⁽¹⁾Historical Note: This chapter 122, effective, subtitle 11 of title 3, … Continue reading

HAWAII ADMINISTRATIVE RULES
TITLE 3
DEPARTMENT OF ACCOUNTING AND GENERAL SERVICES
SUBTITLE 11
PROCUREMENT POLICY BOARD
CHAPTER 122
SOURCE SELECTION AND CONTRACT FORMATION

 

 

SUBCHAPTER 11
CANCELLATION OF SOLICITATIONS AND REJECTION OF OFFERS

 

§3-122-95 Cancellation of solicitations and rejection of offers.

A solicitation may be canceled, or an offer rejected in whole or in part pursuant to section 103D-308, HRS.

[Eff 12/15/95; comp 11/17/97; am and comp MAR 21 2008] (Auth: HRS §§103D-202, 103D-308) (Imp: HRS §103D-308)

§3-122-96 Cancellation of solicitation.

(a) A solicitation may be cancelled for reasons including but not limited to the following:

• (1) Cancellation prior to opening:
  • (A) The agency no longer requires the goods, services, or construction;
  • (B) The agency no longer can reasonably expect to fund the procurement;
  • (C) Proposed amendments to the solicitation would be of a magnitude that a new solicitation is desirable; or
  • (D) A determination by the chief procurement officer or a designee that a cancellation is in the public interest.
• (2) Cancellation after opening but prior to award:
  • (A) The goods, services, or construction being procured are no longer required;
  • (B) Ambiguous or otherwise inadequate specifications were part of the solicitation;
  • (C) The solicitation did not provide for consideration of all factors of significance to the agency;
  • (D) Prices exceed available funds and it would not be appropriate to adjust quantities to come within available funds;
  • (E) All otherwise acceptable offers received are at clearly unreasonable prices;
  • (F) There is reason to believe that the offers may not have been independently arrived at in open competition, may have been collusive, or may have been submitted in bad faith; or
  • (G) A determination by the chief procurement officer or a designee that a cancellation is in the public interest.

(b) A notice of cancellation shall be sent to all businesses solicited and the notice shall include:

• (1) Identity of the solicitation;
• (2) Brief explanation of the reason(s) for cancellation; and
• (3) Where appropriate, an explanation that an opportunity will be given to compete on any resolicitation or any future procurements of similar goods, services, or construction.

(c) Documentation on the reasons for cancellation shall be made a part of the procurement file and shall be available for public inspection.

(Eff 12/15/95; am and comp 11/17 /97; am and comp MAR 21 2008 ] (Auth: HRS §§103D-202, 103D-308) (Imp: HRS §103D-308)

§3-122-97 Rejection of offer.

(a) A bid shall be rejected for reasons including but not limited to:

• (1) The bidder is non-responsible as determined by subchapter 13; or
• (2) The bid is not responsive, that is, it does not conform in all material respects to the solicitation by reason of its failure to meet the requirements of the specifications or permissible alternates or other acceptability criteria set forth in the solicitation, pursuant to section 3-122-33.

(b) A proposal may be accepted with modification or correction, unless the solicitation states otherwise.

• (1) This allowance must be considered in determining whether reasons exist for rejecting all or any part of a proposal.
• (2) A proposal shall be rejected for reasons including but not limited to:
  • (A) The offeror is non-responsible as determined by subchapter 13;
  • (B) The proposal, after any opportunity has passed for modification or clarification, fails to meet the announced requirements of the agency in some material respect; or
  • (C) The proposed price is clearly unreasonable.

(c) An offerer may not limit acceptance to the entire bid or proposal offering, unless allowed by the solicitation:

• (1) If the acceptance of an offer is so limited by the offerer but not allowed, the offer will be determined to be not acceptable and rejected.
• (2) If the acceptance of an offer is so limited by the offeror and allowed, the purchasing agency shall not reject part of the offer and award on the remainder.

(d) A written notice shall be sent to the offerer advising of the reasons for the rejection.

[Eff 12/15/95; comp 11/17/97; am and comp MAR 21 2008] (Auth: HRS §§103D-202, 103D-308) (Imp: HRS §103D-308)

§3-122-98 Disposition of offers.

When offers are rejected, or a solicitation cancelled after offers are received:

• (1) The offers which have been opened shall be retained in the procurement file; and
• (2) The unopened offers shall be returned to the offerers upon request; or otherwise disposed of.

[Eff 12/15/95; comp 11/17/97; comp MAR 21 2008] (Auth: HRS §§103D-202, 103D-308) (Imp: HRS §103D-308)

§§3-122-99 to 3-122-101 (Reserved) .

SUBCHAPTER 12
CONTRACT NOT BINDING UNLESS FUNDS AVAILABLE

 

§3-122-102 Contract not binding unless funds available.

(a) Certification that there is an appropriation or balance of an appropriation sufficient to cover the amount required by the contract as well as the application of federal funds shall comply or be exempt under section 103D-309, HRS.
(b) Additional certification exceptions are for the following types of contracts for which the respective chief financial officer shall only be required to certify that there is an appropriation or balance of an appropriation over and above all outstanding contracts that is sufficient to cover the amount required to be paid under the contract during the initial fiscal period and the contractual obligation of both parties in each fiscal period succeeding the first is subject to the appropriation and availability of funds:

• (1) A lease contract pursuant to section 3-122-147; and
• (2) An installment purchase payment contract pursuant to section 3-122-148.

(c) Certification of a portion of the total funds required for a contract may be permitted when an immediate solicitation will result in significantly more favorable contract terms and conditions to the State than a solicitation made at a later date; provided that certification for partial funding shall be permitted only if the respective chief financial officer, as the case may be, states in the certificate that the availability of funds in excess of the amount certified as available shall be contingent upon future appropriations or special fund revenues. All contracts partially funded shall be enforceable only to the extent to which funds have been certified as available.

[ 12/15/95; am and comp 11/17/97; am and comp MAR 21 2008 ] (Auth: HRS §103D-202) (Imp: HRS §§103D-309, 103D-315)

§3 122-103 REPEALED. [R Mar 21 2008] §3-122-104 REPEALED. [R 11/17/97] §§3-122-105 to 3-122-107 (Reserved) .

SUBCHAPTER 13
RESPONSIBILITY OF BIDDERS AND OFFERORS

 

§3-122-108 Qualification of offeror or prospective offeror.

(a) Pursuant to section 103D-310, HRS, a determination of responsibility or non-responsibility of an offeror or prospective offeror to perform the work called for in the solicitation shall be made by the procurement officer on the basis of available information.
(b) If the procurement officer requires additional information, the offeror or prospective offeror may be required to answer questions contained in the sample questionnaire provided by the policy board.
(c) The requested information shall be furnished upon request within two working days or longer at the discretion of the procurement officer. Failure to furnish the requested information within the time allowed may be grounds for a determination of nonresponsibility.
(d) Upon determination of nonresponsibility, the offeror or prospective offeror shall be notified in writing. The decision shall be final unless the offeror or prospective offeror applies for administrative hearing pursuant to section 3-126-42.

[Eff 12/15/95; am and comp 11/17 /97; am and comp MAR 21 2008] (Auth: HRS §§103D-202, 103D-310) (Imp: HRS §103D-310)

§3-122-109 Questionnaire.

The questionnaire shall request information for the following categories:

• (1) Financial ability to deliver the goods or perform the work required;
• (2) Material, equipment, facility, and personnel resources and expertise available, or the ability to obtain them, in order to meet contractual requirements;
• (3) References for the determination of a satisfactory record of performance;
• (4) References for the determination of a satisfactory record of integrity;
• (5) Legal qualifications to contract with the State; and
• (6) Additional information necessary for a determination of responsibility.

[Eff 12/15/97; comp 11/17/97; am and comp MAR 21 2008] (Auth: HRS §§103D-202, 103D-310) (Imp: HRS §103D-310)

§3-122-110 REPEALED. [R Mar 21 2008]

§3-122-111 Notice of intent to offer.

(a) When required by the solicitation, a prospective offeror shall file a notice of intent to offer, subject to the following:

• (1) The notice shall be received not less than ten days prior to the deadline for receipt of offers; and
• (2) The notice may be submitted by facsimile or electronically, pursuant to section 3-122-9, and the date of receipt as evidenced by the time indicated on the electronic transmittal or the procurement officer’s transaction receiving report, shall determine timeliness of the notice.

(b) A notice of intent to offer may be waived in the case of a single offer when the procurement officer determines that acceptance is in the best interest of the public and the basis for the acceptance is explained in the written determination.

[Eff and comp MAR 21 2008] (Auth: HRS §§103D-202, 103D-310) (Imp: HRS §103D-310)

§3-122-112 Responsibility of offerers.

(a) The offerer, as proof of compliance with the requirements of section 103D-310(c), HRS, upon award of a contract made pursuant to section 103D-302, 103D-303, 103D-304, or 103D-306, HRS, shall provide:

• (1) A tax clearance certificate from the department of taxation and the Internal Revenue Service, subject to section 103D-328, HRS, current within six months of issuance date;
• (2) A certificate of compliance for chapters 383, 386, 392, and 393, HRS, from the department of labor and industrial relations, current within six months of issuance date; and
• (3) A certificate of good standing from the business registration division of the department of commerce and consumer affairs, current within six months of issuance date.

