Legislature(2005 - 2006)

05/07/2005 05:45 PM Senate FIN


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     CS FOR HOUSE BILL NO. 257(JUD)                                                                                             
     "An Act relating to and extending the pilot program for state                                                              
     procurement and electronic commerce tools; and providing for                                                               
     an effective date."                                                                                                        
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken   moved  to  adopt  committee  substitute   Version                                                            
LS0826\P as the working document.                                                                                               
                                                                                                                                
There being no  objection, the Version "P" committee  substitute was                                                            
ADOPTED as the working document.                                                                                                
                                                                                                                                
JANE ALBERTS, Staff to  Senator Bunde, the bill's sponsor, explained                                                            
that, contrary to the original  version of the bill which would have                                                            
eliminated a termination  date for the Pilot Procurement Program and                                                            
could have  allowed  the Program to  be implemented  in every  State                                                            
department,   the    Version   "P"   committee   substitute    would                                                            
"significantly scale back" the proposal.                                                                                        
                                                                                                                                
6:16:41 PM                                                                                                                    
                                                                                                                                
Ms. Alberts stated  that the Version "P" committee  substitute would                                                            
not  expand the  Program to  additional  agencies;  it would  simply                                                            
extend  the current  Program's  termination  date.  Furthermore,  in                                                            
response    to   significant    testimony    by   public    employee                                                            
representatives, a new  Department of Administration $350,000 fiscal                                                            
note,  dated May  7, 2005,  would allow  union members  in "two  new                                                            
agencies   outside  the   Pilot,  operating   with  state   employee                                                            
procurement personnel",  to acquire similar eCommerce tools to those                                                            
utilized  by the Pilot  Program "in order  to provide side-by-side"                                                             
procurement  comparisons.  The  software  to  be purchased  must  to                                                            
similar, but would not  be required to be identical, to the software                                                            
used  by the contractor  in  the Pilot  Program.  The dollar  amount                                                            
specified  in  the fiscal  note  would sufficiently  allow  for  the                                                            
purchase of such equipment.                                                                                                     
                                                                                                                                
Ms.  Alberts  communicated   that  Version  "P"  would   extend  the                                                            
termination  date of the  Pilot Program to  July 1,2009 in  order to                                                            
allow the State's procurement  program time to become functional and                                                            
provide sufficient data  for the comparison study. Were the State to                                                            
decide "within 14 months  to discontinue the program, there would be                                                            
time to wind down and perhaps select a different Contractor".                                                                   
                                                                                                                                
6:18:48 PM                                                                                                                    
                                                                                                                                
Senator  Hoffman, noting  that technology  advances in the  computer                                                            
industry are constantly  occurring, asked whether the State agencies                                                            
could  purchase  "better"  computer  programs  were they  to  become                                                            
available.                                                                                                                      
                                                                                                                                
Ms. Alberts understood  there to be a variety of programs from which                                                            
to choose.  In recognition of the  fact that the two agencies  might                                                            
desire  differing  programs to  meet  their needs,  any appropriate                                                             
program within the specified price parameter could be purchased.                                                                
                                                                                                                                
Senator Hoffman,  agreeing that several programs could  be suitable,                                                            
asked for confirmation  that no particular computer program had been                                                            
specified.                                                                                                                      
                                                                                                                                
Ms. Alberts  understood that  the agencies  would be able to  choose                                                            
the program they deemed  appropriate, "within the constraints of the                                                            
fiscal note".                                                                                                                   
                                                                                                                                
Senator Hoffman  remarked that his concern would be  met "as long as                                                            
they are able to buy the best available program..."                                                                             
                                                                                                                                
Co-Chair  Green asserted  that the specification  that the  agencies                                                            
must acquire  an eCommerce  program similar  to the one utilized  by                                                            
the contractor in the Pilot  Procurement Program would assure that a                                                            
good program could be purchased.                                                                                                
                                                                                                                                
Ms. Alberts affirmed  that the fiscal note would allow  the agencies                                                            
to  purchase   a  program  comparable   to  that  utilized   by  the                                                            
contractor, Alaska Supply Chain Integrators (ASCI).                                                                             
                                                                                                                                
6:20:41 PM                                                                                                                    
                                                                                                                                
Amendment #1:  This amendment inserts a new subsection  in Sec. 5 on                                                            
page four, following line 20.                                                                                                   
                                                                                                                                
