STATE OF HAWAII

STATE OF HAWAII

STATE PROCUREMENT OFFICE FINDINGS AND RECOMMENDATIONS RELATING TO THE STATE PROCUREMENT OFFICE'S REVIEW OF HAWAII'S PROCUREMENT LAWS IN

COMPARISON WITH FEDERAL PROCUREMENT LAWS AS REQUIRED BY HR 142, SLH 2016 JANUARY 2020

This report may also be viewed electronically on the SPO's website at Click on "References" then "Reports."

SUBMITTED TO THE THIRTIETH STATE LEGISLATURE IN RESPONSE TO HR 142, SLH 2016

Hawaii State Procurement Office

Prologue

Construction Procurement Policy Review Findings and Recommendations Report, Ikaso Consulting, December 18, 2019

Enclosed you will find an in-depth, thoughtful analysis of the differences between the Hawaii and the Federal procurement code, with recommendations on whether Hawaii should adopt any Federal codes from a best practice perspective. The State Procurement Office (SPO) expressly states that there has been no redacting or tainting of analysis or recommendations. The SPO desires this report to be considered as an un-biased, third-party report, with the SPO interviewed along with all the other stakeholders. The SPO did review the draft for formatting errors and any content that seemed vague and required more clarification. I am especially pleased at the effort the Ikaso Contractor made on this report. They considered the most important sub-areas in each Chapter, incorporated sound reasoning and data points to substantiate their recommendations, and used a mature outlook on whether it is value-added to make each change. In addition, they submitted the statute and rule change verbiage which will be immensely helpful going forward. We thank all the interviewees for their time and thoughtful responses, our Governor's vision for doing things the right way, and to the Legislature for its consistent interest in improving construction procurement in Hawaii. This legislative session, SPO and the Department of Accounting and General Services, Public Works Division (DAGS-PWD), are recommending a partnership to improve and advise on construction procurement policy and training state-wide, as well as to actively assist any department or agency with an innovative construction projects that may include services. This new section will engage those resources to review this report and implement the recommended changes to our construction guidance. I am excited to see the building of a trusted conduit that will enhance construction communication between siloed agencies and departments and bring a focused attention to improving construction procurement as a whole.

Sarah Allen Administrator State Procurement Office

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Construction Procurement Policy Review Findings and Recommendations Report

Ikaso Consulting

December 18, 2019

Table of Contents

Executive Summary................................................................................................................................................5 Introduction and Methodology .............................................................................................................................11 Comparison of State and Federal Construction Law, Recommendations, and Recommendation Analysis ............14 I. Acquisition of Design Professionals .................................................................................................................16

Subtopic ? Definition of Design Professional ..................................................................................................22 Subtopic - Evaluation Bodies ...........................................................................................................................22 Subtopic - Selection Factors .............................................................................................................................25 Subtopic ? Evaluation Body Output .................................................................................................................28 Subtopic ? Disputing Rankings ........................................................................................................................29 Subtopic ? Negotiating with Ranked Vendors .................................................................................................30 Subtopic ? Fair and Reasonable Price ..............................................................................................................32 Subtopic - Announcement of Award ................................................................................................................37 Subtopic ? Environmental Considerations .......................................................................................................38 Subtopic ? Design Professional Liability .........................................................................................................39 Subtopic ? Debriefing Unsuccessful Design Professionals..............................................................................40 Recommendation(s) Based on FAR Alignment Analysis: ...............................................................................41 Effort and Complexity to Implement Recommendation(s): .............................................................................42 Estimated Cost to Implement Recommendation(s): .........................................................................................43 II. Construction Procurement ...............................................................................................................................45 Subtopic ? Cost Estimates and Limits ..............................................................................................................52 Subtopic ? Solicitation Method ........................................................................................................................55 Subtopic ? Pre-Solicitation/Pre-Bid Notice......................................................................................................58 Subtopic ? Vendor Outreach ............................................................................................................................60 Subtopic ? Pre-bid Conference and Site Visit ..................................................................................................62 Subtopic ? Information Included in the IFB.....................................................................................................65 Subtopic ? IFB Response Time ........................................................................................................................67 Subtopic ? Final Review of IFB .......................................................................................................................69 Subtopic ? Facsimile and Electronic Bids ........................................................................................................70 Subtopic ? Contract Form ................................................................................................................................71 Subtopic ? Master Solicitation / Records .........................................................................................................72 Subtopic ? Changes and Addendums ...............................................................................................................73

