Legislature(2005 - 2006)CAPITOL 120
04/18/2005 01:00 PM House JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| Attorney General of Alaska | |
| Board of Governors of the Alaska Bar | |
| HB257 | |
| HB133 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 257 | TELECONFERENCED | |
| += | HB 133 | TELECONFERENCED | |
| + | HB 92 | TELECONFERENCED | |
| + | HB 177 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE JUDICIARY STANDING COMMITTEE
April 18, 2005
1:20 p.m.
MEMBERS PRESENT
Representative Lesil McGuire, Chair
Representative Tom Anderson
Representative John Coghill
Representative Nancy Dahlstrom
Representative Les Gara
Representative Max Gruenberg
MEMBERS ABSENT
Representative Pete Kott
COMMITTEE CALENDAR
CONFIRMATION HEARING(S)
Attorney General of Alaska [Continued from 4/13/05 meeting that
occurred jointly with the Senate Judiciary Standing Committee]
David W. Marquez - Anchorage
- CONFIRMATION(S) ADVANCED
Board of Governors of the Alaska Bar
Joseph N. Faulhaber - Fairbanks
- CONFIRMATION(S) HEARD AND HELD [Confirmation addressed
again on 4/27/05]
HOUSE BILL NO. 257
"An Act relating to a procurement and electronic commerce tools
program for state departments and instrumentalities of the
state; and providing for an effective date."
- HEARD AND HELD
SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 133
"An Act relating to incorporation of boroughs and to regulations
of the Local Boundary Commission to provide standards and
procedures for municipal incorporation, reclassification,
dissolution, and certain municipal boundary changes; and
providing for an effective date."
- MOVED CSSSHB 133(JUD) OUT OF COMMITTEE
HOUSE BILL NO. 92
"An Act relating to the purchase of interests in corporations,
including limited liability companies, by the University of
Alaska."
- SCHEDULED BUT NOT HEARD
HOUSE BILL NO. 177
"An Act relating to employee and employer contributions to the
teachers' retirement system and the public employees' retirement
system; and providing for an effective date."
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: HB 257
SHORT TITLE: STATE PROCUREMENT ELECTRONIC TOOLS
SPONSOR(S): JUDICIARY
04/06/05 (H) READ THE FIRST TIME - REFERRALS
04/06/05 (H) JUD, FIN
04/11/05 (H) JUD AT 1:00 PM CAPITOL 120
04/11/05 (H) <Bill Hearing Rescheduled to 4/13>
04/13/05 (H) JUD AT 1:00 PM CAPITOL 120
04/13/05 (H) Heard & Held
04/13/05 (H) MINUTE(JUD)
04/18/05 (H) JUD AT 1:00 PM CAPITOL 120
BILL: HB 133
SHORT TITLE: LOCAL BOUNDARY COMMISSION REGS & POWERS
SPONSOR(S): REPRESENTATIVE(S) COGHILL
02/09/05 (H) READ THE FIRST TIME - REFERRALS
02/09/05 (H) CRA, STA
02/16/05 (H) SPONSOR SUBSTITUTE INTRODUCED
02/16/05 (H) READ THE FIRST TIME - REFERRALS
02/16/05 (H) CRA, STA
02/24/05 (H) CRA AT 8:00 AM CAPITOL 124
02/24/05 (H) Heard & Held
02/24/05 (H) MINUTE(CRA)
03/03/05 (H) CRA AT 8:00 AM CAPITOL 124
03/03/05 (H) Moved CSSSHB 133(CRA) Out of Committee
03/03/05 (H) MINUTE(CRA)
03/04/05 (H) CRA RPT CS(CRA) 5DP 2NR
03/04/05 (H) DP: SALMON, NEUMAN, KOTT, THOMAS,
OLSON;
03/04/05 (H) NR: LEDOUX, CISSNA
04/02/05 (H) STA AT 10:00 AM CAPITOL 106
04/02/05 (H) Moved CSSSHB 133(STA) Out of Committee
04/02/05 (H) MINUTE(STA)
04/04/05 (H) STA RPT CS(STA) NT 3DP 2NR
04/04/05 (H) DP: LYNN, ELKINS, SEATON;
04/04/05 (H) NR: GARDNER, GRUENBERG
04/04/05 (H) JUD REFERRAL ADDED
04/13/05 (H) JUD AT 1:00 PM CAPITOL 120
04/13/05 (H) <Bill Hearing Postponed to 4/18>
04/18/05 (H) JUD AT 1:00 PM CAPITOL 120
WITNESS REGISTER
JOSEPH N. FAULHABER, Appointee
to the Board of Governors of the Alaska Bar
Fairbanks, Alaska
POSITION STATEMENT: Testified as appointee to the Board of
Governors of the Alaska Bar.
VERN JONES, Chief Procurement Officer
Central Office
Division of General Services (DGS)
Department of Administration (DOA)
Juneau, Alaska
POSITION STATEMENT: During discussion of HB 257 and proposed
Amendment 1, provided comments and responded to questions.
SCOTT HAWKINS, General Manager
Material Services
Alaska Supply Chain Integrators, LLC (ASCI)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 257 and
responded to questions.
JIM DUNCAN, Business Manager
Alaska State Employees Association (ASEA)
Anchorage, Alaska
POSITION STATEMENT: Provided comments during discussion of
HB 257 and responded to questions and comments.
BARRY JACKSON, Procurement Analyst; Project Manager; Programmer
Analyst
Resource Data, Inc. (RDI)
Anchorage, Alaska
POSITION STATEMENT: Provided comments during discussion of
HB 257.
LAURA LAWRENCE
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to HB 257 and
SB 160.
GAIL KOZLOWSKI
Anchorage, Alaska
POSITION STATEMENT: Provided comments during discussion of
HB 257.
ELLEN KUBIAK
Anchorage, Alaska
POSITION STATEMENT: Provided comments during discussion of
HB 257.
DONNA SCHELIN
Anchorage, Alaska
POSITION STATEMENT: During discussion of HB 257, relayed that
she would be faxing some information to the committee.
KEN BROWN
Anchorage, Alaska
POSITION STATEMENT: Provided comments during discussion of
HB 257.
RYNNIEVA MOSS, Staff
to Representative Coghill
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented SSHB 133 on behalf of the
sponsor, Representative Coghill.
SARAH FELIX, Assistant Attorney General
Labor and State Affairs Section
Civil Division (Juneau)
Department of Law (DOL)
Juneau, Alaska
POSITION STATEMENT: Expressed concerns on behalf of Marjorie
Vandor, Department of Law, during discussion of SSHB 133.
EDGAR BLATCHFORD, Commissioner
Department of Commerce, Community, & Economic Development
(DCCED)
Juneau, Alaska
POSITION STATEMENT: Expressed concerns during discussion of
SSHB 133.
DEBBIE THOMPSON
Union Bay, Alaska
POSITION STATEMENT: Provided comments during discussion of
SSHB 133.
VIOLA JERREL, Ph.D.
