03/15/2004 03:43 PM House L&C
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ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
March 15, 2004
3:43 p.m.
MEMBERS PRESENT
Representative Tom Anderson, Chair
Representative Carl Gatto, Vice Chair
Representative Nancy Dahlstrom
Representative Norman Rokeberg
Representative Harry Crawford
Representative David Guttenberg
MEMBERS ABSENT
Representative Bob Lynn
COMMITTEE CALENDAR
HOUSE BILL NO. 464
"An Act extending the termination date of the Board of Certified
Real Estate Appraisers."
- MOVED HB 464 OUT OF COMMITTEE
HOUSE BILL NO. 329
"An Act relating to retirement incentive programs for the public
employees' retirement system, the judicial retirement system,
and the teachers' retirement system; relating to separation
incentives for certain state employees; and providing for an
effective date."
- MOVED CSHB 329(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 529
"An Act relating to the performance of railroad track
construction work for the Department of Transportation and
Public Facilities by the Alaska Railroad Corporation."
- MOVED HB 529 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 464
SHORT TITLE: EXTEND BOARD OF REAL ESTATE APPRAISERS
SPONSOR(S): RULES BY REQUEST OF LEG BUDGET & AUDIT
02/16/04 (H) READ THE FIRST TIME - REFERRALS
02/16/04 (H) L&C
03/03/04 (H) L&C AT 3:15 PM CAPITOL 17
03/03/04 (H) Heard & Held
03/03/04 (H) MINUTE(L&C)
03/05/04 (H) L&C AT 3:15 PM CAPITOL 17
03/05/04 (H) -- Meeting Canceled --
03/15/04 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 329
SHORT TITLE: RETIREMENT INCENTIVE PROGRAM
SPONSOR(S): REPRESENTATIVE(S) MCGUIRE
05/21/03 (H) READ THE FIRST TIME - REFERRALS
05/21/03 (H) STA, L&C, FIN
01/13/04 (H) STA AT 8:00 AM CAPITOL 102
01/13/04 (H) <Bill Hearing Postponed>
01/29/04 (H) STA AT 8:00 AM CAPITOL 102
01/29/04 (H) Heard & Held
01/29/04 (H) MINUTE(STA)
02/05/04 (H) STA AT 8:00 AM CAPITOL 102
02/05/04 (H) <Bill Hearing Postponed>
02/17/04 (H) STA AT 8:00 AM CAPITOL 102
02/17/04 (H) Heard & Held
02/17/04 (H) MINUTE(STA)
02/19/04 (H) STA AT 8:00 AM CAPITOL 102
02/19/04 (H) Moved CSHB 329(STA) Out of Committee
02/19/04 (H) MINUTE(STA)
02/23/04 (H) STA RPT CS(STA) NT 2DP 5NR
02/23/04 (H) DP: GRUENBERG, LYNN; NR: SEATON,
02/23/04 (H) BERKOWITZ, HOLM, COGHILL, WEYHRAUCH
02/26/04 (H) CORRECTED CS(STA) NT RECEIVED
03/03/04 (H) L&C AT 3:15 PM CAPITOL 17
03/03/04 (H) Heard & Held
03/03/04 (H) MINUTE(L&C)
03/05/04 (H) L&C AT 3:15 PM CAPITOL 17
03/05/04 (H) -- Meeting Canceled --
03/15/04 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 529
SHORT TITLE: ALASKA RAILROAD TRACK WORK
SPONSOR(S): LABOR & COMMERCE
03/03/04 (H) READ THE FIRST TIME - REFERRALS
03/03/04 (H) L&C
03/05/04 (H) L&C AT 3:15 PM CAPITOL 17
03/05/04 (H) -- Meeting Canceled --
03/15/04 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
WENDY LINDSKOOG, Director of External Affairs
Alaska Railroad Corporation (ARRC)
Department of Community & Economic Development (DCED)
Anchorage, Alaska
POSITION STATEMENT: Explained the necessity for HB 529 and
answered questions.
