Legislature(2001 - 2002)

03/13/2001 01:33 PM TRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
             SB  83-CONSTRUCTION OF HIGHWAYS BY DOTPF                                                                       
                                                                                                                                
CHAIRMAN COWDERY,  sponsor of SB 83,  explained that force  accounts                                                            
are part of the state budget  system.  No limit has ever been placed                                                            
on the  amount  that can  be spent  using a  force account.   SB  83                                                            
limits force account  spending, after hearings have  taken place and                                                            
a finding of fact  has been established, to $250,000.   He sponsored                                                            
this bill because many  people have expressed concern that the force                                                            
account  system might  be abused and  that projects  that cost  more                                                            
than $250,000 should be let for competitive bid.                                                                                
                                                                                                                                
MR. KURT PARKAN,  Deputy Commissioner of DOTPF, said  DOTPF does not                                                            
support  SB 83.   DOTPF  believes  that  force accounts  provide  an                                                            
opportunity to take care  of problems and projects in the state that                                                            
are  suited for  that  type of  construction.   Force  account  work                                                            
amounts to 3 or  4 percent of DOTPF's total program  budget: of that                                                            
3 or 4 percent, about 50  percent goes to private firms.  DOTPF sees                                                            
force  accounts  as one  tool  in its  toolbox.   DOTPF  prefers  to                                                            
maintain flexibility  to use that mechanism in the  future and a cap                                                            
of $250,000 will restrict DOTPF's abilities.                                                                                    
                                                                                                                                
CHAIRMAN  COWDERY asked  Mr. Parkan  how DOTPF  would interpret  the                                                            
word "highways" in the title of the bill.                                                                                       
                                                                                                                                
MR. PARKAN  said DOTPF  would interpret  that to  apply to  projects                                                            
that are  funded through  the Federal Highway  Administration  (FHA)                                                            
and subject to FHA requirements.                                                                                                
                                                                                                                                
CHAIRMAN COWDERY asked if a gravel road would fall under SB 83.                                                                 
                                                                                                                                
MR. PARKAN  said in his view  gravel roads  would fit within  SB 83.                                                            
He noted  AS  19.45.001 contains  a  definition for  "highway"  that                                                            
reads:                                                                                                                          
      (9)  "highway" includes  a highway  (whether included  in                                                                 
     primary or secondary systems),  road, street, trail, walk,                                                                 
     bridge,  tunnel, drainage structure  and other similar  or                                                                 
     related structure  or facility, and right-of-way  thereof,                                                                 
     and  further includes  a ferry  system,  whether operated                                                                  
     solely  inside the  state or  to connect  with a Canadian                                                                  
     highway, and any such related facility;                                                                                    
                                                                                                                                
CHAIRMAN COWDERY  said he was aware of the statutory  definition but                                                            
wanted  to make  sure  it was  understood  that the  word  "highway"                                                            
includes just about everything.                                                                                                 
                                                                                                                                
SENATOR WARD asked what cap would be appropriate.                                                                               
                                                                                                                                
MR. PARKAN said that no cap would be appropriate.                                                                               
                                                                                                                                
SENATOR WARD asked if $2 billion would be appropriate.                                                                          
                                                                                                                                
MR. PARKAN stated that DOTPF prefers the statute as written.                                                                    
                                                                                                                                
SENATOR WARD said with  no restriction, a project could be estimated                                                            
in the billions.                                                                                                                
                                                                                                                                
MR. PARKAN repeated that  DOTPF's history of force account use shows                                                            
the amount has been 3 to  4 percent of DOTPF's total program budget.                                                            
DOTPF does  not spend  a lot of  money using  force accounts  and he                                                            
does not anticipate that it will.                                                                                               
                                                                                                                                
SENATOR WARD asked how much 3 or 4 percent equals.                                                                              
                                                                                                                                
MR. PARKAN  said  DOTPF's program  equals  about $400  million  so 4                                                            
percent would amount to about $16 million.                                                                                      
                                                                                                                                
SENATOR WARD  asked if DOTPF  would like the  amount in SB 83  to be                                                            
changed to $16 million.                                                                                                         
                                                                                                                                
MR. PARKAN stated that DOTPF does not want any cap.                                                                             
                                                                                                                                
SENATOR  WARD asked, if  the Chairman  wants a  number in the  bill,                                                            
whether $16 million is the most that DOTPF would use.                                                                           
                                                                                                                                
MR. PARKAN  said  the largest  project  DOTPF has  done using  force                                                            
accounting has cost about $4 million.                                                                                           
                                                                                                                                
SENATOR WARD asked  Mr. Parkan whether $4 million  or $16 million is                                                            
acceptable, if a cap is put in.                                                                                                 
                                                                                                                                
MR. PARKAN said he is not willing to get into hypotheticals.                                                                    
                                                                                                                                
SENATOR WARD  commented that $4 million  is the real number  and $16                                                            
million is hypothetical.                                                                                                        
                                                                                                                                
Number 1599                                                                                                                     
                                                                                                                                
SENATOR   ELTON  asked  Mr.   Parkan  to  review   a  list   of  the                                                            
opportunities that force accounting provides to DOTPF.                                                                          
                                                                                                                                
MR. PARKAN  said  a couple come  to mind.   In  rural Alaska,  where                                                            
village safe  water projects  are constructed  by the Department  of                                                            
Environmental  Conservation  (DEC), a  portion of  a project may  be                                                            
suited  for  some  federal  funding   to,  for  example,  improve  a                                                            
boardwalk or  a road.  DOTPF would  give DEC a portion of  the money                                                            
to take advantage  of combining the two projects.   A second example                                                            
would be when  DOTPF uses its own  staff to do deferred maintenance                                                             
work  in  the summer.    Over  the last  several  years,  DOTPF  has                                                            
increased its  use of federal funds for minor maintenance  projects.                                                            
                                                                                                                                
SENATOR ELTON  indicated that he has  seen opportunities  using this                                                            
kind of  an approach  to train  local workers  so that  some of  the                                                            
dollars stay in the rural community.                                                                                            
                                                                                                                                
