Legislature(2009 - 2010)BELTZ 105 (TSBldg)

04/08/2010 09:00 AM Senate STATE AFFAIRS


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 225 STATE PROCUREMENT CODE TELECONFERENCED
Heard & Held
+ HB 251 VEHICLE LIENS/TOWING/STORAGE/TRANSPORT TELECONFERENCED
Moved CSHB 251(JUD) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
= HB 24 PROCUREMENT PREFERENCE FOR VETERANS
Moved CSHB 24(MLV) Out of Committee
                  HB 225-STATE PROCUREMENT CODE                                                                             
                                                                                                                                
9:06:59 AM                                                                                                                    
CHAIR MENARD announced the first order of business to come                                                                      
before the committee would be HB 225. [CSHB 225(FIN)(CORRECTED)                                                                 
was before the committee. It was heard previously.]                                                                             
                                                                                                                                
SENATOR MEYER moved  to adopt the work draft  committee substitute                                                              
(CS) for  HB 225,  labeled 26-LS0791\C,  as the working  document.                                                              
Senator French objected for the purposes of discussion.                                                                         
                                                                                                                                
CRYSTAL KINEMAN,  staff to  Representative Anna Fairclough,  noted                                                              
that  Version   P  [CSHB   225(FIN)(Corrected)]  exempted   Alaska                                                              
Industrial  Development and  Export Authority  (AIDEA) and  Alaska                                                              
Energy  Authority  (AEA)  from  the   procurement  code.  The  new                                                              
committee substitute,  Version C, [CSHB 225(STA)]  eliminates that                                                              
wording  leaving  AIDEA  and  AEA   under  the  procurement  code.                                                              
Technical changes were  made to Section 36 of  Version P [amending                                                              
AS  36.30.999(l)] which  referred to  AIDEA and  AEA as  agencies.                                                              
Section 19  of Version P was taken  out of Version C  for purposes                                                              
of clarity; the offerors preference is left in regulation.                                                                      
                                                                                                                                
9:10:53 AM                                                                                                                    
SENATOR FRENCH  said the  committee wrestled  with two  provisions                                                              
at  the last  hearing:  whether to  put AEA  and  AIDEA under  the                                                              
procurement  code and  whether to  eliminate  the Alaska  offerors                                                              
preference. He asked if [Version C] does that or not.                                                                           
                                                                                                                                
MS.  KINEMAN  said Version  C  takes  AEA  and  AIDEA out  of  the                                                              
equation  and  leaves the  offerors  preference  as it  exists  in                                                              
regulation.                                                                                                                     
                                                                                                                                
SENATOR  FRENCH  clarified  that  Version C  leaves  the  offerors                                                              
preference as it is right now, untouched.                                                                                       
                                                                                                                                
MS. KINEMAN responded that was correct.                                                                                         
                                                                                                                                
SENATOR PASKVAN said  he sensed a major problem in  the system and                                                              
would like  to hear from Mr.  Jones. He asked about  the sponsor's                                                              
position on  Version C, Version P  or the original  legislation of                                                              
a $5,000 veterans preference.                                                                                                   
                                                                                                                                
9:12:51 AM                                                                                                                    
MS. KINEMAN replied  that the Alaska Veterans Preference  is still                                                              
important to  Representative Fairclough.  Questions about  Version                                                              
C  remain,  but  the  sponsor  will  adapt  to  the  will  of  the                                                              
committee.                                                                                                                      
                                                                                                                                
SENATOR PASKVAN  questioned how objective criteria  are determined                                                              
if  they  do   not  come  from  statutory  authority.   Perhaps  a                                                              
preference should not  be maintained if it can skew  a bid result,                                                              
has no basis in statute and may not have an objective standard.                                                                 
                                                                                                                                
MS. KINEMAN  replied that the sponsor  holds the same  concern and                                                              
the chair may decide whether that is addressed today or not.                                                                    
                                                                                                                                
