Legislature(2011 - 2012)HOUSE FINANCE 519
04/09/2011 01:00 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB204 || HB205 | |
| HB129 | |
| HB93 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 181 | TELECONFERENCED | |
| + | HB 49 | TELECONFERENCED | |
| + | HB 74 | TELECONFERENCED | |
| + | HB 93 | TELECONFERENCED | |
| + | HB 129 | TELECONFERENCED | |
| + | HB 204 | TELECONFERENCED | |
| + | HB 205 | TELECONFERENCED | |
| + | HB 89 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 204
"An Act relating to the State Procurement Code,
including the use of small procurement provisions for
certain amounts of leased space, the requirement of
Alaska business license proof for Alaska bidder and
other procurement preferences, the registration of
construction contract bidders and offerors, the
establishment and maintenance of lists of persons who
want to provide supplies or services to the state,
state agencies, and state instrumentalities,
electronic bids and proposals, small procurements, and
writings; and providing for an effective date."
1:21:10 PM
VICE-CHAIR ANNA FAIRCLOUGH, SPONSOR, explained the
legislation. She pointed out that HB 204 along with the
companion bill HB 205 attempted to modernize the state
procurement code, streamline procurement processes and
change the definition of small procurement. She offered
that HB 204 clarified business license requirements for
sealed bids and qualifications for the Alaskan bidder's
preference. The threshold for small procurements was
increased from $50 thousand to $100 thousand and
construction procurements were increased to $200 thousand.
The bill increased the square footage for small
procurements from 3000 to 7000 square feet. Electronic bids
and signatures were allowed. The legislation updated the
vendor list and enabled the Department of Administration
(DOA) to manage the vendor list online. She concluded that
the legislation modernized the entire procurement process.
VERNON JONES, CHIEF PROCUREMENT OFFICER, DIVISION OF
GENERAL SERVICES, DEPARTMENT OF ADMINISTRATION, provided a
sectional analysis of HB 204 (copy on file).
Section 1: Amends AS 36.30.080(f)
Increases the threshold limit for small
procurements of leased space from 3,000 square
feet to 7,000 square feet, consistent with section
7.
Section 2: Amends AS 36.30.110(b)
Clarifies Alaska business license requirements
for competitive sealed bids and qualification for
the Alaska bidder preference. Change would
require bidders to show proof of their Alaska
Business License prior to award, but would
require the license at the time of bid submission
in order to qualify for the Alaska bidder
preference.
Mr. Jones expounded that the department experienced a
disproportionate amount of technical disqualification on
larger procurement bids. The change was recommended by a
legislative audit to remedy the situation.
Section 3: Amends AS 36.30.130(a)
Eliminates reference to a procurement officer's
use of vendor lists, reflecting the repeal of the
statute establishing the vendor lists, consistent
with section 10.
Mr. Jones added that bid requests were noticed online for
the public.
1:25:29 PM
Mr. Jones continued with the sectional analysis.
Section 4: Amends AS 36.30.210(b)
Clarifies construction contractor registration
requirements, now explicitly requiring
registration before award of a contract.
Section 5: Amends AS 36.30.210(e)
Clarifies Alaska business license requirements
for competitive sealed proposals and
qualification for the Alaska bidder preference
using language consistent with that used in
section 2.
Section 6: Amends AS 36.30 by adding a new section
36.30.290
Adds a new section allowing an agency to accept
electronic bids and proposals.
Section 7: Amends AS 36.30.320(a)
Increases the threshold under which a state
agency may use informal procurement process to
$100,000 for goods and professional services, to
$200,000 for construction, and 7,000 square feet
for lease of space.
Section 8: Amends AS 36.30.655
Eliminates reference to the removal of debarred
or suspended persons from vendor lists,
reflecting the repeal of a law establishing the
vendor lists, consistent with section 10.
Section 9: Amends AS 36.30.990
Adds new definitions for "in writing" and
"written."
Section 10: Repeals statute establishing the vendor
list.
Section 11: Amends the uncodified law of the State of
Alaska
Clarifies the application of the procurement act
to pending solicitations during transition
period.
Section 12: Effective Date
Language making the procurement act effective
immediately.