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Subtopic ? Modifications, Withdrawals, and Mistakes in Bids........................................................................74 Subtopic ? Cancellation of IFB ........................................................................................................................77 Subtopic ? Bid Submission ..............................................................................................................................79 Subtopic ? Late Bids ........................................................................................................................................80 Subtopic ? Opening Bids..................................................................................................................................82 Subtopic ? Evaluating Bids ..............................................................................................................................84 Subtopic ? Responsiveness and Responsibility................................................................................................85 Subtopic ? Past Performance of Bidders ..........................................................................................................88 Subtopic ? Canceling an IFB After Openings Bids..........................................................................................89 Subtopic ? Equal Low Bids ..............................................................................................................................92 Subtopic ? Contract Award and Notice ............................................................................................................93 Subtopic ? Prohibition of Construction Awards to Designing Firm ................................................................95 Subtopic ? Notice to Unsuccessful Bidders .....................................................................................................95 Subtopic ? Negotiation .....................................................................................................................................96 Subtopic ? Two-Step Sealed Bidding...............................................................................................................98 Recommendation(s) Based on FAR Alignment Analysis: .............................................................................100 Effort and Complexity to Implement Recommendation(s): ...........................................................................101 Estimated Cost to Implement Recommendation(s): .......................................................................................102 III. Subcontractor Listing ...................................................................................................................................104 Subtopic ? Subcontractor Listing in Bids.......................................................................................................105 Recommendation(s) Based on FAR Alignment Analysis: .............................................................................117 Effort and Complexity to Implement Recommendation(s): ...........................................................................118 Estimated Cost to Implement Recommendation(s): .......................................................................................118 IV. Evaluation Preferences .................................................................................................................................119 Subtopic ? Hawaii Products Preference .........................................................................................................120 Subtopic ? Apprenticeship Program Preference.............................................................................................122 Subtopic ? Recycled Products Preference ......................................................................................................124 Subtopic ? Small Business Preference ...........................................................................................................125 Recommendation(s) Based on FAR Alignment Analysis: .............................................................................126 Effort and Complexity to Implement Recommendation(s): ...........................................................................128 Estimated Cost to Implement Recommendation(s): .......................................................................................129 V. Design Build ("Two-Phase") Procurement ...................................................................................................131 Subtopic ? Definition of Design-Build...........................................................................................................134 Subtopic ? When to Use Two-Phase Method.................................................................................................135

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Subtopic ? Who Determines Two-Phase Use.................................................................................................138 Subtopic ? Evaluation Committee Determination..........................................................................................139 Subtopic ? Scope of Work Development .......................................................................................................141 Subtopic ? Preparation Time for Offer and Pre-Proposal Conference ...........................................................141 Subtopic ? Phase One Procedures ..................................................................................................................142 Subtopic ? Phase Two Procedures..................................................................................................................146 Subtopic ? Stipend / Design Fee.....................................................................................................................150 Recommendation(s) Based on FAR Alignment Analysis: .............................................................................151 Effort and Complexity to Implement Recommendation(s): ...........................................................................153 Estimated Cost to Implement Recommendation(s): .......................................................................................153 VI. Required Contract Clauses ...........................................................................................................................154 Subtopic ? Required Clauses ? Design Professionals ....................................................................................155 Subtopic ? Required Clauses - Construction ..................................................................................................157 Recommendation(s) Based on FAR Alignment Analysis: .............................................................................167 Effort and Complexity to Implement Recommendation(s): ...........................................................................167 Estimated Cost to Implement Recommendation(s): .......................................................................................168 VII. Other ...........................................................................................................................................................169 Subtopic ? Statutory Treatment ......................................................................................................................170 Subtopic ? Definition of Construction............................................................................................................171 Subtopic ? Small Purchases ? Design Professionals ......................................................................................172 Subtopic ? Small Purchases ? Construction ...................................................................................................173 Subtopic ? Recycled Glass Content Requirements ........................................................................................175 Subtopic ? Hawaiian Plants in Landscaping ..................................................................................................176 Recommendation(s) Based on FAR Alignment Analysis: .............................................................................177 Effort and Complexity to Implement Recommendation(s): ...........................................................................177 Estimated Cost to Implement Recommendation(s): .......................................................................................177 Appendix 1 ? List of Proposed Statutory and Rule Changes .................................................................................178 Appendix 2 - Acronym Glossary............................................................................................................................182 Appendix 3 ? List of Written Materials Reviewed.................................................................................................183 Appendix 4 ? List of Interviews Conducted...........................................................................................................186 Appendix 5 ? List of Report Exhibits.....................................................................................................................189

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