Legislature(2011 - 2012)BUTROVICH 205
03/27/2012 09:00 AM Senate STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SB132 | |
| HB129 | |
| HB204 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 132 | TELECONFERENCED | |
| += | HB 129 | TELECONFERENCED | |
| + | HB 204 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 204-STATE PROCUREMENT CODE
9:14:17 AM
CHAIR WIELECHOWSKI announced that the final bill before the
committee would be HB 204, which proposes changes to the State
Procurement Code.
REPRESENTATIVE ANNA FAIRCLOUGH, sponsor, HB 204, introduced the
bill. She read from the following sponsor statement:
HB 204 proposes changes to the State Procurement Code.
It attempts to clarify the Alaska business license
requirement that bidders hold an Alaska business
license. It increases the dollar amount for thresholds
for small procurements from $50,000 to $100,000, for
construction for a small procurement from $100,000 to
$200,000 and it increases lease space from 3,000 to
7,000, all under small procurements. This legislation
is an effort to modernize procurement policies, which
haven't been amended in over twenty years. In smaller
communities across Alaska it is sometimes difficult to
find lease space or make construction changes under
the current code. The bill amends the code to allow
electronic bids and signatures. It eliminates an
outdated vendor's list that is not used currently, but
is mandated under state statutes to be maintained.
These changes are intended to modernize the
procurement system and assist staff to better fulfill
their duties and put their efforts into leases and
procurements that require more detail than small
procurements.
CHAIR WIELECHOWSKI requested a sectional analysis.
9:16:38 AM
LAURA PIERRE, staff to Senator Anna Fairclough, explained the
sections of HB 204. She related that Section 1 would increase
the threshold limit for small procurements of leased space from
3,000 square feet to 7,000 square feet. She noted that that the
statutes are outdated and this change would help in rural Alaska
or other communities where people may feel intimidated by a
large procurement process.
SENATOR PASKVAN wanted to know what the process would be if
someone has a 7,000 square foot lease.
9:18:04 AM
VERN JONES, Chief Procurement Officer, Division of General
Services, Department of Administration, addressed Senator
Paskvan's question. He explained that there were different
levels of competition for a small procurement, depending on the
dollar amount. He said the current practice in leasing, which
will remain unchanged, is that the division would distribute
requests for proposals (RFP's) to anyone in the community and
place the opportunity on the state's on-line public notice web
site.
SENATOR PASKVAN asked if there were parameters for the small
procedure, such as a maximum duration or maximum dollar amount
of the contract.
MR. JONES replied that in Section 7, the threshold amounts for
other types of procurements were increased. Those are governed
by the dollar value estimates of the procurement going in. For
leases, however, the determination is based on whether the lease
is going to be structured under the small procurement rules or
under the formal procurement process based on the size of the
lease. The bill increases the current square footage from 3,000
to 7,000, irrespective of the cost per square foot. There are no
sideboards on the amount for a lease.
CHAIR WIELECHOWSKI asked for explanation of the major
differences between the procurement process and the changing
procedures for small procurements.
MR. JONES explained that currently in regulation in the small
procurement procedures there are a number of processes,
depending on the size. Up to $5,000, you use competition that is
reasonable under the circumstances determined by the procurement
officer. From $5,000 to $25,000, for general goods and services,
three quotes or informal proposals are required; from $25,000 to
$50,000, a written request for quotes or proposals is required.
Anything over $50,000 is considered a formal procurement. The
bill proposes to double those amounts for goods and services.
He noted that leases are handled differently because the
Division of General Services is the only agency that has
authority to lease office space and it handles leases
internally. A formal process for notification is used due to the
problem of lack of competition. All leases are noticed on line
and sent to everyone who might qualify for the lease.
CHAIR WIELECHOWSKI asked if the dollar amounts were per year.
Mr. JONES clarified that they were dollar amounts per
procurement.
CHAIR WIELECHOWSKI asked if a lease was $5,000 per month, which
provision it would fall under.
MR. JONES explained that it would fall under the small
procurement provision. Under the statute, the requirement would
be to solicit informal quotes and proposals from three firms. In
reality, it would be on the on-line public notice and anyone
could bid on it.
CHAIR WIELECHOWSKI asked how many leased spaces would be
affected by the bill.
MR. JONES related that the Division of General Services
administers 416 leases; 252 of which are 3,000 square feet or
less, 75 are between 3,000 and 7,000 square feet, and 89 are
over 7,000 square feet. He noted that leases are the most
complex of the procurements the state does.
9:24:42 AM
CHAIR WIELECHOWSKI asked what the differences would be for small
procurements, as compared to the large procurements, because of
the bill.