(b) In lieu of the certificates referenced in subsection (a), offeror may make available proof of compliance through a state procurement office designated certification process.
(c) Except for any contract of less than $25,000 or any contract entered into pursuant to section 103D- 307, HRS, all state and county procurement officers or agents shall withhold final payment of a contract made pursuant to section 103D-302, 103D-303, 103D-304, or 103D-306, HRS, until receipt of:

• (1) A tax clearance certificate from the director of taxation and the Internal Revenue Service, subject to section 103D-328, HRS, current within two months of issuance date; and a certification from the contractor affirming that the contractor has, as applicable, remained in compliance with all laws as required by this section. A contractor making a false affirmation shall be suspended and may be debarred pursuant to section 103D- 702, HRS; or
• (2) Proof of compliance as provided in subsection (b).

(d) This section shall not apply to any contract to the extent it jeopardizes federal funding.

[Eff and comp MAR 21 2008 ] (Auth: HRS §§103D-202, 103D- 310) (Imp: HRS §103D-310)

§§3-122-113 to 3-122-115 (Reserved) .

SUBCHAPTER 14
PREQUALIFICATION OF SUPPLIERS

 

§3-122-116 Conditions for prequalification of suppliers.

Prequalification of suppliers for particular types of goods, services, and construction shall be allowed under the following conditions:

• (1) To limit a solicitation to those vendors who meet statutory or licensing requirements applicable to the solicitation;
• (2) To minimize the time necessary to verify vendor qualifications which otherwise would jeopardize timely award of contracts.

[Eff 12/15/95; comp 11/17/97; comp MAR 21 2008] (Auth: HRS §§103D-202, 103D-311) (Imp: HRS §103D-311)

§3-122-117 REPEALED. [R Mar 21 2008] §§3-122-118 to 3-122-120) (Reserved) .

SUBCHAPTER 15
COST OR PRICING DATA

 

§3-122-121 Scope and application.

The cost and pricing data requirement in this subchapter applies to contracts when either cost or pricing data or both are required to be submitted pursuant to section 3-122-123, except for the following:

• (1) Small purchases; or
• (2) A contract let by competitive sealed bidding or multi-step bidding, except when price adjustments are subsequently made to the contract pursuant to section 3-122-123.

[Eff 12/15/95; comp 11/17/97; am and comp MAR 21 2008] (Auth: HRS §103D-202) (Imp: HRS §103D-312)

§3-122-122 Cost or pricing data defined.

Cost and pricing data means all facts as of the date of price agreement that prudent buyers and sellers would reasonably expect to affect price negotiations significantly. Cost or pricing data are factual, not judgmental, and are therefore verifiable. While they do not indicate the accuracy of a prospective contractor’s judgment about future costs or projections, they do include the data forming the basis for that judgment. Cost or pricing data are more than historical accounting data; they are all facts that can reasonably be expected to contribute to the soundness of estimates of future costs and to the validity of determinations of costs already incurred. They also include factors as:

• (1) Vendor quotations;
• (2) Nonrecurring costs;
• (3) Information on changes in production methods and in production or purchasing volume;
• (4) Data supporting projections of business prospects and objectives and related operations costs;
• (5) Unit cost trends as those associated with labor efficiency;
• (6) Make or buy decisions;
• (7) Labor union contract negotiations; and
• (8) Information on management decisions that could have a significant bearing on costs.

[Eff 12/15/95; comp 11/17/97; comp MAR 21 2008] (Auth: HRS §103D-202) (Imp: HRS §103D-312)

§3-122-123 Requirement for cost or pricing data.

The procurement officer shall require cost or pricing data or both in support of the following, and may require for professional services pursuant to subchapter 7:

• (1) Any contract, resulting from competitive sealed proposals or sole source procurement, expected to exceed $100,000;
• (2) Any price adjustment to a contract involving aggregate increases and decreases in costs plus applicable profits expected to exceed $100,000, including a contract resulting from competitive sealed bidding, whether or not cost or pricing data were required in connection with the initial pricing of the contract, except wten unrelated and separately priced adjustments, not requiring cost or pricing data if considered separately, are consolidated for administrative convenience; or
• (3) A written determination by a procurement officer that the circumstances warrant requiring submission of cost or pricing data provided, however, when less than complete cost analysis, for example; analysis of only specific factors will provide a reasonable pricing result on awards under $100,000 without the submission of complete cost or pricing data, the procurement officer shall request only that data considered adequate to support the limited extent of the cost analysis needed and need not require certification.

[Eff 12/15/95; comp 11/17/97; am and comp MAR 21 2008] (Auth: HRS §103D-202) (Imp: HRS §103D-312)

§3-122-124 Exceptions to the requirement for cost or pricing data.

(a) Cost or pricing data need not be submitted or certified where the contract price is based on:

• (1) Adequate price competition which means at least two responsible offerers independently compete for a contract to be awarded to the offerer submitting the lowest evaluated price.
• (2) Established catalogue price which means the price included in a catalogue, price list, schedule, or other form that is regularly maintained by a manufacturer or contractor; is either published or otherwise available for inspection by customers; and states the price at which sales are currently or were last made to a significant number of any category of buyers or buyers constituting the general (non-government) buying public for the goods or services involved.
• (3) Established market price which means a current price, established in the usual and ordinary course of trade between buyers and sellers, which can be substantiated from sources independent of the manufacturer or supplier and may be an indication of the reasonableness of price.
• (4) Prices set by law or regulation which means the price of a good or service is set by law or rule if some governmental body establishes the price that the contractor may charge the State and other customers.

(b) If, despite the existence of an established catalogue price or market price, and after consultation with the prospective contractors, the procurement officer considers that the price is not reasonable, cost or pricing data may be requested. Where the reasonableness of the price can be assured by a request for cost or pricing data limited to data pertaining to the differences in the item or services being procured and those listed in the catalogue or market, requests should be so limited.
(c) When the chief procurement officer or the head of a purchasing agency determines in writing to waive the applicable requirements of section 3-122-123 (1) or 3-122-123(2) for submission of cost or pricing data in a particular pricing action and the reasons for the waiver are stated in the determination, a copy of the determination shall be kept in the contract file and made available to the public upon request.
(d) If after cost or pricing data were initially requested and received, it is determined that adequate price competition does exist, the data need not be certified.

[Eff 12/15/95; am and comp 11/17/97; am comp MAR 21 2008] (Auth: HRS §§103D-202, 103D-312) (Imp: HRS §103D-312)

§3-122-125 Submission of cost or pricing data and certification.

(a) When cost or pricing data are required, they shall be submitted to the procurement officer prior to beginning price negotiations at any reasonable time and in any reasonable manner prescribed by the procurement officer. When the procurement officer requires the offeror or contractor to submit cost or pricing data in support of any proposal, the data shall either be actually submitted or specifically identified in writing.
(b) The offeror or contractor is required to keep the submission current until the negotiations are concluded.
(c) The offeror or contractor shall certify as soon as practicable after agreement is reached on price that the cost or pricing data submitted are accurate, complete, and current as of the date of reaching agreement on price.
(d) A refusal by an offeror to supply the required data shall be referred to the chief procurement officer or the head of a purchasing agency, whose duty shall be to determine in writing whether to disqualify the noncomplying bidder or offeror, to defer award pending further investigation, or to enter into the contract. A refusal by a contractor to submit the required data to support a price adjustment shall be referred to the chief procurement officer or the head of a purchasing agency who shall determine in writing whether to further investigate the price adjustment, not to allow any price adjustment, or to set the amount of the price adjustment, subject to the contractor’s rights under chapter 3-126.

[Eff 12/15/95; comp 11/17/97; comp MAR 21 2008 ] (Auth: HRS §103D-202) (Imp: HRS §103D-312)

§3-122-126 Certificate of current cost or pricing data.

(a) When cost or pricing data must be certified, the certificate of current cost or pricing data form provided by the policy board shall be included in the contract file along with any award documentation required under this subchapter. The offeror or contractor shall be required to submit the certificate as soon as practicable after agreement is reached on the contract price or adjustment.
(b) Although the certificate pertains to “cost or pricing data,” it is not to be construed as a representation as to the accuracy of the offerer’s or contractor’s judgment on the estimated portion of future costs or projections. It does, however, constitute a representation as to the accuracy of the data upon which the offerer’s or contractor’s judgment is based. A certificate of current cost or pricing data shall not substitute for examination and analysis of the offerer’s or contractor’s proposal.
(c) Whenever it is anticipated that a certificate of current cost or pricing data may be required, notice of this requirement shall be included in the solicitation. If a certificate is required, the contract shall include a clause giving the State a contract right to reduction in the price as provided herein.
(d) The exercise of an option at the price established in the initial negotiation in which certified cost or pricing data were used does not require recertification or further submission of data.

[Eff 12/15/95; comp 11/17/97; comp MAR 21 2008] (Auth: HRS §103D-202) (Imp: HRS §103D-312)

§3-122-127 Defective cost or pricing data.

(a) If certified cost or pricing data are subsequently found to have been inaccurate, incomplete, or not current as of the date stated in the certificate, the State is entitled to an adjustment of the contract price, including profit or fee, to exclude any significant sum by which the price, including profit or fee, was increased because of the defective data. It is presumed that overstated cost or pricing data increased the contract price in the amount of the defect plus related overhead and profit or fee. Therefore, unless there is a clear indication that the defective data were not used or relied upon, the price should be reduced by the amount. In establishing that the defective data caused an increase in the contract price, the procurement officer is not expected to reconstruct the negotiation by speculating as to what would have been the mental attitudes of the negotiating parties if the correct data had been submitted at the time of agreement on price.
(b) In determining the amount of a downward adjustment, the contractor shall be entitled to an offsetting adjustment for any understated cost or pricing data submitted in support of price negotiations for the same pricing action up to the amount of the State’s claim for overstated cost or pricing data arising out of the same pricing action.
(c) If the contractor and the procurement officer cannot agree as to the existence of defective cost or pricing data or amount of adjustment due to defective cost or pricing data, the procurement officer shall set an amount in accordance with the provisions of this subchapter and the contractor may appeal this decision as a contract controversy under chapter 3-126.

