Legislature(1995 - 1996)

03/22/1996 03:25 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
 HB 482 - STATE PROCUREMENT PRACTICES & PROCEDURES                           
 Number 102                                                                    
 CHAIRMAN KOTT announced the committee would hear HB 482, "An Act              
 relating to state procurement practices and procedures; and                   
 providing for an effective date," introduced by the Governor.  He             
 informed the committee there has been two other hearings on the               
 DUGAN PETTY, Director, Division of General Services, Department of            
 Administration, came forward to address the bill.  At the last                
 meeting on the bill there were five concerns that Representative              
 Rokeberg had with various sections.  He said he got together with             
 Representative Rokeberg and in the committee member's packets there           
 are four proposed amendments.                                                 
 Number 129                                                                    
 REPRESENTATIVE ROKEBERG moved that Amendment 2 be adopted.                    
 REPRESENTATIVE ELTON objected for the purpose of an explanation.              
 REPRESENTATIVE ROKEBERG said it relates to Section 4.  This                   
 particular section in the bill had a threshold of 5,000 square feet           
 to allow leases to go into the marketplace and to qualify for the             
 small procurement procedures.  He said the change would be to go              
 from 5,000 square feet to 3,000 square feet.  There is also the               
 addition of providing public notice to be prospective (indisc.) in            
 the market area.  It is his understanding that under the small                
 procurement procedure basis they would only have to have three                
 potential offers.  His concern was that they need to at least                 
 publish that to invite anybody who would have space available an              
 opportunity to make an offer.  They could do it under the                     
 procedures of the small procurement code.  Representative Rokeberg            
 said he thinks this is a good accommodation and recommends                    
 Number 182                                                                    
 REPRESENTATIVE ELTON said the offering would not be threatened if             
 an offer was skipped.  He said he is assuming the department would            
 be able to work off of the list that they maintain in their office.           
 If they happen to miss somebody that says, "Hey, I've got 3,000               
 feet," it is not going to threaten.                                           
 REPRESENTATIVE ROKEBERG indicated that is correct.                            
 Number 203                                                                    
 MR. PETTY explained the department would either put a notice in the           
 paper or they would go off of their list of bidders on their                  
 bidders list.  If somebody had not been placed on the department's            
 bidder list because they had not applied or they missed the add in            
 the paper, they would be under no obligation to give them further             
 REPRESENTATIVE ELTON withdrew his objection to the adoption of                
 Amendment 2.                                                                  
 CHAIRMAN KOTT asked if there were further objections to the                   
 adoption of Amendment 2.  Hearing none, Amendment 2 was adopted.              
 Number 227                                                                    
 REPRESENTATIVE ROKEBERG moved that Amendment 3 be adopted.                    
 CHAIRMAN KOTT said there is a motion to adopt Amendment 3 which               
 deals with Section 5.                                                         
 REPRESENTATIVE ELTON objected.                                                
 REPRESENTATIVE ROKEBERG explained the amendment does two things.              
 The way the bill is currently drafted, it allows the department to            
 renegotiate a lease right up to the last day of the natural                   
 expiration of the lease.  The insertion would be on line 12.  At              
 the end of the first paragraph in the amendment it reads, "and has            
 at least 6 months remaining under the lease term,".  He explained             
 the reason he wanted this inserted is that in a larger urban area             
 where there is a dynamic lease market, he thinks it is essential              
 that the other lessors have an opportunity to bid on a major lease            
 hold acquisition if they are about ready to expire.  As a practical           
 matter in the marketplace, landlords are aware of lease expirations           
 and track them and even plan for them to give themselves to                   
 opportunity to bid on them.  Without some type of a cutoff point,             
 this would disruptive to the natural flow of the marketplace.                 
 Representative Rokeberg said although he would like to see a                  
 slightly longer time period, he did agree on a six month provision.           
