Legislature(2019 - 2020)ADAMS ROOM 519
05/13/2019 02:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB44 | |
| HB139 | |
| SB16 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 44 | TELECONFERENCED | |
| += | HB 139 | TELECONFERENCED | |
| + | SB 16 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
HOUSE BILL NO. 139
"An Act providing an exemption from the state
procurement code for the acquisition of investment-
related services for assets managed by the Board of
Trustees of the Alaska Permanent Fund Corporation."
Co-Chair Wilson reported that the committee had wanted to
better understand the procurement process during the prior
discussion on HB 139.
2:39:12 PM
LINDA POLK, CONTRACTING OFFICER, DEPARTMENT OF
ADMINISTRATION, introduced herself. She relayed that she
was prepared to answer questions from the list of questions
she had received from the committee. She answered the
question regarding when the procurement code was
established. She indicated that the code in AS. 36.30 was
effective on January 1, 1988 and was based on the American
Bar Associations (ABA) model procurement code. The ABAs
code was established in 1979 after extensive work. It was
one of ABAs most successful projects. She addressed a
question regarding code revisions. She indicated that the
ABA code was revised between 1997 and 2000 with input from
the National Institute of Government Purchasing (NIGP) and
the National Association of State Procurement Officials
(NASPO). She furthered that SB 12 Public Procurement
[CHAPTER 59 SLA 13] adopted on June 26, 2013 modernized AS
36.30. She listed some of the changes to the code; i.e.,
allowing electronic bids, raising the small procurement
threshold, bidders' preferences were consolidated and
simplified, and the Alaska business license requirements
were modified. She elaborated that initially, an Alaska
business license was required to submit a proposal, which
delayed vendors submissions and reduced competition. The
change required an Alaskan license once the bid was
awarded. She turned to why the procurement process took so
long. She delineated that small procurement ($100 thousand
or less) was completed in a matter of days and up to a few
weeks. Formal procurement took 3 to 6 months and sometimes
longer. The procurement requests were required posting on
the online public notices system for 21 days to ensure
fairness. A procurement officer had the ability to reduce
the public notice time if necessary. She furthered that
bids were evaluated, and negotiations were conducted during
the 3 to 6 month procurement period. She noted a question
concerning the benefits of a procurement code. She
delineated that the code increased consistency across
agencies, informed the vendor community about the states
expectations, and provided equal treatment and fairness to
vendors. She added that the Alaska Bidders Preference fell
within the procurement code and gave in-state vendors an
advantage. The code offered transparency, encouraged
competition, and resulted in the best value for the state.
She addressed the final question that had been posed
regarding what code benefits would be forfeited if the
Alaska Permanent Fund Corporation (APFC) was granted the
exemption. She remarked that the answer depended on the
type of procurement. However, in general competition,
transparency, justification, Alaska preferences, vendor
protests, and public trust would be lost with the
exemption.
2:44:50 PM
Representative Carpenter asked if the whole procurement
process had been evaluated for improvement purposes or were
revisions addressed piecemeal. Ms. Polk responded that the
code through the ABA was reviewed regularly. She noted that
16 states had adopted the code. She reported that the
Department of Administration (DOA) did not regularly review
the code but did make regulatory changes at times.
Representative Carpenter asked about the 21-day review
period waiver. Ms. Polk reported that the waiver was
possible with any procurement under certain circumstances.
She elucidated that an immediate need or very few vendors
able to participate were reasons to shorten the public
review period. Representative Carpenter asked if it was
possible to achieve a 10-day waiver for the Alaska
Permanent Fund Corporation. Ms. Polk indicated that there
was pre-work that had to be done prior to posting but
stated that a 10- day waiver was possible.
2:48:10 PM
Representative Knopp asked about the difference between the
small procurement process and the formal process. He
deduced that the difference was the public notice period
and the dollar amount of over $100 thousand for formal
procurement. Ms. Polk responded that the small procurement
process had 3 levels: $0 to $10 thousand allowed a direct
purchase, $10 thousand to $50 thousand required 3 price
quotes, and above $50 thousand required written quotes. She
added that small procurement was exempt from any time frame
requirements. Representative Knopp suggested that the state
followed similar guidelines as local governments for small
procurement. He asked whether the formal procurement
process was implemented with purchases over $100 thousand.
Ms. Polk responded in the affirmative. Representative Knopp
asked how sole source contracts worked for the state and
whether the contracts followed the small procurement
process. Ms. Polk answered that the state maintained a sole
source procurement process. She conveyed that for small
procurements it merely needed the commissioners approval.
Sole source formal procurements required approval by the
agencys commissioner and the Chief Procurement Officer.
She qualified that APFC was asking to be exempt from any
outside oversight. Representative Knopp asked if the
procurement officer's signature would be required. Ms. Polk
responded in the negative and added that the AS 36.30
procurement exception exempted APFC from every code
requirement. Representative Knopp asked whether the
procurement officer could reject a sole source contract.
Ms. Polk answered in the affirmative.