MARK O'BRIEN, Chief Contracts Officer
Contracting, Procurement and Appeals
Office of the Commissioner
Department of Transportation & Public Facilities
Juneau, Alaska
POSITION STATEMENT: Voiced support for HB 529 and answered
questions.
TOM BROOKS, Chief Engineer
Alaska Railroad Corporation
Department of Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: During discussion of HB 529, answered
questions.
ACTION NARRATIVE
TAPE 04-26, SIDE A
Number 0001
CHAIR TOM ANDERSON called the House Labor and Commerce Standing
Committee meeting to order at 3:43 p.m. Representatives
Anderson, Gatto, Dahlstrom, and Rokeberg were present at the
call to order. Representatives Crawford and Guttenberg arrived
as the meeting was in progress.
HB 464-EXTEND BOARD OF REAL ESTATE APPRAISERS
CHAIR ANDERSON announced that the first order of business would
be HOUSE BILL NO. 464, "An Act extending the termination date of
the Board of Certified Real Estate Appraisers."
Number 0083
CHAIR ANDERSON withdrew the amendment he had offered on behalf
made of Rick Urion discussed at the 3/3/04 hearing since a
different amendment would be proposed at a later date in the
House Finance Committee. He noted that therefore, there were no
amendments to HB 464 before the committee.
Number 0127
REPRESENTATIVE DAHLSTROM moved to report HB 464 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, HB 464 was reported from the
House Labor and Commerce Standing Committee.
HB 329-RETIREMENT INCENTIVE PROGRAM
Number 0173
CHAIR ANDERSON announced that the next order of business would
be HOUSE BILL NO. 329, "An Act relating to retirement incentive
programs for the public employees' retirement system, the
judicial retirement system, and the teachers' retirement system;
relating to separation incentives for certain state employees;
and providing for an effective date."
CHAIR ANDERSON stated that the proposed committee substitute
(CS), Version U, was before the committee and had been adopted.
Number 0217
REPRESENTATIVE DAHLSTROM moved to report CSHB 329, Version 23-
LS1109\U, Craver, 3/3/04, out of committee with individual
recommendations and the accompanying fiscal notes. There being
no objection, CSHB 329(L&C) was reported from the House Labor
and Commerce Standing Committee.
HB 529-ALASKA RAILROAD TRACK WORK
CHAIR ANDERSON announced that the final order of business would
be HOUSE BILL NO. 529, "An Act relating to the performance of
railroad track construction work for the Department of
Transportation and Public Facilities by the Alaska Railroad
Corporation." [HB 529 was sponsored by the House Labor and
Commerce Standing Committee.]
Number 0269
WENDY LINDSKOOG, Director of External Affairs, Alaska Railroad
Corporation (ARRC), Department of Community & Economic
Development (DCED), came forward at the request of Chair
Anderson to explain HB 529, noting that Tom Brooks, chief
engineer, was on teleconference to answer questions. She said
HB 529 fixes a problem ARRC is having in terms of what happens
in relation to some Department of Transportation & Public
Facilities (DOT&PF) projects that involve track work.
Currently, no subcontractors are interested in bidding on track
work for DOT&PF projects if a crossing is involved in a road
project. The goal of the bill is to create a solution that will
allow those projects to move forward.
MS. LINDSKOOG referred to the written sponsor statement provided
by ARRC and said HB 529 amends the procurement code so DOT&PF
can work directly with ARRC on track work through a reimbursable
services agreement (RSA), similar to other utilities. If there
is a line for water or power, for example, DOT&PF can go
directly to a utility under an RSA or utility agreement and have
the utility do the work and then get reimbursed for the cost.
MS. LINDSKOOG reported that prior to 1996, ARRC could conduct
track work for DOT&PF under utility agreements. Then the
procurement code was amended, requiring DOT&PF to contract for
track work under the competitive bid process. For a time,
contractors bid for and won such work, but they now show less
interest. They don't have the specialized, expensive equipment,
and costs are high to meet the specifications required for rail
work. She remarked about the high cost of mobilizing the
specialized, large rail equipment from the Lower 48, where many
subcontractors have come from.