MR. PARKAN agreed  that DOTPF is doing some training  with a federal                                                            
grant, which allows for local hire.                                                                                             
                                                                                                                                
Number 1599                                                                                                                     
                                                                                                                                
SENATOR ELTON  pointed out that none of the opportunities  listed by                                                            
DOTPF  have a  connection  to a  dollar amount,  be  they local  job                                                            
opportunities, job training, or deferred maintenance.                                                                           
                                                                                                                                
CHAIRMAN  COWDERY  asked  what  the  low and  high  limits  are  for                                                            
projects  that went  out to  competitive bid  in rural  Alaska.   He                                                            
asked whether DOTPF competitively bids $1 million projects.                                                                     
                                                                                                                                
MR. PARKAN replied  that projects that cost over $100,000  generally                                                            
go out to competitive bid.                                                                                                      
                                                                                                                                
CHAIRMAN  COWDERY explained  that  he introduced  this bill  because                                                            
almost everyone  involved in construction  supports some  limit.  He                                                            
said he understands  the St. Mary's  project will cost $3.5  million                                                            
for 7 or 8 miles of road.                                                                                                       
                                                                                                                                
MR.  PARKAN said  the  St.  Mary's project  cost  a little  over  $3                                                            
million for 5 miles of road.                                                                                                    
                                                                                                                                
CHAIRMAN  COWDERY said  he was  told that  money was  spent to  hire                                                            
people in the  community because they had a bad fishing  season.  He                                                            
wondered  who will  fish this  year if  everyone is  working on  the                                                            
road.                                                                                                                           
                                                                                                                                
MR. PARKAN stated  that fishing jobs are not DOTPF's  responsibility                                                            
so he cannot  answer that question.   He does know that there  is an                                                            
interest  in construction  jobs  by  rural Alaskans  throughout  the                                                            
state.   The St.  Mary's  project will  hire local  Alaskans;  about                                                            
$900,000 of that project will be spent on local hire.                                                                           
                                                                                                                                
CHAIRMAN COWDERY asked  if the road workers will be paid Davis Bacon                                                            
wages, as they would if paid by private contractors.                                                                            
                                                                                                                                
MR. PARKAN replied  they will be state employees and  hired as Local                                                            
71 employees.                                                                                                                   
                                                                                                                                
CHAIRMAN  COWDERY  said, as  a  former contractor  who  did  several                                                            
million dollars  worth of work in rural Alaska, he  always looked to                                                            
hire local  people.  However, private  contractors are always  stuck                                                            
with paying  Davis Bacon wages.   He asked  if DOTPF does not  think                                                            
local workers  are worth  Davis Bacon  wages and  why those  workers                                                            
will be made state employees.                                                                                                   
                                                                                                                                
MR. PARKAN said the local workers will be temporary employees.                                                                  
                                                                                                                                
SENATOR TAYLOR asked Mr.  Parkan to address the question about Davis                                                            
Bacon wages.                                                                                                                    
                                                                                                                                
MR. PARKAN said they will  be hired at the state employee wage rate,                                                            
which is  less than  the Davis Bacon  wage.  He  noted that  most of                                                            
these  projects  are in  rural Alaska  and  are contracted  out  and                                                            
subject to  Davis Bacon wages so there  are plenty of opportunities                                                             
for people  to earn Davis  Bacon wages.  The  DOTPF jobs provide  an                                                            
opportunity  for local  hire and training.   He  estimated about  17                                                            
people  will be hired  for the  St. Mary's  job.   He repeated  that                                                            
force accounts are just  one of many tools used by DOTPF and he does                                                            
not believe it is overused.                                                                                                     
                                                                                                                                
CHAIRMAN  COWDERY asked  what the cost  of the  project would  be if                                                            
Davis Bacon wages are paid for this project.                                                                                    
                                                                                                                                
MR. PARKAN said the cost  of all state workers will be approximately                                                            
$34,000  per week  while the  cost for  contracted  workers will  be                                                            
about $58,000.                                                                                                                  
                                                                                                                                
SENATOR  WILKEN commented  that he  appreciates the  need for  force                                                            
accounting  but he  has two  concerns.   He is  concerned about  the                                                            
growth of force  accounting.  From  1998 to 2000, not including  the                                                            
St. Mary's project, DOTPF  has increased the use of force accounting                                                            
by 50  percent.   If  this legislation  is  a reaction  to what  the                                                            
legislature  sees as a dangerous trend,  in some respect  SB 83 is a                                                            
defense  to limiting  that  growth while  recognizing  the need  for                                                            
local participation  for a follow up or a small concurrent  project.                                                            
Second,  Fairbanks'  contractors  complained  to  him that  the  St.                                                            
Mary's project  was ready to go out  to bid when someone  stepped in                                                            
and pulled the  $3 million off the table.  The project  is now going                                                            
to be done with state money  and state workers.  SB 83 is a reaction                                                            
to that type of activity.                                                                                                       
                                                                                                                                
SENATOR  WILKEN   referred  to  a   letter  he  received   from  the                                                            
Association  of  General  Contractors   (AGC)  that  speaks  to  the                                                            
economic  upheaval in the  communities hardest  hit by the  crash in                                                            
the fishing industry.   He said he understands and  appreciates that                                                            
problem  and that  the  state has  thrown  hundreds  of millions  of                                                            
dollars to those  communities to help them recover  from that crash.                                                            
At the same  time, DOTPF is going  to take money from the  Fairbanks                                                            
contractors  and  train  people to  get  their  commercial  drivers'                                                            
licenses  to  get through  the  summer.   He  questioned  the  logic                                                            
because those  people will be fishing next summer.   He felt that SB
83 is the Legislature's  attempt to  say, "No more St. Mary's."   He                                                            
pointed out  there was  another group of  force accounting  projects                                                            
that all cost  around $230,000. He  suggested that may be  where the                                                            
sponsor got the number.                                                                                                         
                                                                                                                                
