02/08/2010 01:30 PM House FINANCE

HOUSE BILL NO. 225                                                                                                            
                                                                                                                                
     "An  Act   relating  to  the  State   Procurement  Code;                                                                   
     relating  to  the  procurement  of  supplies,  services,                                                                   
     professional  services,   construction  services,  state                                                                   
     fisheries products,  state agricultural  products, state                                                                   
     timber,  and  state  lumber;   relating  to  procurement                                                                   
     preferences;  relating to procurement  by the  office of                                                                   
     the  ombudsman, the  Alaska  Industrial Development  and                                                                   
     Export  Authority,  the  Alaska  Energy  Authority,  and                                                                   
     other  state  agencies  and   public  corporations;  and                                                                   
     providing for an effective date."                                                                                          
                                                                                                                                
3:48:19 PM                                                                                                                    
                                                                                                                                
Representative  Fairclough introduced HB  225 as  a technical                                                                   
and   comprehensive  way   to   streamline  the   procurement                                                                   
processes in the state of Alaska.  She stated that her office                                                                   
started with the  Veteran's Preference bill which  has passed                                                                   
the House. She would like to hear  from those who have voiced                                                                   
concerns regarding  Section 18  of the  bill. She noted  that                                                                   
Vern  Jones,   Chief  Procurement   Officer,  believes   that                                                                   
technical   issues   raised   in   Section   18   are   being                                                                   
misinterpreted. She  wanted those who had flown  to Juneau to                                                                   
testify  regarding  their concerns  and  then  set aside  the                                                                   
bill.                                                                                                                           
                                                                                                                                
3:49:51 PM                                                                                                                    
                                                                                                                                
JOHN  MACKINNEN,   EXECUTIVE  DIRECTOR,  ASSOCIATED   GENERAL                                                                   
CONTRACTORS  OF  ALASKA,  voiced his  concern  regarding  two                                                                   
areas of this  bill. He referred to past history  where there                                                                   
were  commonplace practices  among some  contractors who  won                                                                   
bids then would  go back to subcontractors that  bid with him                                                                   
and negotiate on the side. Many  people considered unethical.                                                                   
This process was known as bid  shopping.  Many contractors in                                                                   
the  industry   enlisted  the  help  of  the   Department  of                                                                   
Transportation, the prime contractor  in the state, to pass a                                                                   
bill  resulting in  AS 36.30.115  requiring  a contractor  to                                                                   
list their subcontractors  within five working days  of a bid                                                                   
opening. This  process has worked  very well. He  referred to                                                                   
HB  225, Section  14,  which  allows for  multi-step  revised                                                                   
sealed bidding.  This would allow  the contracting  agency to                                                                   
include  successive sets  of  sealed bids  in  a process.  He                                                                   
believed this  was not intended for construction  contracting                                                                   
business  therefore   it  should  be  stated   as  such.  Mr.                                                                   
MacKinnen  elaborated  that  the present  management  in  the                                                                   
Department of Transportation  says that it would  not use the                                                                   
multi-step revised  sealed bidding and he believes  them, but                                                                   
is concerned that some future  management may change this. He                                                                   
indicated  that  Section  18 has  a  similar  provision  that                                                                   
allows multiple  rounds of  best and  final offers.  He would                                                                   
like  language in  the  provision  that says  it  is not  for                                                                   
construction contracting.                                                                                                       
                                                                                                                                
Representative   Doogan  asked  how   the  language   as  Mr.                                                                   
MacKinnon fears it might be applied, would work.                                                                                
                                                                                                                                
Mr. MacKinnen replied  that a contracting agency  would put a                                                                   
project out for  a competitive bid and once the  bids were in                                                                   
the agency might want to see if  there was a better offer and                                                                   
put  it  out for  a  second  round of  competitive  bids.  He                                                                   
indicated  that  there are  cases  where projects  are  rebid                                                                   
which puts the contractors in  difficult position because the                                                                   
numbers are known.                                                                                                              
                                                                                                                                
Representative  Doogan asked  if this  was a situation  where                                                                   
the first  successful bidder may  be pitted against  everyone                                                                   
else, including themselves. Mr. MacKinnon agreed.                                                                               
                                                                                                                                
