1. Improving Procurement
State of Hawaii:
Overview and Recommendations
White Paper
Presented By
Industry Partner:
Lokahi C&T
September 2015

2. Executive Summary: Based on recent procurement issues (e.g. Hawaii Health Connector, Department of Transportation,
OIMT ERP etc.) this white paper suggests the following action items for the State of Hawaii to consider:
Immediate Solution: Develop an Acquisition Oversight/Contract/Project Management “A”-Team for high
dollar/high risk projects. The team would be responsible to monitor and remediate problem contracts.
Oversee the formulation of new contracts and insure “best practices” are strictly adhered to (pre-acquisition
to close out).
Short/Medium/Long-Term Solutions (3-5 years)
•Implement Top 10 list- Focus areas for State Government, National Association State Chief Procurement
Officers (see enclosed for details),
•Prioritize the engagement of Hawaii Small Businesses in State Procurements
● Create an Office of Small Business-State of Hawaii
● Establish Small Business goals and objectives
● Create a Small Business Advocate/Ombudsman position
● Prompt Payment for Small Business (payment 30 days after invoice submittal-burden on Gov’t
to provide a proper review and approval)
•Borrow from the Feds
● GSA Schedule 70 for IT procurements (goods/services)
● Acquisition and Procurement “Best Practices”
● Education and Training of Acquisition and Contract Management Staff
○ Follow the Federal Acquisition Institute (CO, COR and P/PM Level I, II, and III
certifications)

3. Why Improve Procurement?
#State of Affairs: Excessive spending on contracts, lack of accountability/contract oversight (waste/abuse of public
funds; potential for fraud, loss of control on project(s), ultimately failing taxpayers and putting at risk continued
funding from Federal agencies and related sources.
#Recent Examples:
Feds critical of Hawaii's $820 million highway project backlog The money is "waiting to be spent on vital transportation
projects http://www.hawaiinewsnow.com/story/28948850/exclusive-feds-critical-of-hawaiis-820-million-
highway-project-backlog
Hawaii Abandons $13.9 Million Financial Accounting System Apr 24, 2015 - The "FAST" project was supposed to
automate the division's project and ... system that handled accounting for the state Department of Transportation
... Efforts to launch the system failed or were aborted http://www.govtech.com/transportation/Hawaii-
Abandons-139-Million-Financial-Accounting-System-Transportation-System-.html
Hawaii Health Connector Cuts Contract with Vendor for Sub-par Performance http://www.govtech.com/state/Hawaii-Health-
Connector-Cuts-Contract-with-Vendor-for-Subpar-Performance-.html
Aging system needs repair The EPA tells the state to “get it together” or lose millions http://www.staradvertiser.
com/newspremium/20150810_aging_system_needs_repair.html?id=321231091
$200 MILLION OF YOUR MONEY WASTED-State procurement squanders cash and delays services
http://www.hawaiibusiness.com/200-million-of-your-money-wasted/
MEDIA-EXCLUSIVE: State spends nearly $14 million on failed DOT system : Apr 23, 2015 By Keoki Kerr
*"They have failed every single intermediate step in the project," Ige said. "This is typical of how a lot of state projects have been
conducted in the past." "As of today we still have nothing. No system. No working system," said State Senate President Donna Kim, who
said she's working with the governor to prevent failures like this in the future.
*"Over $13 million. What do we have to show for it? Zero. If this was the private sector, somebody's heads would roll," Kim said. Kim
and Ige are upset that the two consultants – BEI and Gartner -- who the state hired to monitor the contractor and manage the project were
paid $6.9 million, the same amount that the main contractor – Ciber -- was paid by the state. Usually consultants are paid a fraction of the
overall project cost.

