Legislature(1995 - 1996)
04/11/1996 08:10 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 482 - STATE PROCUREMENT PRACTICES & PROCEDURES The next order of business to come before the House State Affairs Committee was CSHB 482(L&C). CHAIR JAMES called on Dugan Petty, Department of Administration, to present the bill. Number 1370 DUGAN PETTY, Director, Central Office, Division of General Services, Department of Administration, explained at the end of the last session a federal law was passed, the Procurement Acquisition Streamlining Act of 1994. The Act incorporated a number of reforms that the federal government was making to streamline its procurement practices. The same was asked of the state. The business climate was changing and the procurement area needed to be changed as well. He said reform was "on the horizon." In Alaska, the state recognized it did not have the resources to continue doing business as in the past. Therefore, Commissioner Mark Boyer, Department of Administration asked that the state improve its procurement practices. A Procurement Advisory Council was formed. The council consisted of private practitioners, vendors, university members, stake holders and state practitioners. The council was an on-going initiative. The council would continue to look at the regulations, policies and practices. It also wanted to look at the procedures and practices on a situational basis to see if they could be re-engineered to work better. House Bill 482, therefore, was a result of the work of the council. He proceeded to explain the various sections of the bill. Number 1591 MR. PETTY explained Sections 3 and 37 allowed the Commissioner of Administration to remove a vender that had been disbarred or suspended from the current list of bidders. MR. PETTY moving forward, explained Sections 4 and 22 allowed for a more simplified acquisition process for small leases. Small leases were identified as those that were 3,000 square feet (s.f.) or less. Number 1639 MR. PETTY moving forward, explained Section 5 allowed for an extension of leases for up to 10 years provided that lease had at least 6 months remaining. It would also allow for a rent concession of at least 15 percent, or 10 percent with Americans with Disabilities Act (ADA) compliances. Number 1664 MR. PETTY moving forward, explained Sections 6 and 7 provided the state with the ability to perform a lease-purchase acquisition of real property without notifying the legislature in the event the total amount of the payment was $500,000 or less, or the total amount was under $2,500,000. Number 1698 MR. PETTY moving forward, explained Sections 8 and 12 allowed for the identification of the subcontractors within 5 days of the award for non-construction procurement. Number 1749 REPRESENTATIVE OGAN said based on personal experience as a contractor, general contractors "bid shop" amongst the subcontractors if they were not required to report within a short time frame. He questioned if this was a good practice. He said it opened the possibility for unscrupulous business practices amongst contractors. Number 1806 CHAIR JAMES asked Mr. Petty to explain if that provision addressed the concerns of Representative Ogan. Number 1810 MR. PETTY replied the section was not intended to change that provision as it related to construction contracts. The provision of the five day report requirement remained as such. The practice was not problematic for the service and supply industry. The council was concerned about the definition of a "supplier" and "subcontractor." Upon examination, there was not a bid shop problem amongst the service and supply industry, but it was a problem for the construction industry. REPRESENTATIVE OGAN said, "thank you. That clarified it." Number 1891 MR. PETTY moving forward, explained Section 9 allowed for a procurement officer to shorten the circulation period in a bid or proposal. Currently, only the chief procurement officer or the Commissioner of Transportation and Public Facilities for construction bids, could reduce the period. Number 1953 MR. PETTY moving forward, explained Section 10 required the bidder, if it was to maintain the Alaska bidders' preference, to maintain its place of business for at least six months. The section was to prevent the state from paying the difference upon review of a lower bidder and not receiving a value in return. The council determined that was not the intent of the bidders' preference and suggested the change. Number 2066 REPRESENTATIVE OGAN asked Mr. Petty to explain the six months provision in Section 10. He wondered if one year had been considered because that was the determinate for state residency. Number 2091 MR. PETTY said the companion bill to HB 482 in the Senate addressed this issue. He said it would take up to 12 months for a business to take advantage of the Alaska bidders' preference. Therefore, six months was reasonable. It was also written as six months in statute. Number 2165 MR. PETTY moving forward, explained Section 11 empowered the procurement officer to determine to use a request for proposal (RFP) in lieu of an invitation to bid (ITB) as opposed to the chief procurement officer. The council believed