Report Title:
Public Contracts; Procurement; Small Purchase State Resident Preference
Description:
Amends chapters 103 and 103D, Hawaii Revised Statutes (HRS), to consolidate and clarify sections in the chapter, or repeal related sections of the HRS. Establishes state resident procurement preference. Raises small purchase procurement exception for public school repair and maintenance projects to $250,000. (SD2)
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HOUSE OF REPRESENTATIVES |
H.B. NO. |
2420 |
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TWENTY-FIRST LEGISLATURE, 2002 |
H.D. 1 |
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STATE OF HAWAII |
S.D. 2 |
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A BILL FOR AN ACT
RELATING TO PUBLIC CONTRACTS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. Chapter 103, Hawaii Revised Statutes, is amended by adding to part I a new section to be appropriately designated and to read as follows:
"§103-A Contract not binding unless funds available. (a) Any sealed bid or proposal or sole source contract awarded by the State shall not be binding or of any force and effect unless the comptroller, the director of finance of a county, or the respective chief financial officers of the University of Hawaii, the department of education, the judiciary, or the legislative branches of the State or county, as the case may be, endorses thereon a certificate that there is an appropriation or balance of an appropriation over and above all outstanding contracts, sufficient to cover the amount required by the contract; provided that if the contract is a multi-term, lease, or installment purchase payment contract, the comptroller, director of finance of a county, or chief financial officer shall only be required to certify that there is an appropriation or balance of an appropriation over and above all outstanding contracts, that is sufficient to cover the amount required to be paid under the contract during the fiscal year or remaining portion of the fiscal year of each term of the multi-year contract. This section shall not apply:
(1) To any contract under which the total amount to be paid to the contractor cannot be accurately estimated at the time the contract is to be awarded;
(2) To any contract subject to chapter 103F;
(3) To any contract for which consideration is in kind or forbearance; or
(4) To any sole source contract awarded that is a one-time payment.
(b) In any contract involving state or county funds and supplemental funds from the federal government, this section shall be applicable only to that portion of the contract price that is payable out of state or county funds. As to that portion of the contract price designated to be payable out of federal funds, the contract is an agreement to pay that portion to the contractor only from those federal funds received from the federal government. This subsection shall be liberally construed so as not to hinder or impede the State in contracting for any project involving financial aid from the federal government."
SECTION 2. Chapter 103, Hawaii Revised Statutes, is amended by adding to part II four new sections to be appropriately designated and to read as follows:
"§103-B Indigenous and Polynesian-introduced plants; use in public landscaping. (a) Whenever feasible, all plans, designs, and specifications for new or renovated landscaping of any building, complex of buildings, facility, complex of facilities, or housing developed by the State with public moneys shall incorporate indigenous species of land plants as defined in section 195D-2, and plant species brought to Hawaii by Polynesians before European contact, such as the kukui, noni, and coconut; provided that:
(1) Suitable cultivated plants can be made available for this purpose without jeopardizing wild plants in their natural habitat; and
(2) Whenever possible, indigenous plants shall be used for landscaping on the island or islands on which the species originated.
(b) Each plant used pursuant to subsection (a) shall be clearly identified with signs for the edification of the general public.
§103-C Provisions for pollution control. All public contracts awarded pursuant to this chapter shall include provisions for control of pollution when encountered in the performance of the contract.
§103-D Energy efficiency through life-cycle costing. (a) The procurement practices of the State and its counties shall include energy efficient standards and policies, including life-cycle costing.
(b) In implementing life-cycle costing, the purchasing agency shall be guided by energy efficiency standards and policies for purchasing various items developed and promulgated by the United States Department of Energy and other federal agencies, and by nationally recognized trade associations including the National Association of State Purchasing Officials, the National Institute of Governmental Purchasing, Inc., the National Association of Purchasing Management, and the Air Conditioning and Refrigeration Institute. The purchasing agency shall notify bidders of information, procedures, and forms required in implementing energy efficiency standards and policies. The information required shall include purchasing standards and policies developed by federal agencies and by nationally recognized agencies and associations, as well as energy consumption and life-cycle cost data.
(c) Each purchasing agency shall consider purchasing via the life-cycle costing method those classes of items for which nationally recognized energy efficiency data have been developed. These items shall include motor vehicles and air conditioning systems. The watt-saving variety of common-sized fluorescent lamps shall be purchased except where standard wattage of the lamps is specifically required by the using agency.
