Legislature(2001 - 2002)
05/02/2002 03:47 PM STA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 300-PROCUREMENT OF TRAVEL SERVICES REPRESENTATIVE JOE HAYES read the following from the sponsor statement. HB 300 will allow for the exemption of contracts for certain types of travel services including airplane travel, hotel accommodations and travel agency services from the procurement procedures of AS 36.30. In February 2002, Alaska Airlines adopted a policy similar to other major airlines capping travel agent commissions from 5% of the total ticket price to $10 and $20 for one-way and roundtrip airline tickets, respectively. March 2002 brought even worse news to the agencies when the airlines declared that all airline commissions would cease. Alaska Airlines has not yet cut their commissions to travel agents, but it is expected that they will by May 2002. Due to the abatement of commissions, it has become necessary for many travel agencies to rely on agency fees to stay in business. Since HB 300 will exempt certain travel services from procurement procedures codified in AS 36.30, administrative agencies will be able to choose travel providers on a case-by-case basis. This will foster competition by allowing for the consideration of all agencies… Passing the bill will give all travel agencies an opportunity to provide state travel, thus protecting and fostering Alaskan jobs and businesses. I ask for your support in passing this legislation. th REPRESENTATIVE HAYES said the events of September 11 contributed to the situation because people weren't flying, which caused huge losses for the airline industry. He said most state travel was planned by travel agents who did not charge a fee because the State said they would use their services as long as they didn't charge a fee. He said Southeast Alaska had to bid their travel services out because there weren't enough travel agents in the area. He said US Travel held that contract and charged $8 for a round trip ticket and $4 for a one-way ticket. He said the letter dated April 5, 2002 from the Department of Administration to AAA Travel that was in the bill packets exemplified what HB 300 was trying to achieve. He said HB 300 was an issue of fairness to him. If we requested services from businesses in our communities, he said it was only fair that we compensated them for those services. CHAIRMAN THERRIAULT asked if the fiscal note had been higher. REPRESENTATIVE HAYES said the fiscal note was always $228,000. He said this number was based on the prices that were being charged by US Travel. He said the State believed the contract with US Travel would probably have to be renegotiated and the fees would probably increase. He said we were going to have to pay the same price whether we dealt with one agency or several because of economy of scales. CHAIRMAN THERRIAULT said his personal preference was to remove the findings and intent section of HB 300. He asked if there was anything in the section that was necessary. REPRESENTATIVE HAYES said that was the way the bill was drafted. He said it could be done in a letter if it pleased the committee. CHAIRMAN THERRIAULT asked if there were any questions for Representative Hayes. There were none. MR. VERN JONES, Chief Procurement Officer, Department of Administration (DOA), said in the past, travel agencies received their revenue from airlines, hotels and rental car companies. The consumers, including the State, did not have to pay for their services. He said that had changed since all of the major airlines had or were soon going to cut commissions completely. He said it was the State's policy to get services for free whenever possible and only after they could not get the services for free would they bid out for services. He said this policy resulted in contracts in Juneau, Wrangell, Petersburg, Haines, Cordova, Seward and Dillingham. MR. JONES said HB 300 would not prevent the State from establishing travel agency contracts but DOA intended to follow the intent of the bill and work with industry representatives to establish a fee schedule of what the State would be willing to pay for the services. He said any agency willing to provide their services at or below the costs set forward in the fee schedule would be eligible to receive State business. He said once the travel agents met those requirements, the choice of agents would be at the discretion of the traveler, the division or the department. He noted that HB 300 would not affect existing state contracts because they were legal and binding and the State had an obligation to fulfill them. He said HB 300 was not without cost. He said DOA estimated the difference between competitively awarded contracts and negotiated fees to be around $8 per ticket. Based on the volume of travel conducted by the State, that would be about $230,000 per year. He said the State bought about 50,000 tickets per year, 11,000 of which were purchased directly from the airlines. The remaining 39,000 tickets were purchased through travel agencies. He said he believed $8 was a conservative estimate. CHAIRMAN THERRIAULT asked if anything in the findings and intent section of HB 300 needed to remain in the bill as a directive to DOA. MR. JONES said DOA would perform the same with or without the intent language. He said HB 300 wouldn't prevent DOA from doing a competitive procurement if they thought it was necessary, but it was DOA's intent to follow the intent of the bill. CHAIRMAN THERRIAULT asked if there were any questions for Mr. Jones. There were none. MS. SALLY HUNTLEY, Frontier Travel, said her company has done business with the State since 1982 and hired staff specifically to work with the State. She said they've never received any money from the State. She said competition between agencies has kept the cost for State tickets fairly low. She encouraged support of HB 300 because it would keep a lot of people employed and it would keep the State's ticket costs competitive and fair. She said car companies and hotels have also cut commissions to travel agencies. She said travel agencies provided an incredible service and would like to continue to do so. MS. HUNTLEY said the State did a phenomenal amount of business. She said at the pre-bid meeting that morning the prospective bidders asked for an idea of how much the contract was worth. She said they were not able to get an answer and did not know what they were getting into with the contract. She said she would be able to take on several million more dollars worth of business, but she could not take on five or ten million more dollars worth of business because of the size of her agency. She said she could continue providing service at the level she is providing currently if HB 300 passed. SENATOR PHILLIPS asked if she came down from Anchorage to testify on HB 300. MS. HUNTLEY said she had because she felt very strongly about this bill. CHAIRMAN THERRIAULT asked if there were any further questions for Ms. Huntley. There were none. MR. BILL BECK, President of Airlines Online, said they have seven staff and 15 independent contractors who work through their office. He said they support HB 300. He said competition is the best motivator to keep service standards high. He said there was an advantage to establishing a fee structure and allowing choice based on that fee structure. He said he was also at the pre-bid conference and said DOA wanted bids for 17 areas around the state but could not give any estimates of how much those contracts would be worth, which made it very difficult to come up with a bid and provide for the appropriate amount of staff to handle the contract. He noted that the Juneau contract with US Travel would have to be renegotiated and that cost was likely to go up. He said support of HB 300 would provide better competition and service. CHAIRMAN THERRIAULT asked if there were any questions for Mr. Beck. There were none. MS. CINDY BETTINE said she owned two travel agencies in Palmer and Wasilla, employing 13 women, 4 of which were certified travel counselors. She requested support of HB 300. She said the lack of commission and net compensation was a big issue but was not the most important issue. She said all travel agents were not created equal. She said some agencies were waiving their fees and assigning the least experienced agent to the State account. She said the State may be saving $20 to $30 in fees but may be paying much more for their ticket because they were working with inexperienced agents. She said this was especially important when considering the fiscal note. She said it was important that the travel business remain competitive and HB 300 would probably achieve that. She would like to see the bill passed through the committees and to the Senate floor so travel agencies could continue providing service and saving travelers money. CHAIRMAN THERRIAULT asked if there were any questions for Ms. Bettine. There were none. He asked if committee members felt the same way he did about removing the findings and intent section. SENATOR PHILLIPS moved Amendment #1, deleting Sec. 1. CHAIRMAN THERRIAULT asked if there was any objection to Amendment #1. There being no objection, Amendment #1 was adopted. SENATOR PHILLIPS moved SCSHB 300(STA) out of committee with attached fiscal note and individual recommendations. There being no objection, SCSHB 300(STA) was moved out of committee with attached fiscal note and individual recommendations.