Legislature(2003 - 2004)

05/13/2003 04:08 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                  HOUSE FINANCE COMMITTEE                                                                                       
                        May 13, 2003                                                                                            
                          4:08 PM                                                                                               
                                                                                                                                
TAPE HFC 03 - 90, Side A                                                                                                        
TAPE HFC 03 - 90, Side B                                                                                                        
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Williams called the House  Finance Committee meeting                                                                   
to order at 4:08 PM.                                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative John Harris, Co-Chair                                                                                            
Representative Bill Williams, Co-Chair                                                                                          
Representative Kevin Meyer, Vice-Chair                                                                                          
Representative Berkowitz                                                                                                        
Representative Mike Chenault                                                                                                    
Representative Richard Foster                                                                                                   
Representative Mike Hawker                                                                                                      
Representative Kerttula                                                                                                         
Representative Carl Moses                                                                                                       
Representative Bill Stoltze                                                                                                     
Representative Jim Whitaker                                                                                                     
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
No members were absent.                                                                                                         
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Representative Lesil McGuire;  Joel Gilbertson, Commissioner,                                                                   
Department  of Health  & Social Services;  Bob Labbe,  Deputy                                                                   
Director,  Department of  Health and  Social Services;  Stacy                                                                   
Kraly,  Department  of  Law; Vern  Jones,  Chief  Procurement                                                                   
Officer,   Department   of   Administration;   Stacy   Kraly,                                                                   
Assistant Attorney General, Department  of Law; Scot Hawkins,                                                                   
Alaska Supply Chain Integrals.                                                                                                  
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
There were no teleconference participants.                                                                                      
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 216    "An Act  relating to municipal taxation  of refined                                                                   
          fuel products."                                                                                                       
                                                                                                                                
          HB 216 was postponed.                                                                                                 
                                                                                                                                
HB 244    "An   Act  relating   to  the   Code  of   Criminal                                                                   
          Procedure; relating to defenses, affirmative                                                                          
          defenses, and justifications to certain criminal                                                                      
          acts;  relating   to  rights  of   prisoners  after                                                                   
          arrest;   relating  to  discovery,   immunity  from                                                                   
          prosecution,  notice of defenses,  admissibility of                                                                   
          certain  evidence, and  right to representation  in                                                                   
          criminal   proceedings;  relating  to   sentencing,                                                                   
          probation, and discretionary  parole; amending Rule                                                                   
          16, Alaska  Rules of Criminal Procedure,  and Rules                                                                   
          404, 412,  609, and 803, Alaska Rules  of Evidence;                                                                   
          and providing for an effective date."                                                                                 
                                                                                                                                
          HB 244 was postponed.                                                                                                 
                                                                                                                                
HB 267    "An Act relating to the Alaska Railroad;                                                                              
          authorizing  the  Alaska  Railroad  Corporation  to                                                                   
          provide    financing     for    the    acquisition,                                                                   
          construction, improvement,  maintenance, equipping,                                                                   
          or operation  of facilities for  the transportation                                                                   
          of  natural gas  resources within  and outside  the                                                                   
          state  by others; authorizing  the Alaska  Railroad                                                                   
          Corporation   to  issue  bonds  to   finance  those                                                                   
          facilities; and providing for an effective date."                                                                     
                                                                                                                                
          HB 267 was postponed.                                                                                                 
                                                                                                                                
HB 313    "An Act authorizing a pilot program relating to                                                                       
          state  procurement   and  the  use   of  electronic                                                                   
          commerce  tools;  and  providing for  an  effective                                                                   
          date."                                                                                                                
                                                                                                                                
          HB 313 was REPORTED out of Committee with no                                                                          
          recommendation  and with a new zero  fiscal note by                                                                   
          the Department of Administration.                                                                                     
                                                                                                                                