SENATOR  WILKEN questioned  whether  the existing  force  accounting                                                            
system is in  the best interest of  Alaskans and whether  it is fair                                                            
to private  industry  that is battling  for these  projects and  has                                                            
every right  to expect an  opportunity to bid  on the projects.   He                                                            
stated that  he supports SB  83 although he  does not know  what the                                                            
cap should  be set  out.   He thought  Senator Ward  was asking  for                                                            
DOTPF's help to get that number.                                                                                                
                                                                                                                                
MR. PARKAN responded  that the total program has grown  considerably                                                            
over the  last several  years so  the total dollars  going to  force                                                            
accounts  will  continue  to  increase,  but the  total  percent  is                                                            
holding steady.  Another  component of that growth is that DOTPF has                                                            
been  spending more  money  on deferred  maintenance  for  highways.                                                            
Regarding the  discussion about training  people to get CDLs,  DOTPF                                                            
sees  that   as  an  opportunity   to  develop  a  regionally-based                                                             
workforce.  Hopefully,  those workers will be able  to go to another                                                            
project.  Contractors will  be able to hire local people and not pay                                                            
moving  costs.    Mr.  Parkan  said  he appreciates   the  sponsor's                                                            
sensitivity to the St.  Mary's project but at this time, he is in no                                                            
position to discuss caps or limits.                                                                                             
                                                                                                                                
SENATOR WILKEN  pointed out that DOTPF has gone directly  to federal                                                            
agencies on its own and  asked whether it can use federal monies for                                                            
preventive  maintenance and  repairs.  The  state could not  do that                                                            
before, now it  can.  His contractors feel that force  accounting is                                                            
okay to patch  a few miles of highway  but not to rebuild  ten miles                                                            
of highway.  That  is the balance that needs to be  reached with the                                                            
force account issue.                                                                                                            
                                                                                                                                
CHAIRMAN COWDERY asked how much money will be spent on training.                                                                
                                                                                                                                
MR.  MARK O'BRIEN,  Chief  Contracts  Officer  for DOTPF,  told  the                                                            
committee  that about  $20,000  has been  expended to  date for  CDL                                                            
training in St. Mary's.                                                                                                         
                                                                                                                                
CHAIRMAN  COWDERY  asked if  that will  be the  total  cost for  the                                                            
training.                                                                                                                       
                                                                                                                                
MR. O'BRIEN said  that will be strictly for the CDL  training, which                                                            
is the first  phase of the  training.  Training  for other  types of                                                            
heavy equipment will be given.                                                                                                  
                                                                                                                                
Number 2207                                                                                                                     
                                                                                                                                
CHAIRMAN  COWDERY said  he didn't  have a problem  with DOTPF  using                                                            
force accounting  if it has put a project out and  no one bid on it,                                                            
but when the private sector  is interested, the project should go to                                                            
bid.  He asked  if any DOTPF has put any requests  for proposals out                                                            
in rural  Alaska for projects  over $250,000  that have received  no                                                            
interest from the private sector.                                                                                               
                                                                                                                                
MR. PARKAN said DOTPF gets  several responses to every offering.  He                                                            
said, "A lot of  people are working out there and  yet we still have                                                            
capacity for more jobs, more projects."                                                                                         
                                                                                                                                
CHAIRMAN COWDERY  said when the St.  Mary's project first  surfaced,                                                            
there  was also talk  of doing  a similar  project  in Emmonak.   He                                                            
asked why the Emmonak project was dropped.                                                                                      
                                                                                                                                
MR. PARKAN  said his understanding  is that the Emmonak project  was                                                            
an airport project  and that force accounting would  not be suitable                                                            
for it.                                                                                                                         
                                                                                                                                
CHAIRMAN  COWDERY asked what  the value of  that project would  have                                                            
been.                                                                                                                           
                                                                                                                                
MR. PARKAN said it was under $10 million.                                                                                       
                                                                                                                                
SENATOR WILKEN clarified  that Mr. Parkan was correct.  According to                                                            
DOTPF's budget, force accounting  has increased 50 percent from 1998                                                            
through 2000  while DOTPF's total  budget has increased 46  percent.                                                            
                                                                                                                                
SENATOR  ELTON  encouraged   committee  members  to   consider  that                                                            
training  people in  a local  community to  do other  jobs does  not                                                            
necessarily  displace them from the  fishing industry.  The  fishing                                                            
industry lasts several  weeks at the most in many of these areas and                                                            
a lot  of the  skills  those people  learn  through this  kind of  a                                                            
process can be used to  keep an airport open in the winter.  Senator                                                            
Elton noted  that there is a lot of  enthusiasm about the  fortunate                                                            
placement   of  Congressman   Young   as  Chairman   of  the   House                                                            
Transportation  Committee and Senator Stevens on the  Appropriations                                                            
Committee  and  the dollars  coming  to Alaska  through  the  Denali                                                            
Commission.   He asked Mr. Parkan  how much growth may occur  in the                                                            
force accounting  component  of DOTPF's budget  and whether  that is                                                            
because it only works for certain projects.                                                                                     
                                                                                                                                
Tape 01-8, Side B                                                                                                               
                                                                                                                                
MR. PARKAN said DOTPF expects  to maintain the same level of about 3                                                            
to 4  percent in the  future as  the program grows.   DOTPF  will be                                                            
limited by its own staff constraints.                                                                                           
                                                                                                                                
CHAIRMAN COWDERY  asked if the project  specifications would  be the                                                            
same using a force account or a competitive bid.                                                                                
                                                                                                                                
MR. O'BRIEN  said  they would  be the  same.   DOTPF's construction                                                             
manager will manage those  projects using the same requirements as a                                                            
private sector contractor.                                                                                                      
                                                                                                                                
CHAIRMAN COWDERY  asked if there is an adequate amount  of aggregate                                                            
in St. Mary's.                                                                                                                  
                                                                                                                                
MR. O'BRIEN said he believes there is.                                                                                          
                                                                                                                                
CHAIRMAN COWDERY asked  if the equipment to be used in St. Mary's is                                                            
in place.                                                                                                                       
                                                                                                                                
