Bill Text: HI SB726 | 2015 | Regular Session | Introduced

Hawaii Senate Bill 726 (Prior Session Legislation)

Introduced

Bill Title: Procurement; Subcontractors; Listing; Practices

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2015-01-28 - Referred to GVO/CPN, WAM. [SB726 Detail]

Download: Hawaii-2015-SB726-Introduced.html

THE SENATE	S.B. NO.	726
TWENTY-EIGHTH LEGISLATURE, 2015
STATE OF HAWAII

A BILL FOR AN ACT

relating to procurement.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that the public works projects are often delayed and cost more than budgeted because of bid protests by bidders challenging technical mistakes in the lowest bidder's proposal. Many recent bid protests have been based solely on subcontractor listing and licensing issues. Specifically, section 103D-302, Hawaii Revised Statutes, requires bidders to list all subcontractors or joint contractors to be used on a public works project, along with their proposed scope of work. Protesting bidders often allege that the winning bidder failed to list a required subcontractor or that the listed subcontractor did not possess the appropriate license and was not qualified to perform the work.

The legislature also finds that the contractors license board currently recognizes over one hundred different specialty contractor licenses that a prime bidder must sort through to determine the appropriate subcontractor specialty to be listed on a bid. The short period of time between when a bidder receives all subcontractor bids and when the bidder must submit the bid can result in the inadvertent failure to list a required subcontractor or listing of an improperly licensed subcontractor, giving rise to a bid protest. In addition, due to the complexity of the laws and administrative rules regarding contractor licenses and judicial, quasi-judicial, and agency interpretations of these laws and rules, bidders and subcontractors sometimes misunderstand the licensing requirements.

In addition to project delays, bid protests based on violation of subcontractor listing requirements in public works projects have resulted in funding lapses and inflation increases final project costs. Since 2005, one state agency estimates that the State has paid an extra $11,000,000 because of delays and other issues associated with the subcontractor listing requirement.

The legislature further finds that neither the federal government nor the 2000 American Bar Association Model Procurement Code, on which Hawaii's procurement code is based, require a bid to list subcontractors. Furthermore, the Procurement Task Force convened pursuant to Senate Concurrent Resolution 92, S.D. 2, (2013), initially voted in favor of repealing the subcontractor listing.

Subcontractor listing proponents contend that the legislative intent behind the listing requirement was to deter prime contractors from bid shopping and subcontractors from bid peddling. However, it is evident from the number of awards to non-low bidders and the increased price of construction due to the subcontractor listing discrepancies, that the listing requirement is being used, instead, to exclude qualified low bidders due to a technicality. A more efficient and effective way to ensure that bid shopping and bid peddling does not occur in public works is to prohibit these practices, as does the state of Washington, which includes a prohibition in their subcontractor listing law. This prohibition places the burden of preventing bid shopping and bid peddling on the affected subcontractor, rather than relying on a subcontractor listing requirement that places the burden on taxpayers to pay the increased costs of projects delayed by technical objections to the lowest bid.

The purpose of this Act is to ensure efficiency in the procurement of public works construction projects and deter bid shopping or bid peddling by:

(1) Repealing the subcontractor listing requirement in the competitive sealed bidding process for public works construction projects; and

(2) Prohibiting the practice of bid shopping and bid peddling.

SECTION 2. Section 103D-104, Hawaii Revised Statutes, is amended by adding two new definitions to be appropriately inserted and to read as follows:

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

"Bid peddling" means attempts by a subcontractor to procure a job with the prime contractor by undercutting the bids known to have been submitted to the prime contractor by other subcontractors."

SECTION 3. Section 103D-302, Hawaii Revised Statutes, is amended as follows:

1. By amending subsection (b) to read:

"(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, it shall 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. Construction bids that do not comply with this requirement 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.]"

2. By amending subsection (g) to read:

"(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. The practice of bid shopping or bid peddling before or after the award of the prime contract shall be prohibited. A subcontractor shall be entitled to recover monetary damages from either the prime contractor who is awarded the contract or a subcontractor of the prime contractor who is awarded the contract; provided that no monetary damages shall be allowed against the agency awarding the contract. The burden of proof shall fall on the subcontractor to prove by a preponderance of the evidence that the prime contractor engaged in bid shopping or that the subcontractor or the prime contractor engaged in bid peddling. 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."

SECTION 4. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 6. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________

Report Title:

Procurement; Subcontractors; Listing; Practices

Description:

Prohibits bid shopping and bid peddling for the competitive sealed bidding process. Repeals the subcontractor listing requirement for construction bids made under the competitive sealed bidding process.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.