Legislature(2005 - 2006)BELTZ 211
04/05/2005 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB139 | |
| SJR11 | |
| SB142 | |
| SB160 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 160 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 139 | TELECONFERENCED | |
| += | SJR 11 | TELECONFERENCED | |
| += | SB 142 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
April 5, 2005
1:38 p.m.
MEMBERS PRESENT
Senator Con Bunde, Chair
Senator Ralph Seekins, Vice Chair
Senator Ben Stevens
Senator Johnny Ellis
Senator Bettye Davis
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 139
"An Act relating to termination and oversight of boards,
commissions, and agency programs; extending the termination date
of the Board of Marital and Family Therapy; and providing for an
effective date."
HEARD AND HELD
SENATE JOINT RESOLUTION NO. 11
Urging the United States Congress to amend the tax code to
repeal the federal excise tax on communications.
MOVED SJR 11 OUT OF COMMITTEE
SENATE BILL NO. 142
"An Act relating to ownership of land, buildings, and other
structures by regional school boards; and providing for an
effective date."
MOVED CSSB 142(L&C) OUT OF COMMITTEE
SENATE BILL NO. 160
"An Act relating to a procurement and electronic commerce tools
program for state departments and instrumentalities of the
state; and providing for an effective date."
HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 139
SHORT TITLE: EXTENSIONS OF OCCUPATIONAL BDS/AGENCIES
SPONSOR(s): RULES BY REQUEST OF LEG BUDGET & AUDIT
03/09/05 (S) READ THE FIRST TIME - REFERRALS
03/09/05 (S) L&C, FIN
03/31/05 (S) L&C AT 1:30 PM BELTZ 211
03/31/05 (S) Scheduled But Not Heard
04/05/05 (S) L&C AT 1:30 PM BELTZ 211
BILL: SJR 11
SHORT TITLE: REPEAL TELECOMMUNICATIONS TAX
SPONSOR(s): SENATOR(s) THERRIAULT
03/03/05 (S) READ THE FIRST TIME - REFERRALS
03/03/05 (S) L&C, FIN
03/29/05 (S) L&C AT 1:30 PM BELTZ 211
03/29/05 (S) -- Meeting Canceled --
03/31/05 (S) L&C AT 1:30 PM BELTZ 211
03/31/05 (S) Scheduled But Not Heard
04/05/05 (S) L&C AT 1:30 PM BELTZ 211
BILL: SB 142
SHORT TITLE: REGIONAL SCHOOL BD LAND/BLDG OWNERSHIP
SPONSOR(s): LABOR & COMMERCE
03/16/05 (S) READ THE FIRST TIME - REFERRALS
03/16/05 (S) L&C, FIN
03/31/05 (S) L&C AT 1:30 PM BELTZ 211
03/31/05 (S) Heard & Held
03/31/05 (S) MINUTE(L&C)
04/05/05 (S) L&C AT 1:30 PM BELTZ 211
BILL: SB 160
SHORT TITLE: STATE PROCUREMENT ELECTRONIC TOOLS
SPONSOR(s): LABOR & COMMERCE
04/01/05 (S) READ THE FIRST TIME - REFERRALS
04/01/05 (S) L&C, FIN
04/05/05 (S) L&C AT 1:30 PM BELTZ 211
WITNESS REGISTER
BILL MAHER, staff to Senator Therriault
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Commented on SB 139 for the sponsor.
PAT DAVIDSON
Division of Legislative Audit
PO Box 113200
Juneau AK 99811
POSITION STATEMENT: Supported SB 139.
NONA WILSON, Legislative Liaison
Department of Transportation &
Public Facilities
3132 Channel Dr.
Juneau, AK 99801-7898
POSITION STATEMENT: Commented on SB 160.
KIP KNUDSEN, Deputy Commissioner of Aviation
Department of Transportation &
Public Facilities
3132 Channel Dr.
Juneau, AK 99801-7898
POSITION STATEMENT: Commented on SB 160.
SCOTT HAWKINS
Alaska Supply Chain Integrators
Anchorage AK
POSITION STATEMENT: Supported SB 160.
JIM DUNCAN, Business Manager
Alaska State Employees Association
POSITION STATEMENT: Opposed SB 160.
BEAU GRANT, President
Beau Geste Enterprises
Tampa FL
POSITION STATEMENT: Opposed SB 160.
