Legislature(1995 - 1996)

03/18/1996 03:12 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
 HB 482 - STATE PROCUREMENT PRACTICES & PROCEDURES                           
                                                                               
 CHAIRMAN KOTT announced the first order of business would be HB
 482, "An Act relating to state procurement practices and                      
 procedures; and providing for an effective date."                             
                                                                               
 Number 083                                                                    
                                                                               
 DUGAN PETTY, Director, Division of General Services, Department of            
 Commerce and Economic Development, came before the committee to               
 address HB 482.  He explained that at the conclusion of the last              
 legislative session, Commissioner Boyer gave him a packet of                  
 information which was the 1994 Federal Acquisition Streamlining               
 Act.  He was asked to review the information and note things that             
 we could do in our state procurement practices to make them more              
 efficient and a more results oriented process.  He was also asked             
 to incorporate some of the reform measures that have taken place in           
 the 1994 Act.  Mr. Petty informed the commissioner that HB 116 had            
 just passed through the legislature which removed the Alaska                  
 Seafood Marketing Institute (ASME) from the procurement code.  In             
 each committee the bill went through somebody raised a concern as             
 to whether or not ASME should be removed from the procurement code            
 or whether something should be done to reform and make the                    
 procurement code more streamlined and responsive.  Mr. Petty                  
 explained he told the commissioner that he believed this was a good           
 time to look at reform in the procurement code.  He said he also              
 told the commissioner we are fortunate to have a relatively new               
 procurement law which is based on the model procurement code, and             
 many of the changes the federal government had to make, we didn't             
 have to do because we enjoy the benefit of a more straight forward            
 and simpler process.  Mr. Petty pointed out that we live in complex           
 times and the market is changing.  We live in a rapidly evolving              
 market with electronic interconnects which really changed our                 
 procurement process in many ways.  He said he believes we need to             
 look at our processes and how we do them to make them responsive to           
 today's changing market.  We also need to look at the resources we            
 have available to see what can be done to bring about a more                  
 effective procurement given the resources we have and given the               
 fact that we are not likely to get more resources in the future.              
                                                                               
 MR. PETTY said in an effort to bring about those efficiencies,                
 Commissioner Boyer began a streamline initiative during the summer.           
 One of the major impetuses of that initiative was to form a                   
 procurement advisory council.  This council is made up of                     
 stakeholders, procurement practitioners within and outside of state           
 government, people from ARCO, vendors and representatives of small            
 business advocacy groups.  He said they started looking at                    
 practices from their regulations, from statute, from policy as well           
 as nonresponsive procurement processes and see if they couldn't               
 situationally re-engineer those to be more responsible to today's             
 state procurement needs.  He said the council has met a number of             
 times and came forward with a list of about 34 recommendations to             
 Commissioner Perkins and Commissioner Boyer.  They reviewed the               
 recommendations.  They took some out and they made some                       
 suggestions.  What the committee has before it is suggested changes           
 by the procurement advisory council and the two commissioners,                
 which is advanced to try and build a foundation for beginning to              
 streamline our procurement process.                                           
                                                                               
 Number 384                                                                    
                                                                               
 MR. PETTY said he would review changes by hitting the significant             
 sections.  He said this is not inclusive of all sections; however,            
 there are a number of the changes in statutes that move one section           
 of existing statute to another location or, because of changes that           
 are proposed, affect other sections.                                          
                                                                               
 MR. PETTY referred to Section 3 and Section 38 and said they simply           
 permit the commissioner of the Department of Administration to                
 delete names of vendors that are suspended or debarred.  If they              
 are suspended or debarred, which is currently provided for in                 
 statute, this eliminates an inconsistency in statute.                         
                                                                               
 MR. PETTY said Section 4 would allow the department to acquire                
 small leased office space, which would be identified as 5,000                 
 square feet or less, under small procurement rules.  This means you           
 could get three proposals and award to the low responsive                     
 responsible bidder, taking into account Alaska bidder preferences.            
                                                                               
 MR. PETTY explained Section 5 would authorize extensions of leases            
 up to ten years in return for rent concessions.  He said this may             
 seem similar to a bill that passed the legislature a couple of                
 years ago.  There was about an 18 month window where the department           
 was authorized to extend leases for five years in return for rent             
 concessions of up to 10 percent.  That proved to be very successful           
 in driving down the costs of the leasing budget.  The bill would              
 ask to basically do the same thing on a permanent basis in statute,           
 but give the department the ability to go up to ten years rather              
 than five.  Mr. Petty pointed out that many lessors have said five            
 years didn't offer them the opportunity to refinance.  They felt              
 they could drive better prices by refinancing on a longer term and            
 the state might take advantage of better savings.                             
                                                                               
