Legislature(2011 - 2012)BUTROVICH 205

04/03/2012 09:00 AM STATE AFFAIRS

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved SJR 20 Out of Committee
Heard & Held
Scheduled But Not Heard
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                   HB 205-PUBLIC PROCUREMENT                                                                                
9:15:37 AM                                                                                                                    
CHAIR  WIELECHOWSKI   announced  that  HB  205   was  before  the                                                               
committee. He  said HB 205  addresses preferences in  the state's                                                               
procurement  code;  it  consolidates some  preferences  and  sets                                                               
standards for how they accumulate.                                                                                              
REPRESENTATIVE  ANNA FAIRCLOUGH,  sponsor of  HB 205,  introduced                                                               
the bill. She  related that the bill changes  and streamlines the                                                               
procurement code to ensure consistency  in application of the law                                                               
resulting  in   a  more  understandable,   efficient  procurement                                                               
process.   It eliminates a  seldom-used preference  for employers                                                               
with disabilities, it  consolidates procurement preferences under                                                               
one statute,  and it clarifies  which preferences  are cumulative                                                               
and  those that  may not  be  combined. It  makes application  of                                                               
preferences uniform.  Currently, the  preferences do  not contain                                                               
the same language so they must be applied differently.                                                                          
LAURA PIERRE, staff to  Representative Anna Fairclough, explained                                                               
the sections of HB 205 on behalf of the sponsor.                                                                                
CHAIR  WIELECHOWSKI requested  information about  the substantive                                                               
MS.  PIERRE  described  Section  1  as  the  renumbering  of  the                                                               
CHAIR WIELECHOWSKI asked why the numbers changed.                                                                               
VERN  JONES,  Chief  Procurement  Officer,  Division  of  General                                                               
Services, Department  of Administration, testified that  the bill                                                               
aims  to pull  the preferences  out  of the  various sections  in                                                               
statute and put  them all into one section and  make the language                                                               
uniform so they are more easily applied.                                                                                        
CHAIR  WIELECHOWSKI  summarized  that preferences  are  scattered                                                               
throughout the statutes  and the bill consolidated  them into one                                                               
MS.  PIERRE  explained Section  2  amends  the local  agriculture                                                               
preference  to  grant   a  7  percent  cost   preference  to  the                                                               
qualifying bid, rather than to  the low bid, making it consistent                                                               
with other procurement preferences.                                                                                             
CHAIR WIELECHOWSKI requested more information.                                                                                  
MS. PIERRE repeated her explanation.                                                                                            
MR. JONES  pointed out that  the statute is currently  written to                                                               
say a  procurement must be  awarded to the bidder  that qualifies                                                               
for this preference  if their bid is within  a certain percentage                                                               
of the low bid.                                                                                                                 
9:20:03 AM                                                                                                                    
CHAIR WIELECHOWSKI asked how the bidder qualifies.                                                                              
MR.  JONES explained  that the  bidder, in  this case,  qualifies                                                               
when producing a local agricultural or fisheries product.                                                                       
CHAIR  WIELECHOWSKI  asked if  the  new  bill provides  that  the                                                               
procurement officer  would screen bidders for  qualifications and                                                               
then award a 7 percent preference.                                                                                              
MR. JONES said yes.                                                                                                             
SENATOR PASKVAN asked how a qualifying bid is determined.                                                                       
MR. JONES  said he  did not understand  the question.  He offered                                                               
that the  preference is  based on  a qualified  bid and  would be                                                               
reduced by 7 percent, instead of  figuring out who the low bidder                                                               
9:21:25 AM                                                                                                                    
SENATOR MEYER requested an example  of when a procurement officer                                                               
would go with a low bid rather than with a qualifying bid.                                                                      
MR. JONES called  that a misnomer because a low  bid has not gone                                                               