4. Improving Procurement-How?
•Action items to consider.
•Develop a State of Hawaii Acquisition/Contract Management “A”-Team for high
dollar/high risk projects. (immediate solution)
•Implement Top 10 list- Focus areas for State Government, National Association
State Chief Procurement Officers (short/long term solutions)
•Prioritize Small Business involvement in State Procurements
● Create an Office of Small Business-State of Hawaii
● Establish Annual Small Business goals and objectives.
● Create a Small Business Advocate position.
● Prompt Payment for Small Business (payment 30 days after
invoicePrompt Payment rule makes sure that valid and proper invoices
submitted by vendors are paid on time)
•Borrow from the Feds
● GSA Schedule 70 for IT procurements (goods/services)
● Implement Acquisition and Procurement “Best Practices”
● Mandatory Education and Training of Acquisition and Contract
Management Staff
○ Raise the Competency Bar: Federal Acquisition Institute (CO, COR

5. Improving Acquisition Performance and Successful Project Completions
● Establish an acquisition “A”-Team for high dollar/high risk projects. Highly experienced and
trained team of acquisition professionals empowered to address the most challenging and high
risk State Government projects. Empower the team to take necessary corrective action to insure
on-time/on-budget completion.
Follow the Feds: The White House and Federal agencies have adopted this best practice
approach (examples).
US Digital Service (started from the team that “fixed” Healthcare.gov) https://www.
whitehouse.gov/digital/united-states-digital-service
GSA 18F (assisted acquisition-fee for service) https://18f.gsa.gov/
48 CFR 1.102-4 - Role of the acquisition team. Detailed info:https://www.law.cornell.edu/cfr/text/48/1.102-4
● (e) The FAR outlines procurement policies and procedures that are used by members of the Acquisition Team. If a policy or
procedure, or a particular strategy or practice, is in the best interest of the Government and is not specifically addressed in the
FAR, nor prohibited by law (statute or case law), Executive order or other regulation, Government members of the Team
should not assume it is prohibited. Rather, absence of direction should be interpreted as permitting the Team to innovative
and use sound business judgment that is otherwise consistent with law and within the limits of their authority. Contracting
officers should take the lead in encouraging business process innovations and ensuring that business decisions are sound.

6. Small Business Goals-State of Hawaii 2016
Federal SB Goals v. State of Hawaii SB Goals
(DRAFT)

7. Overview The Acquisition Team and Process
The acquisition team consists of all participants in the acquisition process: requiring activity, contractor, finance, Contracting
Officer, legal counsel, COR, resource manager, quality assurance representative, and others, as applicable.
No one person has all the necessary skills for successful contract management. It requires a team with each member having
specialized expertise and responsibilities. Successful acquisition teams typically assign specific duties, develop performance
measures and milestones, and hold team members individually and collectively accountable. Everyone ensures the team has the
target in sight — it is a team effort.
Figure 4-1 illustrates the acquisition team functions involved in the successful completion of the acquisition process.

9. 1. State Procurement Reform and Reengineering of
Procurement Processes
Streamlined procurement processes, modernize procurement law, reduce
laws and regulations complexity, increased focus on negotiations, levels of
delegation to customer agencies, strategic sourcing.
▪Elevate Procurement Reform as a Top Priority (commitment
from the Executive and Legislative Branches)
▪Establish Procurement goals and objectives (performance/small
business)
▪Implement Best Practices-Fed, State and Local
▪Performance Based Acquisitions (service contracts)
Performance-based contracting allows government to acquire services via contracts that define
what is to be achieved, not necessarily how it is done. This creates a boon for government
procurement, providing best-value products and services and pre-screened contractors.
▪???
Recommendations:

10. 2. Spend Analytics and Greater Procurement Oversight and Efficiency
Procurement data collection, analysis and output, spend management
analytics solutions, benefits, data categorization and mapping,
reports, scorecards.
Establish a Procurement database to collect, track, analyze, all
procurements actions in State Government. (spending patterns-find
ways to buy smarter)
Effective Communication- monthly newsletters/updates to Agencies,
Industry partners and constituents (performance scorecards,
forthcoming bid opportunities etc.) Key: Provide effective
communication and transparency in the procurement process.
▪???
Recommendations:

