Legislature(1993 - 1994)
04/23/1993 09:00 AM House STA
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE STATE AFFAIRS STANDING COMMITTEE
April 23, 1993
9:00 a.m.
MEMBERS PRESENT
Representative Al Vezey, Chair
Representative Pete Kott, Vice Chair
Representative Harley Olberg
Representative Jerry Sanders
Representative Gary Davis
Representative Fran Ulmer
Representative Bettye Davis
MEMBERS ABSENT
None
COMMITTEE CALENDAR
SB 129: "An Act relating to state procurement; and
providing for an effective date."
HCSCSSB 129(STA) PASSED OUT OF COMMITTEE
WITNESS REGISTER
JERRY BURNETTE, Legislative Aide
Legislative Budget and Audit Committee
Room 103, State Capitol
Juneau, Alaska 99801
465-4949
Position Statement: Explained intent of CSSB 129 (FIN)am
DUGAN PETTY
Director of General Services
Department of Administration
P.O. Box 110210
Juneau, Alaska 99811-0210
465-2250
Position Statement: Supported CSSB 129 (FIN)am
BRIAN ROGERS
Vice President for Finance
University of Alaska
207 D Butrovich
Fairbanks, Alaska 99775
474-7448
Position Statement: Supported CSSB 129 (FIN)am
LOREN RASMUSSEN
Chief of Design and Construction Standards
Department of Transportation
3132 Channel Drive
Juneau, Alaska 99801-7898
465-2960
Position Statement: Stated limitations on DOT under
CSSB 129 (FIN)am
PREVIOUS ACTION
BILL: SB 129
SHORT TITLE: POWERS OF CHIEF PROCUREMENT OFFICER
BILL VERSION: CSSB 129(FIN) AM
SPONSOR(S): RULES BY REQUEST OF LEGISLATIVE BUDGET AND AUDIT
TITLE: "An Act relating to state procurement; and providing
for an effective date."
JRN-DATE JRN-PG ACTION
02/22/93 440 (S) READ THE FIRST TIME/REFERRAL(S)
02/22/93 440 (S) STATE AFFAIRS, FINANCE
03/03/93 (S) STA AT 09:00 AM BUTROVICH 205
03/03/93 (S) MINUTE(STA)
03/17/93 (S) STA AT 09:00 AM BUTROVICH 205
03/18/93 846 (S) STA RPT CS 4NR NEW TITLE
03/18/93 846 (S) FISCAL NOTE TO SB (ADM)
03/18/93 846 (S) ZERO FISCAL NOTE TO CS (ADM)
04/07/93 (S) FIN AT 09:00 AM SENATE FIN 518
04/12/93 (S) FIN AT 09:00 AM SENATE FIN 518
04/14/93 (S) FIN AT 08:30 AM SENATE FIN 518
04/15/93 (S) FIN AT 06:45 PM SENATE FIN 518
04/16/93 1438 (S) FIN RPT CS 6DP NEW TITLE
04/16/93 1439 (S) ZERO FISCAL NOTE TO CS (DOT)
04/16/93 1439 (S) PREVIOUS ZERO FN APPLIES TO
CS (ADM)
04/19/93 1483 (S) RULES 3CAL 1NR 4/19/93
04/19/93 1544 (S) READ THE SECOND TIME
04/19/93 1545 (S) FIN CS ADOPTED Y11 N9
04/19/93 1545 (S) AM NO 1 MOVED BY FRANK
04/19/93 1545 (S) AM NO 1 ADOPTED UNAN CONSENT
04/19/93 1546 (S) ADVANCE TO 3RD RDG FAILED Y11 N9
04/19/93 1546 (S) THIRD READING 4/20 CALENDAR
04/20/93 1597 (S) READ THE THIRD TIME CSSB
129(FIN) AM
04/20/93 1597 (S) PASSED Y20 N-
04/20/93 1597 (S) EFFECTIVE DATE VOTE SAME AS
PASSAGE
04/20/93 1602 (S) TRANSMITTED TO (H)
04/20/93 1379 (H) READ THE FIRST TIME/REFERRAL(S)
04/20/93 1379 (H) STATE AFFAIRS, FINANCE
04/23/93 (H) STA AT 09:00 AM CAPITOL 102
ACTION NARRATIVE
TAPE 93-45, SIDE A
Number 000
CHAIRMAN AL VEZEY called an emergency meeting of the House
State Affairs Committee to order at 9:02 a.m. on April 23,
1993. Members present were Representatives Pete Kott,
Harley Olberg, Bettye Davis, Gary Davis, Fran Ulmer and
Jerry Sanders, representing a quorum.