 MR. PETTY referred to Sections 6 and 7 and said they would allow              
 for the lease/purchase acquisition of real property when the annual           
 payments did not exceed $500,000 or the total value of the                    
 lease/purchase agreement does not exceed $2.5 million.  Currently,            
 any acquisition of real property through a lease financing                    
 arrangement requires notice to the legislature and the enactment of           
 the law.                                                                      
                                                                               
 Number 553                                                                    
                                                                               
 MR. PETTY explained Sections 8 and 12 would allow bidders for                 
 services and supply contracts to not list their subcontractors                
 within five days of bid opening and would give them more                      
 flexibility to change subcontractors.  He said he would note that             
 the provision, as it relates to current construction contracts,               
 would not change.  This would only change the subcontractor notice            
 requirement for services and supplies.                                        
                                                                               
 MR. PETTY said Section 9 would permit the procurement officer                 
 issuing a request for proposal (RFP) or a bid to shorten the                  
 circulation period.  The statute requires a 21 day notice.  It may            
 currently be shortened under a determination by the chief                     
 procurement officer.  This would empower the person who is actually           
 issuing the bid or proposal to make the decision as to what                   
 adequate circulation is for notice and they would have to do a                
 determination that it is advantageous to the state and adequate               
 competition is anticipated.                                                   
                                                                               
 MR. PETTY explained Section 10 is an amendment of a section that              
 actually had it genesis in this committee last year.                          
 Representative James had a bill extending the procurement                     
 preference to certain entities.  As the bill came through the House           
 Labor and Commerce Committee, there was some discussion about a               
 trend in (indisc.) bidder preferences.  The department actually               
 worked with the sponsor on a committee substitute to try and ensure           
 that the bidder, if they were to receive the bidder preference, had           
 maintained a place of business for six months of the bid selling              
 the kind of product and service for which the state was issuing the           
 bid for.  This provision is intended to resolve a current issue               
 that they have with brokering of the bidders preference.  It is               
 effectively the same provision that was amended in HB 288 last year           
 in the House Labor and Commerce Committee.                                    
                                                                               
 Number 695                                                                    
                                                                               
 MR. PETTY explained Section 11 would make the use of RFPs an easier           
 threshold to meet.  Currently, the chief procurement officer must             
 make the determination if the use of competitive sealed proposals             
 is appropriate.  This would allow the commissioner of the                     
 Department of Transportation and Public Facilities to make that               
 determination for construction and would allow the procurement                
 officer to make a determination when the RFP process is most                  
 advantageous to the state.  Mr. Petty explained this is one of the            
 ways current reform trend in public procurement seeks to try and              
 include past vender performance as a criteria in making an award              
 and also seeks to make awards best value procurement rather than              
 low bid procurement.                                                          
                                                                               
 MR. PETTY referred to Section 14 and said when a RFP is cancelled             
 prior to notice of intent, the state would maintain a list of                 
 proposals received, but would return the proposals to the bidder.             
 Currently, when an RFP is cancelled, those bids and proposals must            
 remain with the procurement officer, which after the procurement is           
 cancelled, becomes public information.  Bidders can get this                  
 information and then view another bidders proposal.  He said they             
 would want, if an RFP is cancelled, to return the proposals back to           
 the bidders.                                                                  
                                                                               
 MR. PETTY explained Section 16 would make the term "sole source               
 requirement" more flexible.  There has been circumstances with a              
 relatively rigid requirement where there must be clear and                    
 convincing evidence that only one source exists where agencies will           
 spend a tremendous amount of time and effort documenting that there           
 is only one source that appears reasonable because the other source           
 is out of state or is out of the country and it is much more                  
 expensive.  That doesn't meet the test as it currently exists in              
 statute.  He said they have had situations where they'll spend a              
 lot of time and effort trying to document it, not meet it, go out             
 to bid and wind up doing business with the one bidder that they               
 assumed they'd be doing business with.  This seeks to free that up            
 and would allow you to enter into a single source after there was             
 a determination that it was not practical to go through the normal            
 competitive bid process in a determination that a single source               
 contract would be in the state's best interest.  Mr. Petty said it            
 also permits the chief procurement officer to delegate this to                
 other procurement officers.                                                   
                                                                               
 MR. PETTY said Section 17 would allow the chief procurement officer           
 to delegate the limited competition requirement as a method of                
 source selection when it is contrary to the state's best interest             
 to enter into a contract under the normal procurement process.  The           
 chief procurement officer may determine that a limited competition            
 situation exists.  This would allow the chief procurement officer             
 to delegate it.  Mr. Petty pointed out another feature of Section             
 17 is that for legal services contracts, the attorney general would           
 be named as the person determining when it was appropriate to enter           
 into a legal source for just legal services contracts.                        
                                                                               