through the bid process to qualify for the 7 percent preference.                                                                
SENATOR PASKVAN  asked if the  award is  issued in the  amount of                                                               
the original bid or with the 7 percent removed.                                                                                 
MR.  JONES said  it was  in the  amount of  the original  bid. He                                                               
further  explained  that  the   preferences  are  for  evaluation                                                               
purposes only.                                                                                                                  
CHAIR WIELECHOWSKI  asked if the  bill has the ability  to change                                                               
the results of procurement.                                                                                                     
MR. JONES said  it could because the low bid  is different than a                                                               
bid with a percentage removed resulting in a greater amount.                                                                    
9:24:17 AM                                                                                                                    
REPRESENTATIVE FAIRCLOUGH  further explained that the  purpose of                                                               
the section is  twofold, to clarify language, but  also to ensure                                                               
that  Alaskan-owned businesses  that  are  harvesting seafood  or                                                               
agriculture  receive  a  preference  because they  compete  in  a                                                               
market  made  up of  large  suppliers.  She  gave an  example  of                                                               
lettuce bought for schools.                                                                                                     
MS. PIERRE related that Section 3  does the same thing as Section                                                               
2, but for local fisheries.                                                                                                     
She said  that Section  4 would amend  the local  agriculture and                                                               
fisheries preference  to not  allow a bidder  to be  granted both                                                               
CHAIR WIELECHOWSKI requested clarification.                                                                                     
MR.  JONES  explained that  the  preferences  are duplicative.  A                                                               
bidder  cannot  have  more  than   one  preference,  such  as  an                                                               
agricultural  and fisheries  preference,  as well  as an  Alaskan                                                               
CHAIR WIELECHOWSKI asked  if that is in current  law and involves                                                               
MR. JONES  reported that it  has been the division's  practice to                                                               
not allow stacking of preferences.                                                                                              
SENATOR PASKVAN  gave an example  of a local  agricultural bidder                                                               
who would likely  elect the 7 percent preference  rather than the                                                               
Alaskan 5 percent preference.                                                                                                   
MR.  JONES clarified  that  the Alaska  product  preference is  a                                                               
three-tiered process with  a 3 percent, 5 percent,  and 7 percent                                                               
preference based  on the percentage  produced or  manufactured in                                                               
the state.  For example, a  fisheries product, which  is produced                                                               
100 percent  in Alaska, would  get one 7 percent  preference, but                                                               
not  a  fisheries  product  preference,  because  that  would  be                                                               
9:27:50 AM                                                                                                                    
MS. PIERRE reported that Sections 5-10 are renumbering sections.                                                                
She related that Section 11  adds a new section consolidating the                                                               
Alaska bidder  preference, the  Alaska Veterans'  preference, and                                                               
other preferences  formerly at AS 36.30.170(b).  The section also                                                               
simplifies the  qualification for  the disability  and employment                                                               
program  preferences,  eliminates  the seldom-used  employers  of                                                               
people  with disabilities  preference, and  excludes real  estate                                                               
leases from application of procurement preferences.                                                                             
CHAIR WIELECHOWSKI requested more information about Section 11.                                                                 
MR.   JONES   explained   about  the   three   disability-related                                                               
preferences,   the  employment   program,  the   disabled  bidder                                                               
preference, and  the employers of  the disabled  preference. This                                                               
section  eliminates  the last  preference  because  it is  seldom                                                               
used. It  has only been used  by two companies and  has benefited                                                               
only  two  people. The  remaining  two  preferences are  left  in                                                               
SENATOR MEYER  asked if  there is a  cap or a  limit to  how many                                                               
preferences a bidder can receive.                                                                                               
MR. JONES did not know, but thought  it might be between 12 to 15                                                               
