Legislature(2005 - 2006)HOUSE FINANCE 519
04/27/2005 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB67 | |
| HB13 | |
| HB257 | |
| HB53 | |
| HB218 | |
| HB279 | |
| HB243 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | HB 257 | TELECONFERENCED | |
| + | HB 243 | TELECONFERENCED | |
| + | SB 103 | TELECONFERENCED | |
| + | HB 218 | TELECONFERENCED | |
| + | HB 279 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 67 | TELECONFERENCED | |
| += | HB 13 | TELECONFERENCED | |
| += | HB 53 | TELECONFERENCED | |
HOUSE BILL NO. 257
"An Act relating to a procurement and electronic
commerce tools program for state departments and
instrumentalities of the state; and providing for an
effective date."
KEVIN BROOKS, DEPUTY COMMISSIONER, DEPARTMENT OF
ADMINISTRATION, provided a brief overview of the
legislation. House Bill 313, which introduced a procurement
pilot program, was authorized by the legislature several
years previously. The first year was spent to set up the
pilot. A pilot program was set up with the Department of
Transportation and Public Facilities, Southeast Region and a
private contractor (Alaska Supply Chain Integrators). House
Bill 257 would extend the sunset date for the procurement
pilot program to June 30, 2007. Bidder preferences would
also be brought into statute. He pointed out that the
process is in the early stages. There has not been
sufficient time to demonstrate if privatization of
procurement process would result in a savings.
Representative Weyhrauch observed that the contractor,
Alaska Supply Chain Integrators, does not have to follow
state procurement codes and questioned why have procurement
codes if the contractor does not have to follow it. Mr.
Brooks stressed that the intent of the procurement code is
to give entities in competition for state dollars a fair
chance at winning awards. The Administration feels that the
procurement code is a valid and useful tool [for state
government]. He could not address why the procurement code
was not included in the legislation.
Representative Weyhrauch referred to A.S. 36.30.180: The
legislature finds that there exists in the state continuing
high unemployment, underutilization of resident construction
and supply firms, and high costs unfavorable to the welfare
of Alaskans and to the economic health of the state. The
purpose of bidder preference for resident firms when the
state acts as a market participant is to encourage local
industry, strengthen and stabilize the economy, decrease
unemployment, and strengthen the tax and revenue base of the
state. Mr. Brooks noted that the intent of the pilot project
is to analyze the process.
2:56:58 PM
Representative Weyhrauch questioned if the information
should be present before the program is expanded. Mr. Brooks
clarified that the legislation would not expand the program;
the program would only be extended by one year. The bill
does not expand the program beyond original concept.
2:57:31 PM
Representative Joule spoke of a legal review contract by the
employee's review union. He thought the program was found to
be discriminatory. Mr. Brooks did not know. He referred to
Line 10, Page 1, and noted that the statutory cite should be
changed from "A.S. 36.30.100 - 36.30.190" to "A.S. 36.30.100
- 36.30.265." This would include both sealed proposals and
bids.
2:59:29 PM
SCOTT HAWKINS, GENERAL MANAGER MATERIAL SERVICES, ALASKA
SUPPLY CHAIN INTEGRATORS (ASCI), ANCHORAGE, provided a brief
history of the company and its perspective as a program
operator and specialist firm. He emphasized that ASCI has
the tools and specialties to make advantages and achieve
meaningful reductions. He noted that they are operating with
six people, where the state used 10. He addressed cost
savings and pointed out the advantage of consolidating
purchasing for state agencies, which would allow the state
to go to market and achieve better arrangements. The
legislation can accomplish its goals, driven in part by
computer automation, made possible by using computer
automation and contracting out non-core business. The
program shifts funds from overhead functions to direct
program outcomes. The state recently issued its first
Internet order and has begun to order from catalogs. He
acknowledged that change is not easy.
Representative Croft asked if there have been cost savings.
Mr. Hawkins responded that there are start up costs that are
shared. The contract is a fixed price contract and provides
a $160 thousand improvement in the cost of personnel.
