SB 1543: External Consultants; Purchasing Agencies; Disclosure Requirements; Spending Caps; Audit; Reports

A BILL FOR AN ACT

RELATING TO GOVERNMENT ACCOUNTABILITY.

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

     SECTION 1.  The legislature finds that there is a pressing need to reduce the reliance on external consultants for work that can or should be performed by qualified government employees.  Excessive outsourcing of government functions often leads to increased costs, diminished accountability, and a loss of institutional knowledge within public agencies.  By prioritizing the use of in-house expertise, the State can foster greater transparency in its operations, ensuring that decisions about the allocation of public funds are clear, justifiable, and aligned with the best interests of taxpayers.  Moreover, reducing dependence on external consultants will promote cost efficiency, enabling government agencies to allocate resources more effectively while building and retaining institutional capacity.  Strengthening the role of public employees in performing core government functions will also enhance the long‑term sustainability and independence of state operations.  Through these efforts, the legislature seeks to ensure that public agencies are equipped to meet the evolving needs of the State in a manner that is both responsible and effective.

     Accordingly, the purpose of this Act is to reduce reliance on external consultants for work that can be performed by qualified government employees and ensure transparency, cost efficiency, and the development of in-house expertise within government agencies by:

     (1)  Requiring each purchasing agency to provide justification for hiring external consultants;

     (2)  Capping the amount each agency can spend on external consultants;

     (3)  Requiring each agency to seek approval from the legislature for consulting contracts exceeding a certain dollar amount;

     (4)  Requiring each agency to disclose all contracts with external consultants;

     (5)  Requiring annual reports to the legislature;

     (6)  Requiring the compliance audit unit to conduct regular audits of agency consultant contracts to assess cost‑effectiveness and compliance; and

     (7)  Requiring each chief procurement officer to ensure that inherent government functions are not delegated to a contractor.

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

     "§103D-     External consultants; justification; spending caps; reporting requirements; audits.  (a)  Notwithstanding section 103D‑301, each purchasing agency shall:

     (1)  Provide detailed justification for hiring external consultants by:

          (A)  Demonstrating the lack of in-house capacity or expertise;

          (B)  Conducting a cost-benefit analysis that compares consultant costs with the expenses of hiring or training state employees; and

          (C)  Publishing justification reports for public and legislative review;

     (2)  Spend no more than       per cent of the purchasing agency's budget on consulting services;

     (3)  Seek approval from the legislature for any contract for consulting services exceeding $          ;

     (4)  Disclose all contracts the purchasing agency awards to external consultants after the effective date of this Act, including:

          (A)  The total costs of each contract, broken down by service and duration;

          (B)  The names of consultants and firms; and

          (C)  The work scope and deliverables; and

     (5)  Submit an annual report to the legislature no later than twenty days prior to the convening of each regular session on its contracts with external consultants, which shall include:

          (A)  The number of external consultants used; and

          (B)  The percentage of the purchasing agency's budget spent on consulting.

     (b)  The compliance audit unit shall conduct regular audits of each purchasing agency's external consultant contracts to assess the cost-effectiveness of the contracts and compliance with this section.

     (c)  This section shall not apply to the contracting of external consultants for:

     (1)  Highly technical or niche expertise unavailable in the State; and

     (2)  Short-term emergency needs, including disaster response or urgent technical projects."

     SECTION 3.  Section 103D-205, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  For their respective jurisdictions and unless otherwise specifically provided in this chapter, each chief procurement officer shall serve as the central procurement officer for the officer's respective jurisdiction and:

     (1)  Procure or supervise the procurement of all goods, services, and construction;

     (2)  Exercise general supervision and control over all inventories of goods;

     (3)  Sell, trade, or otherwise dispose of surplus goods;

     (4)  Establish and maintain programs for the inspection, testing, and acceptance of goods, services, and construction;

     (5)  Coordinate with the administrator regarding procurement policies, opportunities for statewide innovation implementation, and concerns;

     (6)  Report procurement contract data pursuant to requirements established by the administrator, in the form and manner prescribed by the state procurement office; [and]

     (7)  Assist and cooperate with the administrator regarding any compliance review by the administrator pursuant to section 103D-206[.]; and

     (8)  Ensure that inherent government functions are not delegated to a contractor."

     SECTION 4.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 5.  This Act shall take effect January 1, 2491.