percent.  He said  it was  typically  5 percent,  plus an  Alaska                                                               
preference, or fisheries.                                                                                                       
SENATOR MEYER  used an example  of a road construction  bid which                                                               
was  the  high   bid,  but  was  awarded  the   contract  due  to                                                               
preferences totally 15 percent.                                                                                                 
MR.  JONES said,  generally speaking,  a road  project bid  would                                                               
receive  a 5  percent bidder  preference and  a 7  percent Alaska                                                               
preference to equal a 12 percent total preference.                                                                              
SENATOR MEYER suggested  if the persons hired  were disabled, the                                                               
bid would qualify for an additional preference.                                                                                 
MR. JONES noted it would be another 7 percent.                                                                                  
SENATOR PASKVAN  asked for  more information  about what  type of                                                               
work  the two  companies  previously mentioned  did  in order  to                                                               
receive the employer of disabled preference.                                                                                    
MR.  JONES replied  that  one  firm was  a  business that  offers                                                               
office  space   leases  to  the   state  and  the  other   was  a                                                               
construction firm.  He opined  that the  preference did  not make                                                               
sense in either case.                                                                                                           
SENATOR  PASKVAN  noted, as  currently  written,  a company  that                                                               
employs a 100 percent disabled  workforce could obtain a lease by                                                               
bidding $107,000  and win the  bid over another company  that bid                                                               
MR. JONES said yes, but HB 205 changes that.                                                                                    
9:36:28 AM                                                                                                                    
REPRESENTATIVE  FAIRCLOUGH  stated  that  the  reason  there  are                                                               
preferences  in this  bill is  so that  the population  in Alaska                                                               
will benefit.   The  same is true  for disabled  preferences that                                                               
remain in  the bill in order  to motivate the hiring  of disabled                                                               
SENATOR PASKVAN  agreed with that  intent. He suggested  that the                                                               
work being  done should be  connected with the  disability, which                                                               
is currently not in place in the one preference.                                                                                
MR.  JONES agreed  that there  is no  connection. The  employment                                                               
program preference, which  used to be called  a Shelter Workshop,                                                               
provides   that  connection,   as   does   the  disabled   bidder                                                               
preference. The two preferences remaining  in the bill do provide                                                               
a connection.                                                                                                                   
9:39:00 AM                                                                                                                    
REPRESENTATIVE FAIRCLOUGH explained the  purpose of Section 11 is                                                               
also to  clarify the  "stackability" of  preferences and  how the                                                               
calculations  are done.  The complication  of having  preferences                                                               
located throughout statute was confusing.                                                                                       
SENATOR  PASKVAN followed  up  on  the example  of  a 50  percent                                                               
disabled workforce and asked if  the Department of Administration                                                               
was  taking any  action to  remedy  the problem  of the  disabled                                                               
person  not receiving  the benefit.  He questioned  who the  true                                                               
beneficiary was.                                                                                                                
MR. JONES said  part of the issue is that  the preference did not                                                               
require  any  benefit   to  the  disabled  person,   but  HB  205                                                               
eliminates that problem.                                                                                                        
SENATOR PASKVAN  agreed with  that. He asked  if there  are other                                                               
areas where  a front  corporation is used  to scam  Alaskans. The                                                               
resolution only focuses on one area.                                                                                            
9:42:48 AM                                                                                                                    
REPRESENTATIVE FAIRCLOUGH  noted that  there were other  areas in                                                               
previous bills, but they were  controversial and are not included                                                               
in this  bill. She  used the offerors  preference as  an example.                                                               