§103-E Value engineering clauses. The State and each of the respective counties shall insert clauses providing for value engineering incentives in all public works contracts for amounts in excess of $250,000. The clauses shall provide:
(1) That cost reduction proposals submitted by contractors:
(A) Must require, in order to be applied to the contract, a change order thereto; and
(B) Must result in savings to the State or county, as the case may be, by providing less costly items than those specified in the contract without impairing any of their essential functions and characteristics such as service life, reliability, substitutability, economy of operation, ease of maintenance, and necessary standardized features; and
(2) That accepted cost reduction proposals shall result in an equitable adjustment of the contract price so that the contractor will share a portion of the realized cost reduction."
SECTION 3. Chapter 103D, Hawaii Revised Statutes, is amended by adding to part I a new section to be appropriately designated and to read as follows:
"§103D-A State procurement office revolving fund. (a) There shall be in the state treasury, a state procurement office revolving fund for collecting administrative fees to support ongoing development of online electronic procurement services for all state and county purchasing agencies.
(b) All fees collected under subsection (a) shall be deposited in the state procurement office revolving fund and be expended by the administrator to carry out the purposes of this section."
SECTION 4. Chapter 103D, Hawaii Revised Statutes, is amended by adding to part III a new section to be appropriately designated and to read as follows:
"§103D-B Competitive online bidding. (a) When the head of a purchasing agency determines that competitive online bidding for goods is more advantageous than other source selection methods provided by this chapter, a contract for goods may be entered into by competitive online bidding.
(b) The invitation for online bids shall designate both an opening date and time and a closing date and time. At the opening date and time, the purchasing agency shall begin accepting real-time electronic bids. The invitation for online bids shall remain open until the closing date and time.
(c) The purchasing agency shall require the bidders to register before the opening date and time and, as a part of the registration, to agree to any terms and conditions of the solicitation.
(d) All bid prices shall be posted electronically on the Internet and updated on a real-time basis. At any time before the closing date and time, a bidder may lower the price of its bid below the lowest bid posted to the Internet.
(e) Correction or withdrawal of bids before or after award, or cancellation of invitation for online bids, awards, or contracts shall be permitted.
(f) Section 103D-302(h) shall apply if all online bids exceed available funds."
SECTION 5. Section 103-53, Hawaii Revised Statutes, is amended by amending subsections (b), (c), (d), and (e) to read as follows:
"(b) Notwithstanding the provisions under sections 40-57 and 40-58, if a contractor fails to timely file all tax returns and pay all taxes, interest, and penalties due to the State or Internal Revenue Service during the term of a contract, the state or county [contracting] procurement officer or agent shall immediately assign any progress payment due to the contractor, if any (provided such payment is not subject to any restriction or encumbrance), to the State payable to the department of taxation or to the Internal Revenue Service to the credit of the contractor, whichever the case may be; provided that the department of taxation may first offset its tax debt against the sum owed to the contractor. The state or county [contracting] procurement officer or agent shall assign as many progress payments as necessary to cover the amount of the tax delinquency.
(c) All state and county [contracting] procurement officers or agents shall withhold final payment of a contract until the receipt of tax clearances from the director of taxation and the Internal Revenue Service. Notwithstanding sections 40-57 and 40-58, if a contractor fails to provide the requisite tax clearances within six months of the completion date of the contract, the state or county [contracting] procurement officer or agent shall first notify the department of taxation which in turn [will] shall notify the Internal Revenue Service, of amounts payable to the contractor on completed contracts. The department of taxation and the Internal Revenue Service shall, within thirty days, request the [contracting] procurement officer or agent to offset the amount of taxes due against any payment due to the contractor until the tax debt is paid in full to the State or the Internal Revenue Service or both. No final bill or invoice from the contractor shall be required as a condition to the offset. Any remaining contract balance shall revert to the appropriation under which it was encumbered.
(d) Any assignment of a contract shall require the assignee, as a condition precedent to the assignment, to first obtain a bulk sales certificate if required under section 237-43, and present the certificate, or tax clearance as provided under subsection (a) if a bulk sales certificate is not required, to the state or county [contracting] procurement officer or agent.
