Legislature(2007 - 2008)CAPITOL 120
04/02/2007 01:00 PM House JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| HB158 | |
| HB151 | |
| HB182 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 158 | TELECONFERENCED | |
| + | HB 182 | TELECONFERENCED | |
| + | HB 151 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 151 - INDEMNITY CLAUSE IN PUBLIC CONTRACTS 2:17:17 PM CHAIR RAMRAS announced that the next order of business would be HOUSE BILL NO. 151, "An Act requiring an indemnification and hold harmless provision in professional services contracts of state agencies, quasi-public agencies, municipalities, and political subdivisions." [Before the committee was CSHB 151(STA); included in members' packets was a proposed committee substitute (CS) for HB 151, Version 25-LS0479\L, Bannister, 3/28/07.] 2:18:53 PM REPRESENTATIVE CRAIG JOHNSON, Alaska State Legislature, sponsor by request, explained that HB 151 will require that uniform indemnification and hold harmless provisions be included in professional services contracts for all public agencies within the state. He suggested that the proposed changes are sound public policy and will constitute fair business practices between the public and private sector. House Bill 151 will ensure accountability for all parties involved in professional services contracts, will prevent one party from being absolved of its own negligence, and will save the state money. Currently, in some contracts that are signed by the state - specifically those relayed to construction and engineering - the designer is required to hold state agencies harmless regardless of who is responsible for a negligent act. REPRESENTATIVE JOHNSON, in response to comments, relayed that he sponsored HB 151 at the request of the [Alaska Professional Design Council (APDC)]. He explained that HB 151 pertains to state contracts, not contracts between private individuals; HB 151 will apply the language currently being used by the Department of Transportation & Public Facilities (DOT&PF) to all [construction-related professional services contracts of state agencies, quasi-public agencies, municipalities, and political subdivisions]. In response to further comments, he expressed a desire to see those responsible for mistakes being held accountable for those mistakes, and suggested that this will be accomplished via HB 151. CHAIR RAMRAS suggested that it is the nature of those in the construction industry to try and absolve themselves of blame when things go wrong. He observed that none of those expressing an interest in testifying on the bill are contractors, and that only architects and engineers have written letters of support. REPRESENTATIVE JOHNSON indicated that he's had several conversations with people in various aspects of the construction industry and has not been made aware of any problems with the bill. Currently, one can't even buy insurance that will allow one to indemnify someone else, so every time someone bids on a state contract, he/she is putting his/her company at stake. He attempted to assure the committee that HB 151 won't circumvent the courts but will instead hold the appropriate party accountable for its actions. Presently, some of the best engineers and designers either don't bid on a contract because they're required to indemnify the other parties or they "bid their project up considerably" to cover the potential cost. He concluded by suggesting that people who are not responsible for an error shouldn't be held accountable for that error. 2:26:48 PM REPRESENTATIVE HOLMES referred to the definition of "consultant" found on page 2, line 24, and asked whether the provisions of the bill would apply to sub-consultants. REPRESENTATIVE JOHNSON offered his understanding that contract law says that the contractor is the responsible party and the subcontractors are then responsible to that contractor. Again, the bill addresses contracts between state agencies and private companies. In response to another question, he indicated that the contractor would be responsible for any problems caused by the subcontractors. REPRESENTATIVE DAHLSTROM offered her understanding that subcontractors must obtain "their own bonding" - it would not be the responsibility of the main contractor. REPRESENTATIVE JOHNSON said he would assume that that's always the case, and that a prudent contractor would ensure that the subcontractors were properly bonded. He characterized the current situation in which a designer or an engineer is forced to indemnify the state agency regardless of who is at fault as unfair. CHAIR RAMRAS referred to a construction project involving private entities wherein the roof leaks but the contractor built it to the specifications of the designer. After reading a portion of one letter of support from a designer, he again noted that members' packets don't contain any letters of support from contractors. REPRESENTATIVE JOHNSON suggested that in the aforementioned situation the designer is at fault. CHAIR RAMRAS argued, though, that that designer isn't accepting any of the liability. REPRESENTATIVE JOHNSON surmised that in that situation, the parties will have to go to court. He again pointed out that the bill doesn't pertain to contracts between private individuals. REPRESENTATIVE SAMUELS surmised that currently the liability is different for a university project than it is for a DOT&PF project. REPRESENTATIVE JOHNSON concurred. 2:36:25 PM REPRESENTATIVE GRUENBERG moved to adopt the proposed committee substitute (CS) for HB 151, Version 25-LS0479\L, Bannister, 3/28/07, as the work draft. REPRESENTATIVE COGHILL objected for the purpose of discussion. REPRESENTATIVE JOHNSON explained that Version L defines "construction" to mean the process of building, altering, repairing, maintaining, improving, demolishing, planning, and designing a public highway, a structure, a building, a utility, infrastructure, or another public improvement to real property, but does not mean the routine operation of a public improvement. REPRESENTATIVE GRUENBERG noted that the definition of "professional services" in AS 36.30.990 - which is referenced on page 2, line 26, of Version L - does not include contractors; AS 36.30.990(19) says: (19) "professional services" means professional, technical, or consultant's services that are predominantly intellectual in character, result in the production of a report or the completion of a task, and include analysis, evaluation, prediction, planning, or recommendation; REPRESENTATIVE JOHNSON said that those listed in that definition are the ones who are currently required to hold harmless everyone down the line regardless of fault. In response to a question, he indicated that the bill is meant to indemnify the designer against a contractor's [mistake]. REPRESENTATIVE GRUENBERG surmised that the goal is to have liability apportioned fairly between the parties. CHAIR RAMRAS and REPRESENTATIVE JOHNSON concurred. CHAIR RAMRAS asked that people in the construction industry be contacted to determine their view on HB 151. REPRESENTATIVE JOHNSON agreed to do so, and indicated that he wants everyone to be liable for their own errors and omissions. In response to a question, he offered his understanding that currently the bill will only apply to architects and engineers. 2:44:11 PM CHAIR RAMRAS referred to the University of Alaska museum, and said he is questioning whether the bill will unfairly shift the burden of liability to contractors. REPRESENTATIVE COGHILL removed his objection to the adoption of Version L as the work draft. CHAIR RAMRAS stated that Version L was before the committee. [HB 151, Version L, was held over.]
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