05/13/2021 01:30 PM Senate TRANSPORTATION

          SB 117-PROCUREMENT; CONSTRUCTION; CONTRACTS                                                                       
                                                                                                                                
2:10:39 PM                                                                                                                    
CHAIR MYERS  announced the consideration  of SENATE BILL  NO. 117                                                               
"An Act relating to the  state procurement code; establishing the                                                               
construction manager  general contractor procurement  method; and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
2:10:50 PM                                                                                                                    
ANDY MILLS,  Special Assistant  to the  Commissioner; Legislative                                                               
Liaison,  Department  of  Transportation  and  Public  Facilities                                                               
(DOTPF), Juneau, Alaska, on behalf  of the administration, stated                                                               
that SB  117 was in response  to the department's desire  to work                                                               
directly with  the contracting community.  SB 117 would  amend AS                                                               
36.30,   the  state's   procurement   code,   by  codifying   the                                                               
department's   current   use   of    the   CM/GC   or   construct                                                               
manager/general contractor contracting  method. He explained that                                                               
the CM/GC  method would provide  a two-phase contract for  both a                                                               
project's preconstruction and  construction phases. Although this                                                               
method  was  not an  option  under  current procurement  law  for                                                               
competitive  sealed bidding,  the department  has used  the CM/GC                                                               
contracting  methodology under  the  state's existing  innovative                                                               
procurement  statute for  over fifteen  years.  He recalled  that                                                               
this process was  used on over 20 complex projects.  He said that                                                               
CM/GC is included in  Federal Highway Administrative regulations,                                                               
in  other  states' regulations,  and  is  a common  and  accepted                                                               
practice  in  the  construction  industry.  In  the  department's                                                               
experience,  CM/GC  contracts  could decrease  contractor  change                                                               
orders, administrative delays and leverage department resources.                                                                
                                                                                                                                
2:12:33 PM                                                                                                                    
MR. MILLS  said this process  could allow the department  and its                                                               
contractors  to  improve Alaska's  transportation  infrastructure                                                               
faster, which is  its mission. Once the  CM/CG contracting method                                                               
is adopted in statute, the  department would collaborate with the                                                               
Associated  General   Contractors  of  Alaska  (AGC)   and  other                                                               
stakeholders   to   adopt   regulations,  policy   and   guidance                                                               
materials,  further refining  this innovative  contracting method                                                               
for use in Alaska.                                                                                                              
                                                                                                                                
2:13:23 PM                                                                                                                    
ALICIA SIIRA, Executive  Director, Associated General Contractors                                                               
of  Alaska (AGC),  Anchorage, Alaska,  stated  that AGC  supports                                                               
having  the CM/CG  tool as  an alternative  project delivery  for                                                               
DOTPF.  She stated  that AGC  is a  statewide construction  trade                                                               
association  representing   contractors,  specialty  contractors,                                                               
suppliers   and  manufacturers   in   Alaska.   AGC  unites   the                                                               
construction  industry to  focus on  balance and  work to  foster                                                               
constructive   legislation,   regulation    and   standards.   As                                                               
previously stated, CM/CG has been used  in Alaska for more than a                                                               
decade.  SB  117  will  benefit   the  construction  industry  by                                                               
modifying procurement  statutes to  codify the  CM/CG procurement                                                               
process,  she said.  It  would  allow DOTPF  to  use the  process                                                               
without  submitting  an  innovative procurement  request  to  the                                                               
Department of  Law and the Federal  Highway Administration (FHWA)                                                               
for each  project. This will  modernize, clarify and  improve the                                                               
state's procurement  process and  align Alaska with  the majority                                                               
of other states.                                                                                                                
                                                                                                                                
2:14:53 PM                                                                                                                    
MS.  SIIRA said  SB  117 would  allow DOTPF  to  add clarity  and                                                               
consistency  for  CM/CG  use  across  all  regions,  which  is  a                                                               
priority  for the  construction industry.   She  stated that  the                                                               
passage of  this bill would  also provide an opportunity  for the                                                               
industry to  participate in the  development of  regulations that                                                               
would  remedy concerns  about consistency  in CM/CG  projects. In                                                               
closing, she  said AGC  supports this bill  and looks  forward to                                                               
being included in further enhancing the CM/CG process.                                                                          
                                                                                                                                