11. 3. Technology Procurement
Planning and managing large IT procurements, early
involvement of state central procurement offices.
*Implement Best Practices approach (pre-bid market research-RFI to
industry, utilize performance based acquisition tools such as: statement
of objectives-a problem statement approach designed to have industry
provide “their” best solution to solve the business need.
*Extensive Market Research during the pre-bid phase to identify the
best solutions and vendors in the category. (Market research is defined
as collecting and analyzing information on the market for a
government requirement).
*Acquisition/Project Management “A-Team” Oversight on all high
risk (mission critical)/high dollar projects (over 2m)
* ???
Recommendations:

12. 4. Measuring Success in State Procurement
Metrics, performance measures, benchmarking, cost
savings benefits, data analysis, spending patterns.
*Establish a Procurement database to collect, track, analyze, all
procurements actions in State Government. (spending patterns-find
ways to buy smarter)
*Implement a Statewide Project Management database (Governor’s
Office to oversee effort) to collect, track, analyze, all major projects in
State Government. (identify Green/Yellow/Red projects; A-Team to
provide oversight and engage on Yellow/Red projects)
*Effective Communication-issue monthly newsletter to Agencies,
Industry partners and constituents (scorecard, forthcoming bid
opportunities etc.) Key: Provide Transparency on how public funds
are spent.
▪???
Recommendations:

13. 5. Procurement Preferences and Socio-Economic Policies
Impact on state procurement and the procurement process; direct and indirect effect
on job creation, economic growth and tax revenue nationwide; small businesses,
minority-, disabled-, veteran-owned businesses; implications of other states’
reciprocity laws; the value of local preferences in today’s global marketplace.
*Create an Office of Small Business-support passage of Legislation (e.g. SB1236--SD1-
Establishes the small business office to administer the state small business program) ref: http:
//www.capitol.hawaii.gov/measure_indiv.aspx?billtype=SB&billnumber=1236
*Identify Hawaii based Small Businesses that match up to known State requirements (Small
Business Advocate…Local vendors support the local community and keeps Hawaii dollars in
the local economy)
*Partner with the US Small Business Administration, Veterans Administration, City and
County of Honolulu Workforce Development, High Technology Development Corporation
and other programs.
*Mentor-Protégé program (links high potential Hawaii SBs’ with global firms—build new
capabilities/knowledge transfer to the Hawaii community-Lockheed Martin, General
Dynamics, etc.
*???
Recommendations:

14. 6. Transformation of IT Procurement to Address Rapidly-changing Market
Trends
Changing role of central IT authority in statewide procurement; cloud strategies and new
contracting models; Anything-as-a-Service (XaaS), standards for XaaS providers addressing
requirements for handling data that is managed through these systems; data governance, service
management, security, privacy, data classification, data ownership, cyber insurance; move from low
cost, base configuration approaches toward high choice, technical flexibility model.
•Utilize innovative procurement approaches to transform IT procurement (industry is a up to
date on the latest and can help educate the government customer)
•Develop relationships with Industry during the market research, pre-bid phase.
•Leverage existing government systems (e.g. City and County of Honolulu ERP system
available capacity…can the State pay a user fee instead of buying a whole new system $200M
est.? http://www.honolulu.gov/it.html) Lease vs. Purchase Analysis. Cloud Computing and
SAAS (software as a service) is becoming the “enabler” for Government to do more with less.
•Outsource IT to vendors who can leverage economies of scale: example-email and file
storage: Google for Government used by 45 States Google Apps costs less than $5 per
employee per month – providing cost savings of as much as 50% annually for many
government organizations. https://www.google.com/work/apps/government/benefits.html
•???
Recommendations:

15. 7. Expansion of ERP and eProcurement Systems
Role of tracking ERP deployments, ROI of e Procurement
investments, funding mechanisms.
• ERP--City and County of Honolulu’s system may have unused capacity-accounting,
finance, HR and Payroll…can the State pay a user fee instead of buying a whole new
system and save $200M est.?) Lease vs. Purchase Analysis. Given the rate of change
in technology it might be “smarter” to lease vs. buy (buy the service instead of the
whole system-plus/maintenance and operation costs)
•Acquisition/Project Management “A-Team” Oversight on enterprise system related
procurements.
•Develop a Center of Excellences (ERP and Government Enterprise Systems)
•Educate the acquisition team and do extensive market research (free) before
spending $$$ on systems.
•Engage industry early on in the market research phase.
•Engage our schools so we train the next generation on these enterprise systems
Recommendations:

