Legislature(1995 - 1996)
04/25/1996 01:50 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE BILL 482 "An Act relating to state procurement practices and procedures; and providing for an effective date." DUGAN PETTY, DIRECTOR, DIVISION OF GENERAL SERVICES, DEPARTMENT OF ADMINISTRATION, stated that HB 482 was the result of an effort which began in the Summer, 1995, in order to streamline the State's procurement practices. A Procurement Advisory Council was established. The responsibility of the council is to: * Look at the procurement law and note the changes needed to be implemented to streamline it. * Rewrite regulations and review all procurement policies to conform with the revised regulations and statutes. * Target non-responsive procurement practices. Mr. Petty spoke in support of HB 482 and provided an analysis of the substantive changes between current law and HB 482. [Copy on file]. Mr. Petty provided four amendments which the Department requests be adopted. [Copies on file]. Representative Parnell asked why Legal Services was not subject to the competitive bid process. Mr. Petty replied that it did not make sense to award Legal Services contracts through the competitive bid process. An invitation to bid usually is awarded to the low-responsive bidder. The only specifications would be that the bid complies with the document. Although, the process for legal services does not allow consideration of factors other than cost. Representative Parnell questioned if the Department of Law currently uses the Request For Proposal (RFP) process. Mr. Petty suggested that they do for some of their contracts. Often times, a suit will be brought against the State requiring legal services to defend the State. Representative Parnell indicated concern with a contract copy which the Department of Law entered into in 1983, stipulating that the State should not pay more than $75 thousand dollars for the contract. By 1995, the State added an amendment to that contract bringing the amount up to $19.9 million dollars. He objected to the disparity implicated, and requested proof that the Department of Law 3 is not "sole sourcing" contracts. The procurement process needs to be competitive. Mr. Petty pointed out that Legislative Audit had investigated the Legal Services contracts, finding problems with the Department of Law's procurement process. Representative Kelly asked the difference between "sole source" and "single source" return. Mr. Petty replied that "sole source" means that there is only one source available to do the work. The statute currently reads "sole source". HB 482 proposes a "single source" allowing the State to enter into a contract with a "single source" after determination is made that the bid process would not be practical to use. Representative Kelly questioned the need for a business proposing to bid to be required to have a valid Alaska business license. Mr. Petty interjected, to receive the license would cost $50 dollars including and a returned application. Representative Kelly recommended adding language clarifying that the bidding contender would only need to have applied for an Alaskan business license. Mr. Petty repeated that under current law, if a bidder submitted a bid, and they did not have the license, the bid would not be considered. In order to be on that list, there must be a business license. If the business has a license, has operated a business for six months in Alaska, and is a resident of the State, or if in a partnership, all are residents of the State, they would then qualify for the Alaska Bidders Preference which provides a 5% evaluation preference. To change the law would encourage people to compete from other states; that was not the intent of the original legislation when passed. Mr. Petty added, current statutes requires that the Department not send bids to out-of-state bidders. Representative Mulder asked if the Division of General Services kept a list of legal service contracts in the State. Mr. Petty noted that they do keep on file, the professional service contracts over $25 thousand dollars. Those reports are kept in the Department of Administration (DOA). That Division is required by law to keep a procurement report. Representative Mulder inquired the number of contracts currently on file within the Department. Mr. Petty offered to provide that information. Representative Therriault referenced Section #23, Page 11, the delivery of supplies. Mr. Petty noted that "supplies" is well defined in statute as equipment and services. He referenced AS 36.36.90 which requires that supply purchases 4 be delivered to locations within the State. The Department shall determine that a point of delivery outside the State must be in the best interest of the State. The Department is not proposing a change under that statute to the existing reference. Current procurement code has sections that are applied to preferences for Alaskan business. (Tape Change, HFC 96-138, Side 2). Representative Kohring agreed with the legislation's intent to save costs, although, pointed out the excessive fiscal notes attached. Mr. Petty commented that some of the fiscal notes reflect savings. The central purchasing fiscal notes require action which will take additional time to show a savings. He added, to date, the State of Alaska has widely decentralized procurement. Regardless of the fiscal notes, the legislation will make the State run more effectively. Mr. Petty spoke to Amendment #1. [Copy on file]. Amendment Hanley noted that the "a" should not be deleted. Mr. Petty agreed. Representative Parnell MOVED the amended Amendment Mr. Petty spoke to Amendment #2. [Copy on file]. Amendment legislation with the Senate version. Representative Navarre MOVED to adopt Amendment #2. There being NO OBJECTION, it was adopted. Co-Chair Hanley asked if bidder preferences