Legislature(2005 - 2006)CAPITOL 120

04/18/2005 01:00 PM JUDICIARY

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01:20:12 PM Start
01:20:54 PM Attorney General of Alaska
01:22:05 PM Board of Governors of the Alaska Bar
01:34:21 PM HB257
03:28:36 PM HB133
03:55:02 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Confirmation hearing: Bd of Govs of the TELECONFERENCED
Ak Bar - Joseph N. Faulhaber
Heard & Held
Moved CSSSHB 133(JUD) Out of Committee
Scheduled But Not Heard
Scheduled But Not Heard
+ Bills Previously Heard/Scheduled TELECONFERENCED
Confirmation hearing: Attorney General
<Continued from 4/13 8:30 a.m. meeting>
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE JUDICIARY STANDING COMMITTEE                                                                             
                         April 18, 2005                                                                                         
                           1:20 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Lesil McGuire, Chair                                                                                             
Representative Tom Anderson                                                                                                     
Representative John Coghill                                                                                                     
Representative Nancy Dahlstrom                                                                                                  
Representative Les Gara                                                                                                         
Representative Max Gruenberg                                                                                                    
MEMBERS ABSENT                                                                                                                
Representative Pete Kott                                                                                                        
COMMITTEE CALENDAR                                                                                                            
CONFIRMATION HEARING(S)                                                                                                         
Attorney General of Alaska  [Continued from 4/13/05 meeting that                                                              
occurred jointly with the Senate Judiciary Standing Committee]                                                                  
     David W. Marquez - Anchorage                                                                                               
     - CONFIRMATION(S) ADVANCED                                                                                                 
Board of Governors of the Alaska Bar                                                                                          
     Joseph N. Faulhaber - Fairbanks                                                                                            
     - CONFIRMATION(S) HEARD AND HELD [Confirmation addressed                                                                   
       again on 4/27/05]                                                                                                        
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."                                                                                    
     - HEARD AND HELD                                                                                                           
SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 133                                                                                       
"An Act relating to incorporation  of boroughs and to regulations                                                               
of  the  Local  Boundary  Commission  to  provide  standards  and                                                               
procedures   for   municipal   incorporation,   reclassification,                                                               
dissolution, and certain municipal boundary changes; and                                                                        
providing for an effective date."                                                                                               
     - MOVED CSSSHB 133(JUD) OUT OF COMMITTEE                                                                                   
HOUSE BILL NO. 92                                                                                                               
"An Act relating to the purchase of interests in corporations,                                                                  
including limited liability companies, by the University of                                                                     
     - SCHEDULED BUT NOT HEARD                                                                                                  
HOUSE BILL NO. 177                                                                                                              
"An Act relating to employee and employer contributions to the                                                                  
teachers' retirement system and the public employees' retirement                                                                
system; and providing for an effective date."                                                                                   
     - SCHEDULED BUT NOT HEARD                                                                                                  
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 257                                                                                                                  
SHORT TITLE: STATE PROCUREMENT ELECTRONIC TOOLS                                                                                 
SPONSOR(S): JUDICIARY                                                                                                           
04/06/05       (H)       READ THE FIRST TIME - REFERRALS                                                                        
04/06/05       (H)       JUD, FIN                                                                                               
04/11/05       (H)       JUD AT 1:00 PM CAPITOL 120                                                                             
04/11/05       (H)       <Bill Hearing Rescheduled to 4/13>                                                                     
04/13/05       (H)       JUD AT 1:00 PM CAPITOL 120                                                                             
04/13/05       (H)       Heard & Held                                                                                           
04/13/05       (H)       MINUTE(JUD)                                                                                            
04/18/05       (H)       JUD AT 1:00 PM CAPITOL 120                                                                             
BILL: HB 133                                                                                                                  
SHORT TITLE: LOCAL BOUNDARY COMMISSION REGS & POWERS                                                                            
SPONSOR(S): REPRESENTATIVE(S) COGHILL                                                                                           
02/09/05       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/09/05       (H)       CRA, STA                                                                                               
02/16/05       (H)       SPONSOR SUBSTITUTE INTRODUCED                                                                          
02/16/05       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/16/05       (H)       CRA, STA                                                                                               
02/24/05       (H)       CRA AT 8:00 AM CAPITOL 124                                                                             
02/24/05       (H)       Heard & Held                                                                                           
02/24/05       (H)       MINUTE(CRA)                                                                                            
03/03/05       (H)       CRA AT 8:00 AM CAPITOL 124                                                                             
03/03/05       (H)       Moved CSSSHB 133(CRA) Out of Committee                                                                 
03/03/05       (H)       MINUTE(CRA)                                                                                            
03/04/05       (H)       CRA RPT CS(CRA) 5DP 2NR                                                                                
03/04/05       (H)       DP: SALMON, NEUMAN, KOTT, THOMAS,                                                                      
03/04/05       (H)       NR: LEDOUX, CISSNA                                                                                     
04/02/05       (H)       STA AT 10:00 AM CAPITOL 106                                                                            
04/02/05       (H)       Moved CSSSHB 133(STA) Out of Committee                                                                 
04/02/05       (H)       MINUTE(STA)                                                                                            
04/04/05       (H)       STA RPT CS(STA) NT 3DP 2NR                                                                             
04/04/05       (H)       DP: LYNN, ELKINS, SEATON;                                                                              
04/04/05       (H)       NR: GARDNER, GRUENBERG                                                                                 
04/04/05       (H)       JUD REFERRAL ADDED                                                                                     
04/13/05       (H)       JUD AT 1:00 PM CAPITOL 120                                                                             
04/13/05       (H)       <Bill Hearing Postponed to 4/18>                                                                       
04/18/05       (H)       JUD AT 1:00 PM CAPITOL 120                                                                             
WITNESS REGISTER                                                                                                              
JOSEPH N. FAULHABER, Appointee                                                                                                  
to the Board of Governors of the Alaska Bar                                                                                     
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified as appointee to the Board of                                                                     
Governors of the Alaska Bar.                                                                                                    
VERN JONES, Chief Procurement Officer                                                                                           
Central Office                                                                                                                  
Division of General Services (DGS)                                                                                              
Department of Administration (DOA)                                                                                              
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  During discussion of HB 257 and proposed                                                                   
Amendment 1, provided comments and responded to questions.                                                                      
SCOTT HAWKINS, General Manager                                                                                                  
Material Services                                                                                                               
Alaska Supply Chain Integrators, LLC (ASCI)                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 257 and                                                                         
responded to questions.                                                                                                         
JIM DUNCAN, Business Manager                                                                                                    
Alaska State Employees Association (ASEA)                                                                                       
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Provided comments during discussion of                                                                     
HB 257 and responded to questions and comments.                                                                                 
BARRY JACKSON,  Procurement Analyst; Project  Manager; Programmer                                                               
Resource Data, Inc. (RDI)                                                                                                       
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:    Provided comments  during  discussion  of                                                               
HB 257.                                                                                                                       
LAURA LAWRENCE                                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Testified  in  opposition  to HB  257  and                                                               
SB 160.                                                                                                                         
GAIL KOZLOWSKI                                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:    Provided comments  during  discussion  of                                                               
HB 257.                                                                                                                         
ELLEN KUBIAK                                                                                                                    
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:    Provided comments  during  discussion  of                                                               
HB 257.                                                                                                                         
DONNA SCHELIN                                                                                                                   
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   During discussion  of HB 257,  relayed that                                                               
she would be faxing some information to the committee.                                                                          
KEN BROWN                                                                                                                       
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:    Provided comments  during  discussion  of                                                               
HB 257.                                                                                                                         
RYNNIEVA MOSS, Staff                                                                                                            
to Representative Coghill                                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:    Presented  SSHB  133  on  behalf  of  the                                                               
sponsor, Representative Coghill.                                                                                                
SARAH FELIX, Assistant Attorney General                                                                                         
Labor and State Affairs Section                                                                                                 
Civil Division (Juneau)                                                                                                         
Department of Law (DOL)                                                                                                         
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   Expressed concerns  on behalf  of Marjorie                                                               
Vandor, Department of Law, during discussion of SSHB 133.                                                                       
EDGAR BLATCHFORD, Commissioner                                                                                                  
Department  of   Commerce,  Community,  &   Economic  Development                                                               
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   Expressed  concerns  during discussion  of                                                               
SSHB 133.                                                                                                                       
DEBBIE THOMPSON                                                                                                                 
Union Bay, Alaska                                                                                                               
POSITION  STATEMENT:    Provided comments  during  discussion  of                                                               
SSHB 133.                                                                                                                       
VIOLA JERREL, Ph.D.                                                                                                             
Alaskans Opposed to Annexation                                                                                                  
Homer, Alaska                                                                                                                   
POSITION STATEMENT:  Testified in support of SSHB 133.                                                                          
ACTION NARRATIVE                                                                                                              
CHAIR  LESIL   McGUIRE  called   the  House   Judiciary  Standing                                                             
Committee  meeting  to  order at  1:20:12  PM.    Representatives                                                             
McGuire, Anderson, Coghill, and Gara  were present at the call to                                                               
order.   Representatives Dahlstrom  and Gruenberg arrived  as the                                                               
meeting was in progress.                                                                                                        
^CONFIRMATION HEARING(S)                                                                                                      
^Attorney General of Alaska                                                                                                   
CHAIR McGUIRE  announced that the committee  would first consider                                                               
the appointment of  David W. Marquez to the  position of Attorney                                                               
General of Alaska.  [Mr.  Marquez had provided testimony during a                                                               
joint meeting of  the House Judiciary Standing  Committee and the                                                               
Senate Judiciary Standing Committee on 4/13/05.]                                                                                
1:20:54 PM                                                                                                                    
REPRESENTATIVE COGHILL  made a motion  to advance  from committee                                                               
the nomination of  David W. Marquez as appointee  to the position                                                               
of Attorney General of Alaska.   He reminded members that signing                                                               
the reports  regarding appointments to boards  and commissions in                                                               
no way  reflects individual members'  approval or  disapproval of                                                               
the appointees, and that the  nominations are merely forwarded to                                                               
the full legislature for confirmation or rejection.                                                                             
CHAIR  McGUIRE  reiterated  that signing  the  reports  regarding                                                               
appointments  to  boards  and  commissions  in  no  way  reflects                                                               
individual members'  approval or  disapproval of  the appointees,                                                               
and  that  the  nominations  are merely  forwarded  to  the  full                                                               
legislature for confirmation or rejection.                                                                                      
CHAIR  McGUIRE asked  whether there  were any  objections to  the                                                               
motion  to advance  from  committee the  nomination  of David  W.                                                               
Marquez  as appointee  to  the position  of  Attorney General  of                                                               
Alaska.     There  being  no  objection,   the  confirmation  was                                                               
^Board of Governors of the Alaska Bar                                                                                         
1:22:05 PM                                                                                                                    
CHAIR McGUIRE  announced that the  committee would  next consider                                                               
the appointment of Joseph N.  Faulhaber to the Board of Governors                                                               
of the Alaska Bar.                                                                                                              
The committee took an at-ease from 1:23 p.m. to 1:26 p.m.                                                                       
1:26:06 PM                                                                                                                    
JOSEPH N. FAULHABER,  Appointee to the Board of  Governors of the                                                               
Alaska  Bar, in  response to  the question  of why  he wishes  to                                                               
continue serving  on the  Board of Governors  of the  Alaska Bar,                                                               
relayed that he enjoys the work,  and feels that he adds a unique                                                               
perspective,   perhaps  more   of  a   pragmatic  view,   to  the                                                               
proceedings.   He relayed that  during his  time on the  Board of                                                               
Governors, he succeeded in getting  the Alaska Bar Association to                                                               
accept credit cards.                                                                                                            
REPRESENTATIVE GRUENBERG  opined that the Alaska  Bar Association                                                               
should mandate continuing legal education for its members.                                                                      
MR.  FAULHABER explained  that the  Board of  Governors [adopted]                                                               
