HB1210

SECTION 1. The legislature finds that the procurement process is in need of clear legislative direction to award state contracts to responsible bidders or offerors through the state procurement process, increase accountability with performance on state contracts, and more efficiently utilize taxpayer dollars. Some state contracts may currently be awarded to the lowest bidder through the invitation for bid process without regard to poor past performance. Such bidders may be considered qualified despite prior poor performance on state, federal, or private contracts, which may result in repeated inefficiencies and substandard work.

The purpose of this Act is to:

(1) Require procurement officers to complete periodic performance evaluations of certain contractors;

(2) Establish factors to be included in any evaluation, consideration, or review of past performance and ratings standards for those factors;

(3) Require past performance to be considered in future bid selection of contractors for sole source contracts and any competitive sealed contracts that exceeds the small purchase threshold; and

(4) Require procurement officers to consider specific factors, including past performance, when making a determination of offeror responsibility.

SECTION 2. 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 objectively measurable, such as discounts, transportation costs, and total or life cycle costs. Past performance shall be evaluated in all bids expected to meet or exceed the small purchase threshold. 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 3. Section 103D-303, Hawaii Revised Statutes, is amended by amending subsection (e) to read as follows:

"(e) The request for proposals shall state the relative importance of price and other evaluation factors. Past performance shall be randomly evaluated in at least ten solicitations expected to meet or exceed the small purchase threshold per year. The currency, relevance, and source of the information, context of the data, and general trends in the contractor's performance shall be considered. This assessment of past performance information shall be separate from the responsibility determination required under section 103D-310. The solicitation shall describe the approach for evaluating past performance, including evaluating offerors with no relevant performance history, and shall provide offerors an opportunity to identify past or current contracts, including federal, state, local government, and private contracts, with requirements that are similar to the solicitation. The solicitation shall also authorize offerors to provide information on problems encountered on the identified contracts and the offeror's corrective actions. The governmental body shall consider this information, as well as information obtained from any other sources, when evaluating the offeror's past performance. The procurement officer shall determine the relevance of similar past performance information. The evaluation shall take into account past performance information regarding predecessor companies, key personnel who have relevant experience, or subcontractors that will perform major or critical aspects of the requirement when the information is relevant to the procurement. In the case of an offeror without a record of relevant past performance or for whom information on past performance is not available, the offeror may not be evaluated favorably or unfavorably on past performance."

SECTION 4. 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 5. Section 103D-310, Hawaii Revised Statutes, is amended to read as follows:

"§103D-310 Responsibility of offerors. (a) Purchases shall be made from, and contracts shall be awarded to, responsible prospective contractors only.

(b) In said bids, no purchase or award shall be made unless the procurement officer makes an affirmative determination of responsibility. In the absence of information clearly indicating that the prospective contractor is responsible, the procurement officer shall make a determination of nonresponsibility.

(c) The award of a contract to a prospective contractor based on lowest evaluated price alone can be false economy if there is subsequent default, late deliveries, or other unsatisfactory performance resulting in additional contractual or administrative costs. While it is important that a governmental body's purchases be made at the lowest price, a supplier shall not be awarded a contract solely because that supplier submits the lowest offer. A prospective contractor shall affirmatively demonstrate its responsibility, including, when necessary, the responsibility of its proposed subcontractors. To be determined responsible, a prospective contractor shall:

(1) Have adequate financial resources to perform the contract, or the ability to obtain the resources;

(2) Be able to comply with the required or proposed delivery or performance schedule, taking into consideration all existing commercial and governmental business commitments;

(3) Have a satisfactory performance record. A prospective contractor shall not be determined responsible or nonresponsible solely on the basis of a lack of relevant performance history. A prospective contractor that is or recently has been seriously deficient in contract performance shall be presumed to be nonresponsible, unless the procurement officer determines that the circumstances were properly beyond the contractor's control, or that the contractor has taken appropriate corrective action. Failure to meet the quality requirements of a contract shall be a significant factor to consider in determining satisfactory performance. The procurement officer shall consider the number of contracts involved and the extent of deficient performance in each contract when making this determination;

(4) Have a satisfactory record of integrity and business ethics;

(5) Have the necessary organization, experience, accounting and operational controls, and technical skills, or the ability to obtain these skills, including, as appropriate, production control procedures, property control systems, quality assurance measures, and safety programs applicable to materials to be produced or services to be performed by the prospective contractor and subcontractors;

(6) Have the necessary production, construction, and technical equipment and facilities, or the ability to obtain the equipment and facilities; and

(7) Be otherwise qualified and eligible to receive an award under applicable laws and regulations.

[~~(a)~~] (d) Unless the policy board, by rules, specifies otherwise, before submitting an offer, a prospective offeror, not less than ten calendar days prior to the day designated for opening offers, shall give written notice of the intention to submit an offer to the procurement officer responsible for that particular procurement.

