Hawaii-2015-SB1228-Amended

PART I

SECTION 1. The legislature finds that creative problem solving is necessary to address growing concerns arising from the State's fiscal deficit. Hawaii is responsible for unfunded liabilities totaling billions of dollars. Like many states, Hawaii must balance its budget while managing the demands of infrastructure maintenance and public service needs. Budget shortfalls result in postponed maintenance and reduced social services despite a growing population driving the demand for services and adding stress to the public infrastructure.

The legislature finds that the State's process of acquiring goods and services must be flexible to accommodate circumstances where other than full competition is necessary to address a unique need, such as local food purchasing, or where nontraditional procurement practices, such as public-private partnerships, can help government maintain infrastructure, provide services, and operate more efficiently to achieve the best value while giving effect to state policy goals.

The legislature further finds that public-private partnerships are utilized successfully throughout the nation, and although Hawaii has specifically authorized a select number of such partnerships, a more effective approach of addressing public-private partnership procurements is in the best interest of effective utilization of taxpayer money with increased transparency. A public-private partnership is a contractual agreement between a public agency and a private sector entity where the skills and assets of each sector are combined to deliver services to the public, not a privatization of a government function. Both entities share in the risks and rewards of the venture. The partnership provides for a level of public control and oversight of operations not typical of privatization.

While public-private partnerships are widely employed around the world, only five states have adopted comprehensive legislation authorizing governmental entities to contract with private partners to design, build, finance, operate, and maintain public facilities. Public-private partnerships have been created to address social infrastructure, transportation, water treatment, energy, and financial management concerns. The private sector contributes management efficiency, technology, cash flow management, and personnel development to complement the government's legal authority, capital resources, procurement policies, and broad perspective.

The purpose of this part is to provide the State greater flexibility in procurement by establishing a process for special innovative procurement and generating a framework for public-private partnerships in Hawaii.

SECTION 2. Chapter 103D, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§103D- Special innovative procurement. (a) Contracts for supplies or services may be awarded with other than full competition using a special innovative procurement process in accordance with this section and procedures set forth in rules adopted by the procurement policy board. The special innovative procurement process authorized by this section shall only be used when the chief procurement officer determines in writing that it is advantageous to the State to use the process for procurement of new or unique requirements of the State, new technologies, or to achieve best value.

(b) All special innovative procurements shall include, to the extent possible, provisions and processes to ensure taxpayer accountability, transparency of innovative process for evaluation, communication of innovation for future duplication, and clear cause for deviation from other standard methods of source selection in section 103D-301. Administrative rules shall be adopted by the policy board pursuant to chapter 91 and shall address the following:

(1) Compliance with local, state, and federal laws;

(2) Attaining the maximum level of competition to achieve the best value;

(3) Adherence to purchasing ethics to protect the public trust, as codified in the administrative rules;

(4) Specific procedures for addressing public-private partnerships; and

(5) Minimizing deviation from sections 103D-302 and 103D-303 for construction contracts, specifically addressing contractor provisions such as subcontractor listing, as applicable.

(c) The head of the purchasing agency shall submit a procurement plan developed pursuant to this section and rules adopted by the board to the attorney general for review and approval as to form before issuing the notice required under subsection (d).

(d) Notice of the invitation for bids shall be given in the same manner as provided in section 103D-302(c).

(e) Nothing in this section shall preclude the adoption of rules providing for the use of bonuses instead of preferences or requiring subcontractor provisions in a procurement of construction.

(f) A written determination of the basis for the procurement and for the selection of the particular contractor shall be included by the head of the purchasing agency in the contract file, and a report shall be made by the head of the purchasing agency at least annually describing all determinations made since the last annual report, pursuant to procedures directed by the administrator of the state procurement office. The report shall be transmitted to the administrator of the state procurement office who shall make the report publicly available."

SECTION 3. Section 103D-301, Hawaii Revised Statutes, is amended to read as follows:

"§103D-301 Methods of source selection. Unless otherwise authorized by law, all contracts shall be awarded pursuant to the following sections, as applicable:

(1) Section 103D-302 (Competitive sealed bids);

(2) Section 103D-303 (Competitive sealed proposals);

(3) Section 103D-304 (Professional services procurement);

(4) Section 103D-305 (Small purchases);

(5) Section 103D-306 (Sole source procurement); [~~and~~]

(6) Section 103D-307 (Emergency procurements)[.]; and

(7) Section 103D- (Special innovative procurement)."