MR. O'BRIEN said it is;  the City of St. Mary's is in the process of                                                            
acquiring sufficient equipment to handle this project.                                                                          
                                                                                                                                
SENATOR  TAYLOR said  he is  torn on  this legislation  because  the                                                            
Davis Bacon  legislation was a policy  call orchestrated  by special                                                            
interest  groups to make  sure they  got paid  the highest and  best                                                            
wages they could for doing state projects.  He said,                                                                            
                                                                                                                                
     Now it appears  that some of those folks have  given a buy                                                                 
     or  a pass to  this Administration  that  on some smaller                                                                  
     projects  in some areas where  he wants to seek political                                                                  
     favor they can go out and  they can do other things.  It's                                                                 
     interesting.   I don't  see or sense  any of those things                                                                  
     going  on in my district.  Apparently,  we're not favored                                                                  
     with  wanting  to  assist  local  employment  in  an  area                                                                 
     devastated  by  the loss  of the  timber industry  but  if                                                                 
     somebody has  a bad fishing run up north, all  of a sudden                                                                 
     we  thrown  out  all  the laws  and  we  can  just change                                                                  
     everything  and  every  one of  our  friends  and special                                                                  
     interest groups will go along with us to do this.                                                                          
                                                                                                                                
     I  haven't   heard  a  single  thing  come  out   of  this                                                                 
     Administration   yet   from   your  discussion   and   I'd                                                                 
     appreciate  it if I'm  wrong in my  interpretation but  is                                                                 
     appears  to  be  social  engineering   with a  tremendous                                                                  
     political  bent  thrown  in and  all of  it trying  to  be                                                                 
     justified  on, well, we're going  to get local employment                                                                  
     out of this process.                                                                                                       
                                                                                                                                
     I   haven't  heard   anything  yet   that  says  anything                                                                  
     different.   You're still going  to spend the same amount                                                                  
     of money, there's no saving  there.  You're still going to                                                                 
     build the same road, according  to exactly the same specs,                                                                 
     but  we throw  out all of  these processes  of everything                                                                  
     from Davis Bacon to lowest  bid.  It reminds me a great of                                                                 
     what   Bill  Sheffield   attempted  to   do  with  Lennie                                                                  
     Arsenault.   You know, you've  got a building for sale  or                                                                 
     rent  and, what the  heck, Lennie, I'll  just a deal  with                                                                 
     you.   I don't have  to go through  the state procurement                                                                  
     code  and I don't  have to  abide by any  of these rules.                                                                  
     I'll just do it because  it's a nice thing for me to do to                                                                 
     help out the plumbers' union  in Fairbanks.  He almost got                                                                 
     indicted  over that.   I'm trying to  understand where  we                                                                 
     draw the line  at any given point.  Do you have  to have a                                                                 
     bad fish  run before this Administration  will show  up in                                                                 
     your community  and help you out?  Or do you just  have to                                                                 
     have a  road project and be somebody  that they'd want  to                                                                 
     favor?                                                                                                                     
                                                                                                                                
     Maybe  I'm missing something  here, Mr. Chairman, but  I'm                                                                 
     having  a hard time understanding  it.  Coming from  small                                                                 
     communities,  where  we  get damn  little  in the  way  of                                                                 
     capital projects and we  have to beg DOT to ever come down                                                                 
     there and  even resurface a road, it kind of surprises  me                                                                 
     that they're falling all  over themselves to help somebody                                                                 
     else  up  north  to  make  sure  local  folks  get hired.                                                                  
     They've never once done  that with us.  They never offered                                                                 
     to come to Wrangell and  put everybody on the payroll down                                                                 
     there  and take care of everybody  in town and train  them                                                                 
     how  to operate  things,  let the  city go  buy brand  new                                                                 
     equipment   -  because  that's   what's  happening   here.                                                                 
     Apparently the city's going  to buy the equipment based on                                                                 
     this contract.   What happens  when the job's over.   Does                                                                 
     the state own that equipment or does St. Mary's?                                                                           
                                                                                                                                
MR.  PARKAN  answered  that  St. Mary's  owns  the  equipment.    He                                                            
explained that,  according to statute, projects that  are contracted                                                            
out are subject  to Davis Bacon wages.   The cost of the  St. Mary's                                                            
project was estimated  to be 15 percent higher if  it was contracted                                                            
out.  DOTPF  has done a  force account project  in Ketchikan  on the                                                            
Married Man trail.                                                                                                              
                                                                                                                                
CHAIRMAN COWDERY pointed out the committee was provided with a book                                                             
about DOTPF projects that used force accounts in the past.                                                                      
                                                                                                                                
Number 2148                                                                                                                     
                                                                                                                                
SENATOR WARD  said the Governor  did not want  to declare the  Kenai                                                            
area a disaster  area when it had a disastrous fishing  season, even                                                            
though  the North  Road is  falling  apart.   He asked  if there  is                                                            
anyway to get a force account to get that road fixed.                                                                           
                                                                                                                                
MR. PARKAN said DOTPF is  taking care of a lot of the needs in Kenai                                                            
with its programs.                                                                                                              
                                                                                                                                
SENATOR WARD  said certainly  not on the North  Road, which  has 487                                                            
potholes as of this morning.                                                                                                    
                                                                                                                                
MR.  PARKAN pointed  out  that the  state's  road needs  far  exceed                                                            
DOTPF's ability to meet those needs.                                                                                            
                                                                                                                                
SENATOR WARD said maybe force accounting is part of the problem.                                                                
                                                                                                                                
SENATOR  ELTON commented  that the force  accounting procedure  that                                                            
has been used is not illegal  - the statute gives DOTPF a great deal                                                            
of latitude  in its use.  He noted  that if force accounting  allows                                                            
DOTPF  to spend less  on a  project, that  may enable  DOTPF to  fix                                                            
those potholes in Kenai a little bit faster.                                                                                    
                                                                                                                                
CHAIRMAN  COWDERY  said,  with  that  thought,  we  could  eliminate                                                            
competitive bidding and do all projects with state equipment.                                                                   
                                                                                                                                