mandatory  continuing  legal   education  requirements,  but  the                                                               
[Alaska] Supreme Court overturned them.                                                                                         
REPRESENTATIVE  GRUENBERG opined  that it  is also  time for  the                                                               
Alaska Bar Association to allow  legal specialization, as is done                                                               
in  some other  states, via  examination;  for example,  he is  a                                                               
member of the American Academy of Matrimonial Lawyers.                                                                          
MR. FAULHABER said he would be in  favor of such.  He offered his                                                               
understanding that one  of the Alaska Bar  Association's goals is                                                               
to advance  the science of  jurisprudence, and opined  that since                                                               
the Alaska Bar Association  benefits from occupational licensing,                                                               
the  public  should be  able  to  expect  a certain  standard  of                                                               
expertise from its members.                                                                                                     
1:31:20 PM                                                                                                                    
CHAIR McGUIRE  thanked Mr. Faulhaber,  and concurred  that public                                                               
members are  able to offer  a different perspective to  the Board                                                               
of  Governors.     She  referred  to  an  issue   raised  at  Mr.                                                               
Faulhaber's  last confirmation  hearing, that  of establishing  a                                                               
different  membership fee  for those  that volunteer  their legal                                                               
services  or those  that  serve  in the  legislature.   She  also                                                               
raised the issue that Alaska is  one of the highest in the nation                                                               
with regard to Bar dues and  Bar examination fees.  She asked Mr.                                                               
Faulhaber to comment on those issues.                                                                                           
[Technical   difficulties  with   the  teleconference   equipment                                                               
occurred, resulting  in the confirmation hearing  being set aside                                                               
until 4/27/05.]                                                                                                                 
HB 257 - STATE PROCUREMENT ELECTRONIC TOOLS                                                                                   
[Contains testimony  in opposition to  SB 160, companion  bill to                                                               
HB 257.]                                                                                                                        
1:34:21 PM                                                                                                                    
CHAIR McGUIRE announced that the  next order of business would be                                                               
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                                                               
The committee took an at-ease from 1:34 p.m. to 1:35 p.m.                                                                       
CHAIR McGUIRE, speaking as chair  of the House Judiciary Standing                                                               
Committee, sponsor  of HB  257, asked  Vern Jones,  Department of                                                               
Administration (DOA),  for an explanation  of the  DOA's proposed                                                               
language change  [later referred  to as Conceptual  Amendment 1],                                                               
which read [original punctuation provided]:                                                                                     
                             A BILL                                                                                           
                      FOR AN ACT ENTITLED                                                                                     
        "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."                                                                                                         
     BE  IT  ENACTED BY  THE  LEGISLATURE  OF THE  STATE  OF                                                                  
     *  Section 1.   AS  36.30 is  amended by  adding a  new                                                                  
     section to article 1 to read:                                                                                              
          Sec. 36.30.093.  State procurement and electronic                                                                   
     commerce tools program.                                                                                                  
          (a)  The department may enter into a program under                                                                    
     which the  department contracts with a  person from the                                                                    
     private sector  to provide procurement services  and to                                                                    
     provide  for   the  delivery  and  use   of  electronic                                                                    
     commerce  tools.   Notwithstanding any  other provision                                                                    
     of this  chapter, the contract  shall be  awarded under                                                                    
     AS 36.30.100 - 36.30.265.                                                                                                  
          (b)  Notwithstanding any other  provision of  this                                                                    
     chapter,  all state  departments and  instrumentalities                                                                    
     of the state may  participate in the program authorized                                                                    
     by (a) of this section.                                                                                                    
          (c)  A  procurement   conducted  by   the   person                                                                    
     selected under  (a) of this  section is not  subject to                                                                    
     this chapter or to AS  36.15.  However, the procurement                                                                    
     is subject to (d) -  (u) of this section.                                                                                  
          (d)  A contract based on  solicited bids  shall be                                                                    
     awarded  to  the   lowest  responsive  and  responsible                                                                    
     bidder  after  an  Alaska  bidder  preference  of  five                                                                    
     percent  has been applied for evaluation purposes.                                                                         
          (e)  If a bidder qualifies as an Alaska bidder and                                                                    
     is offering services through an  employment program,  a                                                                    
     15  percent  cost  preference will  be  applied  during                                                                    
          (f)  If a bidder  is  an Alaska  bidder  and is  a                                                                    
     qualifying entity,  a ten percent cost  preference will                                                                    
     be applied during evaluation.                                                                                              
          (g)  If a bidder  is an  Alaska bidder  and if  50                                                                    
     percent or more  of the bidder's employees  at the time                                                                    
     the bid  is submitted are persons  with disabilities, a                                                                    
     ten  percent cost  preference  will  be applied  during                                                                    
     evaluation.   The  contract must  contain a  promise by                                                                    
     the  bidder   that  the  percentage  of   the  bidder's                                                                    
     employees  who  are   persons  with  disabilities  will                                                                    
     remain at 50 percent or more during the contract term.                                                                     
          (h)  Insurance-related contracts shall  be awarded                                                                    
     to the  lowest responsive and responsible  bidder after                                                                    
     an Alaska  bidder preference of  five percent  has been                                                                    
     applied  during   evaluation.    In   this  subsection,                                                                    
     "Alaska bidder" means a person  who is an Alaska bidder                                                                    
     and an Alaska domestic insurer.                                                                                            
          (f)  Alaska  products  shall   be  used   whenever                                                                    
     practicable  in   procurements  for  a   state  agency.                                                                    
     Recycled Alaska  products shall be  used when  they are                                                                    
     of  comparable   quality,  of  equivalent   price,  and                                                                    
     appropriate for the intended use.                                                                                          
          (g)  If   a bid    indicates  that the  product(s)                                                                    
     being  purchased will  be recycled  Alaska products,  a                                                                    
     cost preference of five percent  will be applied during                                                                    
          (h)  In a project financed by state money in which                                                                    
     the  use of  timber,  lumber,  and manufactured  lumber                                                                    
     products   is  required,   only  timber,   lumber,  and                                                                    
     manufactured lumber products  originating in this state                                                                    
     from local forests shall be used wherever practicable.                                                                     
          (i)  When agricultural products are purchased  , a                                                                    
     seven percent  cost preference  will be  applied during                                                                    
     evaluation  to agricultural  products harvested  in the                                                                    
          (j)  When fisheries  products   are  purchased,  a                                                                    
     seven percent  cost preference  will be  applied during                                                                    
     evaluation   to   fisheries   products   harvested   or                                                                    
     processed within the jurisdiction of the state.                                                                            
          (k)  If a bid or  offer designates  the use  of an                                                                    
     Alaska  product  that  is identified  in  the  contract                                                                    
     specifications and  designated as a Class  I, Class II,                                                                    
     Class  III state  product under  AS  36.30.332, a  cost                                                                    
     preference equal to the  percentage established for the                                                                    
     class  under AS  36.30.332(c)  will be  applied to  the                                                                    
     product  during  evaluation.   The  program  contractor                                                                    
     shall  use  the  Alaska  product  preference  list,  as                                                                    
     described  in  3  AAC  92.090(a),   as  the  basis  for                                                                    
     establishing   the   percentage   of   Alaska   product                                                                    
          (l)  If a  contractor  designates the  use  of  an                                                                    
     Alaska product  in a bid  or proposal and fails  to use                                                                    
     the  designated  product  for  a  reason  within  their                                                                    
     control,  each  payment  under the  contract  shall  be                                                                    
     reduced  according  to the  schedule  set  forth in  AS                                                                    
          (m)  Except as provided under (q) of this section,                                                                    
     all preferences are cumulative and  shall be applied in                                                                    
     the order referenced under (d) - (n) of this section.                                                                      
          (n)  A bidder may not receive a preference under                                                                      
     this section  under both (d)  and (e), (d) and  (f), or                                                                    
     (e) and (f) for the same contract.                                                                                         
          (o)  In order to qualify for a preference under                                                                       
     (e), (f),  or (g) of  this section, a bidder  shall add                                                                    
     value  by actually  performing, controlling,  managing,                                                                    
     and  supervising the  services  provided,  or a  bidder                                                                    
     shall  have   sold  supplies  of  the   general  nature                                                                    
     solicited to other state  agencies, governments, or the                                                                    
     general public.                                                                                                            
          (p)  When awarding a contract under competitive                                                                       
     sealed   proposals,   the  program   contractor   shall                                                                    
     consider  the preferences  described  in this  section.                                                                    
     Applicable preferences  shall be applied solely  to the                                                                    
     cost portion of the proposals during evaluation.                                                                           
          (q)  Informal procurements conducted by the                                                                           
     program  contractor  are  subject  to  the  preferences                                                                    
     described in this section.                                                                                                 
          (r)  In this section,                                                                                                 
             (1)    "agency"  has the  meaning  given in  AS                                                                    
             (2)    "agricultural products"  has the meaning                                                                    
     given in AS 36.15.050(g)(1);                                                                                               
             (3)    "Alaska  bidder" has  the meaning  given                                                                    
     in AS 36.30.170(b);                                                                                                        
             (4)    "Alaska products" has  the meaning given                                                                    
     in AS 36.30.338(1);                                                                                                        
             (5)    "contract" has  the meaning given  in AS                                                                    
             (6)    "employment  program"  has  the  meaning                                                                    
     given in AS 36.30.990(11);                                                                                                 
             (7)    "instrumentalities  of the  state" means                                                                    
     a  state public  corporation,  a  state enterprise,  or                                                                    
     another  administrative unit  of state  government that                                                                    
     handles  its procurement  and  supply  management in  a                                                                    
     manner  that  is  separate from  a  department  of  the                                                                    
             (8)    "qualifying  entity"   has  the  meaning                                                                    
     given in AS 36.30.170(e)(1)-(4);                                                                                           
             (9)    "person"  has the  meaning  given in  AS                                                                    
             (10)   "person  with  a   disability"  has  the                                                                    
     meaning given in AS 36.30.170(k);                                                                                          
             (11)   "program    contractor"     means    the                                                                    
     contractor  selected by  the department  to manage  the                                                                    
             (12) "recycled Alaska product" has the                                                                             
     meaning given in AS 36.30.338(4).                                                                                          
      * Sec. 2.  The uncodified law of the State of Alaska                                                                    
        enacted in secs. 2 and 3, ch. 51, SLA 2003, are                                                                         
      * Sec. 3.  The uncodified law of the State of Alaska                                                                    
     is amended by adding a new section to read:                                                                                
         APPLICABILITY.  Nothing in this Act affects the                                                                        
         validity of actions taken by the Department of                                                                         
       Administration under ch. 51, SLA 2003, before the                                                                        
     effective date of this Act.                                                                                                
     * Sec. 4.  This Act takes effect immediately under AS                                                                    
1:35:14 PM                                                                                                                    
VERN JONES,  Chief Procurement Officer, Central  Office, Division                                                               
of General  Services (DGS),  Department of  Administration (DOA),                                                               
explained that the two changes  for which he'd provided a written                                                               
explanation during the bill's last  hearing include replacing the                                                               
reference to AS  36.30.190 with a reference to  AS 36.30.265, and                                                               
revamping  the preferences  sections of  the bill  such that  the                                                               
preferences  will   "act  consistently"  and  involve   taking  a                                                               
percentage from the price that a qualifying entity is offering.                                                                 
1:38:54 PM                                                                                                                    
CHAIR McGUIRE made  a motion to adopt Conceptual  Amendment 1, to                                                               
replace  the  wording in  the  original  bill with  the  language                                                               
suggested by the DOA.                                                                                                           
REPRESENTATIVE  GRUENBERG  drew  attention  to  the  language  in                                                               
Conceptual Amendment  1 regarding  proposed AS  36.36.093(c), and                                                               
noted that the reference to  subsections (d)-(u) ought to instead                                                               