MS. LINDSKOOG said HB 529 tries to remedy the situation by
allowing DOT&PF the flexibility to either use the competitive
bid process or go directly to ARRC under a utility agreement to
do the work. She offered her belief that DOT&PF will realize
some cost savings from this, as well as streamlining in how a
project gets done, and said ARRC feels there is a quality issue
at stake. "That's what we do for a living," she pointed out.
"We work on track." She concluded by saying ARRC believes this
is good bill.
Number 0466
REPRESENTATIVE GUTTENBERG noted that this is an agreement
between DOT&PF and ARRC. He asked whether this allows any level
of contract work to be done or whether there is a monetary
point, under statute elsewhere, at which something must go out
to bid.
MS. LINDSKOOG answered that this leaves the discretion up to
DOT&PF. She said although this issue had been discussed with
AGC [Associated General Contractors], which has voiced support
for this bill, it was decided it would be worthwhile to get
together in a task force arrangement that includes AGC members,
DOT&PF, and ARRC to discuss parameters for when projects would
or wouldn't be put out to bid, for example. As for coming up
with a dollar figure, they'd tried initially to do that, but
couldn't figure one out. "The railroad, in particular, is not
interested in really large projects like the Whittier tunnel
was," she noted, saying it would take away so much from ARRC's
efforts in terms of needed maintenance each summer. She
concluded by predicting that there would be a determination, but
not necessarily a hard-and-fast dollar amount.
REPRESENTATIVE GUTTENBERG asked whether this proposed task force
was part of an agreement for supporting the bill.
MS. LINDSKOOG replied that she thinks it is a "gentleman's
agreement" and that other issues have been discussed with regard
to doing track work.
Number 0599
REPRESENTATIVE GATTO observed that the sponsor statement
indicates this could possibly result in lower costs. He asked
whether that also means it could possibly result in higher
costs. He pointed out that this says there could be a
competitive or noncompetitive bid process, and said it strikes
him that this has just eliminated the competitive bid process.
MS. LINDSKOOG disagreed that this eliminates the competitive bid
process, and said it's up to DOT&PF's discretion whether to go
that route. She suggested perhaps DOT&PF could address
Representative Gatto's concern from its perspective. She added
that she doesn't think it would result in higher costs for
DOT&PF, and indicated ARRC has the equipment in Alaska and won't
have to mobilize it [from the Lower 48]; has the workforce; has
the know-how; and is familiar with the industry standards, which
ARRC works with every day. She acknowledged that she couldn't
provide any guarantee.
CHAIR ANDERSON said he thinks the assumption is that it will
save money.
Number 0682
REPRESENTATIVE DAHLSTROM asked whether a particular incident
spurred this legislation.
MS. LINDSKOOG replied that she believes DOT&PF has had some
trouble finding subcontractors for this type of work in the last
couple of years. This at least provides a tool and lets DOT&PF
work directly with ARRC when the department has run into that
situation. She conveyed her understanding that one of the
companies that used to do rail work in Alaska had demobilized
its equipment, gone back to the Lower 48, and "basically told us
they are no longer interested in bidding the small jobs." Thus
no one is bidding on the work, and yet ARRC has the right
equipment and workforce, and can do it. As for ARRC's not using
the competitive bidding process, she explained, "We're not set
up to pay prevailing wages and get into the federal contracting
business. We're not set up to act as a contractor, so that's
why the railroad has not ... acted as a contractor to do the
work in the past."
Number 0758
REPRESENTATIVE ROKEBERG inquired about AGC's support of the
bill, pointing out that it isn't documented in the bill packet.
He asked whether AGC was planning to write a letter or testify.
MS. LINDSKOOG replied that she could certainly ask AGC to do
that, but didn't have a letter. She offered her understanding
that Thyes Shaub, lobbyist for AGC [of Alaska], had talked to a
few committee members, but then she said maybe that hadn't
happened yet.
CHAIR ANDERSON asked whether she'd been told [of AGC's support].
MS. LINDSKOOG answered in the affirmative.