KENNETH BROWN
Anchorage AK
POSITION STATEMENT: Opposed SB 160.
BARRY JACKSON
Anchorage AK
POSITION STATEMENT: Supported SB 160.
BEN MILAM
Anchorage AK
POSITION STATEMENT: Opposed SB 160.
ACTION NARRATIVE
CHAIR CON BUNDE called the Senate Labor and Commerce Standing
Committee meeting to order at 1:38:16 PM. Present were Senators,
Ellis, Davis, Seekins and Chair Bunde.
SB 139-EXTENSIONS OF OCCUPATIONAL BDS/AGENCIES
CHAIR CON BUNDE announced SB 139 to be up for consideration.
TOM MAHER, staff to Senator Therriault, sponsor, explained the
provisions in SB 139 stem from two audit reports prepared by the
Division of Legislative Audit.
MR. MAHER explained that SB 139 extends the sunset date for
Board of Marital and Family Therapy from June 30, 2005 to June
30, 2010 as per the audit. It also incorporates recommendations
contained in an audit of the sunset process itself. Section 2
clarifies for boards that are terminated that their authority
for regulatory and disciplinary powers is transferred to the
Department of Community & Economic Development (DCED). Currently
this happens, but statutes don't give the department the
authority to those activities.
Sections 3 and 4 change the standard sunset period for
occupational boards in AS 08.03.020(c) and non occupational
boards in AS 44.66.010(c) from not to exceed four years to not
to exceed eight years. Increasing the standard sunset period
allows for better use of audit staff and make the sunset process
less consuming for the legislature, the boards and regulatory
agencies.
Finally, section 5 adds two criteria that must be considered in
the course of a sunset review by the auditors. They are the
extent to which the board, commission or agency has effectively
attained its objectives and the efficiency with which it has
operated and the extent to which the board, commission or agency
duplicates activities of another governmental agency or the
private sector. Expanding the criteria will assure that auditors
will measure the efficiency and effectiveness of boards,
commissions and the agencies under review.
1:40:39 PM
SENATOR BEN STEVENS joined the committee.
1:42:11 PM
PAT DAVIDSON, Division of Legislative Audit, said she recommends
extension of the Board of Marital and Family Therapy. During the
course of her review she looked at whether it should be combined
with other behavioral health boards. But if they continue on
separately as they are, she recommends a five-year extension.
The audit looks at efficiency and the effectiveness of the
Alaska sunset process, a process that came to Alaska in 1977
when a lot of other states started using it also. Since then,
six states have suspended their sunset process and six have
outright repealed it. Alaska has a standard four-year extension,
another group are at six years and another is at ten years.
Given the times the boards and commission have come under
review, it really isn't a question any more that they be
continued. She is now looking more at efficiency and
effectiveness issues.
1:45:20 PM
RICK URION, Director, Division of Occupational Licensing, said
he was a legislator when the 1977 sunset law was passed and he
supported SB 139 now. He noted that the Board of Opticians is
scheduled to sunset and sooner or later the law will need to be
clarified about what the department does in that case.
1:46:44 PM
CHAIR BUNDE moved Amendment 1 as follows for discussion
purposes:
Delete section 2 and insert:
Sec. 2. AS 08.02.020(a) is amended to read:
(a) Upon termination, each board listed in AS
08.03.010 shall continue in existence until June 30 of
the next succeeding year for the purpose of concluding
its affairs. During this period, termination does not
reduce or otherwise limit the powers or authority of
each board. One year after the date of termination, a
board not continued shall cease all activities, and
all statutory authority of the board is transferred to
the department.
MR. URION explained that it clearly establishes that all the
board's statutory authority is transferred to the department. A
new section (4) makes it clear that any litigation,
investigations and licenses that have been issued are in place
until changes are made.
CHAIR BUNDE said there were no objections and Amendment 1 was
adopted.
1:48:14 PM
CHAIR BUNDE moved Amendment 2 as follows for discussion
purposes:
Add a new section to the bill:
Sect. 4. AS 08.03.020 is amended by adding a new
subsection to read:
(d) The department shall carry out the functions of a
board that has been terminated and ceased all
activities. Litigation, hearings, investigations and
other proceedings pending at the time the board ceased
activities continue in effect and may be continued or
completed by the department. Licenses, certificates,
orders and regulations issued or adopted by the board
and in effect at the time the board ceased activities,
remain in effect for the term issued, or until revoked
amended, vacated or repealed by the department.