 REPRESENTATIVE ROKEBERG referred to the subsections and said a 15             
 percent savings was added and a 10 percent savings if there is ADA            
 requirement modifications.  He explained the reason those figures             
 were inserted was to create a higher threshold.  When we're talking           
 about rents that could be expressed in square footage of about                
 $1.50 a square foot, per month, a 10 percent decrease would only be           
 15 cents a square foot.  He noted that may be substantial in some             
 instances, it depends on the market conditions.  Representative               
 Rokeberg said he thinks a higher threshold will benefit the                   
 department because they might be able to use the statute as a tool            
 to generate higher achievable savings.                                        
 Number 359                                                                    
 REPRESENTATIVE ELTON referred to the numerous effective dates of              
 the bill, and asked Representative Rokeberg if he means to change             
 the first report is due August 31, 1996, when the original bill               
 says the report is due in 1997.                                               
 REPRESENTATIVE ROKEBERG explained Mr. Petty assisted him in the               
 drafting of the amendments.                                                   
 MR. PETTY said it probably was intended to be 1997, and then it               
 must cover the fiscal year for 1997.                                          
 Number 392                                                                    
 REPRESENTATIVE ELTON said he would offer that as a friendly                   
 amendment.  The report would be due August 31, 1997.                          
 REPRESENTATIVE ROKEBERG explained it was a typographical error.               
 Number 400                                                                    
 REPRESENTATIVE ELTON withdrew his objection to Amendment 3.                   
 CHAIRMAN KOTT asked if there were further objections.  Hearing                
 none, Amendment 3 was adopted.                                                
 Number 409                                                                    
 REPRESENTATIVE ROKEBERG moved that Amendment 4 be adopted.  He                
 explained the amendment make it symmetrical with the terms                    
 expressed in Amendment 2.  He indicated it is a conforming                    
 CHAIRMAN KOTT asked if there was an objection to Amendment 4.                 
 Hearing none, Amendment 4 was adopted.                                        
 Number 438                                                                    
 REPRESENTATIVE ROKEBERG moved that Amendment 5 be adopted.                    
 REPRESENTATIVE ELTON objected to the adoption of Amendment 5.                 
 REPRESENTATIVE ROKEBERG explained Amendment 5 does two things.  It            
 (indisc.-coughing) the time allowable for a claim up to 90 days.              
 The last sentence of the amendment exempts lease rate adjustments             
 that are stipulated in the lease.  It would exempt those types of             
 things from the time period.  Representative Rokeberg explained in            
 many leases for office space or space, there are escalation clauses           
 for utilities and things of this nature.  Because of the delays in            
 receiving bills and accounting for them, etc., the back charges               
 many times are delayed and it is really difficult to meet an                  
 artificial deadline.  The state does have these types of escalation           
 in their leases based on percentages of consumer price indexes                
 (CPIs) and various other factors.  Representative Rokeberg said he            
 thinks this is consistent with common business practices and the              
 department doesn't have an objection to it.                                   
 REPRESENTATIVE ELTON said that is three months that the state may             
 be at risk for office space.  He said that seems like a long time             
 for him.                                                                      
 MR. PETTY informed the committee members that currently the statue            
 has no time limit on when a claim against the state and the                   
 contract controversy may be brought for any type of contractual               
 circumstance for which there is a claim and a controversy.  He said           
 they started out with 30 days.  The question here is really trying            
 to have a reasonable period of time in which the contractor must              
 bring their claims so that they can't simply wait a year or two and           
 bring it in later.  He indicated the department is comfortable with           
 90 days.  Mr. Petty said with respect to the lease adjustment                 
 circumstance, the department's bid document for lease includes a              
 specific clause that says, "So much of your cost are uncontrollable           
 for utilities or operational costs that are affected by inflation,            
 you can come in and request an increase if the consumer price index           
 has gone up high enough to warrant that."  He said the fact that              
 somebody would overlook that or be late on it, the department                 
 doesn't believe it should keep them from coming back and the                  
 department honoring the bargain that was initially stuck.                     
 Number 564                                                                    
 REPRESENTATIVE ELTON withdrew his objection.                                  
 REPRESENTATIVE ROKEBERG said there are two different things that              
 are being discussed with regards to the amendment.  He said lease             
 hold interests are excluded from this 90 day (indisc.), it is the             
 other contracts in the whole global universe of other claims that             
 are covered by the 90 day....                                                 
 CHAIRMAN KOTT said Amendment 5 has been adopted.                              