Alaskans Opposed to Annexation
Homer, Alaska
POSITION STATEMENT: Testified in support of SSHB 133.
ACTION NARRATIVE
CHAIR LESIL McGUIRE called the House Judiciary Standing
Committee meeting to order at 1:20:12 PM. Representatives
McGuire, Anderson, Coghill, and Gara were present at the call to
order. Representatives Dahlstrom and Gruenberg arrived as the
meeting was in progress.
^CONFIRMATION HEARING(S)
^Attorney General of Alaska
CHAIR McGUIRE announced that the committee would first consider
the appointment of David W. Marquez to the position of Attorney
General of Alaska. [Mr. Marquez had provided testimony during a
joint meeting of the House Judiciary Standing Committee and the
Senate Judiciary Standing Committee on 4/13/05.]
1:20:54 PM
REPRESENTATIVE COGHILL made a motion to advance from committee
the nomination of David W. Marquez as appointee to the position
of Attorney General of Alaska. He reminded members that signing
the reports regarding appointments to boards and commissions in
no way reflects individual members' approval or disapproval of
the appointees, and that the nominations are merely forwarded to
the full legislature for confirmation or rejection.
CHAIR McGUIRE reiterated that signing the reports regarding
appointments to boards and commissions in no way reflects
individual members' approval or disapproval of the appointees,
and that the nominations are merely forwarded to the full
legislature for confirmation or rejection.
CHAIR McGUIRE asked whether there were any objections to the
motion to advance from committee the nomination of David W.
Marquez as appointee to the position of Attorney General of
Alaska. There being no objection, the confirmation was
advanced.
^Board of Governors of the Alaska Bar
1:22:05 PM
CHAIR McGUIRE announced that the committee would next consider
the appointment of Joseph N. Faulhaber to the Board of Governors
of the Alaska Bar.
The committee took an at-ease from 1:23 p.m. to 1:26 p.m.
1:26:06 PM
JOSEPH N. FAULHABER, Appointee to the Board of Governors of the
Alaska Bar, in response to the question of why he wishes to
continue serving on the Board of Governors of the Alaska Bar,
relayed that he enjoys the work, and feels that he adds a unique
perspective, perhaps more of a pragmatic view, to the
proceedings. He relayed that during his time on the Board of
Governors, he succeeded in getting the Alaska Bar Association to
accept credit cards.
REPRESENTATIVE GRUENBERG opined that the Alaska Bar Association
should mandate continuing legal education for its members.
MR. FAULHABER explained that the Board of Governors [adopted]
mandatory continuing legal education requirements, but the
[Alaska] Supreme Court overturned them.
REPRESENTATIVE GRUENBERG opined that it is also time for the
Alaska Bar Association to allow legal specialization, as is done
in some other states, via examination; for example, he is a
member of the American Academy of Matrimonial Lawyers.
MR. FAULHABER said he would be in favor of such. He offered his
understanding that one of the Alaska Bar Association's goals is
to advance the science of jurisprudence, and opined that since
the Alaska Bar Association benefits from occupational licensing,
the public should be able to expect a certain standard of
expertise from its members.
1:31:20 PM
CHAIR McGUIRE thanked Mr. Faulhaber, and concurred that public
members are able to offer a different perspective to the Board
of Governors. She referred to an issue raised at Mr.
Faulhaber's last confirmation hearing, that of establishing a
different membership fee for those that volunteer their legal
services or those that serve in the legislature. She also
raised the issue that Alaska is one of the highest in the nation
with regard to Bar dues and Bar examination fees. She asked Mr.
Faulhaber to comment on those issues.
[Technical difficulties with the teleconference equipment
occurred, resulting in the confirmation hearing being set aside
until 4/27/05.]
HB 257 - STATE PROCUREMENT ELECTRONIC TOOLS
[Contains testimony in opposition to SB 160, companion bill to
HB 257.]
1:34:21 PM
CHAIR McGUIRE announced that the next order of business would be
HOUSE BILL NO. 257, "An Act relating to a procurement and
electronic commerce tools program for state departments and
instrumentalities of the state; and providing for an effective
date."
The committee took an at-ease from 1:34 p.m. to 1:35 p.m.
CHAIR McGUIRE, speaking as chair of the House Judiciary Standing
Committee, sponsor of HB 257, asked Vern Jones, Department of
Administration (DOA), for an explanation of the DOA's proposed
language change [later referred to as Conceptual Amendment 1],
which read [original punctuation provided]:
A BILL
FOR AN ACT ENTITLED
"An Act relating to a procurement and electronic
commerce tools program for state departments and
instrumentalities of the state; and providing for an
effective date."
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF
ALASKA:
* Section 1. AS 36.30 is amended by adding a new
section to article 1 to read:
Sec. 36.30.093. State procurement and electronic
commerce tools program.
(a) The department may enter into a program under
which the department contracts with a person from the
private sector to provide procurement services and to
provide for the delivery and use of electronic
commerce tools. Notwithstanding any other provision
of this chapter, the contract shall be awarded under
AS 36.30.100 - 36.30.265.
(b) Notwithstanding any other provision of this
chapter, all state departments and instrumentalities
of the state may participate in the program authorized
by (a) of this section.
(c) A procurement conducted by the person
selected under (a) of this section is not subject to
this chapter or to AS 36.15. However, the procurement
is subject to (d) - (u) of this section.
(d) A contract based on solicited bids shall be
awarded to the lowest responsive and responsible
bidder after an Alaska bidder preference of five
percent has been applied for evaluation purposes.
(e) If a bidder qualifies as an Alaska bidder and
is offering services through an employment program, a
15 percent cost preference will be applied during
evaluation.
(f) If a bidder is an Alaska bidder and is a
qualifying entity, a ten percent cost preference will
be applied during evaluation.
(g) If a bidder is an Alaska bidder and if 50
percent or more of the bidder's employees at the time
the bid is submitted are persons with disabilities, a
ten percent cost preference will be applied during
evaluation. The contract must contain a promise by
the bidder that the percentage of the bidder's
employees who are persons with disabilities will
remain at 50 percent or more during the contract term.
(h) Insurance-related contracts shall be awarded
to the lowest responsive and responsible bidder after
an Alaska bidder preference of five percent has been
applied during evaluation. In this subsection,
"Alaska bidder" means a person who is an Alaska bidder
and an Alaska domestic insurer.
(f) Alaska products shall be used whenever
practicable in procurements for a state agency.
Recycled Alaska products shall be used when they are
of comparable quality, of equivalent price, and
appropriate for the intended use.
(g) If a bid indicates that the product(s)
being purchased will be recycled Alaska products, a
cost preference of five percent will be applied during
evaluation.
(h) In a project financed by state money in which
the use of timber, lumber, and manufactured lumber
products is required, only timber, lumber, and
manufactured lumber products originating in this state
from local forests shall be used wherever practicable.
(i) When agricultural products are purchased , a
seven percent cost preference will be applied during
evaluation to agricultural products harvested in the
state.