9:15:57 AM                                                                                                                    
CHAIR  MENARD  said the  legislation  is  very confusing  and  she                                                              
wants to give it due diligence. She opened public testimony.                                                                    
                                                                                                                                
SCOTT THORSON, Network  Business Systems, said that  he would like                                                              
to see  the Alaska bidder's  preference clarified in  statute. The                                                              
state should  support locally  owned businesses  because the  vast                                                              
majority of Alaskans work for Alaskan small businesses.                                                                         
                                                                                                                                
9:18:37 AM                                                                                                                    
DENNIS  MEINERS, Intelligent  Energy  System, Anchorage,  supports                                                              
the  committee's   decision  to   take  Section  6   [amending  AS                                                              
36.30.015(f)]  out of  HB 225,  Version P.  Legislative Audit  08-                                                              
30048-08 found  that procurement  policies and procedures  for the                                                              
AEA   Rural  Energy   Group  Projects   need   to  be   rewritten.                                                              
Procurements for  the Rural Power Systems Upgrade  (RPSU) projects                                                              
were not  consistently made  in compliance  with the rural  energy                                                              
group,  bulk fuel  upgrade  program,  rural power  system  upgrade                                                              
program  project reference  manual  guidelines  or the  underlying                                                              
federal  regulations.  Section  6  of Version  P  strengthens  the                                                              
agencies' ability  to create their  own procurement  provisions in                                                              
spite of  past problems. They  are a small  section, maybe 3  or 4                                                              
people,  who have  managed about  $300 million  worth of  projects                                                              
over the last eight years. Very few of those have been bid out.                                                                 
                                                                                                                                
9:21:05 AM                                                                                                                    
AEA has  accumulated traditions or  ways of doing things  over the                                                              
years, surrounding  the way  bids are  put together.   Procurement                                                              
procedures  may  exist but  projects  are directed  to  particular                                                              
contractors;  innovation and  competition is  restricted. He  gave                                                              
an  example of  a 2007  multiple-year software  contract going  to                                                              
the  son  of  one  of  the workers  at  the  agency.  It  was  not                                                              
advertised; his  company and others  did not have  the opportunity                                                              
to bid.  The complexity and lack  of public information  about the                                                              
procurement  practices  at  AEA eliminate  some  contractors  from                                                              
even understanding the bids. The lack of oversight is harmful.                                                                  
                                                                                                                                
CHAIR MENARD asked Mr. Meiners to wrap up.                                                                                      
                                                                                                                                
MR. MEINERS  summarized that it  is not appropriate  to strengthen                                                              
the  procurement  abilities of  the  agency without  a  management                                                              
review.                                                                                                                         
                                                                                                                                
9:24:10 AM                                                                                                                    
TOM  WICKWIRE,  attorney,  Power  Corps  Alaska,  Fairbanks,  said                                                              
Power Corps  Alaska is a plaintiff  in pending litigation  against                                                              
AIDEA  and   one  of  its  employees.   HB  225  would   amend  AS                                                              
36.30.015(f),   effectively  allowing   AEA  to   draft  its   own                                                              
regulations  and adding  AIDEA to  the list of  agencies that  are                                                              
excluded from the  state procurement code. In  pending litigation,                                                              
Power Corps,  has proven  that AIDEA,  acting  through one  of its                                                              
employees,  has succeeding  in  giving over  $1  million worth  of                                                              
contracts to an out of state corporation.                                                                                       
                                                                                                                                
CHAIR  MENARD   interjected  and   said  a  committee   substitute                                                              
[Version C] is currently before the committee.                                                                                  
                                                                                                                                
MR.  WICKWIRE asked  if  Version C  allows AEA  to  draft its  own                                                              
procurement regulations.                                                                                                        
                                                                                                                                
CHAIR MENARD replied no.                                                                                                        
                                                                                                                                
