Legislature(2003 - 2004)
02/11/2004 03:20 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 that." 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.