04/20/1995 01:05 PM House CRA

 HB 294 - BIDDING FOR VILLAGE WATER/SEWER FACILITIES                         
                                                                               
 Number 028                                                                    
                                                                               
 REPRESENTATIVE VEZEY stated he understood previous testimony to               
 indicate there would be a conflict of the statutes regarding                  
 contracting out the projects and force accounting.  He was not                
 aware of any conflict.  Another area of conflicting testimony was             
 regarding local hire.  He pointed out that one of the incentives to           
 local hire was that communities did not have to pay Little Davis              
 Bacon wages.  If that option was extended to contractors, he felt             
 it would be a great incentive for them to hire locally.  He felt              
 that the issue of prevailing or legally mandated wages might be an            
 issue the committee would want to investigate.  He indicated the              
 wages should apply equally.  He felt that going to a competitive              
 wage system would in no way restrict a local community from                   
 participating in the construction projects.                                   
                                                                               
 CO-CHAIR IVAN opened the testimony to teleconference participants.            
 The first site was Bethel.                                                    
                                                                               
 Number 120                                                                    
                                                                               
 WALTON SMITH, City Manager of St. Mary's, stated that he supported            
 the intent of the legislation; however, he felt that force                    
 accounting had provided quality work and excellent prices on their            
 projects.  He disagreed with the sponsor's statement that "only by            
 competitive bidding can we be assured that the funds spent for                
 these construction projects will result in the greatest value to              
 the state and the communities involved."  He did not believe that             
 competitive bid process did that.  The bidding process would                  
 require more engineering work, time to develop bid documents, etc.,           
 and delay the projects considerably.  He was also concerned that              
 contractor profit would increase the cost of the projects.  With              
 the city managing the project, profit was not a concern and local             
 hire was maximized.  This also facilitated training locals to care            
 for and operate the systems once completed.   He wondered what kind           
 of ethical standards were going to be implemented that weren't                
 already in place.  He expressed concern that contractors would                
 subcontract parts of the jobs with little oversight.  It was his              
 opinion that currently both options, force accounting and                     
 competitive bidding, existed and changing the system would not be             
 cost effective or efficient.                                                  
                                                                               
 Number 262                                                                    
                                                                               
 REPRESENTATIVE VEZEY stated that he felt the procurement                      
 procedures allowed for greater flexibility and didn't anticipate              
 that the competitive bid process would be more costly or time                 
 consuming.                                                                    
                                                                               
 Number 293                                                                    
                                                                               
 MR. SMITH indicated that he felt the flexibility was already in the           
 statutes.  He thought the proposed legislation restricted that                
 flexibility.   He was concerned that this method would require                
 considerable more documentation and procedures which would be more            
 costly and inefficient.                                                       
                                                                               
 Number 348                                                                    
                                                                               
 REPRESENTATIVE VEZEY responded that standard specifications were              
 commonly utilized on all similar projects.  He was concerned that             
 a system was lacking to judge the efficiency of the programs.                 
 Contractors routinely bid on unit prices and did not require change           
 orders just because work was added or deleted.                                
                                                                               
 Number 390                                                                    
                                                                               
 MR. SMITH reiterated his fear that this would not allow for the               
 necessary flexibility to accomplish the project efficiently and               
 cited examples of situations he had been involved in where there              
 had been problems.  He reinforced his support of force accounting             
 and local hire.                                                               
                                                                               
 Number 464                                                                    
                                                                               
 BOB CHARLES, Vice President of Operations, Alaska Council of                  
 Village Presidents, and Chairman of the Rural Alaska Sanitation               
 Coalition,  expressed his opposition to the legislation.  He                  
 supported the force accounting concept and believed it promoted and           
 stimulated the local economy.  It gave the communities the ability            
 to determine how the sanitation project would be implemented.  He             
 felt it was important for the community to establish a feeling of             
 ownership of the project.  He questioned whether the lowest bidder            
 was always the best.  He felt it was essential that an                        
 understanding of village life and the problems involved be a strong           
 consideration in developing the projects.  Most often contractors             
 did not have this insight or personal investment in the community.            
 He thought the state should be promoting flexibility instead of               
 limiting them. He stated that the people he represented were                  
 opposed to the bill.                                                          
                                                                               