SB 109    "An Act repealing the statute that sets priorities                                                                    
          for  the Department of  Health and Social  Services                                                                   
          to   apply  to   administration   of  the   medical                                                                   
          assistance  program  when  there  are  insufficient                                                                   
          funds  allocated  in  the  state  budget  for  that                                                                   
          program;  authorizing the  department to  make cost                                                                   
          containment  decisions that  may include  decisions                                                                   
          about  eligibility of  persons and availability  of                                                                   
          services under the medical  assistance program; and                                                                   
          providing for an effective date."                                                                                     
                                                                                                                                
          CSSB 109 (FIN) was REPORTED out of Committee with                                                                     
          a  "do  pass" recommendation  and  with  previously                                                                   
          published fiscal note: #1 HSS.                                                                                        
                                                                                                                                
CS SB 128(FIN) am                                                                                                               
                                                                                                                                
          "An  Act relating to  licensing common  carriers to                                                                   
          dispense alcoholic beverages;  and providing for an                                                                   
          effective date."                                                                                                      
                                                                                                                                
          CS SB 128(FIN) am was REPORTED out of Committee                                                                       
          with a "do pass" recommendation and with                                                                              
         previously published fiscal note: #2 REV.                                                                              
SENATE BILL NO. 109                                                                                                           
                                                                                                                                
     "An Act repealing  the statute that sets  priorities for                                                                   
     the Department  of Health  and Social Services  to apply                                                                   
     to  administration  of the  medical  assistance  program                                                                   
     when  there  are  insufficient funds  allocated  in  the                                                                   
     state   budget  for   that   program;  authorizing   the                                                                   
     department to  make cost containment decisions  that may                                                                   
     include  decisions  about  eligibility  of  persons  and                                                                   
     availability  of services  under the medical  assistance                                                                   
     program; and providing for an effective date."                                                                             
                                                                                                                                
 Co-Chair Harris  MOVED to  ADOPT  the Committee  Substitute,                                                                   
 Work Draft 23-GS1124\H.   There  being NO OBJECTION,  it was                                                                   
 so ordered.                                                                                                                    
                                                                                                                                
 JOEL  GILBERTSON,  COMMISSIONER,  DEPARTMENT   OF  HEALTH  &                                                                   
 SOCIAL SERVICES,  spoke in  support of  the legislation.  He                                                                   
 stressed that the legislation  is needed for  the Department                                                                   
 to move forward in the prudent adoption  of cost containment                                                                   
 measures, which  would  allow  it  to meet  the  legislative                                                                   
 mandate  for  fiscal  accountability  while  minimizing  the                                                                   
 impact  on  Medicaid  beneficiaries.   Intent  language  was                                                                   
 modified and is consistent  with the Department's  intent to                                                                   
 develop  a  preferred  drug  list  that   is  responsive  to                                                                   
 clinical evidence.  It would also  develop an  authorization                                                                   
 system,  which would  allow  providers  to  prescribe  drugs                                                                   
 outside  of the  preferred  drugs  in  each drug  class.  He                                                                   
 observed that the Committee  had held hearings on  the House                                                                   
 version of the bill.                                                                                                           
                                                                                                                                
 Co-Chair Harris asked  if the bill  had been  discussed with                                                                   
 pharmaceutical companies.  The Commissioner  did not perform                                                                   
 that duty.                                                                                                                     
                                                                                                                                
 Vice-Chair Meyer referred  to line 2 of the  intent language                                                                   
 and asked if "all" was appropriate.  Commissioner Gilbertson                                                                   
 explained that  the  section clarifies  that  the drugs  are                                                                   
 Medicaid approved  medications.  This  is a  smaller  subset                                                                   
 than "all pharmaceutical products available  for sale in the                                                                   
 United States".   The Medicaid  program or Alaska's  medical                                                                   
 systems program does not necessarily  cover a product simply                                                                   
 because it is an  approved pharmaceutical product.  It would                                                                   
 also need to be on the national negotiated  fee rate system.                                                                   
 Each drug company negotiates with the  federal government to                                                                   
 establish a  nation  drug rebate  schedule  for states  that                                                                   
 participate in  the Medicaid Program.  The Medicaid  program                                                                   
 at a state level  does not cover  a drug unless it  has been                                                                   
 approved at the federal  level.  He noted that  drugs, which                                                                   
 are specifically  excluded from  the Medicaid program,  such                                                                   
 as  abortion  drugs,  which  are  not  under  the  federally                                                                   
 approved program, cannot be prescribed.                                                                                        
                                                                                                                                
