Legislature(1995 - 1996)
04/03/1995 03:10 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE LABOR & COMMERCE STANDING COMMITTEE
April 3, 1995
3:10 p.m.
MEMBERS PRESENT
Representative Pete Kott, Chairman
Representative Kim Elton
Representative Jerry Sanders
Representative Brian Porter
MEMBERS ABSENT
Representative Norman Rokeberg, Vice Chairman
Representative Beverly Masek
COMMITTEE CALENDAR
*HB 288: "An Act relating to procurement preferences for
corporations and partnerships owned by persons with
disabilities."
HEARD AND HELD
HB 224: "An Act relating to the state plumbing code."
RESCINDED PREVIOUS COMMITTEE ACTION
(* First public hearing)
WITNESS REGISTER
REPRESENTATIVE JEANNETTE JAMES
Alaska State Legislature
State Capitol, Room 102
Juneau, AK 99801-1182
Telephone: (907) 465-3743
POSITION STATEMENT: Prime sponsor HB 288
DUGAN PETTY, Director
Division of General Services
Department of Administration
P.O. Box 110210
Juneau, AK 99811-0210
Telephone: (907) 465-2250
POSITION STATEMENT: Testified on HB 288
STAN RIDGEWAY, Deputy Director
Division of Vocational Rehabilitation
Department of Education
801 West Tenth Street, Suite 200
Juneau, AK 99801
Telephone: (907) 465-6932
POSITION STATEMENT: Testified on HB 288
PREVIOUS ACTION
BILL: HB 288
SHORT TITLE: PROCUREMENT PREFERENCE/DISABLED PERSONS
SPONSOR(S): REPRESENTATIVE(S) JAMES
JRN-DATE JRN-PG ACTION
03/29/95 979 (H) READ THE FIRST TIME - REFERRAL(S)
03/29/95 979 (H) LABOR & COMMERCE
04/03/95 (H) L&C AT 03:00 PM CAPITOL 17
BILL: HB 224
SHORT TITLE: STATE PLUMBING CODE
SPONSOR(S): REPRESENTATIVE(S) KOHRING, Green, Rokeberg
JRN-DATE JRN-PG ACTION
03/03/95 564 (H) READ THE FIRST TIME - REFERRAL(S)
03/03/95 564 (H) LABOR & COMMERCE
03/22/95 (H) L&C AT 03:00 PM CAPITOL 17
03/22/95 (H) MINUTE(L&C)
03/27/95 (H) L&C AT 05:15 PM CAPITOL 17
03/27/95 (H) MINUTE(L&C)
03/29/95 (H) L&C AT 03:00 PM CAPITOL 17
03/29/95 (H) MINUTE(L&C)
ACTION NARRATIVE
TAPE 95-32, SIDE A,
Number 000
The House Labor and Commerce Committee meeting was called to order
by Chairman Pete Kott at 3:10 p.m. Members present at the call to
order were Representatives Kott, Elton, Sanders and Porter.
Members absent were Representatives Masek and Rokeberg.
HB 288 - PROCUREMENT PREFERENCE/DISABLED PERSONS
CHAIRMAN PETE KOTT announced that a quorum was present. The first
and only order of business would be HB 288.
Number 022
REPRESENTATIVE JEANNETTE JAMES, ALASKA STATE LEGISLATURE, PRIME
SPONSOR OF HB 288, read the following sponsor statement: "This
bill will allow 100 percent disabled owned corporations and
partnerships to be eligible for disabled bidder preferences.
"Current law allows disabled owned sole proprietorships to take
advantage of the disabled bidder preference, the exclusion appears
to me to have been a drafting oversight.
Equal protection under the law requires all like situations to be
treated fairly and equally. Current law discriminates against
disabled owned corporations and partnerships.
"The intent of this legislation is to create fairness on this one
issue. I understand that there may be other problems with the
current legislation, it is not my intent to address other
controversial portions of this law and its enforcement.
"I wish to keep this bill focused and on this one narrow point."