 Number 909                                                                    
 MR. PETTY referred to Section 19 and said it would create another             
 method of source selection which is called the innovative                     
 procurement method.  There is a recognition that in today's rapidly           
 evolving procurement environment in the marketplace that the                  
 invitation to bid process, which has been the mainstay of public              
 procurement for 100 years or better, and the RFP process doesn't              
 always work.  We need to have innovative thinking to figure out               
 better ways of getting the job done.  This would establish an                 
 innovative procurement track which would challenge procurement                
 officials in the state to do some "outside the box thinking."  He             
 said they would have to have the procurement plan reviewed, as to             
 form, by the Department of Law.  They would have to have the chief            
 procurement officer determine that it is advantageous to the state            
 to use an innovative procurement process.  Mr. Petty said the idea            
 is if we can document some successful uses that innovate                      
 procurement processes, we could come back and institutional it.               
 Public procurement throughout the United States is struggling with            
 trying to make the procurement process responsive.  This is one way           
 that we could build innovation into the system, but it is                     
 controlled and they would be expected to report on it to compile              
 those successes and failures as well.                                         
                                                                               
 Number 985                                                                    
                                                                               
 MR. PETTY said Section 22 would expand the requirement of                     
 independently examining material facts when determining that a                
 limited competition procurement or a sole source for emergency                
 competition procurement is required.  He said Section 22 fits with            
 Section 16 and 17.  If we're going to give procurement officers               
 more empowerment and authority under 16 and 17, then 22 also makes            
 them accountable for the independent verification of the material             
 facts and also would extend the penalties of a class A misdemeanor            
 to those state officials who might make that determination and not            
 just the chief procurement officer.                                           
                                                                               
 MR. PETTY explained Section 23 would increase the threshold                   
 requirements for use of the small procurement process, which is a             
 simplified process compared to the invitation to bid (ITB) and                
 RFP process.  Currently, ITBs and RFPs must be used if the                    
 material, construction or service is to be over $25,000.  This                
 would expand, for services and supplies, the requirement to use an            
 ITB or RFP when it trips $50,000, and for construction when it                
 trips $100,000.  He said that is the threshold that has been                  
 established under the 1994 Federal Streamlining Act.  Theirs, if              
 you use electronic commerce, would go higher than those thresholds.           
                                                                               
 Number 1072                                                                   
                                                                               
 MR. PETTY said Section 29 allows the commissioner of the Department           
 of Administration to establish, by regulation, a simplified                   
 procurement process.  Currently, we have a two tiered process which           
 brings the initial protest to the contracting officer with the                
 ability to appeal that decision to the commissioner of                        
 Administration as a second tier.  The third tier would be to appeal           
 the commissioner's decision to the court.  That process takes time            
 and effort not only by the state but also by the contractors that             
 use it.  It is the only process we have in statute even if it's a             
 small procurement that is being protested.  He said they would want           
 to establish a more streamline simplified protest process that                
 would be consistent with whatever the threshold would be set in               
 statute for the use of small procurement.                                     
                                                                               
 MR. PETTY informed the committee that Section 30 would require that           
 an invitation that is a protest for solicitation of an RFP or an              
 ITB be brought to the state within ten days before bid opening.  He           
 said that is currently a practice of what is done in regulation.              
 Mr. Petty said they want to require bidders to make sure they read            
 it and bring that forward at an early stage where something can be            
 done with the bids to make changes without causing a delay such as            
 extending the bid opening because it was a late protest.  Those               
 delays not only affect the state, but they affect the vendors that            
 are submitting bids on it as well.                                            
                                                                               
 Number 1196                                                                   
                                                                               
 MR. PETTY said Sections 31, 32, 34 and 35 all have to do with the             
 protest process.  Currently, we have sort of nonstandard time                 
 frames for responses for when the protest report has to be                    
 submitted by either the procurement officer or the protester.  This           
 seeks to make them more standard with a 10-15-30 day scenario.  It            
 is more consistent with court rules and it would be easier for the            
 procurement officials as well as the vendors who are involved in              
 the protest to follow.  There is no advantage gained one way or the           
 other with that.  It is just a matter of trying to standardize                
 these rules.                                                                  
                                                                               
