 103D-1003, Hawaii Revised Statutes, is
14 amended to read as follows:
15 "[[]5103D-1003[]] Printiaq, binding, and stationery work.
16 (a) [All printing, binding, and stationery work for the State or
17 any county shall be performed within the State,] All bids or
18 proposals submitted for a printing binding or stationery
19 contract in which all work will be performed in-state, including
20 all preparatory work, presswork, bindery work, and any other
2lproduction-related work, [and all requests for bids or contracts
22 for this work shall so stipulate; provided that whenever it is
HB1686 HD1
Page 21 H ~ B ~ N O ~ D61
lestablished that this work cannot be performed within the State
2 or that the lowest price for which the work can be procured
3 within the State exceeds the bid or charge of a mainland
4 manufacturer of the item by fifteen per cent, the work or any
5 part thereof so affected may be performed outside the State.
6 (b) No payment shall be made by the State or any county for
7 printing, binding, or stationery work unless it appears that the
8 work was done within the State or was authorized to be done
9 outside the State pursuant to this section. In addition, any
10 manufacturer violating a stipulation in a bid or contract that
llall work will be performed within the State shall be subject to a
12 civil penalty in an amount not to exceed the bid or contract
13 price to be collected by a civil action filed by the attorney
14 general on behalf of the State.
15 (c) The policy office shall adopt rules to implement this
16 section.] shall receive a fifteen per cent preference for
17 purposes of bid or proposal evaluation.
18 (b) Where bids or proposals are for work performed in-state
19 and out-of-state then for the purpose of selecting the lowest
20 bid or evaluating proposals submitted only the amount bid or
2l proposed for work performed out-of-state shall be increased by
22 fifteen per cent The lowest total offer, taking the preference
HB1686 FID1
Page 22 H ~ U ~ N O ~ D61
linto consideration, shall be awarded the contract unless the
2 solicitation provides for additional award criteria. The
3 contract amount awarded however, shall be the amount of the
4 price offered, exclusive of the preference."
5 SECTION 17. Section 103D-1006, Hawaii Revised Statutes, is
6 amended to read as follows:
7 "[[]5103D-1006[7] Software development businesses. (a) In
8 any expenditure of public funds for software development, the use
9 of Hawaii software development businesses shall be preferred.
10 Where a package bid or response to a request for proposal
llcontains both Hawaii and non-Hawaii software development
12 businesses, then for the purpose of selecting the lowest bid or
13 purchase price only, the bid or offer by a non-Hawaii software
14 [developmental center] development business shall be increased by
15 a preference percentage pursuant to rules adopted [in accordance
16 with chapter 91.] by the policy board.
17 [(b) The policy office shall adopt rules to implement this
18 section.
19 (c)] u This section shall not apply when precluded by
20 federal requirements for competitive bidding."
21 SECTION 18. Act 193, Session Laws of Hawaii 1994, is
22 amended by amending section 5, as amended by section 27 of Act
23262, Session Laws of Hawaii 1996, to read as follows:
HB1686 HD1
Page 23 H. U. N O. H D61
1 "SECTION 5. This Act shall take effect upon its approval[;
2 provided that section 2 shall be repealed on June 30, 1998, and
3 section 103D-203, Hawaii Revised Statutes, shall be reenacted in
4 the form in which it existed on the day before the effective date
5 of this Act]."
6 SECTION 19. Section 103-45.5, Hawaii Revised Statutes, is
7 repealed.
8 ["5103-45.5 Preference to bidders on state aQeacy
9 coatracts. (a) The requirements in this section are in addition
10 to any other applicable requirements provided in this chapter.
11 (b) The preference in this section may not be utilized in
12 combination with any other preference otherwise available to a
13 bidder under state or federal law.
14 (c) In any contract for a public works project, a state
15 agency shall award the contract to a bidder who has filed State
16 of Hawaii employment, general excise, and income tax returns and
17 has paid all amounts owing on such returns for four successive
18 years prior to submitting the bid; provided that the amount of
19 that bid is not more than fifteen per cent higher than the amount
20 bid by any competing contractor who has not filed or paid State
21 of Hawaii taxes as specified, and the amount of the bid by the
22 state tax paying bidder is $5,000,000 or less.
HB1686 HD1
Page 24 F"'~ ~ ~ ~ N O , H.DbI
1 (d) In any contract for a public works project, a state
2 agency shall award the contract to a bidder who has filed State
3 of Hawaii employment, general excise, and income tax returns and
4 has paid all amounts owing on such returns for eight successive
5 years prior to submitting the bid; provided that the amount of
6 that bid is not more than fifteen per cent higher than the amount
7 bid by any competing contractor who has not filed or paid State
8 of Hawaii taxes as specified, and the amount of the bid by the
9 state tax paying bidder is more than $5,000,000.
10 (e) If two or more contractors who have paid state and
llcounty taxes or were required to submit a filing regarding state
12 and county taxes are bidding on a public works contract, and
13 those contractors meet the criteria outlined in subsection (c) or
14(d), the state agency shall award the contract to the contractor
15 among them who has submitted the lowest bid.
16 (f) If any federal statute or regulation precludes the
17 granting of federal assistance or reduces the amount of that
18 assistance for a particular public works project because of
19 preference awarded by this section, this section shall not apply
20 insofar as its application would preclude or reduce federal
2l assistance for that work."]