REPRESENTATIVE JAMES told the committee she has had conversations
with the Department of Education (DOE) and also the drafting
attorney to make changes so that HB 288's intent would be to allow
the disabled persons to have business entities other than sole
proprietorships. If disabled persons want to have corporations or
partnerships with other disabled persons, they should not be
disqualified or forced to be sole proprietorships. She is only
addressing the ownership of the business. This was brought to her
attention by three disabled people in the Fairbanks area. They are
severely disabled but mentally alert and capable of managing their
own business. This would not allow a disabled person to own the
business on paper only. The owner of the company should exercise
leadership and management functions in the business. The disabled
person would not be just the recipient or the beneficiary. She
commented on cases where people have ongoing businesses and
transfer the businesses into their wife's name so they will qualify
for "A Women in Business" preference.
REPRESENTATIVE JAMES said this would allow people to decide what
type of entity they want for their business. If there is a
preference for any disabled, then it ought to include all disabled
so as to prevent discrimination.
Number 096
CHAIRMAN KOTT asked if she knew of any cases that had challenged
the provision on Equal Protection grounds.
Number 104
REPRESENTATIVE JAMES responded no. Legally, when partnerships,
corporations and sole proprietorships are talked about,
corporations are not persons. If it is a person, it is its own
person. Therefore, the line must be crossed (indisc.) in regards
to a corporation. If three disabled persons want to form a
corporation, as opposed to three separate sole proprietorships,
they should be entitled to benefits given to disabled persons
regarding bidder preference.
Number 318
REPRESENTATIVE SANDERS asked if HB 288 applied to state procurement
only.
REPRESENTATIVE JAMES replied yes.
REPRESENTATIVE SANDERS asked if the preference would apply only to
Alaska residents, or was it for anyone holding a business license
in the state.
REPRESENTATIVE JAMES wasn't familiar with the rest of the statute.
This is only part of that statute, but she expected the statute was
only for Alaskan residents.
REPRESENTATIVE SANDERS said that with the 10 percent bidder
contracts, many of the large contracts get taken by a half of
percent. For instance, he owns a printing company. If you get a
$40,000 bid for state envelopes, you could have ten people bidding
within a half a percent. If the company that is awarded that
contract brokers those envelopes to some other state, how would
that affect HB 288?
REPRESENTATIVE JAMES replied that she wasn't active in bidding.
However, the statute was set up to allow people with disabilities
to set up their own businesses because they weren't able to be an
employee somewhere else. She asked, "If you were disabled and
bidding, would you like to have a 10 percent bidder preference?"
REPRESENTATIVE KIM ELTON asked if the 10 percent was additional to
the 5 percent Alaska bidder preference.
REPRESENTATIVE JAMES said, "The subsection does not give a bidder
who would otherwise qualify for a preference, under the subsection,
a preference over another bidder who would otherwise qualify for a
preference under the subsection." She did not feel the preferences
could be stacked.
REPRESENTATIVE ELTON asked how many sole proprietorships have taken
advantage of the 10 percent bidder preference in the past and how
big the field now would become.
REPRESENTATIVE JAMES believed the field to be eight. She
reiterated that there may be problems with other parts of the
statute. She is not intending to fix those problems with HB 288,
only to let disabled people qualify as corporations. The three men
who are disabled but mentally fit have the ability to run their own
business. She had asked the drafting attorney to require that in
order to qualify, the vocational rehabilitation people would need
to have severe physical or mental disabilities which limit their
functional capacities. This includes those who are seriously
incapacitated but still have the mental ability to manage a
business.
Number 343
DUGAN PETTY, DIRECTOR, DIVISION OF GENERAL SERVICES, DEPARTMENT OF
ADMINISTRATION (DOA), testified that the department, at this time,
was neutral on HB 288. HB 288 extends the 10 percent bidder
preference to corporations and partnerships where the owners are
disabled. In that sense, it treats all business entities equally.
In order to qualify for this preference, you must qualify as an
Alaskan bidder. HB 288 doesn't carry a fiscal note.
MR. PETTY explained two concerns exist regardless of whether or not
HB 288 is adopted. The first is that while this enhances the
competitive opportunities of disabled bidders, it doesn't add
additional opportunities for disabled employees. The second
concern is the issue of how to ensure that the bidder receiving a
disabled bidder preference doesn't broker the bid. With respect to
the matter of preference stacking, he stated that subsection (e),
the Disabled Bidder Preference, combines with other preferences.
