Of Gooses and Ganders

There's an old saying in culinary circles, "What's good for the goose is good for the gander". But maybe not so in the case of Hawaii's procurement administration.

The University of Hawaii houses the Hawaii Procurement Institute, in conjunction with the Hawaii State Procurement Office. The Procurement Institute describes its role and purpose this way:

The Institute operates as a "think-tank" for the development and analysis of state and local procurement policies, laws, and regulations. The Institute is a model for the United States and its Commonwealths and Territories to follow. The Institute offers conferences, programs, and courses geared to government officials, public and private legal practitioners, and students interested in keeping current in the practice and policies of government procurement. The Hawai‘i Procurement Institute is ready and willing to train public and private procurement personnel from all of these sectors about effective and appropriate procurement policies and contracting.

So, what does this model of procurement knowledge do when the procurement going gets tough? It opts out.

UH’s procurement privilege could release $337M

The University of Hawaii system will be exempt from following the state’s public procurement code, which it has largely blamed for its backlog of deferred maintenance and capital improvement projects, under a new law that takes effect July 1.

University officials say the exemption, effective for two years, will help the 10-campus system operate more efficiently and with greater flexibility in awarding contracts for goods and services, including construction work.

House Bill 347, which Gov. Linda Lingle signed into law May 6 as Act 82, allows the statewide public university system to come up with its own procurement process “in lieu of” the state procurement code.

The university system has pointed to the existing code, which requires larger contracts to be awarded through a competitive sealed bidding process, for tying up projects and increasing costs as a result.

Read more: UH’s procurement privilege could release $337M - Pacific Business News (Honolulu)

The online cite above is a good synopsis of the whole story that appears in the Pacific Business News, May 21, 2010 (Vol. 48, No. 12). The hardcopy offers more detail:

This was the sixth consecutive year that UH asked lawmakers for the exemption.

"Under this new law, the university is charged with creating a two-year pilot program to streamline the procurement process and provide us with greater flexibility", said UH system spokeswoman Jeanne Belding.

The state's procurement code stipulates how government agencies spend and receive money for contracted work for every type of purchase. For example, contracts valued at $50,000 or ore are required to go through a competitive sealed bidding process, while professional services must be procured through a process that requires the agency to develop a list of qualified individuals who then must go through a selection committee to negotiate a contract.

UH have objected to the process, saying it has increased its own administrative costs as well as costs for vendors that would do business with UH.

The State Procurement Office testified against the measure, saying that exempting UH would "not be in the best interest of government, the business community and the general public."

"The code establishes a time-tested, fair and reliable set of rules and processes for the award of contracts," said Aaron Fujioka, administrator of the State Procurement Office.

"The code should not be viewed as an obstacle to a purchasing agency's mission, but rather as the single source of public procurement policy to be applied equally and uniformly. If individual agencies are exempted and allowed to develop their own individual processes, it becomes problematic and confusing to vendors, contractors and service providers that must comply with a variety of different processes and standards.

"Fairness, open competition, a level playing field and government disclosure and transparency in the procurement and contracting process are vital to good government."

"The idea behind a uniform procurement code was that different government agencies do business a little differntly, and that can make it hard for outside businesses to know what the rules are," said Tim Lyons, president of the Subcontractors Association of Hawaii. "You need to know the rules before you put in a bid, and it's awfully hard to determine the rules, many of which have cost implications, if we're not all on the same page."

"What good is the code if only some agencies have to follow it?" he asked.

"If rule changes are needed, we should be looking at the code directly," Lyons stated. "I can't imagine that UH is encountering problems that all other government agencies aren't. They're not special."

The American Council of Engineering Companies of Hawaii also opposes the exemption for UH.

"We are, of course, generally in favor of measures that fast-track infrastructure spending. However, we remain strongly opposed to a wholesale exemption ... in the name of expedience," said National Director Janice Marsters.

"While the university may discuss a few cases involving procurement difficulties, they procure thousands of contracts each year under the current requirements, and a few difficult cases do not warrant a complete exemption."

Now here's where things get a bit interesting. Even the University of Hawaii's own Procurement Institute is on record as saying "exempting agencies from the Code will be unnecessary and, in the long run, potentially problematic for the administration."

COMMENT: Make no mistake: The nuts and bolts of procurement is hard stuff. But it should begin and end with the law, not "special" exceptions. If exceptions are necessary because, despite best efforts, the nuts won't fit the bolts, alter the whole system to improve the system as a whole, consistent with the common fundamental purposes and policies of public contracting.

Making exceptions only undermines the integrity of and confidence in the system as a whole.

I just can't get over the feeling (admittedly without knowledge of the facts of this situation) that the central issue in cases like this is a breakdown in management, particularly management planning, which is number one of the four classic pillars of management: planning, organizing, leading, controlling.

Hawaii is an ABA Model Code jurisdiction, as is Guam. One of the core policies of the code is the "Policy in Favor of Planned Procurement". Most other policies deal with competition, transparency, accountability, fairness and the like. The planning policy focuses on the nuts and bolts.

Planning policy doesn't get much practical emphasis in the Code. But that should not be the benchmark of its core importance. Although not an especially "legal" subject, it must receive at least equal importance from management, whose business and supposed expertise is to manage.

No matter how fair, transparent and accountable a system is, it is worthless if it is not effective. All of those objectives must be met, and it is a red herring to bleat on about fair, transparent and accountable if the agency is not willing to tackle and overcome the planning objectives which any good management system must have.

What's good for the goose must be good for the gander.