She  said this  bill hopes  to  reach consensus.  She noted  wide                                                               
support for HB 205 bill from various entities.                                                                                  
SENATOR PASKVAN  did remember that  controversial bill  two years                                                               
MR.  JONES   noted  another  important  change   in  Section  11,                                                               
subsection  (a), where  a  number  of third-party  qualifications                                                               
that would  indicate disability are  listed. The  current process                                                               
requires the disabled person to have  a doctor's note in order to                                                               
qualify for  the preference. HB  205 instead,  substitutes third-                                                               
party   qualifications,   such   as  a   Veteran   Administration                                                               
Disability  or  Social  Security records  or  state  authorities'                                                               
determination, for Vocational Rehabilitation to accept.                                                                         
CHAIR WIELECHOWSKI asked how disability is proved currently.                                                                    
MR. JONES explained that it  is a case-by-case evaluation process                                                               
by  the  Division of  Vocational  Rehabilitation  and requires  a                                                               
letter from a physician, which is cumbersome.                                                                                   
SENATOR MEYER asked  if there is some protection to  the state if                                                               
a disabled person is injured on the job.                                                                                        
MR. JONES pointed out that  the state requires standard insurance                                                               
SENATOR MEYER  gave an example  of a crime lab  construction bid,                                                               
which would be  very specialized and technical.  He questioned if                                                               
a sole source bid could be requested.                                                                                           
MR. JONES  replied that  would be possible.  He noted  that there                                                               
were stringent requirements for approval of single source bids.                                                                 
9:48:39 AM                                                                                                                    
CHAIR WIELECHOWSKI referred to page 7,  line 6, and asked if that                                                               
information was  currently the law, or  if temporary disabilities                                                               
were allowed preferences under the bill.                                                                                        
MR.  JONES  said  that  language   was  consistent  with  current                                                               
SENATOR PASKVAN asked  if there was any  provision in procurement                                                               
statutes whereby  someone is subject to  criminal prosecution for                                                               
sham entities.                                                                                                                  
MR. JONES replied that the  Alaska Product Preference does have a                                                               
penalty  for illegally  claiming a  preference. There  is also  a                                                               
requirement of good faith in procurement statutes.                                                                              
SENATOR PASKVAN pointed  out that the covenant of  good faith and                                                               
fair dealing is implied in  a contractual civil sense. He thought                                                               
he heard no as the answer to criminal prosecution.                                                                              
MR. JONES understood that fraud is  a crime and can be prosecuted                                                               
by the attorney general.                                                                                                        
SENATOR PASKVAN  suggested there  was no process  for that  so it                                                               
was meaningless.                                                                                                                
SENATOR KOOKESH asked if any shams had been prosecuted.                                                                         
MR.  JONES  replied that  several  times  false preferences  were                                                               
claimed resulting in no contract being awarded.                                                                                 
9:52:34 AM                                                                                                                    
CHAIR WIELECHOWSKI asked if the  current definition of "disabled"                                                               
means permanently,  totally disabled. He asked  if the resolution                                                               
changes that.                                                                                                                   
MR. JONES  explained that the  definition of disability  does not                                                               
change.  Currently, Vocational  Rehabilitation determines  who is                                                               
disabled  and they  feel  they  are not  qualified,  so the  bill                                                               
changes who can determine that the person is disabled.                                                                          
CHAIR  WIELECHOWSKI asked  if the  standard  is now  "permanently                                                               
disabled" according to Vocational Rehabilitation.                                                                               
MR. JONES said yes.                                                                                                             
CHAIR  WIELECHOWSKI   asked  if  it  was   a  "total  disability"                                                               