SECTION 4. (a) The rules for public-private partnerships, adopted pursuant to section 103D- , Hawaii Revised Statutes, shall also address the following:

(1) A requirement that a public-private partnership contract include a long-term maintenance and operations scope;

(2) Provisions that require a suitability test wherein a centralized governmental entity with expertise in public-private partnership delivery and financial modeling compares the value of long-term leases to existing project delivery models before issuing any requests for qualifications or proposals, which would be triggered after satisfaction of basic threshold requirements for public-private partnerships;

(3) Provisions that require the government to have an independent consultant or in-house expert in facilities planning, design, and construction assess the long-term projected needs of the government before considering the use of a public-private partnership; advise the government prior to solicitation; and continue serving as advisor to the government throughout the planning, design, and construction phases;

(4) Comprehensive statutory guidelines that apply to all state entities to provide a uniform, fair process that enables private developers to properly assess the risks and rewards of engagement;

(5) Provisions that encourage communication between design professionals and the end user during the request for proposals phase so the government end user is empowered to provide direct, meaningful input to the competitor design teams developing the proposed designs; and

(6) Provisions that enable small businesses to compete.

(b) The procurement policy board shall submit a report on its draft rules for public-private partnerships and any proposed legislation to the legislature no later than twenty days prior to the convening of the regular session of 2017.

SECTION 5. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2015-2016 and the same sum or so much thereof as may be necessary for fiscal year 2016-2017 for a temporary position within the department of accounting and general services, not to exceed two years from the effective date of this Act, with duties to include but not be limited to assisting the procurement policy board in the research and development of special innovative procurements and public-private partnership rules.

The sums appropriated shall be expended by the department of accounting and general services for the purposes of this part.

PART II

SECTION 6. The legislature finds that the Hawaii health systems corporation provides critical quality of life services that are integral to the public health and safety of our communities. However, as currently operated, Hawaii health systems corporation faces dire financial realities that continue to escalate, placing an ever increasing burden on our state revenues. One possible solution to the long-term financial sustainability of Hawaii health systems corporation would be the establishment of a long-term public-private partnership that would provide financial security while allowing for the continuation of services provided by these hospitals and medical centers.

Samuel Mahelona Memorial Hospital and Medical Center and Kauai Veterans Memorial Hospital serve the rural communities of Kauai by providing numerous medical services. These services include twenty-four hour emergency medical services; rehabilitation therapies (occupational, physical, and recreational); skilled nursing; intermediate, long-term, and acute care; family birth centers; outpatient clinics; imaging services (x-ray, CT, extremity MRI, stress testing, ultrasound-cardiac, and general); and surgery. While both hospitals provide invaluable services to the rural communities of Kauai, these two facilities are also located in urban cores that are in close proximity to schools, public transportation, retail establishments, and housing. The lands these facilities sit on have tremendous opportunity to provide sites for affordable housing, assisted living facilities, retail establishments, and restaurants. The potential revenue through lease rents of these lands could be used to subsidize the hospitals' operations, ease the burden these hospitals have on the state general fund, and allow valued state workers a means to continue providing services in their communities.

The legislature finds that in order for a long-term public-private partnership to work, community input is critical in determining if a project is appropriate. One way to ensure appropriateness is through the use of the Charette process. The Charette process is a design-based, accelerated, and collaborative project management system that spans the entire pre-construction period of a project. In this type of system, members of the community, representatives from state and county government, and various stakeholders would have a voice in determining what is appropriate and viable for the sustainability of both the Samuel Mahelona Memorial Hospital and Medical Center and Kauai Veterans Memorial Hospital, as well as the communities surrounding these facilities. Establishing a master plan for these two facilities and the lands they encompass would further smart growth development while providing a means for a sustainable future for each hospital.

However, the legislature also finds that development of a master plan, particularly through the use of the Charette system, requires specialized knowledge, and these services need to be procured. Accordingly, the purpose of this part is to appropriate funds for the Hawaii Health Systems Corporation to procure services to develop a master plan for the facilities and lands under the jurisdiction of the Samuel Mahelona Memorial Hospital and Medical Center and Kauai Veterans Memorial Hospital.

SECTION 7. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2015-2016 and the same sum or so much thereof as may be necessary for fiscal year 2016-2017 for the procurement of services to develop a master plan for the design and expansion of Samuel Mahelona Memorial Hospital and the Kauai Veterans Memorial Hospital; provided that the master plan shall be established using a collaborative project management system that spans the entire pre-construction period and involves community input.

The sums appropriated shall be expended by the Hawaii health systems corporation for the purposes of this part.

PART III

SECTION 8. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 9. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 10. This Act shall take effect on July 1, 2112.

THE SENATE	S.B. NO.	1228
TWENTY-EIGHTH LEGISLATURE, 2015		S.D. 2
STATE OF HAWAII		H.D. 3