Representative Gara remarked that he liked the bill. He
questioned Section 5. He wanted to tighten the Alaska
bidder preference. He felt that it was too easy for non-
residents to procure bids. Vice-chair Fairclough replied
that HB 204 did not attempt to change the bidder
preference. She communicated that restrictions were legally
challenged in the past and failed. The legal precedent
maintained what latitude did exist in state statute. She
revealed how Section 5 related to the Alaska bidders
preference. The bidder's preference process was frequently
appealed and challenged because of ambiguity in the
language on procurement. Both Section 2 and Section 5
provided explicit language that an Alaska business license
was required at the time of bid submission. She noted that
the change does address Representative Gara's concern. The
provision at least ensured an Alaska residential preference
on the opening bid.
1:29:51 PM
Representative Gara commented on the legal issue. He
informed the committee that interstate commerce laws
precluded that the state cannot require residency in Alaska
for more than a year. A residential bidder preference was
legal up to one year. He wanted to research a way to ensure
that the Alaskan presence [residency] was real and not a
"shell presence." Mr. Jones outlined the existing requisite
for the Alaska bidder preference. The statute required that
a place of business in Alaska was operating and staffed six
months prior to the bid opening. A shell presence was
illegal.
Representative Gara argued that the problem existed. An
outside company can open a fake office and pay an employee
to appear busy. Mr. Jones countered that tightening the
regulations would hurt honest businesses. Further
regulatory measures could eliminate small business or large
corporations from the competitive bid process.
Co-Chair Stoltze noted flaws in Alaska's procurement
process. He gave the example of a Colorado company that was
considered an Alaskan business because its previous
business in the state counted as a presence. The company
acquired an Alaskan bidder's preference over an Arizona
firm. Mr. Jones confirmed that the firm did qualify because
of their presence in the state even though the work was
performed out of state.
1:32:52 PM
Representative Guttenberg cited Sections 2 and 5 of the
legislation. He queried the language change from "must" to
"shall." Mr. Jones replied that the change in semantics did
not make a difference.
Representative Costello asked whether Department of
Commerce, Community and Economic Development (DCCED) had
the ability to share their business license data base with
DOA. Mr. Jones answered in the affirmative. He related that
DOA often referenced DCCED's data base when verifying
qualifications.
Representative Costello referred to Section 7. She asked
what percentage of projects would fall under the lower
limit of small procurements. Mr. Jones voiced that the
question was difficult to answer due to lack of an
automated procurement system to tally the numbers. He
explained the logic behind the changes in small
procurements. The previous raise in dollar limits occurred
in the 1990's. The changes in small procurement afforded
procurement officials more time to deal with higher risk
procurements and less time on simple procurements. The
department hoped that by raising the threshold and placing
more procurement in the small procurement realm small and
rural business would benefit. The small procurement realm
offered small business a streamlined process and easier
access to state bids.
1:36:00 PM
Representative Costello cited the repeal of the vendor list
in Section 10. She wondered what the vendor list was and
what effect removal would provide the process. Mr. Jones
explained that vendor lists were used by DOA to notify bids
to interested parties. The state law mandated DOA to
maintain vendor lists. The vendor list became outmoded
since the onset of electronic media. Currently, the state
provided public notice of bids on its online public notice
website. The online tool was convenient and free. The
public learned where to find the information online. The
department abandoned expensive newspaper notices and
mailings. He did not believe the lists were useful any
longer.
Representative Neuman questioned how the changes to small
procurements ensured that the process remained competitive
for the state. Mr. Jones revealed that the state was
required to obtain a minimum of three informal bids. The
change removed the more formal competitive bidding
requirements. He assured that minimum levels of competition
remained in statue for small procurements.
Co-Chair Stoltze OPENED and CLOSED public testimony.
Co-Chair Stoltze noted the zero fiscal note for DOA.
HOUSE BILL NO. 205
"An Act relating to state and public entity
procurement, including the State Procurement Code,
procurement preferences, and contract awards; relating
to the meaning of 'Alaska bidder'; and providing for
an effective date."
REPRESENTATIVE ANNA FAIRCLOUGH, SPONSOR, highlighted the
legislation. She explained that HB 205 endeavored to
provide uniformity to the application of preferences
through statutory changes in the procurement code.