 MR. PETTY explained Sections 36 and 37 would require a contract               
 claim to be brought against the state under a contract controversy            
 within 30 days from the date that the contractor becomes aware of             
 it or the date that they should have become aware of it.                      
 Currently, under their contract controversies, there is no statute            
 of limitations for bringing a claim against the state.  Mr. Petty             
 said there are lessors who have brought claims as much three years            
 after the award of the lease which makes it difficult for the state           
 to protect its interests.                                                     
                                                                               
 Number 1268                                                                   
                                                                               
 MR. PETTY said Section 33 would limit the protestors' damages to              
 reasonable bid preparation costs or proposal preparation costs.               
 That has been consistent with court settlements for a number of               
 years.  He noted they have been advised that was a bit different              
 and the Department of Law has recommended that we protect ourselves           
 by including this in the statute.                                             
 MR. PETTY informed the committee that Section 39 would exempt the             
 operation, protection and disposal of assets acquired from the                
 agricultural revolving loan fund that go to the Department of                 
 Natural Resources.  Mr. Petty said an example he is aware of is               
 Matanuska Maid which is operating under a foreclosure.  Arguably,             
 it could be said that the operation should be under the procurement           
 law and any disposal of that would be under the procurement process           
 the way the law currently reads.                                              
                                                                               
 MR. PETTY explained Section 40 exempts lobbying public relations              
 and advertising contracts by the Office of the Governor.  That is             
 a recognition that there are times when it is necessary to get                
 people that can be effective in lobbying, either in Washington,               
 D.C., or advertising in local markets, where the RFP or ITB process           
 simply breaks down and doesn't work.  He noted this would not                 
 extend to line agencies of government.  Mr. Petty said another part           
 of Section 40 exempts the acquisition of livestock by Alaska                  
 Correctional Industries.  The Mount McKinley meat packing plant in            
 the Matanuska Valley, operated by Alaska Correctional Industries,             
 has an obligation to buy livestock that farmers bring into them.              
 It is not possible for them to put out an invitation to bid or                
 quotes for that livestock coming in.  It is a barter type                     
 situation.  This would try to rectify that inaccuracy.                        
                                                                               
 Number 1370                                                                   
                                                                               
 MR. PETTY explained Section 41 clarifies that it is specifically              
 permissible to use general services' administration supply                    
 schedules for purchases.  In the Federal Acquisition Streamlining             
 Act of 1994, the federal government made available for the first              
 time, under their cooperative purchases, the use of federal GSA               
 supply schedules by state and local governments.  Mr. Petty said              
 many state and local governments aren't particularly excited about            
 that if they are big and do a lot of high volume purchasing because           
 they can drive pretty good pricing if they have the resources.  He            
 said the state needs to take a look at that because we don't have             
 the volume purchasing that a lot of the larger states have.  These            
 prices could actually be better prices than what we get on our term           
 contracts.  Mr. Petty said he would see that working in such a way            
 that we would be gatekeeper for those contracts.  Where we have               
 existing term contracts in place for the items, we wouldn't use               
 those contracts.  But where we don't and we go out to bid, we'd               
 like to be able to use those contracts as benchmarks and say, "Here           
 is what the GSA pricing schedule is and if you can't beat that                
 price, we'd want to go with the GSA pricing schedule."  Mr. Petty             
 said he would be happy to answer questions.                                   
                                                                               
 Number 1444                                                                   
                                                                               
 REPRESENTATIVE BRIAN PORTER referred to the lease/purchase change             
 and said he was under the impression that the legislature had to              
 approve lease/purchases over $10 million.  He asked if it is                  
 something different for those under that amount.                              
                                                                               
 MR. PETTY explained that there has been a number of changes to                
 statute over the past five or six years in that area.  If it is               
 simply an operational lease, the legislature has to approve it if             
 it is over $500,000 a year or $2.5 million over the term of the               
 lease.  He said that information is provided in their budget                  
 process.  The statute says that approval of the budget covers that.           
 Mr. Petty said on the lease/purchase agreement side, where the                
 lessor would go out and issue certificates for participation or if            
 there is some method of lease financing, the difference at the end            
 is we would have an ownership interest in it.  Currently, the                 
 threshold is zero.  If we are to do any lease/purchase of real                
 estate, it requires notice to legislature and a law to be passed              
 authorizing it.                                                               
                                                                               
 Number 1528                                                                   
                                                                               
 REPRESENTATIVE NORMAN ROKEBERG asked Mr. Petty for the citation of            
 the statue as it relates to the legislative approval for any                  
 operating lease.                                                              
                                                                               
 MR. PETTY responded it is 36.30.080.                                          
                                                                               
 REPRESENTATIVE ROKEBERG questioned what the rationale was about               
 being exempt from legislative approval if there is a $2.5 million             
 lease/purchase agreement.                                                     
                                                                               
