Legislature(2003 - 2004)

02/11/2004 03:20 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 386-NATURAL GAS DEVELOPMENT AUTH. CONTRACT                                                                                 
CHAIR ANDERSON  announced that the  next order of  business would                                                               
be HOUSE BILL NO. 386, "An  Act exempting contracts of the Alaska                                                               
Natural  Gas Development  Authority  from  the State  Procurement                                                               
Code; and providing for an effective date."                                                                                     
Number 0460                                                                                                                     
MARK  GNADT, Staff  to Representative  Eric  Croft, Alaska  State                                                               
Legislature,  introduced  HB  386  on  behalf  of  Representative                                                               
Croft, sponsor.  He stated:                                                                                                     
     We  feel  this  is  a necessary  bill  because  of  the                                                                    
     dynamics of the  Alaska natural gas or  the natural gas                                                                    
     industry  worldwide.   There already  have  been a  few                                                                    
     contracts  that have  come and  gone, where  the Alaska                                                                    
     Natural Gas  Development Authority  has been  trying to                                                                    
      meet the demands of a rapidly moving industry.  And                                                                       
     the requirements to the procurement code inhibit them                                                                      
     in certain ways that we feel are unnecessary.                                                                              
MR.  GNADT  said  certain state  organizations  or  entities  are                                                               
exempt from  the procurement code  already.  Some,  including the                                                               
Alaska   Railroad  Corporation   (ARRC),  the   Alaska  Aerospace                                                               
Development  Corporation,  and a  few  others,  [are exempt]  for                                                               
similar  purposes   of  being  able   to  move   within  contract                                                               
negotiations  without  some of  the  obstacles  that the  state's                                                               
procurement code  puts forward.   Those  obstacles are  great for                                                               
other things  in the  state, and  necessary, but  not necessarily                                                               
for organizations dealing in "the  natural gas industry and other                                                               
things," he added.                                                                                                              
Number 0550                                                                                                                     
REPRESENTATIVE GATTO  asked Mr. Gnadt  to clarify what  the state                                                               
procurement code means to him.                                                                                                  
MR. GNADT  replied, "To me,  it's a  set of regulations  ... that                                                               
guide state entities  in their forming of  contracts with outside                                                               
sources, and  things along that line."   He pointed out  that the                                                               
state's procurement code isn't his area of expertise.                                                                           
Number 0607                                                                                                                     
HAROLD  HEINZE,  Chief  Executive  Officer,  Alaska  Natural  Gas                                                               
Development Authority  (ANGDA), reminded members that  ANGDA is a                                                               
product of the initiative process,  during which little pieces of                                                               
language and  subtleties of law  get may get  left out.   He said                                                               
he'd  make  the  "me  too"  argument,  that  every  other  public                                                               
corporation  of  the State  of  Alaska,  and  most of  its  other                                                               
agencies, "have been  opted out" of the procurement  code as part                                                               
of their creation.                                                                                                              
MR. HEINZE  responded to Representative Gatto's  question, noting                                                               
that  the  state  procurement  code   basically  provides  for  a                                                               
centralized  contracting  authority  within  the  administration.                                                               
This  code is  broadly applied  to everybody  in the  state.   He                                                               
explained that  the legislature  and the  courts are  "opted out"                                                               
and they have  their own set of procurement procedures.   He said                                                               
there  is  a  group  and  an  individual  in  the  Department  of                                                               
Administration responsible for all  the procurement of the state.                                                               
He described  the process as  a series of  procedures, timelines,                                                               
and requirements  which basically assure that  no undue political                                                               
influence will  result in  the awarding  of contracts  to certain                                                               
people.   The goal of this  process is to keep  the playing field                                                               
fair and level.                                                                                                                 
MR. HEINZE  explained that while the  code accomplishes fairness,                                                               
it  also sets  up situations  that aren't  necessarily useful  to                                                               
major contractors  or major entities  that have their  own boards                                                               
or  other  leadership,  separate  from the  executive  branch  of                                                               
government.   He said  ANGDA, as a  public corporation,  looks to                                                               
models such as the Alaska  Housing Finance Corporation (AHFC) and                                                               
ARRC  as   organizations  that  have  evolved   and  faced  major                                                               
decisions similar to ones he anticipates for ANGDA.                                                                             
MR.  HEINZE  contrasted  contracts  under  $100,000,  which  have                                                               
flexibility within  the current system, with  contracts involving                                                               
hundreds of  millions or billions  of dollars, such as  those for                                                               
the purchase  or sale of gas.   These major contracts  don't fare                                                               
as well  in the current  system because  of issues with  time and                                                               