MR. JONES explained that on the leases, the notification would
not change. It's a matter of timing and formality of the
process. Due to the change, the division would have a larger
percentage of leases in a process that does not take as long. It
would be less intimidating, so a prospective bidder would get a
10 to 15 page package to review and fill out instead of a 200
page RFP.
SENATOR PASKVAN spoke of the 99-year railroad lease bill. He
wondered if there was a maximum dollar amount or a maximum year
amount. He was looking for sideboards on potentially expensive
leases.
MR. JONES reported that there is no dollar cap limit on small
lease procurements. However, statute places a limit on all
office leases - they cannot exceed 40 years. It is generally
more acceptable to have a 5 or 10 year lease, with typically 10
to 20 years maximum. There are provisions in statute that allow
for lease extensions. The initial term of a lease can't exceed
40 years.
9:27:37 AM
MS. PIERRE explained that Section 2 would clarify Alaska
business license requirements for competitive sealed bids and
qualification for the Alaska bidder preference. The change would
require bidders to show proof of their Alaska Business License
prior to the award, but would require the license at the time of
bid submission in order to qualify for the Alaska bidder
preference.
CHAIR WIELECHOWSKI asked if adding this section would make it
easier for out-of-state businesses to compete.
REPRESENTATIVE FAIRCLOUGH explained that the bill would allow
anyone to bid on a project, but an Alaska Business License would
be required before an award was received. A company must have an
Alaska Business License in order to receive an Alaska bidder
preference.
MR. JONES agreed that the bill does not make it any easier for
out-of-state companies to bid because all of the formal
procurements are on the on-line public website. It allows
acceptance of an RFP for evaluation and assurance that the
company has an Alaskan business license. This change in the law
was made at the request of Legislative Budget and Audit.
9:31:06 AM
CHAIR WIELECHOWSKI asked which companies are being denied.
MR. JONES replied that the most common situation is from out-of-
state firms that have no Alaskan license, but it applies to
Alaskan firms, too.
CHAIR WIELECHOWSKI asked how much an Alaska preference entailed.
MR. JONES stated that there are many Alaskan preferences. The
most common is the Alaska Business Preference, which is 5
percent.
CHAIR WIELECHOWSKI asked if an Alaskan business license was the
only qualification.
MR. JONES listed the qualifications: have an Alaska business
license, submit a bid or proposal in the names appearing on the
license, and have a place of business in the state for six
months previous to the due date of the bid.
SENATOR MEYER inquired if an Alaskan business could be a
corporation.
MR. JONES said yes.
SENATOR MEYER asked if EXXON was an Alaskan business.
MR. JONES said yes.
9:33:03 AM
CHAIR WIELECHOWSKI asked how many bids are out-of-state bids
versus Alaskan bids.
MR. JONES said he does not currently have a way of capturing
that data. A new automated procurement system is in process. He
pointed out that the increased threshold changes in the bill
would increase the likelihood of an award to an Alaskan firm
because the division is only required to contact three firms.
Regulations stipulate that three in-state firms must be
contacted before out-of-state firms are contacted. There is more
likelihood that an Alaskan vendor would be solicited.
CHAIR WIELECHOWSKI asked if there was a list of those who have
been disqualified for not having a business license.
MR. JONES said no.
CHAIR WIELECHOWSKI expressed interest in who is being excluded.
MR. JONES gave an example of a megaproject bid with only outside
vendors competing and one is disqualified for not having an
Alaska business license. He said that situation is frustrating
and costly.
9:35:22 AM
SENATOR PASKVAN asked if there were glaring examples of
exclusion in the $7,000 and under lease category.
MR. JONES said it was really not an issue in that category
because most of the vendors have Alaskan licenses.
MS. PIERRE related that Section 3 eliminates reference to a
procurement officer's use of vendor lists, reflecting the repeal
of the statute establishing the vendor lists, consistent with
Section 10.
CHAIR WIELECHOWSKI referred to page 2, lines 23 to 25, the
reference to eliminating mailing notices to active prospective
contractors, and questioned the rationale for that decision.
MR. JONES explained that current law requires that all formal
bids and proposals are posted on line, with a 21 day RFP bid
circulation period. There will soon be an automated procurement
system where everything will also be posted on a state web site.
The bidder lists that were required to be maintained are not
required by statute to be used.
CHAIR WIELECHOWSKI summarized that the current process involves
mailing a postcard to a list of potential contractors, notifying
them of a procurement opportunity.
MR. JONES said most of the time the procurement officer does not
use the postcard bidders list because most contractors know to
look on line for the information. However, it is currently
required by statute, therefore HB 204 is trying to do away with
it.