16. 8. Increased Professionalization of the State Procurement
Workforce
Standardized training, training management systems,
certifications.
Example: The Office of Federal Procurement Policy and the Federal
Acquisition Institute have established the following certification programs.
Each program includes education, training, and experience requirements.
Contracting (FAC-C)
Contains useful information about the FAC-C Certification, including requirements, training, and contracting competencies.
Contracting Officer's Representative (FAC-COR)
Contains useful information about the FAC-COR Certification, including requirements, training, and COR competencies.
Program and Project Managers (FAC-P/PM)
Contains useful information about the FAC-P/PM Certification, including requirements, training, and P/PM competencies.

17. 9. Procurement Ethical Practices and Principles
Ensuring compliance with ethical codes and practices, transparency,
integrity of the procurement process; zero tolerance for conflicts of
interest, gratuities, kickbacks, unfair and anticompetitive practices.
Example: Code of Ethics
*Integrity in Your Decisions and Actions
*Value for Your Employer
*Loyalty to Your Profession
1. Perceived Impropriety. Prevent the intent and appearance of unethical or compromising conduct in relationships, actions, and
communications.
2. Conflicts of Interest. Ensure that any personal, business, or other activity does not conflict with the lawful interests of your
employer.
3. Issues of Influence. Avoid behaviors or actions that may negatively influence, or appear to influence, supply management
decisions.
4. Responsibilities to Your Employer. Uphold fiduciary and other responsibilities using reasonable care and granted authority to
deliver value to your employer.
5. Supplier and Customer Relationships. Promote positive supplier and customer relationships.
6. Sustainability and Social Responsibility. Champion social responsibility and sustainability practices in supply management.
7. Confidential and Proprietary information. Protect confidential and proprietary information.
8. Reciprocity. Avoid improper reciprocal agreements.
9. Applicable Laws, Regulations, and Trade Agreements. Know and obey the letter and spirit of laws, regulations, and trade
agreements applicable to supply management.
10. Professional Competence. Develop skills, expand knowledge, and conduct business that demonstrates competence and
promotes the supply management profession.

18. 10. Strategic Role of State Central Procurement
Procurement operations and solutions for operationalizing state-wide
policies, active participation in the state laws and executive decisions
addressing procurement, seat at the table, elevated role and
hierarchy in the executive branch for central public procurement
office.

19. Notes and References
Addendum

20. www.acqnet.gov/Library/OFPP/Best

21. > High Risk > Improving the Management of IT Acquisitions and
Operations
Improving the Management of IT Acquisitions and Operations
This information appears as published in the 2015 High Risk Report.
View the 2015
We have identified nine critical factors underlying successful major acquisitions that
support the objective of improving the management of large-scale IT acquisitions across
the federal government: (1) program officials actively engaging with stakeholders; (2)
program staff having the necessary knowledge and skills; (3) senior department and
agency executives supporting the programs; (4) end users and stakeholders involved in the
development of requirements; (5) end users participating in testing of system functionality
prior to end user acceptance testing; (6) government and contractor staff being stable and
consistent; (7) program staff prioritizing requirements; (8) program officials maintaining
regular communication with the prime contractor; and (9) programs receiving sufficient
funding.[1]