the more frequent use of an RFP provided better value. Number 2203 MR. PETTY moving forward, explained Section 13 was a housekeeping measure. The current law required that the contents of a proposal were not disclosed during the negotiations. Section 13 changed it so that they were not disclosed prior to the notice of intent to award period. Number 2265 MR. PETTY moving forward, explained Section 14 was also a housekeeping measure. He explained when an RFP was cancelled the proposals could be accessed under the Freedom of Information Act, thereby, exposing competitor proposals to one another. The section would require the state to maintain a list of proposals if an RFP was cancelled, and to return them back to the bidder. Number 2317 MR. PETTY moving forward, explained Section 15 allowed the contracting officer to state the amount on whatever page was appropriate in the contract instead of the current mandate requiring the amount on the first page. Number 2350 MR. PETTY moving forward, explained Section 16 was a significant change in statute. A single-source contract could be entered into when the chief procurement officer, or for construction, the Commissioner of the Department of Transportation and Public Facilities, determined in writing that an award through a bid of RFP was not practical. The officer could award it to a single- source if it was in the interest of the state. Number 2434 CHAIR JAMES said she had a problem with Section 16. She referred the committee members to page 9, line 1, and read, "competitive sealed bidding, competitive sealed proposals, or other competition in accordance with regulations adopted by the commissioner." She felt the language was too broad and loose. TAPE 96-50, SIDE A Number 0000 CHAIR JAMES announced the companion bill in the Senate added a subsection (e) to Section 16. She read, "except for procurement of supply services or professional services or construction that do not exceed the amount for small procurement under AS 36.30.320(a) that's applicable. The authority to make the determination required by this section may not be delegated even if the authority to contract is delegated under AS 36.30.015(a)." She explained it was a decision that would have to be made by the commissioner. The addition was an attempt to tighten the language. She was not comfortable with a single-source purchase because it distressed the public. She announced she would like to delete Section 16 altogether. Number 0192 MR. PETTY replied the companion bill in the Senate was amended to consider the concerns regarding the delegation, accountability and control to remain with the chief procurement officer, or the Commissioner of the Department of Transportation and Public Facilities. The added section to the Senate bill that Chair James read resolved those concerns. This area took a tremendous amount of time from the state and many of the requirements were an overkill. Therefore, the council wanted the chief procurement officer to make a reasonable determination to prevent an overkill effort. Number 0357 MR. PETTY moving forward, explained Section 17 would allow for limited competition procurement without putting out an invitation to bid or an RFP. That determination would be made by the chief procurement officer, or the Attorney General for legal service contracts. Number 0439 MR. PETTY moving forward, explained Section 19 permitted the use of an innovative procurement as a method of source selection for new, unique requirements, new technology, or to achieve the best value after the chief procurement officer or the Commissioner of the Department of Transportation and Public Facilitates, determined the method was advantageous to the state and the Department of Law approved the procurement plan. He cited the Exxon Valdez Oil Spill Trustee Council typically wanted to use the RFP bid process by notifying the public. The RFP rules did not require that in statute. Therefore, the council was asking for the ability to use an innovative methodology subject to the public notice requirements. Number 0593 MR. PETTY moving forward, explained Section 21 expanded the requirement to independently examine the material facts to any state official when making a determination for an alternate procurement. The section gave the accountability to the person in authority. If a person knowing made a false statement, he or she would be guilty of a class A misdemeanor. Number 0648 MR. PETTY moving forward, explained Section 22 expanded the minimum threshold for a formal invitation to bid to $50,000 for services and supplies, to $100,000 for construction, and to 3,000 s.f. for leases. Number 0702 MR. PETTY moving forward, explained Section 27 required that records of innovative procurement be kept and be made available by the Department of Administration. Number 0723 MR. PETTY moving forward, explained Section 28 applied the two tiered protest process to all procurement except small ones. The Commissioner of the Department of Administration was permitted to establish a simplified procedure for protests of small procurement. Number 0774 MR. PETTY moving forward, explained Section 29 allowed for the protest of a solicitation to be