other considerations.                                                                                                           
Number 0833                                                                                                                     
MR.  HEINZE  proposed   that  the  ANGDA  board   adopt  its  own                                                               
procurement  code  so it  maintains  control  over any  contracts                                                               
awarded in the future.   He said he felt ANGDA  would do a better                                                               
job in terms  of "Alaska hire" and use of  Alaskan contractors if                                                               
it could control  the process.  He informed the  committee that a                                                               
large  number of  agencies aren't  covered by  the code;  over 43                                                               
different types of  contracts, some major, are  delineated in the                                                               
law itself.                                                                                                                     
Number 0873                                                                                                                     
CHAIR  ANDERSON  requested  clarification   on  models  in  state                                                               
government that are exempt from the procurement code.                                                                           
MR. HEINZE referred to a  handout listing the following agencies:                                                               
ARRC,  Alaska  Aerospace  Development Corporation,  AHFC,  Alaska                                                               
State Pension Investment Board,  Alaska Marine Highway System and                                                               
new  vessels,  Alaska  Seafood Marketing  Institute  (ASMI),  and                                                               
University  of  Alaska.    These  entities  all  have  their  own                                                               
specific,   individualized   procurement  approaches   that   are                                                               
tailored to meet  their needs, he explained,  rather than falling                                                               
under the more general procurement code.                                                                                        
Number 0957                                                                                                                     
REPRESENTATIVE GATTO  asked if there  was a common thread  in the                                                               
procurement  codes of  those organizations  that Mr.  Heinz could                                                               
use to formulate a code.                                                                                                        
MR.  HEINZE replied  that all  have boards  that are  responsible                                                               
for, and  have authority  over, what the  organization does.   He                                                               
proposed using AHFC's procurement code as  a model for ANGDA.  He                                                               
said  AHFC's code  is of  interest,  since it  deals with  large-                                                               
dollar contracts and has a small staff.                                                                                         
REPRESENTATIVE GATTO  asked if  Mr. Heinze  would be  involved in                                                               
the development of a procurement code for ANGDA.                                                                                
MR. HEINZE  explained that he'd  be involved and could  draw upon                                                               
his specific project  management experience from 27  years in the                                                               
oil  industry.   He  explained  that  it's  necessary to  have  a                                                               
procurement  process that  is  flexible,  effective, and  heavily                                                               
weighted  toward  ensuring  that  the  state  and  the  authority                                                               
receive full value  for the contract in terms  of performance, as                                                               
well as for the amount of dollars spent.                                                                                        
Number 1110                                                                                                                     
REPRESENTATIVE  GATTO inquired,  "The  bill,  as written,  simply                                                               
exempts you  from the state procurement  code without authorizing                                                               
entrance into,  or creating  of, any  additional codes;  was that                                                               
the intent?"                                                                                                                    
MR.  HEINZE  explained  that  the  enabling  statute  of  [ANGDA]                                                               
invests  in the  board  of directors  with  broad authorities  to                                                               
conduct business; by being exempt,  the board becomes responsible                                                               
to ensure that  a procurement procedure is followed.   He assured                                                               
the committee  that until the  board can adopt a  new procurement                                                               
code,  "I would  just  continue to  operate  under the  [present]                                                               
procurement code, and move as quickly  as we could, to the Alaska                                                               
Housing Finance Corporation model."                                                                                             
Number 1180                                                                                                                     
LEONARD  HERZOG, Assistant  Attorney General;  Oil, Gas  & Mining                                                               
Section; Civil Division (Anchorage);  Department of Law, said Mr.                                                               
Heinze  had  done a  good  job  of  explaining  the bill,  as  he                                                               
understands  it.    Mr.  Herzog said  he  attends  all  [ANGDA's]                                                               
meetings and  remarked, "We would  proceed under  the procurement                                                               
code until such  time as the authority adopted,  and published to                                                               
the public, its own procurement code."                                                                                          
REPRESENTATIVE  GATTO  reiterated  his  concern,  saying,  "About                                                               
letting somebody  not have any  codes that  they have to  run by,                                                               
according to  the bill,  ... what an  opportunity that  would be.                                                               
But,  indeed, if  that's the  goal and  intent, I  can live  with                                                               
Number 1269                                                                                                                     
REPRESENTATIVE CRAWFORD moved  to report HB 386  out of committee                                                               
with  individual  recommendations  and  the  accompanying  fiscal                                                               
notes.   There being no objection,  HB 386 was reported  from the                                                               
House Labor and Commerce Standing Committee.                                                                                    

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