(j) When fisheries products are purchased, a
seven percent cost preference will be applied during
evaluation to fisheries products harvested or
processed within the jurisdiction of the state.
(k) If a bid or offer designates the use of an
Alaska product that is identified in the contract
specifications and designated as a Class I, Class II,
Class III state product under AS 36.30.332, a cost
preference equal to the percentage established for the
class under AS 36.30.332(c) will be applied to the
product during evaluation. The program contractor
shall use the Alaska product preference list, as
described in 3 AAC 92.090(a), as the basis for
establishing the percentage of Alaska product
preference.
(l) If a contractor designates the use of an
Alaska product in a bid or proposal and fails to use
the designated product for a reason within their
control, each payment under the contract shall be
reduced according to the schedule set forth in AS
36.30.330(a).
(m) Except as provided under (q) of this section,
all preferences are cumulative and shall be applied in
the order referenced under (d) - (n) of this section.
(n) A bidder may not receive a preference under
this section under both (d) and (e), (d) and (f), or
(e) and (f) for the same contract.
(o) In order to qualify for a preference under
(e), (f), or (g) of this section, a bidder shall add
value by actually performing, controlling, managing,
and supervising the services provided, or a bidder
shall have sold supplies of the general nature
solicited to other state agencies, governments, or the
general public.
(p) When awarding a contract under competitive
sealed proposals, the program contractor shall
consider the preferences described in this section.
Applicable preferences shall be applied solely to the
cost portion of the proposals during evaluation.
(q) Informal procurements conducted by the
program contractor are subject to the preferences
described in this section.
(r) In this section,
(1) "agency" has the meaning given in AS
36.30.990(1);
(2) "agricultural products" has the meaning
given in AS 36.15.050(g)(1);
(3) "Alaska bidder" has the meaning given
in AS 36.30.170(b);
(4) "Alaska products" has the meaning given
in AS 36.30.338(1);
(5) "contract" has the meaning given in AS
36.30.990(7);
(6) "employment program" has the meaning
given in AS 36.30.990(11);
(7) "instrumentalities of the state" means
a state public corporation, a state enterprise, or
another administrative unit of state government that
handles its procurement and supply management in a
manner that is separate from a department of the
state;
(8) "qualifying entity" has the meaning
given in AS 36.30.170(e)(1)-(4);
(9) "person" has the meaning given in AS
36.30.990(16);
(10) "person with a disability" has the
meaning given in AS 36.30.170(k);
(11) "program contractor" means the
contractor selected by the department to manage the
program;
(12) "recycled Alaska product" has the
meaning given in AS 36.30.338(4).
* Sec. 2. The uncodified law of the State of Alaska
enacted in secs. 2 and 3, ch. 51, SLA 2003, are
repealed.
* Sec. 3. The uncodified law of the State of Alaska
is amended by adding a new section to read:
APPLICABILITY. Nothing in this Act affects the
validity of actions taken by the Department of
Administration under ch. 51, SLA 2003, before the
effective date of this Act.
* Sec. 4. This Act takes effect immediately under AS
01.10.070(c).
1:35:14 PM
VERN JONES, Chief Procurement Officer, Central Office, Division
of General Services (DGS), Department of Administration (DOA),
explained that the two changes for which he'd provided a written
explanation during the bill's last hearing include replacing the
reference to AS 36.30.190 with a reference to AS 36.30.265, and
revamping the preferences sections of the bill such that the
preferences will "act consistently" and involve taking a
percentage from the price that a qualifying entity is offering.
1:38:54 PM
CHAIR McGUIRE made a motion to adopt Conceptual Amendment 1, to
replace the wording in the original bill with the language
suggested by the DOA.
REPRESENTATIVE GRUENBERG drew attention to the language in
Conceptual Amendment 1 regarding proposed AS 36.36.093(c), and
noted that the reference to subsections (d)-(u) ought to instead
be a reference to subsections (d)-(r).
CHAIR McGUIRE made a motion to amend Conceptual Amendment 1 such
that the subsections referenced in proposed AS 36.36.093(c)
would be (d)-(r). There being no objection, Conceptual
Amendment 1 was amended. [Conceptual Amendment 1, as amended,
was then treated as adopted.]
CHAIR McGUIRE, noting that the bill eliminates the sunset
provision of the pilot project and allows the administration to
expand the use of e-commerce procurement tools, asked Mr. Jones
for his thoughts regarding how the pilot project has worked thus
far and how it can be improved.
1:41:29 PM
MR. JONES explained that the pilot project has only been up and
running for nine months, and that the DOA is still analyzing the
results and so hasn't come to any conclusions thus far.
CHAIR McGUIRE said she is trying to understand whether the pilot
project is working for the employees, and whether any of her
goals are being achieved at all. Has the pilot project resulted
in savings to the state, and is it proving to be a rewarding,
productive partnership between private and public enterprise?
MR. JONES surmised that at the heart of the originating
legislation and at the heart of HB 257 is the outsourcing of
jobs and a shifting from state employees doing procurement under
the state procurement code to contractors doing the state's
procurement under a contract rather than under the code. With
the aforementioned outsourcing comes electronic tools that are
well suited to the application. This outsourcing, however,
raises the policy question of whether the work should actually
be done under the state procurement code by state employees.
The DOA thinks of the pilot project as an experiment, he
indicated, and so is waiting to see whether the results warrant
expansion of the project.
CHAIR McGUIRE acknowledged that creating efficiencies is bound
to result in some job loss, and suggested that changing the
current methodology would not be something to undertake if it
weren't for the belief that doing so will result in more
centralization and efficiency. She pointed out that there is
still the need for those in state government to be in
partnership with those that contract with the state to do the
work. She asked Mr. Jones to comment.
1:47:22 PM
MR. JONES said that the DOA merely wants to be sure that the
methodology employed by the pilot project is successful and is
resulting in efficiencies and improvements before it gets
instituted more widely. He surmised that there are those who
would like to see the existing pilot program utilized fully, but
the DOA has taken a more cautious approach, deploying the pilot
project in a narrow scope and monitoring it. He said that if HB
257 were to pass, he wouldn't be able to say what changes would
be made, particularly given that the pilot project itself has
not yet been used to the fullest extent. He acknowledged that
it would be hard for anyone to argue that bringing a modern
procurement system into state government wouldn't bring
improvements. The question, then, merely becomes a policy
choice regarding how the legislature wants procurements to take
place.
CHAIR McGUIRE asked why it was so difficult to get the pilot
project going and what was the resistance to it. If the very
people who's cooperation is required to let a project go forward
won't cooperate, then how can the state ever determine whether a
project can be a success?