 Number 599                                                                    
 REPRESENTATIVE ROKEBERG explained he had one more amendment and               
 then directed the committee to page 14, Section 40.  He then moved            
 conceptual Amendment 6 which deletes page 14, line 31 and page 15             
 line 1.  On page 15, line 2, delete the subsection 35 and add 34.             
 This deletes Section 34 as it is presented in the bill which                  
 affects the Governor's office.  Number 35 becomes 34.                         
 REPRESENTATIVE ELTON objected.  He said he wouldn't have a problem            
 with it if the same thing is done to the legislature that does                
 these same kinds of procurement and is exempted.  It seems unfair             
 to say that the legislature can go out and hire a law firm in                 
 Washington, D.C., to lobby Congress and not have to comply with the           
 procurement code, but the Governor's office does have to comply.              
 REPRESENTATIVE ROKEBERG stated if his colleague persists in this              
 line, he is going to suggest adding a further amendment to delete             
 subsection 33 from the bill which relates to Alaska Seafood                   
 Marketing Institute (ASMI).                                                   
 REPRESENTATIVE ELTON said we can make whatever amendment offers we            
 want.  This amendment doesn't work and he can think of many                   
 examples in which the Governors office have gone out for                      
 procurement which are in the interest of the state.  He said this             
 would essentially mean that after the Exxon Valdez oil spill, the             
 Governor's office would have to wait on some procurement for a.....           
 He then asked Mr. Petty how long the normal period of time is when            
 you go through the state procurement code                                     
 MR. PETTY said depending on the complexity, it could be 120 days to           
 300 days.  He said one of the issues is it is simply not possible             
 to use the competitive bid or the RFP process to acquire                      
 effectively some of these items.  He said Section 40 doesn't                  
 identify if it would be lobbying, public relations or advertising             
 for line agencies of government which is very particular to the               
 Governor's office.  Mr. Petty said he thinks that it is a                     
 recognition that at some level within the Executive Branch, there             
 are times when they must act, they must buy direct media or                   
 advertising in a particular market to influence a vote in Congress            
 or to have lobbying that is effective within the political                    
 influence that the Governor is obligated to exercise.  It is simply           
 not possible to use a RFP process to buy that kind of direct media            
 or advertising or to get the kind of lobbyists to that is necessary           
 to effectively conduct the Governor's business in Washington, D.C.            
 Number 780                                                                    
 REPRESENTATIVE PORTER questioned what the current law is.                     
 MR. PETTY explained the law requires that these type of contracts             
 go through the invitation to bid process or the RFP process or an             
 exception process such as a sole emergency or limited competition             
 REPRESENTATIVE PORTER said the Governor's office has been dealing             
 with this impossibility for the last 40 years.                                
 MR. PETTY said very ineffectively.                                            
 Number 798                                                                    
 REPRESENTATIVE ELTON said he doesn't think it is a partisan issue.            
 It seem to him that it ties the hands of the Governor, whoever it             
 is.  In services like lobbying and public relations, you don't                
 necessarily want the cheapest.  You want to go with the people who            
 can do the work and can do it quickly and in a timely manner.  A              
 120 day wait is not a timely manner and the state procurement code            
 is designed to get you the least expensive.  You can do all kinds             
 of waivers and other things, but the purpose here is to get the               
 best as fast you can.                                                         
 REPRESENTATIVE ROKEBERG indicated confusion.  This includes both              
 lobbying, public relations and advertising.  He said he sees no               
 reason why advertising cannot be conducted under the standard                 
 procurement procedures.  If we need to change the procurement code            
 lets change the code and not start exempting.  This would be the              
 35th exemption to the ASMI.  He said if there is a circumstance               
 that is important, for example like the Exxon Valdez, he would                
 think the Governor has some discretionary funds he would draw on              
 Number 900                                                                    
 MR. PETTY said the funding may be available within the budget, but            
 the expenditure of the fund would be governed by the procurement              
 code.  If it were over 25,000, under current statute, it would have           
 to go out as an RFP or an invitation to bid, unless it went out               
 under the sole source limited competition or emergency process.               