CHAIR WIELECHOWSKI asked if there will still be electronic
notices sent out, or if people will have to check on line
themselves.
MR. JONES explained that on the on-line public website there is
an option that any interested person can choose to receive
notices by email. The new automated procurement system will do
the same thing.
CHAIR WIELECHOWSKI inquired when the new system would be done.
MR. JONES reported that the system is currently being built and
should be in place by 2014.
CHAIR WIELECHOWSKI asked if the system was instituted through
the Department of Administration and if it was fully funded.
MR. JONES said it was.
CHAIR WIELECHOWSKI asked who was building it.
MR. JONES said it was a firm called CGI.
CHAIR WIELECHOWSKI gave a hypothetical example of a rental
property located in Angoon. He wondered if the owner could post
the availability on line.
MR. JONES explained that a person could submit a notification
request on the on-line public notice website. Any time a lease
procurement came up, they would receive a notification to go
look on line.
CHAIR WIELECHOWSKI concluded that Section 3 takes away the
requirement that postcards are sent to a list of contractors.
MR. JONES said yes.
CHAIR WIELECHOWSKI asked if it would be a cost savings.
MR. JONES thought there would be minimal cost savings.
9:41:07 AM
MS. PIERRE explained Section 4, which clarifies construction
contractor registration requirements, now explicitly requiring
registration before award of a contract.
CHAIR WIELECHOWSKI asked if, under current law, a bidder has to
be a contractor.
MR. JONES said Section 4 maintains a distinction that in
addition to having a business license for a construction
project, the bidder must also be registered as a construction
contractor.
SENATOR PASKVAN asked if the contract proposal from the state
identifies the registration classification needed to meet the
type of contract.
MR. JONES related that there is a list of codes for the
contractor to choose from. He added that DOT has authority for
construction.
SENATOR PASKVAN wondered if there has been a conflict where a
contractor has not identified the required classification.
9:43:44 AM
MR. JONES said that DOT works closely with the Associated
General Contractors of Alaska (AGC) on those requirements.
CHAIR WIELECHOWSKI thought the state would want to hire
registered contractors.
MR. JONES thought it was more of a technical issue on the timing
of the registration. The contractor must be registered before
the award if a contract.
CHAIR WIELECHOWSKI said he thought if it was a construction
contract, the state would want a licensed contractor to do the
job.
MR. JONES said the bill assumes there was a reason they were not
registered yet.
9:46:00 AM
MS. PIERRE addressed Section 5, which clarifies Alaska business
license requirements for competitive sealed proposals and
qualification for the Alaska bidder preference using language
consistent with that used in Section 2.
MR. JONES added that Section 5 deals with RFP's and Section 2
deals with invitations to bid, which are the same, but pick up
different types of procurements.
CHAIR WIELECHOWSKI asked for an explanation of AS 36.31.170 and
AS 36.31.175.
MR. JONES related that the first statute is the evaluation and
award provision.
CHAIR WIELECHOWSKI summarized that it states the timing of when
a contractor must have an Alaskan business license.
MR. JONES stated that Section 5 mirrors Section 2. He explained
the definition of bid, which is to provide specifications
sufficient enough that if a person qualifies and is the low
bidder, then they win the bid. A RFP is a document where cost is
only a fraction of the overall evaluation criteria and entails
scoring points. The high point score wins and cost is a part of
the evaluation; in a bid process, cost is 100 percent of the
evaluation.
SENATOR MEYER asked which process is done the most.
MR. JONES replied that in professional services, RFP's are used,
and commodities are purchased on a low bid basis. Leases are
always done with RFP's.
SENATOR MEYER inquired if RFP's are used for road construction.
MR. JONES said that generally a bid process is used.
9:49:22 AM
MS. PIERRE addressed Section 6, which adds a new section
allowing an agency to accept electronic bids and proposals.
CHAIR WIELECHOWSKI asked if the department does not currently
have the authority to receive bids and proposals.
MR. JONES replied that currently there is no explicit authority
for that.
SENATOR PASKVAN inquired if the procurement branch of government
is ready to receive electronic bids and proposals in a timely
manner.
MR. JONES admitted that currently it was not ready, but a said a
new electronic system was being built.
CHAIR WIELECHOWSKI noted it would be ready around 2014, so until
then, if HB 204 is passed, the department would rely on written
transmission.
MR. JONES agreed that the bill allows for written communication.
MS. PIERRE explained Section 7, which increases the threshold
under which a state agency may use informal procurement process
to $100,000 for goods and professional services, to $200,000 for
construction, and 7,000 square feet for lease of space.