Currently, preferences do not contain the same language so
they must be applied differently. It also clarified which
preferences are cumulative and those that may not be
combined. The legislation consolidated the procurement
preferences under one statute. The bill eliminated the
seldom used preference for employers of the disabled. The
changes streamlined the procurement code to ensure
consistent application of the law which resulted in a clear
and efficient procurement process.
Mr. Jones emphasized that HB 205 made preferences more
consistent and organized into a single section of statute.
He related that the current process was complex. The
preferences were diffused through statute with different
formulas and applications. A three-hour class was provided
for procurement employees to learn how to apply the
preferences. He noted that HB 205 did not eliminate the
Alaska offers preference.
1:42:07 PM
Mr. Jones pointed out that the biggest change to statute
was Section 11, which consolidated all preferences into a
new section of statue. All of the preferences would
transfer into the new section except for the preference
related to the disabled. The department viewed it as a
duplicate preference. He identified two other preferences
that benefit the disabled. He noted that the section
authorized use of alternative verification for the disabled
who qualify for a preference. Under current law the
disabled must provide letters from doctors. The requirement
placed undue burden on the disabled.
Vice-chair Fairclough emphasized that the controversial
offers preference contained in the legislation in the past
was not included in HB 205. She stated that it was not her
intention to offer the preference as an amendment. Her
intention was to provide a better working environment and
more competition and savings for the state. She noted that
the Alaska State Chamber of Commerce supported both HB 204
and HB 205 and read the contents of a handwritten letter:
Dear Vice-chair Fairclough:
The Alaska State Chamber of Commerce supports HB 204
and HB 205 as important steps in reforming the
procurement code. Thanks for working with us on this.
Rachael Petro
Executive Director
Vice-chair Fairclough noted that she did a substantial
amount of outreach before she offered the legislation.
1:46:10 PM
Representative Costello queried what organizations
supported the legislation. Vice-chair Fairclough responded
that her staff contacted the Alaska State Chamber of
Commerce which redirected the request to all local
chambers. Her staff contacted Anchorage homebuilders and
any homebuilding association, the Associated General
Contractors, as well as any entities that opposed or
expressed interest in the previous versions of the
legislation. She added that the legislation was vetted to
all of the interested and contacted parties.
Representative Costello questioned whether the
administration requested the changes or if she initiated
the legislation. Vice-chair Fairclough responded that the
legislation was her own idea. She expounded that she was
working on the Alaska veteran's preference when she
discovered inconsistencies in the preference language. She
began discussions with the department and learned of DOA's
challenges with the preferences. She offered the complex
legislation because she wanted to create efficiencies in
the code, save procurement officer's time, and provide
opportunities for competitive bids in smaller communities.
Representative Neuman shared concerns with Sections 2 and 3
of HB 205. He noted that the legislation provided a 7
percent preference for agricultural products purchased in
the state and deleted language that specified the
agricultural products shall be of like quality compared to
agricultural products harvested outside the state. He
maintained that Alaskan suppliers produced superior quality
products. He supported the purchase of Alaskan agricultural
products by state agencies and schools. He felt that
quality was an inducement to buy locally.
1:50:33 PM
Representative Neuman worried that removing the language
regarding "comparable quality" would hurt Alaskan
producers. Mr. Jones indicated the change in language was
specifically meant to make the application of the
preference simpler and would not change how the products
were graded. He judged that changing the language would
remove an impediment currently in place that mandated
comparison of Alaska produce to outside produce. He added
that the current agricultural preference was cumbersome. In
order to calculate the preference the state went through a
bidding process, applied the Alaska bidder preference and
found the lowest bid, took 7 percent of that bid and
subtracted that number from the bid that offered the
Alaskan produce. The change would allow for a simple 7
percent deduction. He deemed that the change was easier to
understand and apply, and would remove an impediment.
Representative Neuman argued that the problem was where the
quality of the produce was measured. The outside produce
was graded and compared at point of origin. The produce
lost quality and vitamin content in transit to Alaska.
Alaskan agricultural products cannot compete against the
outside produce with the existing process. In reality
Alaskan produce was the better product measuring quality
and nutritional value.
1:54:15 PM
Co-Chair Stoltze asked whether Vice-chair Fairclough would
object to a "friendly" floor amendment on the issue if
warranted. Vice-chair Fairclough reminded that the
preference guaranteed 7 percent instead of up to 7 percent.