Number 0826
MARK O'BRIEN, Chief Contracts Officer; Contracting, Procurement
and Appeals; Office of the Commissioner; Department of
Transportation & Public Facilities, began by voicing support for
HB 529. He commended Ms. Lindskoog for doing a great job of
characterizing the difficulties that DOT&PF has been having with
these projects. He also pointed out that ARRC buys a lot of its
supplies and materials, including railroad ties, in quantity,
and thus is probably able to offer better pricing than some
contractors; this will benefit the state, he suggested.
REPRESENTATIVE GUTTENBERG asked whether discussions had included
a "casual labor contract" whereby a contractor bids on
something, for any scope of work under some definition up to a
certain level. He said this is done on the North Slope and on
[military] bases, for example, so that everything doesn't have
to be bid on incrementally. For instance, it could be done for
the maintenance of track crossings up to a certain level. He
asked whether that had been part of the dialog.
MR. O'BRIEN said no. He surmised that Representative Guttenberg
was referring to what is typically called a "term contract" or
"indefinite quantity/indefinite delivery" contract whereby a
contractor is, in essence, on retainer to provide those services
on an as-needed basis. Mr. O'Brien added that he doesn't know
that it would help here because of the need for a contractor to
tie up expensive, heavy, difficult-to-mobilize equipment in
order to be able to respond on an as-needed basis. He surmised
that this might actually account for some of the reasons that
local contractors haven't been able to survive in that industry;
there isn't enough consistent, repetitive track work outside of
what ARRC does for them to stay in business.
Number 1017
REPRESENTATIVE GATTO asked what ARRC's connection is to [state]
government.
MR. O'BRIEN replied that it's a public corporation under the
[Department of Community & Economic Development].
REPRESENTATIVE GATTO surmised that ARRC is charged with making a
profit. He remarked that he'd always thought it did its own
work. Citing an example, the new interchange between the Glenn
Highway and the Parks Highway, he said the railroad is at grade
right there; the new interchange will now have the railroad pass
underneath an overpass. He asked whether that's the kind of
work ARRC will contract for [with DOT&PF] now or whether a
[private] contractor will do it.
MR. O'BRIEN replied that it would depend on the scope and extent
of the project. He explained:
In our conversations with the railroad, they're not
prepared to tie up all of their resources for a large
project. For instance, you may have seen on Bird
Flats, where they relocated the railroad further out
into the inlet, that that was a significant piece of
work. And it's a discussion we'd have to have with
the railroad as to whether they would have taken that
whole piece on themselves. ... And, as [Ms. Lindskoog]
mentioned, the Whittier tunnel is another example. ...
There are some projects they just will not take on
because they're not equipped to, in which case those
projects are large enough to mobilize equipment in,
and we can get bids on that kind of work.
REPRESENTATIVE GATTO surmised, then, that ARRC is more into
maintenance. He asked about realignment.
MR. O'BRIEN answered:
It depends on who is driving the contract. If it's
... a federal-aid highway job where the realignment is
part of our highway job, then our contractor is going
to do all of the relocation and all of the
[preparation] work, up through sub-base. And then the
railroad would simply come in and do tracks, ties, and
ballast over our realignment.
Number 1138
REPRESENTATIVE ROKEBERG related his understanding that typically
DOT&PF retains a general contractor and that other work is
[performed] by subcontractors. He asked if DOT&PF would rely on
the contractor or it would be drafted in the specifications,
depending upon whether it's a major or minor project.
MR. O'BRIEN answered, "That's correct." He explained that if
the project will include ARRC's doing the work, that portion of
the work will never see the department's bid specifications.
However, on larger projects for which ARRC can't do the job in-
house, ARRC will provide the plans and specifications, as has
been the case since 1996, to DOT&PF to place in the solicitation
to be bid by the contractor. In the aforementioned situation,
ARRC would subcontract that rail work with the contractor.
Number 1222
REPRESENTATIVE ROKEBERG inquired as to where ARRC fits in the
scheme of the contract when ARRC has a problem with the work
done on a major realignment.
