dcca violation of state law

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    Attached is the report of findings and corrective actions. It includes the following, at a minimum:

    (I) The facts and circumstances leading to the need for the good or services, including the explanation as to why

    established procedures were not followed.

    (2) Whether there are any indications of intent to deliberately evade established purchasing procedures;

    (3) Any lack of procurement information or training;

    (4) Whether this is the first occurrence; and

    (5) Whether appropriate written assurance and safeguards have been established to preclude a subsequent unauthorized

    procurement.

    4. Direct questions to: ClydeS. Sonobe, CATV Phone: 586-2620

    Date

    A PPROVED DISAPPROVED

    Chief Procurement Officer

    Department Head

    Reserved for SPO Use Only

    6 Chief Procurement Officer's comments:

    sI certify that the information provided above is to the best of my knowledge, true and correct.

    STATE PROCUREMENT OFFICE

    PROCUREMENT VIOLATION:REPORT OF FINDINGS AND CORRECTIVE ACTIONS AND/OR

    REQUEST FOR AFTER-THE-FACT PAYMENT APPROVAL

    ITO:Chief Procurement OfficerChief Financial Officer

    2FROM:MARK E. RECKTENWALD, Director DCCADepartment/Div is ion/AgencySUBJECT: Procurement Violation Pursuant to 3-131-6, HAR

    3. PART I REPORT OF FINDINGS AND CORRECTIVE ACTIONS for a procurement violation

    8. PART HREQUEST FOR AFTER-THE-FACT PAYMENT APPROVAL, if applicable

    eque s t is hereby made for payment to the vendor because:

    Reserved for DAGS, Comptroller Use Only

    1 9 Chief Financial Officer's comments:

    0 APPROVED DISAPPROVED

    Chief ancial Officer Date

    11. P.V.

    S PO- 16 (Rel, .1193012005)

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    SPO Form-16

    PART I REPORT OF FINDINGS AND CORRECTIVE ACTIONS for a

    procurement violation

    ( 1 ) The facts and circumstances leading to the need for the good or service,including the explanation as to why established procedures were not

    followed:

    Federal law (47 U.S.C. 531) allows the State of Hawaii ("State"), thefranchising authority, to establish requirements in a cable television franchise

    with respect to the designation or use of channel capacity for public, educational,

    and government ("PEG") use. The State, through the Department of Commerce

    and Consumer Affairs ("DCCA"), requires cable operators to designate PEG

    access channels through the franchise orders issued pursuant to HRS chapter

    440G. In these franchise orders, DCCA recognized the benefit that PEG access

    provides the public and required cable operators (as one of the conditions toobtain cable television franchises in the State) to provide channels for PEG use

    and to pay annual PEG access fees for operations, facilities and equipment.

    DCCA entered into separate contracts with the four (4) PEG access

    organizations to (among other things) manage and operate the PEG channels,

    train the public to use the PEG facilities and equipment to create programs, and

    cablecast the programs created and submitted by the public on the cable

    operator's channels. These access organizations are: Olelo Community

    Television ("Olelo") on Oahu, Na Leo 0' Hawaii ("Na Leo") on Hawaii, Hoike:

    Kauai Community Television ("Hoike") on Kauai, and Akaku: Maui Community

    Television ("Akaku") on Maui. DCCA does not consider these organizations tobe State or government agencies because they are private, non-profit

    corporations that are run independent of government, and they have filed articles

    of incorporation and registered with the State's Business Registration Division.

    The PEG access organizations are funded primarily from the annual PEG access

    fees that the local cable operator (currently Time Warner) is required to pay

    pursuant to DCCA's franchise orders. The cable operator pays these annual

    PEG access fees directly to the PEG access organizations, and is allowed to

    pass these fees on to cable television subscribers under federal law. The cable

    operator has elected to pass these fees to subscribers and assesses subscribers

    on a monthly basis. The PEG access organizations do not receive any

    governmental monies either from the State's general fund or DCCA's

    Compliance Resolution Fund.

    DCCA entered into initial PEG access contracts with Olelo in 1990 and Hoike in

    1993. HRS chapter 103D was not in effect when these contracts were initially

    entered into.1 DCCA subsequently entered into initial contracts with Na Leo in

    HRS chapter 103D became effective an July 1, 1994.