 Representative Kerttula MOVED Amendments  #1: 23-GS1124\A.2.                                                                   
 Co-Chair  Williams   OBJECTED.     Representative   Kerttula                                                                   
 explained that Amendment  1 would address the  delegation of                                                                   
 authority issue.  The  amendment would force  the Department                                                                   
 to  bring  the  list  to  the  Governor  so  that  budgetary                                                                   
 decisions could be  made. The Department  would not  be able                                                                   
 to  eliminate a  group  until  all  optional  services  were                                                                   
 eliminated.   The  Legislative  Affairs  Agency's  attorneys                                                                   
 indicated that the bill might over delegate legislative.                                                                       
                                                                                                                                
Commissioner Gilbert  stated that the Administration  did not                                                                   
support the amendment.   The amendment allows  a new priority                                                                   
list to  be set  in statute  a year  in advance. He  stressed                                                                   
that it  would be more responsive  to make the  decision when                                                                   
the budget deficit in the Medicaid  program is determined. He                                                                   
maintained that  the list should  be more ongoing to  be more                                                                   
responsive.  He  indicated that the list would  be created in                                                                   
response  to current deficits,  in order  to achieve  savings                                                                   
and minimize impacts.   He observed that the  amendment would                                                                   
require that  all optional services  be eliminated  before an                                                                   
optional eligible group could  be eliminated. He acknowledged                                                                   
that eligible  individuals should  be protected,  but pointed                                                                   
out that  the amendment would  require that wheel  chairs and                                                                   
prosthetics be  eliminated before eligibility  guidelines for                                                                   
higher earning  individuals could be affected.  He maintained                                                                   
that  this was  not feasible  and harmful  to recipients  and                                                                   
stressed that the system is flawed.                                                                                             
                                                                                                                                
Representative  Kerttula noted that  the amendment  is geared                                                                   
toward  providing   the  information  with  enough   time  to                                                                   
scrutinize   decisions   and   address  the   delegation   of                                                                   
authority.                                                                                                                      
                                                                                                                                
 STACY KRALY, ASSISTANT  ATTORNEY GENERAL, DEPARTMENT  OF LAW                                                                   
 testified  via   teleconference.     She  stated   that  the                                                                   
 Department of Law  did not feel  that the bill  would create                                                                   
 an indefensible  delegation of  authority.   She noted  that                                                                   
 the central  issue was  whether the  legislation would  pass                                                                   
 legislative  authority   on   to  an   agency  without   any                                                                   
 limitations on  the implementation  of the  authority.   She                                                                   
 noted  that there  were  a  variety  of  state  and  federal                                                                   
 limitations,  which  govern  the  Medicaid   program.    She                                                                   
 concluded that  the issues related  to the Medicaid  program                                                                   
 prevented prioritizing to address budget  shortfalls without                                                                   
 addressing  statutory   and   regulatory  limitations.   The                                                                   
 legislation  limits  the discretion  of  the  Department  in                                                                   
 regards to the implementation of cost  containment measures.                                                                   
 She  asserted  that   the  legislation  is   an  appropriate                                                                   
 delegation, providing  an agency with  a vary  specific area                                                                   
 of expertise the authority to administer a program.                                                                            
                                                                                                                                
 Representative  Kerttula asked  if  there  is any  law  that                                                                   
 would define  the  order in  which cuts  would  occur.   Ms.                                                                   
 Kraly acknowledged  that  there is  no  companion list,  but                                                                   
 pointed  out  that  there  are  limitations   regarding  the                                                                   
 coverage of  optional  services.  Individual  determinations                                                                   
 would occur,  rather  than  a  category  of services.    She                                                                   
 stated that there was  no list in federal or  state law, but                                                                   
 that there were limitations pertaining to individuals.                                                                         
                                                                                                                                
 A roll call vote was taken on the motion.                                                                                      
                                                                                                                                