filed 10 days before a bid or RFP opening, unless the bid or RFP provided for a shorter period. There was concern in the House Labor and Commerce Committee and the Senate that this could abridge a bidder from his right to protest. That was not the intent, however. If a pre-bid or pre-proposal conference was held within 12 days of a bid opening, a protest could only be filed only prior to the bid opening to prevent new information being presented without the ability to protest. Number 0875 MR. PETTY moving forward, explained Sections 30, 31, 33 and 34 affected the response to a protest days. The sections set the days at 10, 15 and 30. The sections clarified the current statutes. Number 0897 MR. PETTY moving forward, explained Section 32 limited a protestor's damage to reasonable bid or proposal preparation costs. Number 0924 MR. PETTY moving forward, explained Sections 35 and 36 established a statute of limitations to bring a claim against the state. The claim must be brought within 90 days after the contractor became aware of the claim or knew the basis of the claim. Lessors must also bring a claim regarding Consumer Price Index (CPI) rent adjustments within the terms of the lease. The restriction, however, did not limit a contractor's right under a disputed billing timely payment according to AS 36.05.285. Number 0962 MR. PETTY moving forward, explained Sections 38 and 39 added some exemptions. Section 38 exempted the operation and protection of assets or disposal of assets through the Agricultural Loan Program acquired by the Department of Natural Resources. Number 1009 CHAIR JAMES said she did not have a problem if the state did not operate under the procurement code when operating a facility. She did have a problem, however, if the state wanted to sell a facility. If the state wanted to sell a facility, it should operate under the principles of competitiveness. Number 1043 MR. PETTY replied as the bill read it would allow for the disposal of equipment and supplies acquired by the Department of Natural Resources to not be subject to the procurement code. Number 1058 CHAIR JAMES asked Mr. Petty if the disposal would be recognized as an on-going expense of a business or a liquidation? She believed an on-going expense would not have to go through this process. She was not willing to exempt a liquidation, however. Number 1093 MR. PETTY replied a liquidation would not be subject to the procurement code. The concern of Chair James was well founded . Number 1109 CHAIR JAMES suggested adding additional language to indicate the distinction between on-going business activity and liquidation. Number 1149 MR. PETTY wondered if Chair James was concerned about the liquidation of certain assets by the state and their subject to the procurement code. He stated the section would support her concerns. Number 1181 CHAIR JAMES said she would look at the provision further. She said it was hard to distinguish between a liquidation and an on-going business asset. She did not want to extend that provision, or it would defeat the leniency given. Number 1200 MR. PETTY said he understood the concerns of Chair James. He said the procurement code and the regulations for disposal were primarily aimed at personal property and acquisition of supplies and services which did not fit the picture of the disposal of an asset. Furthermore, the bill addressing the railroad disposal, for example, specifically made the disposal not subject to the procurement code. The reason was due to broad considerations that the procurement code had not focused on. He would talk to the Department of Natural Resources about this issue further. Number 1249 CHAIR JAMES said in the absence of following the procurement code, specific language should be included to explain the process. MR. PETTY said the public deserved an accountable process. CHAIR JAMES said she would consider the provisions further. She asked Mr. Petty to continue explaining the sections. Number 1277 MR. PETTY moving forward, explained Section 39 exempted the livestock purchased by the Alaska Correctional Industries from the procurement code. Number 1301 CHAIR JAMES said it did not work when conducting ordinary business. It only worked in the case of protecting the public from the government purchase of goods and services. MR. PETTY agreed with Chair James. Number 1315 MR. PETTY moving forward, explained Section 40 allowed for General Services Administration, Federal Supply Schedules (GSA) supply schedules to open to state and local governments in accordance with regulations established by the Commissioner of the Department of Administration and as provided for in the federal law. The schedules offered more favorable prices for the state. The current law provided for that, but the council wanted to clarify the intent in statute. Number 1358 CHAIR JAMES asked Mr. Petty the status of the companion bill in the Senate (SB 275)? Number 1367 MR. PETTY replied it passed out of the Senate State Affairs Committee and was now in the Senate Judiciary Committee. Number 1387 REPRESENTATIVE ROBINSON announced she had to leave to attend a caucus meeting. Number 1399 REPRESENTATIVE OGAN asked Mr. Petty, if the state was