Legislature(1995 - 1996)
03/22/1996 03:25 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 measure. 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 approval. 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 notice. 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 amendment. 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 procurement. 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 immediately. 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 Governor. 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. Katz. 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 amendment. 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.