 IN FAVOR:     Berkowitz, Kerttula, Moses                                                                                       
 OPPOSED:      Chenault, Hawker, Meyer, Harris, Williams                                                                        
                                                                                                                                
 Representatives Foster,  Stoltze  and  Whitaker were  absent                                                                   
 from the vote.                                                                                                                 
                                                                                                                                
 The MOTION FAILED (3-5).                                                                                                       
                                                                                                                                
 Representative  Kerttula  MOVED  Amendment   #2.    Co-Chair                                                                   
 Williams OBJECTED.                                                                                                             
                                                                                                                                
 Representative Kerttula  stated that the amendment  contains                                                                   
 a notice provision,  which would  require the  Department to                                                                   
 notify  individuals  that are  impacted  at  least  60  days                                                                   
 before coverage would be denied by written notice.                                                                             
                                                                                                                                
 Commissioner Gilbertson agreed  that there should  be notice                                                                   
 provisions, but pointed  out that  there are already  a host                                                                   
 of notice requirements under the Medicaid  program. There is                                                                   
 a minimum 30 days public notice period  and a minimum 30-day                                                                   
 waiting period  before the regulation  change can  occur. He                                                                   
 estimated that it already takes 90 to  120 days for a change                                                                   
 [in regulations]  to occur.   He stated  that under  federal                                                                   
 law, participants  have to receive  a 10  ten day  notice on                                                                   
 adverse actions  if service is  denied, terminated,  reduced                                                                   
 or  required.  He  concluded  that  federal  law  and  state                                                                   
 regulations addressed notice for changes in service.                                                                           
                                                                                                                                
 Representative Berkowitz clarified  that a 10-day  notice is                                                                   
 required [for the denial of service] and  asked if there was                                                                   
 a reason not to give more notice.                                                                                              
                                                                                                                                
 BOB LABBE, DEPUTY DIRECTOR, DEPARTMENT  OF HEALTH AND SOCIAL                                                                   
 SERVICES, pointed out  that the participants  would probably                                                                   
 receive  two  notices.  Individual  case  actions  typically                                                                   
 required  a  ten-day  notice,  but  broad  category  changes                                                                   
 generally received a longer notice.   He reiterated the ten-                                                                   
 day minimum under federal law.                                                                                                 
                                                                                                                                
 Representative Berkowitz  asserted that,  in a rural  state,                                                                   
 ten days  was not adequate.  He stressed  that people  might                                                                   
 not be contacted in  time to make alternative  arrangements.                                                                   
 He proposed that the state of Alaska  be more courteous than                                                                   
 the requirements under federal law                                                                                             
                                                                                                                                
 Commissioner  Gilbertson  responded  that  there  are  ample                                                                   
 notice   requirements   under   federal    law   and   state                                                                   
 regulations. The regulation  process would take  longer than                                                                   
 sixty days.    He  pointed  out that  larger  changes  would                                                                   
 require longer notice.                                                                                                         
                                                                                                                                
 Representative Berkowitz asked the time  frame for notifying                                                                   
 impacted individuals.    Mr.  Labbe stated  that  individual                                                                   
 cases were  given  a 10-day  notice.  General changes  would                                                                   
 have a minimum thirty-day notice.   He added that regulation                                                                   
 changes would  be  necessary. He  speculated  that a  longer                                                                   
 process might require  [the Department to  institute] larger                                                                   
 reductions  due  to  delay  [in  savings]   and  a  lack  of                                                                   
 efficiency.                                                                                                                    
                                                                                                                                
 Representative  Kerttula  pointed  out   that  a  regulation                                                                   
 notice was very different  than a notice to  the participant                                                                   
 that they are  losing a  benefit.   She observed that  there                                                                   
 was little information  about the nature of  notice received                                                                   
 by individuals.   She  suggested that  a written notice  was                                                                   
 easy enough, and maintained that a written  notice would not                                                                   
 be onerous.                                                                                                                    
                                                                                                                                
 A roll call vote was taken on the motion.                                                                                      
                                                                                                                                