MR. JONES explained that the state was bound by union bargaining
agreements to first conduct a feasibility study, which in turn
required that the state hire a contractor to map the agency -
describe all the procurement work being done by state employees,
and calculate the cost of that work; only after the results of
that study were gathered was a procurement issued for the actual
outsourcing contractor, which turned out to be Alaska Supply
Chain Integrators, LLC (ASCI). He noted that this entire
process took a lot of time and involved a lot of work, with each
step being subject to challenge. In response to another
question, he relayed that 10 positions were ultimately
outsourced, though some of the people holding those positions
found work elsewhere in state government. He opined that it
would not be accurate to say that the state delayed instituting
the pilot project.
1:54:28 PM
REPRESENTATIVE GRUENBERG asked how many jobs will be
lost/outsourced if the pilot project is expanded.
MR. JONES offered that there are approximately 200 procurement
positions that could be outsourced. In response to a further
question, he relayed that with regard to the aforementioned 10
outsourced state procurement positions, the contractor had six
fulltime employees doing the same work.
1:56:11 PM
MR. JONES, in response to questions regarding audits, relayed
that several audits of the pilot project have been conducted,
including one by the Office of Management & Budget (OMB)
regarding contract compliance; that the DGS has been performing
quarterly benchmark audits; that the DGS's first quarter audit
is concluded; that the only results available from the second
quarter pertain to the cost of goods; that the DGS's benchmark
audits investigate the cost of goods - comparing the cost of
goods purchased by the contractor with the cost of goods
purchased by the state - the time used to process orders, the
utilization of Alaska vendors, and the mistakes made by the
contractor; and that it is anticipated that the final audit for
the pilot project's contract should be available after June of
2006.
CHAIR McGUIRE noted that one of the problems with the pilot
project is that under its current sunset date, it is now too
late to institute the project fully.
[Following was a brief discussion regarding what material
members' packets should contain.]
2:02:29 PM
SCOTT HAWKINS, General Manager, Material Services, Alaska Supply
Chain Integrators, LLC (ASCI), relayed that ASCI was founded in
1999 to provide purchasing, warehousing, and other aspects of
supply chain management to the Alaska North Slope (ANS) oil
fields; has since grown to about 150 employees; has developed a
full suite of e-commerce tools here in Alaska that compete with
some of the best e-commerce tools available nation- and world-
wide; and uses those tools to transact business on behalf of its
customers, and to deliver streamlining, automation, and cost
savings. Remarking on the ability of ASCI to specialize in
procurement, he added that ASCI sees a future in "back office
process operation" in both the public and private sectors, since
procurement is typically not the primary business of most
organizations.
MR. HAWKINS explained that after the pilot project's originating
legislation, House Bill 313, passed the legislature, ASCI - one
of the two proposers to engage in the resulting "request for
proposals" (RFP) process - was selected as the contractor to
operate the pilot project and has been operating that project
since July 2004. He said that ASCI supports HB 257, adding that
the bill will eliminate the pilot project's current sunset date,
will expand the administration's authorization to institute such
a system in other departments, and will provide the
administration more flexibility in which to find the project's
optimal value. He said that from the perspective of the
contractor - ASCI - the cost savings that were promised have
been delivered, both through a decrease in personnel costs and
through a decrease in the cost of catalog purchases.
MR. HAWKINS relayed that the estimate of savings in personnel
costs is based on a state feasibility study and on what ASCI's
contract will pay [its employees] compared to what state
employees were getting paid. The estimate of savings for the
cost of goods - catalog purchases - is based on a recent report
using catalog data involving nearly 1,000 transactions that
occurred over the first six months using the e-commerce web
tools. He indicated that to the degree that ASCI is allowed to
operate the project as it was envisioned, ASCI will be able to
deliver the cost savings as promised. Referring to a handout in
members' packets, he predicted that there will be a savings of
nearly $200,000 "over the first term of the agreement."
CHAIR McGUIRE asked Mr. Hawkins to describe the basic concept
behind what ASCI does.
MR. HAWKINS said:
We don't actually buy the goods and take ownership of
them and resell them; we simply operate the processes
on behalf of the customer. So a purchase order for
"BP," for example, goes out as a BP purchase order. A
purchase order for the State of Alaska, or our
contract for the State of Alaska, is written on State
of Alaska procurement forms.
But what we do is we come in and - through the use of
these web tools, through the use [of a] very intensive
process of measuring and metrics and those types
things - process control by specializing and taking it
seriously and managing this process very intensively
on a day-to-day basis; we're typically able to deliver
cost savings of 25-40 percent in the overhead of
actually just operating the administrative processes.
The cost of goods are over and above that, and that
depends a lot on ... where a customer is, how good a
job do they do of managing their current (indisc.).
But with our tools, tools like "reverse auctions,"
tools like getting catalog agreements set up and
getting competitive situations in place, we can
deliver cost-of-goods savings going forward too. And
... how much of that there is really just kind of
depends on what you experience as you go forward.
2:10:09 PM
REPRESENTATIVE GARA asked whether ASCI's conclusions regarding
cost savings are based on the DGS's quarterly benchmark audits.
MR. HAWKINS said the ASCI's conclusions are not based on the
DGS's audits, which he characterized as not being based on
statistically valid samples. The handout in members' packets,
in comparison, provides statistics based on 972 transactions and
shows a decline of 3 percent for the cost of goods. He posited
that this decline is the result of using e-commerce tools, which
facilitate the purchasing of goods at the best price available
to the state.
2:14:31 PM
MR. HAWKINS, in response to a comment, clarified that reverse
auction is merely one tool by which to set up agreements,
whereas the process of going into the "smart catalog" tool
ensures that the best pricing under the state's existing
contracts is available.
CHAIR McGUIRE offered her understanding that many state and
local government entities have chosen to privatize their
procurement process. She relayed that in spite of the fact that
the state's current procurement code has some great provisions,
such as preferences for Alaskan-owned, women-owned, or minority-
owned businesses or for Alaskan made products, she disagrees
with statements she's heard that the entire procurement code is
a great one. She asked Mr. Hawkins to explain whether the bill
has incorporated the aforementioned preferences, and whether
such preferences are being utilized by ASCI. She also asked Mr.
Hawkins to address the issues of integrity and corruption.
2:17:45 PM
MR. HAWKINS opined that the latter question goes to the heart of
the policy issue. He offered:
Pretty much everything that's contracted out to the
private sector by government, at one time along the
way, was considered controversial. ... Procurement is
a perfect candidate for this type of thing because
it's very "back office" and administrative. As the
agent for the state, we don't make a decision to spend
any money. The requisition comes to us, the budget
authority comes to us, and our job is to simply carry
that out. If there's a significant amount of money
involved, there's always a committee of end users -
... a proposal evaluation review committee - that
makes the final decision, and what we end up doing is
really performing clerical administrative services.
In terms of the inherent integrity, I would submit to
you that ... corruption happens everywhere and [that]
governments are not immune [and] government employees
are not immune. You can see examples in history of
government employees having committed those types of
things. In the case of a private contractor, there's
a great deal to lose. This is our business. If we
were ever found to be steering business to a crony, or
anything like that, it would hurt the entire company,
it would hurt the value of the entire company. I
would submit to you that we have a great deal more to
lose, and a great deal more incentive to keep it
pristine.