(e) This section shall not apply to:
(1) Any procurement [of less than $25,000 or is considered a small purchase under] within the limits in section 103D-305 [and any state or county department contract of less than $25,000];
(2) Emergency purchases for the procurement of goods, services, or construction under section 103D-307, disaster relief under chapter 127, or a civil defense emergency under chapter 128;
(3) Grants and subsidies disbursed by a state agency pursuant to [chapter 42D] section 42F-101, or made in accordance with standards provided by law as required by article VII, section 4, of the State Constitution, or made by the counties pursuant to their respective charters or ordinances;
(4) Contracts or agreements between government agencies;
(5) Contracts or agreements to disburse funds:
(A) To make payments to or on behalf of public officers and employees for salaries, fringe benefits, professional fees, and reimbursements;
(B) To satisfy obligations required to be paid by law, including fees, judgments, settlements, and other payments for resolving claims;
(C) To make refunds or return funds held by the State or county as trustee, custodian, or bailee;
(D) For entitlement programs, including public assistance, unemployment, and workers' compensation programs, established by state or federal law;
(E) For deposit, investment, or safekeeping, including sums to pay expenses related to their deposit investment, or safekeeping;
(F) For loans under government-administered loan programs;
(G) To make periodic, recurring payments for utility services; and
(6) Rent for the use or occupation of the premises and facilities at Aloha Stadium, the convention center, or any other state or county large spectator events facility; and
(7) Contracts or agreements entered into pursuant to chapter 102[; and
(8) Requirements of chapter 103D]."
SECTION 6. Section 103-55, Hawaii Revised Statutes, is amended to read as follows:
"§103-55 Wages, hours, and working conditions of employees of contractors performing services. (a) Before any offeror enters into a contract to perform services in excess of [$25,000] the limits in section 103D-305 for any governmental agency, the offeror shall certify that the services to be performed will be performed under the following conditions:
Wages. The services to be rendered shall be performed by employees paid at wages or salaries not less than the wages paid to public officers and employees for similar work.
Compliance with labor laws. All applicable laws of the federal and state governments relating to workers' compensation, unemployment compensation, payment of wages, and safety will be fully complied with.
(b) No contract to perform services for any governmental contracting agency in excess of [$25,000] the limits in section 103D-305 shall be granted unless all the conditions of this section are met. Failure to comply with the conditions of this section during the period of contract to perform services shall result in cancellation of the contract, unless such noncompliance is corrected within a reasonable period as determined by the procurement officer. Final payment of a contract or release of bonds or both shall not be made unless the procurement officer has determined that the noncompliance has been corrected.
It shall be the duty of the governmental contracting agency awarding the contract to perform services in excess of [$25,000] the limits in section 103D-305 to enforce this section.
(c) This section shall apply to all contracts to perform services in excess of [$25,000] the limits in section 103D-305, including contracts to supply ambulance service and janitorial service.
This section shall not apply to:
(1) Managerial, supervisory, or clerical personnel.
(2) Contracts for supplies, materials, or printing.
(3) Contracts for utility services.
(4) Contracts to perform personal services under paragraphs (2), (3), (12), and (15) of section [76-16,] 76-16(b), paragraphs (7), (8), and (9) of section 46-33, and paragraphs (7), (8), and (12) of section 76-77.
(5) Contracts for professional services.
(6) Contracts to operate refreshment concessions in public parks, or to provide food services to educational institutions.
(7) Contracts with nonprofit institutions."
SECTION 7. Section 103D-102, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:
"(b) Notwithstanding subsection (a), this chapter shall not apply to contracts by governmental bodies:
(1) Solicited or entered into before July 1, 1994, unless the parties agree to its application to a contract solicited or entered into prior to July 1, 1994;
(2) To disburse funds, irrespective of their source:
(A) For grants or subsidies as those terms are defined in section 42F-101[,]; or made [by the State] in accordance with standards provided by law as required by article VII, section 4, of the State Constitution; or by the counties pursuant to their respective charters or ordinances;
(B) To make payments to or on behalf of public officers and employees for salaries, fringe benefits, professional fees, or reimbursements;
(C) To satisfy obligations that the State is required to pay by law, including paying fees, permanent settlements, subsidies, or other claims, making refunds, and returning funds held by the State as trustee, custodian, or bailee;
(D) For entitlement programs, including public assistance, unemployment, and workers' compensation programs, established by state or federal law;
(E) For dues and fees of organizations of which the State or its officers and employees are members, including the National Association of Governors, the National Association of State and County Governments, and the Multi-State Tax Commission;
(F) For deposit, investment, or safekeeping, including expenses related to their deposit, investment, or safekeeping;
(G) To governmental bodies of the State;
(H) As loans, under loan programs administered by a governmental body; and
(I) For contracts awarded in accordance with [the provisions of] chapter 103F;
(3) To procure goods, services, or construction from a governmental body other than the University of Hawaii bookstores, from the federal government, or from another state or its political subdivision;