2:51:52 PM
Representative Josephson purported that Ms. Polk had
described the flexibility in current law. He asked her to
repeat her answers regarding the minimum release time. Ms.
Polk replied that the code required a listing on the Online
Public Notice system (OPN) to be posted for 21 days.
However, the timeline could be shortened if the procurement
officer determined it was necessary. The officer had to
place a written note in the file stating the need for the
shortened period. The officer could shorten the time as
needed as long as decent proposals were received.
Representative Josephson noted that the committee had been
given a list of allowable adjustments to the procurement
code [APFC Legislative Initiative: Procurement
Streamlining (copy on file)]. He asked what else could be
adjusted. Ms. Polk replied that quite a few things could
be adjusted depending on the scope of work required. She
reported that there was no way to get around a 10-day
protest period. She delineated that during the 10-day
protest period, a Proposal Evaluation Committee reviewed
the proposal. If the committee was quick, an approval could
happen in a matter of days. However, sometimes the
committee was busy, and review could take much longer.
2:54:26 PM
Vice-Chair Johnston suggested that her question might be
unfair. She voiced that some procurements were very
technical and noted that Ms. Polk stated that a timely
review depended on how busy the evaluation committee was.
She asked if procurement backlogs existed. Ms. Polk
responded in the negative. She alerted the evaluation
committee when to expect proposals and requested the
committee to dedicate the proper amount of time for timely
review. Vice-Chair Johnston recalled Ms. Polk's testimony
to Representative Josephson about the times the committee
was busy and not as able to be as responsive. Ms. Polk
indicated she had provided an example of what could slow
the process down. She voiced that a procurement officer was
in control of the procurement and an officer would disallow
a committee to draw out a timeline for a procurement for
one that had to be rushed.
Co-Chair Wilson recalled that investment management
contracts were currently exempt. She understood through Ms.
Polks testimony that the 10-day exemption was not really
an issue. Ms. Polk replied in the affirmative. Co-Chair
Wilson asked how often a procurement was protested and
required a new solicitation. Ms. Polk answered that a
solicitation was called a draft RFP (Request for
Proposal). Often, vendor feedback caused an RFP to be
amended before the closing date. She mentioned that
protests happened and caused the process to take much
longer than planned. Co-Chair Wilson asked if the protest
happened immediately after closing or at the end of the
protest period. Ms. Polk responded that a vendor could
protest a solicitation 10 days prior to the solicitation
closing. The solicitation could be fixed prior to the end
of the solicitation period. Co-Chair Wilson asked for
clarification regarding protesting a sole source award. Ms.
Polk indicated that any sole source award could be posted
within 10 days.
2:59:37 PM
Representative Carpenter asked for clarification concerning
the 10-day period. Ms. Polk responded that a sole source
contract was subject to the 10 day protest period.
Representative Carpenter asked how long the sole source
process took. Ms. Polk answered that it depended on how
long the sole source justification documentation took and
the required approvals by either the commissioner or both
the commissioner and chief procurement officer. She
maintained that small procurements could be approved within
a day.
Co-Chair Wilson provided a hypothetical scenario in which
there was a small window of opportunity for the
procurement. She deduced through Ms. Polk's testimony that
the procurement process could meet a 10 day deadline and
asked whether she was correct. Ms. Polk asked whether she
was referring to an RFP or a sole source contract. Co-Chair
Wilson answered that her question related to the bill and
whether the process could be shortened from 54 days to 10
days. She recounted that APFC had to hire a third party and
pay 20 percent of the investment profits to the entity in
order to avoid a lengthy procurement process. She offered
that none of the committee members wanted to lose 20
percent of the profits. Ms. Polk explained that merely
shortening the public notice process did not shorten the
entire process to 10 days due to the 10 day protest period
subsequent to the state choosing the vendor. She replied
that a formal solicitation could not be completed within 10
days. Co-Chair Wilson ascertained that the protest period
was the essence of the bill exemption. She determined that
pre-work prior to solicitation had to be completed
regardless of the process and that exempting the appeal
period was the crux of the legislation. Ms. Polk responded
that she was correct.
Co-Chair Wilson asked Vice-Chair Johnston to comment.
Vice-Chair Johnston replied that she generally agreed with
Co-Chair Wilson. She added that a highly technical sole
source contract process could cause a delay.
Co-Chair Wilson returned to the subject of sole source
contracts which she thought mainly applied to the APFC. She
asked how sole sourcing worked compared to procurement. Ms.
Polk explained that APFC had to supply a justification
regarding a sole source procurement. The procurement
officer would examine the justification to ensure it met
the sole source requirements. Her office typically approved
them in the same day and the contract would be ready for
the commissioner's signature.
Co-Chair Wilson asked Ms. Rodell to testify. She wanted to
understand whether the bill primarily addressed sole source
contracts. She thought that there were two issues; formal
solicitations and sole source contracts.