be a reference to subsections (d)-(r).                                                                                          
CHAIR McGUIRE made a motion  to amend Conceptual Amendment 1 such                                                               
that  the  subsections  referenced in  proposed  AS  36.36.093(c)                                                               
would  be   (d)-(r).    There  being   no  objection,  Conceptual                                                               
Amendment 1  was amended.   [Conceptual Amendment 1,  as amended,                                                               
was then treated as adopted.]                                                                                                   
CHAIR  McGUIRE,  noting  that  the  bill  eliminates  the  sunset                                                               
provision of the  pilot project and allows  the administration to                                                               
expand the use  of e-commerce procurement tools,  asked Mr. Jones                                                               
for his thoughts regarding how  the pilot project has worked thus                                                               
far and how it can be improved.                                                                                                 
1:41:29 PM                                                                                                                    
MR. JONES explained  that the pilot project has only  been up and                                                               
running for nine months, and that  the DOA is still analyzing the                                                               
results and so hasn't come to any conclusions thus far.                                                                         
CHAIR McGUIRE said she is  trying to understand whether the pilot                                                               
project  is working  for the  employees, and  whether any  of her                                                               
goals are being achieved at all.   Has the pilot project resulted                                                               
in savings  to the state,  and is it  proving to be  a rewarding,                                                               
productive partnership between private and public enterprise?                                                                   
MR.  JONES  surmised  that  at   the  heart  of  the  originating                                                               
legislation and  at the  heart of  HB 257  is the  outsourcing of                                                               
jobs and a shifting from  state employees doing procurement under                                                               
the  state  procurement code  to  contractors  doing the  state's                                                               
procurement under  a contract rather  than under the code.   With                                                               
the aforementioned  outsourcing comes  electronic tools  that are                                                               
well  suited  to the  application.    This outsourcing,  however,                                                               
raises the  policy question of  whether the work  should actually                                                               
be  done under  the state  procurement code  by state  employees.                                                               
The  DOA  thinks  of  the  pilot project  as  an  experiment,  he                                                               
indicated, and so  is waiting to see whether  the results warrant                                                               
expansion of the project.                                                                                                       
CHAIR McGUIRE  acknowledged that  creating efficiencies  is bound                                                               
to  result in  some job  loss,  and suggested  that changing  the                                                               
current methodology  would not  be something  to undertake  if it                                                               
weren't  for  the  belief  that  doing so  will  result  in  more                                                               
centralization and  efficiency.   She pointed  out that  there is                                                               
still  the  need   for  those  in  state  government   to  be  in                                                               
partnership with  those that  contract with the  state to  do the                                                               
work.  She asked Mr. Jones to comment.                                                                                          
1:47:22 PM                                                                                                                    
MR. JONES  said that  the DOA  merely wants to  be sure  that the                                                               
methodology employed  by the pilot  project is successful  and is                                                               
resulting  in  efficiencies  and   improvements  before  it  gets                                                               
instituted more  widely.   He surmised that  there are  those who                                                               
would like to see the  existing pilot program utilized fully, but                                                               
the DOA has  taken a more cautious approach,  deploying the pilot                                                               
project in a narrow scope and monitoring  it.  He said that if HB
257 were to  pass, he wouldn't be able to  say what changes would                                                               
be made,  particularly given  that the  pilot project  itself has                                                               
not yet  been used to the  fullest extent.  He  acknowledged that                                                               
it  would be  hard for  anyone to  argue that  bringing a  modern                                                               
procurement   system  into   state   government  wouldn't   bring                                                               
improvements.    The  question, then,  merely  becomes  a  policy                                                               
choice regarding  how the legislature wants  procurements to take                                                               
CHAIR McGUIRE  asked why  it was  so difficult  to get  the pilot                                                               
project going  and what was  the resistance to  it.  If  the very                                                               
people who's cooperation is required  to let a project go forward                                                               
won't cooperate, then how can  the state ever determine whether a                                                               
project can be a success?                                                                                                       
MR. JONES explained that the  state was bound by union bargaining                                                               
agreements to  first conduct a  feasibility study, which  in turn                                                               
required that  the state hire  a contractor  to map the  agency -                                                               
describe all the procurement work  being done by state employees,                                                               
and calculate  the cost of that  work; only after the  results of                                                               
that study were gathered was  a procurement issued for the actual                                                               
outsourcing  contractor, which  turned  out to  be Alaska  Supply                                                               
Chain  Integrators,  LLC  (ASCI).   He  noted  that  this  entire                                                               
process took a lot of time and  involved a lot of work, with each                                                               
step  being  subject  to  challenge.    In  response  to  another                                                               
question,   he  relayed   that  10   positions  were   ultimately                                                               
outsourced,  though some  of the  people holding  those positions                                                               
found  work elsewhere  in state  government.   He opined  that it                                                               
would not be  accurate to say that the  state delayed instituting                                                               
the pilot project.                                                                                                              
1:54:28 PM                                                                                                                    
REPRESENTATIVE   GRUENBERG   asked   how  many   jobs   will   be                                                               
lost/outsourced if the pilot project is expanded.                                                                               
MR. JONES  offered that there  are approximately  200 procurement                                                               
positions that  could be  outsourced.  In  response to  a further                                                               
question, he  relayed that with  regard to the  aforementioned 10                                                               
outsourced state  procurement positions,  the contractor  had six                                                               
fulltime employees doing the same work.                                                                                         
1:56:11 PM                                                                                                                    
MR.  JONES, in  response to  questions regarding  audits, relayed                                                               
that several  audits of  the pilot  project have  been conducted,                                                               
including  one  by  the  Office  of  Management  &  Budget  (OMB)                                                               
regarding contract  compliance; that the DGS  has been performing                                                               
quarterly benchmark  audits; that  the DGS's first  quarter audit                                                               
is concluded;  that the  only results  available from  the second                                                               
quarter pertain  to the cost  of goods; that the  DGS's benchmark                                                               
audits  investigate the  cost of  goods -  comparing the  cost of                                                               
goods  purchased  by  the  contractor  with  the  cost  of  goods                                                               
purchased by  the state -  the time  used to process  orders, the                                                               
utilization  of Alaska  vendors,  and the  mistakes  made by  the                                                               
contractor; and that  it is anticipated that the  final audit for                                                               
the pilot  project's contract should  be available after  June of                                                               
CHAIR  McGUIRE noted  that one  of  the problems  with the  pilot                                                               
project is  that under  its current  sunset date,  it is  now too                                                               
late to institute the project fully.                                                                                            
[Following  was  a  brief   discussion  regarding  what  material                                                               
members' packets should contain.]                                                                                               
2:02:29 PM                                                                                                                    
SCOTT HAWKINS, General Manager,  Material Services, Alaska Supply                                                               
Chain Integrators, LLC  (ASCI), relayed that ASCI  was founded in                                                               
1999  to provide  purchasing, warehousing,  and other  aspects of                                                               
supply  chain management  to  the Alaska  North  Slope (ANS)  oil                                                               
fields; has since  grown to about 150 employees;  has developed a                                                               
full suite of  e-commerce tools here in Alaska  that compete with                                                               
some of  the best e-commerce  tools available nation-  and world-                                                               
wide; and uses those tools to  transact business on behalf of its                                                               
customers,  and to  deliver  streamlining,  automation, and  cost                                                               
savings.   Remarking  on the  ability  of ASCI  to specialize  in                                                               
procurement, he  added that  ASCI sees a  future in  "back office                                                               
process operation" in both the  public and private sectors, since                                                               
procurement  is  typically  not  the  primary  business  of  most                                                               
MR. HAWKINS explained that after  the pilot project's originating                                                               
legislation, House Bill  313, passed the legislature,  ASCI - one                                                               
of  the two  proposers to  engage in  the resulting  "request for                                                               
proposals"  (RFP) process  - was  selected as  the contractor  to                                                               
operate the  pilot project  and has  been operating  that project                                                               
since July 2004.  He said  that ASCI supports HB 257, adding that                                                               
the bill will eliminate the  pilot project's current sunset date,                                                               
will expand the administration's  authorization to institute such                                                               
a   system   in  other   departments,   and   will  provide   the                                                               
administration more  flexibility in  which to find  the project's                                                               
optimal  value.    He  said  that from  the  perspective  of  the                                                               
contractor  - ASCI  - the  cost savings  that were  promised have                                                               
been delivered,  both through a  decrease in personnel  costs and                                                               
through a decrease in the cost of catalog purchases.                                                                            
MR. HAWKINS  relayed that  the estimate  of savings  in personnel                                                               
costs is  based on a state  feasibility study and on  what ASCI's                                                               
contract  will  pay  [its  employees]   compared  to  what  state                                                               
employees were  getting paid.   The estimate  of savings  for the                                                               
cost of goods  - catalog purchases - is based  on a recent report                                                               
using  catalog  data  involving nearly  1,000  transactions  that                                                               
occurred  over the  first  six months  using  the e-commerce  web                                                               
tools.  He  indicated that to the degree that  ASCI is allowed to                                                               
operate the  project as it was  envisioned, ASCI will be  able to                                                               
deliver the cost savings as promised.   Referring to a handout in                                                               
members' packets,  he predicted that  there will be a  savings of                                                               
nearly $200,000 "over the first term of the agreement."                                                                         
CHAIR McGUIRE  asked Mr.  Hawkins to  describe the  basic concept                                                               
behind what ASCI does.                                                                                                          
MR. HAWKINS said:                                                                                                               
     We don't actually  buy the goods and  take ownership of                                                                    
     them and  resell them; we simply  operate the processes                                                                    
     on behalf  of the  customer.  So  a purchase  order for                                                                    
     "BP," for example, goes out as  a BP purchase order.  A                                                                    
     purchase  order  for  the  State   of  Alaska,  or  our                                                                    
     contract for the  State of Alaska, is  written on State                                                                    
     of Alaska procurement forms.                                                                                               
     But what we do  is we come in and -  through the use of                                                                    
     these web tools, through the  use [of a] very intensive                                                                    
     process  of  measuring  and  metrics  and  those  types                                                                    
     things - process control by  specializing and taking it                                                                    
     seriously  and managing  this process  very intensively                                                                    
     on a day-to-day basis;  we're typically able to deliver                                                                    
     cost  savings  of  25-40 percent  in  the  overhead  of                                                                    
     actually just operating the administrative processes.                                                                      
     The cost  of goods  are over and  above that,  and that                                                                    
     depends a  lot on ... where  a customer is, how  good a                                                                    
     job  do they  do of  managing their  current (indisc.).                                                                    
     But  with our  tools,  tools  like "reverse  auctions,"                                                                    
     tools  like  getting  catalog  agreements  set  up  and                                                                    
     getting  competitive   situations  in  place,   we  can                                                                    
     deliver cost-of-goods  savings going forward too.   And                                                                    
     ...  how much  of that  there  is really  just kind  of                                                                    
     depends on what you experience as you go forward.                                                                          
2:10:09 PM                                                                                                                    
REPRESENTATIVE  GARA asked  whether ASCI's  conclusions regarding                                                               
cost savings are based on the DGS's quarterly benchmark audits.                                                                 
MR.  HAWKINS said  the ASCI's  conclusions are  not based  on the                                                               
DGS's  audits,  which he  characterized  as  not being  based  on                                                               
statistically valid  samples.  The  handout in  members' packets,                                                               
in comparison, provides statistics  based on 972 transactions and                                                               
shows a decline of  3 percent for the cost of  goods.  He posited                                                               
that this decline is the  result of using e-commerce tools, which                                                               
facilitate the  purchasing of goods  at the best  price available                                                               
to the state.                                                                                                                   
2:14:31 PM                                                                                                                    
MR. HAWKINS,  in response  to a  comment, clarified  that reverse                                                               
auction  is  merely one  tool  by  which  to set  up  agreements,                                                               
whereas  the  process of  going  into  the "smart  catalog"  tool                                                               
ensures  that  the  best  pricing   under  the  state's  existing                                                               
contracts is available.                                                                                                         
CHAIR  McGUIRE  offered her  understanding  that  many state  and                                                               
local  government   entities  have  chosen  to   privatize  their                                                               
procurement process.  She relayed that  in spite of the fact that                                                               
the state's  current procurement code has  some great provisions,                                                               
such as preferences for  Alaskan-owned, women-owned, or minority-                                                               