          "(v) The contract authorized by (a) of this section must                                                              
     include  terms that protect the  interests of the state  if the                                                            
     contractor   stops   performing   or  fails   to  perform   the                                                            
     contractor's  obligations  under  the contract.    In order  to                                                            
     allow the Department  of Administration and the departments and                                                            
     other  instrumentalities  of  the state  participating  in  the                                                            
     pilot  program authorized  by (a) of this  section to  make the                                                            
     transition  back to having state  instrumentalities  handle the                                                            
     activities  provided  by  the contractor  under  the  contract,                                                            
     these required terms must include provisions that                                                                          
                (1) give the Department of Administration and the                                                               
     departments   and   other  instrumentalities    of  the   state                                                            
     participating  in the  pilot program  the right  to use,  for a                                                            
     reasonable   period  of   time  after   the  contractor   stops                                                            
     performing or fails  to perform, the electronic commerce tools,                                                            
     including  all software, used by the contractor  to perform the                                                            
     contract;  the provision required by this paragraph  must allow                                                            
     use  by the  employees  or  contractors  of the  Department  of                                                            
     Administration  or the departments  or other instrumentalities                                                             
     of the state participating in the pilot program; and                                                                       
                (2) require the contractor to provide whatever                                                                  
     assistance the contractor  is able to provide to the Department                                                            
     of    Administration    and   the   departments    and    other                                                            
     instrumentalities   of the  state participating   in the  pilot                                                            
     program in  using the electronic commerce tools  referred to in                                                            
     (1) of  this subsection and otherwise  making the transition."                                                             
                                                                                                                                
Senator  Dyson  understood  that  the  affect  of  the  Version  "P"                                                            
committee substitute  would be to eliminate as of  July 1, 2009, the                                                            
entirety of  Sec. 2, page one, line  11 through page two,  line one.                                                            
This action  would remove the limitations  as to which agencies  the                                                            
pilot program  could  be applied.  To that point,  an amendment  has                                                            
been developed "that would  protect the State in case the contractor                                                            
providing  the  services  fails  to  perform".   While  placing  the                                                            
entirety of a State department's  "procurement capacity in the hands                                                            
of the contractor …. might  be wonderful", "the danger is that" were                                                            
the  contractor  to  fail  to perform,  the  State  would  have  "no                                                            
fallback  position" in  which to "to  pick up  the pieces and  start                                                            
doing their own  purchasing". The amendment would  require that were                                                            
the contractor  "unable to  perform" or to  choose "not to  perform,                                                            
their software and files"  would become available to the State. This                                                            
would allow the State to assume those activities.                                                                               
                                                                                                                                
Co-Chair  Green  voiced  concern  that  the  proprietary  rights  of                                                            
contractor to  that property might prohibit the State  from enacting                                                            
such language.                                                                                                                  
                                                                                                                                
Ms.  Alberts  informed  the  Committee   that  the  issue  has  been                                                            
discussed.  The determination was  that this would be an  acceptable                                                            
amendment.  However,   a  representative  from  the   Department  of                                                            
Administration could more appropriately respond to the concern.                                                                 
                                                                                                                                
Senator Dyson moved for the adoption of Amendment #1.                                                                           
                                                                                                                                
AT EASE 6:23:42 PM / 6:25:32 PM                                                                                             
                                                                                                                                
Co-Chair Green  noted that the amendment is accompanied  by a May 4,                                                            
2005   Memorandum  to   Senator   Dyson  from   Theresa   Bannister,                                                            
Legislative Council, Legal  Services, Division of Legal and Research                                                            
Services,  Legislative Affairs  Agency [copy  on file] that  further                                                            
explains the amendment. The Memorandum reads as follows.                                                                        
                                                                                                                                
     Impairment  of  contracts  issue.  If  the  proposed  amendment                                                            
     requires  the parties to modify  an existing contract  with the                                                            
     pilot program  contractor, this requirement may  raise an issue                                                            
     under  the constitutional prohibitions  against the  impairment                                                            
     of contracts.1  The initial question  appears to be  whether or                                                            
     not  the  change  in  state  law  operates   as  a substantial                                                             
     impairment  of the parties' contractual relationship.2  Because                                                            
     this amendment  is limited to  the remedies under the  contract                                                            
     and not the  performance obligation to the contract,  it may be                                                            
     considered   not  be  to  a   substantial  impairment   of  the                                                            
     contract.3  So it  may not be a problem, but I wanted you to be                                                            
     aware of the issue.                                                                                                        
                                                                                                                                
     1. U.S. Const. Art.  I, sec. 10; Alaska Const. Art. I, sec. 15.                                                            
     2. 2 Rotunda  and Nowak, Treatise  on Constitutional  Law 15.8,                                                            
     p. 654 (3rd ed. 1999).                                                                                                     
     3. 2 Rotunda  and Nowak, Treatise  on Constitutional  Law 15.8,                                                            
     p.  654  - 655  (3rd  ed.  1999);  and see  Hagberg  v.  Alaska                                                          
     National Bank, 585 P. 2d 559, 561-562 (Alaska 1978).                                                                     
                                                                                                                                