 IN FAVOR:     Berkowitz, Kerttula, Moses                                                                                       
 OPPOSED:      Foster, Stoltze, Hawker, Meyer, Harris,                                                                          
               Williams                                                                                                         
                                                                                                                                
 Representatives Chenault and  Whitaker were absent  from the                                                                   
 vote.                                                                                                                          
                                                                                                                                
 The MOTION FAILED (3-6).                                                                                                       
                                                                                                                                
 Co-Chair  Harris MOVED  to  report  CSSB  109 (FIN)  out  of                                                                   
 Committee    with    the    accompanying     fiscal    note.                                                                   
 Representative Kerttula OBJECTED.                                                                                              
                                                                                                                                
 A roll call vote was taken on the motion.                                                                                      
                                                                                                                                
 IN FAVOR:     Berkowitz, Kerttula, Moses                                                                                       
 OPPOSED:      Foster, Stoltze, Hawker, Meyer, Harris,                                                                          
               Williams                                                                                                         
                                                                                                                                
 Representatives Chenault and  Whitaker were absent  from the                                                                   
 vote.                                                                                                                          
                                                                                                                                
 CSSB 109  (FIN) was  REPORTED out  of Committee  with a  "do                                                                   
 pass" recommendation  and with  previously published  fiscal                                                                   
 note: #1 HSS.                                                                                                                  
HOUSE BILL NO. 313                                                                                                            
                                                                                                                                
     "An Act authorizing a pilot program relating to state                                                                      
     procurement and the use of electronic commerce tools;                                                                      
     and providing for an effective date."                                                                                      
                                                                                                                                
REPRESENTATIVE LESIL MCGUIRE,  SPONSOR spoke in support of HB
313.   The legislation  would look at  the state  of Alaska's                                                                   
procurement  process.   This  is  the  overhead   portion  of                                                                   
government:   buy   and  selling.   The   legislation   would                                                                   
streamline procurement through e-commerce tools.                                                                                
                                                                                                                                
Vice-Chair Meyer asked the potential  savings. Representative                                                                   
McGuire  estimated that  there would  be between  $5 and  $20                                                                   
million dollars  in overall savings. The pilot  program would                                                                   
start with  two distinct departments  and two  distinct areas                                                                   
to  see  if the  savings  can  be proved  over  a  three-year                                                                   
period.  She felt  that the savings  would  be closer to  $20                                                                   
million.                                                                                                                        
                                                                                                                                
In   response   to   a   question    by   Vice-Chair   Meyer,                                                                   
Representative  McGuire  stated  that  there  is  an  Alaskan                                                                   
company, which is very advanced  in procurement, particularly                                                                   
in the North Slope.  She noted a Alaskan preference.                                                                            
                                                                                                                                
Vice-Chair  Meyer expressed  his  support of  the  bill.   He                                                                   
asked  if  the  bill  would  follow  Alaskan  guidelines  for                                                                   
hiring, for example in hiring  veterans, etc.  Representative                                                                   
McGuire  responded  that  the  selection of  the  out  source                                                                   
company would  be implemented under the  existing procurement                                                                   
code. There  is an exception for  the pilot program  to allow                                                                   
the  commissioner of  Administration as  much flexibility  as                                                                   
possible  using  the principle  set  out in  the  procurement                                                                   
code.   She  noted that  British Petroleum  (BP) has  similar                                                                   
procurement policies. An on-line  action was created [for BP]                                                                   
with their procurement policies.                                                                                                
                                                                                                                                
Representative Hawker asked whether  the sponsor would object                                                                   
to a  friendly amendment  requiring an  annual report  by the                                                                   
vendor.  Representative  McGuire stated  that  she would  not                                                                   
object.                                                                                                                         
                                                                                                                                
SCOT HAWKINS,  ALASKA SUPPLY  CHAIN INTEGRALS responded  that                                                                   
the intention is  to prove the concept and be  able to expand                                                                   
it and demonstrate  its value. A report would  be inherent in                                                                   
the intent.                                                                                                                     
                                                                                                                                