able to purchase through the GSA, would that eliminate instate businesses? Number 1413 MR. PETTY said it was not clear that this would happen at the federal level. There was a moratorium surrounding this provision in the statute. It was not clear if the moratorium would be lifted, however. If it was lifted, the department would act as the gatekeeper for the Division of General Services. The intent was to use the contracts within the state when a dealer could give GSA prices. Number 1469 REPRESENTATIVE GREEN asked Mr. Petty to further explain Sections 4 and 22, and Sections 6 and 7. He asked what was the current cost for rental space? Number 1499 MR. PETTY replied it was approximately $1.35 to $1.50 per s.f. There were rents as high as $5 to $6 per s.f. in Barrow, for example. At the other end there were rents as low as 70 cents to 80 cents per square foot. Number 1525 REPRESENTATIVE GREEN asked Mr. Petty how the 3,000 s.f. or the $500,000 was arrived at in Section 4 and Section 6? Number 1542 MR. PETTY replied the $500,000 was the current threshold requirement in AS 36.30.80 to bring an operating lease to the legislature for approval. The 3,000 s.f. made more sense than a dollar amount because of fluctuations. The council recommended 5,000 s.f. initially. It was reduced to 3,000 s.f. in the House Labor and Commerce Committee. Number 1589 REPRESENTATIVE GREEN said he was concerned that those two provisions together would give latitude for the state to enter into a "healthy" contract. Number 1602 CHAIR JAMES said she was not interested in the state entering into any lease-purchase agreement without legislative approval no matter how small. It was necessary to consider the obligation of the state in the future regarding maintenance, for example. Number 1634 MR. PETTY replied any decision made on a lease-purchase agreement needed to consider the cost of operation and maintenance of the facility. It was built into the formula. If it did not make sense to own a building considering the operation cost, then the state should be leasing it. Number 1663 CHAIR JAMES said she understood what Mr. Petty said. However, deferred maintenance had not been funded. Therefore, it behooved the legislature to consider the obligation by approving this provision. She reiterated that the legislature did not have a future plan to deal with the deferred maintenance of public facilities. She suggested as a solution that the state sell and lease back all of the public facilities. Number 1707 REPRESENTATIVE GREEN asked Mr. Petty to explain Section 9 further. He said it opened the avenue for the "good ole boy." He was concerned that the length of time could be shortened to favor someone. Number 1734 MR. PETTY replied that clearly was not the intend of Section 9. The current requirement was 21 days no matter what, unless the chief procurement office determined it needed to be changed. He said 10 days were the typical length of time needed, leaving 11 days left for the process. The language "advantageous to the state and adequate competition" was added to insure competition within the amount of time necessary. Number 1791 CHAIR JAMES called for a five minute break. Number 1801 CHAIR JAMES called the House State Affairs Committee meeting back to order. Representatives Ogan, Porter, Green and James were present. CHAIR JAMES called on the first witness via teleconference in Anchorage, Dave Gerke. Number 1829 The record reflected the testimony of Dave Gerke was inaudible at times due to interference. DAVE GERKE said he had been an Alaskan resident for over 20 years. He was disabled. He expressed his opposition to HB 482 because it would not be good for Alaska. He specifically opposed Section 10 addressing Alaska bidders' preference. He stated it would hinder a lot of people with disabilities and was discriminatory against those trying to get into procurement with the state. He further opposed Section 16 addressing a single-source contract. He reiterated the bill was bad for Alaskan companies except for a few bureaucrats in Juneau. He suggested the committee members take a look at the provisions further before taking any action. Number 2061 CHAIR JAMES explained to Mr. Gerke the six months requirement was added to prevent the establishment of a company to obtain the bid. That was unfair to established businesses. Number 2115 MR. GERKE replied Section 10 would not affect his business that much. He was concerned about future disabled companies, however. Number 2135 CHAIR JAMES thanked Mr. Gerke for his testimony. She called on further discussion from the committee members. CHAIR JAMES announced she did not plan to move the bill out of the committee today. Number 2144 REPRESENTATIVE OGAN said he was distressed last year to pass bills that exempted various quasi private organizations from the procurement process. He had stated many times that there was a problem with the procurement process. Therefore, he applauded the efforts of Mr. Petty and the council. The bill needed further work, but he agreed with the concept of it. Number 2197 CHAIR JAMES thanked Mr. Petty for his time and explanation of the bill today.
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