2:15:48 PM                                                                                                                    
SENATOR KIEHL  asked how broadly  this process would be  used. He                                                               
related  his understanding  that it  was not  appropriate to  use                                                               
this process in lots of projects.                                                                                               
                                                                                                                                
MR.  MILLS agreed  with  Senator Kiehl.  He  stated that  low-bid                                                               
process   was   predominately   used  by   the   department   for                                                               
administrative ease. Given the nature  of many DOTPF projects, he                                                               
said  it wasn't  necessary  to  use CM/GC  to  add efficiency  or                                                               
complete the process.                                                                                                           
                                                                                                                                
2:17:10 PM                                                                                                                    
CHARLIE  DEININGER,  Chief  Procurement  Officer,  Department  of                                                               
Transportation  and Public  Facilities  (DOTPF), Juneau,  Alaska,                                                               
responded that DOTPF has typically used  CM/GC on one to three of                                                               
the 100 to  120 total DOTPF projects per year.  He explained that                                                               
the  department would  develop criteria  in regulation  for CM/CG                                                               
contracting.  Further,   it  would  require   the  commissioner's                                                               
approval to use the CM/CG process.                                                                                              
                                                                                                                                
2:18:48 PM                                                                                                                    
SENATOR SHOWER stated that this  bill was previously heard in the                                                               
State  Affairs Committee,  which he  chairs, so  he was  familiar                                                               
with it.  He pointed  out that the  administration made  it clear                                                               
that the  department would work  with smaller contractors  on the                                                               
process.  He  suggested  that  the  committee  consider  a  small                                                               
amendment to  require the administration  to conduct  outreach to                                                               
inform contractors about  this process and provide  them with any                                                               
assistance needed. He acknowledged  that CM/CG would generally be                                                               
limited to larger, more complex projects.                                                                                       
                                                                                                                                
2:20:32 PM                                                                                                                    
SENATOR  KIEHL recalled  slides during  a presentation  discussed                                                               
using an  independent cost estimator.  He characterized it  as an                                                               
essential part  of the process but  he did not see  any provision                                                               
for an independent cost estimator in the bill.                                                                                  
                                                                                                                                
MR. MILLS  related his understanding  that many aspects  would be                                                               
included in  regulations for CM/CG.  He assured members  that the                                                               
independent cost estimator would be part of the process.                                                                        
                                                                                                                                
SENATOR KIEHL said the independent  cost estimator was a critical                                                               
safeguard for the owner so he wants to be sure it is addressed.                                                                 
                                                                                                                                
2:22:30 PM                                                                                                                    
CHAIR MYERS opened public testimony on SB 117.                                                                                  
                                                                                                                                
2:22:51 PM                                                                                                                    
SARAH LEFEBVRE, Office  Manager/Contract Administrator, Exclusive                                                               
Paving,  Fairbanks,  Alaska, spoke  in  support  of SB  117.  She                                                               
provided  her  background,  such  that  she  has  worked  in  the                                                               
construction  industry for  over 20  years. She  said she  agreed                                                               
with AGC's testimony.                                                                                                           
                                                                                                                                
MS. LEFEBVRE spoke to her  experience with the CM/CG process. She                                                               
said that  each proposal is  different depending on  whether best                                                               
practices   are   incorporated   into  the   proposal.   From   a                                                               
contractor's  perspective, she  expected that  the largest  CM/CG                                                               
project  her  company was  involved  in  would provide  the  best                                                               
experience. However,  that was not  the case. She  predicted that                                                               
the inconsistencies  and flaws within the  process would continue                                                               
unless legislation were  passed. Other than the  state's steps to                                                               
obtain the  authority to  use the  CM/CG procurement  method, the                                                               
state does  not have  any defined processes.  She said  CM/CG was                                                               
being used as a procurement concept.  After that, how it was used                                                               
depended  on the  specific DOTPF  staff  involved. Comparing  the                                                               
CM/CG  projects from  2012 to  2021, the  results would  show the                                                               
process varied widely  and the sequence of changes  did not track                                                               
for developing  or implementing best practices.  Placing CM/CG in                                                               
statute would create  a pathway to develop  regulations and clear                                                               
guidelines to define  the process and ensure that  the best value                                                               
was indeed  being described  and sought on  behalf of  the state.                                                               
She  said  this is  crucial  to  achieving the  best  competitive                                                               
environment.                                                                                                                    
                                                                                                                                