Representative  Kerttula noted that  the procurement  did not                                                                   
actually fall  under the Alaskan  procurement code  and asked                                                                   
why not.   Representative McGuire noted discussions  with the                                                                   
Administration  about ways to  provide the most  flexibility,                                                                   
including purchase orders.                                                                                                      
                                                                                                                                
 VERN  JONESS,  CHIEF  PROCUREMENT  OFFICER,   DEPARTMENT  OF                                                                   
 ADMINSTRATION clarified that  the selection of  the original                                                                   
 contractor, that would  run the  pilot, would be  subject to                                                                   
 the procurement code.   The contractors  in the  pilot would                                                                   
 not be subject to the code.                                                                                                    
                                                                                                                                
 Representative Kerttula  asked  why the  contractors in  the                                                                   
 pilot would not fall under the code.   Mr. Jones stated that                                                                   
 there was a recognition that the state  procurement code was                                                                   
 not  designed  with   efficiency  in  mind.  Parts   of  the                                                                   
 procurement code are  inefficient, entailing  timelines that                                                                   
 the private sector could not follow.   He speculate that the                                                                   
 intent  of   the  bill   was  to  take   advantage   of  the                                                                   
 efficiencies of the private sector and  technologies and not                                                                   
 to saddle the pilot with the inefficient  and time consuming                                                                   
 process of government.                                                                                                         
                                                                                                                                
 Representative  McGuire emphasized  that  e-commerce  allows                                                                   
 the  financial  authority  to  commit  and  revise  purchase                                                                   
 orders as an  agent of  the state.  She maintained  that for                                                                   
 the pilot  program to  succeed,  it must  have the  required                                                                   
 flexibility. She  stated that the  challenge was  to rewrite                                                                   
 the entire procurement code  or to allow a pilot  program in                                                                   
 a small  area to  go  forward to  see  if it  can work.  She                                                                   
 suggested  that  this  may  precipitate   a  change  to  the                                                                   
 procurement code.                                                                                                              
                                                                                                                                
 Representative Chenault  observed that  the fiscal  note was                                                                   
 zero and asked about the potential cost.                                                                                       
                                                                                                                                
 Mr. Jones noted that the note was zero  since it involves an                                                                   
 element of  privatization.  The  idea  is that  the  private                                                                   
 sector is able to  use cheaper labor, run a  cheaper process                                                                   
 and obtain  cheaper goods and  services.   He noted  that if                                                                   
 the pilot  did  not  result in  a  savings,  it would  be  a                                                                   
 failure.                                                                                                                       
                                                                                                                                
 Representative Chenault maintained that  there would be some                                                                   
 cost involved in  putting on the  program and asked  to know                                                                   
 what it  is.  Mr.  Jones noted  that there  are a  number of                                                                   
 steps before the pilot can be implemented.  The mix of goods                                                                   
 and services purchased by various state  agencies would have                                                                   
 to be studied, along with current bids  to select a study. A                                                                   
 feasibility study  would  have to  be  conducted, per  union                                                                   
 bargaining agreements.   He noted that that  the feasibility                                                                   
 study would enlighten the potential costs.   He acknowledged                                                                   
 that there would be a fee involved for  the procurement, but                                                                   
 stated that  unless  the  program  generated a  savings,  it                                                                   
 would not be undertaken.   Representative  Chenault stressed                                                                   
 that it would  cost something to  initiate a  pilot program,                                                                   
 whether or not the program was successful.                                                                                     
                                                                                                                                
 Mr. Hawkins  noted  experience in  the  private sector,  and                                                                   
 observed  that   companies  generally   worked  within   the                                                                   
 existing budget  for  a  department and  demonstrated  their                                                                   
 ability to reduce the  budget for that activity.   Regarding                                                                   
 start  up costs,  he  stated,  that  these  costs  would  be                                                                   
 integrated within  the department's  budget.  He  maintained                                                                   
 that the funding  was found  within the  savings.   He noted                                                                   
 that if savings were  not realized, then the  business would                                                                   
 not  be  undertaken.     In  response   to  a   question  by                                                                   
 Representative  Chenault,  Mr.  Hawkins  confirmed  that  if                                                                   
 savings are not demonstrated, costs would not incurred.                                                                        
                                                                                                                                
