Touted as a possible model for streamlining the state’s procurement process, the University of Hawaii’s new system for awarding multimillion-dollar construction contracts already is producing benefits.

But it’s also producing controversy.

While the university says the new system enables projects to start more quickly and proceed more efficiently, creating desperately needed construction jobs in Hawaii, critics say it smacks of favoritism.

Since 2008, they note, three of four sizable construction jobs, including the $113 million UH-West Oahu project and the $119 million Cancer Research Center of Hawaii, have gone to Albert C. Kobayashi Inc. via a selection method that was based largely on qualifications and did not include traditional competitively priced bids.

Contracts for the West Oahu campus, cancer center and a research building were all awarded through the Research Corporation of the University of Hawaii using a process called design assist.

This month the university awarded the design contract for a fourth project, a UH-Hilo dormitory, to Kobayashi, giving the firm the inside track to snag the more lucrative construction work for that job.

If Kobayashi gets the job, it will have landed four of the five design-assist projects at the university over the past four years, including the two largest. The only one it sought but didn’t get: a $6.3 million renovation.

A Kobayashi executive did not respond to several requests seeking comment. UH officials said Kobayashi was selected each time after a rigorous evaluation comparing specific qualifications of the bidders.

The university’s process for awarding contracts is getting renewed attention this legislative session as lawmakers and the Abercrombie administration look for ways to expedite construction projects to create jobs. Some believe the UH system could be a possible model for streamlining the state’s contracting methods.

The university has been able to institute new procedures because legislators in 2010 granted it a temporary exemption from key provisions of the state’s procurement code.

The exemption gives the university greater flexibility in purchasing goods and services, including the ability to forgo traditional price competition in soliciting certain construction proposals.

The exemption also allows UH to decide the merits of procurement protests filed against it — a self-policing power few other government agencies in Hawaii have.

“That is highly, highly unusual,” said Jim Nagle, a Seattle attorney with expertise in public procurement law.

The university has denied all six procurement complaints lodged against it since obtaining jurisdiction over protests. If a protesting party is not satisfied with UH’s decision, it can sue.

Several contractors who do business with UH told the Star-Advertiser they are rethinking whether to invest the considerable time and resources required to pursue design-assist projects at the university because the selection process is too subjective and seems to favor one company. None would speak on the record for fear of retaliation.

But the head of the Subcontractors Association of Hawaii said he hears more procurement-related complaints about UH than any other government entity.

“Transparency is not a word I often hear about the UH system,” said Tim Lyons, association president.

UH officials defended their overall procurement process and the design-assist one in particular, saying it is fair, transparent, gets construction started eight to nine months sooner than the traditional method and results in fewer time-consuming delays, saving money.

They said detailed procurement procedures were developed after consulting with officials throughout the industry. The rules cover more than 350 pages.

More than $500 million worth of construction projects have been started under the new system, according to UH, with the work going to multiple companies.

“The reason we’re doing this is because we want to be part of a vibrant, well done, well executed, efficient system of getting public construction done here, and on top of all that, we want to create jobs, take advantage of this relatively low-cost construction environment and get projects done in a hurry,” UH President M.R.C. Greenwood said in an interview.

She noted that only one project, a $6 million-plus School of Nursing facility, has been completed using the new flexibility authorized by the 2010 legislation. “To complain about our procedures not being fair, not being transparent is a little premature,” she said.

When lawmakers granted the procurement flexibility, they considered it a pilot project that would enable the state, through UH, to test new methods for purchasing goods and services.

The university already has made headway. It started an online solicitation system, for instance, that expedites procurements of up to $250,000, resulting in better pricing and quicker service, UH officials said.

The exemption is set to expire in June, but a pending bill, SB 1332, would extend it to give the UH more time to gather data on the effects. Gov. Neil Abercrombie, the General Contractors Association of Hawaii and others support an extension.

“This pilot is important to achieve the state’s educational and economic development goals via the university and also to inform potential improvements in the state’s procurement code for all agencies,” Abercrombie wrote in testimony last year.

Charles Kaneshiro of the Group 70 design firm, which does business with UH, told the Star-Advertiser that the design-assist process is good for complicated projects, especially because the designer works for the contracting agency, not the contractor. That minimizes miscommunication and reduces the need for expensive change orders, he said.

“Design assist is really optimal for cost control,” Kaneshiro said.

Opponents of the exemption extension are leery.

Aaron Fujioka, the state’s chief procurement officer, told legislators that the university, rather than getting special treatment, should be a leader in championing a level playing field for all.

“If the City and County of Honolulu were seeking a similar exemption from the procurement law to create their own process for awarding contracts, and utilized this created process for awarding contracts for the rail projects, people would be outraged,” Fujioka said in a statement to the Star-Advertiser.

Patrick Shin, owner of Nan Inc., one of the largest contractors in the state, said he is discontinuing funding for four UH engineering scholarships because of the procurement flap.

“Everybody in the construction community is so fed up,” Shin added.

The design-assist process is commonly used in the private sector, but experts say government agencies usually use some form of competitive pricing in awarding construction projects, though innovative methods increasingly are being adopted or considered around the country.

Sealed bids traditionally have been used for construction projects to try to ensure taxpayers get the best value for their money. For the purchase of legal, engineering and other professional services, a qualifications-based selection process is common in the public sector, including for Hawaii agencies subject to the state code.

In choosing a design-assist contractor, UH says it can ask companies to propose pricing for design work and construction administration as part of the qualifications evaluation. But such pricing would not include the main cost of doing the construction. If the university is satisfied with the selected vendor’s design work, it typically negotiates a price cap with the contractor for the construction portion, relying on third-party cost estimators to help determine what is reasonable.

Contractors say an experienced company that gets the initial design work is all but assured of landing the construction job.

Even before UH obtained an exemption, it was able to do design-assist projects by routing agreements through the RCUH, which isn’t subject to the state procurement code.

The experience the school had with that arrangement prompted UH officials to seek greater flexibility from the Legislature.

UH officials cite the Kakaako cancer center, which is under construction, to illustrate the advantages of using the design-assist process. The contractor was able to break ground and start grading work when the design was only half complete, effectively cutting as much as nine months from the process, UH officials said. Had the traditional approach been used, the university would’ve waited until the design was complete, then solicited bids for construction.

“We saw the success of getting into the ground sooner with the projects we did with RCUH, and we said, ‘Ah, let’s take that process and try to implement it as part of our flexibility,” said Brian Minaai, the school’s associate vice president for capital improvements.

Since getting the exemption, UH says it has made the design-assist process more rigorous.

Louis Kiang has his doubts.

Kiang used to work for Townsend Capital, the developer that lost the cancer center project to Kobayashi Group, a company with past ties to UH. Its founder, Bert A. Kobayashi Sr., was a former UH regent and son of Albert C. Kobayashi, founder of the construction company, which eventually was sold to employees.

Minaai used to work for Kobayashi Group. But he said he has no financial ties to his former employer or the construction company.

Still, some remain skeptical of the UH system.

“The issue really lies not in the delivery method itself but the ease with which UH is able to bias the procurement process,” Kiang said in an email to the Star-Advertiser.

Townsend sued the university for breach of contract — it did not take issue with the design-assist method — and eventually settled out of court for

$2.5 million. UH denied any wrongdoing.

Greenwood said no one has provided her with evidence to show that UH is being unfair in how it awards contracts. Yet she acknowledged that some people perceive the process as unfair because of the outcomes.

“It’s a dilemma,” she said. “If you do a process and you rank people, and a company keeps winning, do we not award the contract just because they’ve won before?”