owned  businesses or  for Alaskan  made  products, she  disagrees                                                               
with statements she's  heard that the entire  procurement code is                                                               
a great one.   She asked Mr. Hawkins to  explain whether the bill                                                               
has  incorporated  the  aforementioned preferences,  and  whether                                                               
such preferences are being utilized by  ASCI.  She also asked Mr.                                                               
Hawkins to address the issues of integrity and corruption.                                                                      
2:17:45 PM                                                                                                                    
MR. HAWKINS opined that the latter  question goes to the heart of                                                               
the policy issue.  He offered:                                                                                                  
     Pretty  much everything  that's contracted  out to  the                                                                    
     private  sector by  government, at  one time  along the                                                                    
     way, was  considered controversial. ...  Procurement is                                                                    
     a  perfect candidate  for this  type  of thing  because                                                                    
     it's  very "back  office" and  administrative.   As the                                                                    
     agent for the state, we  don't make a decision to spend                                                                    
     any money.   The  requisition comes  to us,  the budget                                                                    
     authority comes to  us, and our job is  to simply carry                                                                    
     that out.   If  there's a  significant amount  of money                                                                    
     involved,  there's always  a committee  of end  users -                                                                    
     ...  a  proposal  evaluation review  committee  -  that                                                                    
     makes the final  decision, and what we end  up doing is                                                                    
     really performing clerical administrative services.                                                                        
     In terms of  the inherent integrity, I  would submit to                                                                    
     you that  ... corruption happens everywhere  and [that]                                                                    
     governments are  not immune [and]  government employees                                                                    
     are not  immune.   You can see  examples in  history of                                                                    
     government  employees having  committed those  types of                                                                    
     things.  In  the case of a  private contractor, there's                                                                    
     a great  deal to lose.   This is  our business.   If we                                                                    
     were ever found to be  steering business to a crony, or                                                                    
     anything like  that, it would hurt  the entire company,                                                                    
     it  would hurt  the value  of  the entire  company.   I                                                                    
     would submit to  you that we have a great  deal more to                                                                    
     lose,  and  a great  deal  more  incentive to  keep  it                                                                    
     Governments  are not  the  only  institutions that  are                                                                    
     concerned  with  this  type of  thing;  the  other  big                                                                    
     clients of  our, such  as the  oil companies,  are also                                                                    
     very  concerned with  that type  of thing  - they  have                                                                    
     shareholders that care a great  deal about that type of                                                                    
     thing.  And, again, the  standards of conduct are very,                                                                    
     very  high, and  there, as  well, if  we were  ever ...                                                                    
     found  to be  doing  anything like  that,  it would  be                                                                    
     devastating to  the company.   And so we  are extremely                                                                    
     vigilant and  extremely concerned  and watch  that type                                                                    
     of  thing   very  carefully,   because,  [as]   in  all                                                                    
     business, if  we aspire  to grow  and really  turn this                                                                    
     into  a  much  larger  Alaska  success  story  than  it                                                                    
     already is,  our reputation  has got  to be  very, very                                                                    
MR.  HAWKINS then  noted that  there were  no preferences  in the                                                               
original legislation  authorizing the pilot project,  but relayed                                                               
that  the ASCI  does  not have  any objections  to,  and in  fact                                                               
supports,  abiding  by  the  preferences  currently  in  Alaska's                                                               
procurement  code.   He  pointed  out  that the  ASCI's  contract                                                               
contains  a requirement  that the  ASCI take  a proactive  stance                                                               
with regard to "buy Alaskan,"  but surmised that adhering to such                                                               
preferences does  not alter  things statistically;  rather, where                                                               
it really  matters is in  the creation of the  specifications and                                                               
the  framework for  procurement, in  order to  ensure that  those                                                               
specifications  and  framework  won't inherently  exclude  Alaska                                                               
businesses or inherently advantage out of state businesses.                                                                     
2:22:15 PM                                                                                                                    
REPRESENTATIVE GARA  noted that  the DGS's audit  information and                                                               
the ASCI's  statistics appear  to conflict  with each  other with                                                               
regard to whether there has been any cost savings to date.                                                                      
MR.  HAWKINS opined  that the  DGS's audits  are not  designed to                                                               
provide an  answer to the question  of whether the cost  of goods                                                               
has decreased, particularly given that  those audits are based on                                                               
extremely small samples and non-cataloged data.  He added:                                                                      
     The best data  we have, that I'm submitting  to you, is                                                                    
     the  972 transactions  that are  based  on the  catalog                                                                    
     where you have  a very high likelihood of  an apples to                                                                    
     apples  comparison,  [where]  you  have  a  very  large                                                                    
     number of  transactions.  And  [I] would submit  to you                                                                    
     that  if  you look  at  the  two  data sets,  one  will                                                                    
     support conclusions, the other one will not.                                                                               
REPRESENTATIVE  GARA  asked why  the  legislature  is not  simply                                                               
waiting for the pilot project to run its course.                                                                                
2:24:12 PM                                                                                                                    
MR. HAWKINS  explained that the  sunset is fast approaching  on a                                                               
project that is  only being tried on an extremely  small scale, a                                                               
scale, he  opined, that  is too small  to really  demonstrate the                                                               
system's  full value  and  capabilities.   He  remarked that  the                                                               
project will  continue to be  in transition for sometime,  and so                                                               
the full  value of it  will only emerge  over a period  of years.                                                               
He offered belief that it is  very important to allow the project                                                               
more  time and  more flexibility  so as  to be  able to  find its                                                               
optimal application.                                                                                                            
2:26:05 PM                                                                                                                    
REPRESENTATIVE GARA said he is  concerned that it is premature to                                                               
make  a  decision  on  this  issue  before  the  final  audit  is                                                               
MR.  HAWKINS opined  that one  would be  hard pressed  to find  a                                                               
program  anywhere  in  state  government  that's  more  carefully                                                               
scrutinized and  audited than the  pilot project.   He reiterated                                                               
his  belief  that  the  legislature ought  to  move  forward  and                                                               
gradually,  responsibly,  build  the  program  out  to  its  full                                                               
CHAIR  McGUIRE indicated  agreement with  Mr. Hawkins's  comments                                                               
regarding the pilot project's sunset,  adding that her concern is                                                               
that there are some other departments  that would like to use the                                                               
aforementioned tools but can't.  She  said she would almost go so                                                               
far as to  say that the pilot project is  being sabotaged because                                                               
it  might  pose a  direct  threat  to  the  very people  who  are                                                               
required,  for the  project's success,  to comply  with it.   She                                                               
noted that the City of  Anchorage has recently instituted the use                                                               
of e-commerce procurement tools.                                                                                                
2:30:46 PM                                                                                                                    
REPRESENTATIVE GARA said there is  a jump between saying that the                                                               
state   should  engage   in  "e-procurement"   and  saying   that                                                               
procurement  should be  outsourced.   "If we  need to  modify the                                                               
state law  so the state  can do much more  vigorous e-procurement                                                               
like the  City [of  Anchorage] is,  that's one  thing, but  ... I                                                               
don't  understand why  we have  to outsource  that function,"  he                                                               
REPRESENTATIVE ANDERSON  offered his belief that  Mr. Hawkins has                                                               
been innovative, and noted that  some members of the legislature,                                                               
during   the  last   election,  ran   on  a   platform  promoting                                                               
outsourcing as a  way of realizing efficiencies.   He indicated a                                                               
preference  for  moving  forward   with  [the  bill]  and  simply                                                               
continuing to  assess the project's  efficiency and  provide ASCI                                                               
the tools with which to expand.                                                                                                 
2:32:39 PM                                                                                                                    
REPRESENTATIVE   GRUENBERG    said   that   according    to   the                                                               
aforementioned chart,  it appears that  the majority of  the cost                                                               
savings is the result of the loss of people's jobs.                                                                             
MR. HAWKINS  concurred, reiterating  that six ASCI  employees are                                                               
now  doing  the  work  that  was  previously  done  by  10  state                                                               
REPRESENTATIVE GRUENBERG  opined that that is  simply another way                                                               
of saying  that by automating  the way  things are done  and thus                                                               
eliminating people's jobs, things can be done more cheaply.                                                                     
MR.  HAWKINS concurred,  but  remarked that  the  premise of  the                                                               
project is  "this rigor  (ph) and  catalog and  system framework.                                                               
He  predicted that  if ASCI  can deliver  even just  a 3  percent                                                               
reduction  in costs,  that equates  to a  savings of  between $15                                                               
million and $20 million per year.                                                                                               
REPRESENTATIVE GRUENBERG asked how many jobs would be lost.                                                                     
MR. HAWKINS said  that is not known, but offered  his belief that                                                               
state procurement  officers will always  be needed for  the types                                                               
of  procurement that  are more  suitable for  state employees  to                                                               
perform,   such    as   construction   procurement,    which   he                                                               
characterized  as   "large-dollar/high-risk"  procurement.     He                                                               
     It's  hard to  say, at  the end  of the  day, how  many                                                                    
     would be  affected, but [that]  ... comes to  the point                                                                    
     of  why the  expansion is  important, ...  that in  any                                                                    
     given agency,  you may  not take  on the  entire piece.                                                                    
     This  is really  about more  the low-dollar  repetitive                                                                    
     types of  things that  lend themselves  to streamlining                                                                    
     and automation.  And finding  that economic sweet spot,                                                                    
     across  several  agencies,  is probably  more  feasible                                                                    
     that  trying to  fully  implement a  smaller number  of                                                                    
2:35:29 PM                                                                                                                    
REPRESENTATIVE  GRUENBERG   said  he   is  concerned   about  the                                                               
potential  job  losses,  particularly  for those  living  in  his                                                               
district.  He pointed out  that downsizing and making things more                                                               
efficient will have an impact on  jobs, and surmised that some of                                                               
the questions raised by downsizing  include:  "How do we redirect                                                               
their employability?   What do  we do  [for] the people  who lose                                                               
their jobs?  How  do we keep them employed?"   He opined that the                                                               
state  has a  responsibility to  ensure  - though  of course  not                                                               
through keeping  everyone employed  at governmental expense  - to                                                               
have  a healthy  economy; "governmental  efficiency" and  "people                                                               
losing their jobs"  are simply two ways of saying  the same thing                                                               
- it is the same issue regardless of how its termed.                                                                            
2:37:41 PM                                                                                                                    
MR. HAWKINS  remarked that affecting  the employment  of existing                                                               
state  employees is  ASCI's least  favorite part  of "this  whole                                                               
proposition."   He  offered his  understanding that  some of  the                                                               
employees whose  positions were affected  during the  first phase                                                               
of the  pilot project were due  to retire anyway and  so took the                                                               
opportunity to  do so, and that  the rest of the  employees whose                                                               
positions  were affected  have since  filled  other positions  in                                                               
state government.  He relayed  that ASCI would be very supportive                                                               
of  anything that  would provide  some  transition assistance  to                                                               
those whose positions are affected  by the expansion of the pilot                                                               
project, and noted  that ASCI had in fact made  job offers to all                                                               
of the  aforementioned non-retiring  procurement staff,  but none                                                               
accepted  a  position with  ASCI.    He  surmised that  this  was                                                               
probably due  to their preferring  to maintain  employment within                                                               
the state's retirement system.  He offered:                                                                                     
     But  as we  me move  forward,  I would  expect that  to                                                                    
     change, particularly  if there's a perception  that the                                                                    
     political will  exists within this body,  and that this                                                                    
     is an ongoing, long-term  program.  I believe employees                                                                    
     would  be  more  inclined  to join  our  company  or  a                                                                    
     company like  ours; they would  have an  opportunity to                                                                    
     be  part  of  a  technology-driven  enterprise  -  that                                                                    
     option would be  there.  But for those that  want to do                                                                    
     something else  and change careers, we  would [be] very                                                                    
     positive on  transition assistance  ... because  ... we                                                                    
     don't relish that  aspect of this, this  process of ...                                                                    
     -  [as] economists  call it  - "creative  destruction."                                                                    
     That process has winners and  losers, and we sympathize                                                                    
     with that.                                                                                                                 
2:39:38 PM                                                                                                                    