1:48:59 PM
SENATOR BEN STEVENS asked if the legislature allows the board to
sunset, does that automatically confer its authority to the
department.
MR. URION replied that is correct. For example, if the Board of
Opticians sunsets, the department would continue to license and
follow the criteria in the law. He added, "We license a whole
lot of people in the state without boards."
1:50:30 PM
MS. DAVIDSON explained that two legal opinions, one from the
Department of Law and one from Legislative Legal, address what
happens when a board sunsets. One opinion said that from the
time the board sunset, no one can be issued a license, but those
licenses don't go away. But nothing can move forward in terms of
licensing. The second opinion was that if a board goes away,
then the regulations that refer to it are moot. In which case,
if you have no regulations to carry out the function of the
statute, there is no process for people that are licensed to
continue with the license or it goes into a limbo.
Last year she recommended allowing the Board of Opticians to
sunset and starting up a registration process that would allow
for individuals who want to call themselves registered
dispensing opticians to meet certain qualifications and
criteria.
MS. DAVIDSON said if any board is going to sunset, it goes into
a wind-down year. But boards don't want to wind down; they
really hope for an extension. This bill lets the department step
into that space providing for an orderly process.
1:53:24 PM
SENATOR BEN STEVENS said the decision to shut down comes from
the legislature and he asked if the department could manage
without further input from it.
MS. DAVIDSON replied that the legislature would have to take
further actions by eliminating all the statutes if it wanted the
whole licensing function to go away. Eliminating the board would
be a first step in that process.
SENATOR BEN STEVENS asked if the department would continue
licensing under regulation until that happened.
MS. DAVIDSON replied, "Yes, it would."
1:55:48 PM
CHAIR BUNDE assumed that the boards are charging enough to be
self-supporting, but if the departments have to issue licenses,
he thought a fiscal note might be necessary.
MS. DAVIDSON replied that the statute says any occupations being
regulated by the division have to be self-supporting.
1:56:19 PM
SENATOR STEVENS asked what other boards would fall under
provision.
MR. URION replied about 20 more licensing boards.
CHAIR BUNDE said he thought it was an administrative goal to
eliminate some of the boards, but he didn't see a lot of
movement in that direction.
1:56:59 PM
CHAIR BUNDE said there was no further objection to Amendment 2
and it was adopted. He said he would hold CSSB 139(L&C) for
another hearing.
SJR 11-REPEAL TELECOMMUNICATIONS TAX
CHAIR CON BUNDE announced SJR 11 to be up for consideration.
DAVE STANCLIFF, staff to Senator Therriault, explained the
resolution and that there is a bipartisan effort to eliminate
it. Originally, he said the telecommunications tax was put in
place to support the Spanish American War.
2:00:06 PM
CHAIR BUNDE stated his concern about eliminating the tax and
asked how much doing that would decrease the state's revenues.
SENATOR ELLIS in an aside noted that President Clinton supported
repeal of the tax.
2:01:45 PM
SENATOR SEEKINS moved to pass SJR 11 from committee with
individual recommendations and attached fiscal note. Senators
Seekins, Ellis, Davis, Ben Stevens and Chair Bunde vote yea; and
SJR 11 moved from committee.
SB 142-REGIONAL SCHOOL BD LAND/BLDG OWNERSHIP
CHAIR CON BUNDE announced SB 142 to be up for consideration.
NONA WILSON, Legislative Liaison, Department of Transportation
and Public Facilities (DOTPF), said there were questions about
SB 142 in the last meeting and the department wanted to address
those.
KIP KNUDSEN, Deputy Commissioner of Aviation, Department of
Transportation and Public Facilities (DOTPF), explained:
Our lawyers were trying to do us a favor and give us
some power and influence over buildings that school
districts might also want to claim. We don't have any
event where a school district is leasing a building, a
DOT building. So, giving us the power to deny their
request would be silly. So, really all we're focused
on is land. All we really care about is title to the
land and, hopefully, this amendment strips the bill
down to the barest essential.
CHAIR BUNDE moved Amendment 1 and objected for discussion
purposes. There were no questions and Amendment 1 was adopted.
2:06:11 PM
CHAIR BUNDE closed public testimony.
