Section 3-126-38 - Remedies after an award(a) When there is no fraud or bad faith by a contractor: (1) Upon finding after award that a state or county employee has made an unauthorized award of a contract or that a solicitation or contract award is otherwise in violation of law where there is no finding of fraud or bad faith, the chief procurement officer or designee may ratify and affirm, modify, or terminate the contract in accordance with this section after consultation with the respective attorney general or corporation counsel, as applicable.(2) If the violation can be waived without prejudice to the State or other bidders or offerors, the preferred action is to ratify and affirm the contract.(3) If the violation cannot be waived without prejudice to the State or other bidders or offerors, if performance has not begun, and if there is time for resoliciting bids or offers, the contract shall be terminated. If there is no time for resoliciting bids or offers, the contract may be amended appropriately, ratified, and affirmed.(4) If the violation cannot be waived without prejudice to the State or other bidders or offerors and if performance has begun, the chief procurement officer or designee shall determine in writing whether it is in the best interest of the State to terminate or to amend, ratify, and affirm the contract. Termination is the preferred remedy. The following factors are among those pertinent in determining the State's best interest:
(A) The costs to the State in terminating and resoliciting;(B) The possibility of returning goods delivered under the contract and thus decreasing the costs of termination;(C) The progress made toward performing the whole contract; and(D) The possibility of obtaining a more advantageous contract by resoliciting.(5) Contracts based on awards or solicitations that were in violation of law shall be terminated at no cost to the State, if possible, unless the determination required under paragraphs (2) through (4) is made. If the contract is terminated, the State shall, where possible and by agreement with the supplier, return the goods delivered for a refund at no cost to the State or at a minimum restocking charge. If a termination claim is made, settlement shall be made in accordance with the contract. If there are no applicable termination provisions in the contract, settlement shall be made on the basis of actual costs directly or indirectly allocable to the contract through the time of termination, other than attorney's fees. Such costs shall be established in accordance with generally accepted accounting principles. Profit shall be proportionate only to the performance completed up to the time of termination and shall be based on projected gain or loss on the contract as though performance was completed. Anticipated profits are not allowed.(b) When there is fraud or bad faith by the contractor: (1) Upon finding after award that a solicitation or award is in violation of law and the recipient of the contract acted fraudulently or in bad faith, the chief procurement officer or designee may, after consulting with the respective attorney general or corporation counsel, declare the contract void or ratify and affirm, or modify in accordance with this section.(2) The contract shall be declared void unless modification, ratification, and affirmation are found to be in the State's best interest under paragraph (3).(3) The contract shall not be modified, ratified, and affirmed unless it is determined in writing that there is a continuing need for the goods, services, or construction under the contract and: (A) There is no time to re-award the contract; or(B) The contract is being performed for less than it could be otherwise performed.(4) In all cases where a contract is voided, the State shall endeavor to return those goods delivered under the contract that have not been used or distributed". No further payments shall be made under the contract and the State is entitled to recover the greater of: (A) The difference between payments made under the contract and the contractor's actual costs up until the contract was voided; or(B) The difference between payments under the contract and the value to the State of the goods, services, or construction the State obtained under the contract.(C) The State may in addition claim damages under any applicable legal theory.(5) The State shall be entitled to any damages it can prove under any theory including, but not limited to, contract and tort regardless of its ratification and affirmation of the contract.(6) If a state or county employee knowingly and willfully lets a contract contrary to law, that employee may be personally liable for his or her actions.[Eff 12/15/95; am and comp MAY 20 2004] (Auth: HRS §§ 103D-106, 103D-202) (Imp: HRS §§ 103D-106, 103D-707)