 Vice-Chair Meyer observed that the intent  is to use Alaskan                                                                   
 services where possible. Mr. Hawkins agreed.                                                                                   
                                                                                                                                
 Representative   Berkowitz   spoke   in   support   of   the                                                                   
 legislation. He observed  that the two departments  in which                                                                   
 the pilot program would occur could be  quite large, such as                                                                   
 the Department  of Transportation  and Public Facilities  or                                                                   
 the Department of Health  and Social Services.  He suggested                                                                   
 that  if  it  were  a  pilot  program   it  would  be  a  C5                                                                   
 [procurement].  Representative  McGuire responded  that  the                                                                   
 chief  procurement  officer  is  working  closely  with  the                                                                   
 commissioner  of  Administration.  They  would  examine  the                                                                   
 potential  costs  and  determine  where   savings  would  be                                                                   
 realized.   She stated that  the intent  was to implement  a                                                                   
 mechanism for a feasibility study.                                                                                             
                                                                                                                                
 Mr. Jones stressed  that there had  not been any  studies to                                                                   
 target any  agencies and  noted  that a  division or  office                                                                   
 could  be  targeted.   Organizational  structures   must  be                                                                   
 analyzed. He expressed  the hope that a  self-contained unit                                                                   
 could be found to use as a test case.                                                                                          
                                                                                                                                
 TAPE HFC 03 - 90, Side B                                                                                                     
                                                                                                                                
 Representative Berkowitz asked  if it was possible  to model                                                                   
 the program.    He  asked if  one  could simply  complete  a                                                                   
 comparison for  the entire  state  procurement, rather  than                                                                   
 for two departments.  Mr. Jones stated  that the idea was to                                                                   
 examine smaller portions of the administration,  since there                                                                   
 were great  complexities  and a  wide variety  of goods  and                                                                   
 services.   He stated that  a test  case was desired  before                                                                   
 taking broad action.  He pointed out  that private firms had                                                                   
 lower labor costs, and  life cycle costs.  He  stressed that                                                                   
 while a model would reflect potential  benefit, it might not                                                                   
 reflect a complete picture.                                                                                                    
                                                                                                                                
 Representative Berkowitz  referred to the  procurement code,                                                                   
 and pointed out that there were reasons  that the government                                                                   
 did not operate  in the  manner of the  private sector.   He                                                                   
 expressed  concern  with  deviations  from  the  procurement                                                                   
 code, and questioned  if policy problems were  considered in                                                                   
 abandoning the code.  Mr. Jones responded  that this was the                                                                   
 reason for  a  pilot  program,  to prevent  widespread  out-                                                                   
 sourcing. Policies  and procedures  for contractors  need to                                                                   
 be  developed;  these may  be  more  than  that  needed  for                                                                   
 private sector clients. There  is a lot of due  process. The                                                                   
 intent is not  to end up with  a private sector  contractor,                                                                   
 which is operating in the same manner as the state.                                                                            
                                                                                                                                
 Representative McGuire reiterated the  commitment to Alaskan                                                                   
 business.   She  recounted her  experience  with the  Alaska                                                                   
 Supply   Company,   and   pointed   out   that   procurement                                                                   
 requirements could  be  programmed into  the  process.   She                                                                   
 emphasized that  parts of the  state procurement  code would                                                                   
 remain unchanged and could be programmed in.                                                                                   
                                                                                                                                
 Mr. Hawkins  explained that  the  procurement code  requires                                                                   
 three quotes. He noted that the company  could set up a mini                                                                   
 marketplace of  providers to create  a "smart  catalogue" of                                                                   
 suppliers, chosen  to  compete  on a  regular  basis.   When                                                                   
 procuring, the  electronic  system provides  the best  price                                                                   
 from those  providers  on any  given  day.   The  electronic                                                                   
 process  would replace  the  need  to  get three  quotes  by                                                                   
 telephone or  mail. He  pointed out  that the  code did  not                                                                   
 allow the same process  to realize these savings.   He noted                                                                   
 that his  company would  not advocate  choosing too  large a                                                                   
 pilot  program.    It   is  important  that  the   pilot  be                                                                   
 successful and  not  overreach. The  challenge  is to  right                                                                   
 size the program.                                                                                                              
                                                                                                                                