SENATOR SEEKINS moved CSSB 142(L&C) from committee with
individual recommendations and attached zero fiscal note.
Senators Seekins, Davis, Ben Stevens, Ellis and Chair Bunde
voted yea; and CSSB 142(L&C) moved from committee.
SB 160-STATE PROCUREMENT ELECTRONIC TOOLS
CHAIR CON BUNDE announced SB 160 to be up for consideration.
SENATOR SEEKINS moved to adopt CSSB 160(L&C), version X. There
were no objections and it was so ordered.
CHAIR BUNDE explained that the committee substitute adds the
Alaska bidder preference that was deleted from the original
bill.
SENATOR ELLIS said previous legislatures had debated about the
extra preference to in-state bidders and disabled folks. He
asked if a preference for disabled business owners was still
included in the CS.
CHAIR BUNDE replied that he understands the CS replicates what
is in existing statute. He went on to explain how the bill came
about. Internet technology has created ways to increase
efficiency and lower costs in state procurement. So, the state
had a pilot program to show if that was possible.
KEVIN BROOKS, Deputy Commissioner, Department of Administration
(DOA), said the genesis of this project occurred two years ago
in HB 313, which established a pilot project that included up to
two state departments and two instrumentalities of the state and
provided for a sunset date for the pilot. SB 160 eliminates the
sunset date and the restriction on the number of departments. It
enables him to go forward with analyzing the benefits of the
efforts that were undertaken.
In this day and age, we are looking for opportunities
to streamline and make government more efficient.
Certainly E-commerce tools and procurement tools have
come a long way and the state's method for procuring
goods and services is a bit antiquated in that regard
- a very paper driven process. And so, we certainly
share the interest in trying to make that process more
efficient. Currently, there has only been one state
agency, the Department of Transportation, and more
specifically, the Southeast Region, that has been
involved in the pilot. That has really only been
during the current fiscal year.
We started last summer and the successful
contractor...Alaska Supply Chain Integrators, Inc.
began working with DOT.... The contractor has done a
great deal of work in bringing his system into the
state agency. There is a lot of groundwork that has
been laid. We have done some analysis of the first
quarter of the fiscal year. We're finishing a review
of second quarter procurements and now we just
completed the third quarter.... Currently, at this
point, from the administration's perspective, the jury
is still out. We don't have enough data to say it's
been a success or a failure, but it's certainly worth
continuing the process to see how this is going to
work out and so this bill would allow us to continue
that....
2:13:22 PM
CHAIR BUNDE asked if he thought the state might need a larger
sample to be able to judge if this is effective or not.
MR. BROOKS replied that he personally thinks the department
needs 2nd and 3rd quarter data from the fiscal year. That will
provide a basis in expanding the sample size. It must go through
a feasibility process, which includes documenting cost savings
on paper before proceeding. There is also a notification
process.
2:15:54 PM
SENATOR ELLIS asked since the jury is still out, how does that
square with extending the model to all state agencies.
MR. BROOKS answered that all departments wouldn't necessarily
participate; it would make more sense for some than others. The
Department of Law, for instance, doesn't deal with a lot of
commodities.
2:17:32 PM
CHAIR BUNDE said Mr. Brooks mentioned there is a procedure where
some savings are possible before this could go forward and asked
if this bill passes, would those procedures stay in effect. If a
department would qualify, it could move forward.
MR. BROOKS replied that is correct.
2:17:50 PM
SENATOR ELLIS said it's been reported to him that state
employees in the affected agency wanted to bid on some sort of
change in the procurement system and the administration decided
to preclude them from getting together and making a proposal to
compete with the private contractors. He asked him what
happened.
MR. BROOKS replied that he didn't have personal knowledge of
that, but would get back to committee. He disclosed that he came
into his position just last summer.
SENATOR ELLIS said that he believes competition is good and
leads to efficiencies and further:
If state employees wanted to come up with a new system
that was equal or superior to the private contractor,
we ought to have a contest of ideas and see who comes
out on top and provides the state with the best
service.
MR. BROOKS responded that automating the state's procurement
process is a good idea and the pilot uses a private contractor
that might do it more effectively. He said he would look into
Senator Ellis' question.
SENATOR ELLIS said he was told that the state employees were
precluded from even trying to do that.