Governments are not the only institutions that are
concerned with this type of thing; the other big
clients of our, such as the oil companies, are also
very concerned with that type of thing - they have
shareholders that care a great deal about that type of
thing. And, again, the standards of conduct are very,
very high, and there, as well, if we were ever ...
found to be doing anything like that, it would be
devastating to the company. And so we are extremely
vigilant and extremely concerned and watch that type
of thing very carefully, because, [as] in all
business, if we aspire to grow and really turn this
into a much larger Alaska success story than it
already is, our reputation has got to be very, very
clean.
MR. HAWKINS then noted that there were no preferences in the
original legislation authorizing the pilot project, but relayed
that the ASCI does not have any objections to, and in fact
supports, abiding by the preferences currently in Alaska's
procurement code. He pointed out that the ASCI's contract
contains a requirement that the ASCI take a proactive stance
with regard to "buy Alaskan," but surmised that adhering to such
preferences does not alter things statistically; rather, where
it really matters is in the creation of the specifications and
the framework for procurement, in order to ensure that those
specifications and framework won't inherently exclude Alaska
businesses or inherently advantage out of state businesses.
2:22:15 PM
REPRESENTATIVE GARA noted that the DGS's audit information and
the ASCI's statistics appear to conflict with each other with
regard to whether there has been any cost savings to date.
MR. HAWKINS opined that the DGS's audits are not designed to
provide an answer to the question of whether the cost of goods
has decreased, particularly given that those audits are based on
extremely small samples and non-cataloged data. He added:
The best data we have, that I'm submitting to you, is
the 972 transactions that are based on the catalog
where you have a very high likelihood of an apples to
apples comparison, [where] you have a very large
number of transactions. And [I] would submit to you
that if you look at the two data sets, one will
support conclusions, the other one will not.
REPRESENTATIVE GARA asked why the legislature is not simply
waiting for the pilot project to run its course.
2:24:12 PM
MR. HAWKINS explained that the sunset is fast approaching on a
project that is only being tried on an extremely small scale, a
scale, he opined, that is too small to really demonstrate the
system's full value and capabilities. He remarked that the
project will continue to be in transition for sometime, and so
the full value of it will only emerge over a period of years.
He offered belief that it is very important to allow the project
more time and more flexibility so as to be able to find its
optimal application.
2:26:05 PM
REPRESENTATIVE GARA said he is concerned that it is premature to
make a decision on this issue before the final audit is
available.
MR. HAWKINS opined that one would be hard pressed to find a
program anywhere in state government that's more carefully
scrutinized and audited than the pilot project. He reiterated
his belief that the legislature ought to move forward and
gradually, responsibly, build the program out to its full
potential.
CHAIR McGUIRE indicated agreement with Mr. Hawkins's comments
regarding the pilot project's sunset, adding that her concern is
that there are some other departments that would like to use the
aforementioned tools but can't. She said she would almost go so
far as to say that the pilot project is being sabotaged because
it might pose a direct threat to the very people who are
required, for the project's success, to comply with it. She
noted that the City of Anchorage has recently instituted the use
of e-commerce procurement tools.
2:30:46 PM
REPRESENTATIVE GARA said there is a jump between saying that the
state should engage in "e-procurement" and saying that
procurement should be outsourced. "If we need to modify the
state law so the state can do much more vigorous e-procurement
like the City [of Anchorage] is, that's one thing, but ... I
don't understand why we have to outsource that function," he
added.
REPRESENTATIVE ANDERSON offered his belief that Mr. Hawkins has
been innovative, and noted that some members of the legislature,
during the last election, ran on a platform promoting
outsourcing as a way of realizing efficiencies. He indicated a
preference for moving forward with [the bill] and simply
continuing to assess the project's efficiency and provide ASCI
the tools with which to expand.
2:32:39 PM
REPRESENTATIVE GRUENBERG said that according to the
aforementioned chart, it appears that the majority of the cost
savings is the result of the loss of people's jobs.
MR. HAWKINS concurred, reiterating that six ASCI employees are
now doing the work that was previously done by 10 state
employees.
REPRESENTATIVE GRUENBERG opined that that is simply another way
of saying that by automating the way things are done and thus
eliminating people's jobs, things can be done more cheaply.
MR. HAWKINS concurred, but remarked that the premise of the
project is "this rigor (ph) and catalog and system framework.
He predicted that if ASCI can deliver even just a 3 percent
reduction in costs, that equates to a savings of between $15
million and $20 million per year.
REPRESENTATIVE GRUENBERG asked how many jobs would be lost.
MR. HAWKINS said that is not known, but offered his belief that
state procurement officers will always be needed for the types
of procurement that are more suitable for state employees to
perform, such as construction procurement, which he
characterized as "large-dollar/high-risk" procurement. He
added:
It's hard to say, at the end of the day, how many
would be affected, but [that] ... comes to the point
of why the expansion is important, ... that in any
given agency, you may not take on the entire piece.
This is really about more the low-dollar repetitive
types of things that lend themselves to streamlining
and automation. And finding that economic sweet spot,
across several agencies, is probably more feasible
that trying to fully implement a smaller number of
agencies.
2:35:29 PM
REPRESENTATIVE GRUENBERG said he is concerned about the
potential job losses, particularly for those living in his
district. He pointed out that downsizing and making things more
efficient will have an impact on jobs, and surmised that some of
the questions raised by downsizing include: "How do we redirect
their employability? What do we do [for] the people who lose
their jobs? How do we keep them employed?" He opined that the
state has a responsibility to ensure - though of course not
through keeping everyone employed at governmental expense - to
have a healthy economy; "governmental efficiency" and "people
losing their jobs" are simply two ways of saying the same thing
- it is the same issue regardless of how its termed.
2:37:41 PM
MR. HAWKINS remarked that affecting the employment of existing
state employees is ASCI's least favorite part of "this whole
proposition." He offered his understanding that some of the
employees whose positions were affected during the first phase
of the pilot project were due to retire anyway and so took the
opportunity to do so, and that the rest of the employees whose
positions were affected have since filled other positions in
state government. He relayed that ASCI would be very supportive
of anything that would provide some transition assistance to
those whose positions are affected by the expansion of the pilot
project, and noted that ASCI had in fact made job offers to all
of the aforementioned non-retiring procurement staff, but none
accepted a position with ASCI. He surmised that this was
probably due to their preferring to maintain employment within
the state's retirement system. He offered:
But as we me move forward, I would expect that to
change, particularly if there's a perception that the
political will exists within this body, and that this
is an ongoing, long-term program. I believe employees
would be more inclined to join our company or a
company like ours; they would have an opportunity to
be part of a technology-driven enterprise - that
option would be there. But for those that want to do
something else and change careers, we would [be] very
positive on transition assistance ... because ... we
don't relish that aspect of this, this process of ...
- [as] economists call it - "creative destruction."
That process has winners and losers, and we sympathize
with that.