9:51:26 AM
SENATOR PASKVAN wondered why there was a change from "may" to
"shall", because it eliminates the department's discretion.
MR. JONES said it appears to do that, but in reality it does
not. When the department issues a small procurement, it can be
written to include requirements of a formal procurement. He
related that there are different protest procedures, depending
on the size of the procurement. In small procurements, the
process is one step. In formal procurements there is a protest
to the commission officer and an appeal to the Commissioner of
Administration or Transportation. Section 7 classifies which
process to use.
9:53:28 AM
SENATOR PASKVAN argued to keep "may" in the bill. He understood
that using "shall" means the department can still impose
restrictions similar to a formal procurement process.
MR. JONES agreed. He gave an example of the lease procurement
process, where the department has imposed the formal process in
order to obtain more competition.
SENATOR PASKVAN asked if there would have to be regulation
changes to accommodate that intent.
MR. JONES explained that there has to be regulation changes to
account for the new dollar amounts, but the flexibility is
already built in to adopt more formal requirements.
CHAIR WIELECHOWSKI asked if the bill would require numerous
regulations.
MR. JONES said it would.
REPRESENTATIVE FAIRCLOUGH clarified that Section 7 dictates the
appeal process on a small procurement. If the department adds
extra layers of requirements, and someone protests the
additional requests, the department "shall" use the small
procurement procedure. She opined that Legislative Legal was
trying to narrow the focus of the appeal.
9:57:10 AM
SENATOR PASKVAN wanted to make sure the procurement officer has
as much discretion as possible. He assumed additional
requirements, or a hybrid procurement process, would require
more regulations.
MR. JONES clarified with an example of a $20,000 procurement,
which under small procurement rules, require solicitation of
three bids. A procurement officer could make the decision to get
more bids and solicit ten firms or put the announcement on the
on-line public notice or adopt the 21-day circulation time.
There is that flexibility even though the wording of the bill
says "shall be run", because small procurement requirements are
minimal requirements. The wording does require following the
protest procedures for a small procurement.
CHAIR WIELECHOWSKI stated that would not be possible if the
department adopted regulations that said otherwise.
MR. JONES maintained that the department would not do that
because it would not make sense to bar additional competition or
additional time requirements.
CHAIR WIELECHOWSKI requested an example of an abuse of this
section.
MR. JONES repeated the $20,000 procurement example.
CHAIR WIELECHOWSKI argued if regulations were adopted for the
small procurement procedure that made specific bid or time
requirements, the legislation would be bound by them.
MR. JONES clarified that regulations generally say to do the
minimum required.
CHAIR WIELECHOWSKI thanked Mr. Jones for the good education on
the procurement process.
10:01:54 AM
MS. PIERRE turned to Section 8, which eliminated reference to
the removal of debarred or suspended persons from vendor lists,
reflecting the repeal of a law establishing the vendor lists,
consistent with Section 10.
CHAIR WIELECHOWSKI inquired if current law allows debarred or
suspended persons to be considered.
MR. JONES replied that they are prohibited from bidding. Section
8 deletes the reference to the bidder list, which was eliminated
in a previous section.
CHAIR WIELECHOWSKI concluded that it was cleaning up redundancy.
MS. PIERRE said yes.
She continued to say that Section 9 updates definitions to
include electronics.
CHAIR WIELECHOWSKI inquired if AS 36.30.990 was the definition
section.
MS. PIERRE said yes.
MS. PIERRE related that Section 10 repeals statute establishing
the vendor list.
10:04:45 AM
MS. PIERRE explained that Section 11 clarified the application
of the Procurement Act to pending solicitations during
transition period.
CHAIR WIELECHOWSKI concluded that it applies only to bids or
proposals that come about after this section.
MS. PIERRE said yes.
SENATOR PASKVAN referred to page 4, lines 18 and 19, and asked
if it would state in the contract that the submission of an
application is their acceptance of these provisions.
MR. JONES said yes.
CHAIR WIELECHOWSKI inquired if Section 12 was the immediate,
effective date.
MS. PIERRE said yes.
CHAIR WIELECHOWSKI asked if the effective date was a problem
without the electronic system in place.
MR. PIERRE said it was not a problem. The bill allows the
department to accept electronic bids and proposals, but does not
require the department to do so.
10:06:44 AM
SCOTT THORSON, representing himself, Anchorage, Alaska,
testified in support of HB 204 as a way of streamlining state
procurement and making private sector firms' business easier.
CHAIR WIELECHOWSKI asked if there was any opposition to the
bill.
