SB 615: RELATING TO PROCUREMENT.

A BILL FOR AN ACT

RELATING TO PROCUREMENT.

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

     SECTION 1.  Section 103D-501, Hawaii Revised Statutes, is amended to read as follows:

     "§103D-501  Contract clauses and their administration.  (a)  The policy board shall adopt rules requiring the inclusion of contract clauses providing for adjustments in prices, time of performance, or other contract provisions, as appropriate, and covering the following subjects:

     (1)  The unilateral right of the governmental body to order in writing:

          (A)  Changes in the work within the scope of the contract; and

          (B)  Changes in the time of performance of the contract that do not alter the scope of the contract work;

     (2)  Variations occurring between estimated quantities of work in a contract and actual quantities;

     (3)  Suspension of work ordered by the governmental body; and

     (4)  Site conditions differing from those indicated in the contract, or ordinarily encountered, except that differing site conditions clauses established by these rules need not be included in a contract:

          (A)  When the contract is negotiated;

          (B)  When the contractor provides the site or design; or

          (C)  When the parties have otherwise agreed with respect to the risk of differing site conditions.

     (b)  Adjustments in price permitted by rules adopted under subsection (a) shall be computed in one or more of the following ways:

     (1)  By agreement on a fixed price adjustment before commencement of the pertinent performance;

     (2)  By unit prices specified in the contract or subsequently agreed upon before commencement of the pertinent performance;

     (3)  By the costs attributable to the events or situations under [such] the clauses with adjustment of profit or fee, all as specified in the contract or subsequently agreed upon before commencement of the pertinent performance;

     (4)  In any other manner as the contracting parties may mutually agree upon before commencement of the pertinent performance; or

     (5)  In the absence of agreement by the parties:

          (A)  For change orders with value not exceeding fifty per cent of the total contract price and not exceeding $50,000 by documented actual costs of the work, allowing for twenty per cent of the actual costs for overhead and profit on work done directly by the contractor and ten per cent on any subcontractor's billing to the contractor for the contractor's overhead and profit.  There shall be no cap on the total cost of the work if this method is used.  A change order shall be issued within fifteen days of submission by the contractor of proper documentation of completed force account work, whether periodic (conforming to the applicable billing cycle) or final.  The procurement officer shall return any documentation that is defective to the contractor within fifteen days after receipt, with a statement identifying the defect; or

          (B)  For change orders not exceeding fifty per cent of the total contract price, but with value exceeding $50,000 by a unilateral determination by the governmental body of the costs attributable to the events or situations under clauses with adjustment of profit or fee, all as computed by the governmental body in accordance with applicable sections of the rules adopted under section 103D-601 and subject to the provisions of part VII.  When a unilateral determination has been made, a unilateral change order shall be issued within ten days.  Costs included in the unilateral change order shall allow for twenty per cent of the actual costs for overhead and profit on work done directly by the contractor and ten per cent on any subcontractor's billing to the contractor for the contractor's overhead and profit.  Upon receipt of the unilateral change order, if the contractor does not agree with any of the terms or conditions, or the adjustment or nonadjustment of the contract time or contract price, the contractor shall file a notice of intent to claim within thirty days after the receipt of the written unilateral change order.  Failure to file a protest within the time specified shall constitute agreement on the part of the contractor with the terms, conditions, amounts, and adjustment or nonadjustment of the contract time or the contract price set forth in the unilateral change order.

     A contractor shall be required to submit cost or pricing data if any adjustment in contract price is subject to the provisions of section 103D-312.  A fully executed change order or other document permitting billing for the adjustment in price under any method listed in paragraphs (1) through (4) shall be issued within ten days after agreement on the method of adjustment.

     (c)  Any change order:

     (1)  That increases the cost of a contract by more than fifty per cent of the original contract cost;

     (2)  Having a cost increase that, when added to the cost changes of all prior change orders for that contract, increases the cost of a contract by more than fifty per cent of the original contract cost; or

     (3)  That substantially changes the scope of work for a contract,

shall be prohibited by rules adopted under subsection (a) and shall be considered a new procurement; provided that the head of a purchasing agency may approve a change order that is otherwise prohibited by this subsection if, in a written justification of the approval, the head of the purchasing agency determines that the approval is in the best interest of the State, taking into consideration the purpose and intent of this subsection.

     [(c)] (d)  The policy board shall adopt rules requiring the inclusion in contracts of clauses providing for appropriate remedies and covering the following subjects:

     (1)  Liquidated damages as appropriate;

     (2)  Specified excuses for delay or nonperformance;

     (3)  Termination of the contract for default; and

     (4)  Termination of the contract in whole or in part for the convenience of the governmental body.

     [(d)] (e)  The chief procurement officer or the head of a purchasing agency may vary the clauses that may be required to be included in contracts under the rules adopted under subsections (a) and [(c);] (d); provided that:

     (1)  Any variations are supported by a written determination that states the circumstances justifying [such] the variations; and

     (2)  Notice of any [such] material variation be stated in the invitation for bids or request for proposals when the contract is awarded under section 103D-302 or 103D‑303."

     SECTION 2.  This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on July 1, 2025.

Report Title:

Procurement; Change Order; Cost Increases; Scope of Work

Description:

Requires that any procurement change order that increases the contract cost by more than fifty per cent or substantially increases the scope of work be considered a new contract for procurement purposes.

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