 MR. PETTY explained that they need the ability, if there is a lease           
 that they are into that can be converted to a lease/purchase                  
 agreement and it makes sense to purchase and is good business for             
 the state, there needs to be some ability to seize those                      
 opportunities.                                                                
                                                                               
 REPRESENTATIVE ROKEBERG said, "Seize on the opportunity - I mean              
 these things are -- these windows are to me very narrow.  I don't             
 think that is necessarily the case.  I'm not sure why you can't go            
 through the existing statutory procedure.  If there is a good                 
 enough deal you can bring it to the LBA Committee and ask them for            
 authority to proceed - can you not?                                           
                                                                               
 MR. PETTY indicated it requires a law and LB&A wouldn't meet the              
 requirement to actually pass the law.                                         
                                                                               
 Number 1615                                                                   
                                                                               
 REPRESENTATIVE ROKEBERG said, "In Section 5 on page 2 you have the            
 lease extension authorization.  I'm really concerned about this               
 entire clause.  Number 1, the maximum extension of ten years and              
 then these thresholds of savings of only 5 and 10 percent.  I mean            
 I think these are really not the proper numbers frankly, based on             
 my experience in the commercial real estate....  The 10 percent is            
 not, you know, in the real world is relatively a marginal savings             
 and I can see this being abused or has a possibility of abuse,                
 cause there doesn't seem to be a deep enough discount (indisc.) the           
 reason for an extension.  Plus the other thing about the ten year             
 extension is that if you are in a falling marketplace, as we are              
 now, if you go in and tie up a leasehold interest for ten years,              
 you're not going to be in a position to benefit from any other                
 reductions that may be coming in the future.  The converse                    
 obviously is true for the business sense and it is very unusual for           
 the state of Alaska -- in the state of Alaska even for commercial             
 enterprises to enter into a ten year leasehold interest unless it             
 is build-to-suit type situation.  Very very unusual.  At this point           
 I'm going to be very outspokenly against this particular section.             
 Also, you mentioned Section 36.  You said that the -- 30 days the             
 claim must be filed within 30 days.  It's on page 14.  You said               
 that -- you brought up an example about lessees or leasehold                  
 interests here again where there would be claims.  Would this be              
 like for the claim on the part of a landlord for escalation                   
 adjustments for utilities and things like that.  Or what were you             
 referring to?  Do you know?"                                                  
                                                                               
 Number 1715                                                                   
                                                                               
 MR. PETTY said what he was referring to in a three year issue,                
 although he believes it probably could cover Representative                   
 Rokeberg's issues, was it is just a claim where the contractor came           
 in and said, "You owed me more money because I built this building            
 this way instead of that way in response to your lease."  Mr. Petty           
 said it's not that they don't believe that they should be addressed           
 but they should be addressed timely.                                          
                                                                               
 REPRESENTATIVE ROKEBERG said there could be a dispute about the               
 specifications and sometimes that doesn't come to light until the             
 project is significantly underway.  He said 30 days seems like an             
 awfully short period of time.                                                 
                                                                               
 MR. PETTY said he believes it could be extended.  The point is to             
 have some statute of limitations.  He said as they read the bill,             
 an argument could be made that the contractor should be aware of              
 that claim, at least within the contract period.  They would have             
 a right during that contract period or as much as 30 days after the           
 exploration of the contract to bring it.  He said what they are               
 trying to prevent is a situation where a contractor brings a claim            
 two or three years after the contractual relationship ended.                  
                                                                               
 Number 1911                                                                   
                                                                               
 MR. PETTY said he would address Representative Rokeberg's earlier             
 concern about the lease extension.  He said they were able to use             
 the flexibility they had in the lease extension for the 18 month              
 window effectively.  Mr. Petty pointed out they did not, in all               
 cases, agree to extend the lease for five years for a 10 percent              
 reduction.  In some cases they said, "Ten percent doesn't work for            
 you, Mr. Lessor, because the market dictates a stronger savings               
 than that," and negotiated higher savings.  He said they have                 
 applied this in a way that it has to make good business sense.                
 Just because it meets the requirements of the law and doesn't make            
 good business sense, doesn't mean that they ought to enter into it.           
 He said he believes the department has been responsible on how they           
 dealt with this in the past and he wouldn't see that changing even            
 though the bill would allow them to enter into agreements.                    
                                                                               