[Eff 12/15/95; comp 11/17/97; comp MAR 21 2008] (Auth: HRS §103D-202) (Imp: HRS §103D-312)

§3-122-128 Cost analysis techniques.

Cost analysis includes the appropriate verification of cost or pricing data, and the use of this data to evaluate:

• (1) Specific elements of costs which may include direct labor, indirect costs, direct material, other direct costs, subcontract costs, and fixed fee or profit;
• (2) The necessity for certain costs;
• (3) The reasonableness of amounts estimated for the necessary costs;
• (4) The reasonableness of allowances for contingencies;
• (5) The basis used for allocation of indirect costs;
• (6) The appropriateness of allocations of particular indirect costs to the proposed contract; and
• (7) The reasonableness of the total cost or price.

[Eff 12/15/95; comp 11/17/97; comp MAR 21 2008] (Auth: HRS §103D-202) (Imp: HRS §103D-312)

§3-122-129 Price analysis techniques.

(a) Price analysis is used to determine if a price is reasonable and acceptable. It involves an evaluation of the prices for the same or similar items or services. Examples of price analysis criteria include but are not limited to:

• (1) Price submissions of prospective bidders or offerors in the current procurement;
• (2) Prior price quotations and contract prices charged by the bidder, offeror, or contractor;
• (3) Prices published in catalogues or price lists;
• (4) Prices available on the open market; and
• (5) In-house estimates of cost.

(b) In making the analysis, consideration must be given to any differing terms and conditions.

[Eff 12/15/95; comp 11/17/97; comp MAR 21 2008] (Auth: HRS §103D-202) (Imp: HRS §103D-312)

§3-122-130 Evaluation of cost or pricing data.

Evaluations of cost or pricing data should include comparisons of costs and prices of an offeror’s cost estimates with those of other offerors and any independent state price and cost estimates. They shall also include consideration of whether the costs are reasonable and allocable under the pertinent provisions of chapter 3-123.

[Eff 12/15/95; comp 11/17/97; comp MAR 21 2008] (Auth: HRS §103D-202) (Imp: HRS §103D-312)

§§3-122-131 to 3-122-132 (Reserved).

SUBCHAPTER 16
TYPES OF CONTRACTS

 

§3-122-133 Restrictive or prohibitive use of certain types of contracts.

(a) Subject to the limitations of this section, any type of contract that will promote the purchasing agency’s best interests may be used, except that cost-reimbursement and cost-plus-a-percentage-of-cost contracts are:

• (1) Restricted to only when the chief procurement officer determines in writing that the contracts are likely to be less costly than any other type of contract or that it is impracticable to obtain the goods, services, or construction required except by means of the contracts.
• (2) Prohibited if their use would jeopardize the receipt of federal assistance moneys or reduce the amount cf the assistance under any applicable federal statute or regulation.

(b) Award of a cost-plus-a-percentage-of-cost contract may not be made unless:

• (1) Notice is given to the head of the compliance audit unit, president of the senate, speaker of the house of representatives, and the chairpersons of the senate ways and means and house finance committees; and
• (2) Notice is conspicuously posted in an area accessible to the public in the office of the procurement officer and available for public inspection during normal business hours.

(c) The determinations required by this section shall be final and conclusive unless they are clearly erroneous, arbitrary, capricious, or contrary to law.

[Eft 12/15/95; am and comp 11/17/97; comp MAR 21 2008] (Auth: HRS §§103D-202, 103D-313, 103D-318) (Imp: HRS §§103D-313, 103D-318)

§3-122-134 Selection of contract types.

(a) The selection of an appropriate contract type depends on factors, including but not limited to:

• (1) The nature of the goods, services, or construction to be procured;
• (2) The uncertainties which may be involved in contract performance;
• (3) The extent to which the purchasing agency or the contractor is to assume the risk of the cost of performance of the contract; and
• (4) The degree of responsibility assumed by the contractor.

(b) The objective when selecting a contract type is to obtain the best value in needed goods, services, or construction in the time required and at the lowest cost or price to the purchasing agency.

• (1) To achieve this objective, the procurement officer, before choosing a contract type, should review the elements of the procurement which directly affect the cost, time, risk, and profit incentives bearing on the performance;
• (2) Factors to be considered in selecting any type of contract include but are not limited to:
  • (A) The type and complexity of the good, service, or construction item being procured;
  • (B) The difficulty of estimating performance costs as the inability of the agency to develop definitive specifications, to identify the risks to the contractor inherent in the nature of the work to be performed, or otherwise to establish clearly the requirement of the contract;
  • (C) The administrative costs to both parties;
  • (D) The degree to which the purchasing agency must provide technical coordination during the performance of the contract;
  • (E) The effect of the choice of the type of contract on the amount of competition to be expected;
  • (F) The stability of material or commodity market prices or wage levels;
  • (G) The urgency of the requirement; and
  • (H) The length of contract performance.

[Eff 12/15/95; comp 11/17/97; am and comp MAR 21 2008] (Auth: HRS §§103D-202, 103D-313) (Imp: HRS §103D-313)

§3-122-135 Types of contracts.

(a) Contract types described below are the principal contract types and any other type not described may be used, subject to the prohibition and restriction in section 3-122-133.
(b) Contract types are categorized based on the following and a type of contract may be a combination of any of the following:

• (1) Compensation, which includes:
  • (A) Fixed-price contract, pursuant to section 3-122-136, as follows:
    • (i) Firm fixed-price contract; and
    • (ii) Fixed-price contract with price adjustment;
  • (B) Cost-reimbursement contract, pursuant to section 3 122-137, as follows:
    • (i) Cost contract without fee;
    • (ii) Cost-plus-fixed fee contract of the completion form type or the term form type; and
    • (iii) Cost-plus-a-percentage-of-cost contract;
• (2) Cost incentives to provide special incentives to reduce total costs of performance, which includes cost-incentive contract, pursuant to section 3-122-138, as follows:
  • (A) Fixed-price cost incentive contract; and
  • (B) Cost-reimbursement contract with cost incentive fee;
• (3) Performance incentive, pursuant to section 3-122-139;
• (4) Time and materials, pursuant to section 3-122-140;
• (5) Labor hour, pursuant to section 3-122-141;
• (6) Quantity, which includes:
  • (A) Definite quantity contract, pursuant to section 3-122-142; and
  • (B) Indefinite quantity contract, which includes requirements contract, pursuant to section 3-122-143;
• (7) Use of multiple sources when conditions exist under which it is either necessary or advantageous to award a contract to more than one supplier for the same item on a solicitation, or for similar items, which includes:
  • (A) Incremental award contract of a definite quantity, pursuant to section 3-122-144;
  • (B) Multiple aware contract of an indefinite quantity, pursuant to section 3-122-145; and
  • (C) Geographic or regional award contract, pursuant to section 3-122-146;
• (8) Passing of title, which includes lease contracts, pursuant to section 3-122-147;
• (9) Installment purchase payments, pursuant to section 3-122-148; and
• (10) Length of contract, which includes multi-term contracts, pursuant to section 3-122-149.

[Eff 12/15/95; am and comp 11/17/97; am and comp MAR 21 2008] (Auth: HRS §§103D-202, 103D-313, 103D-322) (Imp: HRS §§103D-313, 103D-315, 103D-322)

§3-122-136 Fixed-price contract.

(a) The fixed-price contract is the only type of contract that can be used in competitive sealed bidding. It places responsibility on the contractor for the delivery of the goods or the complete performance of the services or construction in accordance with the contract terms at a price that may be firm or may be subject to contractually specified adjustments. It is appropriate for use when the extent and type of work necessary to meet the purchasing agency’s requirements can be reasonably specified and the cost can be reasonably estimated, as is generally the case of construction or standard commercial products.
(b) The firm fixed-price contract is one type of fixed-price contract. It provides a price that is not subject to adjustment due to variations in the contractor’s cost of performing the work specified in the contract. It should be used whenever prices which are fair and reasonable to the purchasing agency can be established at the outset. Bases upon which firm fixed prices may be established include:

• (1) Adequate price competition for the contract;
• (2) Comparison of prices in similar prior procurement in which prices were fair and reasonable;
• (3) Establishment of realistic costs of performance by utilizing available cost or price data and identifying certainties in contract performance; or
• (4) Use of other adequate means to establish a firm price.

(c) The fixed-price contract with price adjustment is another type of fixed-price contract. It provides for variation in the contract price under special conditions defined in the contract, other than customary provisions authorizing price adjustments due to modifications to the work. The formula or other basis by which the adjustment in contract price can be made shall be specified in the solicitation and the resulting contract. Adjustment allowed may be upward or downward only or both upward and downward.
(d) Examples of conditions under which adjustments may be provided are:

• (1) In fixed-priced contracts:
  • (A) Changes in the contractor’s labor agreement rates as supplied to industry or area wide; or
  • (B) Changes due to rapid and substantial price fluctuations, which can be related to an accepted index; and
• (2) In requirements contracts:
  • (A) When a general price change applicable to all customers occurs; or
  • (B) When a general price change alters the base price, as a change in a manufacturer’s price to which a fixed discount is applied pursuant to the contract to determine the contract price.

[Eff 12/15/95; comp 11/17/97; am and comp MAR 21 2008 ] (Auth: HRS §§103D-202, 103D-313) (Imp: HRS §103D-313)

§3-122-137 Cost-reimbursement contract.