2:39:38 PM
REPRESENTATIVE COGHILL remarked that although the advent of
computers has drastically changed the employment scene, it has
never stopped anyone from being employed. An improved system
always raises problems regarding employment, he added, but noted
that he is predisposed to privatization. He offered his belief
that Conceptual Amendment 1 will result in a better procurement
system and will allow the state the flexibility to make use of a
private procurement system. He offered his understanding that
the bill requires compliance with the state's procurement code.
2:42:27 PM
JIM DUNCAN, Business Manager, Alaska State Employees Association
(ASEA), provided members with a copy of a portion of the DGS's
second quarter audit of the pilot project, and noted that it
contains a chart which illustrates that the cost of goods, when
purchased by ASCI, increased by 3.308 percent in one table and
increased by 70.409 percent in another table; taking the average
of those two tables, the total increase in the cost of goods
when purchased by ASCI is 16.348 percent.
REPRESENTATIVE GRUENBERG surmised, then, that that chart
illustrates that under the pilot project, there haven't been any
savings except for what was saved because of the loss of
positions.
MR. DUNCAN concurred. In response to comments, he pointed out
that the current state procurement code doesn't need to be
changed in order to allow for e-procurement; all that is needed
is for the administration to have the correct tools. It was not
necessary for e-procurement to be outsourced; furthermore, no
other local or state government entity has ever outsourced
procurement. He assured the committee that if a system can be
employed whereby things can be done more efficiently, the ASEA
would work with the legislature to implement that system
notwithstanding the potential for job loss.
MR. DUNCAN referred to a federal document entitled, "OMB
Circular No. A-76", which gives direction to the heads of
departments and establishments to be very careful with regard to
what gets privatized, and which also indicates that some
activities are inherently governmental and so should only be
performed by government employees. He relayed that the
aforementioned document says in part:
An inherently governmental activity is an activity
that is so intimately related to the public interest
as to mandate performance by government personnel.
These activities require the exercise of substantial
discretion in applying government authority and/or
making decisions for the government. Inherently
governmental activities normally fall into two
categories: the exercise of sovereign government
authority or the establishment of procedures and
processes related to the oversight of monetary
transactions or entitlements. An inherently
governmental activity involves: ... [e]xerting
ultimate control over the acquisition, use, or
disposition of United States property (real or
personal, tangible or intangible), including
establishing policies or procedures for the
collection, control, or disbursement of appropriated
and other federal funds.
MR. DUNCAN surmised that via this document, the [current] "Bush
Administration" is saying that [governmental] procurement
doesn't lend itself to privatization, adding his belief that the
public should be able to trust that the procurement process is
being handled in a professional manner under strict guidelines.
2:50:33 PM
REPRESENTATIVE GRUENBERG asked about possible constitutional
problems.
MR. DUNCAN relayed that a memorandum - dated April 8, 2005 -
that he provided to the committee during the bill's last hearing
says that HB 257 would deny Alaska businesses and individuals
equal protection under the law because it sets one contractor
above the others and does not necessarily provide equal access
to businesses. He characterized this as a serious
constitutional question that should be addressed by the House
Judiciary Standing Committee.
2:52:04 PM
CHAIR McGUIRE pointed out that Title [36] - the state's
procurement code - already contains 47 exemptions, including an
exemption for the university.
MR. DUNCAN explained that the current procurement code was put
in place in 1985 and was a model code at that time, endorsed by
the American Bar Association (ABA); since that time, various
groups have come before the legislature and asked to be exempted
from the code. He added that he is not suggesting that granting
all those exemptions was the correct thing to do, but is merely
acknowledging that they did get adopted through the legislative
process.
MR. DUNCAN offered his belief that contrary to Representative
Coghill's understanding, HB 257 will not require the contractor
to comply with the state's procurement code. Under the current
procurement code, the public knows what the rules are - rules
that were established by the legislature - but under HB 257, the
legislature would no longer set the rules. Instead a private
contractor and the administration would set the rules. This
will result in a loss of transparency; the public would not be
aware of what those rules were, and the legislature would no
longer be assured that those rules would include competitive
procedures or give vendors the right to appeal or protest an
award.
MR. DUNCAN, in response to comments, clarified that he is merely
saying that HB 257 would not provide transparency.
2:56:46 PM
REPRESENTATIVE GRUENBERG offered his recollection that when the
university came before the legislature asking to be exempted
from Title 36, the testimony was that the university already had
it's own procurement system in place.
2:57:27 PM
BARRY JACKSON - Procurement Analyst; Project Manager; Programmer
Analyst - Resource Data, Inc. (RDI), on the subject of how many
positions are currently doing procurement-related work, he said
his research indicates that there are between 200-300 positions
spread out among the departments - with 6 of those positions
being in the DOA's DGS, and characterized the current system as
strongly decentralized. He opined that a decentralized
procurement system diminishes savings, fairness, and expertise.
Furthermore, operational pressures, personal preferences, and
differing operational standards reduce the diligence with which
the rules of fairness are applied. The inability to recognize
and consolidate repetitive purchases of goods and services
diminishes significant opportunities to save money, and similar
procurement problems are resolved differently from department to
department.
MR. JACKSON said that in comparison, in a centralized
environment, the rules of fairness are better enforced, and
consolidation opportunities are recognized and more dependable;
as a result, cost savings are also more dependable.
Furthermore, expertise in subject matter is fostered and
developed, and "best practices" can be identified, resulting in
more satisfactory transactions between the state and its
suppliers. He offered his belief that the current pilot project
offers [the state] an opportunity to realize the benefits of an
appropriate degree of centralized procurement without the usual
disadvantages.
MR. JACKSON went on to say:
In a mature application of ASCI's e-commerce tools,
the user virtually eliminates paper pushing from the
procurement process. The tools allow instantaneous
orders for commodities and services found in the
customized catalog, the user gets instant feedback
[and] instant accountability with regard to receipt of
goods, red tape is cut, and it provides for corporate
delivery. All of these things add up to the potential
for increased savings. It also means that through the
e-commerce tools ... there's an ability to analyze
procurements across departmental lines to identify
consolidation opportunities and target them for
additional savings. Subject matter experts are
developed in a centralized procurement setting, which
[allows] us to address procurement issues across
departmental lines. In competitive scenarios, e-
commerce procurement processes can give access to all
qualified interested bidders and virtually eliminate
the burdensome waiting periods that now characterize
the manual process.
Regarding the subject of the potential for corruption,
I'd simply like to point out that currently the
departments can spend up to $50,000 at a crack without
meeting formal bidding requirements. It's my belief
[that] right now, under the current laws and
regulations, that somewhere between 50 and 80 percent
of all procurement dollars can be spent by the
departments without [them] being required to follow
the formal bidding procedures encapsulated in the
procurement code. I [haven't] ... seen any recent
analysis of how much the state ... spends through
procurement procedures, but if it's anything like the
past, that 50 to 80 percent amounts to hundreds of
millions of dollars per year.