MR. O'BRIEN explained that placing ARRC in charge of developing
and executing the specifications it relieves DOT&PF of all
responsibility in terms of warranting the product because [ARRC]
is responsible for it from beginning to completion. Therefore,
DOT&PF views the aforementioned as an advantage. He noted that
under the previous arrangement, if the subcontractor failed to
properly put in the ties, railroad, or alignment, then ARRC
would've turned to DOT&PF to enforce against its prime
contractor. The aforementioned would subsequently result in the
prime contractor's [going to] the subcontractor for the fix for
the failed work.
REPRESENTATIVE ROKEBERG posed a situation in which the
subcontractor under the general [contractor], under the
department's specifications, didn't perform properly on the
"road bed" underneath the tracking of the railroad. He asked if
the aforementioned would be resolved under normal dispute-
resolution methods. He surmised that there will be a separate
entity that will be involved in the general scope of work, while
DOT&PF will have an agreement directly with ARRC.
MR. O'BRIEN agreed, noting that even under the new scenario
there are several parties involved. He explained that the prime
contractor will be responsible for the project, while the
subcontractor will be responsible for up through sub-base and
ARRC will be responsible for track ties and ballast. A failure
in the sub-base could be the result of a number of things. A
design error would potentially return to ARRC as a design
failure in the sub-base. Mr. O'Brien explained, "If it was a
failure in having ... installed or ... the gradations being
handled correctly through the subcontractor, then there's a
liability on the prime [contractor] who's working for the
sub[contractor]. And it depends on why it fails, and how it
fails, and who's responsible."
REPRESENTATIVE ROKEBERG surmised that all the plans and
specifications will come from ARRC. He asked if that has been
the case in the past.
MR. O'BRIEN replied yes.
Number 1375
REPRESENTATIVE ROKEBERG asked if currently all the [DOT&PF]
contracts fall under the prevailing wage Act or the Little
Davis-Bacon Act [AS 36.05].
MR. O'BRIEN replied yes. In further response to Representative
Rokeberg, he specified that ARRC isn't subject to the same wage
requirements. If the department enters into an agreement with
ARRC as a utility, as envisioned in HB 529, ARRC would be a
government entity contracting with DOT&PF. Therefore, ARRC
wouldn't be considered a contractor under the Little Davis-Bacon
Act and thus wouldn't be required to take prevailing wages.
CHAIR ANDERSON announced that a letter from the AGC had just
been provided to the committee. He noted that the letter
relates AGC's support of HB 529.
REPRESENTATIVE ROKEBERG continued, and asked if money is being
saved by utilizing a governmental entity to do the work rather
than a private contractor.
MR. O'BRIEN said that wasn't mentioned as one of the savings.
He deferred to ARRC.
CHAIR ANDERSON related his understanding that part of the reason
for HB 529 is that no one is bidding on these projects.
MR. O'BRIEN responded, "That is, in part, correct." He informed
the committee that for one of the last contracts [DOT&PF] had on
the Bird Flats, ARRC had to step in for the subcontractor and
finish the project.
Number 1500
REPRESENTATIVE ROKEBERG asked if there is a particular type of
ballast material that couldn't be provided by a contractor other
than ARRC.
MR. O'BRIEN deferred to ARRC.
REPRESENTATIVE ROKEBERG related his understanding that the
legislation doesn't provide a provision for a break point
between a major and minor scope of work. He asked if Mr.
O'Brien wanted to make a statement with regard to the policy in
terms of the commissioner's discretion.
MR. O'BRIEN responded:
As a result of the meetings with the task force that
we've established (indisc.) Associated General
Contractors, we will be establishing guidelines for
the use of the railroad for this work, and that it is
our intent that major projects - and I can't define
that because we were unable to agree on either a
length of track segment or a dollar amount to try to
put [a] box around - but for major projects where the
railroad is just not staffed to handle those for us,
those will be put out to competitive bid.
REPRESENTATIVE ROKEBERG surmised, then, that if ARRC can't
perform the work, the department will have to go to the private
sector to find someone to do the work. Therefore, ARRC would be
in the default position to perform the work unless ARRC doesn't
want to do the work.