CSSB 129 (FIN)am POWERS OF CHIEF PROCUREMENT OFFICER
Number 011
CHAIRMAN VEZEY read the title to CSSB 129 (FIN)am, and
stated his intent to go through the bill section by section.
He noted the changes in Section 1, extending the term of
office for the chief procurement officer from four to six
years; and noted the clarifications in job status and
salary in Section 2. He then stated he felt the intent of
the bill was contained in Section 3, which required
judicial, legislative and departmental offices to report to
the legislature any renewal of, or entrance into, a lease
purchase or lease finance agreement, and also requires the
report of the total lease payment for the full term of the
lease to the legislature.
Number 122
REPRESENTATIVE FRAN ULMER asked if that meant the
refinancing clause could be interpreted to mean the
legislature would have to pass a law approving the
refinancing.
Number 127
CHAIRMAN VEZEY stated he did not interpret the clause to
mean that. He said the reasonable interpretation would
require notice to the legislature before the deal was made,
provided it exceeded $1 million a year or $10 million in
total.
Number 154
REPRESENTATIVE HARLEY OLBERG stated the sentence may mean
the department could not enter or renew an agreement above
$1 million because the sentence appears to only relate to
subsections 4 through 10.
Number 166
REPRESENTATIVE ULMER stated she felt the sentence needed
clarifying because of the implication the department may not
be able to enter into such agreements.
Number 180
JERRY BURNETTE, LEGISLATIVE AIDE, LEGISLATIVE BUDGET AND
AUDIT COMMITTEE, joined the committee to clarify some points
about CSSB 129 (FIN)am. He stated the bill was amended to
provide for notice to the legislature for any lease purchase
or lease finance agreement except for existing balance. He
stated the intent of the legislation was derived from a pair
of transactions at Wildwood prison where the single annual
lease payment exceeded $1 million, with the total lease
amount exceeding $10 million. He said prison officials
split the transaction into two lease purchase agreements to
avoid the procurement requirements. Subsequently, auditors
recommended the legislature be involved in any lease
purchase agreement at any amount, which CSSB 129 (FIN)am
would accomplish.
Number 243
REPRESENTATIVE ULMER asked if the Department of
Transportation (DOT) had been consulted, and if they found
the new regulations problematic.
Number 247
MR. BURNETTE stated he had not been in contact with DOT, but
there was no indication CSSB 129 (FIN)am would present
problems.
Number 254
REPRESENTATIVE ULMER stated she was concerned about DOT
purchases or leases of property for airports or ferry ports.
She noted DOT may want to lease purchase land from native
corporations in the bush for the purposes of building
maintenance hangars, and expressed concern CSSB 129 (FIN)am
would prevent such a buy.
Number 272
MR. BURNETTE stated DOT airport and seaport purchases are
exempt from Alaska Procurement Procedures.
Number 275
REPRESENTATIVE ULMER stated concern DOT may want to lease
land or facilities in the future, and wondered if the
legislature would have to pass a bill to allow those deals.
Number 286
CHAIRMAN VEZEY said he would like to move on, and asked what
would be accomplished if total lease payments on lease
purchase or lease finance agreements are included in reports
to the legislature.
Number 292
MR. BURNETTE stated the clause was designed to provide
notice to the legislature for any amount.
Number 308
CHAIRMAN VEZEY noted that Section 4 appeared to be technical
and minor because it allowed the procurement of professional
services on a sole source bid of less than $25,000, a point
the committee had addressed previously.
Number 324
REPRESENTATIVE ULMER asked the logic of adding professional
services to the exemptions from procurement laws.
Number 338
DUGAN PETTY, DIRECTOR OF GENERAL SERVICES, DEPARTMENT OF
ADMINISTRATION, joined the committee to explain the
provisions of Section 4. He said Section 4 simply
standardizes the allowances for small procurements to
include professional services. He stated it is current law
to allow procurement officers to buy almost anything under
that cap, and it is logical to allow them to also procure
services in much the same way.
Number 374
REPRESENTATIVE ULMER expressed concern about the number of
small procurement that could be allowed under the services
provision. She asked how many the state did each year and
if there were limits on the numbers allowed.
