HB1214

SECTION 1. The legislature finds that the Hawaii Public Procurement Code requires bid proposals to include the name and scope of work of subcontractors and joint contractors that will be used on a public works project. The legislature also finds that many recent bid protests have been based on subcontractor listing and licensing issues, including where a bidder has failed to list a required subcontractor or when a listed subcontractor did not possess the appropriate license and was not qualified to perform the work. Time constraints between the time a bidder receives all subcontractor bids and the bid submission deadline can cause inadvertent failure to list a required subcontractor or the listing of an improperly licensed subcontractor in a bid, resulting in a bid protest.

Furthermore, inadvertent errors occur due to the complexity of the laws regarding contractor licenses under chapter 444, Hawaii Revised Statutes; title 16, Hawaii Administrative Rules; and judicial, quasi-judicial, and agency interpretations of these laws and rules. Oftentimes, technical mistakes in a low bidder's proposal result in a bid challenge, thus delaying the execution and delivery of public works projects. As a result of bid challenges, projects are also delayed, funding lapses, and the final project cost may increase.

While subcontractor listing is meant to deter bid shopping and bid peddling, providing prime contractors with additional time to correct minor technical issues with subcontractor listings would facilitate the legislature's intent of ensuring that subcontractors are listed properly on the bid submittal and are licensed and qualified in the scope and nature of the work to be performed, while maintaining the integrity of the bid process.

However, the legislature finds that the unscrupulous practices of bid shopping and bid peddling still plague Hawaii's construction industry. The state of Washington prohibits bid shopping and bid peddling and affords subcontractors affected by those practices a means of legal redress. The legislature finds that enacting similar legislation will curtail bid shopping and bid peddling in the State.

The purpose of this Act is to:

(1) Minimize bid challenges, costs, and delays of public works construction projects by allowing a bidder of a public works construction project to clarify and correct minor technical issues with subcontractor listings for up to two hours after the closing of a bid;

(2) Further curb undesirable bid shopping and bid peddling practices in public works by affording subcontractors affected by those practices a means of legal redress; and

(3) Require the listing of joint contractors and subcontractors for construction contracts with a total value of more than $ ; provided that a construction bid that does not comply with this requirement may be accepted if it is in the best interest of the State and the value of the work to be performed by a subcontractor is equal to or less than per cent of the total bid amount.

This Act is not intended to change in any way the statutory requirement to use licensed subcontractors under chapter 444, Hawaii Revised Statutes.

SECTION 2. Section 103D-302, Hawaii Revised Statutes, is amended to read as follows:

"§103D-302 Competitive sealed bidding. (a) Contracts shall be awarded by competitive sealed bidding except as otherwise provided in section 103D-301. Awards of contracts by competitive sealed bidding may be made after single or multi-step bidding. Competitive sealed bidding does not include negotiations with bidders after the receipt and opening of bids. Award is based on the criteria set forth in the invitation for bids.

(b) An invitation for bids shall be issued, and shall include a purchase description and all contractual terms and conditions applicable to the procurement. If the invitation for bids is for construction[,] with a total estimated contract value of more than $ , it shall [~~specify~~]:

(1) Specify that all bids include the name of each person or firm to be engaged by the bidder as a joint contractor or subcontractor in the performance of the contract and the nature and scope of the work to be performed by each[.]; and

(2) Allow the bidder to provide clarity and correction of the subcontractor information required by paragraph (1) for up to two hours after the closing of the invitation for bids.

Construction bids that do not comply with this [~~requirement~~] subsection may be accepted if acceptance is in the best interest of the State and the value of the work to be performed by the joint contractor or subcontractor is equal to or less than [~~one~~] per cent of the total bid amount.

(c) Adequate public notice of the invitation for bids shall be given a reasonable time before the date set forth in the invitation for the opening of bids. The policy board shall adopt rules [~~which~~] that specify:

(1) The form that the notice is to take;

(2) What constitutes a reasonable interim between publication and bid opening; and

(3) How notice may be published, including publication in a newspaper of general circulation, notice by mail to all persons on any applicable bidders mailing list, publication by any public or private telecommunication information network, or any other method of publication it deems to be effective.

(d) Bids shall be opened publicly in the presence of one or more witnesses, at the time and place designated in the invitation for bids[.]; provided that if the bid is for construction, it shall be opened no sooner than two hours after the closing of the invitation for bids. The amount of each bid and other relevant information specified by rule, together with the name of each bidder shall be recorded. The record and each bid shall be open to public inspection.

(e) Bids shall be unconditionally accepted without alteration or correction, except as authorized in this chapter or by rules adopted by the policy board.

(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. 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.

(g) Correction or withdrawal of inadvertently erroneous bids before or after award, or cancellation of invitations for bids, awards, or contracts based on such bid mistakes, shall be permitted in accordance with rules adopted by the policy board. After bid opening, no changes in bid prices or other provisions of bids prejudicial to the interest of the public or to fair competition shall be permitted. Except as otherwise provided by rule, all decisions to permit the correction or withdrawal of bids, or to cancel awards or contracts based on bid mistakes, shall be supported by a written determination made by the chief procurement officer or head of a purchasing agency.

(h) The substitution of a listed subcontractor in furtherance of bid shopping or bid peddling before or after the award of the prime contract shall be prohibited, and the originally listed subcontractor may recover monetary damages against the prime contractor who executed a contract with the governmental body and the substituted subcontractor, but shall not be entitled to monetary damages from the governmental body that issued the invitation for bids. The substitution of an originally listed subcontractor who has a valid and appropriate contractor's license from the time of bid through the time of award may be made by the prime contractor for the following reasons:

(1) Refusal of the originally listed subcontractor to sign a contract with the prime contractor;

(2) Bankruptcy or insolvency of the originally listed subcontractor; or

(3) Inability of the originally listed subcontractor to perform the contractual requirements of the proposed contract or the project consistent with the terms and written understandings of the parties at the time of bid.

As used in this subsection:

"Bid peddling" means attempts by a subcontractor to undercut known bids submitted to the prime contractor to procure a job.

"Bid shopping" means the use of a low bid already received by the prime contractor to pressure other subcontractors into submitting even lower bids.

[~~(h)~~] (i) The contract shall be awarded with reasonable promptness by written notice to the lowest responsible and responsive bidder whose bid meets the requirements and criteria set forth in the invitation for bids. In the event all bids exceed available funds as certified by the appropriate fiscal officer, the head of the purchasing agency responsible for the procurement in question is authorized in situations where time or economic considerations preclude resolicitation of work of a reduced scope to negotiate an adjustment of the bid price, including changes in the bid requirements, with the low responsible and responsive bidder, in order to bring the bid within the amount of available funds.

[~~(i)~~] (j) When it is not practicable to initially prepare a purchase description to support an award based on price, an invitation for bids, which requests the submission of unpriced offers to be followed by an invitation for bids limited to those bidders whose offers have been qualified under the criteria set forth in the first solicitation, may be used. If a multi-step sealed bidding process is used, the notice and the invitation for bids shall describe each step to be used in soliciting, evaluating, and selecting unpriced offers."

SECTION 3. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect on July 1, 2021; provided that on July 1, 2023, section 2 of this Act shall be repealed and section 103D-302, Hawaii Revised Statutes, shall be reenacted in the form in which it read on the day before the effective date of this Act.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	1214
THIRTY-FIRST LEGISLATURE, 2021
STATE OF HAWAII