(a) The cost-reimbursement contract, subject to section 3-122-133, provides for payment to the contractor of allowable costs incurred in the performance of the contract as determined in accordance with subchapter 15 and as provided in the contract.
(b) It establishes at the outset an estimated cost for the performance of the contract and a dollar ceiling which the contractor may not exceed, except at its own expense, without prior approval or subsequent ratification by the procurement officer and, in addition, may provide for payment of a fee.
( c) It has a provision whereby the contractor agrees to perform as specified in the contract until the contract is completed or until the costs reach the specified ceiling, whichever occurs first.
(d) It is appropriate when the uncertainties involved in contract performance are of the magnitude that the cost of contract performance cannot be estimated with sufficient certainty to realize economy by use of any type of fixed-price contract.
(e) It necessitates appropriate monitoring by agency personnel during performance so as to give reasonable assurance that the objectives of the contract are being met.
(f) It is particularly suitable for research, development, and study type contracts.
( g) It may be used only when it is determined that:

• (1) A contract is likely to be less costly to the purchasing agency than any other type or that it is impracticable to obtain otherwise the goods, services, or construction;
• (2) The proposed contractor’s accounting system will permit timely development of all necessary cost data in the form required by the specified contract type contemplated; and
• (3) The proposed contractor’s accounting system is adequate to allocate costs in accordance with generally accepted accounting principles.

(h) The cost contract is one type of cost-reimbursement contract which provides that the contractor will be reimbursed for allowable costs incurred in performing the contract but will not receive a fee.
(i) The cost-plus-fixed fee contract is another type of cost-reimbursement contract:

• (1) It provides for payment to the contractor of an agreed fixed fee in addition to reimbursement of allowable incurred costs. The fee is established at the time of contract award and does not vary whether or not the actual cost of contract performance is greater or less than the initial estimated cost established for the work. Thus, the fee is fixed but not the contract amount because the final contract amount will depend on the allowable costs reimbursed. The fee is subject to adjustment only if the contract is modified to provide for an increase or decrease in the scope of work specified in the contract.
• (2) It can be either a completion form or term form.
  • (A) The completion form is one which describes the scope of work to be done as a clearly defined task or job with a definite goal or target expressed and with a specified end-product required. This form of cost-plus-fixed fee contract normally requires the contractor to complete and deliver the specified end-product as a condition for payment of the entire fixed-fee established for the work and within the estimated cost if possible. However, in the event the work cannot be completed within the estimated cost, the agency can elect to require more work and effort from the contractor without increase in fee provided it increases the estimated cost.
  • (B) The term form is one which describes the scope of work to be done in general terms and which obligates the contractor to devote a specified level of effort for a stated period of time. The fixed fee is payable at the termination of the agreed period of time. Payment is contingent upon certification that the contractor has exerted the level of effort specified in the contract in performing the work called for and that the performance is considered satisfactory by the purchasing agency.
  • (C) The completion form of the cost-plus-fixed fee contract is preferred over the term form whenever the following can be defined with sufficient precision to permit the development of estimates within which prospective contractors can reasonably be expected to complete the work:
    • (i) The work itself; or
    • (ii) Specific milestones which are definable points in a program when certain objectives can be said to have been accomplished.
  • (D) In no event should the term form of the cost-plus-fixed fee contract be used unless the contractor is obligated by the contract to provide a specific level-of-effort within a definite period of time.

(j) The cost-plus-a-percentage-of-cost contract is another type of cost-reimbursement contract. Its use is restricted or prohibited, pursuant to section 3-122-133. Prior to completion of the work, the parties agree that the fee will be a predetermined percentage of the total cost of the work. The contract provides incentive for the contractor to incur cost at the expense of the State since the more the contractor spends, the greater its fee.

[Eff 12/15/95; am and comp 11/17/97; am and comp MAR 21 2008 ] (Auth: HRS §§103D-202, 103D-313) (Imp: HRS §103D-313)

§3-122-138 Cost-incentive contract.

(a) The cost-incentive contract provides for the reimbursement to the contractor of allowable costs incurred up to the ceiling amount and establishes a formula whereby the contractor is rewarded for performing at less than target costs or is penalized if it exceeds target cost.
(b) The profit or fee under the contract will vary inversely with the actual, allowable costs of performance and consequently is dependent on how effectively the contractor controls cost in the performance of the contract.
(c) The fixed-price cost incentive contract is one type of cost incentive contract. The parties establish at the outset a target cost, a target profit, a formula which provides a percentage increase or decrease of the target profit depending on whether the actual cost of performance is less than or exceeds the target cost, and a ceiling price. After performance of the contract, the actual cost of performance is arrived at based on the total incurred allowable costs as determined in accordance with subchapter 15 and as provided in the contract. The final contract price is then established in accordance with the formula using the actual cost of performance. The final contract price may not exceed the ceiling price. The contractor is obligated to complete performance of the contract, and, if actual costs exceed the ceiling price, the contractor suffers a loss.

The fixed-price cost incentive contract serves three objectives:

• (1) It permits the establishment of a firm ceiling price for performance of the contract which takes into account uncertainties and contingencies in the cost of performance;
• (2) It motivates the contractor economically since cost is in inverse relation to profit– the lower the cost, the higher the profit; and
• (3) It provides a flexible pricing mechanism for establishing a cost sharing responsibility between the State and contractor depending on the nature of the goods, services, or construction being procured, the length of the contract performance, and the performance risks involved.

(d) The cost-reimbursement contract with cost incentive fee is another type of cost-incentive contract. The parties establish at the outset a target cost, a target fee, a formula for increase or decrease of fee depending on whether actual cost of performance is less than or exceeds the target cost, with maximum and minimum fee limitations, and a cost ceiling which represents the maximum amount which the agency is obligated to reimburse the contractor. The contractor continues performance until the work is complete or costs reach the ceiling specified in the contract. After performance is complete or costs reach the ceiling, the total incurred, allowable costs reimbursed in accordance with subchapter 15 and as provided in the contract are applied to the formula to establish the incentive fee payable to the contractor. This type of contract gives the contractor a stronger incentive to efficiently manage the contract than a cost-plus-fixed fee contract provides.
(e) Prior to entering into any cost incentive contract, or any cost-reimbursed contract with cost incentive fee, the procurement officer shall make the written determination required by section 3-122-137(g).

[Eff 12/15/95; am and comp 11/17/97; am and comp MAR 21 2008 ] (Auth: HRS §§103D-202, 103D-313) (Imp: HRS §103D-313)

§3-122-139 Performance incentive contract.

In a performance incentive contract, the parties establish at the outset a pricing basis for the contract, performance goals, and a formula which varies the profit or the fee if the specified performance goals are exceeded or not met. For example, early completion may entitle the contractor to a bonus while later completion may entitle the State to a price decrease.

[Eff 12/15/95; comp 11/17/97; am and comp MAR 21 2008] (Auth: HRS §§103D-202, 103D-313) (Imp: HRS §103D-313)

§3-122-140 Time and materials contract.

(a) A time and materials contract provides an agreed basis for payment for materials supplied and labor performed.
(b) A time and materials contract shall, to the extent possible, contain a stated ceiling or an estimate that shall not be exceeded without prior agency approval.
(c) A time and materials contract shall be entered into only after the procurement officer determines in writing that:

• (1) Agency personnel have been assigned to closely monitor the performance of the work; and
• (2) In the circumstances, it would not be practicable to use any other type of contract to obtain needed goods, services, or construction, in the time required, and at the lowest cost or price to the purchasing agency.

[Eff 12/15/95; comp 11/17/97; am and comp MAR 21 2008] (Auth: HRS §§103D-202, 103D-313) (Imp: HRS §103D-313)

§3-122-141 Labor hour contract.

(a) A labor hour contract provides only for the payment of labor performed.
(b) A labor hour contract shall contain the same ceiling as provided in section 3-122-140(b).
(c) Prior to the award of the contract, the procurement officer shall make the determination as required in section 3-122-140(c).

[Eff 12/15/95; comp 11/17/97; am and comp MAR 21 2008 ] (Auth: HRS §§103D-202, 103D-313) (Imp: HRS §103D-313)

§3-122-142 Definite quantity contract.

A definite quantity contract is a type of fixed-price contract that provides for delivery of a specified quantity of goods or services either at specified times or when ordered.

[Eff 12/15/95; comp 11/17/97; comp MAR 21 2008] (Auth: HRS §§103D-202, 103D-313) (Imp: HRS §103D-313)

§3-122-143 Indefinite quantity contract.

(a) An indefinite quantity contract is a type of fixed-price contract for an indefinite amount of goods or services to be furnished at specified times, or as ordered.
(b) The solicitation for an indefinite quantity contract:

• (1) Shall include an approximate quantity or the best information available as to quantity;
• (2) May provide a minimum quantity the purchasing agency is obligated to order and may also provide for a maximum quantity provision that limits the purchasing agency’s obligation to order.

(c) A requirements contract is a type of indefinite quantity contract for goods or services that obligates the purchasing agency to order all the actual requirements of designated agencies during a specified period of time, and for the protection of the purchasing agency and the contractor, may include the following:

• (1) A provision which requires the purchasing agency and any other users named in the solicitation to order their actual requirements of the goods or services covered; and
• (2) A provision to reserve the right to take bids separately if a particular quantity requirement arises which exceeds the purchasing agency’s normal requirements or an amount specified in the contract.

(d) An exemption from ordering under a requirements contract may be granted when the chief procurement officer, head of the purchasing agency, or a designee approves a finding that the good or service under the contract will not meet the needs of the purchasing agency.

[Eff 12/15/95; am and comp 11/17/97; am and comp MAR 21 2008] (Auth: HRS §§103D-202, 103D-313) (Imp: HRS §103D-313)

§3-122-144 Incremental award contract.