MR.  WICKWIRE asked  if  Version  C excludes  AEA  from the  state                                                              
procurement code.                                                                                                               
                                                                                                                                
CHAIR MENARD replied no.                                                                                                        
                                                                                                                                
MR.  WICKWIRE  asked   if  AEA  will  be  subject   to  the  state                                                              
procurement code.                                                                                                               
                                                                                                                                
CHAIR MENARD replied yes.                                                                                                       
                                                                                                                                
MR. WICKWIRE  said if AEA is  excluded from the  procurement code,                                                              
this change  will occur while  litigation is pending  against AEA.                                                              
Trans Power  has alleged, and  submitted proof  to the AG,  that a                                                              
certain AEA  employee has  intentionally violated the  procurement                                                              
code. It looks like  the AEA has drafted this provision  of HB 225                                                              
to get itself out  of a difficult box. It is  inappropriate for an                                                              
agency to try to amend a law while litigation is pending.                                                                       
                                                                                                                                
9:28:00 AM                                                                                                                    
CHAIR MENARD closed public testimony.                                                                                           
                                                                                                                                
SENATOR  PASKVAN said  he is  uncomfortable rewriting  legislation                                                              
without more information and would like Mr. Jones to weigh in.                                                                  
                                                                                                                                
SENATOR MEYER  said the legislation  is attempting to  fix certain                                                              
areas of  the procurement code. Version  C deletes Section  20 and                                                              
Section 6,  which puts AIDEA and  AEA back under  procurement code                                                              
and  leaves  the   offerors  preference  the  way   it  was.  Some                                                              
testimony   supports  this,  however,   the  procurement   officer                                                              
remains frustrated  with the  number of accumulative  preferences.                                                              
He  suggested   getting  rid  of   the  offerors   preference  and                                                              
increasing  the Alaska bidders  preference.  He also believes  the                                                              
criteria,  six  months,  for Alaska  business  residency,  is  not                                                              
enough.                                                                                                                         
                                                                                                                                
9:30:20 AM                                                                                                                    
CHAIR MENARD asked if Mr. Meyer would suggest a year.                                                                           
                                                                                                                                
SENATOR  MEYER said  a year  requirement should  be considered  as                                                              
that is  consistent with other  Alaska residence  requirements. He                                                              
has also  heard concern about Sections  33 and 34 which  allow the                                                              
procurement officer  to go outside  the procurement code  and join                                                              
up  with  a cooperative  made  up  of several  western  states  in                                                              
attempt to  get a better  rate for the  state. AEA and  AIDEA also                                                              
want to  be outside the procurement  code. He reiterated  that the                                                              
state needs  to be able to keep  better track of money  spent with                                                              
an automated and  centralized system. His inclination  is to leave                                                              
the  procurement code  as  it is  and  take more  time  to find  a                                                              
comprehensive solution.                                                                                                         
                                                                                                                                
CHAIR MENARD  said that is  why she would  like to hold  Version C                                                              
and go back  to HB 24 which  deals with the  veterans' preference.                                                              
The procurement code needs more work and discussion.                                                                            
                                                                                                                                
SENATOR KOOKESH  said he has no  problem with Chair  Menard's plan                                                              
as long  as we have some  control over AEA  and AIDEA. He  said he                                                              
is not  willing to let  them have state  money and not  be subject                                                              
to the procurement code.                                                                                                        
                                                                                                                                
CHAIR MENARD  said she  appreciated  his argument  that it  is all                                                              
state money. [HB 225 was held in committee.]                                                                                    
                  HB 225-STATE PROCUREMENT CODE                                                                             
                                                                                                                                
10:09:42 AM                                                                                                                   
SENATOR KOOKESH asked  Chair Menard not to adjourn  before stating                                                              
for the record what she would like to do with HB 225.                                                                           
                                                                                                                                
CHAIR MENARD replied that HB 225 is being held in committee.                                                                    

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