 REPRESENTATIVE PORTER said there is the procurement code with 37              
 exceptions to it, all for different reasons and concerns.  The                
 problem obviously isn't in the exceptions, the problem is the                 
 procurement code.  If we exempted the Governor's office, all                  
 motivation for really changing it is gone.                                    
 Number 986                                                                    
 REPRESENTATIVE KUBINA said you wouldn't be exempting the Governor's           
 office.  You're only exempting them on lobbying, public relations             
 and advertising.  He said think what you guys have done, as the               
 majority in the legislature, this year hiring people that are                 
 experts.  He indicated they didn't go out and do a public bid and             
 allow RFPs go out on the fish and game experts that were hired.               
 REPRESENTATIVE PORTER pointed out there is a separation of powers             
 issue that comes into the procurement code.  What we do is probably           
 what the Democratic majority did six years ago.  That is the way it           
 has been for different majorities.  Representative Porter said what           
 he is talking about is the effect of the procurement code on all              
 the other agencies.                                                           
 REPRESENTATIVE KUBINA said the procurement code is obviously a very           
 complicated thing.  He said look what happens with the federal                
 government procurement code.  We're not talking about going out               
 buying nuts, bolts, tools and clean supplies.  We ought to have               
 rules and we do have rules.  He questioned how you can go on a                
 competitive bid for a lobbyist or public relations.                           
 REPRESENTATIVE PORTER said he totally agrees with Representative              
 Kubina.  If that is a realistic problem, why shouldn't it be a                
 problem for the Department of Public Safety, the Department of                
 Natural Resource, the Department of Corrections and not for the               
 REPRESENTATIVE KUBINA said he isn't sure they're out buying                   
 lobbyists or public relation firms.                                           
 REPRESENTATIVE SANDERS said the Department of Transportation does.            
 Number 1155                                                                   
 MR. PETTY explained that this is not intended to be an out for                
 (indisc.) agencies of government because he believes they are able            
 to anticipate their need for public relations.  The Department of             
 Commerce does an effective job of acquiring their public relations            
 and advertising through an RFP process, but they have an ongoing              
 program where they can project that.  Oftentimes that doesn't                 
 happen at the Governor's office level.  There simply isn't time to            
 do that kind of RFP process to make it work and that is why this              
 special exemption was only intended to cover the Governor's office.           
 There are circumstances that the Governor's office can anticipate             
 far enough down the line that they might be able to use an RFP                
 process.  Mr. Petty explained the Governor's office deals in                  
 political issues that are fundamentally different.                            
 REPRESENTATIVE ROKEBERG suggested putting some of these people on             
 a retainer so you wouldn't have to go through the process.  He said           
 he thought we already had a representative in Washington, D.C., Mr.           
 REPRESENTATIVE ELTON said he is in an odd position where he doesn't           
 disagree with some of what he has heard.  He said he would like to            
 note that if we go for the argument that the Governor's office                
 ought to share the same pain felt by the agencies, the logical                
 extension of that is so should the legislature because that will              
 might force the legislature to take a good look at the procurement            
 code and figure out how we can make it work for everybody.  He said           
 if we do this, where tying the hands of one of the elected                    
 officials in the state that probably has a very legitimate interest           
 in what is happening in Congress, just as the legislature does.  He           
 said he would find this easier to accept if the rules were applied            
 equally to everybody and we're not doing that with the proposed               
 CHAIRMAN KOTT asked if there were further questions for Mr. Petty             
 on the amendment.  There were no further questions.  Chairman Kott            
 asked if there still was an objection.                                        
 REPRESENTATIVE ELTON maintained his objection.                                
 Number 1431                                                                   
 A roll call vote was taken.  Representatives Masek, Porter,                   
 Rokeberg, Sanders and Kott were in support of the amendment.                  
 Amendment 6 was adopted.                                                      
 Number 1488                                                                   
 REPRESENTATIVE ROKEBERG made a motion to pass HB 482, Version A, as           
 amended, out of committee with individual recommendations and the             
 accompanying fiscal note.                                                     
 CHAIRMAN KOTT asked if there was an objection.  Hearing none, CSHB
 482(L&C) was moved out of the House Labor and Commerce Committee.             

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