SENATOR TAYLOR  asked, even if force accounting were  illegal, where                                                            
he would find anyone to enforce it in this Administration.                                                                      
                                                                                                                                
CHAIRMAN COWDERY said Senator  Elton is correct in saying that DOTPF                                                            
has acted legally according  to statute, but the purpose of SB 83 is                                                            
to put  a limit  in statute.   Some  people believe  that the  force                                                            
account system is being abused.  He then took public testimony.                                                                 
                                                                                                                                
Number 2020                                                                                                                     
                                                                                                                                
MR.  BOB POE,  Executive Director  of  the Alaska  Energy  Authority                                                            
(AEA),  said he  wanted to  speak to  the suggestion  to extend  the                                                            
concept of  a cap on force  account projects  to other parts  of the                                                            
Executive Branch.                                                                                                               
                                                                                                                                
MR. POE said three issues  are at the heart of force accounting: the                                                            
economic impact  of the project on  the community; the overall  cost                                                            
of  the project;  and  sustainability  -  how do  we make  sure  the                                                            
community has  the ownership and the knowledge about  the project to                                                            
help it reach its economic  life.  The force account system has been                                                            
the most  effective  approach  AEA has  to maximize  local hire.  It                                                            
leaves  a lot more  of the economic  benefit in  the community  than                                                            
just the project.  It provides  the community members an opportunity                                                            
to earn  money and  to get skills.   It also  gives the community  a                                                            
greater sense of pride and community ownership in the project.                                                                  
                                                                                                                                
MR. POE explained  that AEA is using a slightly different  model for                                                            
its  force  accounts.    AEA  recently  awarded   six  contracts  to                                                            
construction managers.   It is in the process of reviewing proposals                                                            
for design and  construction.  The proposals were  solicited through                                                            
competitive bid and contractors  will use the private sector to do a                                                            
lot  of  things  related  to the  projects.    In  the construction                                                             
management  contracts, AEA  also asked that  the contractors  submit                                                            
proposals for  improving training,  perhaps on a regional  basis, to                                                            
develop  skills  in  those communities.    As  an  example,  Houston                                                            
Contractors has a very  real need to hire rural employees to work on                                                            
the pipeline.   They are losing Native  employees through  attrition                                                            
or retirement.   Houston  is very  interested  in developing  skills                                                            
among rural  Alaskans  and attracting  those people  to work  on the                                                            
pipeline.    Houston  has partnered  with  the  AFL-CIO  to  develop                                                            
training programs for electricians,  welders, pipe fitters, plumbers                                                            
sandblasters,   painters  and  heavy   equipment  operators,   using                                                            
apprenticeship  wages.   AEA tries  to use force  accounts to  leave                                                            
benefits in  communities and to use  the private sector to  leverage                                                            
AEA's ability  to not add a lot of  state employees.  AEA  contracts                                                            
with each city; those employees  working on a force account actually                                                            
work for the city.   Using a force account typically  does result in                                                            
a  lower wage  scale  and  reduces  transportation  and out-of-town                                                             
housing  costs.    Using  a construction   management  approach  has                                                            
lowered  AEA's  costs  because  of  onsite  quality  control.    The                                                            
construction  managers find a foreman  who then works for  the city.                                                            
The design  costs are lower  since a complete  bid package  is done.                                                            
Greater  consistency   among  projects  occurs  because   parts  and                                                            
equipment can  be standardized.  He  said that AEA would  argue that                                                            
there are real  benefits to force accounts and AEA  is using a model                                                            
that makes sense for both the private sector and communities.                                                                   
                                                                                                                                
Number 1813                                                                                                                     
                                                                                                                                
CHAIRMAN COWDERY asked Mr. Poe if AEA requires any bonding.                                                                     
                                                                                                                                
MR. POE said he did not  know the answer but he is sure that bonding                                                            
is required  on the construction management  contracts as  part of a                                                            
normal state contract.                                                                                                          
                                                                                                                                
SENATOR WARD asked if AEA  has created any state employees to do any                                                            
of the work.                                                                                                                    
                                                                                                                                
MR. POE said it has not.                                                                                                        
                                                                                                                                
MR. NICK TUCKER, a resident  from Emmonak representing himself, said                                                            
he is  opposed to  limiting any  funds that will  stop rural  Alaska                                                            
from  moving  into the  mainstream  of  the 21st  Century  and  help                                                            
economic  development  and the  education  that rural  children  are                                                            
getting  now.   Local hire  and training  help the  young people  of                                                            
Emmonak.   He  is concerned  that creating  two  classes of  people,                                                            
urban and rural,  with only urban citizens being qualified  to work,                                                            
will  be very  dangerous.   He  is a  commercial fisherman  who  was                                                            
extremely  hurt by the two  fishing disasters.   He was a member  of                                                            
the Raven Commission under  Governor Hickel.  The Emmonak region has                                                            
one of the lowest  per capita incomes in the state  and country.  It                                                            
has no timber or major  industries, only a very small scale fishery.                                                            
When that  fishery is hurt,  people are hurt.   The opportunity  for                                                            
any level of training and  education is very important to the people                                                            
in the villages.                                                                                                                
                                                                                                                                
CHAIRMAN  COWDERY commented  that  the way  that  DOTPF is  managing                                                            
force accounts is creating  a rural-urban divide because contractors                                                            
from rural  Alaska could bid on such  a project.  The fact  that the                                                            
urban contractors do not  have the opportunity to bid these projects                                                            
creates a divide.                                                                                                               
                                                                                                                                
MR. TUCKER  said  he is awed  at how  creative  Alaska Natives  are.                                                            
They need to have the same  opportunities as urban people.  He noted                                                            
people in the  village are very thankful to have year  round jobs to                                                            
put food on the table.                                                                                                          
                                                                                                                                
CHAIRMAN COWDERY  said he did a bank erosion project  in Kotlik.  He                                                            
hired eight urban people  and about 30 local people for that project                                                            
because it was cheaper.   He hired the eight urban people because he                                                            
needed qualified people to meet certification requirements.                                                                     
                                                                                                                                