MR. BROOKS said that he would check into that. He also wanted to
comment that he supported the preferences amendment. Often they
are clumsy and awkward and asked if he could provide language
that would not change the preferences, but make them more
efficient and straight-forward within the bill.
2:21:02 PM
SENATOR ELLIS said he wanted to make sure that existing
preferences were included in the committee substitute.
MR. BROOKS said that is the case, specifically the disabilities
preference.
Another item he mentioned was on page 1, line 10, that says the
contract would be awarded under AS 36.31.100 through AS
36.31.190. Expanding the reference from AS 36.30.100 through AS
36.30.265 was recommended. This would give the state the ability
to award this contract via competitive sealed proposal process.
And now the statutory reference stops short of that.
2:22:20 PM
SENATOR SEEKINS said he has no objection to an Alaska
preference, but has concern about extending a preference to
disabled people unless they are the actual operators of a
business. He has seen several contracts awarded to people with a
disability preference and they were just a subcontractor to one
of the other people that bid on the project in the first place.
CHAIR BUNDE asked him to work on language with Mr. Brooks.
MR. BROOKS responded:
We are certainly interested in the appropriate
implementation of these preferences and share your
concern that they be afforded to people who genuinely
deserve them and not any body else.
CHAIR BUNDE said that Scott Hawkins is the contractor who is
discussed and he owns a business within his Senate district.
2:23:48 PM
SCOTT HAWKINS, Alaska Supply Chain Integrators (ASCI), said he
won the contract for the procurement pilot project. ASCI was
founded in 1999 to provide purchasing, warehousing and other
aspects of procurement and material operations to the North
Slope oil fields and gradually to other clients. It has grown to
150 employees and has developed a suite of E-commerce tools to
help clients. It is up against national competitors who have a
lot of capital behind them. He sees a future in back-office
business process operation in both public and private sectors.
He has delivered substantial, documentable savings to his
clients.
2:25:59 PM
He explained that his business model doesn't buy and resell
goods. It operates the administrative processes on behalf of the
customer.
Our vision is that the back-office overhead that does
these types of administrative services is a necessary
function you have to have in order to operate. But the
more money that can be saved in those types of
activities, the more can be poured directly into
program expenditures - things that really meet the
needs of constituents and stakeholders.
2:28:57 PM
He said a memorandum, written by Suzanne Dallimore to Beau
Grant, opponents of the program, had been circulated that
reflected on the program and him as a contractor. It alluded to
cases of outsourcing programs gone awry, even one item on the
current program. It contained unsubstantiated allegations that
are primarily scare tactics. Some of the issues did not even
concern the pilot project and there seemed to be an incomplete
understanding as to how the program works.
The memo erroneously says that the bill prematurely privatizes
100 percent of Alaska procurement without economic
justification. In reality, the bill does not set forth a
schedule and doesn't require any further privatization
whatsoever if the administration is not so inclined. However,
the bill does authorize expansion at the discretion of the
administration and only if feasibility can be shown. Union
bargaining agreements require that feasibility be shown. The
agreements have a tremendous amount of due process that enforce
that requirement.
MR. HAWKINS said the memo suggests that the savings are illusory
and he referred the committee to the feasibility study and to a
subsequent compliance audit conducted by the Office of
Management and Budget to reassure and verify members that the
savings are quite real and significant.
He said the bill is alleged to not mandate competition in
procurement and gives the contractor carte blanch over
procurement, which it doesn't do. On the contrary, he said the
program does mandate competition and, much like the current
procurement code, it requires a certain amount of competition at
certain levels of "spend."
MR. HAWKINS said the rules in his contract are similar in spirit
to the current procurement code, but there is a lot of excessive
red tape in the procurement code that he is not bound by. His
contract requires competition at different levels of spend; it
does not eliminate competition and preserves bidder's
preference.
The memo says that privatization favors a few large firms
headquartered elsewhere and he admitted that his firm is
headquartered in Anchorage. It also alleges that the bill favors
a single firm, but he said the expansion and extension of the
pilot does not guarantee his company any business. He has a
current contract for a current scope of work that is very
limited and it expires on June 30, 2006. The administration will
then have three options. It can renew the contract for one
renewal term, it can choose to rebid or it can choose to not
renew it and replace his contract service with state employees.
2:35:20 PM
CHAIR BUNDE said he assumed if the state employees wanted a
competitive bid, they wouldn't be treated any different than any
private firm. He asked Mr. Hawkins if he supported that
competition.