Number 382
MR. PETTY stated the number of small appropriations done
each year varied from department to department. He stated
the department would generally not allow a fragmented
contract to take effect because of its inefficiency.
Number 390
REPRESENTATIVE ULMER stated that with no limits and working
under the discretion of a procurement officer, a friend to
that officer could be let four or five small procurement
contracts.
Number 408
MR. PETTY said the law now requires proof that a contractor
is clearly the only source of a service under sole source
contracts and any abuse of the system would be caught
eventually.
Number 420
REPRESENTATIVE ULMER commented that designing a contract to
identify a contractor as the only source of a service would
be easy, and without safeguards, there would be no one
looking over the shoulder of procurement officers.
Number 430
MR. PETTY said he felt the concern was probably not that
great, since the state only lets between 50 and 75 sole
source contracts each year.
Number 440
CHAIRMAN VEZEY asked Representative Ulmer if she would voice
the same concerns regarding Section 5, which dealt with
similar limited competition contracts.
REPRESENTATIVE ULMER replied she would.
CHAIRMAN VEZEY noted Section 7's provisions for criminal
penalties for false statements under limited, sole source,
and emergency procurement, then called for comments on
Section 8, which provided for a wide range of contracts,
including cost-plus-a-percentage-of-cost, which had been
previously prohibited. He called for comments.
Number 489
MR. PETTY noted that current law does not allow cost-plus-a-
percentage-of cost contracts, even though in many cases it
would give the state a financial advantage. He stated he
was in favor of the change because the variations in such
contracts could be beneficial to the state.
CHAIRMAN VEZEY noted the change in Section 9, which set the
timing of filing of appeals on procurement decisions.
Number 507
MR. PETTY explained that CSSB 129 (FIN)am cleaned up a
confusing situation under the old law, which allowed
appellants seven days to file and the hearing officer seven
days to respond, which counted against the 15 days the
commissioner or department head had to make a final
determination. The new language would allow 15 days after
the final due date for appeals to be filed as the deadline.
CHAIRMAN VEZEY noted the change in Section 10, which added
two new exceptions for contracts under procurement laws.
Number 526
MR. PETTY stated the two exceptions were being made for good
reasons. The first allowed an exemption for contracts
outside the country because of cultural and legal
differences between Alaska and other countries, such as
Japan. The second provided for the letting of contracts for
legal work when the Department of Law would be in conflict
doing state work, such as when a special prosecutor might be
called in.
Number 540
CHAIRMAN VEZEY called for comments on Section 11, which
deleted the requirement for the chief procurement officer to
give written justification for accepting life cycle based
contracts on equipment.
Number 543
MR. PETTY said the deletion was designed to accomplish two
things: to allow the procurement officer to make a
determination to the best of his ability while streamlining
the process for buying equipment.
Number 554
CHAIRMAN VEZEY noted Section 12's incentives and exemptions
for renegotiating lease purchase and lease finance
agreements for several departments in the state, and noted
there was no location given for either Section 12 nor
Section 13 to be placed in current statute.
REPRESENTATIVE ULMER asked if any other agencies were not
addressed under Section 12 that might also be given the same
latitudes.
Number 567
MR. PETTY stated he believed most lease agreements were made
under the Department of Administration, but there could be
some problems for the Alaska Housing Finance Corporation and
the Alaska Railroad.
Number 582
BRIAN ROGERS, VICE PRESIDENT FOR FINANCE, UNIVERSITY OF
ALASKA, joined the committee to testify. He stated the
University would be concerned specifically with Section 3.
He noted the University had recently acquired land and
buildings for student housing and had plans to acquire more
from Alaska Pacific University. He stated the University
had no problem with the one million per year/ten million
over the life of the lease agreement provisions of CSSB 129
(FIN)am, but future deals might be put at risk. He stated
the University could go along with the reporting provisions,
but asked the committee to amend CSSB 129 (FIN)am so the
University could expend non-general fund monies for
acquiring real property. He also stated the University was
in favor of amending the single source, small procurement,
professional services provisions. He then presented the
committee with drafts of two amendments to accomplish the
exemptions he requested earlier.
REPRESENTATIVE ULMER said she saw little difference between
the two.
Number 660
MR. ROGERS stated the first created the exemptions by
redefining the lease agreement terms; while the second,
which he favored more, spelled the exemptions out in
specifics for the University.
