May 4, 2012:

2012 National ILG Conference Press Release

April 6, 2012:

Pre-Solicitation Matters

Hawaii state agencies looking to procure goods and services must comply with the procedures established in agency rules, state law, and the SPO’s Procurement Manual to prepare and publicize solicitations. There are three basic steps involved in preparing the solicitation – acquisition planning, selecting the solicitation method, and drafting criteria for statements of work (SOW), specifications, and evaluation.

Acquisition planning enables an agency to meet its need in a timely and cost-effective manner by coordinating and integrating personnel efforts. The process includes an assessment of the minimum need, a cost analysis, and specification development. Planning is most effective when all stakeholders are involved by keeping vendors and agency personnel informed and providing opportunities for comment.

The solicitation method should be chosen in accordance with the conditions surrounding the procurement. Competitive sealed bidding (CSB), the default method in Hawaii, is most effective when an agency can specifically define a scope of work or when it is procuring market-tested commodities. The solicitation, called an invitation to bid, must be issued publicly to enable a broad applicant pool and meaningful competition. The lowest responsive bid submitted by a responsible bidder will be awarded a contract. In contrast, competitive sealed proposals (CSP) are used when CSB is “not practicable or not advantageous to the State,” i.e., when requirements are hard to define or there is a high performance risk. Contract award is based on price and the RFP’s evaluation factors. In Hawaii, the head of the procuring agency must approve use of this process due to its "perceived" restrictive nature.

The SOW are guidelines for vendors and the government to follow when managing the project. A typical SOW includes an introduction (containing the agency need, contract goal, location of work, and agency justification of the contract); definitions; quantifiable project objectives; scope of work (a checklist of specific work/tasks); task identification (milestones/deliverables/processes needed to complete objectives); deliverables; time frames and deadlines; inspection criteria; payment plan; and government responsibilities.

Specifications describe what the agency hopes to procure. They should be drafted to maximize objectivity and competition and must meet the minimum need. There are four general categories of specifications – performance specifications, design specifications, brand name “or equal” specifications, and pre-approved products lists.

Performance specifications describe the desired function and evaluate cost relative to use. They are favored for allowing industry expertise to efficiently determine “equal or better performance at lower costs.”

Design specifications are strict requirements of product/service characteristics. Because their rigidity restricts competition, it is less accommodating of new technologies, and places nonperformance risk on the government. Design specifications are falling out of favor.

Brand name “or equal” specifications rely on the quality standards set by a commercially-available product/service and allow for substitution of an equivalent.

Pre-approved (or qualified) products lists include those products examined and tested prior to the opening of competitive solicitation. Although these requirements simplify evaluation, they restrict competition and create a burden of constant testing to maintain updated lists of suitable products.

Evaluation criteria promote competition by ensuring the fair and comprehensive consideration of submitted proposals. Factors in evaluation typically fall within the categories of quality, capability, technical ability, management, and cost/price. The evaluation criteria must serve to fairly advise contractors of the consequences of the failure to meet requirements and the respective weight of each factor and subfactor considered. Factors/subfactors need not be listed if they are “logically and reasonably related to a stated factor/subfactor.”

Once the solicitation is completed, it must be publicized in accordance with Hawaii Procurement Board rules. At a minimum, the solicitation must be displayed on the purchasing agency’s website. The agency may also publish the solicitation in a newspaper, via mail/email/fax, or another method determined by the procurement officer. A copy of the solicitation must be publicly available for inspection at the office of the procurement officer. (See HAR 3-122-16.03).

This information was excerpted from ABA Publishing's "State and Local Government Procurement Law: Analysis and Commentary," written by Danielle M. Conway, Michael J. Marks Distinguished Professor of Business Law & Director, University of Hawaii Procurement Institute.

February 21, 2012:

Fiscal Law

State or local governments pay for work performed under a government contract from a designated appropriation. (Most states do not separate authorization and appropriation functions). Accordingly, expenditures of funds for state government contracts are subject to appropriations (or fiscal) laws. These fiscal laws are derived from state constitutions, municipal charters, legislation, and/or judicial/attorney general opinions. The purpose of fiscal law is to prevent unauthorized spending, overspending, or misuse of funds.

In Hawaii, for example, the appropriations process involves the following:

1) State agencies submit their budgets to the Governor,
2) Budget hearings are held,
3) The Governor submits a proposal to the legislature,
4) The proposal is introduced as a bill in one or both houses, the legislature votes to approve (which requires certification by the president officers and clerks of both houses), and submits the bill to the Governor, and
5) The Governor approves the bill.

The standards of time, purpose, and amount restrict spending to ensure that the funding of government contracts is transparent and consistent with the legislative body's intent. During a fiscal year, an appropriation may be used only for line items explicitly enumerated in the bill. Appropriations are available for no more than one fiscal year, after which time the bill expires and unspent money must be returned to the general fund. This money may not be held or redistributed for any purposes other than what was explicitly provided for by the appropriation. Appropriations can only be increased by a bill - they cannot be "augmented" outside the fiscal year, nor can an agency spend funds they have accumulated by collecting fees (unless authorized by law, fees collected must be returned to the general fund). The "color of the money" spent must always match that provided for in the appropriations bill.