Co-Chair Green voiced concern  as to how this amendment might impact                                                            
either  the State or  the contractor  in regards  to the terms  that                                                            
already exist in the Pilot Procurement Program contract.                                                                        
                                                                                                                                
6:27:07 PM                                                                                                                    
                                                                                                                                
Ms.  Alberts  noted  that because  Senator  Dyson  had  voiced  this                                                            
concern in previous  hearings, an answer could be  provided shortly.                                                            
                                                                                                                                
Co-Chair  Green ordered  the bill SET  ASIDE in  order to allow  the                                                            
Department of  Administration and other concerned  parties to review                                                            
the amendment.                                                                                                                  
                                                                                                                                
[NOTE: The  Committee readdressed  this bill  at time stamp  6:59:44                                                            
PM.]                                                                                                                            
                                                                                                                                
6:27:27 PM                                                                                                                    
                                                                                                                                
                                                                                                                                
     CS FOR HOUSE BILL NO. 257(JUD)                                                                                             
     "An Act relating to and extending the pilot program for state                                                              
     procurement and electronic commerce tools; and providing for                                                               
     an effective date."                                                                                                        
                                                                                                                                
                                                                                                                                
Co-Chair  Green  announced  that  this  bill was  again  before  the                                                            
Committee.  The discussion would continue  in regards to  the impact                                                            
that might result by the adoption of Amendment #1.                                                                              
                                                                                                                                
Ms. Alberts expressed that  the Amendment has been deemed acceptable                                                            
to the sponsor.                                                                                                                 
                                                                                                                                
6:59:44 PM                                                                                                                    
                                                                                                                                
KEVIN BROOKS,  Deputy Commissioner,  Department  of Administration,                                                             
stated that  after discussing the  issue with Senator Dyson  and Ms.                                                            
Alberts,  the understanding  is  that the  intent  of the  amendment                                                            
would be to provide  protection to the State were  the Pilot Program                                                            
to fail at some point in  the future. The Department appreciates the                                                            
intent and viewed this as a positive amendment to the bill.                                                                     
                                                                                                                                
Amendment-to-Amendment  #1:  This amendment-to-the-amendment   would                                                            
replace the  words "whatever  assistance the  contractor is  able to                                                            
provide"  with  the  words  "reasonable  assistance"  in  subsection                                                            
(v)(2) of the  amendment, following the word "provide".  The amended                                                            
language would read as follows.                                                                                                 
                                                                                                                                
                 (2) require the contractor to provide reasonable                                                               
     assistance   to  the  Department  of  Administration   and  the                                                            
     departments   and   other  instrumentalities    of  the   state                                                            
     participating  in  the pilot  program in  using the  electronic                                                            
     commerce  tools  referred  to in  (1)  of this  subsection  and                                                            
     otherwise making the transition.                                                                                           
                                                                                                                                
Senator Dyson moved to amend the amendment.                                                                                     
                                                                                                                                
There  being  no  objection,   the  amendment-to-the-amendment   was                                                            
ADOPTED.                                                                                                                        
                                                                                                                                
There being no objection, Amendment #1, as Amended, was ADOPTED.                                                                
                                                                                                                                
Senator Dyson  stated for  the record that  a representative  of the                                                            
contractor  has conveyed that  the contractor  is in agreement  with                                                            
the amendment.                                                                                                                  
                                                                                                                                
Co-Chair  Wilken  moved  to  report   the  bill,  as  amended,  from                                                            
Committee   with   accompanying    fiscal   notes   and   individual                                                            
recommendations.                                                                                                                
                                                                                                                                
There  being no  objection, SCS  CS HB  257(FIN)  was REPORTED  from                                                            
Committee zero  fiscal note #1, dated April 8, 2005  from the Alaska                                                            
Court  System, indeterminate  fiscal  note #2, dated  April 8,  2005                                                            
from   the   Division    of   General   Services,   Department    of                                                            
Administration,  and  a new  $350,000 fiscal  note  from the  Senate                                                            
Labor &  Commerce Committee  for the Department  of Administration,                                                             
dated May 7, 2005.                                                                                                              
                                                                                                                                
Senator Hoffman,  while voicing  no objection  to the action,  asked                                                            
that  the State's  Chief  Procurement  Officer  provide  a  position                                                            
statement  regarding  the legislation  prior  to its'  Senate  Floor                                                            
Session hearing.                                                                                                                

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