The point is that this money is spent with little or
no competition. The reality is, there's not much
difference between professionally administered public
and private purchasing practices except for mountains
of red tape, institutionalized delay, antiquated
systems, and huge performance and efficiency gaps.
Routine monitoring by [the DGS] ... for procurement
code violations in the operating departments is
nonexistent, and violations are only investigated when
some form of bad conduct is alleged by an interested
party or someone in the department stumbles upon a
problem and reports it to [the DGS].
MR. JACKSON continued:
I suggest that an independent contractor with
preservation of its investment as its most potent
motivation has an unbiased primary interest in simply
doing the job as efficiently and economically as
possible for the state. In fact, I would argue that
and independent contractor is in a stronger position
to resist pressures to commit bad practices. Such
pressures do exist and are difficult for state
employees to resist, because their jobs or careers can
be put in jeopardy. These pressures and consequences
are not idle speculation on my part. They are real.
I know from long and challenging personal experience.
I argue that coupled with independent oversight, such
as this contract has with the [DGS], an independent
contractor with its own enlightened self-interest at
heart is in a far better position to rebuff pressures
to use bad practices than are rank and file state
employees.
3:04:20 PM
MR. JACKSON, speaking on the issue of audits, said he hasn't
ever seen scrutiny at the level being applied to ASCI, and
predicted that such a level of scrutiny, were it applied to
state procurement operations, would reveal numerous purchasing
violations and bad practices. He opined that as a former senior
manager of the state's procurement system, the e-commerce tools
that ASCI is providing are well-tailored to the job; will create
efficiencies, which will in turn increase user productivity; and
are the best tools he's ever seen for bringing e-commerce to
Alaska's state government.
MR. JACKSON expressed his belief that the union has one main
argument and one goal, and characterized them as defective and
historically unattainable, respectively. He elaborated:
[With regard to the union's] argument ... that the
union could do same thing as the contractor if they
were just given the tools and they'd do it cheaper, if
the union believes in fair play, ... then no one is
going to give the union the necessary e-commerce tools
free of charge and yet require their competitors to
build their own tools at their own expense. [If] the
unions want to compete to provide e-commerce tools and
services, they better fire up their venture capitalist
and create the capacity to develop software technology
and service systems to get the job done.
And they better have started a few years ago because
the need is in front of us today. If we were to
speculate, and were it possible to turn back the clock
and provide for the unions to act as a joint venture
proposer in the pilot project RFP, is it the union's
position that they could have won the RFP as a
straight up competitor to the other proposers and
preserve every one of those jobs that were lost? The
only way the RFP services could possibly be performed
at a lower cost than the state's is to save costs by
employing technological solutions that allow fewer
employees to accomplish the work.
This is because the source of funding for the contract
is the staffing budget for the procurement function of
the Southeast Region of [Department of Transportation
& Public Facilities (DOT&PF)]. To put it bluntly,
unions would need to have an e-commerce system at
least the equal of [ASCI's], and they would have to
have ... cut even more jobs if they wanted to win by
being a competitor. For the unions to deliver similar
results, you have to accept the notion that they would
deploy technology effectively and then deliver the
staff reductions made possible.
I would submit to you that this is unlikely.
Therefore, the only likely outcome is more cost for
technology but no savings delivered. We can see an
example of this in the state's current use [of] ...
procurement technology - the Buyspeed program; [the
DOT&PF] implemented this several years ago, but it is
implemented poorly and serves only to require re-input
of paper records and absorb tens of thousands annually
in licensing costs. The number of people who are
capable of using it fully can probably be counted on
the fingers of one hand.
MR. JACKSON added:
Second is the union's goal of preserving every job
regardless of the march of ... progress. This battle
has been lost over and over by unions all over the
world. The goal can't be reached in the long run. In
industry, including the industry of government,
technological progress usually reduces or transforms
staffing requirements. Instead, enlightened unions
have found another perspective, one which is
ultimately much more valuable to union members. That
perspective is not to oppose the adoption and
advancement of technology, but to bargain for ways to
retrain, reeducate, and reequip their members to
compete anew in the working world, whether with the
same employer or a new one.
Attempting to block the march of progress because it
might cost jobs of members is a classic union tactic
which hasn't worked in the past 100 years and won't
work here, now. I would like to remind the committee
that I say this as a former president of [the Alaska
Public Employees Association (APEA)] and a founding
member of the group that created the [ASEA].
Regardless of who implements it, including the union
itself, e-commerce technology will result in staff
reductions, or at least it will if [it] successfully
delivers efficiencies. Helping those who will be
affected to prepare for and find other desirable
employment is the correct role for the unions to
pursue.
3:09:35 PM
MR. JACKSON concluded by saying that HB 257 presents an
opportunity to look into the future in search of improvements.
Passage of HB 257 will allow the state to avoid an unnecessary
expenditure of public funds while saving the state significant
amounts of money, increasing efficiency, and incrementally
extending the use of e-commerce tools throughout state
government over the next few years. He offered his belief that
the introduction into state procurement of e-commerce tools and
services, specifically the tools and services created and
provided by ASCI, is an unalloyed good. The technology is
available now, the capacity to implement it is present, and the
cost reduction is real; all that is needed is the resolve to do
the obvious.
3:11:02 PM
LAURA LAWRENCE - after noting that she has been employed by the
DOT&PF for 24 years, specifically in the field of procurement
for [the last] 21 of those years - said she would be speaking in
opposition to HB 257 and SB 160. She indicated that those in
the field of procurement are required to sign numerous
agreements [of compliance with] the rules and regulations
dictated by the state to control purchasing; violating those
agreements would make one guilty of a class C felony. The
current procurement policies, codes, and statutes were put in
place to stop unorthodox purchasing and garner the public's
trust.
MS. LAWRENCE offered her understanding that ASCI has readily
admitted to doing business with one of their own companies and
then admitted that doing so was a mistake. How many such
mistakes will be allowed, she asked, given that ASCI is not
required to follow the state's procurement code. How much
business and money will be diverted to only particular groups or
ASCI's favorite venders? She characterized "this" as a
disservice to the entire state's business community as well as
to local taxpayers. To illustrate her point, she offered a
hypothetical example wherein a small-to-average Alaskan business
finds itself having to compete with a national corporation that
is exempt from the procurement rules which the Alaskan company
must follow. She likened such a scenario to taking on Mohamed
Ali with one's hands tied behind one's back. How could one
expect the local company to follow the state's rules and become
low bidder while the company that's operating the pilot project
is exempt from the same rules?
MS. LAWRENCE relayed that many Alaska venders look forward to
the yearly bids for commodities in excess of $5,000, and make
yearly inquiries as to when those bids are due to come out. If
the state were to provide for and allow the state's purchasing
departments the infrastructure to purchase statewide
requirements electronically in the international marketplace, is
it likely that ASCI could remain the low bidder? She opined
not. She asked whether the committee is aware that the DOT&PF
already has an electronic [procurement] system in place but has
been prevented from fully utilizing it. "Untie our hands," she
said, "and we can provide all the supplies and services at a
rate equal [to] or better than the outsource company while
keeping the jobs and tax base within the state."