MR. TUCKER  asked the  committee to  keep in mind  that putting  any                                                            
limit  on   force  accounts  will   inhibit  the  growth   of  rural                                                            
communities while  the state is working very hard  to get people off                                                            
of welfare.                                                                                                                     
                                                                                                                                
MR. WALTON  SMITH, city manager of  St. Mary's, said in response  to                                                            
the concern  that training local residents  will affect the  fishing                                                            
industry, that  there are more than 600 fish permit  holders in that                                                            
area and  each has  a helper.  Less  than 5  percent of the  fishers                                                            
will be put to work on  the construction project and St. Mary's does                                                            
not expect to have a fish opening next summer anyway.                                                                           
                                                                                                                                
CHAIRMAN  COWDERY pointed  out that  was the reason  DOTPF gave  for                                                            
using a force account to do the St. Mary's project.                                                                             
                                                                                                                                
MR. SMITH  stated the Wade  Hampton unorganized  borough has  one of                                                            
the highest  unemployment  rates;  chronic unemployment  is over  30                                                            
percent  and with a  poor fishing  industry, it is  worse.   The St.                                                            
Mary's project has allowed  39 people to get CDL training.  CDLs are                                                            
required  and there is a  special federal  exemption for Alaska  for                                                            
off road  CDLs.  This project  has provided  a great opportunity  to                                                            
meet some requirements  that were already in effect.   He noted that                                                            
regarding the  comment that these  operators will not be  paid Davis                                                            
Bacon  wages, these  operators, many  of whom  are unemployed,  will                                                            
work a 60 hour work week  with time and one-half for overtime, which                                                            
will equal  between $1400  and $1650 per week.   Contrasted  with no                                                            
income,  he does  not feel  they are  being cheated  by not  earning                                                            
Davis Bacon  wages.   The City of  St. Mary's  has done millions  of                                                            
dollars of  force account  work on water and  sewer projects  in the                                                            
last few years, including  some money from DOTPF for some road work.                                                            
That allowed more  pipe to be put in the ground and  improved public                                                            
health than  would have been  possible had  higher wages been  paid.                                                            
Using the force account system allows "more bang for the buck."                                                                 
                                                                                                                                
Regarding welfare  reform, the new federal law limits  the amount of                                                            
time a person  can stay on welfare.  If no training  and no jobs are                                                            
available,  people will go hungry.   He is concerned about  comments                                                            
that using force  accounts is a dangerous trend and  that abuses are                                                            
occurring;  he does not believe anything  illegal is going  on.  One                                                            
condition  for a  best  interest finding  is  the declaration  of  a                                                            
disaster,  which  occurred  in  St. Mary's  several  years  ago  and                                                            
continues  in effect  right  now.   The City  of St.  Mary's is  not                                                            
buying brand new  equipment for this project - it  cannot afford to.                                                            
He said regarding  the argument that  force accounts take  something                                                            
away from someone  else, Anchorage has had one of  its biggest years                                                            
ever for  contractors  with state highway  funds.   The City  of St.                                                            
Mary's project  represents  less than 3 percent  of DOTPF's  budget.                                                            
He applauds the Governor  and the Commissioner of DOTPF because they                                                            
have helped,  with the decision to  use force accounting  on the St.                                                            
Mary's project,  economic development and diversification,  which is                                                            
what  the residents  of St.  Mary's  need.   Passage of  SB 83  will                                                            
create two classes of Alaskans.                                                                                                 
                                                                                                                                
CHAIRMAN  COWDERY  asked how  many  "belly dumps"  the  City of  St.                                                            
Mary's owns.                                                                                                                    
                                                                                                                                
MR. SMITH said  it owns none, and  it does not plan to acquire  any.                                                            
St. Mary's has three 12  yard end dumps, which are not adequate, and                                                            
it will be purchasing three used off-road haulers.                                                                              
                                                                                                                                
CHAIRMAN COWDERY  asked if St. Mary's  has compactors, water  trucks                                                            
and asphalt equipment.                                                                                                          
                                                                                                                                
MR. SMITH  said that St.  Mary's has no asphalt  equipment.   It has                                                            
compactors,   a  grader,  three  CATS,   three  end-dumps   and  two                                                            
excavators.                                                                                                                     
                                                                                                                                
CHAIRMAN COWDERY  asked if a contractor  came in to do this  job and                                                            
asked to  lease equipment  from St. Mary's,  the city would  be in a                                                            
position to do that.                                                                                                            
                                                                                                                                
MR. SMITH  said right  now that  equipment is  very valuable  to St.                                                            
Mary's.    In  the  past,  contractors  have  rented  equipment  and                                                            
returned  it in poor condition.   St. Mary's  is reluctant  to lease                                                            
the  equipment now  but it  will be  in a  better  position to  make                                                            
equipment available to a contractor when its fleet is larger.                                                                   
                                                                                                                                
CHAIRMAN  COWDERY  said  when  he  rented  equipment,  there  was  a                                                            
standard for the normal wear and tear.                                                                                          
                                                                                                                                
MR.  SMITH noted  the  city has  had  people rent  a  truck to  haul                                                            
equipment from  the airport and although  the truck can carry  6,000                                                            
pounds, 22,000 pounds of freight was carried in one trip.                                                                       
                                                                                                                                
SENATOR WARD  asked Mr. Smith if the  City of St. Mary's  considered                                                            
hiring the employees instead of having them be state employees.                                                                 
                                                                                                                                
MR. SMITH said it did and  advocated for that for over two years but                                                            
DOTPF felt  that because  it would be directly  responsible  for the                                                            
money   and   directly   responsible    to   the   Federal   Highway                                                            
Administration (FHA), city  hire would not be appropriate.  The city                                                            
has  hired  an  engineer  to  provide  supervision   over  qualified                                                            
superintendents who will run the job and train workers.                                                                         
                                                                                                                                
SENATOR WARD  asked Mr. Smith if DOTPF  told him the city  could not                                                            
hire  city employees  and  if that  was because  the  cost would  be                                                            
different.                                                                                                                      
                                                                                                                                