3:06:08 PM
Mr. Hawkins noted that the vast majority is for smaller
purchases. Representative Croft questioned where the cost
savings are coming from. Mr. Hawkins responded that initial
cost savings occur through personnel and the use of web
tools. Automation of the order delivery process accounts for
much of the initial savings. He stressed that as orders are
placed through the catalog, better prices can be obtained.
3:08:01 PM
Representative Croft asked if the program had the effect of
shifting purchases to outside suppliers. Mr. Hawkins
responded that the program would not shift to outside
vendors. The program does not change the vendors; it makes
the ordering process quicker and more efficient. The agenda
is to encourage the Alaskan process.
3:09:55 PM
Representative Croft noted that the initial savings are from
the paper system. He noted that the use of market power
would pressure vendors to lower their prices and questioned
if local suppliers will have to lower their prices to
respond to that pressure. Mr. Hawkins did not think that
there was anything inherent in volume accumulation, which
would disadvantage Alaskan vendors.
3:11:37 PM
Representative Holm disagreed. He pointed out that larger
quantities allow vendors to reduce their freight rates. He
expressed concerned that it would be difficult for local
businesses to compete against catalog companies. He referred
to vendor kickbacks. He wanted more assurances and
sideboards.
3:14:19 PM
Mr. Hawkins emphasized that the state of Alaska would
benefit from any "kickbacks". He observed that Alaskan
suppliers are often better off, in that they have experience
in calculating freight costs.
3:16:59 PM
Representative Holm reiterated that freight is a big concern
and is a disadvantage for Alaskan companies. He observed
that Home Depot has the ability to spread freight costs over
all their stores. He maintained that large box stores could
destroy small businesses. He wondered how small businesses
would be affected. He asked why state procurement codes were
not followed.
Mr. Hawkins explained that the legislation exempted them
from the procurement codes. He explained that they follow
the contract terms, which are astringent rules and are
effectively their procurement code. He recalled that the
decision was made to exempt them from the procurement code
because it was too difficult to rewrite [the codes into the
contract] in a way that would apply to current practices.
Representative Holm urged him to not adversely impact small
businesses. Mr. Hawkins noted that their contract requires
them to be pro-Alaskan.
3:21:17 PM
Representative Weyhrauch asked what the start-up costs are.
Mr. Hawkins listed several of their start up costs:
developing a 5,000-item catalog and integrating web tools.
Representative Weyhrauch asked the state's share of the
cost. Mr. Hawkins noted that the total startup costs were
$180 thousand, of which the state paid $60,000.
3:22:18 PM
In response to a question by Representative Kelly, Mr.
Hawkins explained that the original bill allowed the
Administration to extend the program to other agencies, the
current version only extends the program a year. He
emphasized that this type of change is difficult because
there is natural opposition. He clarified that their
contract expires in 14 months. The legislation allows the
Administration to negotiate an extension.
3:23:47 PM
LARRY HOWE, GENERAL MANAGER, ALLIANCE, encouraged support of
the bill. He maintained that the pilot program has
demonstrated efficiencies and that the cost savings can be
achieved in other areas.
Representative Weyhrauch asked if Mr. Howe had reviewed any
reports, which demonstrate the economic benefits seen in the
cost analysis. Mr. Howe replied that he had seen a power
point presentation by ASCI that showed $163 thousand in
savings.
3:25:52 PM
LYNN JOHNSON, PRESIDENT, DOWLAND-BACH CORPORATION,
ANCHORAGE, testified in favor of HB 257. His company
competes daily with outside firms. He emphasized the ability
of e-commerce to lower the state of Alaska's costs.
3:27:37 PM
Representative Foster MOVED to REPORT CSHB 257 (JUD) out of
Committee with individual recommendations and the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
CSHB 257 (JUD) was REPORTED out of Committee with a "no
recommendation" recommendation and with zero fiscal impact
note #1 by the Alaska Court System, and with indeterminate
note #2 by the Department of Administration.
3:28:44 PM
At ease.
3:36:35 PM
| Document Name | Date/Time | Subjects |
|---|