(4) To procure the following goods or services which are available from multiple sources but for which procurement by competitive means is either not practicable or not advantageous to the State:
(A) Services of expert witnesses for potential and actual litigation of legal matters involving the State, its agencies, and its officers and employees, including administrative quasi-judicial proceedings;
(B) Works of art for museum or public display;
(C) Research [and], reference, and educational materials including books, maps, periodicals, and pamphlets, which are published or available in print, video, audio, magnetic, or electronic form[;], including web-based databases;
(D) Meats and foodstuffs for the Kalaupapa settlement;
(E) Opponents for athletic contests;
(F) Utility services whose rates or prices are fixed by regulatory processes or agencies;
(G) Performances, including entertainment, speeches, and cultural and artistic presentations;
(H) Goods and services for [commercial] resale by the State;
(I) Services of printers, rating agencies, support facilities, fiscal and paying agents, and registrars for the issuance and sale of the State's or counties' bonds;
(J) Services of attorneys employed or retained to advise, represent, or provide any other legal service to the State or any of its agencies, on matters arising under laws of another state or foreign country, or in an action brought in another state, federal, or foreign jurisdiction, when substantially all legal services are expected to be performed outside this State;
(K) Financing agreements under chapter 37D; and
(L) Any other goods or services which the policy board determines by rules or the chief procurement officer determines in writing is available from multiple sources but for which procurement by competitive means is either not practicable or not advantageous to the State; and
(5) Which are specific procurements expressly exempt from any or all of the requirements of this chapter by:
(A) References in state or federal law to provisions of this chapter or a section of this chapter, or references to a particular requirement of this chapter; and
(B) Trade agreements, including the Uruguay Round General Agreement on Tariffs and Trade (GATT), which require certain non-construction and non-software development procurements by the comptroller to be conducted in accordance with its terms."
SECTION 8. Section 103D-301, Hawaii Revised Statutes, is amended to read as follows:
"[[]§103D-301[]] Methods of source selection. Unless otherwise authorized by law, all contracts shall be awarded [by competitive sealed bidding pursuant to section 103D-302, except] as provided in:
(1) Section 103D-302 (Competitive sealed bidding);
(2) Section 103D-B (Competitive online bidding);
[(1)] (3) Section 103D-303 (Competitive sealed proposals);
[(2)] (4) Section 103D-304 (Professional services procurement);
[(3)] (5) Section 103D-305 (Small purchases);
[(4)] (6) Section 103D-306 (Sole source procurement); and
[(5)] (7) Section 103D-307 (Emergency procurements)."
SECTION 9. Section 103D-302, Hawaii Revised Statutes, is amended by amending subsection (h) to read as follows:
"(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] If all bids exceed available funds [as certified by the appropriate fiscal officer,] or if revenues do not meet the purchasing agency's requirements, 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.] may negotiate an adjustment in the price offered, including revisions in the specifications, with the responsible and responsive bidder, to bring the bid within the amount of available funds or level of revenues that would meet the purchasing agency's requirements; provided that the head of the purchasing agency determines in writing that time or economic considerations, or both, preclude resolicitation of a revised scope of work."
SECTION 10. Section 103D-304, Hawaii Revised Statutes, is amended by amending subsections (f) and (g) to read as follows:
"(f) Contracts awarded under [this section] subsection (e) in excess of the limits in section 103D-305 shall be posted electronically within seven days of the contract award by the chief procurement officer or designee and shall remain posted for at least one year. Information to be posted shall include[:] but not be limited to:
(1) The names of the [top five] persons submitted under subsection (d)[, or, if the list submitted under subsection (d) is less than five, all of the persons submitted];
(2) The name of the person or organization receiving the award;
(3) The dollar amount of the contract;
(4) The purchasing agency head making the selection; and
(5) Any relationship of the principals to the official making the award.
(g) Contracts for professional services of less than [$25,000] the limits in section 103D-305 may be negotiated by the head of a purchasing agency, with any two persons who appear on the list of qualified persons established pursuant to subsection (c). Negotiations shall be conducted in the manner set forth in subsection (e), but without establishing any order of preference."
SECTION 11. Section 103D-305, Hawaii Revised Statutes, is amended to read as follows:
"§103D-305 Small purchases; prohibition against parceling. (a) Procurements of less than [$25,000] $100,000 for goods, services, or construction, and procurements of less than $250,000 for public school repair and maintenance, shall be made in accordance with procedures set forth in rules adopted by the policy board that are designed to ensure administrative simplicity and as much competition as is practicable; provided that multiple expenditures shall not be created at the inception of a transaction or project so as to evade the requirements of this chapter; and provided further that procurement requirements shall not be artificially divided or parceled so as to constitute a small purchase under this section.
(b) Small purchase awards for $50,000 or more shall be posted electronically in accordance with procedures set forth in a procurement directive issued by the policy board.
(c) The names of all contractors, a brief description of the contract, and the amount of each contract awarded, shall be submitted to the legislature in a monthly report regarding every public school repair and maintenance contract of $100,000 or more awarded under this section."