MR. O'BRIEN replied no, and specified that this is a negotiation
process between the department and ARRC. If DOT&PF felt that it
couldn't reach an agreement on the cost and it was of a size
that could entice a contractor to enter, then [a competitive bid
process] could be used. He further specified that
competitiveness and the size of the work could be reasons to [do
a competitive bid process].
REPRESENTATIVE ROKEBERG inquired as to Mr. Brooks' impression of
today's testimony. Specifically, he requested that Mr. Brooks
comment on ARRC's position on the prevailing wage Act and how
those labor costs compare.
[Chair Anderson passed the gavel to Vice Chair Gatto.]
Number 1646
TOM BROOKS, Chief Engineer, Alaska Railroad Corporation,
Department of Community & Economic Development said, generally
speaking, folks have covered everything accurately. In terms of
wages, Mr. Brooks said he hasn't reviewed a comparison between
ARRC's wages and the Little Davis-Bacon Act wages. However, he
noted that ARRC's wage structure through ARRC's union agreement
is quite different from AGC's wage structure through its
agreements. In the broad sense, he said, he believes [the wages
for ARRC wages and AGC] would be in the same ballpark.
REPRESENTATIVE ROKEBERG asked if, because [ARRC's employees] are
under collective bargaining agreements, [its employees] would be
exempt from the prevailing wage Act.
MR. BROOKS related that ARRC is under a collective bargaining
agreement. He further related his understanding that under
utility agreements ARRC wouldn't be subject to [Little Davis-
Bacon Act] because it would be [a contract] between state
entities. If ARRC were to be subject to the [Little Davis-Bacon
Act], ARRC would look at trying to become a contractor.
However, he viewed that as impediment because ARRC's wage
agreements are so different [from AGC's], and therefore it would
require negotiation with ARRC's union. Additionally, it's
difficult to envision ARRC, as a state-owned entity, competing
in the private sector against another railroad contractor.
REPRESENTATIVE ROKEBERG surmised that the scope of the work
seems to be the key point with regard to whether the work would
be competitively bid or not.
MR. BROOKS, in response to Representative Rokeberg, clarified
that if ARRC performs work as a utility, then ARRC wouldn't be
subject to the Little Davis-Bacon Act.
[Vice Chair Gatto returned the gavel to Chair Anderson.]
MR. BROOKS related his belief that the [determining] question is
regarding whether ARRC acts as a subcontractor to the general
contractor or whether ARRC has a utility agreement directly with
DOT&PF.
Number 1778
REPRESENTATIVE GUTTENBERG noted that it seems that one of the
issues is the availability of contractors who are able to
perform the work. Therefore, he inquired as to how much
specialty and technical knowledge would be necessary to lay the
track and set the ballast.
MR. BROOKS explained that the equipment used to lay tracks and
ballasts are the tamper and ballast regulator, both of which
cost between $300,000 and $500,000. The tamper is fairly
sophisticated controlled by a computer. He informed the
committee that ARRC has the only equipment of that type in the
state.
MR. BROOKS, in response to Representative Gatto, explained that
as the chief engineer he sets the engineering standards and
works with those within the railroad's right-of-way. In further
response to Representative Gatto, Mr. Brooks confirmed that it's
in the scope of his position to see that ARRC prospers.
REPRESENTATIVE GATTO inquired as to how the cost [of projects]
could be controlled when ARRC is the only entity available to
perform the work. He further inquired as to whether ARRC would
have the privilege of making a substantially higher bid since
there is essentially no competition.
MR. BROOKS informed the committee that the work ARRC does for
DOT&PF under a utility agreement is strictly a cost-reimbursable
arrangement. The audit rates don't allow any profit to be
included in the rate.
CHAIR ANDERSON, upon determining no one else wished to testify,
closed public testimony.
Number 1892
REPRESENTATIVE ROKEBERG moved to report HB 529 out of committee
with individual recommendations and the accompanying zero fiscal
note. There being no objection, HB 529 was reported from the
House Labor and Commerce Standing Committee.
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:15 p.m.
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