(a) An incremental award contract is a type of a definite quantity contract resulting from conditions under which it was either necessary or advantageous to award a contract to more than one supplier for the same item on a solicitation, or for similar items.
(b) An incremental award contract is a contract based on an award of portions of a definite quantity requirement to more than one contractor, and each portion is for a definite quantity and the sum of the portions is the total definite quantity required.
(c) This type of contract may be used only when awards to more than one bidder or offerer for different amounts of the same item are necessary to obtain the total quantity or the required delivery dates.
(d) If this type of contract is anticipated prior to issuing a bid or proposal, the State shall reserve the right to make an incremental award and the criteria for award shall be stated in the bid or proposal and the bid or proposal shall provide for separate item bids on less than the full quantity or the total delivery.
(e) Evaluation and award shall be made by accepting prices and deliveries beginning with the most economical and progressing to higher offers until the full requirements are committed at the lowest overall cost available.
(f) Competitive sealed bidding, subchapter 5, is the conventional procurement method for establishing this type of contract, although competitive sealed proposals, small purchase procedures, and emergency procurements may be used if appropriate as determined in accordance with subchapters 6, 8, and 10.
(g) The procurement officer shall make a written determination setting forth the reasons for the incremental award, which shall be made a part of the procurement file.

[Eff 12/15/95; am and comp 11/17/97; comp MAR 21 2008 ] (Auth: HRS §§103D-202, 103D-322) (Imp: HRS §103D-322)

§3-122-145 Multiple award contract.

(a) A multiple award contract is a contract resulting from an award of an indefinite quantity requirement for one or more similar goods or services to more than one bidder or offerer. The relative importance of price may vary based on the requirement and method of source selection. In making a best value determination under a competitive sealed proposals process, the purchasing agency may consider among other factors:special features, trade-in, life cycle, warranties, service availability, past performance, environmental or energy efficiency considerations or both, and competition in the marketplace.
(b) The chief procurement officer shall determine, and the solicitation shall so state, if use of multiple award contracts is voluntary or mandatory for purchasing agencies.
(c) Multiple awards may be limited to a number of suppliers necessary to meet the valid requirements of using agencies and to provide for best value and competitive pricing.
(d) All eligible users of the contract shall be named in the solicitation or be allowed to participate at a later date.
(e) The State shall reserve the right to take offers separately if:

• (1) A particular quantity requirement arises which exceeds its normal requirement or an amount specified in the contract; or
• (2) The head of a purchasing agency approves a finding that the goods or services available under the contract will not meet a nonrecurring special need of the State.

(f) The contract shall allow the using agencies to procure goods produced, or services performed, incidental to the State’s own programs, as correctional industries, when the goods or services satisfy the need.
(g) A multiple award contract may also be awarded through a single competitive solicitation on a geographic or regional basis, pursuant to section 3-122-146.

[Eff 12/15/95; am and comp 11/17/97; am and comp MAR 21 2008 ] (Auth: HRS §§103D-202, 103D-322) (Imp: HRS §103D-322)

§3-122-146 Geographic or regional award contract.

(a) Geographic or regional award contract is a type of multiple-award contract made when goods or services are required to widely scattered locations or a particular requirement is of a local nature.
(b) Geographic regions may include:

• (1) Oahu as region 1, and further subdivided into leeward 1A, central Oahu-lower 1B, central Oahu-upper 1C, and windward 1D;
• (2) Maui as region 2, Hawaii as region 3, Kauai as region 4;
• (3) Those vendors that can provide goods, services, or construction anywhere in the State would be identified as region 5, or they may select one or more of the regions in paragraphs (1) and (2) depending on their capabilities.

(c) Geographic purchasing can be advantageous, or even necessary, for a number of reasons related to cost of transportation in terms of cost of the product or to the need for local service, and limits the purchases to firms located in the area involved and to firms which serve that area.
(d) Geographic bidding should not be used, however, where a larger contract can satisfy agencies requirements by more effective competition and at lower costs.
(e) If a regional award is anticipated prior to issuing a solicitation, the State shall reserve the right to make the award and the criteria for award shall be stated in the solicitation.
(f) The procurement officer shall make a written determination setting forth the reasons for a regional award, which shall be made a part of the procurement file.

[Eff 12/15/95; comp 11/17/97; am and comp MAR 21 2008](Auth: HRS §§103D-202, 103D-322) (Imp: HRS §§103D-322, 103D-904)

§3-122-147 Lease contract.

(a) A lease is a contract for the use of goods under which title does not pass to the agency.
(b) A lease may be entered into provided:

• (1) It is in the best interest of the purchasing agency;
• (2) All conditions for renewal and costs of termination are set forth in the lease; and
• (3) The lease is not used to circumvent normal procurement procedures.

(c) A lease contract shall comply with the certification of funds requirement, pursuant to section 3-122-102(b).
(d) The following lease arrangements are subject to the competitive sealed bidding or proposals process when section 103D-305, HRS, does not apply:

• (1) When a lease is for at least one year;
• (2) When a lease agreement contains an option to purchase and the total expenditure under this option includes lease or rental payments; or
• (3) When the total expenditure is for a multi-term contract.

(e) When the lease arrangement is subject to the competitive sealed bidding or proposals process and an option to purchase is contemplated, an option to purchase provision shall be included in the solicitation. The provision shall provide that to exercise the option is at the purchasing agency’s discretion only, and not subject to agreement or acceptance by the contractor. Before exercising the option the procurement officer shall:

• (1) Investigate alternative means of procuring comparable goods; and
• (2) Compare estimated costs and benefits associated with the alternative means and the exercise of the option, for example, the benefit of buying new state-of-the-art goods compared to the estimated, initial savings associated with exercise of a purchase option.

[Eff 12/15/95; am and comp 11/17/97; am and comp MAR 21 2008] (Auth: HRS §§103D-202, 103D-313) (Imp: HRS § 103D-313)

§3-122-148 Installment purchase payment contract.

(a) Goods contracts may provide for purchase payments, including interest charges, over a period of time.
(b) Installment payments should be used judiciously in order to achieve economy and not to avoid budgetary restraints and shall be justified in writing by the head of the purchasing agency.
(c) Heads of purchasing agencies shall be responsible for ensuring that statutory or other prohibitions are not violated by use of installment provisions and that all budgetary, funding, or other required prior approvals are obtained.
(d) When used, a provision for installment payments shall be included in the solicitation document.
(e) An installment purchase payment contract shall comply with the certification of funds requirement pursuant to section 3-122-102 (b).

[Eff 12/15/95; comp 11/17/97; am and comp MAR 21 2008] (Auth: HRS §§103D-202, 103D-313) (Imp: HRS §103D-313)

§3-122-149 Multi-term contract.

(a) The objective of the multi-term contract is to encourage effective competition or otherwise promote economies in the procurement of goods and services.
(b) A multi-term contract extends over more than one fiscal period but funds are available for only the initial fiscal period, and the contractual obligation of both parties in each fiscal period succeeding the first is subject to the appropriation and availability of funds.
(c) When funds are not appropriated or otherwise made available to support continuation of performance in a subsequent fiscal period, the contract shall be canceled and the contractor shall be reimbursed for the reasonable value of any non-recurring costs incurred but not amortized in the price of the good or service delivered under the contract.
(d) A multi-term contract may be considered:

• (1) When it is in the best interest of the State to provide uninterrupted service over more than one fiscal period and where the contract will result in significantly more favorable contract terms and prices compared to a series of shorter term contracts for the same good or service due to:
  • (A) High start-up costs; for example, a student bus transportation contractor would incur high start-up costs for buses and other equipment solely to meet the State’s requirements but the equipment would have useful life in excess of one year; or
  • (B) A changeover of service contractors with both high phase-in and high phase-out costs during a transition period;
• (2) When special production, involving alteration in the contractor’s facilities or high startup costs, for definite quantities of goods for more than one fiscal period is necessary to best meet the needs of the State and funds are available only for the initial fiscal period;
• (3) When firms, otherwise not willing or able to compete because of high start-up costs or capital investment in facility expansion, will be encouraged to participate in the competition because of assurance of recouping the costs during the period of contract performance;
• (4) When lower production costs because of larger quantity or service requirements, and substantial continuity of production or performance over a longer period of time, can be expected to result in lower unit prices;
• (5) When stabilization of the contractor’s work force over a longer period of time may promote economy and consistent quality; or
• When the cost and burden of contract solicitation, award, and administration of the procurement may be reduced.

(e) A multi-term contract may be entered into for any period of time deemed to be in the best interest of the State, provided the head of the purchasing agency determines in writing that:

• (1) The contract will serve the best interest of the State by encouraging effective competition or otherwise promoting economies in procurement; and
• (2) Sufficient funds to pay for the initial term of the contract are available.

(f) The solicitation for a multi-term contract shall state:

• (1) The term of the contract and conditions for renewal or extension, if any;
• (2) That funds are available for only the initial term of the contract, and the contractual obligation of both parties in each fiscal period succeeding the first is subject to the appropriation and availability of funds;
• (3) The amount of goods or services required for the proposed contract period;
• (4) That a unit price shall be given for each good or service, and that the unit prices shall be the same throughout the contract, except to the extent price adjustment is allowed;
• (5) That the contract will be cancelled only if funds are not appropriated or otherwise made available to support continuation of performance in any fiscal period succeeding the initial term of the contract; however, this does not affect either the State’s rights or the contractor’s rights under any termination clause of the contract;
• (6) That the head of the purchasing agency must notify the contractor on a timely basis that the funds are, or are not, available for the continuation of the contract for each succeeding fiscal period; and
• (7) That, in the event of cancellation as provided in paragraph (5), the contractor will be reimbursed the unamortized, reasonably incurred, nonrecurring costs.