Report Title:

External Consultants; Purchasing Agencies; Disclosure Requirements; Spending Caps; Audit; Reports

Description:

Requires each purchasing agency to provide justification for hiring external consultants.  Caps the amount each agency can spend on external consultants.  Requires each agency to seek approval from the Legislature for consulting contracts exceeding a certain dollar amount.  Requires each agency to disclose new contracts with external consultants.  Requires annual reports to the Legislature.  Requires the Compliance Audit Unit to conduct regular audits of agency consultant contracts to assess cost-effectiveness and compliance.  Requires each chief procurement officer to ensure that inherent government functions are not delegated to a contractor.  Effective 1/1/2491.  (SD2)

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

A BILL FOR AN ACT

RELATING TO GOVERNMENT ACCOUNTABILITY.

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

     SECTION 1.  The legislature finds that there is a pressing need to reduce the reliance on external consultants for work that can or should be performed by qualified government employees.  Excessive outsourcing of government functions often leads to increased costs, diminished accountability, and a loss of institutional knowledge within public agencies.  By prioritizing the use of in-house expertise, the State can foster greater transparency in its operations, ensuring that decisions about the allocation of public funds are clear, justifiable, and aligned with the best interests of taxpayers.  Moreover, reducing dependence on external consultants will promote cost efficiency, enabling government agencies to allocate resources more effectively while building and retaining institutional capacity.  Strengthening the role of public employees in performing core government functions will also enhance the long‑term sustainability and independence of state operations.  Through these efforts, the legislature seeks to ensure that public agencies are equipped to meet the evolving needs of the State in a manner that is both responsible and effective.

     Accordingly, the purpose of this Act is to reduce reliance on external consultants for work that can be performed by qualified government employees and ensure transparency, cost efficiency, and the development of in-house expertise within government agencies by:

     (1)  Requiring each purchasing agency to provide justification for hiring external consultants;

     (2)  Capping the amount each agency can spend on external consultants;

     (3)  Requiring each agency to seek approval from the legislature for consulting contracts exceeding a certain dollar amount;

     (4)  Requiring each agency to disclose all contracts with external consultants;

     (5)  Requiring annual reports to the legislature;

     (6)  Requiring the compliance audit unit to conduct regular audits of agency consultant contracts to assess cost‑effectiveness and compliance; and

     (7)  Requiring each chief procurement officer to ensure that inherent government functions are not delegated to a contractor.

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

     "§103D-    External consultants; justification; spending caps; reporting requirements; audits.  (a)  Notwithstanding section 103D‑301, each purchasing agency shall:

     (1)  Provide detailed justification for hiring external consultants by:

          (A)  Demonstrating the lack of in-house capacity or expertise;

          (B)  Conducting a cost-benefit analysis that compares consultant costs with the expenses of hiring or training state employees; and

          (C)  Publishing justification reports for public and legislative review;

     (2)  Spend not more than       per cent of the purchasing agency's budget on consulting services;

     (3)  Seek approval from the legislature before contracting for consulting services exceeding $          ;

     (4)  Disclose all contracts the purchasing agency currently holds with external consultants, including:

          (A)  The total costs of each contract, broken down by service and duration;

          (B)  The names of consultants and firms; and

          (C)  The work scope and deliverables; and

     (5)  Submit an annual report to the legislature no later than twenty days prior to the convening of each regular session on its contracts with external consultants, which shall include:

          (A)  The number of external consultants used; and

          (B)  The percentage of the purchasing agency's budget spent on consulting.

     (b)  The compliance audit unit shall conduct regular audits of each purchasing agency's external consultant contracts to assess the cost-effectiveness of the contracts and compliance with this section.

     (c)  This section shall not apply to the contracting of external consultants for:

     (1)  Highly technical or niche expertise unavailable in the State; and

     (2)  Short-term emergency needs, including disaster response or urgent technical projects."

     SECTION 3.  Section 103D-205, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  For their respective jurisdictions and unless otherwise specifically provided in this chapter, each chief procurement officer shall serve as the central procurement officer for the officer's respective jurisdiction and:

     (1)  Procure or supervise the procurement of all goods, services, and construction;

     (2)  Exercise general supervision and control over all inventories of goods;

     (3)  Sell, trade, or otherwise dispose of surplus goods;

     (4)  Establish and maintain programs for the inspection, testing, and acceptance of goods, services, and construction;

     (5)  Coordinate with the administrator regarding procurement policies, opportunities for statewide innovation implementation, and concerns;

     (6)  Report procurement contract data pursuant to requirements established by the administrator, in the form and manner prescribed by the state procurement office; [and]

     (7)  Assist and cooperate with the administrator regarding any compliance review by the administrator pursuant to section 103D-206[.]; and

     (8)  Ensure that inherent government functions are not delegated to a contractor."