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    1996 and with Akaku in 1998. At that time, DCCA was not aware that these PEG

    access contracts were subject to the State's Procurement Code.

    DCCA then entered into new contracts with all four PEG access organizations in

    1998-1999 to require more specific reporting requirements and accountability,

    but maintain the level and types of access services already being provided to thepublic. 2 As in the past, DCCA was not aware that these PEG access contracts

    were subject to the State's Procurement Code. The Attorney General's office

    reviewed and approved the contracts as to form.

    Up until 2004, the PEG access contracts were automatically renewed each year.

    After December 2003, DCCA began re-negotiating these contracts and has been

    extending them by Supplemental Agreements. While reviewing the PEG access

    contracts, the DCCA asked the Department of the Attorney General and the

    State's Procurement Office ("SPO") whether DCCA's contracts with these PEG

    access organizations are subject to the State Procurement Code. After much

    discussion, DCCA was informed that these PEG access contracts are subject tothe State Procurement Code and that none of the exemptions in HRS 103D-

    102(b) appear to apply; however, the exemption in HRS 103D-102(b)(4)(L)

    allows the chief procurement officer to determine that a good or service is

    exempt from the Procurement Code even though such good or service is

    available from multiple sources because procurement by competitive means is

    either not practicable or not advantageous to the State.

    DCCA plans to conduct public meetings to obtain the public's input and

    comments on PEG access and PEG services in the State. These publicmeetings will be held in each county and will provide the DCCA with input on

    whether to proceed with the REP process or to seek an exemption from the SPO.There are a number of complex issues that must be addressed if the State issues

    an RFP (e.g., whether the RFP should address issues related to operational

    practices and policies; transition of resources, staff, facilities and equipment from

    existing PEG s to new organization(s); and maintaining the level of access

    services with minimal disruption during the transition). DCCA anticipates that the

    public comment process and DCCA's evaluation of the issues relating to an REP

    will take no more than (7) months (i.e., to approximately June 30, 2006).

    To ensure that PEG access services continue to be provided without interruption

    to the public and provide DCCA with adequate time to conduct the public

    comment meetings, DCCA entered into Supplemental Agreements with all fourPEG access organizations and extended the current contracts to June 30, 2006.

    2

    The current contract with Olelo was entered into on December 24, 1998; the current contract withAkaku was entered into on June 17, 1999; the current contract with Na Leo was entered into on June 17 :1998 and the current contract with Hoike was entered into on August 25, 1999.

    2

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    (2) Whether there are any indications of intent to deliberately evade

    established purchasing procedures:

    Until recently,-DCCA was not aware that the PEG access contracts were subject

    to the State's Procurement Code. Since the first contracts with Olelo and Hoike

    predated the adoption of the Code, the Department had established a practice ofhandling these contracts through direct negotiations with each PEG rather than

    through competitive bidding. Furthermore, these contracts differ in some

    significant ways from typical government contracts. Most notably, the funds that

    are being expended are not disbursed by the government, but rather are paid

    directly to each PEG by a private party (currently, Time Warner). Moreover, the

    Attorney General's office reviewed and approved the 1998-1999 contracts as to

    form. Thus, any failure to comply with the requirements of HRS chapter 103D

    was inadvertent and purely unintentional.

    DCCA notes that these contracts do not involve the payment of monies from the

    State's general fund and there is no request to approve an after-the-factdisbursal of general funds.

    (3) Any lack of procurement information or training:

    The SPO has met with DCCA staff to go over the Procurement Code

    requirements with respect to the PEG access contracts. DCCA welcomes

    additional training on HRS chapter 103D.

    (4) Whether this is the first occurrence:

    To the best of our knowledge, this appears to be the first occurrence of this typefor DCCA.

    (5) Whether appropriate written assurance and safeguards have been

    established to preclude a subsequent unauthorized procurement:

    Yes. Now that DCCA is aware that these PEG access contracts are subject to

    the Procurement Code, the Director has provided written direction to the Cable

    Television Division that contracts for PEG-type services should be subject to

    competitive bidding pursuant to HRS 1030, unless exempted.

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