(g) A cancellation, as used in multi-term contracting, means the cancellation of the total requirements for the remaining portion of the contract because funds were not appropriated or otherwise made available.

• (1) Cancellation of a multi-term contract shall result when the head of the purchasing agency:
  • (A) Notifies the contractor of nonavailability of funds for contract performance for any fiscal period subsequent to the first; or
  • (B) Fails to notify the contractor that funds are available for the succeeding fiscal period or that funds which may be used for the contract have not been appropriated or otherwise made available, by the date set forth in the contract, unless the parties agree to extend the date;
• (2) This subsection does not limit the rights of the State or the contractor under any termination clause of the contract if the contract is terminated pursuant to that clause rather than cancelled as provided in this subsection.

[Eff 12/15/95; am and comp 11/17/97; am and comp MAR 21 2008] (Auth: HRS §103D-202) (Imp: HRS §103D-315)

§§3-122-150 to 3-122-154 (Reserved).

SUBCHAPTER 17

 

§3-122-155 REPEALED. [R Mar 21 2008] §§3-122-156 to 3-122-165 REPEALED. [R Mar 21 2008]

SUBCHAPTER 18
RIGHT TO INSPECT PLANT

 

§3-122-166 Inspection of plant or site.

Circumstances under which the State may perform inspections include, but are not limited to, inspections of the contractor’s plant or site in order to determine:

• (1) Whether the standards set forth in section 3-122-108 have been met or are capable of being met; and
• (2) If the contract is being performed in accordance with its terms.

[Eff 12/15/95; comp 11/17/97; comp MAR 21 2008 ] (Auth: HRS §103D-202) (Imp: HRS §103D-316)

§3-122-167 Access to plant or place of business.

The State may enter the plant or place of business of a contractor, subcontractor, vendor, material supplier, or a professional services provider to:

• (1) Inspect goods or services for acceptance by the State pursuant to the terms of a contract;
• (2) Audit cost or pricing data or audit the books and records pursuant to section 3-122-175; and
• (3) Investigate in connection with an action to debar or suspend a person from consideration for award of contracts pursuant to sections 3-126-11 through 3-126-18.

[Eff 12/15/95; am and comp 11/17/97; comp MAR 21 2008] (Auth: HRS §103D-202) (Imp: HRS §103D-316)

§3-122-168 Inspection and testing of goods and services.

(a) State contracts may provide that the State may inspect supplies and services as required at any site or facility and perform tests to determine whether they conform to solicitation requirements, or after award, to contract requirements, and are therefore acceptable. The inspections and tests shall be conducted in accordance with the terms of the solicitation and contract.
(b) The chief procurement officer may establish operational procedures governing the testing and trial use of equipment, materials, and other supplies by any state agency, and the application of resulting information and data to specifications or procurements.

[Eff 12/15/95; am and comp 11/17/97; comp MAR 21 2008] (Auth: HRS §103D-202) (Imp: HRS §103D-316)

§3-122-169 Conduct of inspections.

(a) Inspections or tests shall be performed so as not to unduly delay the work. The presence or absence of an inspector shall not result in the waiver of any requirements of the contract, nor shall any act, statement or omission by an inspector constitute or be deemed a change unless the procedure for changes is followed.
(b) When an inspection is made in a plant or place of business, the contractor or subcontractor shall provide without charge, all reasonable facilities and assistance for the safety and convenience of the person performing the inspection or testing.
(c) Inspection or testing of supplies and services performed at a plant or place of business shall be performed at reasonable times.

[Eff 12/15/95; am and comp 11/17/97; comp MAR 21 2008] (Auth: HRS §103D-202) (Imp: HRS §103D-316)

§3-122-170 Inspection of construction projects.

On-site inspection of construction shall be performed in accordance with the terms of the contract.

[Eff 12/15/95; comp 11/17/97; comp MAR 21 2008 ] (Auth: HRS §103D-202) (Imp: HRS §103D-316)

§§3-122-171 to 3-122-174 (Reserved).

SUBCHAPTER 19
RIGHT TO AUDIT RECORDS

 

§3-122-175 Statutory authority to audit.

Pursuant to section 103D-317, HRS, the State may, at reasonable times and places, audit the books and records of a contractor, prospective contractor, subcontractor, or prospective subcontractor which are related to:

• (1) The cost or pricing data submitted under sections 3-122-122 through 3-122-130;
• (2) A state contract, including subcontracts, other than a firm fixed-price contract, awarded pursuant to subchapters 5 through 10; and
• (3) Any claim for additional compensation or for changes.

[Eff 12/15/95; am and comp 11/17/97; comp MAR 21 2008 ] (Auth: HRS §103D-202) (Imp: HRS §103D-317)

§3-122-176 Auditors’ audit reports.

Audits requested under this subchapter shall be performed by the office of the chief procurement officer, the head of a purchasing agency, the attorney general or corporation counsel with legal authority over the procuring agency, or an independent auditor. An audit report shall be prepared in accordance with section 3-122-178 or section 3-122-180. Except when the audit is done in response to a claim for additional compensation or in connection with an investigation for criminal conduct or fraud relating to the procurement, the report shall be made available to the party audited upon request.

[Eff 12/15/95; am and comp 11/17/97; comp MAR 21 2008] (Auth: HRS §103D-202) (Imp: HRS §103D-317)

§3-122-177 Cost or pricing data audit.

(a) The chief procurement officer, head of a purchasing agency, the attorney general or corporation counsel with legal authority over the purchasing agency, or a designee of either officer may require an audit of cost or pricing data submitted under section 3-122-125.
(b) An audit should be required when in respect to the contractor, prospective contractor, subcontractor, or prospective subcontractor, there is:

• (1) A question as to the adequacy of accounting policies or cost systems;
• (2) A substantial change in the methods or levels of operation;
• (3) Previous unfavorable experience indicating doubtful reliability of estimating, accounting, or purchasing methods;
• (4) A lack of cost experience due to the procurement of a new supply or service; or
• (5) Other evidence that an audit is in the State’s best interests as determined by the chief procurement officer, head of the purchasing agency, the attorney general or corporation counsel with legal authority over the purchasing agency, or a designee of either officer.

[Eff 12/15/95; am and comp 11/17/97; comp MAR 21 2008 ] (Auth: HRS §103D-202) (Imp: HRS §103D-317)

§3-122-178 Cost or pricing data audit report.

(a) When the chief procurement officer, the head of a purchasing agency, the attorney general or corporation counsel with legal authority over the purchasing agency, or a designee of either officer requires an audit under section 3-122-177, the auditor shall submit a written report to the officer by an agreed upon date.
(b) Subject to final determination by the auditor, the report should contain the following in respect to the contractor, prospective contractor, subcontractor, or prospective subcontractor:

• (1) A description of the original proposal and all submissions of cost or pricing data;
• (2) An explanation of the basis and the method used in preparing the proposal;
• (3) A statement identifying any cost or pricing data not submitted but examined by the auditor which has a significant effect on the proposed cost or price;
• (4) A description of any deficiency in the cost or pricing data not submitted and an explanation of its effect on the proposal;
• (5) A statement summarizing those major points where there is a disagreement as to the cost or pricing data submitted; and
• (6) A statement identifying any information obtained from other sources.

[Eff 12/15/95; am and comp 11/17/97; comp MAR 21 2008 ] (Auth: HRS §103D-202) (Imp: HRS §103D-317)

§3-122-179 Contract audit.

(a) Under the authority of section 3-122-175, the type of contract under which books and records should be audited is that in which price is based on costs or is subject to adjustment based on costs, or that in which auditing would be appropriate to assure satisfactory performance, as a time and materials contract.
(b) The requirement of a contract audit may be warranted when a question arises in connection with:

• (1) The financial condition, integrity, and reliability of the contractor or subcontractor;
• (2) Any prior audit experience;
• (3) The adequacy of the contractor’s or subcontractor’s accounting system;
• (4) The number or nature of invoices or reimbursement vouchers submitted by the contractor or subcontractor for payment;
• (5) The use of federal assistance funds;
• (6) The fluctuation of market prices affecting the contract; or
• (7) Any other situation when the procurement officer finds that an audit is necessary for the protection of the State’s interest.

(c) The scope of the audit may be limited by the chief procurement officer, the head of the purchasing agency, the attorney general or corporation counsel with legal authority over the purchasing agency, or a designee of either officer.

[Eff 12/15/95; am and comp 11/17/97; comp MAR 21 2008 ] (Auth: HRS §103D-202) (Imp: HRS §103D-317)

§3-122-180 Contract audit report.

Where the chief procurement officer, head of a purchasing agency, or a designee of either officer requires a contract audit under section 3-122-179, the auditor shall submit a written report to the officer by an agreed upon date. The scope of the report will depend on the scope of the audit ordered. However, the report should contain specific reference to the terms of the contract to which the audited data relate and a statement of the degree to which the auditor believes the audited data evidence compliance with those terms.

[Eff 12/15/95; comp 11/17/97; comp MAR 21 2008 ] (Auth: HRS §103D- 202) (Imp: HRS §103D-317)

§3-122-181 Retention of books and records.

(a) Any contractor who receives a contract, change order, or contract modification for which cost or pricing data are required shall maintain the books and records that relate to the cost or pricing data for three years from the date of final payment under the contract.
(b) Books and records that relate to a state contract, including subcontracts, other than a firm fixed-price contract, awarded under any method set forth in section 3-122-175 shall be maintained:

• (1) By a contractor, for three years from the date of final payment under the price contract; and
• (2) By a subcontractor, for three years from the date of final payment under the subcontract.