SECTION 12. 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 a manner described in rules adopted by the policy board, [and no objection is outstanding.] and the determination is then approved by the chief procurement officer with no objection outstanding. The written determination, any objection, and a written summary of the disposition of any objection shall be included in the contract file."
SECTION 13. Section 103D-315, Hawaii Revised Statutes, is amended to read as follows:
"[[]§103D-315[]] Multi-term contracts. (a) Unless otherwise provided by law, a contract for goods or services may be entered into for any period of time deemed to be in the best interests of the governmental body[,]; provided that the [term of the contract and conditions of renewal or extension, if any, are included in the solicitation and funds are available for the first fiscal period at the time of contracting. Payment and performance obligations for succeeding fiscal periods shall be subject to the availability and appropriation of funds therefor.
(b) Prior to the utilization of a multi-term contract, it shall be determined in writing:
(1) That estimated requirements cover the period of the contract and are reasonably firm and continuing;
(2) That such a contract will serve the best interests of the governmental body by encouraging effective competition or otherwise promoting economies in procurement; and
(3) That sufficient funds to pay for the initial term of the contract are available and the funds necessary for the remaining terms of the contract are likely to be available from sources which are identified in writing.
(c) When funds are not appropriated or otherwise made available to support continuation of performance in a subsequent fiscal period, the contract shall be cancelled and the contractor shall be reimbursed for the reasonable value of any non-recurring costs incurred but not amortized in the price of the goods or services delivered under the contract. The cost of cancellation may be paid from any appropriations available for such purposes.] following are included in the solicitation:
(1) The term of the contract;
(2) A statement that funds for the first fiscal year period of the contract are available; and
(3) A statement that payment and performance obligations for the remaining contract period shall be subject to the availability and appropriation of funds therefor.
(b) Prior to soliciting pricing for a multi-term contract, the procurement officer shall determine that:
(1) Requirements cover the period of the contract and are firm and continuing;
(2) The term of the contract will encourage effective competition; and
(3) Sufficient funds to pay for the first fiscal year period of the contract are available, and the funds for the remaining period of the contract are subject to their availability in future fiscal years.
(c) When funds are not appropriated or available to support continuation of performance in a subsequent fiscal year, the contract shall be canceled.
This section does not apply to contracts exempt from section 103-A."
SECTION 14. Section 103D-320, Hawaii Revised Statutes, is amended to read as follows:
"[[]§103D-320[]] Retention of procurement records. All procurement records shall be retained and disposed of in accordance with chapter 94 and records retention guidelines and schedules approved by the [comptroller.] governmental body."
SECTION 15. Section 103D-323, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
"(a) Unless the policy board determines otherwise by rules, bid security shall be required [only] for goods, services, and construction contracts to be awarded pursuant to sections 103D-302 and 103D-303, when approved by the procurement officer, and when the price of the contract is estimated [by the procurement officer] to exceed [$25,000 or, if the contract is for goods or services, the purchasing agency secures the approval of the chief procurement officer.] the limits in section 103D-305. Bid security shall be a bond provided by a surety company authorized to do business in the State, or the equivalent in cash, or otherwise supplied in a form specified in rules."
SECTION 16. Section 103D-324, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
"(a) Unless the policy board determines otherwise by rules, the following bonds or security, when approved by the procurement officer, shall be delivered to the purchasing agency and shall become binding on the parties upon the execution of the contract if the contract which is awarded pursuant to section 103D-302 or 103D-303 exceeds [$25,000] the limits in section 103D-305 and is for goods, services, or construction[, or the purchasing agency secures the approval of the chief procurement officer]:
(1) A performance bond in a form prescribed by the rules of the policy board, executed by a surety company authorized to do business in this State or otherwise secured in a manner satisfactory to the purchasing agency, in an amount equal to one hundred per cent of the price specified in the contract;
(2) A payment bond in a form prescribed by the rules of the policy board, executed by a surety company authorized to do business in this State or otherwise secured in a manner satisfactory to the purchasing agency, for the protection of all persons supplying labor and material to the contractor for the performance of the work provided for in the contract. The bond shall be in an amount equal to one hundred per cent of the price specified in the contract; or
(3) A performance and payment bond which satisfies all of the requirements of paragraphs (1) and (2)."
SECTION 17. Section 103D-403, Hawaii Revised Statutes, is amended to read as follows:
"[[]§103D-403[]] Exempted items. Specifications for goods, services, or construction items procured under section 103D-209, or those exempted pursuant to section [103D-210,] 103D-102, or by rules adopted by the policy board, may be prepared by a purchasing agency in accordance with this chapter and rules adopted hereunder."