MR. HAWKINS replied that he wouldn't be in any position to
oppose it. He understands that collective bargaining agreements
allow a period of time for affected unions to respond and that
response is entirely out of his hands.
2:35:55 PM
SENATOR ELLIS asked if the state precluded state employees from
putting their proposal forward.
MR. HAWKINS replied no.
SENATOR SEEKINS said if the state employee were to use his
position or the knowledge of any privileged information within
his position to try to compete for a contract like that, he
might run into severe ethics problems.
2:36:40 PM
CHAIR BUNDE said collective bargaining agreements allow it.
MR. HAWKINS returned to commenting on the memo that accuses the
bill of mandating a one-size-fits-all privatization model that
might not be appropriate for all agencies. However, he said the
feasibility assessment would determine if the model was
appropriate for all agencies. The memo sites specific federal
requirements for the use of federal funds in procurement and
those are a factor that could be worked through on an agency-by-
agency basis. It could be a limiting factor in terms of the
scope of the pilot.
The memo also accuses the bill of raising constitutional
concerns in terms of allowing the contractor to set the rules.
However, these concerns have come from the Arizona Center for
Alaska Constitutional Studies. But, HB 313 didn't appear to
raise any constitutional issues and he doesn't get to set the
procurement rules. He has to follow them.
Another section claims that the bill will expose the state to
litigation because it might impair existing contracts that other
vendors would have with the state.
2:38:16 PM
MR. HAWKINS said his model does not have him contracting
directly with vendors or contractors. His company performs
administrative functions; the contracts are state contracts.
When he takes over an office, as with DOTPF Southeast Region, he
inherits a portfolio of contracts to administer under their
existing terms and conditions. That administration and
subsequent actions have to be consistent with the contracts, but
also have to occur under the state's procurement code.
The contractor is accused of having an economic relationship
with a government official, but he wanted to put on the record
that no one associated with ASCI has any relations with anyone
in the Alaska government.
2:41:36 PM
MR. HAWKINS said there are several reasons to privatize this
function. These activities have become more system-oriented with
web tools and management specialization and the cost of the
overhead infrastructure can be shared across other entities. He
brings exposure to other ways of doing things in doing this type
of activity for multiple clients. Another benefit is elimination
of long-term retirement obligations as procurement and supply
chain personnel are moved to private sector employment.
2:44:29 PM
He said this program is very new, but the major milestones have
been met. The operation is on schedule. "We have delivered
significant personnel cost savings. We've achieved some
significant historical firsts in E-commerce...."
However, he said the engagement was way too small to be able to
bring the full resources of what he could bring to the table. He
can offer value in pooling volume of several state agencies and
get better pricing. It's hard to show the value of the program
using such a small corner of business.
2:48:30 PM
The Office of Management and Budget (OMB) contract compliance
report says the contract has been complied with. He went on to
explain that in a previous position he used to spend time
promoting Anchorage as a supply chain and logistics hub. Some
years ago he formed a company that is attempting to do that in
the private sector.
2:52:43 PM
CHAIR BUNDE said that the pilot program displaced 10 state
workers and asked if he was obligated to try to provide
employment for those workers.
MR. HAWKINS said he tried, although he did not have a
contractual obligation. He scheduled assumption of duties and
schedules in such way as to minimize impacts on impending
retirements. He spent a fair amount of time in the preparatory
month interviewing and working with the affected staff members
who were being eliminated. Every single one in the procurement
office was offered a job at comparable pay. None accepted it.
They were able to find similar positions in other agencies.
2:55:14 PM
JIM DUNCAN, Business Manager, Alaska State Employees Association
(ASEA), opposed this legislation. He represents a significant
number of people who would be impacted by this project as well
as those who lost their jobs. He is concerned about the long-
term impacts on his members.
Procurement of goods and services for state governments is an
important issue and must be handled carefully to maintain public
trust and the integrity of the system. He applauded adding
bidder preferences on page 2, but he asked the committee to look
at page 1, line 14 that says "a procurement conducted by the
person selected under (a) of this section is not subject to this
chapter or to AS 36.15." That means that any procurement that
is conducted by the contractor who is selected under this
project is exempted from the Procurement Code.