[Eff 12/15/95; comp 11/17/97; comp MAR 21 2008] (Auth: HRS §103D-202) (Imp: HRS §103D-317)

§3-122-182 Sanctions for lack of cooperation.

A party or entity that fails to comply or fully cooperate with an authorized audit shall be subject to any and all of the following sanctions:

• (1) Rejection of the claim related to the audit; or
• (2) Declaration of contractor default or breach of contract; or
• (3) Debarment from future contracts pursuant to section 103D-702, HRS.

[Eff 12/15/95; am and comp 11/17/97; comp MAR 21 2008] (Auth: HRS §103D-202) (Imp: HRS §103D-317)

§3-122-183 to 3-122-185 (Reserved).
§3-122-187 TO 3-122-190 REPEALED. [R MAR 21 2008]

SUBCHAPTER 20

 

§3-122-186 REPEALED. [R MAR 21 2008]

SUBCHAPTER 21
REPORTING OF ANTICOMPETITIVE PRACTICES

 

§3-122-191 Anticompetitive practices.

For the purposes of these rules, an anticompetitive practice is a practice among bidders or offerors which reduces or eliminates competition or restrains trade. An anticompetitive practice can result from an agreement or understanding among competitors to restrain trade as submitting collusive offers, or result from illicit business actions which have the effect of restraining trade, as controlling the resale price of products or an improper collective refusal to submit an offer. Indications of suspected anticompetitive practices include, but are not limited to, identical offers, rotated low offers, sharing of the business, “tie-in” sales, resale price maintenance, and group boycotts.

[Eff 12/15/95; comp 11/17/97; comp MAR 21 2008] (Auth: HRS §103D-202) (Imp: HRS §103D-319)

§3-122-192 Independent price determination.

Every solicitation shall provide that by submitting an offer, the offeror certifies that the price submitted was independently arrived at without collusion.

[Eff 12/15/95; comp 11/17/97; comp MAR 21 2008] (Auth: HRS §103D-202) (Imp: HRS §103D-319)

§3-122-193 Detection of anticompetitive practices.

In order to assist in ascertaining whether or not an anticompetitive practice may have occurred or may be occurring, the procurement officer should be alert and sensitive to conditions of the market place and will often find it necessary to perform the following, as appropriate:

• (1) Study the pricing history of a good, service, or construction item over a period of time sufficient to determine any significant pricing patterns or changes;
• (2) Review similar state contract awards over a period of time; or
• (3) Consult with outside sources of information, as offerors who have competed for similar state business in the past but who are no longer competing for the business.

[Eff 12/15/95; comp 11/17/97; comp MAR 21 2008] (Auth: HRS §103D-202) (Imp: HRS §103D-319)

§3-122-194 Identical bidding and price fixing.

(a) The term ”identical bidding” means the submission by offerors of the same total price or the same price on a particular line item. The submission of identical offers may or may not signify the existence of collusion. In some instances, price controls imposed by state or federal governments result in the submission of identical offers. Identical offers for supplies are more likely to occur in the absence of collusion if:

• (1) The supply is a commodity with a well-established market price or a brand name with a ”suggested retail price;”
• (2) The quantity being purchased is small in relation to the supplier’s total sales;
• (3) Early delivery is required; or
• (4) Transportation expenses are low relative to total costs.

(b) In seeking to determine whether collusion has taken place, the procurement officer should view the identical offers against present and past pricing policies of the bidders or offerors, the structure of the industry involved including comparisons of prices f.o.b. shipping point and f.o.b. destination, and the nature of the supply, service, or construction involved, as whether it is a basic chemical or metal. Identical offers may also result from resale price maintenance agreements which are described in section 3-122-83. Any other attempt by offerors to fix prices should also be reported.

[Eff 12/15/95; comp 11/17/97; comp MAR 21 2008 ] (Auth: HRS §103D-202) (Imp: HRS §103D-319)

§3-122-195 Other anticompetitive practices.

(a) The practices which are described in this section and which the procurement officer suspects might be anticompetitive shall be reported in accordance with section 3-122-196.
(b) Rotated low offers result where all offerors participating in the collusive scheme submit offers and by agreement, alternate being the lowest offeror. To aid in determining whether rotation may be occurring, the procurement officer should review past similar procurements in which the same offerors have participated.
(c) The practice of resale price maintenance consists of an agreement between a manufacturer and a distributor or a dealer to fix the resale price of a good. A procurement officer should consider the possibility that an agreement exists where prices offered adhere to an established pattern, as a published price schedule, and when identical bidding occurs.
(d) Sharing of the business occurs where potential offerors allocate business among themselves based on the customers or the territory involved. Thus, a procurement officer might discover that a potential offeror is not participating in a state procurement because a particular state agency, or a particular territory, has not been allocated to the offeror by the producer or manufacturer.
(e) “Tie-in” sales are those in which an offeror attempts to sell one good or service only upon the condition that the procurement officer purchase another particular good or service.
(f) A group boycott results from an agreement between competitors not to deal with another competitor or not to participate in, for instance, a state procurement until the boycotting competitors’ conditions are met by the boycotted competitor or the State. The boycott of a competitor by other competitors may have an effect on the market structure or price of a good, service, or construction item needed by the State.

[Eff 12/15/95; comp 11/17/97; comp MAR 21 2008 ] (Auth: HRS §103D-202) (Imp: HRS §103D-319)

§3-122-196 Reporting suspected anticompetitive practices.

The chief procurement officer, in consultation with the respective attorney general or corporation counsel, may develop procedures, including forms, for reporting suspected anticompetitive practices. A procurement officer who suspects that anticompetitive practice has occurred or may be occurring shall follow these procedures.

[Eff 12/15/95; am and comp 11/17/97; comp MAR 21 2008] (Auth: HRS §103D-202) (Imp: HRS §103D-319)

§§3-122-197 to 3-122-200 (Reserved).

SUBCHAPTER 22
RETENTION OF PROCUREMENT RECORDS

 

§3-122-201 Retention of procurement records.

All procurement records shall be retained and disposed of in accordance with chapter 94, HRS, and records retention guidelines and schedules approved by the governmental body.

[Eff 12/15/95; comp 11/17/97; am and comp MAR 21 2008] (Auth: HRS §103D-202) (Imp: HRS §103D-320)

§§3-122-202 to 3-122-210 (Reserved) .

SUBCHAPTER 23

 

§3 122-211 REPEALED. [R MAR 21 2008] §3-122-212 to 3-122-220 REPEALED. [R MAR 21 2008]

SUBCHAPTER 24
BID SECURITY, CONTRACT PERFORMANCE, AND PAYMENT BONDS

 

§3-122-221 General.

(a) The term “bid security”, as used in this subchapter means security provided at the time an offer is submitted.
(b) Bid security protects the State against the failure or refusal of an offerer to execute the contract for the work bid or to supply the necessary performance and payment bonds, as required.
(c) A contract performance bond indemnifies the State against loss resulting from the failure of the contractor to perform a contract, in particular a construction contract, in accordance with the plans and specifications.
(d) A contract payment bond guarantees payment and protection for those furnishing labor and materials to the contractor or its subcontractors for the work bonded.

[Eff 12/15/95; am and comp 11/17 /97; comp Mar 21 2008] (Auth: HRS §§103D-202, 103D-323, 103D-324) (Imp: HRS §§103D-323, 103D-324)

§3-122-222 Acceptable bid security, contract performance and payment bonds.

(a) Acceptable bid security and contract performance and payment bonds, pursuant to sections 103D-323 and 103D-324, HRS, shall be limited to:

• (1) Surety bond underwritten by a company licensed to issue bonds in this State;
• (2) Legal tender; or
• (3) A certificate of deposit; credit union share certificate; or cashier’s, treasurer’s, teller’s, or official check drawn by, or a certified check accepted by a bank, a savings institution, or credit union insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration, and payable at sight or unconditionally assigned to the procurement officer advertising for offers. These instruments may be utilized only to a maximum of $100,000. If the required amount totals over $100,000, more than one instrument not exceeding $100,000 each and issued by different financial institutions shall be accepted.

(b) All documentation provided to the purchasing agency shall contain the original signatures signed in ink.

[Eff 12/15/95; am and comp 11/17/97; am and comp Mar 21 2008 ] (Auth: HRS §§103D-202, 103D-323, 1 324) (Imp: HRS §§103D-323, 103D-324)

§3-122-223 Bid security.

(a) Bid security shall be required for:

• (1) Construction bids exceeding the limits of section 103D-305, HRS;
• (2) Goods and services bids exceeding the limits of section 103D-305, HRS, when the head of a purchasing agency has secured the approval of the chief procurement officer; and
• (3) Federally funded contracts wherein the conditions of the funding requires performance or payment bonds or both.

(b) Bid security, when required, shall be in an amount equal to at least five per cent of the base bid and additive alternates or in an amount required by the terms of the federal funding.
(c) If a contractor fails to accompany its offer with the bid security when required, the offer shall then be deemed non-responsive in accordance with the definition of “responsive bidder or offeror” in section 3-120-2, except as provided by subsection (d).
(d) If an offer does not comply with the security requirements of this subchapter, the offer shall be rejected as non-responsive, unless the failure to comply is determined by the chief procurement officer, the head of a purchasing agency, or a designee of either officer, to be non-substantial where:

• (1) Only one offer is received, and there is not sufficient time to resolicit the contract;
• (2) The amount of the bid security submitted, though less than the amount required by the solicitation, is equal to or greater than the difference in the price stated in the next higher acceptable offer plus an amount to cover reasonable administrative costs and expenses, including the cost of rebidding the project, resulting from the failure of the bonded bidder to enter into a contract for the work bid; or
• (3) The bid security becomes inadequate as a result of the correction of a mistake in the offer or offer modification in accordance with section 3-122-31, if the offeror increases the amount of security to required limits within the time established by the procurement officer.