MR. JONES explained how  Vocational Rehabilitation determines the                                                               
definition of disability; the individual  has some type of bar to                                                               
employment. He said he did not know what standard was used.                                                                     
CHAIR  WIELECHOWSKI did  not want  to  set a  higher standard  of                                                               
REPRESENTATIVE  FAIRCLOUGH understood  that  the resolution  uses                                                               
the  current standard  but relieves  the  Division of  Vocational                                                               
Rehabilitation  from   determining  the  standard.   People  with                                                               
disabilities  have already  qualified  under one  of the  avenues                                                               
included  in HB  205.  The resolution  removes  a duplication  of                                                               
process. She offered to find out more about the standard used.                                                                  
CHAIR  WIELECHOWSKI   noted  he  was  looking   at  the  workers'                                                               
compensation definition  and was looking for  further information                                                               
regarding the definition of disabled.                                                                                           
9:56:32 AM                                                                                                                    
MS. PIERRE explained Section 12,  which modifies the use of local                                                               
forest products statute to grant  a seven percent cost preference                                                               
to the  qualifying bid  rather than  to the  low bid.  Section 13                                                               
clarifies in  statute which preferences are  cumulative and which                                                               
cannot be combined.  Section 14 moves the  definition for "Alaska                                                               
bidder"  to a  new section.  Sections 15  and 16  are renumbering                                                               
sections.  Section 17  repeals statute  establishing the  veteran                                                               
preference  because it  was  moved to  another  section. It  also                                                               
repeals  employment program  language and  relationship to  other                                                               
preferences.  Section   18  clarifies  the  application   of  the                                                               
Procurement  Act  to   pending  solicitations  during  transition                                                               
period.  Section  19  is  language  making  the  Procurement  Act                                                               
effective immediately.                                                                                                          
9:59:19 AM                                                                                                                    
CHAIR WIELECHOWSKI asked if any preferences are new or amended.                                                                 
MR. JONES  replied that none are  new. The bill exempts  lease of                                                               
office  space  real  estate leases  from  preferences  and  makes                                                               
changes   to   third-party   qualification   for   the   disabled                                                               
CHAIR  WIELECHOWSKI  asked  if  Section 11  (c)  is  in  existing                                                               
MR.  JONES said  it was.  A domestic  insurer does  not currently                                                               
have to  obtain an Alaska business  license, so in order  to keep                                                               
the preference  consistent for them, subsection  (c) would exempt                                                               
them from having to have  a business license; however, they would                                                               
still have  to qualify for all  the other elements of  the Alaska                                                               
bidder preference.                                                                                                              
CHAIR WIELECHOWSKI opened public testimony.                                                                                     
10:01:12 AM                                                                                                                   
SCOTT  THORSON, representing  himself, testified  in favor  of HB                                                               
205. He  spoke from  a small  business owner's  perspective about                                                               
the advantages of HB 205. It  makes doing business with the state                                                               
easier and  more efficient. He  said he appreciated  the benefits                                                               
to locally-owned businesses.                                                                                                    
CHAIR WIELECHOWSKI closed public testimony.                                                                                     
REPRESENTATIVE FAIRCLOUGH  thanked the committee for  hearing the                                                               
CHAIR WIELECHOWSKI said he would hold HB 205 in committee.                                                                      

Document Name Date/Time Subjects
SJR 20 SSTA 4/3/2012 9:00:00 AM
SJR 20
SJR20.Eielson's Strategic Importance Overview.pdf SSTA 4/3/2012 9:00:00 AM
SJR 20
SJR20.Legislative Journal.Impact of F-16 Move from Eielson.pdf SSTA 4/3/2012 9:00:00 AM
SJR 20
SJR20.Murkowski and Begich Fighting F-16 Move.pdf SSTA 4/3/2012 9:00:00 AM
SJR 20
SJR 20.pdf SSTA 4/3/2012 9:00:00 AM
SJR 20
SJR20 STA Fiscal Note.pdf SSTA 4/3/2012 9:00:00 AM
SJR 20
SJR20 Article.Interior AK Eielson AFB closure. whats really going on.pdf SSTA 4/3/2012 9:00:00 AM
SJR 20
SJR20 Sponsor Statement.pdf SSTA 4/3/2012 9:00:00 AM
SJR 20
SJR20.Eielson AFB Fact Sheet.pdf SSTA 4/3/2012 9:00:00 AM
SJR 20
01 HB 205 (1).pdf SSTA 4/3/2012 9:00:00 AM
HB 205
03 HB 205 Sectional Analysis.pdf SSTA 4/3/2012 9:00:00 AM
HB 205
02 HB 205 Sponsor Statement.pdf SSTA 4/3/2012 9:00:00 AM
HB 205
04 HB205-DOA-PUR-03-23-11.pdf SSTA 4/3/2012 9:00:00 AM
HB 205