She requested confirmation that the 7 percent agricultural
preference could couple with a 12 percent "assurity"
preference for agricultural products. Mr. Jones confirmed
that the agriculture preferences accumulated.
Representative Neuman noted that price was not the only
factor. He recognized the important multiplier effect and
substantial benefit to the state by purchasing Alaska
products. He contended that Alaska cannot compete with
outside suppliers because of economies of scale. The
outside supplier was aware of the 7 percent preference and
was able to underbid Alaskan suppliers. The bidder's
preference did not consider the significant value to the
state when large state institutions buy locally. He
exemplified that the Department of Corrections (DOC)
purchased large quantities of agricultural products but are
often able to purchase large quantities from outside buyers
at greater than 7 percent savings compared to in-state
products. He was uncertain how to rectify the situation
with preferences. He reported that many agency
commissioners agreed with his assessment. He asked if the
legislation was an opportunity to correct the problem. Mr.
Jones agreed the problem was difficult. He noted that the
department was focused on bottom line costs. He suggested
an increase in the agricultural preference but was not sure
that was the answer.
Representative Neuman believed that a solution was
authorizing commissioners to purchase in-state if the
purchase provided substantial benefit to the state. Mr.
Jones related that he had dealt personally with the issue
through several administrations. He reminded the committee
that HB 205 raised the small procurement threshold. He
informed that a state agency could simply call a small
procurement from three Alaskan vendors and ensure buying
in-state. He thought the problem was more complicated than
simply preference. Market issues, timing, and the way the
state purchased products contributed to the problem. He
exemplified that DOC held contracts with large firms that
purchased agriculture products. The purchasers were looking
for year around consistency and reliability. Alaskan
suppliers cannot provide that.
2:00:19 PM
Representative Gara supported the agricultural preference.
He was concerned about the size of some of the preferences.
He pointed to Page 5, Line 11, and asked where the 15
percent preference applied. He believed in the state
accepting the extra costs of a 5 to 7 percent preference
for the benefit but thought 15 percent was excessive. Mr.
Jones explained that the preference benefited employment
programs that employ people with developmental
disabilities. Representative Gara established that the
entire section dealt with vocational programs for the
disabled. Mr. Jones agreed. Representative Gara thought the
preference was justified. He asked if the state was losing
the blind person's preference for vending machines. Mr.
Jones replied that was a federal program not affected by
the bill.
Representative Gara turned to Page 8, line 13, which cited
cumulative preferences. He asked which preferences were
cumulative and what the cumulative sum was. Mr. Jones
answered that in general, a bidder that qualified for two
similar preferences was prohibited from receiving both. He
exemplified that someone cannot be a disabled bidder and
receive a preference for an employment program or a bidder
cannot receive an agricultural preference and also obtain a
timber preference. He added that agricultural, timber, and
fisheries products cannot be combined. Disability
preferences cannot be combined. He exemplified that someone
can qualify for an Alaskan bidders preference or Alaskan
products preference and also be a disabled bidder. A bidder
could have an Alaskan product preference but could not
combine an agricultural preference.
2:04:09 PM
Representative Gara asked if cumulative language existed in
current statute. Mr. Jones responded in the affirmative. He
offered to provide a complete list. He reiterated that HB
205 did not change how preferences accumulated.
Co-Chair Stoltze OPENED and CLOSED public testimony.
2:05:44 PM
AT EASE
2:06:09 PM
RECONVENED
Vice-chair Fairclough MOVED to report HB 204 out of
Committee with individual recommendations and the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
HB 204 was REPORTED out of Committee with a "do pass"
recommendation and with attached previously publish fiscal
note: FN1, ADM.
Vice-chair Fairclough MOVED to report HB 205 out of
Committee with individual recommendations and the
accompanying fiscal note.
Representative Doogan OBJECTED to state that he commended
the work and did not want to see the bills again.
Representative Joule agreed.
There being NO further OBJECTION, it was so ordered.
HB 205 was REPORTED out of Committee with a "do pass"
recommendation and with attached previously published
fiscal note: FN1, ADM.
2:11:14 PM
AT EASE
2:22:45 PM
RECONVENED
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 49 support Letter.pdf |
HFIN 4/9/2011 1:00:00 PM |
HB 49 |