 Number 1958                                                                   
                                                                               
 REPRESENTATIVE KIM ELTON said he made an assumption that may have             
 been an erroneous assumption and that is that a lot of the real               
 property leases that the department may enter into are for three              
 year periods with the possibility of additional one year                      
 extensions.  He said he didn't read this in terms of signing a ten            
 year real property lease.  He asked if a ten year real property               
 lease is common or is it more common to have a real property lease            
 of three or five years with the possibility of one year extensions.           
                                                                               
 MR. PETTY said ten years ago they would say that three years and              
 five years is about as long as they would go.  The fact of the                
 matter is that if they bid on those short turnaround basis today,             
 the moving, cabling and loss of productivity costs would simply eat           
 them alive.  He said particularly in the office lease area we have            
 to try and go for longer term leases to prevent the costs of the              
 moves which are becoming more and more expensive.  Years ago it               
 used to be relatively cheap to box up stuff and move.  That is not            
 the case today.  Mr. Petty referred to a decline in market and said           
 while that is true, we can drive good prices on long term leases.             
 He said the average is probably five years for a lease, but if they           
 were going out for a 20,000 square foot lease in today's market, he           
 would look for at least a ten year lease agreement.                           
                                                                               
 Number 2045                                                                   
                                                                               
 REPRESENTATIVE ELTON said Section 4 allows for the use of a small             
 procurement process for leases of 5,000 square feet and said he               
 would have expected that the standard would be cost and not                   
 necessarily the number of square feet.  If you are doing a ten year           
 lease, the cost could be considerable even though you've got 5,000            
 or less.  He asked for an explanation of why the size of the foot             
 print of the real property is the standard rather than the cost.              
                                                                               
 MR. PETTY said if you define leases in terms of size, they are                
 hoping that keeps the size down on leases and is an easier way to             
 deal them.  The cost issue escalates up if we're saying that small            
 leases of a certain size makes sense to do in an expedited                    
 procurement process regardless of the relative values going up or             
 down over the years.  He said this is the threshold the department            
 has proposed.  There may be a threshold that makes better sense to            
 the committee.  There ought to be a more streamline approach to               
 acquiring small offices.  Mr. Petty said he believes that the                 
 department does an excellent job at what they do and it tends to be           
 a very contentious environment.  He said this will go a long way to           
 give them the flexibility to get the job done with the resources              
 they have available to use.                                                   
                                                                               
 Number 2129                                                                   
                                                                               
 REPRESENTATIVE ROKEBERG referred to Section 5 and said the impact             
 of the marketplace is very substantial particularly if there is a             
 leasehold interest coming through a natural expiration.  To use               
 this particular thing and put it in statute on an ongoing basis               
 would have a very devastating impact on the nature of the                     
 marketplace within an area like Anchorage.  He said this is like              
 granting yourself a renewal option in statute.  Renewal option are            
 100 percent in favor of the tenant.  He said he will be adamantly             
 opposed to this.  Representative Rokeberg said he thinks these                
 types of clauses are good when conditions are such that the state             
 can take advantage of them, but he believes they should be limited            
 in scope and only for a short period of time.  The lease should               
 come to the end of its natural expiration and (indisc.) marketplace           
 and let competition and other landlords and building owners bid on            
 it.                                                                           
                                                                               
 MR. PETTY said he wishes they had the staff resources to be                   
 replacing all their leases timely when they expire.                           
                                                                               
 REPRESENTATIVE ROKEBERG suggest lengthening the leases.  He said              
 there is a lot of things they could do.                                       
                                                                               
 MR. PETTY explained the statute does not permit them to extend a              
 lease beyond its expiration.  He said he believes Representative              
 Rokeberg has valid points and that he understands the real estate             
 and the commercial leasing market.  Mr. Petty said one of the                 
 problems they have when there is an expiring lease is most lessees            
 enjoy the benefit of being able to go back and negotiate with the             
 current lessor to gain rent concessions rather than to go back out            
 in the marketplace.  He explained there is a significant cost to go           
 back out into the marketplace.  Mr. Petty said the state could be             
 caught in a situation when they go back out in the marketplace,               
 lose a lot of productivity and spend a lot of money to move down              
 the street for a small savings.  If they could effectively                    
 negotiate a better deal than what they believe the market would               
 yield, they ought to be able to do that.  Under the current                   
 statute, it is not possible.                                                  
                                                                               
 Number 2263                                                                   
                                                                               
 CHAIRMAN KOTT said in a rising market this would give Mr. Petty the           
 opportunity to extend that lease at a 5 or 10 percent savings                 
 depending on the case.  He said in response to Representative                 
 Rokeberg's comment, the operative word if "may."  There is no                 
 guarantee that the state won't try to go out there and enter into             
 a 10 percent savings if there is a (indisc.) drop in the real                 
 estate market.                                                                
                                                                               