REPRESENTATIVE  COGHILL  remarked  that although  the  advent  of                                                               
computers has  drastically changed  the employment scene,  it has                                                               
never stopped  anyone from  being employed.   An  improved system                                                               
always raises problems regarding  employment, he added, but noted                                                               
that he is  predisposed to privatization.  He  offered his belief                                                               
that Conceptual Amendment  1 will result in  a better procurement                                                               
system and will allow the state  the flexibility to make use of a                                                               
private procurement  system.  He  offered his  understanding that                                                               
the bill requires compliance with the state's procurement code.                                                                 
2:42:27 PM                                                                                                                    
JIM DUNCAN, Business Manager,  Alaska State Employees Association                                                               
(ASEA), provided  members with a copy  of a portion of  the DGS's                                                               
second  quarter audit  of the  pilot project,  and noted  that it                                                               
contains a chart  which illustrates that the cost  of goods, when                                                               
purchased by  ASCI, increased by  3.308 percent in one  table and                                                               
increased by 70.409 percent in  another table; taking the average                                                               
of those  two tables,  the total  increase in  the cost  of goods                                                               
when purchased by ASCI is 16.348 percent.                                                                                       
REPRESENTATIVE   GRUENBERG  surmised,   then,  that   that  chart                                                               
illustrates that under the pilot  project, there haven't been any                                                               
savings  except  for  what  was  saved because  of  the  loss  of                                                               
MR. DUNCAN  concurred.  In  response to comments, he  pointed out                                                               
that  the  current state  procurement  code  doesn't need  to  be                                                               
changed in order  to allow for e-procurement; all  that is needed                                                               
is for the administration to have  the correct tools.  It was not                                                               
necessary  for e-procurement  to be  outsourced; furthermore,  no                                                               
other  local  or  state government  entity  has  ever  outsourced                                                               
procurement.   He assured the committee  that if a system  can be                                                               
employed whereby  things can be  done more efficiently,  the ASEA                                                               
would  work  with  the  legislature   to  implement  that  system                                                               
notwithstanding the potential for job loss.                                                                                     
MR.  DUNCAN  referred  to  a   federal  document  entitled,  "OMB                                                               
Circular  No.  A-76",  which  gives direction  to  the  heads  of                                                               
departments and establishments to be  very careful with regard to                                                               
what  gets  privatized,  and  which   also  indicates  that  some                                                               
activities  are inherently  governmental  and so  should only  be                                                               
performed  by   government  employees.    He   relayed  that  the                                                               
aforementioned document says in part:                                                                                           
     An  inherently  governmental  activity is  an  activity                                                                    
     that is  so intimately  related to the  public interest                                                                    
     as  to  mandate  performance by  government  personnel.                                                                    
     These  activities require  the exercise  of substantial                                                                    
     discretion  in  applying  government  authority  and/or                                                                    
     making  decisions  for   the  government.    Inherently                                                                    
     governmental   activities   normally  fall   into   two                                                                    
     categories:    the  exercise  of  sovereign  government                                                                    
     authority  or  the   establishment  of  procedures  and                                                                    
     processes   related  to   the  oversight   of  monetary                                                                    
     transactions   or   entitlements.       An   inherently                                                                    
     governmental   activity  involves:     ...   [e]xerting                                                                    
     ultimate   control  over   the  acquisition,   use,  or                                                                    
     disposition   of  United   States  property   (real  or                                                                    
     personal,    tangible    or   intangible),    including                                                                    
     establishing   policies    or   procedures    for   the                                                                    
     collection,  control, or  disbursement of  appropriated                                                                    
     and other federal funds.                                                                                                   
MR. DUNCAN surmised  that via this document,  the [current] "Bush                                                               
Administration"   is  saying   that  [governmental]   procurement                                                               
doesn't lend itself to privatization,  adding his belief that the                                                               
public should  be able to  trust that the procurement  process is                                                               
being handled in a professional manner under strict guidelines.                                                                 
2:50:33 PM                                                                                                                    
REPRESENTATIVE  GRUENBERG  asked  about  possible  constitutional                                                               
MR. DUNCAN  relayed that  a memorandum  - dated  April 8,  2005 -                                                               
that he provided to the  committee during the bill's last hearing                                                               
says that  HB 257  would deny  Alaska businesses  and individuals                                                               
equal protection  under the  law because  it sets  one contractor                                                               
above the  others and does  not necessarily provide  equal access                                                               
to   businesses.      He  characterized   this   as   a   serious                                                               
constitutional  question that  should be  addressed by  the House                                                               
Judiciary Standing Committee.                                                                                                   
2:52:04 PM                                                                                                                    
CHAIR  McGUIRE  pointed  out  that   Title  [36]  -  the  state's                                                               
procurement code  - already contains 47  exemptions, including an                                                               
exemption for the university.                                                                                                   
MR. DUNCAN  explained that the  current procurement code  was put                                                               
in place in 1985  and was a model code at  that time, endorsed by                                                               
the  American Bar  Association (ABA);  since  that time,  various                                                               
groups have come before the  legislature and asked to be exempted                                                               
from the code.  He added  that he is not suggesting that granting                                                               
all those exemptions  was the correct thing to do,  but is merely                                                               
acknowledging that  they did get adopted  through the legislative                                                               
MR.  DUNCAN offered  his belief  that contrary  to Representative                                                               
Coghill's understanding,  HB 257 will not  require the contractor                                                               
to comply with  the state's procurement code.   Under the current                                                               
procurement code,  the public  knows what the  rules are  - rules                                                               
that were established by the legislature  - but under HB 257, the                                                               
legislature would  no longer  set the rules.   Instead  a private                                                               
contractor  and the  administration would  set the  rules.   This                                                               
will result  in a loss of  transparency; the public would  not be                                                               
aware  of what  those rules  were, and  the legislature  would no                                                               
longer  be assured  that those  rules  would include  competitive                                                               
procedures  or give  vendors the  right to  appeal or  protest an                                                               
MR. DUNCAN, in response to  comments, clarified that he is merely                                                               
saying that HB 257 would not provide transparency.                                                                              
2:56:46 PM                                                                                                                    
REPRESENTATIVE GRUENBERG  offered his recollection that  when the                                                               
university  came before  the legislature  asking  to be  exempted                                                               
from Title 36, the testimony  was that the university already had                                                               
it's own procurement system in place.                                                                                           
2:57:27 PM                                                                                                                    
BARRY JACKSON - Procurement  Analyst; Project Manager; Programmer                                                               
Analyst - Resource  Data, Inc. (RDI), on the subject  of how many                                                               
positions are  currently doing procurement-related work,  he said                                                               
his research  indicates that there are  between 200-300 positions                                                               
spread  out among  the departments  - with  6 of  those positions                                                               
being in the  DOA's DGS, and characterized the  current system as                                                               
strongly  decentralized.     He   opined  that   a  decentralized                                                               
procurement system  diminishes savings, fairness,  and expertise.                                                               
Furthermore,  operational  pressures, personal  preferences,  and                                                               
differing operational  standards reduce the diligence  with which                                                               
the rules  of fairness are  applied.  The inability  to recognize                                                               
and  consolidate  repetitive  purchases  of  goods  and  services                                                               
diminishes significant  opportunities to save money,  and similar                                                               
procurement problems are resolved  differently from department to                                                               
MR.   JACKSON  said   that  in   comparison,  in   a  centralized                                                               
environment,  the  rules of  fairness  are  better enforced,  and                                                               
consolidation opportunities  are recognized and  more dependable;                                                               
as   a   result,  cost   savings   are   also  more   dependable.                                                               
Furthermore,  expertise   in  subject  matter  is   fostered  and                                                               
developed, and  "best practices" can be  identified, resulting in                                                               
more  satisfactory   transactions  between  the  state   and  its                                                               
suppliers.  He offered his  belief that the current pilot project                                                               
offers [the state]  an opportunity to realize the  benefits of an                                                               
appropriate degree  of centralized procurement without  the usual                                                               
MR. JACKSON went on to say:                                                                                                     
     In  a mature  application of  ASCI's e-commerce  tools,                                                                    
     the user  virtually eliminates  paper pushing  from the                                                                    
     procurement  process.   The  tools allow  instantaneous                                                                    
     orders  for  commodities  and  services  found  in  the                                                                    
     customized  catalog,  the  user gets  instant  feedback                                                                    
     [and] instant accountability with  regard to receipt of                                                                    
     goods, red tape  is cut, and it  provides for corporate                                                                    
     delivery.  All of these  things add up to the potential                                                                    
     for increased savings.  It  also means that through the                                                                    
     e-commerce  tools ...  there's  an  ability to  analyze                                                                    
     procurements  across  departmental  lines  to  identify                                                                    
     consolidation   opportunities  and   target  them   for                                                                    
     additional  savings.     Subject  matter   experts  are                                                                    
     developed in  a centralized procurement  setting, which                                                                    
     [allows]  us  to   address  procurement  issues  across                                                                    
     departmental  lines.    In  competitive  scenarios,  e-                                                                    
     commerce procurement  processes can give access  to all                                                                    
     qualified  interested bidders  and virtually  eliminate                                                                    
     the  burdensome waiting  periods that  now characterize                                                                    
     the manual process.                                                                                                        
     Regarding the subject of  the potential for corruption,                                                                    
     I'd  simply  like  to  point  out  that  currently  the                                                                    
     departments can spend up to  $50,000 at a crack without                                                                    
     meeting formal  bidding requirements.   It's  my belief                                                                    
     [that]   right  now,   under  the   current  laws   and                                                                    
     regulations, that  somewhere between 50 and  80 percent                                                                    
     of  all  procurement  dollars  can   be  spent  by  the                                                                    
     departments  without [them]  being  required to  follow                                                                    
     the  formal  bidding  procedures  encapsulated  in  the                                                                    
     procurement  code.   I [haven't]  ...  seen any  recent                                                                    
     analysis  of  how much  the  state  ... spends  through                                                                    
     procurement procedures,  but if it's anything  like the                                                                    
     past,  that 50  to 80  percent amounts  to hundreds  of                                                                    
     millions of dollars per year.                                                                                              
     The point  is that this  money is spent with  little or                                                                    
     no  competition.   The  reality  is,  there's not  much                                                                    
     difference  between professionally  administered public                                                                    
     and private  purchasing practices except  for mountains                                                                    
     of  red   tape,  institutionalized   delay,  antiquated                                                                    
     systems,  and  huge  performance and  efficiency  gaps.                                                                    
     Routine  monitoring by  [the DGS]  ... for  procurement                                                                    
     code  violations   in  the  operating   departments  is                                                                    
     nonexistent, and violations  are only investigated when                                                                    
     some form  of bad conduct  is alleged by  an interested                                                                    
     party  or someone  in the  department  stumbles upon  a                                                                    
     problem and reports it to [the DGS].                                                                                       
MR. JACKSON continued:                                                                                                          
     I   suggest  that   an   independent  contractor   with                                                                    
     preservation  of  its  investment as  its  most  potent                                                                    
     motivation has  an unbiased primary interest  in simply                                                                    
     doing  the  job  as  efficiently  and  economically  as                                                                    
     possible for  the state.   In fact, I would  argue that                                                                    
     and independent  contractor is  in a  stronger position                                                                    
     to  resist pressures  to commit  bad  practices.   Such                                                                    
     pressures  do   exist  and  are  difficult   for  state                                                                    
     employees to resist, because their  jobs or careers can                                                                    
     be put  in jeopardy.  These  pressures and consequences                                                                    
     are not  idle speculation on  my part.  They  are real.                                                                    
     I know  from long and challenging  personal experience.                                                                    
     I argue  that coupled with independent  oversight, such                                                                    
     as  this contract  has with  the [DGS],  an independent                                                                    
     contractor  with its  own enlightened  self-interest at                                                                    
     heart is in  a far better position  to rebuff pressures                                                                    
     to  use bad  practices  than are  rank  and file  state                                                                    
3:04:20 PM                                                                                                                    