In reference to Representative Sanders question regarding
subcontracting, he said this was permissible under the law.
Number 318
REPRESENTATIVE SANDERS asked if Moore Business Forms were eligible
for the Alaska bidders preference.
MR. PETTY replied that it holds an Alaskan Business License, it has
submitted bids for goods of service, its name appears under an
Alaska Business License, its had a place of business in the state
for over six months, and it is incorporated.
REPRESENTATIVE SANDERS pointed out that Moore Business Forms was a
multi-national company out of Canada. With the 10 percent bidder
preference, you run the risk of larger corporations bidding the
price up 10 percent higher, and then taking the work to Moore
Business Forms and having the work done there. The result being
that the state would be paying 10 percent more.
Number 343
MR. PETTY replied any bidder preferences the state has affects the
outcome of the bid. Preferences increase the cost to the state.
Number 344
CHAIRMAN KOTT asked if you had to be a resident of the state in
order to hold an Alaska Business License.
Number 349
MR. PETTY replied AS 36.31.70 (b) sets out a number of criteria,
none of which includes residency. However, it requires the firm to
have an Alaska Business License, to submit a bid for goods and
services in the name appearing on the license, and to maintain a
place of business within the state, staffed by the bidder or
employee of the bidder for a period of six months immediately
preceding the date of the bid. He added that if the bidder is
incorporated it must be registered in the state. If it is a
proprietorship or partnership, all owners must be residents of the
state. Corporations do not have to be residents of the state.
Number 363
REPRESENTATIVE PORTER asked, "That's the qualification for what?"
MR. PETTY answered, "Qualifying for the Alaska bidders preference."
REPRESENTATIVE PORTER asked in reference to the preference for
businesses which hire 50 percent or more handicapped people,
whether the exception accrues to a business regardless of its form
of organization.
Number 373
MR. PETTY said that was correct. They would have to qualify for
the Alaska bidders preference. However, it would be for any
bidder, regardless of whether it was a sole proprietorship, a
corporation, or a sole partnership.
REPRESENTATIVE PORTER said HB 288 would make the ownership issue
for handicapped persons equivalent to the employee type of
business.
MR. PETTY replied yes. The bill covers all business entities in
the same fashion with respect to ownership interest and
disabilities.
Number 376
REPRESENTATIVE ELTON asked if HB 288 only covered non-profit groups
run by boards of directors, if everyone involved has a disability.
Number 381
MR. PETTY answered yes. If a non-profit fits in any of those
categories, that would be the case. If there are non-profit
corporations with all shareholders having disabilities they would
be covered.
REPRESENTATIVE ELTON noted that those non-profit groups he and
Representative James use for their printing would, under the terms
of HB 288, not be eligible for the disabled bidder preference.
MR. PETTY responded that employment programs or sheltered workshops
have a special dispensation elsewhere in the procurement code. In
some cases, they were able to not go to bid, where there was a
contract with one of those organizations.
REPRESENTATIVE ELTON asked what the dollar threshold was under AS
36.31.70.
Number 406
MR. PETTY responded that it applies to an invitations to bid which
are over $25,000. Invitations under $25,000 are done through
request for quotation. This section also applies to requests for
proposals.
Number 415
CHAIRMAN KOTT asked if women and minorities were considered within
the scope of the Alaska bidder preference scheme.
MR. PETTY said women and minorities are considered Alaskan bidders
and eligible for the bidders preference if they meet the
requirements. Under state statutes, there is no separate
distinction, set a side program, or preference in either case.
Number 422
CHAIRMAN KOTT thought there was some provision at the federal level
pertaining to women and minorities who occupy various positions in
corporations.
Number 429
STAN RIDGEWAY, DEPUTY DIRECTOR, DIVISION OF VOCATIONAL
REHABILITATION, DOE, testified that the bidder preference was
changed three years ago to include sole proprietorships and
businesses having 50 percent of their employees with severe
disabilities. This was added to the employment program preference,
which is the largest of three programs. There are 16 employment
programs in the state. He said when legislation was introduced by
then Representative Ellis, there was a lot of controversy and
concern that there would be a flood of people applying for
preferences. Over the past three years there have been 11 sole
proprietorships that have requested bid packets. Of those 11, 6
were certified and 1 was turned down. The other four failed to
return their packets. No businesses having 50 percent of its
employees handicapped have been certified.