 REPRESENTATIVE ROKEBERG referred to Section 30, relating to the               
 protest of ten days and said he has concerns with the way it is               
 drafted where if there are an improprieties you have to give ten              
 days notice.  As a practical matter, it is difficult.  He said he             
 understands the reasoning for the clause.  One of the major                   
 concerns and problems with the procurement code is how disruptive             
 it gets when you have certain vendors who specialize in state                 
 (indisc.) because they know the (indisc.) and they delight in                 
 things that can hold up the process or slow it down if it doesn't             
 go their way.  He said he doesn't understand the use of "alleged              
 improprieties."                                                               
                                                                               
 MR. PETTY said that language, in his view, means that if the bidder           
 believes that we've done something wrong in the bid document or in            
 the process or if there is an ambiguity in the solicitation that              
 they would bring that within ten days before the bid opening.  It             
 distinguishes between the protest award.  They would clearly have             
 the right to protest the award afterwards because it was a separate           
 issue.  If there is something wrong with a bid or an RFP, they                
 certainly have the right to protest it.  They are just trying to              
 get them to bring it forward within ten days of the bid opening.              
                                                                               
 Number 2299                                                                   
                                                                               
 REPRESENTATIVE ROKEBERG questioned how the new additional language            
 is consistent with the existing language.  He asked if they are               
 exclusive.                                                                    
                                                                               
 MR. PETTY said they are not exclusive.  He referred to the current            
 language and said they have to protest that award within ten days             
 after the notice of intent to award.  The current statute doesn't             
 address the time frame for bringing a protest, a solicitation or              
 the document itself.  This attempts to use that same ten day                  
 standard.                                                                     
                                                                               
 CHAIRMAN KOTT referred to Section 30 and said the ten day                     
 requirement is something that is currently being practiced based on           
 regulations.                                                                  
                                                                               
 MR. PETTY confirmed they currently do have that in their                      
 regulations.                                                                  
                                                                               
 Number 2411                                                                   
                                                                               
 REPRESENTATIVE ELTON questioned the time period is between the                
 request for a proposal and the time a proposal must be submitted.             
                                                                               
 MR. PETTY said, "That is a 21 day period by statute from the time             
 that the proposal is put out on the street or the ITB is awarded or           
 put out on the street, the time we open the bid or the due date on            
 the submission of the proposal is 21 days.  To shorten that,                  
 currently the law requires a determination by the chief procurement           
 officer to reduce that period."  [END OF TAPE]                                
                                                                               
 TAPE 96-23, SIDE B                                                            
 Number 036                                                                    
                                                                               
 CHAIRMAN KOTT referred to wording in Section 43, "If the                      
 procurement officer determine in writing that a shorter notice                
 period is advantageous."  He said that 21 day period could be cut             
 down to something less if adequate competition is anticipated.  He            
 asked if there would ever be a case where that period of time could           
 be shortened to 11 days and affect Section 30 where it says we must           
 have a filing within ten days.                                                
                                                                               
 MR. PETTY said that issue was raised in the Senate State Affairs              
 Committee.  He explained the department's inclination to deal with            
 that is to have that ten day rule only when the pool solicitation             
 notice is in effect, but if there has been a shortened circulation            
 period simply to require a protest of solicitation to be brought              
 before the bid opening.  It would simply have to be brought before            
 the bid opening.  That would seem to give somebody as much                    
 opportunity as possible to protest the solicitation in advance and            
 give the department a chance to delay the process.                            
                                                                               
 Number 093                                                                    
                                                                               
 REPRESENTATIVE PORTER asked if in some cases do they pre-bid                  
 conferences that all bidders go to.                                           
                                                                               
 MR. PETTY said that is a practice used primarily for more complex             
 or high dollar volume term contracts or bids.  He said they do use            
 the proposal of the pre-bid conference process.                               
                                                                               
 REPRESENTATIVE PORTER referred to Section 30 and said if this                 
 conference were scheduled more than ten days after the bid had been           
 let, they would not be precluded from trying to square away                   
 ambiguities.  That is what that conference is for.                            
                                                                               
 MR. PETTY said that is true; however, what they typically find is             
 the shortened circulation bids are usually for the off-the-shelf              
 less controversial type items.  If there is a proposal or pre-bid             
 conference, it would be unusual that it would be a short                      
 circulation type situation.   He said Section 30, as it is written,           
 would apply to any bidder proposal.  Usually those more complicated           
 ones have a longer period.                                                    
                                                                               