SECTION 18. Section 103D-1002, Hawaii Revised Statutes, is amended by amending subsection (e) to read as follows:
"(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).] The administrator of the state procurement office shall maintain and distribute copies of the Hawaii products list to the purchasing agencies of the various governmental agencies."
SECTION 19. Section 103D-1005, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:
"(b) The office of solid waste management in the department of health, in coordination with the state procurement office, [with the assistance of the office of solid waste management in the department of health] as provided in section 342G-42, shall develop a recycled product procurement program that shall require state purchasing agencies and urge county purchasing agencies to:
(1) Apply preference to the purchase of products with recycled content before purchasing products without any recycled content;
(2) Be consistent with applicable federal specification standards incorporated in Executive Order No. [12873,] 13101, signed by the President of the United States on [October 20, 1993,] September 14, 1998, and any subsequent amendments to that order; and
(3) Ensure, to the maximum extent economically feasible, the purchase of materials that may be recycled or reused when discarded, and to avoid the purchase of products deemed environmentally harmful."
SECTION 20. Section 103D-1007, Hawaii Revised Statutes, is amended to read as follows:
"§103D-1007 Preference to bidders on state agency contracts. (a) The requirements in this section are in addition to any other applicable requirements provided in this chapter.
(b) The preference in this section may not be used in combination with any other preference otherwise available to a bidder under state or federal law.
(c) In any section 103D-302 or 103D-303 contract for a public works project, a state agency shall award the contract to an offeror who [has filed all state tax returns due to the State and paid all amounts owing on such returns for two successive years] is a state contractor prior to submitting the offer; provided that the amount of that offer is not more than seven per cent higher than the amount offered by any competing contractor who [has not filed or paid all applicable state taxes, and the amount of the offer by the state tax paying offeror is $5,000,000 or less.] is not a state contractor.
[(d) In any section 103D-302 or 103D-303 contract for a public works project, a state agency shall award the contract to an offeror who has filed all state tax returns due to the State and paid all amounts owing on such returns for four successive years prior to submitting the offer; provided that the amount of that offer is not more than seven per cent higher than the amount offered by any competing contractor who has not filed or paid all applicable state taxes, and the amount of the offer by the state tax paying offeror is more than $5,000,000.]
(d) A state contractor is qualified for the preference under this section when the state contractor affirms that:
(1) The contractor is licensed pursuant to chapter 444;
(2) The contractor is licensed to conduct business in the State pursuant to section 237-9;
(3) The contractor shall submit a bid under the name appearing on that contractor's current contracting or business license;
(4) If other than an individual, the contractor is a domestic corporation, partnership, or business organized under the laws of the State;
(5) The contractor has maintained its principal place of business within the State for at least two hundred consecutive days prior to the submission of a bid;
(6) The contractor has filed a Hawaii resident income tax return and all other applicable tax returns for the preceding tax year and has paid all amounts owing on those tax return;
(7) The contractor has complied with all applicable Hawaii employment, insurance, and workers' compensation laws;
(8) If an employer with one or more employees, all of its employees are state residents; and
(9) If a joint venture, is composed entirely of entities that qualify under paragraphs (1) to (8) and eighty-five per cent of all the employees of the joint venture are state residents.
(e) If two or more [contractors who have paid state and county taxes or were required to submit a filing regarding state and county taxes] state contractors are bidding on a public works contract, [and those contractors meet the criteria outlined in subsection (c) or (d),] the state agency shall award the contract to the state contractor among them who has submitted the lowest bid.
(f) If any federal statute or regulation precludes the granting of federal assistance or reduces the amount of that assistance for a particular public works project because of preference awarded by this section, this section shall not apply insofar as its application would preclude or reduce federal assistance for that work.
(g) Any contractor found to have submitted a false statement under this section may have its offer rejected and may be debarred or suspended pursuant to section 103D-702. If work on a project has commenced prior to institution of a challenge against a contractor's affirmation, the contractor may be permitted to continue working during resolution of the challenge.
(h) For purposes of this section, a person shall be deemed to be a "state resident" if the person has lived continuously in the State for a period of six months prior to the awarding of the contract under which the person shall work, and if the person has not established residency in another jurisdiction during that time period."
