Legislature(2011 - 2012)CAPITOL 106
03/13/2012 08:00 AM House STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB212 | |
| HB239 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 212 | TELECONFERENCED | |
| *+ | HB 239 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 239-PROF. SERVICES IN STATE-FUNDED CONTRACTS
9:16:45 AM
CHAIR LYNN announced that the final order of business was HOUSE
BILL NO. 239, "An Act relating to the procurement of
architectural, engineering, or land surveying contracts funded
by money from the state."
9:17:00 AM
REPRESENTATIVE LINDSEY HOLMES, Alaska State Legislature, as
sponsor, presented HB 239. She said currently the State of
Alaska uses a qualifications based selection process when using
its own money for state projects; the federal government
similarly requires qualification based criteria when federal
grants or other money are involved. Under HB 239, the process
would be extended to state grants being used [for architectural,
engineering, and land surveying] projects.
REPRESENTATIVE HOLMES said when consumers search for a physician
or lawyer, or when they shop for a vehicle, the first
consideration is not price, it is experience and value. In the
example of buying a car, she said a price is negotiated only
after a vehicle with the necessary features has been found.
Representative Holmes suggested the same process should happen
when the state bids; once the state chooses the best company
based on qualifications, it would then negotiate for price with
that company. If that company will not give a price that is
acceptable, then the state would go to the next company on the
qualification-based list.
9:20:47 AM
CHAIR LYNN commented that the information in resumes can be
selective, and choosing from them subjective.
9:21:28 AM
REPRESENTATIVE JOHANSEN asked if the ultimate focus of the
proposed legislation is quality of work or cost savings.
REPRESENTATIVE HOLMES answered it is both.
CHAIR LYNN suggested that it is the responsibility of the state
to include its expectation for a project in its request for
proposals (RFPs).
REPRESENTATIVE HOLMES said, "That depends."
9:23:17 AM
MIKE COUMBE, Staff, Representative Lindsey Holmes, Alaska State
Legislature, on behalf of Representative Holmes, sponsor,
offered a summary of HB 239, as follows:
It requires that state funded contracts be negotiated
with the most qualified and suitable professional of
demonstrated competence, also considering proximity to
the project site. If those negotiations fail, the
state funded contractor will negotiate with the next
qualified professional, in order of ranking.
Proposals may be rejected by the state contractor.
Situations of public necessity are excluded from these
requirements. Price can be considered, as long as the
project evaluators are registered professionals. And
this does not apply to contracts incorporating both
design and construction work.
9:27:06 AM
MR. COUMBE, in response to Representative Johansen, clarified
that the bill addresses all contracts in which the state
invests.
REPRESENTATIVE JOHANSEN said if the intent is to include
anything engineered in the state, then that will raise a lot of
questions.
9:28:50 AM
REPRESENTATIVE HOLMES said she would research that issue.
9:29:01 AM
REPRESENTATIVE SEATON expressed concern about including land
surveying, because "it's done for numerous things." He directed
attention to a sentence beginning on page 1, line 6, which read
as follows:
If a contracting person procures architectural,
engineering, or land surveying services for a state-
funded contract, the contracting person shall, when
selecting the contractor, negotiate with the most
qualified and suitable professional person of
demonstrated competence to perform the services.
REPRESENTATIVE SEATON said that sounds like the RFP process
would not even be used.
REPRESENTATIVE HOLMES deferred to Mark O'Brien for an answer
regarding RFPs. She said licensing is still very important.
9:32:05 AM
REPRESENTATIVE SEATON said it does not sound like there would be
any real cost constraint, as long as negotiations are made and
there is enough money from the state for the project.
REPRESENTATIVE HOLMES responded that "this language" is the same
language as that which applies to fully state-funded projects.
She deferred again to Mark O'Brien.
9:33:41 AM
CHAIR LYNN questioned whether the system is broken and, thus,
needs to be fixed.
