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Next Hurdle Is Procurement

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By Lowell L. Kalapa
(Released on 3/29/09)

Legislators are wringing their hands over a couple of bills that would allow administrators to sidestep procurement rules if those rules impede the expenditure of funds from the recently approved federal stimulus bill. Anyone who has dealt with the state’s Procurement Code usually will roll their eyes when the subject is mentioned. Although the Procurement Code was drafted in reaction to the way state contract letting was abused before its adoption, the Procurement Code, over the years, has become synonymous with the term “red tape.” Reportedly there is more than $130 million in highway capital improvement projects that have been stuck in the system for over three years. In addition to those funds, there are supposedly more than $100 million in educational facilities repair and maintenance projects stuck in the system.

So one can understand the concern of state officials faced with spending the millions of dollars that are coming to the state through the American Recovery and Reinvestment Act (ARRA) otherwise known as the federal stimulus package. Under the federal stimulus package, to make the nearly $800 billion effective in turning the economy around, the money has to get out on the street as quickly as possible. There are specific deadlines in the bill by which state and county officials must commit stimulus funds or run the chance of losing those funds altogether. For example, states will have 120 days in which to commit at least 50% of the funds designated for highway improvements or construction. Thus, the term being applied to many of the funds for capital projects is that the projects must by “shovel ready.” The Act even includes a provision that state procurement laws may be waived for projects that will be funded by stimulus moneys.

On the other side, the Act includes numerous provisions to ensure that the appropriated funds are spent as intended by Congress. As a result, projects and programs that are funded by the stimulus money will be subjected to extensive public scrutiny and will have to meet very high standards with respect to transparency and accountability. It is expected that the federal government will conduct extensive audits of how state and local governments spent or spend this money.

That’s why it is so curious that when the administration proposed a measure that would allow the waiver of the state procurement laws with respect to the expenditure of the federal stimulus moneys that the legislature squawked at the idea. Lawmakers railed that they did not want to be embarrassed should these funds be mis-spent or abused in any way. It was as if lawmakers had never seen the provisions of the federal law governing the accountability and transparency in the use of the federal dollars.

Nor did it seem that lawmakers understand the difficulties of the state procurement law and how it has held up numerous state projects. Between the Procurement Code and government’s web of permitting, doing business in Hawaii has been costly and tediously slow. Ah, but advocates of the Procurement Code argue that it is necessary that each proposal, bid and award be carefully scrutinized. Advocates argue that the Procurement Code was specifically drafted to insure that taxpayer dollars are spent wisely and not handed out as rewards to political cronies.

But when the system imposes undue delays in accomplishing the goal of securing a contract or the purchase of goods and services, then it becomes an in lieu tax. It is not only a tax on the responders to a proposal but also on all taxpayers because it makes the expenditure of public funds inefficient. Although everyone seems to acknowledge that the public permitting system, be it at the county or the state level, is draconian, no one seems to want to fix it. Meanwhile, bureaucrats argue that the system is there to protect the health and safety of the public. That may be true, but when the lengthy process delays the implementation of a project, it makes that project much more costly than it should have been.

So while the stimulus money from the American Recovery and Reinvestment Act could help restart the state’s economy, lawmakers need to realize that unless hurdles like the Procurement Code and permits can be waived, Hawaii may find more egg on its face than the embarrassment of misspending of these federal funds. It just might find itself with a lot less stimulus funds than it could have had.

Lowell L. Kalapa is the president of the Tax Foundation of Hawaii. Mr. Kalapa’s commentary is printed each week in the Maui News, West Hawaii Today, Garden Isle News, and the HawaiiReporter.com.

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