Legislature(1995 - 1996)

04/11/1996 08:10 AM STA

Audio Topic
* first hearing in first committee of referral
+ 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            
 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              
 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                    
 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             
 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                
 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                        
 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             
 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                    
 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               
 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                 
 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                 
 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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