Legislature(1999 - 2000)

04/11/2000 03:15 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
HOUSE BILL NO. 445                                                                                                            
                                                                                                                                
     "An Act relating to a rural school construction and                                                                        
     planned maintenance pilot program; and providing for an                                                                    
     effective date."                                                                                                           
                                                                                                                                
Co-Chair Mulder spoke  in support of HB 445.  He observed the                                                                   
expense  and difficulty  of  building  in rural  Alaska.  The                                                                   
legislation  creates a  pilot program  to see  if there  is a                                                                   
better way to  build schools in rural Alaska.  He pointed out                                                                   
that  there   are  four   functions  involved  in   building:                                                                   
financing,   design,   construction,  and   maintenance   and                                                                   
operation. He  maintained that  these four functions  tend to                                                                   
be  segregated. Each  has its  own  contingency. The  biggest                                                                   
contingencies  are generally in  design and construction  and                                                                   
can range  up to 15 percent.  Bonds are sometimes let  far in                                                                   
advance  of  when  the  money  is  actually  needed  for  the                                                                   
project. There are no time limits  between when bonds are let                                                                   
and when the money is needed.  He maintained that there would                                                                   
be less money lost through interest  paid if the time between                                                                   
the bonding and building were reduced.                                                                                          
                                                                                                                                
Co-Chair  Mulder summarized  that  the bill  unites the  four                                                                   
facets of school construction  under one umbrella and reduces                                                                   
costs associated  with timing, contingency-planning  dollars,                                                                   
and change  orders. The goal  of the  bill is to  have school                                                                   
construction  without   change  orders.  The   bill  provides                                                                   
coordination  and allows  all  components  to work  together,                                                                   
while  building  a  facility to  the  specifications  of  the                                                                   
school district  and employing  local hire standards  without                                                                   
contingencies and  cost overruns. This process is  not new to                                                                   
the private sector.                                                                                                             
                                                                                                                                
Co-Chair   Mulder  explained   that  the  legislation   would                                                                   
authorize the department  to enter into a RFP  process to see                                                                   
if  there  are entities  that  would  bid  as a  package  and                                                                   
oversee the construction  as a package in order  to guarantee                                                                   
savings to the state of Alaska.                                                                                                 
                                                                                                                                
In response to a question by Representative Grussendorf, Co-                                                                    
Chair Mulder  noted that  he worked  with the department  and                                                                   
other individuals on the legislation.  He maintained that the                                                                   
department wants  direction from the legislature.  He did not                                                                   
anticipate  that   there  would  be  a  fiscal   impact  note                                                                   
accompanying the legislation.                                                                                                   
                                                                                                                                
Co-Chair  Therriault observed  that  the  department did  not                                                                   
anticipate submitting  a fiscal impact note.  A House Finance                                                                   
Committee zero fiscal note would  be submitted with the bill.                                                                   
                                                                                                                                
Representative    Phillips   recalled   discussions,    which                                                                   
indicated that  the management  contractor would  oversee the                                                                   
project   for  three   years   after  its   completion.   The                                                                   
legislation   provides  for   "a   private  sector   facility                                                                   
maintenance   plan"  for   "a   period   of  time   following                                                                   
completion."  She  questioned  if  a  "period  of  time"  was                                                                   
included  over a  "three-year period"  because it  is a  test                                                                   
project.  Co-Chair Mulder  agreed  that  the anticipation  is                                                                   
that  there would  be  supervision  for a  three-year  period                                                                   
following completion.  He thought  that the department  would                                                                   
like to  have some flexibility  in regards to  the "warranty"                                                                   
period.                                                                                                                         
                                                                                                                                
Representative  Austerman referred to  a handout  provided by                                                                   
Co-Chair  Mulder titled  Rural  Schools Capital  Construction                                                                   
and Planned  Maintenance  Pilot Project  (copy on file.)  Co-                                                                   
Chair Mulder observed that Mark Pepper, was the consultant.                                                                     
                                                                                                                                
Representative Austerman noted  that the legislation pertains                                                                   
to all  schools. He emphasized  that schools in  Kodiak would                                                                   
have different  needs than schools  in Nome. Co-Chair  Mulder                                                                   
pointed  out  that  the  legislation  reads:  A  request  for                                                                   
proposals  required   under  this  subsection   must  solicit                                                                   
proposals   for  development   of  all  school   construction                                                                   
projects  funded for  construction  in fiscal  year 2001  and                                                                   
located  within   rural  educational  attendance   areas.  He                                                                   
observed  that  Kodiak  is not  within  a  rural  educational                                                                   
attendance  area. He  noted that there  are existing  designs                                                                   
for many of the  schools that are on the list.  The intent is                                                                   
not  to impose  a  prototypical design,  but  to have  proper                                                                   
management  of  the  design,   construction  and  maintenance                                                                   
phases  in order  to increase  efficiency  and reduce  change                                                                   
orders.                                                                                                                         
                                                                                                                                