 REPRESENTATIVE PORTER said Section 30 says that if you have a                 
 concern about ambiguity that you must file that ten days before the           
 due date.  He asked if the statute would preclude the ability to              
 clear up an ambiguity at a pre-bid conference that was something              
 less than ten days.                                                           
                                                                               
 MR. PETTY said he doesn't believe it would because if that came out           
 in a pre-bid conference at a mark less than ten days, it would be             
 knowledge that the contracting officer would have and it would be             
 hard for them to ignore that knowledge and not act on it.  He                 
 explained that his reading of the Cliff Berg decision is that the             
 contracting officer must act on the knowledge he has.  He said he             
 doesn't think that would be any kind of a basis to not deal with              
 the protest on its merit.  He said if that was an issue the                   
 committee wanted to address, he is sure they could look at amending           
 this to have a pre-bid conference exception to that rule.                     
                                                                               
 REPRESENTATIVE PORTER indicated that would be helpful to him.                 
                                                                               
 Number 201                                                                    
                                                                               
 REPRESENTATIVE ROKEBERG told Mr. Petty he thinks the department is            
 doing a good job in terms of trying to come to grips with the                 
 procurement code.  The vendors and business people of the state               
 hate it.  He explained his concern is with the innovative                     
 procurement idea and asked Mr. Petty to give an example.                      
                                                                               
 MR. PETTY said, "I can give you an example.  The two live examples            
 that it is my understanding that the Procurement Advisory Council             
 would be addressed by this.  One of them is the Exxon Valdez oil              
 spill procurements that have taken place for their research and               
 project studies.  We met with a group of procurement officers                 
 several years back to try and figure out, within the state                    
 procurement laws, a way that we could go out and competitively                
 acquire, in accordance with 36.30, these unique requirements that             
 they had for studies.  And we couldn't figure out a way that                  
 satisfied the Exxon Valdez Trustee Oil Spill Council because they             
 wanted, at one point, before awarding and before completing the               
 evaluation on the RFPs, to make the proposals public.  Our                    
 procurement process, for a good reason prevents that.  It prevent             
 that because if we disclose a proposal to another proposer before             
 we have had a discussion stage, that would give them an unfair                
 advantage.  So it's appropriate that it should prevent that from              
 happening.  But in this case, we could not figure out a way to                
 acquire what they needed and meet the requirements.  In the end,              
 the federal contracting officers wound up buying those studies                
 under a federal procurement practice known as a broad agency                  
 announcement which allowed them to do what they needed to get the             
 job accomplished and still had a (indisc.) procurement process.  I            
 felt, frankly, frustrated because one of our goals is to help                 
 agencies get their job done in accordance with the law and we just            
 simply weren't able to make that happen.  That is a case where we             
 could have developed an innovative procurement process that would             
 have accomplished the end result.  We wouldn't have heard, `Well              
 the procurement law won't let us do it,' and had the accountability           
 and the competition that we believe the law intended to have.                 
                                                                               
 MR. PETTY said, "Another case and point that I have been advised of           
 is that the actual procurement of the new ferry was exempted by the           
 legislature some years back would have actually fit under this                
 innovative procurement process but couldn't technically have been             
 done under the ITB or the RFP rules in the procurement process."              
                                                                               
 MR. PETTY said he wouldn't suggest that this should be used all the           
 time, but it is an avenue where procurement professionals can                 
 figure out a better approach to getting the job done.  He said in             
 state government, we need to encourage some innovative thought                
 processes when we can, yet maintain the controls and the                      
 accountability.  He said it allows them, when there is a unique               
 requirement or when there is a value that can be achieved, to                 
 employ that kind of process.  He said he would not think they would           
 undertake this lightly.                                                       
                                                                               
 Number 357                                                                    
                                                                               
 REPRESENTATIVE ELTON said the purpose is to permit latitudes that             
 allow professions to do their jobs.  He said he thinks when you try           
 to apply a cookie cutter recipe to each of the individual                     
 situations that a procurement officer is going to face, that is               
 very very difficult.  While there may be individual parts that can            
 be fine tuned on this bill, the purpose of the bill is really                 
 noble.  He said this does allow the professionals in the field                
 latitude to accomplish some things that are very difficult to                 
 otherwise achieve with a cookie cutter approach.  He said he would            
 also note that the latitude always comes with danger and the                  
 danger, in this instance, would be legislative audits and other               
 things that may sway legislative opinion on the way an agency                 
 (indisc.).  Representative Elton said professional latitude gets              
 right to the heart of this.                                                   
                                                                               
 Number 438                                                                    
                                                                               
 CHAIRMAN KOTT said HB 482 would be held until Wednesday.                      
                                                                               

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