State senators investigating the Lingle administration's improper award of a hydrogen investment fund contract may call for the appointment of an independent counsel to determine whether state procurement law was intentionally violated.

A confidential draft report by the Senate's investigatory committee recommends an independent counsel because senators believe the state attorney general's office has a conflict of interest. The attorney general's office represented several state officials during the committee's probe.

State Senate Vice President Donna Mercado Kim, who is leading the investigation, would not comment yesterday on the draft but said she hopes to release the final report next Tuesday. Kim and other senators are reviewing comments from state officials and others about the draft.

The state Department of Business, Economic Development and Tourism last year awarded an $8.7 million hydrogen investment fund contract to H2 Energy LLC over top-ranked bidder Kolohala Holdings LLP. The State Procurement Office ordered the state to rescind the contract and award it to Kolohala. The new contract was signed last month.

The Senate's investigation has focused on whether Ted Liu, the DBEDT director, and other state officials manipulated the procurement process to steer the contract to a favored bidder.

Liu has acknowledged making an error in awarding the contract to H2 Energy, which had the lowest ranking among bidders, but has denied it was knowing or intentional.

In his written response to the Senate's draft report, Liu said the committee's conclusions make "no sense to any rational or fair-minded person. It seems to employ tortured and convoluted reasoning designed to support, at whatever cost to plausibility, a pre-determined conclusion."

Kim, D-14th (Halawa, Moana- lua, Kamehameha Heights), has clashed with the Lingle administration over the investigation since it began early this year.

In an unusual step, Gov. Linda Lingle asked the Senate to remove Kim from the committee because the Republican governor believed Kim was biased against Liu and had pre-judged the issue. Senate leaders declined the governor's request.

Others within the Lingle administration have said privately that it was overkill for the committee to hold 60 hours of hearings and review 21,000 pages of documents when the state had admitted the error and the original contract had been rescinded.

Kim chose not to comment on Liu's written response until the final report is released. But she said the committee has conducted a fair investigation.

"I guess when you cannot attack the facts and you cannot attack the evidence, then you need to attack an individual," Kim said.

Although Kim has been the target of the Lingle administration's criticism, the committee — including state Sen. Sam Slom, R-8th (Kahala, Hawai'i Kai) — voted unanimously last month to adopt the draft report.

State Sen. Les Ihara, Jr., D-9th (Kapahulu, Kaimuki, Palolo), who serves on the committee, said senators worked together on the draft and that Kim alone was not in control.

"I consider it an evidence-based report," he said.

Under the committee's draft recommendations, the state attorney general's office would appoint the independent legal counsel. The independent counsel would be required to provide a written report to the Senate before the next session of the state Legislature in January.

A spokeswoman for the attorney general did not return a telephone call seeking comment yesterday afternoon.

The draft also calls for the Senate to submit the findings of its investigation to the state Ethics Commission to determine whether Liu or other state officials violated state ethics law.

State lawmakers passed a bill last session, which became law without Lingle's signature, that allows the attorney general to retain outside counsel for the Legislature if the office declines to represent the Legislature because of a conflict of interest.