MR. SMITH said  DOTPF felt, because  of the FHA objections  that the                                                            
money might  not be appropriately  used,  that this mechanism  would                                                            
best meet the needs of  the City of St. Mary's and FHA requirements.                                                            
                                                                                                                                
SENATOR WARD  said he does not believe  that is an FHA requirement.                                                             
He then  asked how many of  the 39 people  who have been trained  in                                                            
St. Mary's are from Anchorage.                                                                                                  
                                                                                                                                
MR. SMITH said as far as he knows, none.                                                                                        
                                                                                                                                
SENATOR WARD asked where they are from.                                                                                         
                                                                                                                                
MR.  SMITH  said as  far  upriver  as  Russian Mission  and  as  far                                                            
downriver as Kotlik.                                                                                                            
                                                                                                                                
Number 749                                                                                                                      
                                                                                                                                
SENATOR WILKEN  asked how  much the three  17 yard off road  haulers                                                            
are worth.                                                                                                                      
                                                                                                                                
MR. SMITH  said by the time  they are delivered  to St. Mary's  they                                                            
will cost under  $140,000 each.  They are used pieces  of equipment.                                                            
                                                                                                                                
SENATOR WILKEN asked if that is part of the $3 million contract.                                                                
                                                                                                                                
MR. SMITH said it is not.   The city is getting a rate that is close                                                            
to Blue Book.   In the last five years, the city has  exported gross                                                            
sales of over  $500,000 in gravel.  The city anticipates  additional                                                            
contracts and  believes the additional  work it does on gravel  will                                                            
pay for the equipment in a couple of years.                                                                                     
                                                                                                                                
SENATOR WILKEN asked if  the city is using city, not state, funds to                                                            
purchase the equipment.                                                                                                         
                                                                                                                                
MR. SMITH said that is correct.                                                                                                 
                                                                                                                                
SENATOR  WILKEN asked  if that equipment  will be  used as the  city                                                            
sees fit to make money.                                                                                                         
                                                                                                                                
MR.  SMITH  said that  is  correct  and it  is  being viewed  as  an                                                            
economic  development   project  as  it  will  help  replace   aging                                                            
equipment.  He  noted the city has sold over 30,000  tons of crushed                                                            
rock in the last three years.                                                                                                   
                                                                                                                                
CHAIRMAN  COWDERY asked  if the 5 to  8 miles of  road that  will be                                                            
built will be a state road  and whether the city's off road vehicles                                                            
will be legal to haul on it.                                                                                                    
                                                                                                                                
MR. SMITH said as far as  he knows, there should be no problem.  His                                                            
only concern has to do with coatings.                                                                                           
                                                                                                                                
CHAIRMAN COWDERY asked  if Mr. Smith thinks the state will waive the                                                            
regulations to allow the  city's vehicles to use the road regardless                                                            
of weight.                                                                                                                      
                                                                                                                                
MR. SMITH  said the state  has done so for  private contractors  for                                                            
years.                                                                                                                          
                                                                                                                                
CHAIRMAN COWDERY pointed out they haven't had a road.                                                                           
                                                                                                                                
MR. SMITH explained  that the road  has been there since  1993 -this                                                            
project will rehabilitate the road.                                                                                             
                                                                                                                                
SENATOR TAYLOR asked if the road will be paved.                                                                                 
                                                                                                                                
MR. SMITH said  they have had some  discussion about high  float and                                                            
oil emulsion that  is known as "a poor man's paving."   Once that is                                                            
done, track vehicles  will not be allowed on the road  and they will                                                            
have to transport with a low boy.                                                                                               
                                                                                                                                
SENATOR  TAYLOR asked  what amount  of return  the city anticipates                                                             
receiving off  of this contract for use of the three  17 yard Volvos                                                            
it is purchasing.                                                                                                               
                                                                                                                                
MR. SMITH said,  as with a contractor, it depends  on how many hours                                                            
the equipment  is down, how many flat tires they have,  and how fast                                                            
his mechanic is.                                                                                                                
                                                                                                                                
SENATOR TAYLOR  said at best it will  be 50 percent, at worst  maybe                                                            
25 percent.   His engineer thinks  the state has underestimated  the                                                            
length of time the project will take.                                                                                           
                                                                                                                                
SENATOR  TAYLOR asked  if,  when the  city went  to  its banker,  it                                                            
contemplated a certain  amount of return on this equipment from this                                                            
job.                                                                                                                            
                                                                                                                                
MR. SMITH said his bank  anticipates that the city should be able to                                                            
net around $150,000 per year over the next ten years.                                                                           
                                                                                                                                
SENATOR  TAYLOR  asked  if  a  major portion   of the  cost  of  the                                                            
equipment  will be amortized  back to  the city  off of both  gravel                                                            
sales and this project.                                                                                                         
                                                                                                                                
MR.  SMITH said  that is  true and  that is  why it  is an  economic                                                            
development  project.   Right now  the city  has three  12 yard  end                                                            
dumps but it could  carry the same amount with one  17 yard truck in                                                            
the same amount of time  so it should make the city more competitive                                                            
in gravel sales along the Yukon.                                                                                                
                                                                                                                                
Number 428                                                                                                                      
                                                                                                                                
SENATOR TAYLOR  asked what  the primary source  of employment  is in                                                            
St. Mary's.                                                                                                                     
                                                                                                                                
MR. SMITH said St. Mary's  has a single site school district and two                                                            
local stores.   He assumes  about 12 jobs  are in the local  stores;                                                            
those jobs pay about $5 or $6 per hour.                                                                                         
                                                                                                                                
SENATOR TAYLOR asked what the population of St. Mary's is.                                                                      
                                                                                                                                
MR. SMITH said about 500 people live in St. Mary's.                                                                             
                                                                                                                                
