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Hawaii Enacts Procurement Reform

To take effect Jan. 1, 2005

Hawaii Gov. Linda Lingle this month signed a bill to bring various state agencies with 40 statutory exemptions back under the state's procurement law. However, the governor added she would ask next year's Legislature to address concerns of certain agencies that believe the new law will impede their ability to remain autonomous and diminish their flexibility to manage their own purchasing and contracting.

HB2136, now Act 216, repeals 40 statutory exemptions in the State Procurement Code and adopts guidelines for the debarment and suspension of government contractors. Act 216 also requires businesses that win contract bids to comply with all applicable state business laws, sets up a due process procedure for overturning the decision of a selection committee involved in the selection of professional services such as architects and engineers, and authorizes the attorney general to waive existing in-state business requirements when procuring legal services not available in Hawaii.

The new law exempts the Hawaii Tourism Authority, the Research Corporation of the University of Hawaii, and the Hawaii Hurricane Relief Fund from the procurement code. Three other semi-autonomous agencies -- the University of Hawaii (UH); the Hawaii Health Systems Corporation (HHSC), which manages the state's hospital system; and the Correctional Industries, administratively attached to the Department of Public Safety -- say they too should be exempt from the centralized procurement system in order to maintain efficiencies and achieve greater autonomy. In addition, semi-autonomous attached agencies such as the Natural Energy Laboratory of Hawaii (NELHA) may need greater legislative flexibility in their procurement procedures.

The administration has been working with the agencies that are concerned about being included under the tightened procurement code to address their objections. Of particular concern to the governor in weighing whether to sign or veto HB2163 was the inclusion of HHSC in the bill. The record illustrates how at the last minute, the Legislature, with little community input or discussion on the impact to the state hospital system and the people it serves, altered the bill to include HHSC. Like the university, HHSC says it needs the flexibility of its present streamlined procurement operation to facilitate ongoing upgrades in service and medical care.

"This new law complements the procurement reform measures our administration successfully enacted last year to bring more openness and accountability to the state government contracting process," said Gov. Lingle. "However, while Act 216 closes many loopholes, this action must be balanced against efficiencies for those agencies which are semi-independent in nature. That is why in the next legislative session we will be asking the Legislature to make refinements to the procurement process." Act 216 will take effect on January 1, 2005.