Legislature(2001 - 2002)

05/02/2002 03:47 PM STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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.                                                                                                                

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