Legislature(2003 - 2004)
03/18/2003 01:32 PM Senate TRA
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 40-CONSTRUCTION OF HIGHWAYS BY DOTPF
MR. MARK O'BRIEN, Chief Contracts Officer for Department of
Transportation and Public Facilities (DOTPF), told members the
effect of SB 40 would be to prohibit DOTPF and agencies that it
transfers projects to from using their own employees when the
project costs exceeded $250,000, but by statute DOTPF may
exercise the use of a force account in two instances. One is for
community and boardwalk projects where an agency such as the
Bureau of Indian Affairs (BIA) has a project and DOTPF is
providing access to that project. DOTPF may transfer [funds] to
the BIA to accomplish that project. In many cases, a transfer is
in the interest of all agencies and is cost effective. SB 40
would also affect municipalities and cities because they would
be prohibited from asking for and receiving transfer of a
project if the cost exceeded $250,000.
MR. O'BRIEN said the second instance under which DOTPF could
exercise a force account is when they use their own maintenance
staff to accomplish capital projects. DOTPF has been addressing
close to $200 million in deferred maintenance by using federal
aid funds and state maintenance staff to perform those projects
during the summer. The types of maintenance projects that are
eligible include cracked ceilings, bridge repair, chip seal road
surfacing, and others. The program benefits DOTPF in a number of
ways. It provides the ability to transfer costs of the winter
maintenance program to a federal aid project, thereby preserving
general fund dollars for severe winter events. DOTPF can then
retain year-round skilled, knowledgeable employees. It also
allows DOTPF to fund a portion of its equipment costs and defray
some of the state costs of maintaining equipment by charging
those costs to the federal aid projects, which further stretches
the dollars for deferred maintenance.
MR. O'BRIEN said another key factor is the size of the program.
DOTPF's summer maintenance program represents less than three
percent of the federal aid program. More than half of that three
percent is contracted out to the private sector now. He said the
impetus for this legislation was the St. Mary's project.
CHAIR COWDERY remarked the St. Mary's project did stir things up
a bit but he knows that DOTPF did a 35 mile chip seal project on
the Old Seward Highway a few years ago and referred to it as a
maintenance project. He said other states use different
standards for maintenance and construction. He has no problem
with DOTPF doing maintenance work, but he believes construction
projects should go out to competitive bid. He said some states
consider any project that costs over $50,000 to be a
construction project rather than a maintenance project.
He pointed out that before the state came into its oil wealth,
the state got a non-construction rate from the unions during the
winter and hired equipment operators from the union halls to
plow the snow. He said those are some of the reasons he
introduced this legislation. He placed a $250,000 limit in the
bill because DOTPF said some projects cost less than $100,000.
He said he believes the competitive process is a good one and
that everyone should be entitled to the same Davis-Bacon wages
in both rural and urban Alaska.
1:40 p.m.
SENATOR OLSON said the St. Mary's project is in his district. He
clarified that project was completed ahead of schedule and under
budget. He pointed out that it looks like there will be a
request for a significant amount of money to complete the
Anchorage International Airport, which he finds appalling. He
then asked Mr. O'Brien if he had a breakdown of the source of
funds used for force account projects, specifically federal and
general fund money.
MR. O'BRIEN said almost all of the funds used for the force
account programs are federal aid funds. DOTPF receives very
little in terms of general funds.
SENATOR OLSON asked how many DOTPF employees would be affected
by the passage of SB 40.
MR. O'BRIEN said he hadn't done that calculation but one of two
things would happen. Without the ability to use the federal aid
to subsidize the general fund, DOTPF would either have to reduce
its summer employment or it would not be able to respond to
severe winter events with overtime hire. He said management
would have to decide which alternative to take and either
alternative would result in a different number of employees that
would be affected.
SENATOR OLSON asked what kind of effect this legislation would
have on future supplemental budgets.
MR. O'BRIEN said in order to respond to severe winter events,
DOTPF managers would have to make some tough choices. Either
additional funding would have to be provided to pay for overtime
work to address such an event or DOTPF would have to reduce
summer employment. He said a budget increase would be necessary
to maintain a consistent work force throughout the year and
respond to winter events.
SENATOR OLSON asked how much of DOTPF's capital budget would be
affected by this bill.
MR. O'BRIEN said since nearly all of the force account work is
done with federal funds, SB 40 would affect all projects that
cost over $250,000.
SENATOR OLSON said he was asking for a definitive number.
MR. O'BRIEN said he has not computed the numbers in that manner.
CHAIR COWDERY referred to Senator Olson's comment on the St.
Mary's project being completed under budget and said there is
nothing to compare that cost to because it was not put out to
competitive bid. He said he believes an audit is being done on
that project now and added that DOTPF has been very supportive
of the concept of day labor contracts, which would assure that
local people get the work.