Number 690
REPRESENTATIVE ULMER asked how the University handled the
$25,000 small procurement and how often such procurement
were needed, especially those for professional services.
Number 693
MR. ROGERS stated the University rarely needed such
procurement, on the average of ten to 15 times a year, and
as the University looked to cut administrative costs, it
would like to see the notification requirements eliminated
to streamline the process.
TAPE 93-45, SIDE B
Number 013
REPRESENTATIVE ULMER asked if the University would ever use
small procurement of $25,000 or less to fund faculty
positions.
Number 017
MR. ROGERS stated it would not. The small procurement would
usually apply to building or management consultants hired by
the University, and on occasion, for research purposes. He
stated that for the most part the University preferred to
use competitive bid procedures for professional services.
He expressed the University's support of the idea, saying it
seemed ridiculous to allow procurement officers to handle
contracts of up to $1.5 million, while professional services
contracts of $10,000 would have to be reviewed in Juneau
unless CSSB 129 (FIN)am was adopted.
CHAIRMAN VEZEY stated it might seem to some people that CSSB
129 (FIN)am might have been crafted to prevent circumvention
of the state's procurement requirements. He asked if the
University's requests might drive a hole in that intent.
Number 076
MR. ROGERS stated the University had long tried to uphold
state law, and he knew of no time the University had
deliberately violated the procurement provisions. He
recognized there had been some procurement cases brought,
but the University believed it was in the best interest of
the state to streamline the process where it could.
Number 099
CHAIRMAN VEZEY asked if it might be fair to summarize Mr.
Roger's testimony as the University had never violated the
procurement codes, so it ought to be exempted from the new
law.
MR. ROGERS stated he could not say the University had never
violated the procurement code, but it was in the best
interest of the state to exempt the University.
Number 119
REPRESENTATIVE ULMER asked if the Department of
Transportation might be effectively hurt by the changes made
in CSSB 129 (FIN)am, and inquired how many professional
services contracts of the small procurement variety are let
each year.
Number 134
LOREN RASMUSSEN, CHIEF OF DESIGN AND CONSTRUCTION STANDARDS,
DEPARTMENT OF TRANSPORTATION (DOT), stated the department
let very few professional services contracts each year, and
CSSB 129 (FIN)am would provide few limitations for DOT. He
stated DOT rarely used lease purchase or lease finance
agreements for airports or seaports, but it might want to in
the future.
Number 169
CHAIRMAN VEZEY asked Mr. Rasmussen to comment on the use of
sole source professional services contracts.
Number 174
MR. ROGERS stated it would be very rare for DOT to use sole
source contracts for professional services for construction.
He said the DOT usually does that work itself, and in the
cases of small procurement, it is easy for the department to
get at least three competitive bids.
Number 197
CHAIRMAN VEZEY noted the short time before the committee
members would have to return to the floor for the day's
session, and asked the members' pleasure.
Number 202
REPRESENTATIVE GARY DAVIS stated the only problem appeared
to be those issues with the University.
Number 208
CHAIRMAN VEZEY stated he saw some concerns with the
professional services provisions and the exemptions from
Section 3.
Number 212
REPRESENTATIVE ULMER made a motion for a State Affairs
committee substitute (CS) to include exceptions for the
University, to eliminate the words "by law" from line 22 of
page 2, and then to delete the words "does not" from the
appropriation language on page 3. She said she would also
like to see a mechanism to track the number of single source
professional service contracts, which she said was
apparently acceptable to the sponsor.
Number 267
CHAIRMAN VEZEY said he believed there were enough changes
being made to CSSB 129 (FIN)am to extend the meeting, so he
would put the committee at ease until immediately after the
House floor session. The time was 9:56 a.m.
Number 271
CHAIRMAN VEZEY called the committee back to order at 12:36
p.m., immediately following the House floor session.
Members present were Representatives Bettye Davis, Jerry
Sanders, and Harley Olberg.
Number 282
REPRESENTATIVE JERRY SANDERS moved passage of HCSCSSB 129
(STA) from House State Affairs.
House Committee Substitute for Committee Substitute for
Senate Bill 129 (STA) passed by a 4-0 vote.
ADJOURNMENT
Number 307
CHAIRMAN VEZEY adjourned the emergency session of the House
State Affairs committee at 12:47 p.m.
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