SECTION 21. Section 103D-1203, Hawaii Revised Statutes, is amended to read as follows:
"§103D-1203 Administrator of the state procurement office; duties. The administrator of the state procurement office shall:
(1) Perform a periodic review of the inventory management system of all governmental bodies;
(2) Enforce rules adopted by the policy board governing the management of state property;
(3) Assist, advise, and guide governmental bodies in matters relating to the inventory management of state property; and
(4) [Establish, manage, and maintain] Manage a centralized property inventory record [file] system developed and maintained by the department of accounting and general services, for each [department, board, commission, or office of the State] governmental body having the care, custody, or control of any state property[, other than the University of Hawaii, the department of education, the several counties, and those governmental bodies administratively attached thereto, unless otherwise specified in this chapter or in rules adopted pursuant to chapter 91.] within the executive branch of the State, except for the department of education and the office of Hawaiian affairs."
SECTION 22. Chapter 103F-405, Hawaii Revised Statutes, is amended to read as follows:
"[[]§103F-405[]] Small purchases. [Purchases] Small purchases of health and human services [of less than $25,000 are small purchases, and] shall be made in accordance with section 103D-305 and rules adopted by the policy board to implement that section."
SECTION 23. Section 103D-309, Hawaii Revised Statutes, is repealed.
["§103D-309 Contract not binding unless funds available. (a) Contracts awarded pursuant to section 103D-302, 103D-303, or 103D-306, shall neither be binding nor have any force and effect of law unless the comptroller, the director of finance of a county, or the respective chief financial officers of the department of education, the judiciary, or the legislative branches of the State or county, as the case may be, endorses thereon a certificate that there is an appropriation or balance of an appropriation over and above all outstanding contracts, sufficient to cover the amount required by the contract; provided that if the contract is a multi-term contract, the comptroller, director of finance, or chief financial officer shall only be required to certify that there is an appropriation or balance of an appropriation over and above all outstanding contracts, that is sufficient to cover the amount required to be paid under the contract during the fiscal year or remaining portion of the fiscal year of each term of the multi-year contract; provided further that the administrator of the state procurement office shall attest in writing to any recommendation or solicitations. This section shall not apply to any contract under which the total amount to be paid to the contractor cannot be accurately estimated at the time the contract is to be awarded, or to any contract for which consideration is in kind or forbearance, or to any contract awarded pursuant to section 103D-306 that is a one-time payment through a purchase order.
(b) In any contract involving not only state or county funds but supplemental funds from the federal government, this section shall be applicable only to that portion of the contract price as is payable out of state or county funds. As to the portion of the contract price as is expressed in the contract to be payable out of federal funds, the contract shall be construed to be an agreement to pay the portion to the contractor, only out of federal funds to be received from the federal government. This subsection shall be liberally construed so as not to hinder or impede the State in contracting for any project involving financial aid from the federal government."]
SECTION 24. Section 103D-314, Hawaii Revised Statutes, is repealed.
["[§103D-314] Approval of accounting system. Except with respect to firm fixed-price contracts, no contract shall be used unless it has been determined in writing by the chief procurement officer, the head of a purchasing agency, or a designee of either officer that:
(1) The proposed contractor's accounting system will permit timely development of all necessary cost data in the form required by the specific contract type contemplated; and
(2) The proposed contractor's accounting system is adequate to allocate costs in accordance with generally accepted accounting principles."]
SECTION 25. Section 103D-328, Hawaii Revised Statutes, is repealed.
["[§103D-328] Tax clearances; setoff for due and unpaid taxes. (a) Unless the director of taxation determines that waiver of the Internal Revenue Service tax clearance requirement is necessary to expedite or facilitate the procurement process and is in the best interest of the State, and waives the Internal Revenue Service tax clearance requirement, no contract shall be binding or effective until the contractor secures and the purchasing agency receives a tax clearance from the director of taxation and the Internal Revenue Service to the effect that all returns due have been filed, and all taxes, interest, and penalties levied or accrued, under title 14 that are administered by the department of taxation and under the Internal Revenue Code, against the contractor have been paid.
(b) During the term of a contract, if a lien is imposed against the contractor for a tax debt under section 231-33 or the contractor fails to timely file all tax returns and pay all taxes, interest, and penalties due to the Internal Revenue Service, the comptroller or respective county director of finance, upon request of the director of taxation, shall set off the amount of the tax debt against any payment due to the contractor until the tax debt is paid in full.
(c) All state and county procurement officers or agents shall withhold final payment of a contract until the receipt of tax clearances from the director of taxation and the Internal Revenue Service. Notwithstanding sections 40-57 and 40-58, if a contractor fails to provide the requisite tax clearances within six months of the completion of the contract, the state or county procurement officer or agent shall first notify the department of taxation which in turn will notify the Internal Revenue Service, of amounts payable to the contractor on completed contracts. The department of taxation and the Internal Revenue Service, within thirty days, shall request the procurement officer or agent to set off the amount of taxes due against any payment due to the contractor until the tax debt is paid in full to the State or the Internal Revenue Service, or both. No final bill or invoice from the contractor shall be required as a condition to the setoff. Any remaining contract balance shall revert to the appropriation under which it was encumbered.