 Number 525                                                                    
                                                                               
 GREG CAPITO, Village Safe Water Program (VSWP), Department of                 
 Community and Regional Affairs, stated that it was his                        
 responsibility to assist with the planning, design, and building of           
 safe sanitation facilities in the bush.  The facilities, once                 
 completed, became owned and operated by the community and are not             
 owned by the state.  He indicated the department opposed the                  
 legislation.  It was the VSWP's belief that local government should           
 decided how a project must be built since they have to own and                
 operate the facility.  Ownership was integral to successful                   
 operation and maintenance of the facility.  He stated that                    
 administrators and city managers need as many alternatives as                 
 possible to complete the projects.  VSWP encourages a mix of force            
 accounting and contract construction to accomplish the projects.              
 He noted that approximately $8 million worth of projects were                 
 currently being bid.  The communities need the authority and                  
 responsibility to make these decisions.  He felt it was the                   
 contractor's responsibility to adapt to the needs of the remote               
 communities.                                                                  
                                                                               
 Number 584                                                                    
                                                                               
 REPRESENTATIVE VEZEY asked if it was accurate that local wages were           
 60 percent of the Little Davis Bacon wages.                                   
                                                                               
 MR. CAPITO answered that yes, 60 percent was correct.  For a force            
 account job, the local prevailing rate varied depending on the area           
 of the state.  The wage rate is adjusted up according to the skills           
 of the job required.  He estimated that, for an entry level                   
 position, the hourly rate would be $12-12.50 and up to $17-18 per             
 hour for a journeyman or skilled person.                                      
                                                                               
 REPRESENTATIVE VEZEY estimated those rates to be 35-40 percent of             
 the Davis Bacon rates.  He stated that Davis Bacon rates would run            
 from a low of about $31-32 to upwards of $41-44 per hour.   He                
 inquired as to why Mr. Capito felt that the contractor would have             
 to pay Davis Bacon wages.                                                     
                                                                               
 MR. CAPITO indicated that if local government does the job using              
 force accounts, the prevailing wage rate of that community is the             
 one that is employed.  If a licensed contractor does the same work            
 under the statutes, Davis Bacon wage rates kick in.                           
                                                                               
 REPRESENTATIVE VEZEY felt that the law stated that Title 36 wages             
 were not required on village safe water projects and indicated that           
 it was not the intent of the legislation to do so.  He stated the             
 funding source was a significant factor in whether the Davis Bacon            
 wages were used.  He also felt that if a contractor hired locally             
 there was not a need for the cost of a camp.                                  
                                                                               
 MR. CAPITO stated that he had never seen a project where a                    
 contractor came into a village and didn't bring his own people.               
 Housing, water and sewage are considerable problems under those               
 circumstances.                                                                
                                                                               
 REPRESENTATIVE VEZEY felt that if a contractor could get employees            
 for $15 instead of $35, he would hire locally.                                
                                                                               
 MR. CAPITO indicated that the funding source was not the issue, but           
 that the statute clearly stated that, if the contractor paid the              
 people, they received Davis Bacon wages; if the local government              
 employed the workers, the local prevailing wage was used.                     
                                                                               
 TAPE 95-15, SIDE B                                                            
 Number 000                                                                    
                                                                               
 CO-CHAIR IVAN stated that the complexity of some projects                     
 automatically excludes force accounting in communities, but those             
 that could be handled at the local level were encouraged,                     
 particularly because of the bad economy.                                      
                                                                               
 Number 024                                                                    
                                                                               
 CO-CHAIR AUSTERMAN indicated it was his understanding that, if it             
 was force accounting, the workers were municipal employees and not            
 subject to the Davis Bacon; but if the municipality goes to                   
 competitive bid and contracts it out, those contract employees are            
 subject to Davis Bacon.                                                       
                                                                               
 REPRESENTATIVE VEZEY stated that it was his understanding the                 
 village safe water project were exempt from Title 36 if the funding           
 came through that source.                                                     
                                                                               
 Number 062                                                                    
                                                                               
 TOM QUICK, Vice Mayor of Ouzinkie, President of the Kodiak Island             
 Village Utility Council, and representing the Kodiak Area Native              
 Association on the Rural Alaska Sanitation Coalition, wanted to               
 emphasize cost isn't the only factor.  He was concerned about the             
 quality and on-going serviceability and viability of the projects.            
 Under force accounting, the local government wasn't in need of the            
 profit factor as was a private contractor.  Contractor interest               
 tends to be very short-term.  Use of local people provides a                  
 community resource and knowledge.  He cited problems he had                   
 encountered with contractors working in the villages, such as abuse           
 of the equipment, use of subcontractors, and a desire to get the              
 job done too quickly.  He expressed a strong concern for                      
 maintenance as an ongoing resource in the state of local Alaska               
 people to work with when there are problems or needs for future               
 planning of projects.                                                         
                                                                               