MR.  JACKSON, speaking  on the  issue of  audits, said  he hasn't                                                               
ever  seen scrutiny  at  the  level being  applied  to ASCI,  and                                                               
predicted  that such  a level  of  scrutiny, were  it applied  to                                                               
state  procurement operations,  would reveal  numerous purchasing                                                               
violations and bad practices.  He  opined that as a former senior                                                               
manager of  the state's procurement system,  the e-commerce tools                                                               
that ASCI is providing are  well-tailored to the job; will create                                                               
efficiencies, which will in turn  increase user productivity; and                                                               
are  the best  tools he's  ever seen  for bringing  e-commerce to                                                               
Alaska's state government.                                                                                                      
MR.  JACKSON expressed  his belief  that the  union has  one main                                                               
argument and  one goal, and  characterized them as  defective and                                                               
historically unattainable, respectively.  He elaborated:                                                                        
     [With  regard to  the union's]  argument  ... that  the                                                                    
     union could  do same  thing as  the contractor  if they                                                                    
     were just given the tools  and they'd do it cheaper, if                                                                    
     the union  believes in  fair play, ...  then no  one is                                                                    
     going to give the  union the necessary e-commerce tools                                                                    
     free  of charge  and yet  require their  competitors to                                                                    
     build their own  tools at their own expense.   [If] the                                                                    
     unions want to compete  to provide e-commerce tools and                                                                    
     services, they better fire  up their venture capitalist                                                                    
     and create the capacity  to develop software technology                                                                    
     and service systems to get the job done.                                                                                   
     And they  better have started  a few years  ago because                                                                    
     the  need is  in front  of  us today.   If  we were  to                                                                    
     speculate, and were it possible  to turn back the clock                                                                    
     and provide  for the unions  to act as a  joint venture                                                                    
     proposer in  the pilot project  RFP, is it  the union's                                                                    
     position  that  they  could  have  won  the  RFP  as  a                                                                    
     straight  up  competitor  to the  other  proposers  and                                                                    
     preserve every one  of those jobs that were  lost?  The                                                                    
     only way  the RFP services could  possibly be performed                                                                    
     at a  lower cost than the  state's is to save  costs by                                                                    
     employing  technological  solutions  that  allow  fewer                                                                    
     employees to accomplish the work.                                                                                          
     This is because the source  of funding for the contract                                                                    
     is the staffing budget  for the procurement function of                                                                    
     the Southeast  Region of [Department  of Transportation                                                                    
     &  Public Facilities  (DOT&PF)].   To  put it  bluntly,                                                                    
     unions  would  need to  have  an  e-commerce system  at                                                                    
     least the  equal of  [ASCI's], and  they would  have to                                                                    
     have ...  cut even more jobs  if they wanted to  win by                                                                    
     being a competitor.  For  the unions to deliver similar                                                                    
     results, you have to accept  the notion that they would                                                                    
     deploy  technology  effectively  and then  deliver  the                                                                    
     staff reductions made possible.                                                                                            
     I  would   submit  to  you   that  this   is  unlikely.                                                                    
     Therefore,  the only  likely outcome  is more  cost for                                                                    
     technology but  no savings  delivered.   We can  see an                                                                    
     example of  this in  the state's  current use  [of] ...                                                                    
     procurement  technology -  the  Buyspeed program;  [the                                                                    
     DOT&PF] implemented  this several years ago,  but it is                                                                    
     implemented poorly and serves  only to require re-input                                                                    
     of paper records and absorb  tens of thousands annually                                                                    
     in  licensing costs.    The number  of  people who  are                                                                    
     capable of  using it fully  can probably be  counted on                                                                    
     the fingers of one hand.                                                                                                   
MR. JACKSON added:                                                                                                              
     Second  is the  union's  goal of  preserving every  job                                                                    
     regardless of the  march of ... progress.   This battle                                                                    
     has  been lost  over and  over by  unions all  over the                                                                    
     world.  The goal can't be  reached in the long run.  In                                                                    
     industry,   including  the   industry  of   government,                                                                    
     technological  progress usually  reduces or  transforms                                                                    
     staffing  requirements.   Instead,  enlightened  unions                                                                    
     have   found   another   perspective,  one   which   is                                                                    
     ultimately much  more valuable to union  members.  That                                                                    
     perspective  is   not  to   oppose  the   adoption  and                                                                    
     advancement of  technology, but to bargain  for ways to                                                                    
     retrain,  reeducate,  and   reequip  their  members  to                                                                    
     compete  anew in  the working  world, whether  with the                                                                    
     same employer or a new one.                                                                                                
     Attempting to  block the march  of progress  because it                                                                    
     might cost  jobs of members  is a classic  union tactic                                                                    
     which hasn't  worked in  the past  100 years  and won't                                                                    
     work here, now.   I would like to  remind the committee                                                                    
     that I  say this as  a former president of  [the Alaska                                                                    
     Public  Employees Association  (APEA)]  and a  founding                                                                    
     member   of  the   group  that   created  the   [ASEA].                                                                    
     Regardless of  who implements  it, including  the union                                                                    
     itself,  e-commerce  technology  will result  in  staff                                                                    
     reductions, or  at least it  will if  [it] successfully                                                                    
     delivers  efficiencies.    Helping those  who  will  be                                                                    
     affected  to  prepare  for  and  find  other  desirable                                                                    
     employment  is  the  correct role  for  the  unions  to                                                                    
3:09:35 PM                                                                                                                    
MR.  JACKSON  concluded  by  saying   that  HB  257  presents  an                                                               
opportunity to  look into the  future in search  of improvements.                                                               
Passage of  HB 257 will allow  the state to avoid  an unnecessary                                                               
expenditure of  public funds while  saving the  state significant                                                               
amounts  of  money,   increasing  efficiency,  and  incrementally                                                               
extending   the  use   of  e-commerce   tools  throughout   state                                                               
government over the  next few years.  He offered  his belief that                                                               
the introduction  into state procurement of  e-commerce tools and                                                               
services,  specifically  the  tools   and  services  created  and                                                               
provided  by ASCI,  is  an  unalloyed good.    The technology  is                                                               
available now, the  capacity to implement it is  present, and the                                                               
cost reduction is  real; all that is needed is  the resolve to do                                                               
the obvious.                                                                                                                    
3:11:02 PM                                                                                                                    
LAURA LAWRENCE -  after noting that she has been  employed by the                                                               
DOT&PF for  24 years,  specifically in  the field  of procurement                                                               
for [the last] 21 of those years  - said she would be speaking in                                                               
opposition to  HB 257 and  SB 160.   She indicated that  those in                                                               
the  field   of  procurement  are   required  to   sign  numerous                                                               
agreements  [of  compliance  with]   the  rules  and  regulations                                                               
dictated  by the  state to  control  purchasing; violating  those                                                               
agreements  would make  one  guilty of  a class  C  felony.   The                                                               
current  procurement policies,  codes, and  statutes were  put in                                                               
place  to  stop unorthodox  purchasing  and  garner the  public's                                                               
MS.  LAWRENCE offered  her understanding  that  ASCI has  readily                                                               
admitted to  doing business with  one of their own  companies and                                                               
then  admitted that  doing  so  was a  mistake.    How many  such                                                               
mistakes  will be  allowed, she  asked,  given that  ASCI is  not                                                               
required  to  follow the  state's  procurement  code.   How  much                                                               
business and money will be  diverted to only particular groups or                                                               
ASCI's  favorite   venders?    She  characterized   "this"  as  a                                                               
disservice to  the entire state's  business community as  well as                                                               
to  local taxpayers.   To  illustrate  her point,  she offered  a                                                               
hypothetical example wherein  a small-to-average Alaskan business                                                               
finds itself having  to compete with a  national corporation that                                                               
is exempt  from the procurement  rules which the  Alaskan company                                                               
must follow.   She likened such  a scenario to taking  on Mohamed                                                               
Ali  with one's  hands tied  behind one's  back.   How could  one                                                               
expect the local  company to follow the state's  rules and become                                                               
low bidder while  the company that's operating  the pilot project                                                               
is exempt from the same rules?                                                                                                  
MS. LAWRENCE  relayed that  many Alaska  venders look  forward to                                                               
the yearly  bids for  commodities in excess  of $5,000,  and make                                                               
yearly inquiries as to  when those bids are due to  come out.  If                                                               
the state  were to provide  for and allow the  state's purchasing                                                               
departments    the   infrastructure    to   purchase    statewide                                                               
requirements electronically in  the international marketplace, is                                                               
it likely  that ASCI  could remain  the low  bidder?   She opined                                                               
not.   She asked whether the  committee is aware that  the DOT&PF                                                               
already has an  electronic [procurement] system in  place but has                                                               
been prevented from  fully utilizing it.  "Untie  our hands," she                                                               
said, "and  we can  provide all  the supplies  and services  at a                                                               
rate  equal  [to] or  better  than  the outsource  company  while                                                               
keeping the jobs and tax base within the state."                                                                                
MS. LAWRENCE went on to say:                                                                                                    
     I  feel  the  state  set the  rules  on  using  instate                                                                    
     vendors to  help stimulate  local economies  and ensure                                                                    
     local employment.   This ends up  being more effective.                                                                    
     The money returns to the  local economies and the state                                                                    
     of  Alaska instead  of out-of-state  stockholders.   We                                                                    
     have a  fiduciary responsibility to the  people of this                                                                    
     state.   These bills appear  to be moving  entirely too                                                                    
     fast in  regard to outsourcing procurement.   The pilot                                                                    
     program with ASCI [has] ...  undergone only nine months                                                                    
     of  a  trial  period;  that's not  long  enough  for  a                                                                    
     thorough audit  to take  place.   [Only] time  will ...                                                                    
     determine the success  of such a pilot  as suggested in                                                                    
     the original bill.                                                                                                         
     Purchasing  for  the  [Department of  Transportation  &                                                                    
     Public  Facilities] in  itself is  a vast  undertaking,                                                                    
     given  the logistics,  needs, and  local services  that                                                                    
     are required to  fulfill many of the  demands needed to                                                                    
     operate  our   highways  and  airports  safely.     I'm                                                                    
     confident that  an outsource company  will not  be able                                                                    
     to  take on  these  responsibilities in  a fair  manner                                                                    
     that  will be  just to  our local  companies, nor  will                                                                    
     they  be aware  of  the ...  local logistical  problems                                                                    
     that are innate to the individual areas.                                                                                   
MS. LAWRENCE concluded:                                                                                                         
     Furthermore,  ASCI  is  using State  of  Alaska  office                                                                    
     space,  office equipment,  and a  warehouse to  operate                                                                    
     their  purchasing automation.   Are  these costs  being                                                                    
     taken  into consideration  when  audits  are being  ...                                                                    
     [conducted]?   Their lack  of infrastructure  ... shows                                                                    
     in itself  that they are not  in a position to  take on                                                                    
     such a vast responsibility.   They were not prepared to                                                                    
     handle two  more entities.   How can we expect  them to                                                                    
     handle   the  entire   state   of  Alaska   procurement                                                                    
     function. ... Thank you for letting me speak.                                                                              
3:17:09 PM                                                                                                                    
GAIL  KOZLOWSKI  said  that  in her  job  with  an  Alaskan-owned                                                               
business  and   office  supply  company,   she  works   with  the                                                               
Department  of Public  Safety (DPS),  the  Department of  Natural                                                               
Resources  (DNR), and  the DOA,  and  sees a  lot of  competitive                                                               
bidding  and employees  attempting  to manage  their state  funds                                                               
appropriately.  She added:                                                                                                      
     Our  customers   can  go  to   our  web  site   or  our                                                                    
     competitor's  web  site  [and]   look  right  at  their                                                                    
     contract pricing.   The supplies can be  delivered in a                                                                    
     24-hour  turnaround [period]  without any  paperwork if                                                                    
     they so choose  or they can get a hard  copy.  But this                                                                    
     is e-commerce  at its best.   The state  employees have                                                                    
     the option  to use their  state contract or go  to bid.                                                                    