MS.  LEFEBVRE explained  that contractors  must make  significant                                                               
investments for  CM/CG projects. In her  experience, the internal                                                               
costs  ranged  from  $30,000  to  $100,000  for  her  company  to                                                               
participate  in  the  process.   She  suggested  that  the  small                                                               
business amendment  would be better  addressed by  regulation. In                                                               
closing,  she urged  members  not  to delay  passing  SB 117  for                                                               
another    year.   With    forthcoming   federal    funds   state                                                               
infrastructure  projects will  increase,  she  said. The  CM/CG's                                                               
procurement method will  provide an opportunity for  the state to                                                               
ensure that Alaska can maximize  the opportunities to use federal                                                               
funding. She  cautioned that it may  take a year to  complete the                                                               
regulation  process  after  passage  of  SB  117.  She  said  the                                                               
construction  industry is  prepared  to  actively participate  in                                                               
drafting regulations  to ensure that  Alaska is a  sound platform                                                               
to build future CM/CG Request for Proposals (RFPs).                                                                             
                                                                                                                                
2:25:45 PM                                                                                                                    
CHAIR MYERS,  after first determining  no one wished  to testify,                                                               
closed public testimony on SB 117.                                                                                              
                                                                                                                                
2:26:00 PM                                                                                                                    
SENATOR SHOWER  offered to  work with the  Chair on  an amendment                                                               
for small businesses.                                                                                                           
                                                                                                                                
2:27:02 PM                                                                                                                    
SENATOR MICCICHE stated his desire for SB 117 to pass this year.                                                                
                                                                                                                                
SENATOR SHOWER offered to make a conceptual amendment.                                                                          
                                                                                                                                
MR. MILLS  interjected that  an amendment  was not  necessary for                                                               
public  outreach. He  offered to  commit to  initiating a  public                                                               
information campaign.  Further, he said he  had already discussed                                                               
with  Mr. Deininger  ways  to supplement  the  process to  better                                                               
inform contractors.                                                                                                             
                                                                                                                                
SENATOR SHOWER indicated that he  was comfortable with Mr. Mill's                                                               
commitment.                                                                                                                     
                                                                                                                                
CHAIR  MYERS informed  members that  HB 160,  the companion  bill                                                               
passed  the  house.  He  wondered   about  the  process  for  the                                                               
companion bill.                                                                                                                 
                                                                                                                                
SENATOR MICCICHE explained that if SB  117 were to pass, it would                                                               
meet up with  HB 160 in Senate Rules. He  expressed concern about                                                               
any potential delays by holding SB 117 in committee.                                                                            
                                                                                                                                
CHAIR MYERS said he was comfortable moving SB 117.                                                                              
                                                                                                                                
SENATOR SHOWER stated that he was comfortable moving SB 117.                                                                    
                                                                                                                                
2:30:41 PM                                                                                                                    
At ease                                                                                                                         
                                                                                                                                
2:31:15 PM                                                                                                                    
CHAIR MYERS reconvened the meeting.                                                                                             
                                                                                                                                
2:31:23 PM                                                                                                                    
SENATOR SHOWER  moved to  report SB  117, work  order 32-GS1579\A                                                               
from  committee  with  individual  recommendations  and  attached                                                               
fiscal note(s).                                                                                                                 
                                                                                                                                
CHAIR MEYERS found no objection and  SB 117 was reported from the                                                               
Senate Transportation Standing Committee.