MS. HOLMES recommended that the committee hear from those
waiting to testify. In response to a follow-up question from
the chair, she said she does not think the proposed legislation
would either decrease or increase competition.
9:34:57 AM
REPRESENTATIVE JOHANSEN directed attention to language on page
2, lines 22-23, which read as follows:
(f) This section does not apply to a contract
that incorporates both design services and
construction.
REPRESENTATIVE JOHANSEN asked why that language is in the bill.
REPRESENTATIVE HOLMES said she believes the language aligns with
current state practice.
REPRESENTATIVE JOHANSEN indicated that within DOT&PF, there is a
movement towards "design build and cost savings."
9:36:11 AM
MR. COUMBE, in response to Representative Johansen, said the
idea for HB 239 originated from the Alaska Professional Design
Council (APDC).
9:36:40 AM
MARK O'BRIEN, Chief Contracts Officer, Contracting and Appeals,
Office of the Commissioner, Department of Transportation &
Public Facilities, offered a review of the state's selection
process. He said since the state procurement code was enacted
in 1986, the department has been using a qualification-based
selection process, which has been required for every federal-
based contract since 1972. Currently, grant recipients in state
and local governments who receive any federal aid are required
to perform a qualification-based selection. Some use price as a
factor and some do not, he said. Mr. O'Brien offered his
understanding that there are 42 states that currently have a
qualification-based selection process. Of those 42, 21
currently require what is proposed in HB 239.
9:39:44 AM
MR. O'BRIEN said in a low-price selection process, any potential
design savings may be offset by higher construction or operating
costs from a less than optimal design consideration. He relayed
that a life-cycle cost or lifespan of a building engineered is
typically about 40 years, and negotiated design fees are usually
less than 1 percent of that, while the other 99 percent fall in
the category of maintenance and operation costs. He said it can
be short-sighted to try to save money on the 1 percent, while
the other 99 percent is "expensed out over the life of the
building because additional design considerations were not taken
into effect." Mr. O'Brien said when design decisions are driven
by low price, the emphasis of the design professional changes
from being able to take advantage of the full range of design
opportunities, which may affect the efficiency of the building
over time, to having to focus solely on managing costs.
9:41:51 AM
MR. O'BRIEN, in response to a request for clarification,
explained that the purpose of HB 239 is to change the process by
which all state and local governments acquire their
architectural, land surveying, and engineering services: price
would no longer be a factor in the selection of the most
qualified firm; it becomes a factor later on. He continued as
follows:
The state, when we go out to ... acquire an architect
or an engineer, we send out a request for proposal, we
get in proposals from those interested firms, we
evaluate them ... only on their qualifications, we
take the highest ranked firm, and we enter into
negotiations for the actual scope of services that
we're trying to acquire. That's the process; and
that's the process that this bill then imposes on
local jurisdictions for state money that's handed
down. So, ... the comments that I made about low
price were relative to the process that may be going
on out there and why it may be worthwhile to consider
a qualification-based requirement.
9:45:01 AM
MR. O'BRIEN, in response to Chair Lynn, said cost containment is
a project management issue rather than a selection process.
9:46:34 AM
REPRESENTATIVE SEATON offered his understanding that the
proposed legislation would require [a contractor using state
awarded funds] to negotiate with the most qualified entities,
but would not require RFPs.
9:48:14 AM
MR. O'BRIEN said AS 36.30.270 - statute applying to architects,
engineers, and land surveyors - falls under the competitive
sealed proposal section of the procurement code. He said, "That
issue is addressed in ... procurement code and statute and
regulation for us, pointing to an RFP process in advance of
that, and that is absent from this." He noted that there is one
reference to rejection on page 2, line 7, which read, "The
contracting person may reject all or part of a proposal
submitted under this section." He said that implies that there
is a proposal process.
