Legislators effectively killed a bill Thursday that would have extended the University of Hawaii’s controversial exemption from the state procurement code, a move hailed by some as a victory for government fairness and transparency but which UH lamented as likely to increase construction costs.
Unless the Legislature takes extraordinary steps to resurrect Senate Bill 1332 before the end of the session — a move key House and Senate conferees said was highly unlikely — the university’s two-year exemption from key aspects of procurement rules will expire June 30, putting UH back under the same rules as most state agencies.
Lawmakers in 2010 gave the university the ability to experiment with new ways of purchasing goods and services, with the goal of adopting the best methods for other parts of state government.
But critics said UH’s implementation of the new system smacked of favoritism, pointing out that three of four major construction jobs awarded under a "design-assist" process went to the same contractor. Selections under UH’s design-assist process are based largely on qualifications, not price competition, which critics said make the system too susceptible to the playing of favorites.
UH denied any favoritism, saying the selections were based on specific criteria and were fair to all parties.
"We’re elated," Tim Lyons, president of the Subcontractors Association of Hawaii, which opposed the exemption, said after House and Senate conferees failed to reach agreement on the bill Thursday afternoon. "We think this might help return some credibility and transparency to the system."
But UH officials said in a statement that they were "extremely disappointed that the university will not be allowed to fully demonstrate how much time, effort and money the procurement flexibility can save not only the university but the entire state and the taxpayers."
They said two years was hardly enough time to prove the value of a system they said was carefully crafted and completely transparent, had more rigorous rules than the state’s process and resulted in one project — the only one completed under the new system — coming in on time, within budget and free of protests.
"This decision will likely result in significant delays in our ability to complete and deliver over $225 million in construction projects," the UH officials said. "It’s a loss to the taxpayers, who pay for these projects. They’ll cost more and take longer to get done."
Rep. Scott Nishimoto and Sen. Jill Tokuda, two key negotiators on the House-Senate conference committee formed to try to agree on a compromise bill, said the two sides were too far apart to reach agreement as legislators scramble to meet end-of-session deadlines.
One of the key stumbling blocks was how UH handled procurement complaints.
Under the current system, UH decides whether procurement protests have merit, a self-policing process considered unusual in government procurements. For most other state agencies, protests are decided by the state Department of Commerce and Consumer Affairs.
Nishimoto (D, Kaimuki-Waikiki) said the House believed UH’s exemption had merit but favored returning jurisdiction over complaints to the DCCA. "The independent, third-party review was critical for us," he told the Star-Advertiser.
The Senate’s approach was to give UH a year to develop a report for implementing an independent, third-party review process, Tokuda said.
Sen. Sam Slom, a member of the conference committee, said UH lobbied heavily to extend the exemption, but he opposed carving out a special exception for the school. If the state procurement code needs revisions to make it more effective, the changes should apply to all agencies, not just one, said Slom (R, Diamond Head-Hawaii Kai).
UH officials indicated that the ending of the exemption could jeopardize design-assist projects in the pipeline.
"If construction contracts for these projects have not been issued by June 30, the projects themselves would have to revert on that date back to the old procurement process, start from scratch and be rebid," they said.
