03/18/2003 01:47 PM House FIN

HOUSE BILL NO. 67                                                                                                             
                                                                                                                                
     An Act relating to construction of highways by the                                                                         
    Department of Transportation and Public Facilities.                                                                         
                                                                                                                                
REPRESENTATIVE  JIM HOLM  commented that  the Alaska  statute                                                                   
requires  that  construction  and  maintenance  contracts  be                                                                   
awarded to  the private  sector on  the basis of  competitive                                                                   
bidding.   However,  statute also  allows the  State to  fund                                                                   
small  projects   or  repairs   in-house  through   a  "force                                                                   
account",  meaning that  the  State uses  its  own forces  to                                                                   
accomplish the work.                                                                                                            
                                                                                                                                
To   date,   force  account   spending   by   Department   of                                                                   
Transportation &  Public Facilities has been  frequently used                                                                   
to  fund projects  costing  considerably  more than  $250,000                                                                   
dollars.    Such action  takes  dollars  out of  the  private                                                                   
sector and  omits the  checks and  balance over-sight  of the                                                                   
competitive bidding process.                                                                                                    
                                                                                                                                
HB  67 was  introduced to  insure that  State force  accounts                                                                   
continue to be allowed for smaller  jobs while requiring that                                                                   
projects over  $250,000 dollars  utilize private  contractors                                                                   
in the competitive bidding process.   Private contractors not                                                                   
only  maintain  an inventory  of  specialized  equipment  and                                                                   
employ  skilled managers,  but they  assume risk-costs,  thus                                                                   
providing the State with considerable savings.                                                                                  
                                                                                                                                
Representative  Hawker  agreed  that the  bill  makes  sense,                                                                   
however,  the fiscal note  indicates that  assuming that  the                                                                   
forced  account projects  remain constant  over the next  six                                                                   
years, the lost savings would total $25.6 million dollars.                                                                      
                                                                                                                                
Representative  Holm responded  that  the analysis  indicates                                                                   
that potential loss.  He added  that he had not seen any back                                                                   
up material  to justify  the number and  that he  believed it                                                                   
was a "fear" tactic.   He claimed that the fiscal  note would                                                                   
be zero and that putting a project  out to bid would not cost                                                                   
more.                                                                                                                           
                                                                                                                                
Co-Chair  Harris pointed  out  that the  Department does  not                                                                   
support  the bill.    He acknowledged  that  the concept  was                                                                   
good, however,  certain communities do have  a difficult time                                                                   
retaining  Department of Transportation  & Public  Facilities                                                                   
employees.  If  those employees were laid off  in the summer,                                                                   
there would  be a tremendous amount  of turn over.   He asked                                                                   
if there was a way to address  this concern without affecting                                                                   
the rural communities.   Co-Chair Harris advised  that he did                                                                   
not support  the bill; however,  he would be willing  to work                                                                   
with Representative Holm.                                                                                                       
                                                                                                                                
MARK   O'BRIEN,  CHIEF   CONTRACT  OFFICIER,   COMMISSIONER'S                                                                   
OFFICE,  DEPARTMENT OF  TRANSPORTATION  & PUBLIC  FACILITIES,                                                                   
stated  that  the   effect  of  HB  67  would   prohibit  the                                                                   
Department and any agency that  transfers projects from using                                                                   
its  own employees  to  perform  the  work on  projects  that                                                                   
exceed $250  thousand dollars.   There are two  categories of                                                                   
projects that fall under the force account:                                                                                     
                                                                                                                                
   ·    Community roads                                                                                                         
   ·    State maintenance forces                                                                                                
                                                                                                                                
Using  capital  funds,  the Department  is  able  to  develop                                                                   
programs  within the  three regions  to address  some of  the                                                                   
$200  million  dollar  backlog in  the  deferred  maintenance                                                                   
program.                                                                                                                        
                                                                                                                                
Mr. O'Brien  noted that  there are four  key benefits  of the                                                                   
program:                                                                                                                        
                                                                                                                                
   ·    Ability to transfers the cost of the winter                                                                             
        maintenance employees to federal aid money which                                                                        
        allows the Department to preserve general fund money                                                                    
        for severe wintertime events;                                                                                           
   ·    Retain year round employees;                                                                                            
   ·    Use the federal aid funds to fund a portion of the                                                                      
        equipment costs which then helps to defer the cost                                                                      
        of repair for maintenance activities; and                                                                               
   ·    Extend and utilize the money further.                                                                                   
                                                                                                                                
                                                                                                                                
TAPE HFC 03 - 36, Side A                                                                                                      
                                                                                                                                
                                                                                                                                
Mr. O'Brien concluded  his discussion regarding  the four key                                                                   
benefits.                                                                                                                       
                                                                                                                                
Representative  Stoltze asked  if there  was a definition  of                                                                   
"construction projects" for major capital and maintenance.                                                                      
                                                                                                                                
Co-Chair  Williams  stated  that  HB  67  would  be  HELD  in                                                                   
Committee for further consideration.