SENATOR OLSON said the numbers that were forwarded to his office
show that DOTPF budgeted over $3 million for the St. Mary's
project while total expenditures were about $2.7 million.
CHAIR COWDERY said his point was that a private contractor might
have bid that project at $1.7 million. He said there is no way
to know what the private sector might have estimated the cost to
be.
SENATOR LINCOLN said her questions about Administrative Order
199 (AO 199) hadn't been answered and although she doesn't know
its status, she believes it plays into SB 40. She pointed out
that as a resident of Rampart she has seen what happens when an
outside contractor comes in and doesn't believe in the day labor
contract concept. She has seen outside contractors bring in all
of their own food, manpower, equipment, some housing and even
furniture. Her community pushed for the runway project and had
to be very vocal to get just two local people hired. She said
the letter from Mr. James of the Tununak IRA Council shows that
such jobs are the lifeblood of many small communities and SB 40
would have a devastating impact. She urged to look at what is in
the best interest of the entire state and repeated she is very
uncomfortable that her questions about AO 199 have gone
unanswered.
CHAIR COWDERY asked if the equipment was available in Rampart to
do the runway job.
SENATOR LINCOLN replied some equipment was available.
CHAIR COWDERY said he worked on a number of projects in rural
Alaska and needed to import a lot of things. He hired and rented
locally as much as possible. He said the day labor contract
concept is pretty much tailored to the local people.
SENATOR WAGONER commented that he understands the concerns of
rural communities but he also understands the position of the
contractors. A woman from Nome recently testified that her
company would bid on any size project in rural Alaska. He said
he sees the need for force accounting but believes it should be
limited. He asked how many projects Mr. O'Brien foresees using a
force account on during the next year that would cost in excess
of $250,000.
MR. O'BRIEN said using the year 2000 as a baseline for the
number of projects, two were below $250,000 and the rest were
more. He said, "... just looking back through the lists, a price
tag of $1 million would probably take care of 60 to 70 percent
of them - allow them to be done. A price tag of half that would
probably let 15 to 20 percent of them through."
SENATOR THERRIAULT asked whether any communities formed
construction companies to bid projects or were they are barred
from doing so. He pointed out those communities should be able
to underbid other contractors because they would not have to
mobilize anyone.
MR. O'BRIEN said, in order to do a construction project in
excess of $100,000 in Alaska, an entity must be bonded. In
addition, that entity must meet the requirements set for a
licensed and bonded contractor. A surety company looks at
expertise, past performance, equipment capability and capacity
before it agrees to bond an entity. He said he is not aware of
any consortiums or groups that have been created to respond to
state bids in rural Alaska.
SENATOR THERRIAULT commented those hurdles are not
insurmountable. He questioned whether those requirements should
be waived.
MR. O'BRIEN said there may a way to assist those entities. DOTPF
is restricted by statute to doing business with certain
entities. He said if that barrier is broken down, an entity
could bid a project on a competitive basis.
CHAIR COWDERY said the Native corporations have the ability to
bond small groups.
MR. O'BRIEN said if there is no licensed surety within the
state, there is an option under the bonding for individual
sureties to bond construction companies. It requires two
individual sureties to provide identical bonding at the full
amount.
CHAIR COWDERY asked if the purpose of bonding is to assure that
all employees get paid and to guarantee performance.
MR. O'BRIEN said that is correct.
SENATOR LINCOLN responded to Senator Therriault's question about
why a village could not compete for a bid and said what usually
happens with a force account project is that a particular
village does a particular project, but they aren't ongoing. She
said the Doyon Corporation did get involved in construction for
a very brief time, but none of the 38 village corporations in
the Interior have a construction company because it is cost
prohibitive for small villages.
SENATOR WAGONER said in his area just about all of the oil field
contract work has been taken over by Native corporations. He
said they hire both Native and non-Native employees. He said he
believes strongly in bidding out any project and using force
accounting when no bids are received.
SENATOR THERRIAULT moved SB 40 from committee with individual
recommendations with its zero fiscal note.
SENATOR LINCOLN objected because the only other committee of
referral was the Senate Finance Committee and this committee
didn't even know how many projects would be affected by this
legislation or what is happening with AO 199. She said there are
too many unanswered questions to pass this legislation from the
one and only committee that would scrutinize it.
SENATOR OLSON stated his objection as well saying this
legislation is less palatable than the version introduced last
year because the limit has been reduced from $1 million to
$250,000.
CHAIR COWDERY called for a roll call vote.
The motion to move SB 40 and its attached zero fiscal note from
committee carried with Senators Therriault, Wagoner and Cowdery
voting in favor and Senators Lincoln and Olson opposed.
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