[~~(b)~~] (e) 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 purpose, 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~~] the 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.

[~~(c)~~] (f) All offerors, upon award of contract, shall comply with all laws governing entities doing business in the State, including chapters 237, 383, 386, 392, and 393. Offerors shall produce documents to the procuring officer to demonstrate compliance with this subsection. Any offeror making a false affirmation or certification under this subsection shall be suspended from further offerings or awards pursuant to section 103D-702. The procuring officer shall verify compliance with this subsection for all contracts awarded pursuant to sections 103D-302, 103D-303, 103D-304, and 103D-306, and for contracts and procurements of $2,500 or more awarded pursuant to section 103D-305; provided that the attorney general may waive the requirements of this subsection for contracts for legal services if the attorney general certifies in writing that comparable legal services are not available in this State.

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

SECTION 6. Chapter 103D, Hawaii Revised Statutes, is amended by adding a new section to part V to be appropriately designated and to read as follows:

"§103D- Contract performance information; past performance evaluations. (a) Agencies shall monitor performance of contractors under previously awarded contracts or orders, as provided in this section for future evaluation purposes. An evaluation shall:

(1) Include a clear, non-technical description of the principal purpose of the contract or order;

(2) Reflect how the contractor performed, including clear relevant information that accurately depicts the contractor's performance, and be based on objective facts supported by program and contract or order performance data; and

(3) Be tailored to the contract type, size content, and complexity of the contractual requirements.

(b) Evaluation factors for each assessment shall include, at a minimum, the following:

(1) Technical (quality of product or service);

(2) Cost control (not applicable for firm-fixed-price or fixed-price with economic price adjustment arrangements);

(3) Schedule and timeliness;

(4) Management or business relations;

(5) Small business subcontracting, including reduced or untimely payments to small business subcontractors when the contract requires a subcontracting plan; and

(6) Other factors, as applicable (such as trafficking violations, tax delinquency, failure to report in accordance with contract terms and conditions, defective cost or pricing data, terminations, suspensions, and debarments).

(d) Each factor and subfactor used shall be evaluated and a supporting narrative shall be provided. Each evaluation factor shall be rated in accordance with the following five scale rating system:

(1) Exceptional;

(2) Very good;

(3) Satisfactory;

(4) Marginal; and

(5) Unsatisfactory;

provided that the ratings and narratives shall reflect the definitions in subsection (m); provided further that plus or minus signs may be used in conjunction with a rating to indicate an improving or worsening trend that is insufficient to change the evaluation status; and provided further that a "N/A" or "not applicable" rating shall be used if the rating is not going to be applied to a particular area for evaluation.

(e) Agencies shall monitor their compliance with the past performance evaluation requirements on said chosen projects and measure the quality and timely reporting of past performance information.

(f) Past performance evaluations shall be prepared at least annually and at the time the work under a contract or order is completed. Past performance evaluations shall be required for selected contracts and orders as specified in subsections (h) through (k). These evaluations are generally for the entity, division, or unit that performed the contract or order. Past performance information shall be entered into an evaluation reporting tool for past performance reports on contracts and orders on identified projects under this section.

(g) Except as provided in subsection (k), agencies shall prepare evaluations of contractor performance for each selected contract that exceeds the small purchase threshold. Agencies shall also prepare an evaluation if a modification to the contract causes the dollar amount to exceed the small purchase threshold.

(h) Past performance evaluations shall include an assessment of a contractor's:

(1) Performance against, and efforts to achieve, the goals identified in the contract; and

(2) Reduced or untimely payments made to small business subcontractors, if determined by the procurement officer to be unjustified. The procurement officer shall:

(A) Consider and evaluate a contractor's written explanation for a reduced or an untimely payment when determining whether the reduced or untimely payment is justified; and

(B) Determine that a history of unjustified reduced or untimely payments has occurred when the contractor has reported three or more occasions of unjustified reduced or untimely payments under a single contract within a twelve-month period; provided that the following payment or nonpayment situations shall not be considered unjustified:

(i) There is a contract dispute on performance;

(ii) A partial payment is made for amounts not in dispute;

(iii) A payment is reduced due to past overpayments;

(iv) There is an administrative mistake; or

(v) Late performance by the subcontractor leads to later payment by the prime contractor.

(i) Agency evaluations of selected contractor performance, including both negative and positive evaluations, shall be provided to the contractor as soon as practicable after completion of the evaluation. The contractor shall receive a notification when an evaluation is ready for comment. Contractors shall be afforded up to fourteen calendar days from the date of notification of availability of the past performance evaluation to submit comments, rebutting statements, or additional information. Agencies shall provide for review at a level above the contract administrator to consider disagreements between the parties regarding the evaluation. The ultimate conclusion on the performance evaluation is a decision of the contracting agency. Copies of the evaluation, contractor response, and review comments, if any, shall be retained as part of the evaluation. The completed evaluation shall not be released to anyone other than government personnel and the contractor whose performance is being evaluated during the period the information may be used to provide source selection information.