     They've done  this effectively without going  through a                                                                    
     third party.                                                                                                               
     How many of  you have campaigned on  increasing jobs in                                                                    
     Alaska?  I agree  with [Representative] Gruenberg about                                                                    
     losing  jobs locally.   Who  has the  best interest  of                                                                    
     state funds  at heart?   Employees who are paid  by the                                                                    
     state,  or  a  nonstate  employee  who  has  no  vested                                                                    
     Our  Alaskan prisons  are  making  furniture for  state                                                                    
     offices.   It may not  be the cheapest to  purchase, or                                                                    
     it may  be, I don't know  the pricing on that,  but the                                                                    
     point  is,  we are  utilizing  our  prison inmates  and                                                                    
     teaching them  a viable job  skill to help make  them a                                                                    
     more  productive member  of  society  when they  finish                                                                    
     their term  in prison.   Do we  want to  eliminate this                                                                    
     type of job skill and training  as well?  Thank you for                                                                    
     letting me share my thoughts.                                                                                              
3:19:12 PM                                                                                                                    
ELLEN KUBIAK  - noting that  she works  for an Alaskan  owned and                                                               
operated company - said she can't  believe that the state is even                                                               
considering  outsourcing  procurement.    She  relayed  that  the                                                               
company she  is employed  with is keeping  its head  above water,                                                               
trying  to  keep  the  big   box  stores  from  getting  all  the                                                               
procurement  business in  her area,  and has  done very  well for                                                               
itself and the state.  For  example, by utilizing the company she                                                               
works for,  the [the DOT&PF]  saved the state  $600 on a  bid for                                                               
basic supplies.                                                                                                                 
CHAIR  McGUIRE offered  her understanding  that  under the  bill,                                                               
everyone  will  have  to  comply  with  the  bidding  preferences                                                               
regarding "made in Alaska" and Alaskan-owned companies.                                                                         
MS. KUBIAK  said she  merely wants  to offer  her support  to the                                                               
state's  professional  procurement  officers, and  remarked  that                                                               
they are doing  a great job and that she  resents the possibility                                                               
that those people could lose their jobs.                                                                                        
3:20:55 PM                                                                                                                    
DONNA  SCHELIN  simply relayed  that  she  would be  faxing  some                                                               
information to the committee.                                                                                                   
3:21:12 PM                                                                                                                    
KEN  BROWN mentioned  that he  has worked  for the  state in  the                                                               
field  of construction  procurement for  the  last 20  of his  30                                                               
years  of state  employment.   He  opined that  if  HB 257  moves                                                               
forward, it  will result in  the loss of approximately  200 state                                                               
positions, and  that such should  not be the  way to run  a pilot                                                               
project, especially given that the  goal of the original bill was                                                               
to  take advantage  of the  benefits  provided by  e-procurement.                                                               
The union's  response to  ASCI's proposal was  to merely  look at                                                               
the comparison  between state salaries  and the  contract amount,                                                               
he  remarked, and  suggested that  outsourcing  is not  something                                                               
that should be treated with callous indifference.                                                                               
MR. BROWN offered his belief  that the issue of outsourcing state                                                               
functions was  addressed in the  1994 Alaska Supreme  Court case,                                                               
Moore  v.  Alaska  Department   of  Transportation,  wherein  the                                                             
concern  was  that  privatization  can  be used  as  a  means  of                                                               
subverting  state requirements  regarding worker  qualifications,                                                               
conditions  of employment,  and employment  benefits.   He opined                                                               
that privatization  violates public policy by  allowing the state                                                               
to  avoid  employment costs  which  it  would otherwise  normally                                                               
bear, and  suggested that those  benefits are intended  to ensure                                                               
that  public employees,  especially in  the area  of procurement,                                                               
are above  the fray and  won't be easily manipulated,  that those                                                               
employees will be working for the  common good and benefit of all                                                               
MR. BROWN relayed that although  the court in Moore supported the                                                             
legitimacy  of outsourcing,  that  view rests  on  the fact  that                                                               
there are protections under the  law; specifically the court said                                                               
in part:   "... to the  extent that privatization creates  a risk                                                               
of exposing  state workers to  political influence, that  risk is                                                               
largely obviated  by provisions  of the  State Personnel  Act and                                                               
state personnel rules  dealing with layoffs and  by provisions of                                                               
the State  Procurement Code and the  rules promulgated thereunder                                                               
dealing with  state contracts.".   He opined  that HB  257 throws                                                               
out the state's current procurement  code, which, he surmised, is                                                               
there  for  a  reason.   Furthermore,  the  procurement  code  is                                                               
referenced in  other statutes, by  reference adopts  the [Uniform                                                               
Commercial  Code  (UCC)],  and provides  criminal  penalties  for                                                               
misrepresentation and for anticompetitive practices.                                                                            
MR. BROWN relayed that Oregon, with  the help of firms similar to                                                               
ASCI,  has instituted  a  "Buysmart"  e-commerce [system]  within                                                               
state  government,   thus  eliminating  the  need   to  outsource                                                               
people's  jobs.   He predicted  that moving  forward with  HB 257                                                               
will  engender  a  fight,  since   there  are  various  forms  of                                                               
protection  for state  employees,  and mentioned  that the  pilot                                                               
project's  contract allows  ASCI to  raise the  current limit  on                                                               
counterproposals but  state procurement  officers were  not given                                                               
the same  advantage.  In  conclusion, he offered his  belief that                                                               
in  the  RFP  for  the  pilot project,  certain  costs  were  not                                                               
CHAIR McGUIRE  closed public  testimony and  relayed that  HB 257                                                               
[as amended] would be held over.                                                                                                
HB 133 - LOCAL BOUNDARY COMMISSION REGS & POWERS                                                                              
3:28:36 PM                                                                                                                    
CHAIR McGUIRE  announced that the  final order of  business would                                                               
be SPONSOR  SUBSTITUTE FOR HOUSE  BILL NO. 133, "An  Act relating                                                               
to  incorporation of  boroughs and  to regulations  of the  Local                                                               
Boundary  Commission  to  provide standards  and  procedures  for                                                               
municipal   incorporation,  reclassification,   dissolution,  and                                                               
certain  municipal   boundary  changes;  and  providing   for  an                                                               
effective date."  [Before the committee was CSSSHB 133(STA).]                                                                   
RYNNIEVA  MOSS, Staff  to  Representative  Coghill, Alaska  State                                                               
Legislature,   sponsor   of  SSHB   133,   said   on  behalf   of                                                               
Representative Coghill  that the  bill originally did  one thing,                                                               
which was  to say that  any regulations  that are adopted  by the                                                               
Local  Boundary  Commission  have  to be  consistent  with  state                                                               
statute.   This  concept was  engendered  by the  discovery of  a                                                               
regulation  that allowed  for an  aggregate  vote to  be used  to                                                               
annex  land into  a borough.   State  law, however,  requires the                                                               
annexation of  land into a borough  to be decided at  an election                                                               
of the voters living in the area  to be annexed, and it must pass                                                               
by  a majority  vote.    She explained  that  the aggregate  vote                                                               
allows all the residents, both of  the area to be annexed as well                                                               
as of  the existing borough, to  vote, and if, via  that combined                                                               
vote,  it is  approved,  the area  could then  be  annexed.   She                                                               
clarified that  SSHB 133 says  that both  the area to  be annexed                                                               
and the  area of the  existing municipality each have  to approve                                                               
annexation  by   a  majority  vote;   this  will   eliminate  the                                                               
possibility of a  "hostile takeover" of an un-annexed  area by an                                                               
existing municipality.                                                                                                          
MS. MOSS pointed out that Section  1 says that the Local Boundary                                                               
Commission may not  amend a petition or impose  conditions on the                                                               
incorporation,  which,  she  said,   is  a  change  in  statutory                                                               
language, but noted  that the constitution clearly  says that the                                                               
Local Boundary  Commission will do  "this" as prescribed  by law,                                                               
that being statutory  law passed by the legislature.   She turned                                                               
attention   to   Section  2,   and   said   that  under   current                                                               
constitutional authority, the Local  Boundary Commission can take                                                               
a proposal to the legislature for  its approval without a vote of                                                               
the people; Section  2, in contrast, says that there  needs to be                                                               
at least two  public hearings and that there should  be a vote of                                                               
the people.   Ms. Moss noted that Legislative  Legal and Research                                                               
Services told  her that  Section 2 probably  would not  survive a                                                               
constitutional challenge.   She  said that  she had  an amendment                                                               
prepared that would  take out the election provision  so that the                                                               
bill could withstand such a challenge.                                                                                          
REPRESENTATIVE GRUENBERG  commented that  he had asked  that this                                                               
bill be referred to this  committee specifically to deal with the                                                               
constitutionality of  the bill.   He suggested that  the language                                                               
on page  2, line 5, "and  shall notify the director  of elections                                                               
of the incorporation proposal", be deleted from the bill.                                                                       
REPRESENTATIVE COGHILL,  speaking as  the sponsor, said  he would                                                               
prefer to delete  the language rather than approaching  it from a                                                               
severability issue  because of the  costs associated  with trying                                                               
to defend it.  He said:                                                                                                         
     I appreciate  the severability issue, but  I don't want                                                                    
     the rest  of the  bill to  get put in  a place  where a                                                                    
     court can put the whole thing  under a cloud when all I                                                                    
     wanted was  a simple, little  fix. ... Under  this bill                                                                    
     we're  testing the  legislative  authority against  the                                                                    
     boundary  commission  authority,   and  I'm  asserting,                                                                    
     rather strongly, legislative  authority here.  However,                                                                    
     there [are]  ... some  real constitutional  reasons for                                                                    
     the boundary commission, and when  we go back and we've                                                                    
     studied it in the  different committees that we've been                                                                    
     in, I  would be  satisfied in  taking this  portion out                                                                    
     because it still  then allows two public  hearings in a                                                                    
     community,  which, to  me, ...  kicks a  door open  for                                                                    
     more public  process.   And then  the vote  wouldn't be                                                                    
3:35:00 PM                                                                                                                    
REPRESENTATIVE GRUENBERG  agreed with Representative  Coghill and                                                               
therefore  announced  that  he  would  not  offer  his  amendment                                                               
labeled 24-LS0512\Y.1, Cook, 4/13/05, which read:                                                                               
     Page 3, following line 22:                                                                                                 
          Insert a new bill section to read:                                                                                    
        "*  Sec. 6.   The  uncodified  law of  the State  of                                                                
     Alaska is amended by adding a new section to read:                                                                         
          SEVERABILITY.  Under AS 01.10.030, if any                                                                             
     provision of this  Act or the application of  it to any                                                                    
     person or  circumstance is held invalid,  the remainder                                                                    
     of this  Act and  the application  to other  persons or                                                                    
     circumstances are not affected."                                                                                           
     Renumber the following bill section accordingly.                                                                           
REPRESENTATIVE  GRUENBERG  commented  that   he  didn't  see  any                                                               
serious problem  with requiring the Local  Boundary Commission to                                                               
hold two public hearings.                                                                                                       
REPRESENTATIVE COGHILL  noted that the Local  Boundary Commission                                                               
was amenable  to having  two hearings, but  [language on  page 2,                                                               
line 5] became problematic.                                                                                                     
MS.  MOSS relayed  that former  Lieutenant Governor  Jack Coghill                                                               
testified  at a  House State  Affairs Standing  Committee hearing                                                               
during which  he was  asked about  Section 1.   She said  that he                                                               
offered  his belief  that  the  bill put  into  statute what  the                                                               
intent was of  the constitutional convention.   She commented, "I                                                               
think   those   are  some   very   strong   words  that   support                                                               
Representative Coghill's desire for  the legislature to make sure                                                               
that the  Local Boundary  Commission is not  stepping out  of ...                                                               
[its] bounds."                                                                                                                  
REPRESENTATIVE   GRUENBERG   explained  that   his   [un-offered]                                                               
amendment   really   just   calls  attention   to   the   general                                                               
severability statute,  but it  really doesn't  add anything.   He                                                               
reiterated  his belief  that the  committee should  instead adopt                                                               
Representative Coghill's suggested change.                                                                                      
3:37:00 PM                                                                                                                    
REPRESENTATIVE  GRUENBERG asked  whether  the  Department of  Law                                                               
(DOL) would have any problem defending Section 1 of the bill.                                                                   
SARAH FELIX, Assistant Attorney  General, Labor and State Affairs                                                               