 Representative Stoltze  referred to the current  procurement                                                                   
 code  and the  number  of  changes  to  it  that  have  been                                                                   
 necessary.    He   noted  the  advantage   of  technological                                                                   
 advances.                                                                                                                      
                                                                                                                                
 Representative  Berkowitz  asked if  any  consideration  was                                                                   
 given to allowing  state procurement  offices to  compete in                                                                   
 the bidding  process.  Mr.  Jones stated  that this  was not                                                                   
 the intent  of  the  bill, but  the  process did  allow  for                                                                   
 counter proposals as part of the union bargaining process.                                                                     
                                                                                                                                
 Representative   Kerttula   expressed   concern   with   the                                                                   
 potential amount  to be expended  without any  sidebars. She                                                                   
 asked how  preferences  of  the  procurement code  might  be                                                                   
 maintained.                                                                                                                    
                                                                                                                                
 Mr.  Jones  speculated  that  any  policies  and  procedures                                                                   
 developed  would  be contained  in  a  contract,  which  the                                                                   
 contractor would be required  to adhere to.  The presumption                                                                   
 of the bill is that the private sector  can achieve savings,                                                                   
 if it is  not encumbered with  governmental procedures.   He                                                                   
 acknowledged that there were many preferences  that would be                                                                   
 difficult  to administer.    He  did  not  envision  writing                                                                   
 requirements substantially  equivalent to  the state  system                                                                   
 into the contract.                                                                                                             
                                                                                                                                
 Representative Moses expressed concern  that legislation was                                                                   
 required  to implement  the  pilot  program.  Representative                                                                   
 McGuire noted that  in discussions with  the Administration,                                                                   
 it was decided  that this  was the  proper avenue,  since it                                                                   
 proposed potentially large  policy changes.  She  felt that,                                                                   
 in a  few years,  they  would be  able  to view  preferences                                                                   
 contained in the contract.                                                                                                     
                                                                                                                                
 Representative Berkowitz  MOVED to  AMEND Page  2 line  8 of                                                                   
 the bill to delete "with a person from the private sector".                                                                    
                                                                                                                                
 Vice-Chair Meyer  OBJECTED. Representative McGuire  observed                                                                   
 that [using the  private sector] is  the would of  the bill.                                                                   
 She clarified that partnerships would be included.                                                                             
                                                                                                                                
 Representative Berkowitz  explained that the  private sector                                                                   
 would not be precluded,  but that it would allow  cities and                                                                   
 other  entities   to   participate.   Representative   Moses                                                                   
 suggested  the  use  of  "entity".   Representative  McGuire                                                                   
 expressed opposition to the amendment.                                                                                         
                                                                                                                                
 Co-Chair Williams OBJECTED to the amendment.                                                                                   
                                                                                                                                
 A roll call vote was taken on the motion.                                                                                      
                                                                                                                                
 IN FAVOR:     Berkowitz, Kerttula                                                                                              
 OPPOSED:      Chenault, Foster, Meyer, Moses, Stoltze,                                                                         
               Whitaker, Williams                                                                                               
                                                                                                                                
 Co-Chair Harris was absent from the vote.                                                                                      
                                                                                                                                
 The MOTION FAILED (2-8).                                                                                                       
                                                                                                                                
 Representative  Foster  MOVED  to  report   HB  313  out  of                                                                   
 Committee with the accompanying fiscal note NO OBJECTIONS                                                                      
                                                                                                                                
HB 313 was REPORTED out of Committee with no recommendation                                                                     
and with a new zero fiscal note by the Department of                                                                            
Administration.                                                                                                                 
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 5:19 PM                                                                                            
                                                                                                                                
                                                                                                                                

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