SENATOR TAYLOR said he  can sympathize with St. Mary's in its desire                                                            
to put more  pipe in the  ground and get  the road project  going as                                                            
there isn't  a small  community in  the state that  wants to  do the                                                            
same.  He expressed  concern that  the other communities  are always                                                            
saddled  with   Davis  Bacon  wage   requirements  and  that   small                                                            
communities are treated differently.                                                                                            
                                                                                                                                
MR. SMITH said he believes  it is because of the relative poverty in                                                            
St. Mary's.   The residents of St.  Mary's are exceedingly  poor and                                                            
the area has very limited  resources.  Something needs to be done to                                                            
train the local  people and make them more versatile.   This project                                                            
is truly a community development project.                                                                                       
                                                                                                                                
SENATOR  TAYLOR   said  he  doesn't  get  much  support   from  this                                                            
Administration  for  similar projects.   He  said he  is amazed  St.                                                            
Mary's is even getting a road repaved.                                                                                          
                                                                                                                                
Number 184                                                                                                                      
                                                                                                                                
CHAIRMAN COWDERY asked  if St. Mary's would still sell the gravel to                                                            
the low bidder if the project was done with a competitive bid.                                                                  
                                                                                                                                
MR. SMITH clarified  that he was speaking about gravel  sales in the                                                            
future, not  for this project.   He said  his understanding  is that                                                            
the majority  of the gravel for this  project will come out  of pits                                                            
that are being opened up by the state.                                                                                          
                                                                                                                                
SENATOR TAYLOR  asked where those pits would be located  and why the                                                            
state wouldn't  use the aggregate  right there since the  city has a                                                            
rock crusher.                                                                                                                   
                                                                                                                                
MR. SMITH said a majority  of the rock, which will amount to 150,000                                                            
cubic meters,  will be "pit-run" material  for the base course.   It                                                            
will not  be crushed so the  state will be  opening up at  least two                                                            
other pits between  the city and the airport at a  high point so the                                                            
trucks will go uphill empty  and downhill loaded.  If the state used                                                            
the  city  pit,  which  is  close  to  town,   the  costs  would  be                                                            
horrendous.                                                                                                                     
                                                                                                                                
CHAIRMAN  COWDERY asked  Mr. Smith  if he believes  the state  would                                                            
open  up pits  to furnish  the aggregate  necessary  if the  private                                                            
sector bid the job.                                                                                                             
                                                                                                                                
MR. SMITH  said the pits  the state will open  are not owned  by the                                                            
state - they  are owned by Chulista.   The state is negotiating  for                                                            
use of those pits.                                                                                                              
                                                                                                                                
CHAIRMAN COWDERY  thanked Mr. Smith for his testimony  and asked Mr.                                                            
Head to testify.                                                                                                                
                                                                                                                                
MR. ROGER HEAD,  RV Management Services, said that  most of the work                                                            
his firm does  is in rural Alaska,  the majority being in  the Lower                                                            
Yukon-Kuskokwim  area.  He  is very familiar  with the unemployment                                                             
situation  in that area,  which is  at about 22  percent right  now.                                                            
The  unemployment  rate in  that  area has  traditionally  been  the                                                            
highest in the state for the last ten years.                                                                                    
                                                                                                                                
TAPE 01-9, Side A                                                                                                               
                                                                                                                                
MR. HEAD  said DOTPF  has a number  of mechanisms  that prevent  the                                                            
overuse  of force  accounting.    The federal  government  has  very                                                            
stringent  policies  on  its  funds.   He  is  concerned  that  this                                                            
legislation   will   create   additional   restrictions   that   are                                                            
unnecessary and will not be in the public interest.                                                                             
                                                                                                                                
MR. JERRY  DRAKE, from Bethel,  representing  himself, said he  is a                                                            
member of the  city council.  The  city council passed a  resolution                                                            
in support  of St. Mary's  ability to operate  a force account.   In                                                            
his opinion, the  purpose of SB 83 is to prevent the  possibility of                                                            
abusing the  force account system.   Every dollar pumped  out of the                                                            
state  has checks  and balances  so  that it  won't be  abused.   He                                                            
stated  that very few  communities are  able to  do a force  account                                                            
project because  they do  not have the  infrastructure necessary  to                                                            
support the  project.  That  being the case,  force accounts  have a                                                            
built-in  limit already.   In his view, anytime  the state  allows a                                                            
community  to do a  force account  project, everybody  wins.   Every                                                            
dollar  spent in  local wages  is spent  back in  the community  and                                                            
helps that economy.                                                                                                             
                                                                                                                                
MR. STEVE WEAVER,  Alaska Native Tribal Health Consortium,  said one                                                            
of the Consortium's responsibilities  is the operation of sanitation                                                            
facilities  and construction  programs in  partnership with  the 220                                                            
federally recognized  tribes of Alaska.  Most of those  projects are                                                            
funded  through cooperative  agreements  with multiple  federal  and                                                            
state agencies.   Some of those projects include contributions  from                                                            
DOTPF for improvements,  such as boardwalks  and access roads.   The                                                            
local governments that  the Consortium works with often select force                                                            
accounts  as  a means  of  constructing  these  facilities.    Force                                                            
accounts  are  an  improved  construction  option  for  all  of  the                                                            
Consortium's  funding  agencies.    It  is one  of  several  options                                                            
available  to local  governments.   The Consortium  recommends  that                                                            
option remain available in the communities' toolboxes.                                                                          
                                                                                                                                
CHAIRMAN COWDERY  announced that no  one else wanted to testify  and                                                            
that he would like to move  SB 83 to its next committee of referral.                                                            
                                                                                                                                
SENATOR  WARD moved  SB 83  and its  accompanying  fiscal note  from                                                            
committee with individual recommendations.                                                                                      
                                                                                                                                
SENATOR ELTON  objected and said that  he sees no connection  at all                                                            
in controlling  the use of force accounting by putting  an arbitrary                                                            
cap on those accounts.                                                                                                          
                                                                                                                                
A  roll call  vote  was  taken.   The  motion  to  move SB  83  from                                                            
committee carried  with Senators Ward,  Taylor, Wilken, and  Cowdery                                                            
voting "yea," and Senator Elton voting "nay."                                                                                   

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