3:56:10 PM                                                                                                                    
                                                                                                                                
VERN JONES, CHIEF PROCUREMENT  OFFICER, DEPARTMENT OF GENERAL                                                                   
SERVICES, agreed  with Mr. MacKinnon  that the  Department of                                                                   
Transportation  does not  plan  to use  this in  construction                                                                   
procurement. The  reason behind the changes is  that there is                                                                   
seldom a chance to do a comprehensive  review and updating of                                                                   
the  procurement  codes,  so  things  were  added  that  were                                                                   
believed could be useful at a  future point. He noted that in                                                                   
Sections 14 and  18 there are techniques that  private sector                                                                   
companies have  used with some  success. He pointed  out that                                                                   
these changes were  not aimed at construction.  He thought it                                                                   
important  to   put  in  all   the  tools  possible   in  the                                                                   
procurement  codes to  be successful  to  get cost  effective                                                                   
contracts.  He  added  that  the points  brought  up  by  Mr.                                                                   
MacKinnon  were  valid and  had  no  problem with  making  an                                                                   
amendment to limit or exempt construction.                                                                                      
                                                                                                                                
3:58:19 PM                                                                                                                    
                                                                                                                                
Representative Fairclough  explained it was never  the intent                                                                   
of the bill to make unfair business  practices. She wanted to                                                                   
propose a  tool to  save the state  money. The Department  of                                                                   
Transportation does  not plan to use this practice  so she is                                                                   
not opposed to an amendment.                                                                                                    
                                                                                                                                
Representative   Gara  mentioned  that   in  the   past  some                                                                   
procurement  bills have  been hugely  divisive, but  often it                                                                   
was  a housekeeping  method to  make things  work better.  He                                                                   
wondered if  there were cleanups  necessary to get  items for                                                                   
the state at a  cheaper point than might be  arrived with the                                                                   
bidding process.                                                                                                                
                                                                                                                                
Mr. Jones  responded there  are many housekeeping  provisions                                                                   
specific  to  modernizing and  streamlining  the  procurement                                                                   
code contained  in HB 225. One  of the provisions  raised the                                                                   
threshold  for  a  formal  bid   from  $50,000  to  $100,000.                                                                   
Construction bids would be raised  from $100,000 to $200,000.                                                                   
This would avoid the time consuming  publicly noticed bidding                                                                   
process until  the threshold is  met thereby simplifying  the                                                                   
process.                                                                                                                        
                                                                                                                                
Representative  Gara wondered  once the  bids were turned  in                                                                   
there might still  be circumstances where going  to the store                                                                   
to buy the item is easier and cheaper.                                                                                          
                                                                                                                                
Mr.  Jones  responded  that  the   procurement  officer  must                                                                   
certify  that  the  bids  are appropriate  in  price.  If  an                                                                   
unanticipated high price occurs, then it can be revisited.                                                                      
                                                                                                                                
4:03:30 PM                                                                                                                    
                                                                                                                                
Representative  Salmon noticed  approximately  45 changes  in                                                                   
the  bill and  wondered  if this  speeds  up the  procurement                                                                   
process.  Mr.  Jones  replied   that  the  bill  attempts  to                                                                   
streamline, modernize, simplify  and speed up the procurement                                                                   
process.                                                                                                                        
                                                                                                                                
4:05:17 PM                                                                                                                    
                                                                                                                                
Representative Fairclough interjected  that she would like an                                                                   
opportunity to address  the issues that have  been raised and                                                                   
reach out to the business community for comments.                                                                               
                                                                                                                                
Representative  Kelly   commented  that  if   the  Associated                                                                   
Builders and  Contractors (ABC) have  not weighed in  then to                                                                   
try and get their comments before  rather than after the bill                                                                   
is passed.  Representative Fairclough  raised her  concern to                                                                   
make  the extra  efforts to  get businesses  to respond.  She                                                                   
indicated talking  with Wayne Stevens directly  and asked him                                                                   
to  look at  Section 14  and 18  and  ABC was  in her  office                                                                   
earlier. Both  have been tracking  the issue. She  added that                                                                   
there  is an  elimination of  two preferences  that might  be                                                                   
controversial  to  the  two  individuals   that  access  that                                                                   
preference.                                                                                                                     
                                                                                                                                
Co-Chair Stoltze added that Wayne  Stevens is with the Alaska                                                                   
State  Chamber  of  Commerce   and  ABC  is  a  building  and                                                                   
construction  organization.  Representative  Kelly  suggested                                                                   
consulting the state bidders list.                                                                                              
                                                                                                                                
4:09:10 PM                                                                                                                    
                                                                                                                                
Co-Chair Stoltze noted  that bid shopping is a  tool or dirty                                                                   
word depending on the individual perspective.                                                                                   
                                                                                                                                
SB  225  was   HEARD  and  HELD  in  Committee   for  further                                                                   
consideration.