MR. RIDGEWAY said that HB 288 was intended for people who live in
group homes that might not want to work through shelter workshops.
These people could get janitorial and other contracts for people
living in the workshop. Normally the house parent would run the
company. There is room for abuse; however, they haven't seen any
thus far. There are people from Fairbanks that are severely
disabled and should have qualified for a bidder preference under
this bill; nevertheless, since it was for sole proprietorships,
they had to turn down the request.
MR. RIDGEWAY stated that certifying corporations would open up
abuses of the program. His understanding of HB 288 is if they
certify corporations, all that is required is an Alaska Business
License. Any corporation in the world, as long as they were
certified to do business in Alaska, could get a bidders preference.
He doesn't feel this was the initial intent of HB 288. The
loophole needs to be tightened to address people's concerns, such
as that of the gentlemen from Fairbanks.
Number 482
CHAIRMAN KOTT asked if an individual, corporation or entity that
qualified under the Alaska bidder preference could broker their
awarded contracts to a third party located out of the state.
MR. RIDGEWAY answered yes.
REPRESENTATIVE ELTON asked if the men from Fairbanks would qualify
under paragraph (f), and if they have employees of which more than
50 percent are not disabled.
MR. RIDGEWAY felt it was a fairly large corporation with an office
also in Illinois. However, this is different in that the people
owning the corporation are disabled instead of having the employees
disabled.
Number 497
CHAIRMAN KOTT said he had a proposed CS, dated 4-3-95, Version F.
The major change is that the title was opened up to allow for a
change in Section 2, which addresses the award of the contract for
the Alaska bidder preference provision and prohibits brokering to
a third party. Section 3 ensures that any bids currently being
reviewed are excluded. He acknowledged the prime sponsor was
focusing on a narrower provision of the law. However, the
committee has the opportunity to fix an identified problem.
Number 514
REPRESENTATIVE PORTER asked if the disability business preference
would allow a business whose owner was handicapped the 10 percent
bidder preference, even though the business itself had employees
that were not impaired.
Number 521
REPRESENTATIVE JAMES said her intent was to have severely disabled
people covered to the extent that they could own and manage a
business. If they are physically disabled and there was physical
work to be done, they would have to have a non-disabled person to
do the physical work. She would like to see a door closed in that
the owners of the corporations or partnerships would each have to
be qualified by Vocational Rehabilitation as being severely
disabled. Also, it is important that disabled owners be in active
management of the business.
CHAIRMAN KOTT asked if they would be placing a higher degree of
requirement on the disabled than they would on the other
individuals who receive bidder preference.
REPRESENTATIVE JAMES responded yes.
Number 540
REPRESENTATIVE PORTER noted that this was being accomplished by the
wording requiring all partners to qualify.
REPRESENTATIVE JAMES responded that in the example of Moore
Business Forms, or another company like that, if they are a large
corporation they have an extended number of stockholders, and
consequently there's no way they could qualify. It would have to
be a closed corporation, where everyone of the shareholders was
severely disabled. She felt this closes the door so they don't
have to worry. They are encouraging disabled people to get
educated and pick up other things to do to take care of themselves;
and in doing that, give them that preference to bid.
Number 556
REPRESENTATIVE ELTON said if they were requiring this of the
Department of Education, and the door opens not only to Alaska
corporations but to any corporations that can file in the state, it
would seem to broadly expand the duties of the Department of
Education. He asked if they would need additional resources on the
fiscal note.
Number 558
REPRESENTATIVE JAMES said she would defer the question to the
department, as they never came to a conclusion on the issue.
Number 573
REPRESENTATIVE PORTER made a motion to adopt the proposed CSHB
288(L&C), Version F.
CHAIRMAN KOTT asked if there was an objection.
