Legislature(2001 - 2002)
05/02/2002 03:47 PM Senate STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 300-PROCUREMENT OF TRAVEL SERVICES
REPRESENTATIVE JOE HAYES read the following from the sponsor
statement.
HB 300 will allow for the exemption of contracts for
certain types of travel services including airplane
travel, hotel accommodations and travel agency services
from the procurement procedures of AS 36.30.
In February 2002, Alaska Airlines adopted a policy
similar to other major airlines capping travel agent
commissions from 5% of the total ticket price to $10
and $20 for one-way and roundtrip airline tickets,
respectively. March 2002 brought even worse news to
the agencies when the airlines declared that all
airline commissions would cease. Alaska Airlines has
not yet cut their commissions to travel agents, but it
is expected that they will by May 2002. Due to the
abatement of commissions, it has become necessary for
many travel agencies to rely on agency fees to stay in
business.
Since HB 300 will exempt certain travel services from
procurement procedures codified in AS 36.30,
administrative agencies will be able to choose travel
providers on a case-by-case basis. This will foster
competition by allowing for the consideration of all
agencies…
Passing the bill will give all travel agencies an
opportunity to provide state travel, thus protecting
and fostering Alaskan jobs and businesses. I ask for
your support in passing this legislation.
th
REPRESENTATIVE HAYES said the events of September 11 contributed
to the situation because people weren't flying, which caused huge
losses for the airline industry. He said most state travel was
planned by travel agents who did not charge a fee because the
State said they would use their services as long as they didn't
charge a fee.
He said Southeast Alaska had to bid their travel services out
because there weren't enough travel agents in the area. He said
US Travel held that contract and charged $8 for a round trip
ticket and $4 for a one-way ticket. He said the letter dated
April 5, 2002 from the Department of Administration to AAA Travel
that was in the bill packets exemplified what HB 300 was trying
to achieve. He said HB 300 was an issue of fairness to him. If
we requested services from businesses in our communities, he said
it was only fair that we compensated them for those services.
CHAIRMAN THERRIAULT asked if the fiscal note had been higher.
REPRESENTATIVE HAYES said the fiscal note was always $228,000.
He said this number was based on the prices that were being
charged by US Travel. He said the State believed the contract
with US Travel would probably have to be renegotiated and the
fees would probably increase. He said we were going to have to
pay the same price whether we dealt with one agency or several
because of economy of scales.
CHAIRMAN THERRIAULT said his personal preference was to remove
the findings and intent section of HB 300. He asked if there was
anything in the section that was necessary.
REPRESENTATIVE HAYES said that was the way the bill was drafted.
He said it could be done in a letter if it pleased the committee.
CHAIRMAN THERRIAULT asked if there were any questions for
Representative Hayes. There were none.
MR. VERN JONES, Chief Procurement Officer, Department of
Administration (DOA), said in the past, travel agencies received
their revenue from airlines, hotels and rental car companies.
The consumers, including the State, did not have to pay for their
services. He said that had changed since all of the major
airlines had or were soon going to cut commissions completely.
He said it was the State's policy to get services for free
whenever possible and only after they could not get the services
for free would they bid out for services. He said this policy
resulted in contracts in Juneau, Wrangell, Petersburg, Haines,
Cordova, Seward and Dillingham.
MR. JONES said HB 300 would not prevent the State from
establishing travel agency contracts but DOA intended to follow
the intent of the bill and work with industry representatives to
establish a fee schedule of what the State would be willing to
pay for the services. He said any agency willing to provide
their services at or below the costs set forward in the fee
schedule would be eligible to receive State business. He said
once the travel agents met those requirements, the choice of
agents would be at the discretion of the traveler, the division
or the department. He noted that HB 300 would not affect
existing state contracts because they were legal and binding and
the State had an obligation to fulfill them.
He said HB 300 was not without cost. He said DOA estimated the
difference between competitively awarded contracts and negotiated
fees to be around $8 per ticket. Based on the volume of travel
conducted by the State, that would be about $230,000 per year.