HB1686 HD1
Page 25 H B N O 1686
H.D. 1
1 SECTION 20. Section 103-53, Hawaii Revised Statutes, is
2 repealed.
3 ["5103-53 Contracts with the State or countieat tax
4 clearances, assignments. (a) All state and county officers and
5 agents making contracts on behalf of the State or any county
6 shall require, as a prerequisite to entering into these
7 contracts, tax clearances from the director of taxation and the
8 Internal Revenue Service to the effect that all tax returns due
9 have been filed, and all taxes, interest, and penalties levied or
10 accrued under the provisions of title 14 that are administered by
lithe department of taxation and under the Internal Revenue Code
12 against the contractor have been paid.
13 (b) Notwithstanding the provisions under sections 40-57 and
14 40-58, if a contractor fails to timely file all tax returns and
15 pay all taxes, interest, and penalties due to the State or
16 Internal Revenue Service during the term of a contract, the state
17 or county contracting officer or agent shall immediately assign
18 any progress payment due to the contractor, if any (provided such
19 payment is not subject to any restriction or encumbrance), to the
20 State payable to the department of taxation or to the Internal
21 Revenue Service to the credit of the contractor, whichever the
22 case may be; provided that the department of taxation may first
HS1686 HD1
Page 26 I" I ~ B ~ N O , H.D61
loffset its tax debt against the sum owed to the contractor. The
2 state or county contracting officer or agent shall assign as many
3 progress payments as necessary to cover the amount of the tax
4 delinquency.
5 (c) All state and county contracting officers or agents
6 shall withhold payment in the final settlement of a contract
7 until the receipt of tax clearances from the director of taxation
8 and the Internal Revenue Service. Notwithstanding sections 40-57
9 and 40-58, if a contractor fails to provide the tax clearances
10 within six months of the notice of final settlement or completion
lldate of the contract, the state or county contracting officer or
12 agent shall assign the final settlement payment in an amount not
13 to exceed the tax liability to the department of taxation or
14 Internal Revenue Service; provided that the department of
15 taxation may first offset its tax debt against the sum owed to
16 the contractor.
17 (d) Any assignment of a contract shall require the
18 assignee, as a condition precedent to the assignment, to first
19 obtain a bulk sales certificate if required under section 237-43,
20 and present the certificate, or tax clearance as provided under
2l subsection (a) if a bulk sales certificate is not required, to
22 the state or county contracting officer or agent.
HB1686 FID1
Page 27 LI , Q ' f~ I O , D6 )
1 (e) Subsection (a) shall not apply to:
2 (1) Any procurement of less than $10,000 that qualifies as
3 a small purchase under section 103D-305, except that
4 any state or county department or contracting agency
5 may apply subsection (a) to contracts of less than
6 $10,000; and
7 (2) Emergency purchases as set forth in section 103D-307.
8 (f) This section shall not apply to a contractor if the
9 department of taxation certifies that the contractor is in good
10 standing under a plan in which delinquent taxes are being paid to
lithe department of taxation (and the Internal Revenue Service, if
12 applicable) in installments.
13 (g) Any officer or employee of any governmental agency who
14 intentionally or knowingly violates any provision under this
15 section shall be fined not more than $1,000 or imprisoned not
16 more than one year, or both.
17 (h) The provisions of subsections (a), (b), (c) and (d)
18 shall not apply to the extent and during the period that the
19 validity of the taxes, penalties, or interest is being contested
20 in an administrative or judicial appeal with the department of
2l taxation or Internal Revenue Service."]
HB1686 FID1
Poge 28 ~ ~ ~ N O " D61
1 SECTION 21. Section 103D-801 is amended by repealing the
2 definition of "external procurement activity."
3 ["External procurement activity" means any buying
4 organization not located in this State which, if located in this
5 State, would qualify as a public procurement unit. An agency of
6 the United States is an external procurement activity."]
7 SECTION 22. Section 237-45, Hawaii Revised Statutes, is
8 repealed.
9 ["5237-45 Contracts with the State or countiest tax
10 clearances, aseigamants. All state and county officers and
Ilagents making contracts on behalf of the State or county shall do
12 so in accordance with section 103-53."]
13 SECTION 23. Sections 103-24.6, 103D-102, 103D-104, 103D-
14 202, 103D-205, 103D-208, 103D-211, 103D-213, 103D-214, 103D-302,
15 103D-303, 103D-304, 103D-306, 103D-310, 103D-311, 103D-312, 103D-
16313, 103D-322, 103D-323, 103D-324, 103D-401, 103D-501, 103D-601,
17 103D-701, 103D-702, 103D-703, 103D-704, 103D-709, 103D-804, 103D-
18901, 103D-902, 103D-1004, 103D-1005, 103D-1103, 103D-1105, 103D-
19 1107, 103D-1201, 103D-1202, 103D-1203, and 201-82 are amended by
20 substituting the words "policy board" wherever the words "policy
2l office" appear, as the context requires.
HB1686 HD1
Page 29 H. U. N O. H D61
1 SECTION 24. Statutory material to be repealed is bracketed.
2 New statutory material is underscored.
3 SECTION 25. This Act shall take effect on October 1, 1997.
HB1686 FID1
REPORT TITLE:
Procurement
DESCRIPTION:
Makes various amendments relating to the Hawaii Public
Procurement Code. (HB1686 HD1)
HB1686 HDl