     SECTION 4.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 5.  This Act shall take effect January 1, 2491.

Report Title:

External Consultants; Purchasing Agencies; Disclosure Requirements; Spending Caps; Audit; Reports

Description:

Requires each purchasing agency to provide justification for hiring external consultants.  Caps the amount each agency can spend on external consultants.  Requires each agency to seek approval from the Legislature for consulting contracts exceeding a certain dollar amount.  Requires each agency to disclose all contracts with external consultants.  Requires annual reports to the Legislature.  Requires the Compliance Audit Unit to conduct regular audits of agency consultant contracts to assess cost-effectiveness and compliance.  Requires each chief procurement officer to ensure that inherent government functions are not delegated to a contractor.  Effective 1/1/2491.  (SD1)

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

A BILL FOR AN ACT

relating to Government accountability.

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

     SECTION 1.  The legislature finds that there is a pressing need to reduce the reliance on external consultants for work that can or should be performed by qualified government employees.  Excessive outsourcing of government functions often leads to increased costs, diminished accountability, and a loss of institutional knowledge within public agencies.  By prioritizing the use of in-house expertise, the State can foster greater transparency in its operations, ensuring that decisions about the allocation of public funds are clear, justifiable, and aligned with the best interests of taxpayers.  Moreover, reducing dependence on external consultants will promote cost efficiency, enabling government agencies to allocate resources more effectively while building and retaining institutional capacity.  Strengthening the role of public employees in performing core government functions will also enhance the long-term sustainability and independence of state operations.  Through these efforts, the legislature seeks to ensure that public agencies are equipped to meet the evolving needs of the State in a manner that is both responsible and effective.

     Accordingly, the purpose of this Act is to reduce reliance on external consultants for work that can be performed by qualified government employees and ensure transparency, cost efficiency, and the development of in-house expertise within government agencies by:

     (1)  Requiring each purchasing agency to provide justification for hiring external consultants;

     (2)  Capping the amount each agency can spend on external consultants;

     (3)  Requiring each agency to seek approval from the legislature for consulting contracts exceeding a certain dollar amount;

     (4)  Requiring each agency to disclose all contracts with external consultants;

     (5)  Requiring annual reports to the legislature; and

     (6)  Requiring the compliance audit unit to conduct regular audits of agency consultant contracts to assess cost-effectiveness and compliance.

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

     "§103D-    External consultants; justification; spending caps; reporting requirements; audits.  (a)  Notwithstanding section 103D‑301, each purchasing agency shall:

     (1)  Provide detailed justification for hiring external consultants by:

          (A)  Demonstrating the lack of in-house capacity or expertise;

          (B)  Conducting a cost-benefit analysis that compares consultant costs with the expenses of hiring or training state employees; and

          (C)  Publishing justification reports for public and legislative review;

     (2)  Spend not more than       per cent of the purchasing agency's budget on consulting services;

     (3)  Seek approval from the legislature before contracting for consulting services exceeding $          ;

     (4)  Disclose all contracts the purchasing agency currently holds with external consultants, including:

          (A)  The total costs of each contract, broken down by service and duration;

          (B)  The names of consultants and firms; and

          (C)  The work scope and deliverables; and

     (5)  Submit an annual report to the legislature no later than twenty days prior to the convening of each regular session of its contracts with external consultants, which shall include:

          (A)  The number of external consultants used; and

          (B)  The percentage of the purchasing agency's budget spent on consulting.

     (b)  The compliance audit unit shall conduct regular audits of each purchasing agency's external consultant contracts to assess the cost-effectiveness of the contracts and compliance with this section.

     (c)  This section shall not apply to:

     (1)  Highly technical or niche expertise unavailable in the State; and

     (2)  Short-term emergency needs, including disaster response or urgent technical projects."

     SECTION 3.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect upon its approval.

Report Title:

External Consultants; Purchasing Agencies; Disclosure Requirements; Spending Caps; Audit; Reports

Description:

Requires each purchasing agency to provide justification for hiring external consultants.  Caps the amount each agency can spend on external consultants.  Requires each agency to seek approval from the Legislature for consulting contracts exceeding a certain dollar amount.  Requires each agency to disclose all contracts with external consultants.  Requires annual reports to the Legislature.  Requires the Compliance Audit Unit to conduct regular audits of agency consultant contracts to assess cost-effectiveness and compliance.