Representative Grussendorf recalled  similar legislation in a                                                                   
previous year.                                                                                                                  
                                                                                                                                
Representative  J. Davies  referred to  page 2,  line 10  and                                                                   
questioned the  definition of "development".  Co-Chair Mulder                                                                   
responded that the intent is to  provide management, but that                                                                   
development  was  used  because   it  is  more  encompassing.                                                                   
Representative  J. Davies  pointed out  that the  legislation                                                                   
focuses on FY01  construction projects and that  projects may                                                                   
take more than one fiscal year  to complete.  Co-Chair Mulder                                                                   
clarified that the legislation  pertains to projects that are                                                                   
funded in fiscal year 2001. The  legislation would be a pilot                                                                   
program. He observed  that some communities do  not have much                                                                   
experience  with  school  construction.   The  intent  is  to                                                                   
provide assistance  and technical oversight to  make sure the                                                                   
state gets the best value for its dollars.                                                                                      
                                                                                                                                
Representative J.  Davies expressed concern that  each school                                                                   
be put  to bid as  an individual  package, so that  different                                                                   
people around the state might  work on the projects. Co-Chair                                                                   
Mulder affirmed that it was his  intent that the projects are                                                                   
put out as separate bids and not focused toward one entity.                                                                     
                                                                                                                                
Vice  Chair  Bunde  expressed  concern that  savings  can  be                                                                   
realized  through  an  economy   of  scale.  Co-Chair  Mulder                                                                   
stressed that most of the projects  have completed the design                                                                   
phase. In  response to  a question by  Vice Chair  Bunde, Co-                                                                   
Chair Mulder observed  that he did not know  how many schools                                                                   
would be affected.                                                                                                              
                                                                                                                                
Representative  G. Davis acknowledged  the use of  prototypes                                                                   
but emphasized concerns regarding local input.                                                                                  
                                                                                                                                
JON  STOLLE,  PRESIDENT, AMERICAN  INSTITUTE  OF  ARCHITECTS,                                                                   
ANCHORAGE testified via teleconference.  He expressed concern                                                                   
that  there had  been  insufficient debate  on  the bill.  He                                                                   
added  that   there  are  unsubstantiated  claims   that  the                                                                   
traditional  method is  slow and costly.  He maintained  that                                                                   
the  selection  criteria seems  to  be narrowly  crafted  and                                                                   
would exclude  many design  firms in  Alaska.  He  emphasized                                                                   
that  there are  few  entities  that would  meet  all of  the                                                                   
qualifications.  He  asserted   that  there  are  checks  and                                                                   
balances  in the  current  system  and recommended  that  the                                                                   
legislation be held for further consideration.                                                                                  
                                                                                                                                
DR.  JOHN  DAVIS,  SUPERINTENDENT,   BERING  STRAIGHT  SCHOOL                                                                   
DISTRICT,   UNALAKLEET  testified   via  teleconference.   He                                                                   
expressed  concern that  the  legislation  would affect  FY01                                                                   
construction.  He observed  that  most of  the projects  that                                                                   
would  be funded  in  FY01 would  already  be  in the  design                                                                   
phase.  It would  cost additional  money  to reengineered  or                                                                   
rethink design  plans. He  expressed support for  legislation                                                                   
that   would   remove   the    school   district   from   the                                                                   
responsibility  of constructing  buildings. He stressed  that                                                                   
they have been  able to achieve cost savings  through the use                                                                   
of a  single architect  on several  projects. He pointed  out                                                                   
that many  schools built under  the Bureau of  Indian Affairs                                                                   
are prototypical in design.                                                                                                     
                                                                                                                                
Co-Chair  Mulder emphasized  that the  legislation is  not an                                                                   
effort  to force  prototypical design.  He acknowledged  that                                                                   
there  are  three  projects  in  Unalakleet  that  have  gone                                                                   
through the design phase.                                                                                                       
                                                                                                                                
KAREN  REHFELD,  DIRECTOR,  DIVISION   OF  EDUCATION  SUPPORT                                                                   
SERVICES,  DEPARTMENT  OF  EDUCATION  AND  EARLY  DEVELOPMENT                                                                   
testified  in  support  of the  legislation.  The  department                                                                   
supports  the  overall  goal  to  efficiently  manage  school                                                                   
construction projects,  to reduce costs, and  to maximize the                                                                   
dollars  available   for  schools.  She  observed   that  the                                                                   
department has  had discussions with Co-Chair  Mulder and his                                                                   
staff  regarding  the school  construction  management  pilot                                                                   
program in  HB 445 and understands  that it is the  intent to                                                                   
implement a  pilot program  for school construction  projects                                                                   
that are funded in FY01.                                                                                                        
                                                                                                                                