 Number 230                                                                    
                                                                               
 WILLIAM J. HUNTER, City Manager of Bethel, supported the idea of              
 competitive bidding in general; however, he felt local governments            
 needed options other than competitive bidding.                                
                                                                               
 Number 272                                                                    
                                                                               
 CHUCK EGGENER, Sanitary Engineer and Bush Contractor, explained               
 that he had been a contractor and brought a camp in to do the                 
 projects; however, in the last ten years, he had gone to a small              
 core group and utilizing local workers, essentially becoming a                
 force accounting construction management company.  He felt that               
 they build contractor quality projects at 35 percent less cost.  He           
 felt they had an excellent reputation for quality and efficiency.             
 He thought that the mechanism allowing communities to do force                
 accounting was working and there were a lot of spin-off benefits to           
 the local community.  He opposed the legislation.                             
                                                                               
 Number 346                                                                    
                                                                               
 REPRESENTATIVE VEZEY asked if there was an effort to establish a              
 regional wage scale.                                                          
                                                                               
 MR. EGGENER stated that you couldn't get good performers who are              
 skilled at their jobs to leave Anchorage for less than Davis Bacon            
 wages.  Local people are available, have a vested interest in the             
 outcome of the construction, and view it as an opportunity.                   
                                                                               
 Number 375                                                                    
                                                                               
 REPRESENTATIVE VEZEY asked if Mr. Eggener was able, as a                      
 contractor, to pay local or regional prevailing wages, would it               
 influence his decision as to the source of labor.                             
                                                                               
 MR. EGGENER indicated that it may to some extent, but the bidding             
 contractor, not knowing his labor, would bid a large contingency              
 just in case he couldn't get the quality of labor needed.                     
                                                                               
 REPRESENTATIVE VEZEY asked if he was testify the productivity                 
 wouldn't be any more or less, but that in a fixed price or unit               
 price bid a contractor would have to allow for contingencies.                 
                                                                               
 MR. EGGENER indicated that you were paying a lower wage, but you              
 were training the individuals.                                                
                                                                               
 REPRESENTATIVE VEZEY asked if by hiring workers at 35 percent less,           
 couldn't you afford to train them.                                            
                                                                               
 MR. EGGENER said he thought a contractor would take advantage of              
 that opportunity.                                                             
                                                                               
 Number 426                                                                    
                                                                               
 MARIE SANSONE, Assistant Attorney General, Department of Law,                 
 stated that the Department of Environmental Conservation had asked            
 the Department of Law to review the legislation.  She indicated               
 there were three areas of concern:  1) the bill as drafted                    
 conflicted with the state procurement code in at least one and                
 possibly several areas that would require amendments to the                   
 procurement code in order to avoid the conflict; 2) the bill was              
 ambiguous as to whether the recipient of a grant under the village            
 safe water program under Title 6 could continue to use force                  
 account labor, and there was some ambiguity as to the other                   
 recipients of the other types of grants that are covered by this              
 bill;  and 3) there were a number of provisions, terms and                    
 definitions in the bill that conflicted or differed from other                
 terminology that was used in the procurement code, in Title 36,               
 Title 37 or Title 46.  She elaborated on these issues and felt that           
 they needed to be clarified in order to carry out the true intent             
 of the legislation.                                                           
                                                                               
 Number 566                                                                    
                                                                               
 REPRESENTATIVE VEZEY asked if she would provide her comments in               
 writing.  He asked for clarification between AS 36.30 regarding               
 exempting grants.                                                             
                                                                               
 MS. SANSONE stated the provision of the procurement code that                 
 exempts the grants from the procurement code has the effect of                
 allowing the grantee to elect to use force accounting.  When the              
 grantee chooses to contract, they were required to follow the                 
 procurement code which would trigger the Little Davis Bacon Act.              
                                                                               
 Number 604                                                                    
                                                                               
 CO-CHAIR IVAN informed the committee that HB 294 would be held for            
 more hearings because of the affect it had on over 200 villages in            
 the state.