He said the State bought about 50,000 tickets per year, 11,000 of
which were purchased directly from the airlines. The remaining
39,000 tickets were purchased through travel agencies. He said
he believed $8 was a conservative estimate.
CHAIRMAN THERRIAULT asked if anything in the findings and intent
section of HB 300 needed to remain in the bill as a directive to
DOA.
MR. JONES said DOA would perform the same with or without the
intent language. He said HB 300 wouldn't prevent DOA from doing
a competitive procurement if they thought it was necessary, but
it was DOA's intent to follow the intent of the bill.
CHAIRMAN THERRIAULT asked if there were any questions for Mr.
Jones. There were none.
MS. SALLY HUNTLEY, Frontier Travel, said her company has done
business with the State since 1982 and hired staff specifically
to work with the State. She said they've never received any
money from the State. She said competition between agencies has
kept the cost for State tickets fairly low. She encouraged
support of HB 300 because it would keep a lot of people employed
and it would keep the State's ticket costs competitive and fair.
She said car companies and hotels have also cut commissions to
travel agencies. She said travel agencies provided an incredible
service and would like to continue to do so.
MS. HUNTLEY said the State did a phenomenal amount of business.
She said at the pre-bid meeting that morning the prospective
bidders asked for an idea of how much the contract was worth.
She said they were not able to get an answer and did not know
what they were getting into with the contract. She said she
would be able to take on several million more dollars worth of
business, but she could not take on five or ten million more
dollars worth of business because of the size of her agency. She
said she could continue providing service at the level she is
providing currently if HB 300 passed.
SENATOR PHILLIPS asked if she came down from Anchorage to testify
on HB 300.
MS. HUNTLEY said she had because she felt very strongly about
this bill.
CHAIRMAN THERRIAULT asked if there were any further questions for
Ms. Huntley. There were none.
MR. BILL BECK, President of Airlines Online, said they have seven
staff and 15 independent contractors who work through their
office. He said they support HB 300. He said competition is the
best motivator to keep service standards high. He said there was
an advantage to establishing a fee structure and allowing choice
based on that fee structure. He said he was also at the pre-bid
conference and said DOA wanted bids for 17 areas around the state
but could not give any estimates of how much those contracts
would be worth, which made it very difficult to come up with a
bid and provide for the appropriate amount of staff to handle the
contract. He noted that the Juneau contract with US Travel would
have to be renegotiated and that cost was likely to go up. He
said support of HB 300 would provide better competition and
service.
CHAIRMAN THERRIAULT asked if there were any questions for Mr.
Beck. There were none.
MS. CINDY BETTINE said she owned two travel agencies in Palmer
and Wasilla, employing 13 women, 4 of which were certified travel
counselors. She requested support of HB 300. She said the lack
of commission and net compensation was a big issue but was not
the most important issue. She said all travel agents were not
created equal. She said some agencies were waiving their fees
and assigning the least experienced agent to the State account.
She said the State may be saving $20 to $30 in fees but may be
paying much more for their ticket because they were working with
inexperienced agents. She said this was especially important
when considering the fiscal note. She said it was important that
the travel business remain competitive and HB 300 would probably
achieve that. She would like to see the bill passed through the
committees and to the Senate floor so travel agencies could
continue providing service and saving travelers money.
CHAIRMAN THERRIAULT asked if there were any questions for Ms.
Bettine. There were none. He asked if committee members felt
the same way he did about removing the findings and intent
section.
SENATOR PHILLIPS moved Amendment #1, deleting Sec. 1.
CHAIRMAN THERRIAULT asked if there was any objection to Amendment
#1.
There being no objection, Amendment #1 was adopted.
SENATOR PHILLIPS moved SCSHB 300(STA) out of committee with
attached fiscal note and individual recommendations.
There being no objection, SCSHB 300(STA) was moved out of
committee with attached fiscal note and individual
recommendations.
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