REPRESENTATIVE FAIRCLOUGH stated that the State Chamber of
Commerce supports the bill. She noted written support from the
State Chamber of Commerce. She related that she was aware of no
opposition to the bill.
CHAIR WIELECHOWSKI wondered if there had been controversial
sections in the bill that had been removed.
REPRESENTATIVE FAIRCLOUGH recalled a contentious point two years
ago; a provision to remove a bidder's preference currently
allowed in regulation. The provision no longer exists in the
bill.
SENATOR MEYER recalled a concern about the procurement process
in the past. He pointed out that each state department makes
purchases individually and it is difficult to track how the
money is being spent. He made a suggestion to capture the dollar
amount and then put it out for bid in order to save the state
money. He said he realized technology would be needed to do
that. He hoped by 2014 the state could save money using
technology for procurement.
CHAIR WIELECHOWSKI asked if each department does its own
procurements.
MR. JONES explained that the procurement authority for goods and
services and for professional services is vested in the Chief
Procurement Officer and the Commissioner of Administration. The
construction procurement authority is vested in the Commissioner
of the Department of Transportation. General Services delegates
unlimited authority to all agencies for procurement of goods and
services and for professional services because of the
impossibility of the five buyers to be able to conduct the
volume of procurements. Delegation is a practical matter. He
agreed that there is some loss of control and oversight that
way. He maintained that the automated system will improve that
situation.
10:12:01 AM
CHAIR WIELECHOWSKI pointed out that centralized procurement
saves money.
MR. JONES hoped to have that system in place.
REPRESENTATIVE FAIRCLOUGH made final comments. She shared the
committee's enthusiasm about moving toward an accountable
system. She said the proposed changes to procurement in the bill
are very small, but they are intended to give the procurement
officers that are centralized, the ability to concentrate their
resources on much more complex issues.
CHAIR WIELECHOWSKI held HB 204 in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 132 Sponsor Statement.pdf |
SSTA 3/22/2012 9:00:00 AM SSTA 3/27/2012 9:00:00 AM |
SB 132 |
| SB0132A.pdf |
SSTA 3/22/2012 9:00:00 AM SSTA 3/27/2012 9:00:00 AM |
SB 132 |
| SB132-DOA-DMV-3-16-12.pdf |
SSTA 3/22/2012 9:00:00 AM SSTA 3/27/2012 9:00:00 AM |
SB 132 |
| SB 132 Student Driving Presentation.ppt |
SSTA 3/22/2012 9:00:00 AM SSTA 3/27/2012 9:00:00 AM |
SB 132 |
| CS SB 132 - 3-26-12.PDF |
SSTA 3/27/2012 9:00:00 AM |
SB 132 |
| CSHB 129(FIN) - Version I.pdf |
SSTA 3/22/2012 9:00:00 AM SSTA 3/27/2012 9:00:00 AM |
HB 129 |
| HB129CS(FIN)-DHSS-BVS-12-15-11.pdf |
SSTA 3/22/2012 9:00:00 AM SSTA 3/27/2012 9:00:00 AM |
HB 129 |
| 01 HB 129 Sponsor Statement.pdf |
HMLV 2/22/2011 1:00:00 PM SSTA 3/22/2012 9:00:00 AM SSTA 3/27/2012 9:00:00 AM |
HB 129 |
| HB 129 version D.pdf |
SSTA 3/27/2012 9:00:00 AM |
HB 129 |
| HB 129 - Explanation of Changes.pdf |
HMLV 2/22/2011 1:00:00 PM SSTA 3/22/2012 9:00:00 AM SSTA 3/27/2012 9:00:00 AM |
HB 129 |
| HB 129 - Death Certificate Example.pdf |
HMLV 2/22/2011 1:00:00 PM SSTA 3/22/2012 9:00:00 AM SSTA 3/27/2012 9:00:00 AM |
HB 129 |
| HB204-DOA-PUR-12-01-11.pdf |
SSTA 3/27/2012 9:00:00 AM |
HB 204 |
| HB 204.pdf |
SSTA 3/27/2012 9:00:00 AM |
HB 204 |
| HB 204 Sponsor Statement.pdf |
SSTA 3/27/2012 9:00:00 AM |
HB 204 |
| HB 204 Sectional Analysis.pdf |
SSTA 3/27/2012 9:00:00 AM |
HB 204 |
| HB 204 Support- University.pdf |
SSTA 3/27/2012 9:00:00 AM |
HB 204 |
| Alaska Chamber HB 204 March 26, 2012.pdf |
SSTA 3/27/2012 9:00:00 AM |
HB 204 |