(j) Evaluations used in determining award or incentive fee payments may also be used to satisfy the requirement of this section.

(k) Agencies shall require at least quarterly evaluations of agency compliance on selected projects with the reporting requirements of this section. The evaluation shall identify delinquent past performance reports and monitor reports for quality control.

(l) Agencies shall ensure that information on these identified projects is accurately documented within ninety calendar days after a procurement officer:

(1) Issues a final determination that a contractor has submitted defective cost or pricing data;

(2) Makes a subsequent change to the final determination concerning defective cost or pricing data;

(3) Issues a final termination for cause or default notice;

(4) Makes a subsequent withdrawal or a conversion of a termination for default to a termination for convenience; or

(5) Determines that a contractor has a history of three or more unjustified reduced or untimely payments to small business subcontractors under a single contract within a twelve-month period.

(m) For the purpose of this section:

"Exceptional" means that performance meets contractual requirements and exceeds many requirements to the government's benefit. The contractual performance of the element or sub-element being evaluated was accomplished with few minor problems for which corrective actions taken by the contractor were highly effective. To justify an exceptional rating, multiple significant events should be identified with a statement of how the events were of benefit to the government; provided that a singular benefit could be of a magnitude that it alone constitutes an exceptional rating; provided further that there should have been no significant weaknesses identified.

"Marginal" means that performance does not meet some contractual requirements. The contractual performance of the element or sub-element being evaluated reflects a serious problem for which the contractor has not yet identified corrective actions. The contractor's proposed actions appear only marginally effective or were not fully implemented. To justify marginal performance, identify a significant event in each category that the contractor had trouble overcoming and state how it impacted the government. A marginal rating shall be supported by referencing the management tool that notified the contractor of the contractual deficiency, such as management, quality, safety, or environmental deficiency report or letter.

"Satisfactory" means that performance meets contractual requirements. The contractual performance of the element or sub-element contains some minor problems for which corrective actions taken by the contractor appear or were satisfactory. To justify a satisfactory rating, there should have been only minor problems, or major problems the contractor recovered from without impact to the contract or order; provided that there should have been no significant weaknesses identified. A fundamental principle of assigning ratings is that contractors shall not be evaluated with a rating lower than satisfactory solely for not performing beyond the requirements of the contract or order.

"Unsatisfactory" means that performance does not meet most contractual requirements and recovery is not likely in a timely manner. The contractual performance of the element or sub-element contains a serious problem or problems for which the contractor's corrective actions appear or were ineffective. To justify an unsatisfactory rating, multiple significant events in each category should be identified that the contractor had trouble overcoming with a statement of how it impacted the government. A singular problem, however, could be of such serious magnitude that it alone constitutes an unsatisfactory rating. An unsatisfactory rating should be supported by referencing the management tools used to notify the contractor of the contractual deficiencies, such as management, quality, safety, or environmental deficiency reports, or letters.

"Very good" means that performance meets contractual requirements and exceeds some requirements to the government's benefit. The contractual performance of the element or sub-element being evaluated was accomplished with some minor problems for which corrective actions taken by the contractor were effective. To justify a very good rating, a significant event should be identified with a statement of how it was a benefit to the government; provided that there should have been no significant weaknesses identified."

SECTION 7. Section 103D-709, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) Only parties to the protest made and decided pursuant to sections 103D-701, 103D-709(a), [~~103D-310(b),~~] 103D-310(e), and 103D-702(g) may initiate a proceeding under this section. The party initiating the proceeding shall have the burden of proof, including the burden of producing evidence as well as the burden of persuasion. The degree or quantum of proof shall be a preponderance of the evidence. All parties to the proceeding shall be afforded an opportunity to present oral or documentary evidence, conduct cross-examination as may be required, and present argument on all issues involved. Fact finding under section 91-10 shall apply."

SECTION 8. The state procurement office shall submit preliminary reports to the legislature on the implementation of this Act no later than twenty days prior to the convening of the regular sessions of 2022, 2023, 2024, and 2025, and a final report to the legislature on the implementation of this Act, including any proposed legislation, no later than twenty days prior to the convening of the regular session of 2026.

SECTION 9. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 10. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 11. This Act shall take effect on July 1, 2021; provided that on June 30, 2026, this Act shall be repealed and sections 103D-302(f), 103D-303(e), 103D-306(a), 103D-310, and 103D-709(c), Hawaii Revised Statutes, shall be reenacted in the form in which they read on the day prior to the effective date of this Act.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	1210
THIRTY-FIRST LEGISLATURE, 2021
STATE OF HAWAII