9:50:41 AM
REPRESENTATIVE KELLER said it is obvious that Mr. O'Brien has
faith in the quality selection process. He ventured, "It seems
like ... you could preclude in that process the contractor that
may, in fact, be the one that can give you the best product for
the best price." He pointed to the word "proximity" [on page 2,
line 1], and noted that the language does not specify whether
near or far is better. He expressed concern that "using
criteria like that could ... prevent you from cost containment
in step two."
9:52:10 AM
MR. O'BRIEN said a professional's experience and ability to
provide a desired design is not necessarily tied to that
professional's hourly price. He explained that a firm with a
higher hourly rate may have done so many iterations of a project
that it is more time efficient in carrying out the project than
a firm with a lower hourly rate that has not had the same
experience. He continued:
Does price tell you how much you're going to get in
terms of value from that contractor? And for a
professional, I would argue no. It's the same reason
you wouldn't select a doctor by price, you wouldn't
select an attorney by price. There are factors other
than that that are more important in terms of their
qualifications and their ability to perform for you
the product that you're looking for.
9:54:00 AM
REPRESENTATIVE JOHANSEN offered his understanding that Mr.
O'Brien said this process already takes place when federal money
is being used. He asked, "We're just talking about strictly
state money and some other source, and not federal money, is
that correct?"
MR. O'BRIEN answered that is correct.
REPRESENTATIVE JOHANSEN asked, "Would it be fair to say that ...
most every project we do has some sort of federal money
involved, and that all of those are already under this umbrella,
[vis-à-vis] this language?"
MR. O'BRIEN said that is correct.
REPRESENTATIVE JOHANSEN gave an example of a $10 million dollar
library project taking place in Ketchikan, using a local $5
million municipal bond and a state appropriation for $5 million,
and asked if, under HB 239, "we would be able to do the project
under these statutes."
MR. O'BRIEN replied that if HB 239 passes and that project is
partially state funded, then he believes the answer is yes. He
said he would have to read the law to recollect whether the
distinction is partially or fully state funded.
9:55:59 AM
REPRESENTATIVE JOHANSEN questioned whether municipalities and
local entities have the expertise, time, and energy to "go
through this process."
MR. O'BRIEN responded, "If they're currently receiving any
federal aid funds - directly or passed through to the state -
they're already doing it."
9:56:47 AM
KATHIE WASSERMAN, Legislative Director, Alaska Municipal League,
said AML members discussed HB 239 at AML's legislative
conference last month and no one could figure out what the
problem was that necessitated the proposed legislation. She
said she has never heard that the procurement rules are an
issue. She said a few years ago, when she was the mayor of
Pelican, Alaska, the state turned over its harbors to the
municipalities, and the amount of money she received to restore
Pelican's harbor was very small. She said that "it's all about
money," and to not be able to make decisions based on cost would
"tie up everything." She mentioned the proximity requirement
under HB 239, and she said although she agrees with the bill
sponsor that she would not necessarily choose a doctor based on
cost, she said proximity would not enter into her decision
either; she would fly to Seattle to see a doctor if she had to
do so. Conversely, she said she would consider cost when buying
a vehicle. She said as former mayor she has received federal
money many times, but has never gone through the process
described by "the gentleman from DOT." She expressed doubt that
what works for DOT will also work for small communities that are
doing all they can with few resources.
9:59:40 AM
MS. WASSERMAN, in response to Representative Johansen, said she
does not remember ever going through an RFP process any
differently with federal money than with state money. In
response to Representative Seaton, she offered her understanding
that most municipalities have a set amount under their
ordinances under which they do not require RFPs, but that amount
is usually very small. She reemphasized the relationship
between a low budget and consideration of cost. In response to
a follow-up question, she stated her belief that AML's problem
with HB 239 is that it does not believe there is a need for it.
10:02:07 AM
REPRESENTATIVE JOHANSEN encouraged Ms. Wasserman to speak with
the other municipalities about considerations of larger versus
smaller communities.
10:03:45 AM
CHAIR LYNN noted that there were several people left to testify,
with no time left.
10:04:14 AM
CHAIR LYNN announced that HB 239 was held over.