Hawaii taxpayers will likely be paying more to buy agriculture products under a new state law aimed at supporting local growers.
Act 175 hopes to use government purchasing power to benefit local agriculture. The law, which took effect July 1, requires state agencies to gather competitive bids before buying food and other agricultural products.
It gives up to 15 percent preference to locally grown products in the bidding process. So if a Mainland grower can supply the food for $100, and a local grower bids $114, the local grower gets the contract.
"What this bill allows is for the state to use its purchasing power to procure these local products to really enhance local agriculture by giving them viable market opportunities," said Elizabeth Haws Connally, who lobbied for the change on behalf of the Hawaii Farm Bureau Federation.
While the intent of the law is to support local growers, not all officials are convinced that will be the effect.
The change also could hurt local farmers because before the new law, state agencies were not required to conduct competitive bidding for agricultural products. State agencies could choose to purchase all their food from local companies without considering Mainland bids.
"If ... it becomes a competitive process, we're not sure exactly what the effect would be - whether it would be positive or negative, because nobody has any experience with that."
- Sandra Lee Kunimoto, state agriculture director
Competitive procurement is expected to draw more Mainland competition, even with the 15 percent advantage given to local growers.
"If . . . it becomes a competitive process, we're not sure exactly what the effect would be - whether it would be positive or negative, because nobody has any experience with that," said state Agriculture Director Sandra Lee Kunimoto. "But the farm bureau and the farmers felt it was worth trying to see if it would increase the purchase of local goods."
State Procurement Office Administrator Aaron Fujioka agreed.
"It didn't have to be competed, and it could be all purchased local from local companies locally grown," Fujioka said. "The prior exemptions allowed agencies, if they chose, to purchase only from local companies and locally grown fresh produce and meats. They could have done that. Now that choice is no longer available. It has to go through a formal, more structured process."
Other concerns were raised by the agencies that buy agriculture products and live animals, which are included in the bill.
The University of Hawaii has expressed concerns about how the changes could affect Waikiki Aquarium operations as well as lab research involving live-animal test subjects. In testimony last year, an aquarium official said competitive purchases of required rare and exotic species were not feasible. Similarly, the university said that purchasing animals from the lowest bidder would create too many variables leading to potentially adverse consequences for research programs.
The university isn't the only agency expressing concern. The law affects both state and city agencies. Shortly after the changes took effect, the state Public Safety Department sought an exemption on the purchase of more than $100,000 a month of fresh meat and produce. The agency argued that seeking multiple bids to supply varying daily needs for fresh foods at local correctional facilities would be an unnecessary hindrance.
According to the state Procurement Office, state agencies purchased $6.63 million in fresh meat and produce from November 2005 through January 2009. The average award was about $7,400. The top three suppliers in terms of dollar volume of sales during that period were Love's Bakery ($907,813), Meadow Gold Dairies ($511,295) and Mikilua Poultry Farm ($500,000). The top three suppliers in terms of number of awards were: Ham Produce (162), Hilo Products (133) and Armstrong Local Produce (132).
Procurement Office data suggest that most fresh food and produce purchased by state agencies came from local wholesalers and retailers. What isn't clear is whether those local firms acquired their produce from local farms.
Many of the concerns expressed about the changes focus on the lengthy procurement process for fresh foods that need to be acquired on short notice. There are signs that agencies may shift to buying more frozen goods that can be stored and used for longer periods. Both the Public Safety Department and the Hawaii State Hospital system have recently explored purchasing frozen foods for inmate and patient needs.
Connally, an associate attorney at Alston Hunt Floyd & Ing, acknowledged that the changes could create challenges for government agencies that need fresh meat and produce. However, those problems could be solved via long-term purchasing agreements with multiple local suppliers or farmer co-ops. Business can still be funneled to local farmers by soliciting food on factors other than lowest price, she said.
Farmers are convinced that the changes in procurement law could help send more government business their way.
"The Big Island farm bureau polled their members, and they've got 650 members - and they only had one producer selling on a regular basis to the state and one who shipped their first shipment this year," Connally said. "Their sense was their products were not going into the state facilities.
"If the farmers see that there's a steady market available, then they can produce for that market."