This information was excerpted from ABA Publishing's forthcoming book entitled "State and Local Government Procurement Law: Analysis and Commentary," written by Danielle M. Conway, Michael J. Marks Distinguished Professor of Business Law & Director, University of Hawaii Procurement Institute. More information and further materials and resources on government contracting in Hawaii can be found on our website.

January 24, 2012:

The Contract Pricing II webinar compared and contrasted government contract cost and pricing analyses. By analyzing contract cost and pricing, government procurement officials are able to determine whether funds are maximized to meet the needs of contracting agencies.

Two methods can be used to evaluate bids: price realism and cost realism. Market-based, or price realism analysis, involves forecasting the offeror's end price, and can be effective in healthy, competitive markets with high experience with contract requirements. It relies on the assumption that a market is established and will be a fair and accurate indicator of an appropriate bid price, and is the favored approach as it is quick to evaluate. However, exclusive use of price realism analysis risks manipulation and oversight in the bidding process.

Cost realism analysis involves evaluating each bid element for realism, and provides detailed cost estimates. It should be used when there is insufficient fair market competition or historical pricing data, or when contract performance and/or resources are unpredictable. Cost realism must be used when dealing with single source fixed price contracts. Although the method may be lengthier, it is a better safeguard against under-/overcompensation and noncompliance with relevant regulations (e.g. labor rates).

Using one method does not preclude the other. Understanding government contract cost and pricing is necessary to ensuring that contractors and procurement officials use solid data to negotiate the right solution for the right price.

You can find the entire webinar here.

January 17, 2012:

Guarded optimism for Hawaii's economy was the catch phrase heard by local leaders last week. Europe's economy "remains a mess and a drag" on the international economy, economist Jack Suyderhoud told a group of about 100 business and community leaders at a Hawaii thought leaders program sponsored in part by the Hawaii Procurement Institute on January 9. Suyderhoud, a professor of business economics at the University of Hawaii Shidler College of Business, noted that Japan is faring a little better, in that there is growth but it remains under two percent. He said that China, Korea, India and to a lesser degree Australia are seen as economic bright spots. Suyderhoud said that the U.S. economy will stumble along and pointed to varying degrees of optimism and at the same time pessimism over recent job growth, since the U.S. continues to be "short" about two million jobs as compared to pre-recession. Suyderhoud predicted growth for Hawaii's visitor arrivals, spending, personal income, tax revenues and jobs.

A special mahalo to HPI Board Chair Ed Young and board member Lance Inouye for participating as discussants in the panel discussions. Many other members of the HPI volunteer ohana attended and participated in the program. Watch for more information about the thought leaders program on the HPI website.

Also available on the website is a list of state legislative bills that the Hawaii Procurement Institute is monitoring from last session -- and it will be updated weekly as bills are introduced once the 2012 Hawaii State Legislature convenes on January 18. To view this list, click here.

January 12, 2012:

Wednesday, Hawaii attorney Dawn Chang spoke about burial law basics to community members at an informal luncheon convened by the Hawaii Procurement Institute. She gave a brief explanation of how pre-contact Hawaiians buried their deceased and the beliefs that remain in place today. Ms. Chang gave examples of construction projects that were completed and ones that remain incomplete due to the discovery of unmarked or unknown burials; she also shared some of the processes that enabled those projects to be completed after the discoveries. She mentioned the importance of keeping in contact with cultural and state agencies, as well as cultural and lineal descendants while planning construction projects of any size. Ms. Chang also noted that burial laws are relatively new, only being implemented since the 1990’s which means a redevelopment of older buildings, previously used land, or infrastructure may lead to the discovery of burials which may have been ignored during the first build out. Ms. Chang concluded by reiterating the need for community involvement and the respect for burial beliefs, and noted those two things will go a long way ensuring that stakeholders are satisfied with the outcome.

For a copy of Ms. Chang's outline, please click here.

January 4, 2012:

The Contract Pricing II webinar, presented by Professor Danielle Conway, is now available for viewing under the Webinars tab or click here.

January 3, 2012:

In Hawaii, about 160 human service nonprofits provide services to state and county government, according to a resolution adopted by the Hawaii state legislature, and fifty per cent of the nonprofits reported problems with late payments, substantially higher than the national average of forty-one per cent. The legislature established a “Prompt Payment Task Force” consisting of governmental and private sector representatives, requesting a report to be submitted 20 days prior to the start of the 2012 legislative session (session starts January 18). Here is a link to the resolution creating the task force: http://www.capitol.hawaii.gov/session2011/Bills/SCR28_SD2_.PDF

In the meantime, the Hawaii Procurement Institute had convened a conversation about government purchases of services from non-profits with the executive director of the Hawaii Alliance for Non-Profit Organizations (HANO) Lisa Maruyama and attorney Dianne Brookins, moderated by Eliza Talbot of Hawaii Public Policy Advocates. To watch the conversation, click here.