22. Seven Steps to Better Procurement
1. Develop a full time, professional procurement staff in all departments: For most staff, state
procurement is now an added responsibility to their usual duties.
2. Make salaries of procurement professionals competitive with private industry: You get what you
pay for.
3. Re-centralize supervision of procurement in the State Procurement Office: Decentralizing, which
was meant to expedite the process, resulted in waste and fraud.
4. Remove exemptions from state procurement code: Far from promoting autonomy, granting
exemptions from the code to certain agencies exposes them to litigation, waste and fraud.
5. Encourage, rather than discourage, reasonable protests of contract awards: A lively, expeditious
protest system is our most effective way to check misconduct and inefficiency in the solicitation
process.
6. Educate, educate, educate: And not only about Hawaii procurement laws, but about innovative
procurement practices in the federal government and elsewhere. Remain open to novel or
mainstream procurement innovations.
7. Invest time and resources in acquisition planning: Up-front planning will make for a smooth
process during the formation and administration of a contract.
Source: Danielle Conway. professor of Law at the University of Hawaii, and Director of the
Hawaii Procurement Institute

23. Acquisition Team (Federal Model)
Define Roles and Assign Responsibilities
It is important that the members of the team understand their roles and responsibilities.
Successful teams are typically ones where specific duties are assigned, performance measures and milestones are developed,
and members are held accountable for individual as well as collective work products.
Normally, leadership of the team is shared between the Program Manager and the Contracting Officer. The Program
Manager is responsible for ensuring that the resulting contract meets the long-range and short-range requirements of the
activity’s mission and that it is designed to produce the intended result.
The Contracting Officer is responsible for managing the contracting process and ensuring all legal and regulatory
requirements are satisfied. It is highly desirable, especially on more complex acquisitions, that a written Project Plan
Agreement be developed that documents the duties, responsibilities, standards and milestones agreed upon by the team
members.
Once a decision is made to acquire products or services through the contracting process, a partnership is formed between the
Program Manager, or the responsible manager from the requiring activity, and the Contracting Officer. These individuals
play a critical role in ensuring that the contracting process is successful. Assisting them is an integrated team of individuals
based upon the complexity and nature of the acquisition. While anyone who can contribute to the success of the acquisition
can be a member of the acquisition team, the following individuals are normally involved either as direct participants or
advisors to the team:
Small Business Office
The Small Business Office provides advice and counsel to the Acquisition Team on all small business matters and assists
them to develop acquisition strategies to maximize participation by small and disadvantaged businesses (Small Business Set
aside or Small Business Subcontracting plans).

24. Competition Advocate
The role of the Competition Advocate is to develop acquisition strategies that foster competition and are consistent with
public law. The Competition Advocate provides advice to the Acquisition Team on all matters involving competition.
General Counsel
The role of General Counsel is to provide legal advice to the Acquisition Team and review Acquisition documents for legal
sufficiency.
Contracting Officer
A Contracting Officer is an individual expressly authorized to enter into, administer and/or terminate contracts. Contracting
Officers are responsible for ensuring that all contract actions comply with appropriate laws, executive orders, regulations and
other applicable procedures, including clearances and approvals.
They are also responsible to ensure that both the government and the contractor comply with the terms and conditions of the
contract. Contracting Officers act as our focal point for customer service, communications and product delivery and
coordinate with our customers to plan and execute acquisition strategies.
While a Contracting Officer may delegate some of his or her duties, for example, a Contracting Officer may designate a
Contracting Officer’s Representative to assist in monitoring the technical aspects of a contract, the Contracting Officer may
never delegate the responsibility to enter into, modify or terminate a contract to anyone else, unless that person is also a
Contracting Officer.
Contracting Officer’s Representative (COR)
A COR is an individual appointed, in writing, by a Contracting Officer who monitors the technical or performance aspects of
a contract and performs other duties specified by their appointment letter. The individual who will serve as the COR once the
contract is awarded, should participate in developing the requirement and other pre-award activities so that he/she is familiar
with all aspects of the contract.
Contract Specialist
The Contract Specialist is an acquisition professional who works directly for the Contracting Officer. The Contract Specialist
performs most of the day-to-day functions required to advertise and award government contracts, i.e. synopsizing
(advertising) the requirement, preparing contract documents for the Contracting Officer’s review and approval, answering
questions from prospective contractors, etc. The Contract Specialist is also responsible for assisting the Contracting Officer
in the administration of the contract.