(e) When it is determined that failure to comply with required bid security is non-substantial, the chief procurement officer, the head of a purchasing agency, or a designee of either officer shall indicate the reasons for that determination in writing and a copy of the determination shall be kept in the contract file and made available to the public upon request.

[Eff 12/15/95; am and comp 11/17/97; am and comp MAR 21 2008 ] (Auth: HRS §§103D-202, 103D-323) (Imp: HRS §103D-323)

§3-122-224 Contract performance and payment bonds.

(a) Performance and payment bonds shall be required for:

• (1) Construction contracts exceeding the limits of section 103D-305, HRS;
• (2) Goods and services contracts exceeding the limits of section 103D-305, HRS, when the head of the purchasing agency has secured the approval of the chief procurement officer; and
• (3) Federally funded contracts wherein the conditions of the funding requires a performance or payment bond or both.

(b) The amounts of the performance and payment bonds, when required, shall be as follows:

• (1) For construction contracts, performance and payment bonds shall each be in an amount equal to one hundred per cent of the amount of the contract price;
• (2) For goods and services contracts, performance and payment bonds shall each be in an amount not to exceed fifty per cent of the amount of the contract price;
• (3) For contracts where contract price cannot be determined at the time of award, the amounts of the performance and payment bonds shall each be stated in the solicitation; and
• (4) For federally funded contracts, performance or payment bond or both shall each be in amount required by the terms of the federal funding.

(c) The performance and payment bonds, if required, shall be delivered by the contractor to the State at the same time the contract is executed. If the contractor fails to deliver the required performance and payment bonds, the contractor’s award shall be cancelled, the contractor shall be subject to a claim by the State for all resulting damages, its bid security shall be enforced, and award of the contract may be made to the next lowest offeror in accordance with subchapter 11.

[Eff 12/15/95; am and comp 11/17/97; am and comp MAR 21 2008] (Auth: HRS §§103D-202, 103D-324) (Imp: HRS §103D-324)

§3-122-225 Reduction of contract performance and payment bond amounts.

(a) Prior to the deadline for receipt of offers and during performance of the contract, the amounts of a performance bond and a payment bond may be reduced upon written determination by the chief procurement officer or head of a purchasing agency that it is in the best interest of the State to do so.

• (1) For construction contracts only, and prior to the deadline for receipt of offers, reduction of performance and payment bond amounts shall be limited to not less than fifty per cent of the contract price;
• (2) During performance of the contract, the amount of the performance bond may be reduced as work is completed and the amount of the payment bond may be reduced as payments are made by the contractor.

(b) Additional performance bond or payment bond may be required by the procurement officer for a contract change order or modification where the contract amount increases.

[Eff 12/15/95; comp 11/17/97; and comp MAR 21 2008] (Auth: HRS §§103D-202, 103D-324) (Imp: HRS §103D-324)

§3-122-226 REPEALED. [R Mar 21 2008]

§3-122-227 Payment claims against the bond.

(a) Any person or entity who has furnished labor or material to the contractor for the work provided in the contract, for which a payment bond or a performance and payment bond is furnished under this section, and who has not been paid amounts due before the expiration of a period of ninety days after the day on which the last of the labor was done or performed or material was furnished or supplied, for which such a claim is made, may institute an action for the amount, or balance thereof, unpaid at the time of the institution of the action against the contractor or the contractor and its sureties, on the payment bond and have their rights and claims adjudicated in the action, and judgment rendered thereon; subject to the State’s priority on the bond.
(b) If the full amount of the liability of the contractor or the contractor and its sureties on the security is insufficient to pay the full amount of the claims, then, after paying the full amount due the State, the remainder shall be distributed pro rata among the claimants.
(c) As a condition precedent to any such suit, written notice shall be given to contractor and surety, within ninety days from the date on which the person did or performed the last labor or furnished or supplied the last of the material for which claim is made, stating with substantial accuracy the amount claimed and the name of the party to whom the material was furnished or supplied for whom the labor was done or performed.
(d) The written notice shall be served by registered or certified mailing of the notice, to the contractor and surety, at any place they maintain an office or conduct their business, or in any manner authorized by law to serve summons.
(e) Every suit instituted under subsection (a) shall be brought in the circuit court of the circuit in which the project is located, but no suit shall be commenced after the expiration of one year after the day on which the last of the labor was performed or material was supplied for the work provided in the contract. The obligee named in the bond need not be joined as a party in any suit.
(f) The terms “labor” and “material” have the same meanings in this section as the terms are used in section 507-41, HRS.

[Eff 12/15/95; am and comp 11/17/97; am and comp MAR 21 2008 ] (Auth: HRS §§103D-202, 103D-324) (Imp: HRS §103D-324)

§3-122-228 Bond forms.

(a) The required bond forms for bid security, performance, payment, and combination performance and payment bonds shall be in conformance with sections 3-122-221, 3-122-222, and 3-122-227 and shall be as specified by the procurement policy board and issued by procurement directive.
(b) Certified copies of bonds may be requested and obtained by any person from the State upon payment of the cost of reproduction of the bond and postage, if any. A certified copy of a bond shall be prima facie evidence of the contents, execution, and delivery of the original.

[Eff 12/15/95; am and comp 11/17/97; comp MAR 21 2008](Auth: HRS §§103D-202, 103D-325) (Imp: HRS §103D-325)

§§3-122-229 to 3-122-240 (Reserved) .

SUBCHAPTER 25
FISCAL RESPONSIBILITY

 

§3-122-241 Fiscal responsibility.

Every contract modification, change order, or contract price adjustment under a contract shall be subject to prior written certification by the appropriate fiscal officer for funding the project or the contract, as to the effect of the contract modification, change order, or adjustment in contract price on the total project budget or the total contract budget. In the event that the certification of the fiscal officer discloses a resulting increase in the total project budget or the total contract budget, the procurement officer shall not execute or make contract modification, change order, or adjustment in contract price unless sufficient funds are available therefor, or the scope of the project or contract is adjusted so as to permit the degree of completion that is feasible within the total project budget or total contract budget as it existed prior to the contract modification, change order, or adjustment in contract price under consideration; provided, that with respect to the validity, as to the contractor, of any executed contract modification, change order, or adjustment in contract price which the contractor has reasonably relied upon, it shall be presumed that there has been compliance with this section.

[Eff 12/15/95; comp 11/17/97; comp MAR 21 2008] (Auth: HRS §103D-326) (Imp: HRS §103D-326)

§3-122-242 (Reserved) .

DEPARTMENT OF ACCOUNTING AND GENERAL SERVICES
Amendments to and compilation of chapter 3-122, Hawaii Administrative Rules, on the Summary Page dated February 21, 2008 were adopted at the Procurement Policy Board meeting on February 21, 2008 following a public hearing held on February 6, 2008, after public notice was given in the Honolulu Star-Bulletin, The Maui News, The Garden Island, Hawaii Tribune-Herald, and West Hawaii Today newspapers on January 5, 2008. The rules replace interim rules previously adopted and effective on 7/25/02, 7/03/03, 11/15/03, 1/1/05, 4/18/05, 2/27 /06, 10/09/06, and 9/04/07. The rules shall take effect ten days after filing with the Office of the Lieutenant Governor. APPROVED AS TO FORM:

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EXHIBITS

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HAR Chapter 3-122
PROCUREMENTS APPROVED FOR COMPETITIVE SEALED PROPOSALS
07/13/06

The following goods, services, or constructions may be procured by Competitive Sealed Proposals, pursuant to HAR §3-122-45, and has been approved by the procurement policy board:

No.	Competitive Sealed Proposals
1	Consulting services in the areas of software and telecommunications.
2	Travel agency services to include air and ground transportation, and lodging services.
3	Computer software and hardware systems.
4	Design and build construction projects.

HAR Chapter 3-122
PROCUREMENTS APPROVED FOR SOLE SOURCE
01/18/07

The following list of Sole Source procurements, pursuant to HAR §3-122-81, has been approved by the procurement policy board:

Sole Source No.	Sole Source
1	Rental of booth space for exhibits at conventions and trade shows when organized by a single sponsor. Criteria: When rental is available only through a single organizer or sponsor of the convention or trade show.
2	For the repair, replacement, installation (connection, activation or hookup), or relocation of public utility company equipment or facilities. Criteria: When the equipment or facilities are owned or controlled by utility companies such as an electric, telephone, gas, or cable television company.
3	Annual license renewal and maintenance for computer software. Criteria: When the license renewal and maintenance can be obtained from only a single source, normally the developer of the software.
4	Procurement of computer software conversions, modifications, and maintenance for existing programs from the manufacturer of the software. Criteria: When the conversion, modification, or maintenance can only be obtained from the manufacturer of the software.
5	Transcripts of court proceedings. Criteria: When the transcripts of court proceedings are only available from the respective assigned court reporter provided by the Judiciary.
6	Repair and maintenance services and supplies from the original equipment manufacturer or its designated representative; when the manufacturer or its designated representative is required to provide the services and supplies to retain the manufacturer’s warranty or guarantee. Criteria: When the services or supplies can only be obtained from the manufacturer or its designated representative to retain the manufacturer’s warranty or guarantee.
7	Procurement of equipment upgrades from the original manufacturer to existing equipment and information technology hardware, when the upgrades can only be obtained from the manufacturer. Criteria: When the upgrades are available only from the manufacturer.