Ms. Rehfeld  pointed out  that the  department does  not know                                                                   
which projects would  be included. The pilot  appears to only                                                                   
involve  REAA school  district projects.  There are  concerns                                                                   
with the timing, preparing the  RFP and some of the technical                                                                   
issues.  There  are  some  details  that  would  need  to  be                                                                   
considered in order  for the pilot program to  be successful,                                                                   
but  the  department  is supportive  of  efforts  to  address                                                                   
school construction.                                                                                                            
                                                                                                                                
CARL ROSE, EXECUTIVE  DIRECTOR, ASSOCIATION OF  ALAKSA SCHOOL                                                                   
BOARDS expressed  concerns with the legislation.  He referred                                                                   
to experiences with cost overruns  relating to a school built                                                                   
in   Skagway.  He   stressed  that   availability  of   funds                                                                   
contributed  to cost overrun  problems.  He observed  that he                                                                   
was the president of an insurance  company that replaced four                                                                   
schools  that  burnt  down. He  stressed  that  schools  were                                                                   
replaced  with   the  assistance   of  an  architect   and  a                                                                   
contractor. It  was in the insurance company's  best interest                                                                   
to replace the schools promptly.  He maintained that adequate                                                                   
funding  reduced  cost  overruns.  He stressed  the  need  to                                                                   
identify the problem  and cost. He questioned  what insurance                                                                   
is there that equity and fairness  would be provided in terms                                                                   
of the distribution of jobs.                                                                                                    
                                                                                                                                
In  response  to a  question  by  Co-Chair Mulder,  Mr.  Rose                                                                   
observed  that schools  are  insured for  replacement  costs.                                                                   
Replacement  costs are  adjusted  for a  variety of  factors.                                                                   
The company worked  with the communities in all  but one case                                                                   
the  cost  was  contained.  The needs  of  a  community  were                                                                   
balanced.                                                                                                                       
                                                                                                                                
Co-Chair Mulder  pointed out that  savings could  be realized                                                                   
if there is someone responsible  to assure that shipments are                                                                   
timely. Mr.  Rose stressed that  the availability  of funding                                                                   
is the  major issue. Costs would  have increased if  they had                                                                   
spread  the  work between  seasons.  He  reiterated  concerns                                                                   
regarding  issues  of fairness  and  questioned  if the  work                                                                   
would be single  source to one person. Co-Chair  Mulder spoke                                                                   
in support of providing sufficient funding for projects.                                                                        
                                                                                                                                
Vice Chair Bunde stressed that  the goal is to produce school                                                                   
buildings  and not  provide  economic development.  Mr.  Rose                                                                   
responded that  the issue is  between a sole  source contract                                                                   
and  competitive  bid.  Co-Chair  Mulder  stressed  that  the                                                                   
department would protect competition.                                                                                           
                                                                                                                                
Representative  Williams  referred  to  a  tribal  government                                                                   
program where  the tribe manages the construction  of schools                                                                   
and provides local hire. The federal  government pays for the                                                                   
local  hire portion.  Co-Chair  Mulder stated  that he  would                                                                   
look into the concept.                                                                                                          
                                                                                                                                
Representative  J. Davies recommended  that the bill  require                                                                   
two  or  three  private  sector   developers  with  different                                                                   
expertise in different areas of  the state. He also suggested                                                                   
that  there   be  some  cost   analysis  regarding   how  the                                                                   
legislation would save money.                                                                                                   
                                                                                                                                
Representative  J. Davies  questioned  if the  second use  of                                                                   
"price"  in line  16 was  redundant. He  also suggested  that                                                                   
there  be a  sunset provision  to remove  pilot program  from                                                                   
statue.                                                                                                                         
                                                                                                                                
Co-Chair  Mulder  emphasized  that  the  department  has  the                                                                   
ability to  implement the  without legislation, but  observed                                                                   
that the department prefers to have legislative direction.                                                                      
                                                                                                                                
Representative  J. Davies noted  that some design  firms have                                                                   
indicated concerns  with the speed  in which the  legislation                                                                   
has advanced and the qualification list in subsection 2.                                                                        
                                                                                                                                
(TAPE CHANGE, HFC 00 - 112, SIDE 2)                                                                                           
                                                                                                                                
Co-Chair Mulder emphasized that he is open for suggestions.                                                                     
                                                                                                                                
HB  445  was   heard  and  HELD  in  Committee   for  further                                                                   
consideration.                                                                                                                  

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