Number 576
REPRESENTATIVE SANDERS objected. He said on the surface HB 288
looks like a good idea. However, he asked for clarification on the
language "may not assign the contract". He explained that, in his
business, they would never be aware of it. He wouldn't assign the
contract. He would call Moore Business Forms and have them do the
job, put the product into a plain box, and send it to his office
where he would put his business sticker on the box. He asked
whether this would cover that sort of situation.
Number 586
REPRESENTATIVE JAMES responded that it would. It states that the
section does not prohibit subcontracting less than the entire
contract. You wouldn't be able to subcontract the entire contract.
Number 603
REPRESENTATIVE ELTON said that the section that reads, "This
section does not prohibit subcontracting less than the entire
contract." He said to him that would mean if he was contractor
`XYZ,' he could bid a job and then assign 90 percent of that
contract and say that 10 percent of the contract is management
oversight. He observed this to be a loophole "big enough to drive
a Mack truck through," because any contract would have a management
component.
Number 615
REPRESENTATIVE SANDERS thought this would cause more abuse. He
appreciated what the chairman had done in trying to tighten the
language, but felt it needs to be tightened further.
Number 627
REPRESENTATIVE JAMES commented that, if they had the provision that
disabled people had to be in the management of the business, this
would close the door. However, the question was how to do that
without discriminating against the other part of this legislation,
which is the part requiring disabled employees. There are two
different parts to this legislation. One part concerns businesses
owned by disabled persons. The other part concerns companies that
hire disabled persons. She said she doesn't feel this would be
opening the door for misuse because these people would have to be
qualified by Vocational Rehabilitation as being severely disabled.
The decision the committee is making is whether or not they want
these people to be other than a sole proprietorship and allow them
to have this other entity.
REPRESENTATIVE JAMES told the committee what prompted her to
introduce this legislation was the case of the three men in
Fairbanks.
TAPE 95-32, SIDE B
Number 000
REPRESENTATIVE JAMES continued that maybe if the men weren't doing
this as a corporation, they wouldn't be able to have the business
they are doing. She asked whether these three disabled people
would be denied the benefit given to other disabled people.
Number 004
REPRESENTATIVE SANDERS acknowledged that the statute should be
broadened to cover corporations. However, the language would have
to be tightened.
Number 014
CHAIRMAN KOTT stated that they still had the motion to adopt the
proposed CSHB 288(L&C), dated 4-3-95, Version F, Bannister. He
asked if Representative Sanders maintained his objection.
REPRESENTATIVE SANDERS withdrew his objection.
CHAIRMAN KOTT stated there being no objection, the CSHB 288(L&C),
dated 4-3-95, Version F, Bannister, was adopted.
Number 025
REPRESENTATIVE JAMES said that in Section 2 the wording "where a
person has been awarded" should be changed to "person, corporation
or partnership", unless `person' could include the other business
entities. She said she would ask for legal advice on that.
CHAIRMAN KOTT said he believed that `person' would stand for an
entity.
Number 038
REPRESENTATIVE PORTER said the last line states "this Section does
not prohibit subcontracting less than the entire contract." He
asked if they should change that to "this section does not prohibit
subcontracting less than 50 percent of the entire contract."
Number 047
CHAIRMAN KOTT said that if you acquired an Alaska bidder preference
as a general contractor, you may be subcontracting part of the
contract out to several different entities.
Number 054
REPRESENTATIVE PORTER said that if you retained 51 percent of the
work yourself, you could justifiably say this is a legitimate
interest of the state to provide business to a handicapped person.
However, if it was just a broker operation, it would be unfair to
other businesses.
Number 079
MR. PETTY said it would be difficult to identify the minimum
percentages of subcontracting because what is appropriate and
customary in one service or supply may not be appropriate in
another service or supply. This would apply to the use of
subcontracting with construction contracts because those are more
prevalent. They have looked at the way the federal government
dealt with this issue with respect to women and minorities in
businesses. The federal approach is to require that bidders be
defined as dealers, which means they must be in the business of
selling the product or service to the public. This would prohibit
a bidder who has never conducted this business from turning around
and subcontracting out 100 percent of it and then selling it to the
state. He felt it would be difficult to come to a solution today.
However, they should approach it from the subcontracting end, or
look at the regular dealer approach.