Section,  Civil  Division  (Juneau),  Department  of  Law  (DOL),                                                               
stated that she  was attending the meeting on  behalf of Marjorie                                                               
Vandor, who is  assigned to the Local  Boundary Commission's work                                                               
and who would be back in  Juneau tomorrow.  Ms. Felix stated that                                                               
Ms. Vandor had said that she  is concerned about Section 1 of the                                                               
bill.  Ms. Felix continued:                                                                                                     
         [Ms. Vandor] indicated that the Local Boundary                                                                         
     Commission is one of the few constitutionally created                                                                      
     commissions, and  that the framers expressed  an intent                                                                    
     that boundary  decisions be made at  a statewide rather                                                                    
     than a  local level because of  the statewide interests                                                                    
     in  the municipal  organization of  Alaska.   Case law,                                                                    
     interpreting the  Local Boundary  Commission authority,                                                                    
     has found  that the commission has  discretion to alter                                                                    
     boundaries  presented in  incorporation petitions.  ...                                                                    
     Case  law  has  also   recognized  the  Local  Boundary                                                                    
     Commission's   constitutionally-based  authority.   ...                                                                    
     However,  we  know  that  not   every  issue  has  been                                                                    
     decided.    I  mean,  there has  been  some  litigation                                                                    
     concerning   the  authority   of  the   Local  Boundary                                                                    
     Commission  but there  are still  a  lot of  unanswered                                                                    
     The  line  dividing  the  Local  Boundary  Commission's                                                                    
     constitutional   authority    and   the   legislature's                                                                    
     authority to enact laws  restricting the Local Boundary                                                                    
     Commission's   authority   is   not   entirely   clear.                                                                    
     Existing  precedent suggests  that  removing the  Local                                                                    
     Boundary  Commission's authority  to change  boundaries                                                                    
     in  incorporation  petitions  raises  a  constitutional                                                                    
MS. FELIX added:                                                                                                                
     Ms. Vandor wanted me to  stress that her reading of the                                                                    
     constitutional  debate   indicates  that   the  framers                                                                    
     intended   that  the   concept   behind  adopting   the                                                                    
     constitutional   provision   authorizing   the   [Local                                                                    
     Boundary  Commission]  was   that  political  decisions                                                                    
     don't  usually   create  proper  boundaries   and  that                                                                    
     boundaries should  be established  at the  state level,                                                                    
     and that  the advantage of  the method proposed  in the                                                                    
     constitution for the Local  Boundary Commission lies in                                                                    
     placing  the  process  at a  level  where  areawide  or                                                                    
     statewide needs can be taken  into account, and that by                                                                    
     placing  that  authority  in this  third  party  -  the                                                                    
     commission  - the  arguments for  and against  boundary                                                                    
     changes can be analyzed objectively.                                                                                       
3:40:39 PM                                                                                                                    
MS. MOSS  noted that  the case  law is based  on a  state statute                                                               
that  this bill  would change.   She  also pointed  out that  the                                                               
constitution  says  that  the  [Local  Boundary  Commission]  may                                                               
consider  any proposed  local  government  boundary changes,  but                                                               
doesn't  say that  the commission  can amend  or alter  it.   She                                                               
opined,   "I  think   the  legislature   definitely,  under   the                                                               
constitution,  has  the  authority  to change  this  statute  and                                                               
direct the Local  Boundary Commission."  She  stated that Article                                                               
XII, Section  11, [of  the Alaska  State Constitution]  says that                                                               
"by law"  and "by  the legislature"  can be  used interchangeably                                                               
with  regard  to  law-making powers;  therefore,  she  concluded,                                                               
"prescribed by  law" doesn't mean  the constitution or  the Local                                                               
Boundary Commission,  but instead means statutes  that are passed                                                               
by the legislature.                                                                                                             
3:41:42 PM                                                                                                                    
EDGAR   BLATCHFORD,   Commissioner,   Department   of   Commerce,                                                               
Community, &  Economic Development  (DCCED), offered  his apology                                                               
for not  advising the bill  sponsor of the  department's concerns                                                               
sooner.  He stated:                                                                                                             
     The department  has this obligation to  be the advocate                                                                    
     for   the   unorganized    borough   and   to   promote                                                                    
     municipalities,  whether  they're cities  or  boroughs.                                                                    
     And  our  concerns are  that  [the  bill] reverses  the                                                                    
     Local  Boundary  Commission's  authority to  amend  and                                                                    
     impose  conditions on  the petition.   We're  concerned                                                                    
     that the  voters must first approve  this annexation or                                                                    
     detachment before the legislature  can take action.  We                                                                    
     are  also  concerned  that  proposals  for  legislative                                                                    
     review  must  first be  approved  by  residents of  the                                                                    
     area.   And  we're concerned  also that  the annexation                                                                    
     into  existing  boroughs  and cities  would  be  almost                                                                    
     impossible  or probably  improbable without  support of                                                                    
     the annexed areas.                                                                                                         
     As it  is, it's unlikely  that there would be  any more                                                                    
     organized governments  in the unorganized  borough, and                                                                    
     the  unorganized   borough,  we  believe,   can  remain                                                                    
     confident  that until  they decide  to incorporate,  an                                                                    
     existing borough  or city would  not be able  to attach                                                                    
     them to their  boundaries.  And looking at  the bill as                                                                    
     it is ..., we believe  this could impede development of                                                                    
     natural resources.   We  believe too  that as  the bill                                                                    
     ... stands now,  ... it would hinder  the assumption of                                                                    
     the  local responsibilities  by local  people.   And we                                                                    
     also  believe ...  that the  bill  could prevent  local                                                                    
     people from  seizing the  opportunities that  come with                                                                    
     local government.                                                                                                          
COMMISSIONER BLATCHFORD noted that he had not seen any of the                                                                   
proposed [amendments].                                                                                                          
REPRESENTATIVE COGHILL relayed that the following language in                                                                   
Section 2 will be removed if the committee agrees:                                                                              
     and  shall   notify the  director of  elections of  the                                                                    
     incorporation   proposal.     Within   30  days   after                                                                    
     notification, the director of  elections shall order an                                                                    
     election  in the  proposed  borough  area to  determine                                                                    
     whether the  voters desire incorporation.   Only if the                                                                    
     voters   approve  the   incorporation  may   the  Local                                                                    
     Boundary   Commission  submit   the  proposal   to  the                                                                    
REPRESENTATIVE COGHILL went on to say:                                                                                          
     I think  we need  to organize  in Alaska.   We  need to                                                                    
     organize  in   boroughs.     But  the   [Alaska  State]                                                                    
     Constitution has allowed  for unorganized and organized                                                                    
     boroughs.   It also said  that as we begin  to populate                                                                    
     and become  an economy,  that we  are to  be considered                                                                    
     organization along several different  criteria.  And so                                                                    
     we  set up  a  boundary commission  to  help us  figure                                                                    
     those things  out.   But at  the end  of the  day, it's                                                                    
     going to be based on the  law that we put together that                                                                    
     respects the right  of the individual voter.   And it's                                                                    
     our  job to  protect that.   It's  the administration's                                                                    
     job  to   administer.    So   I  can   recognize  their                                                                    
     reluctance  because they're  going  to  advocate for  a                                                                    
     particular style that they've been doing.                                                                                  
     [The DCCED  is] going  to bring  their proposals  to us                                                                    
     and here's the action that we  have:  ... that the only                                                                    
     action  that  the  legislature  can  do  is  disapprove                                                                    
     something.    That's  a huge  negative  vote.    Almost                                                                    
     everything   else  we   do   in   the  legislature   is                                                                    
     affirmative with the  exception of this one  issue.  So                                                                    
     it  gives   the  Local   Boundary  Commission   a  huge                                                                    
     authority.    And  so  the authority  then  has  to  be                                                                    
     carefully crafted  by law.   And  so I  understand that                                                                    
     [the  DCCED  is]  concerned about  it,  but  ...  [our]                                                                    
     constitutional   duty  is   to  make   sure  that   the                                                                    
     individual voters in those areas  are not forced into a                                                                    
     government that they  don't want. ... We  want a larger                                                                    
     agency looking at the need to organize.                                                                                    
3:48:13 PM                                                                                                                    
DEBBIE  THOMPSON stated  that she  is a  concerned resident  of a                                                               
subdivision in  Union Bay,  near Meyers Chuck.   She  stated that                                                               
she strongly  believes that the  best way to reflect  the desires                                                               
of  the  community  is to  be  able  to  let  the people  of  the                                                               
communities vote  on the issues  rather than just  bypassing them                                                               
to go to the legislature.                                                                                                       
3:49:56 PM                                                                                                                    
VIOLA JERREL, Ph.D., Alaskans Opposed  to Annexation, stated that                                                               
she  was  also speaking  for  Doris  Cabana.   She  testified  in                                                               
support  of SSHB  133 and  said:   "Regarding any  attachments or                                                               
annexations, we want  a vote of the people only  in the area that                                                               
a city  or another group is  trying to annex.   We do not  want a                                                               
combined vote;  we do  not want  an aggregate  vote."   She noted                                                               
that she and Doris Cabana hired  Attorney Robert C. Erwin, who is                                                               
a former  Alaska Supreme Court  justice, to oppose  annexation by                                                               
the  City of  Homer.   She further  noted that  a superior  court                                                               
judge in  Anchorage remanded  the Homer  annexation case  back to                                                               
the Local  Boundary Commission  to consider  the effect  that the                                                               
Homer  annexation  of  4.58  square miles  had  on  the  Kachemak                                                               
Emergency Service Area of 214 miles.                                                                                            
DR.  JERREL  referred   to  a  meeting  of   the  Local  Boundary                                                               
Commission on  January 5,  2005, during which  the City  of Homer                                                               
Annexation Remand  was on the  agenda, and offered  the following                                                               
as a statement  purportedly made at that  meeting by Commissioner                                                               
Robert Harcharek:                                                                                                               
     I  strongly  believe  that   the  judicial  system  was                                                                    
     totally  out of  line in  remanding us  to rehear  this                                                                    
     action.   It is  not in  the administrative  code, it's                                                                    
     not a  part of our  legislative procedures. ...  I feel                                                                    
     that if  we're going  to send a  message, it's  to tell                                                                    
     the judges  to stay the hell  out of it because  it has                                                                    
     nothing for them to do with it.                                                                                            
DR. JERREL  opined that this statement  by Commissioner Harcharek                                                               
was illegal and inappropriate.                                                                                                  
DR. JERREL expressed  her belief that the  current Local Boundary                                                               
Commission is not following the  order of the court and therefore                                                               
the members need  to be replaced.  She continued:   "Public money                                                               
cannot  be used  to deny  people  the due  process of  law.   The                                                               
United States  Constitution is  the supreme law  of the  land and                                                               
everyone  has to  go  by it,  including the  judges.   The  Local                                                               
Boundary Commission has to go by it.  They have to be replaced."                                                                
3:53:50 PM                                                                                                                    
CHAIR McGUIRE closed public testimony on SSHB 133.                                                                              
REPRESENTATIVE COGHILL made a motion  to adopt Amendment 1, which                                                               
read [original punctuation provided]:                                                                                           
     Page 2, line 5:                                                                                                            
     After the word "incorporation"                                                                                             
     Delete all language through line 9, except the period.                                                                     
REPRESENTATIVE COGHILL said that  Amendment 1 "takes the election                                                               
out of it but leaves the public comment hearing in it."                                                                         
CHAIR  McGUIRE  asked  whether   there  were  any  objections  to                                                               
Amendment 1.  There being none, Amendment 1 was adopted.                                                                        
3:54:42 PM                                                                                                                    
REPRESENTATIVE  GRUENBERG moved  to  report  CSSSHB 133(STA),  as                                                               
amended,  out of  committee with  individual recommendations  and                                                               
the accompanying fiscal notes.   There being no objection, CSSSHB
133(JUD)  was   reported  from   the  House   Judiciary  Standing                                                               
3:55:02 PM                                                                                                                    
The House Judiciary Standing Committee  was recessed at 3:55 p.m.                                                               
to a call of the chair.  [The meeting was never reconvened.]                                                                    

Document Name Date/Time Subjects