2:58:36 PM
The Procurement Code was not just thrown together lightly or
quickly. It was done with much forethought and study to ensure
that the public trust was being maintained. In 1986, the
Legislature adopted the Model Procurement Code (MPC) and it was
endorsed by the American Bar Association. He thought it should
be strengthened to make sure the public trust was maintained to
the fullest. He was concerned that one sentence on page 1, line
1, would say that the contractor is not subject to the
Procurement Code that has been in place since 1986.
3:02:27 PM
As a commissioner of the Department of Administration, Mr.
Duncan said he oversaw the procurement process and he thought it
worked well.
3:03:14 PM
He pointedly thought this is premature and there is no clear
indication that the pilot project is successful or not. His best
information indicates first quarter cost of goods increased 20
percent and the audit on the next quarter isn't complete. He was
confused with the language on the Alaska bid preferences, the
competitive bid process and request for RFP. The jury is really
out on the pilot project.
3:04:38 PM
He responded to Mr. Hawkins' comment about rules and asked if
the negotiated rules would be identical to the procurement code.
Could employees have a high level of trust in them? Is the
integrity of the procurement process protected?
3:06:07 PM
He asked why the legislature would want to give up its
responsibility to set the procurement process in statute to an
administration that would negotiate different rules for every
contract. "That's not where the rules in procurement should be!"
3:06:43 PM
MR. DUNCAN applauded the legislature for wanting to look for
ways to bring about more efficient government. His union wants
to bring about more efficient government. He said the union did
not have a chance to respond when the pilot project was
originally let. It did not have an initial chance and has a
grievance filed that will probably go to arbitration.
On February 11, 2004, ASEA received a letter from Commissioner
Miller, DOA, giving notice of the results of a feasibility study
to determine the potential cost and benefits of the pilot
project in the Southeast Region. The study stated that there
would be a project savings of more than $260,000 and a projected
approximate $200,000 each year after that. He requested further
information on March 3 relating to the detailed cost analysis
ASCI performed in building their budgets and operation plans and
that analysis was referred to in the ASCI bid document.
On March 5, the state refused to provide a copy of
that detailed cost analysis stating it was an internal
document prepared by ASEA. It was not a requirement of
the RFP and the cost analysis was not received by the
state. The state said they couldn't provide it to us,
because they didn't get it.
On March 12 ASEA did submit an alternate plan and the
commissioner rejected it on March 19. He was told at that time
the cost analysis was not available. ASCI's cost analysis was
not provided to the union and it had no way to determine it was
correct and neither could the state.
3:10:05 PM
BEAU GRANT, President, Beau Geste Enterprises, said he
specializes in procurement management and is here on behalf of
the unions. He has over 30 years of experience in government
procurement at the federal, state and local levels. He
specializes in general procurement management and strategic
planning, investigative consulting, expert witness work and he
is also a certified mediator and arbitrator with AAA.
He handed out a new response. He said that government business
is not the same as private business. Government procurement
consumes approximately 23 percent of the nation's gross national
product and services, which translates to approximately $1.7
trillion per year. It is the biggest company on the planet.
The first difference is the law. In the private sector he can do
whatever the law does not explicitly prohibit him from doing.
But in the public sector, people can only do what the law
specifically allows them to do. Because of the legislature's
fiduciary authority it must have enabling legislation to receive
the authority to spend public dollars. You can't just give that
to a company and excuse them from the code. If there is no law,
if there are no guidelines assurances as to how the money is
spent, then whoever is spending it has no authority. The market
is different, the customer is different.
3:16:58 PM
He did not think that all the impacts of privatizing procurement
had been thought through and identified. ASCI has already
indicated that things had happened that weren't planned, because
they were doing business in the private sector. He also pointed
out that no one else bid for the project and he thought some
would have if privatization had been successful somewhere else.
MR. GRANT said that 85 percent of all privatization is
contracting out and that is what public procurement
professionals are trained to do.
The reality is [privatization] hasn't been
successful.... Unfortunately, 45 out of 50 states have
suffered severe deficit budgets and we have found a
direct relationship between those budgets and the
over-expenditures caused by [indisc.] procurement and
no contract management. If you don't manage it; if you
don't measure it; don't expect it to succeed....
3:18:12 PM
He said there are good examples of what can be done in-house
with having to pay someone else to do what you could do.
3:20:58 PM
SENATOR BEN STEVENS asked him where he is located.
MR. GRANT answered in Tampa, Florida.