Number 143
REPRESENTATIVE PORTER said he had dealt with this indirectly
himself, and felt the federal approach would be preferable in
eliminating the problem of a handicapped entity being used by
another business to gain a bidders preference.
Number 162
REPRESENTATIVE ELTON said that would be a productive approach.
However, the change from sole proprietorship doesn't mean anything
with regard to increased employment opportunities for disabled
people. This only creates additional business opportunities for
corporations that have 100 percent disabled ownership.
Number 186
REPRESENTATIVE PORTER said he didn't understand it to mean that in
the first place. He asked why they shouldn't increase the
opportunities for handicapped people to own businesses rather than
just being employees.
Number 190
REPRESENTATIVE ELTON responded that he didn't have a problem with
that. What they were talking about are corporations and
partnerships that are already formed and are profitable. "We are
just expanding the ability of a discreet number these partnerships
or corporations to increase their profitability."
Number 201
REPRESENTATIVE PORTER added that he sees this as an opportunity for
the 50 percent disabled employees who are working for someone else
but are capable of doing business for themselves. This provides
opportunities both ways.
Number 209
REPRESENTATIVE SANDERS said that any bidders preference would raise
the procurement price. He didn't believe they could maintain the
zero fiscal note.
Number 220
MR. PETTY responded that they have had very little impact as the
law now reads. It would be difficult for them to deduce what the
cost to state agencies would be if HB 288 is passed. Any
preference which results in awarding to the higher bidder will
increase the costs to the state. Over the last three years they
have not seen much impact from this preference.
Number 238
REPRESENTATIVE ELTON said if they adopted the federal approach,
there would need to be an expanded certification process to ensure
those business making bids meet the federal requirements.
Number 249
MR. PETTY said they would look at that. They had never given
serious consideration to a fiscal note for certification of this
type of a program.
Number 255
REPRESENTATIVE JAMES commented that she was trying to visualize who
all the disabled people are in the state that have the ability, the
money and all the other things that are needed to implement this
organization. She said that the six or so people that have been
certified might be able to change their business entity to be a
corporation or partnership, as opposed to a sole proprietorship.
There are benefits. If there weren't any, we wouldn't have those
business entities. This opens the door for these people in
providing that 100 percent of the shareholders are severely
disabled. That alone would limit the number of people that would
be able to do this.
Number 283
CHAIRMAN KOTT stated that it was his intent to hold HB 288 until
Friday. The committee would work with the prime sponsor as well as
the Department of Administration to come up with language discussed
during the meeting.
HB 224 - STATE PLUMBING CODE
CHAIRMAN KOTT said there was no further bills to come before the
committee. However, in the previous meeting, the committee had
passed out HB 224. Since that time, the subcommittee chairman had
discovered that another problem may have been created that they had
not yet discussed. He asked unanimous consent in rescinding the
committee's previous action of March 31. The bill had not been
transmitted to the Chief Clerk as of yet. They would notice it on
Wednesday, April 5, 1995.
Number 307
REPRESENTATIVE ELTON made motion that the House Labor and Commerce
Standing Committee rescind their action in passing out HB 224, and
asked unanimous consent.
CHAIRMAN KOTT asked if there were objections. Hearing none, the
action was rescinded. HB 224 would be back before the committee on
Monday, April 10.
Number 314
REPRESENTATIVE PORTER asked what the problem was.
CHAIRMAN KOTT responded that it was a health and safety issue
concerning the substance circulated through the single wall heat
exchangers versus the double wall exchangers. He announced that
Wednesday's meeting had been canceled due to majority caucus.
Monday, April 10 would be a work session on HB 251. Wednesday they
would bring up a proposed CS for HB 224.
Number 339
REPRESENTATIVE ELTON pointed out that if HB 224 was sent back to a
subcommittee, a new subcommittee chairman should be appointed.
Number 348
CHAIRMAN KOTT stated that it was not his intent to send the bill
back to subcommittee. He felt they could eliminate the sunset
provision, and thereby remedy the problem.
ADJOURNMENT
There being no further business to come before the House Labor and
Commerce Standing Committee, Chairman Kott adjourned the meeting at
4:17 p.m.
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