would be cumulative. Mr. Petty replied that some would be cumulative. The net effect does not always accomplish the intended net result. The Department requests to have a uniform way of applying the preferences. Discussion followed between Co-Chair Hanley and Mr. Petty regarding the possible bidder preferential percentage reaching 20%. Representative Brown MOVED to change the semicolon in Amendment #2 to a comma so that it would be grammatically correct. There being NO OBJECTION, it was amended. Mr. Petty explained Amendment #3. [Copy on file]. He noted that the amendment would reduce the rent threshold requirement for lease concessions from 15% to 10%. Representative Kohring suggested that drop was too steep. Mr. Petty replied, under authority granted, leases have been extended for 5 years in return for a 10% rent concession. A number of lessors were below market, and he thought that a 15% rent concession would be fair. Representative Kohring questioned the percentage of profit on a lease payment received by the lessee through the State 5 of Alaska. Mr. Petty explained that the State considers the indirect costs to be about 35% of the lease; beyond that would be operating and maintenance costs. The 35% number is the one used by the State to determine the profit margin. Representative Brown asked if there would be rent adjustments in the 10 year extensions. Mr. Petty pointed out that the base rent in the extensions would be reduced by 10%, and that the Consumer Price Index (CPI) always would affect the base rent. Representative Brown MOVED to adopt Amendment #3. There being NO OBJECTION, it was adopted. Mr. Petty explained Amendment #4. [Copy on file]. He stated that the added language would conform to that established in the Senate State Affairs Committee. The intent would be to use the Government Service Information (GSI) schedules when purchasing from State vendors. Co-Chair Hanley recommended amending the amendment by adding "made" and then insert "from persons located in the state". Representative Mulder MOVED to adopt the amended amendment. There being NO OBJECTION, it was adopted as amended. Representative Martin MOVED to adopt Amendment #5, 9- GH2020\F.3, Bannister, 4/24/96. [Copy on file]. He pointed out that the amendment would provide a title change while addressing lobbying concerns. Co-Chair Hanley noted that the amendment would prohibit the agencies listed from hiring a contract lobbyist. Representative Navarre commented that the language on Page 2, Line 5, would prohibit having employees lobby. Representative Brown disagreed, indicating that it is necessary for the agencies listed to have some contact with the Legislature regarding their interests. Following discussion among Committee members, Representative Brown MOVED to delete Page 2, Line 5. There being NO OBJECTION, the amendment was amended. Mr. Petty advised that the proposed amendment did not address procurement issues. He stated that the Division would not support the amendment from a procurement perspective, suggesting that these were operational decisions which should be made by each individual agency. Representative Navarre OBJECTED to Amendment #5 in order that Legal Services could provide an opinion on the single subject rule prohibition. He noted that he supported the intent. Co-Chair Hanley advised that he would request a legal opinion and if there was a problem, that portion would 6 be removed from the bill. Representative Navarre agreed and WITHDREW the OBJECTION to the amendment. Representative Brown asked why only Alaska Industrial Development and Export Authority (AIDEA) had been referenced in the title. Representative Martin responded that the intent was to place AIDEA under the procurement code. Co- Chair Hanley understood the intent was to include AIDEA under the prohibition on hiring. (Tape Change, HFC 96-139, Side 1). Co-Chair Hanley pointed out that Senator Pearce had submitted the amendment. He noted that he agreed with the intent, although, questioned the referenced section. Representative Mulder MOVED to amend Amendment #5, Page 1, Line 2, striking "," and then deleting material: "Including entities owned and operated by the Alaska Industrial Development and Export Authority,"; and deleting Lines 16 through 18 beginning with the "," on Line 16. There being NO OBJECTION, it was amended. Representative Navarre recommended that Legal Services provide an opinion on the amended amendment. There being NO OBJECTION, Amendment #5 was adopted. Representative Parnell spoke to Amendment #6. [Copy on file]. Mr. Petty noted that Amendment #6 would add language to allow for accredited youth education programs to be exempted from the procurement statute. Representative Parnell MOVED to adopt Amendment #6. There being NO OBJECTION, it was adopted. Co-Chair Foster MOVED to report CS HB 482 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. CS HB 482 (FIN) was reported out of Committee with "no recommendations" and with zero fiscal notes by the (2) Department of Administration dated 2/9/96, the Department of Commerce and Economic Development dated 2/9/96, the Department of Community and Regional Affairs dated 2/9/96, the Department of Health and Social Services dated 2/9/96, the Department of Labor dated 2/9/96, the Department of Law dated 2/9/96, the Department of Military and Veterans Affairs dated 2/9/96, the Department of Corrections dated 2/9/96, the Department of Education dated 2/9/96, the Department of Environmental Conservation dated 2/9/96, the Department of Fish and Game dated 2/9/96, the Department of Natural Resources dated 2/9/96, the Department of Public Safety dated 2/9/96, the Department of Revenue dated 2/9/96, 7 Statewide dated 2/9/96 and a fiscal impact note by the Department of Transportation and Public Facilities dated 2/9/96, and the Department of Administration.