SENATOR BEN STEVENS noted that page 16 of Mr. Grant's memo says,
"History teaches us that if anything, privatized systems - the
only cost savings a state receives - is by the elimination of
employees."
He asked Mr. Grant if he thought the only way to achieve
efficiency is to hire more people.
MR. GRANT replied that the only way to achieve real savings that
will reduce the need for people is to use E-commerce, but you
don't need to go outside to get that done.
3:23:06 PM
SENATOR BEN STEVENS said the conclusion at the bottom of page
25-26 says, "There is no immediate budget crisis in Alaska and
there is time to reflect." He hadn't seen any entity put that in
writing before.
3:25:09 PM
SENATOR SEEKINS asked Mr. Grant for a brief about the comment on
page 21 that this bill could have US Constitution issues.
3:25:57 PM
KENNETH BROWN, Anchorage, said he is a 30-year state employee
and his is one of the positions ASCI tried to outsource. He was
involved in the union response to the RFP. He said:
I'm here today to ask you not to break two contracts.
Passing this bill will. Section 2 repeals the previous
statute that created the pilot project and changes the
sunset date and the way I read it, it breaks the
contract that the Department of Administration has
with Alaska's Supply Chain Integrators. Secondly, it
would break a more important contract - the
Constitution - the contract between the people and
their government....
He said the pilot project was an enormous disruption to his
business and he said that costs money that was not allowed to be
included in the studies.
MR. BROWN said he wrote most of the counter proposal for ASEA.
In it, he assumed a fair and equal basis of comparison would be
allowed and that the union would be allowed to deviate from the
Procurement Code the same way ASCI was allowed. He proposed
viable alternatives including a process that preserved the use
of Alaska preferences and it was rejected. Additional costs were
even added to his proposal. But, ASCI's cost projections were
accepted without verification including $120,485 in start-up
expenses, which he thought was an unethical manipulation.
3:31:59 PM
He also stated that ASCI could not prevail upon the legislature
to break or alter their agreement with the administration.
BARRY JACKSON, retired state employee, said he served as the
Acting Director of the Division of General Services in the
Department of Administration, as a Deputy Director and a
Contracting Manager for decades. He is currently employed by
Resources Data as a programmer analyst, a project manager and a
procurement consultant. Resources Data performs services for
ASCI and he has helped prepare the documents for this contract.
He said:
In the mid-80s, when I was still a state employee, we
were faced with a catastrophic reduction in our
staffing capabilities. My staff in Anchorage at that
time was cut literally in half. The only way we were
able to cope with that was through attempted
automation efforts.... I wrote programs that were used
from 85' until almost 1998 or so. It was only through
the use of these automation tools that we were able to
successfully carry on. Otherwise we would have had a
crash and burn in our capacity to do the business of
the state.
3:34:28 PM
CHAIR BUNDE handed the gavel to Senator Seekins.
MR. BROWN continued:
What ASCI is offering to do here is to give the
legislature the opportunity to see that coming again
as it certainly appears to be. The time will come when
there will be a need to cut state employees, including
in the procurement function. There will be no way to
cope with the work that is generated by the
departments to accomplish their missions without some
form of continued automation. ASCI has the tools. I've
seen them; I've trained on them. They are very useful
tools. They fit Alaska's state government very well.
So, I'm very enthusiastic about the use of those tools
and I believe that they will make a big difference
when that day comes that the legislature has to face
it and start cutting positions.
3:36:49 PM
BEN MILAM, Anchorage, said he has 30 years of contracting
experience, four professional certifications and has worked with
Alaska businesses helping them to get government contracts. He
has also worked as a private contractor. He understands the
philosophy of government contracting and public purchasing
better than most. "My only comment on this is this is just
really poor public policy - to contract out pursing in the first
place."
MR. MILAM said he belongs to a news clipping service and sees
many ethics violations by government officials in purchasing and
contracting who have let contracts to their friends, have rigged
contracts and those kinds of things. In government, that kind of
thing is illegal, although it's not in the private sector.
If a private business wants to give business to his
best friend, that's okay. It's his money and he can
spend it the way he wants to. But if you're spending
public money as we are, you can't do that. That's the
reason, as Mr. Duncan said, that we have a Procurement
Code.
CHAIR BUNDE announced that the bill would held and adjourned the
meeting at 3:40:53 PM.
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