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

STAND. COM. REP. NO. 751

Honolulu, Hawaii

RE:    S.B. No. 1543

       S.D. 2

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Sir:

     Your Committee on Ways and Means, to which was referred S.B. No. 1543, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO GOVERNMENT ACCOUNTABILITY,"

begs leave to report as follows:

     The purpose and intent of this measure is to reduce the State's reliance on external consultants for work that can be performed by qualified government employees.

     More specifically, the measure:

     (1)  Requires each state purchasing agency to provide justification for hiring external consultants;

     (2)  Caps the amount that each agency may spend to hire external consultants;

     (3)  Requires each agency to seek approval from the Legislature for consulting contracts exceeding a certain dollar amount;

     (4)  Requires each agency to disclose all contracts with external consultants;

     (5)  Requires annual reports to the Legislature;

     (6)  Requires the Compliance Audit Unit to conduct regular audits of agency consultant contracts to assess cost-effectiveness and compliance; and

     (7)  Requires each chief procurement officer to ensure that inherent government functions are not delegated to a contractor.

     Your Committee received written comments in opposition to this measure from the Department of Corrections and Rehabilitation; American Council of Engineering Companies of Hawaii; and one individual.

     Your Committee received written comments on this measure from the Departments of Accounting and General Services, Department of Budget and Finance, Department of Education, Employees' Retirement System of the State of Hawaii, Hawaii State Public Library System, State Procurement Office, University of Hawaii System, and Hawaii Health Systems Corporation.

     Your Committee finds that there is a pressing need to reduce the State's reliance on external consultants for work that qualified government employees can or should perform.  Your Committee further finds that excessive outsourcing of government functions often leads to increased costs, diminished accountability, and a loss of institutional knowledge within state agencies.  Your Committee recognizes that prioritizing the use of in-house expertise and strengthening the role of public employees in performing core government functions can foster greater transparency, promote cost efficiency, retain institutional knowledge, and enhance the long-term sustainability and independence of state operations.  Your Committee finds that the requirements in this measure will help the State achieve these objectives.

     Your Committee has amended this measure by:

     (1)  Clarifying that the requirement for legislative approval of contracts exceeding a certain amount shall apply to each contract sought by the purchasing agency;

     (2)  Clarifying that the required disclosure of contracts currently held by a purchasing agency shall only apply to contracts approved after the effective date of this measure; and

     (3)  Making technical, nonsubstantive changes for the purposes of clarity, consistency, and style.

     As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1543, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as S.B. No. 1543, S.D. 2.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,

STAND. COM. REP. NO. 323

Honolulu, Hawaii

RE:    S.B. No. 1543

       S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Sir:

     Your Committee on Government Operations, to which was referred S.B. No. 1543 entitled:

"A BILL FOR AN ACT RELATING TO GOVERNMENT ACCOUNTABILITY,"

begs leave to report as follows:

     The purpose and intent of this measure is to:

     (1)  Require each purchasing agency to provide justification for hiring external consultants;

     (2)  Cap the amount each agency can spend on external consultants;

     (3)  Require each agency to seek approval from the Legislature for consulting contracts exceeding a certain dollar amount;

     (4)  Require each agency to disclose all contracts with external consultants;

     (5)  Require each agency to submit annual reports on its external consultant contracts to the Legislature; and

     (6)  Require the Compliance Audit Unit to conduct regular audits of agency consultant contracts to assess cost‑effectiveness and compliance.

     Your Committee received testimony in opposition to this measure from the American Council of Engineering Companies of Hawaii.

     Your Committee received comments on this measure from the Department of Education, Department of Budget and Finance, State Procurement Office, Department of Accounting and General Services, Employees' Retirement System, Hawaii Health Systems Corporation, and American Institute of Architects Hawaii State Council.

     Your Committee finds that excessive outsourcing of government functions often leads to increased costs, diminished accountability, and a loss of institutional knowledge within public agencies.  Reducing dependence on external consultants fosters transparency in government operations and promotes cost efficiency.  This measure promotes accountability and the in-house retention of government functions by establishing regulations to reduce outsourcing certain duties to contractors.

     Your Committee notes the testimony of the State Procurement Office that chief procurement officers also play a significant role in determining when outsourcing is necessary.

     Accordingly, your Committee has amended this measure by:

     (1)  Inserting new language to require each chief procurement officer to ensure that inherent government functions are not delegated to a contractor;

     (2)  Inserting an effective date of January 1, 2491, to encourage further discussion;

     (3)  Amending section 1 to reflect its amended purpose; and

     (4)  Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

     As affirmed by the record of votes of the members of your Committee on Government Operations that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1543, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1543, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Government Operations,