(d) This section shall not apply to any contract of less than $25,000 or any contract entered into pursuant to section 103D-305 or 103D-307.
(e) This section shall not apply to a contractor who the director of taxation certifies is:
(1) Contesting the validity of a tax debt, or that any tax, penalty, or interest is due and owing the Internal Revenue Service in an administrative or judicial appeal; or
(2) In good standing, having entered into a plan or plans in which the tax debt, or any tax, penalty, or interest due and owing the Internal Revenue Service is being paid to the department of taxation or the Internal Revenue Service."]
SECTION 26. Section 103D-408, Hawaii Revised Statutes, is repealed.
["[§103D-408] Indigenous and Polynesian introduced plants; use in public landscaping. (a) Wherever and whenever feasible, all plans, designs, and specifications for new or renovated landscaping of any building, complex of buildings, facility, complex of facilities, or housing developed by the State with public moneys shall incorporate indigenous land plant species as defined in section 195D-2, and plant species brought to Hawaii by Polynesians before European contact, such as the kukui, noni, and coconut; provided that:
(1) Suitable cultivated plants can be made available for this purpose without jeopardizing wild plants in their natural habitat; and
(2) Wherever and whenever possible, indigenous plants shall be used for landscaping on the island or islands on which the species originated.
(b) Each plant or group of plants used pursuant to subsection (a) shall be clearly identified with signs for the edification of the general public."]
SECTION 27. Section 103D-409, Hawaii Revised Statutes, is repealed.
["[§103D-409] Provisions for pollution control. All contracts shall make provisions for control of pollution when encountered in the performance of the contract."]
SECTION 28. Section 103D-410, Hawaii Revised Statutes, is repealed.
["[§103D-410] Energy efficiency through life-cycle costing. (a) The procurement practices of the State shall include energy efficient standards and policies, including life-cycle costing.
(b) In implementing life-cycle costing, the purchasing agency shall be guided by energy efficiency standards and policies for purchasing various items developed and promulgated by the United States Department of Energy and other federal agencies, and nationally recognized trade associations, including but not limited to the National Association of State Purchasing Officials, the National Institute of Governmental Purchasing, Inc., the National Association of Purchasing Management, and the Air Conditioning and Refrigeration Institute. The purchasing agency shall notify bidders of information, procedures, and forms required in implementing energy efficiency standards and policies. The information required shall include purchasing standards and policies developed by federal agencies and by nationally recognized agencies and associations, as well as energy consumption and life-cycle cost data.
(c) The purchasing agency shall consider purchasing via the life-cycle costing method those classes of items for which nationally recognized energy efficiency data have been developed. These items shall include but not be limited to automobiles and air conditioning systems. The watt-saving variety of common-sized fluorescent lamps shall be purchased except where standard wattage of those lamps is specifically required by the using agency."]
SECTION 29. Section 103D-411, Hawaii Revised Statutes, is repealed.
["[103D-411] Value engineering clauses. The State shall insert clauses providing for value engineering incentives in all public works contracts for amounts in excess of $250,000. The clauses shall provide:
(1) That cost reduction proposals submitted by contractors:
(A) Must require, in order to be applied to the contract, a change order thereto; and
(B) Must result in savings to the State or county, as the case may be, by providing less costly items than those specified in the contract without impairing any of their essential functions and characteristics such as service life, reliability, substitutability, economy of operation, ease of maintenance, and necessary standardized features; and
(2) That accepted cost reduction proposals shall result in an equitable adjustment of the contract price so that the contractor will share a portion of the realized cost reduction."]
SECTION 30. There is appropriated out of the general revenues of the State of Hawaii the sum of $1, or so much thereof as may be necessary for fiscal year 2002-2003, for deposit into the state procurement office revolving fund.
SECTION 31. There is appropriated out of the state procurement office revolving fund the sum of $1, or so much thereof as may be necessary for fiscal year 2002-2003, for the purposes of this Act.
The sum appropriated shall be expended by the state procurement office for the purposes of this Act.
SECTION 32. In codifying the new sections added by sections 1 to 4 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.
SECTION 33. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 34. If any provision of this Act, or the application thereof to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this Act which can be given effect without the invalid provision or application, and to that extent the provisions of this Act are severable.
SECTION 35. This Act shall take effect on October 1, 2002; provided that:
(1) Section 3 shall take effect upon approval;
(2) Sections 30 and 31 shall take effect on July 1, 2002; and
(3) Sections 11 and 22 shall take effect on June 30, 2002.