3:06:55 PM
ANGELA RODELL, EXECUTIVE DIRECTOR, ALASKA PERMANENT FUND
CORPORATION, explained that the bill only pertained to sole
source investment related services and would no longer need
the approval of the commissioner or general services prior
to making an award.
3:07:41 PM
Representative Josephson asked for clarification around the
term "sole source." He wondered if it meant the contracting
party needed to argue that the vendor was the only one
available to perform the service. Ms. Rodell answered in
the affirmative and furthered that when the APFC prepared
the justification they had to explain why the vendor should
be given the contract without having to go through the
formal procurement process. If either the commissioner or
chief procurement officer disagreed, APFC had to go through
the formal procurement process. Representative Josephson
asked if the exemption granted APFC cart blanch. Ms. Rodell
responded that APFC would internally document the
justifications for its selections and hiring. The
corporation was subject to Legislative Audits and its own
annual audits. She pointed out that the exemption applied
to a limited set of procurements and was not a full
procurement exemption. The corporation still preserved its
justification process. The procurement would no longer need
the approval of the commissioner and the procurement
officer.
Co-Chair Wilson asked why Ms. Polk stated that the process
would be less transparent under the exemption. Ms. Polk
responded that the solicitation was exempt from public
notification.
Vice-Chair Johnston asked if the ARM Board or the
investment arm of the Department of Revenue (DOR) was
required to go through the procurement process. Ms. Polk
did not know the answer to the question.
3:10:37 PM
Vice-Chair Johnston asked if Ms. Rodell knew whether the
ARM Board had to go through the procurement process. Ms.
Rodell responded that the ARM Board had a complete
exemption.
Representative Carpenter asked if the public notice period
would impact APFCs solicitations. Ms. Rodell replied that
it could prove problematic to enter into the investment if
the investors discovered that APFC was seeking third-party
advice. Sometimes the investments were highly confidential
in cases of mergers, acquisitions, or initial public
offerings. She indicated that if the corporation was
telegraphing via a public notice that it was seeking
investment advice, it could jeopardize the investment
opportunity.
Vice-Chair Ortiz wondered what percentage of the
corporations total investments the exemption applied to.
Ms. Rodell replied that the amount was roughly 12 percent.
Vice-Chair Ortiz recalled her testimony that the earnings
from the 12 percent of investments totaled 30 percent. She
responded in the affirmative. Vice-Chair Ortiz asked what
the benefit of the procurement exemption was. Ms. Rodell
responded that part of the corporation's responsibility was
to make the best investments possible by lowering the cost
of investments and ensuring that the largest number of
investment opportunities were available to the fund. The
highest need was to ensure the fund performed optimally.
3:14:15 PM
Representative LeBon asked whether APFC had lost some
investment opportunities because of the procurement
timeline. Ms. Rodell explained that when the corporation
felt strongly about an investment, they had chosen an
alternative route to secure the investment. However, when
the corporation proceeded with the procurement process it
was not as fervent about the investment to warrant going
through an alternative process. Representative LeBon did
not think many other states had something similar to the
Alaska Permanent Fund. Ms. Rodell responded that there were
about 10 states that had something similar and over the
past 10 years the amount of countries with sovereign wealth
funds rose from 30 to 60. She observed that awareness was
growing regarding creating a financial asset from a non-
renewable asset, which offered a tremendous benefit to the
population.
3:16:14 PM
Representative LeBon asked if she had a feel for whether
Alaska had an advantage or disadvantage when competing with
the other states for investments. Ms. Rodell retorted that
Alaska had more of an advantage because of the age and size
of the fund. She noted that North Dakota established its
fund 6 years ago and that the fund was worth $6 billion
dollars. The fund was run similarly to the Alaska Permanent
Fund. Representative LeBon suggested the state needed to be
competitive with the national and global market for the
types of investments. He did not think the corporation was
asking for the exemption if it did not believe that some
investment opportunities could be lost. Ms. Rodell replied
in the affirmative.
Co-Chair Wilson RECESSED the meeting to a Call of the
Chair.
3:18:23 PM
AT EASE
4:12:25 PM
RECONVENED
Co-Chair Wilson discussed the process for the remainder of
the hearing.
4:14:10 PM
Vice-Chair Johnston MOVED to report CSHB 139(FIN) out of
Committee with individual recommendations and the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
HB 139 was REPORTED out of committee with four "do pass"
recommendations and six "no recommendation" recommendations
and with one previously published zero note: FN1 (REV).
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 44 HCS WORKDRAFT FIN v.G (included presc. drug items).pdf |
HFIN 5/13/2019 2:30:00 PM |
SB 44 |
| HB 139 APFC Follow Up HFIN_11MAY19.pdf |
HFIN 5/13/2019 2:30:00 PM |
HB 139 |
| SB44 vsn O Explanation of Changes House FIN 5-13-19.pdf |
HFIN 5/13/2019 2:30:00 PM |
SB 44 |
| SB 16 HCS WORKDRAFT FIN v.C.pdf |
HFIN 5/13/2019 2:30:00 PM |
SB 16 |