MS. LAWRENCE went on to say:
I feel the state set the rules on using instate
vendors to help stimulate local economies and ensure
local employment. This ends up being more effective.
The money returns to the local economies and the state
of Alaska instead of out-of-state stockholders. We
have a fiduciary responsibility to the people of this
state. These bills appear to be moving entirely too
fast in regard to outsourcing procurement. The pilot
program with ASCI [has] ... undergone only nine months
of a trial period; that's not long enough for a
thorough audit to take place. [Only] time will ...
determine the success of such a pilot as suggested in
the original bill.
Purchasing for the [Department of Transportation &
Public Facilities] in itself is a vast undertaking,
given the logistics, needs, and local services that
are required to fulfill many of the demands needed to
operate our highways and airports safely. I'm
confident that an outsource company will not be able
to take on these responsibilities in a fair manner
that will be just to our local companies, nor will
they be aware of the ... local logistical problems
that are innate to the individual areas.
MS. LAWRENCE concluded:
Furthermore, ASCI is using State of Alaska office
space, office equipment, and a warehouse to operate
their purchasing automation. Are these costs being
taken into consideration when audits are being ...
[conducted]? Their lack of infrastructure ... shows
in itself that they are not in a position to take on
such a vast responsibility. They were not prepared to
handle two more entities. How can we expect them to
handle the entire state of Alaska procurement
function. ... Thank you for letting me speak.
3:17:09 PM
GAIL KOZLOWSKI said that in her job with an Alaskan-owned
business and office supply company, she works with the
Department of Public Safety (DPS), the Department of Natural
Resources (DNR), and the DOA, and sees a lot of competitive
bidding and employees attempting to manage their state funds
appropriately. She added:
Our customers can go to our web site or our
competitor's web site [and] look right at their
contract pricing. The supplies can be delivered in a
24-hour turnaround [period] without any paperwork if
they so choose or they can get a hard copy. But this
is e-commerce at its best. The state employees have
the option to use their state contract or go to bid.
They've done this effectively without going through a
third party.
How many of you have campaigned on increasing jobs in
Alaska? I agree with [Representative] Gruenberg about
losing jobs locally. Who has the best interest of
state funds at heart? Employees who are paid by the
state, or a nonstate employee who has no vested
interest?
Our Alaskan prisons are making furniture for state
offices. It may not be the cheapest to purchase, or
it may be, I don't know the pricing on that, but the
point is, we are utilizing our prison inmates and
teaching them a viable job skill to help make them a
more productive member of society when they finish
their term in prison. Do we want to eliminate this
type of job skill and training as well? Thank you for
letting me share my thoughts.
3:19:12 PM
ELLEN KUBIAK - noting that she works for an Alaskan owned and
operated company - said she can't believe that the state is even
considering outsourcing procurement. She relayed that the
company she is employed with is keeping its head above water,
trying to keep the big box stores from getting all the
procurement business in her area, and has done very well for
itself and the state. For example, by utilizing the company she
works for, the [the DOT&PF] saved the state $600 on a bid for
basic supplies.
CHAIR McGUIRE offered her understanding that under the bill,
everyone will have to comply with the bidding preferences
regarding "made in Alaska" and Alaskan-owned companies.
MS. KUBIAK said she merely wants to offer her support to the
state's professional procurement officers, and remarked that
they are doing a great job and that she resents the possibility
that those people could lose their jobs.
3:20:55 PM
DONNA SCHELIN simply relayed that she would be faxing some
information to the committee.
3:21:12 PM
KEN BROWN mentioned that he has worked for the state in the
field of construction procurement for the last 20 of his 30
years of state employment. He opined that if HB 257 moves
forward, it will result in the loss of approximately 200 state
positions, and that such should not be the way to run a pilot
project, especially given that the goal of the original bill was
to take advantage of the benefits provided by e-procurement.
The union's response to ASCI's proposal was to merely look at
the comparison between state salaries and the contract amount,
he remarked, and suggested that outsourcing is not something
that should be treated with callous indifference.
MR. BROWN offered his belief that the issue of outsourcing state
functions was addressed in the 1994 Alaska Supreme Court case,
Moore v. Alaska Department of Transportation, wherein the
concern was that privatization can be used as a means of
subverting state requirements regarding worker qualifications,
conditions of employment, and employment benefits. He opined
that privatization violates public policy by allowing the state
to avoid employment costs which it would otherwise normally
bear, and suggested that those benefits are intended to ensure
that public employees, especially in the area of procurement,
are above the fray and won't be easily manipulated, that those
employees will be working for the common good and benefit of all
Alaskans.
MR. BROWN relayed that although the court in Moore supported the
legitimacy of outsourcing, that view rests on the fact that
there are protections under the law; specifically the court said
in part: "... to the extent that privatization creates a risk
of exposing state workers to political influence, that risk is
largely obviated by provisions of the State Personnel Act and
state personnel rules dealing with layoffs and by provisions of
the State Procurement Code and the rules promulgated thereunder
dealing with state contracts.". He opined that HB 257 throws
out the state's current procurement code, which, he surmised, is
there for a reason. Furthermore, the procurement code is
referenced in other statutes, by reference adopts the [Uniform
Commercial Code (UCC)], and provides criminal penalties for
misrepresentation and for anticompetitive practices.
MR. BROWN relayed that Oregon, with the help of firms similar to
ASCI, has instituted a "Buysmart" e-commerce [system] within
state government, thus eliminating the need to outsource
people's jobs. He predicted that moving forward with HB 257
will engender a fight, since there are various forms of
protection for state employees, and mentioned that the pilot
project's contract allows ASCI to raise the current limit on
counterproposals but state procurement officers were not given
the same advantage. In conclusion, he offered his belief that
in the RFP for the pilot project, certain costs were not
included.
CHAIR McGUIRE closed public testimony and relayed that HB 257
[as amended] would be held over.
HB 133 - LOCAL BOUNDARY COMMISSION REGS & POWERS
3:28:36 PM
CHAIR McGUIRE announced that the final order of business would
be SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 133, "An Act relating
to incorporation of boroughs and to regulations of the Local
Boundary Commission to provide standards and procedures for
municipal incorporation, reclassification, dissolution, and
certain municipal boundary changes; and providing for an
effective date." [Before the committee was CSSSHB 133(STA).]
RYNNIEVA MOSS, Staff to Representative Coghill, Alaska State
Legislature, sponsor of SSHB 133, said on behalf of
Representative Coghill that the bill originally did one thing,
which was to say that any regulations that are adopted by the
Local Boundary Commission have to be consistent with state
statute. This concept was engendered by the discovery of a
regulation that allowed for an aggregate vote to be used to
annex land into a borough. State law, however, requires the
annexation of land into a borough to be decided at an election
of the voters living in the area to be annexed, and it must pass
by a majority vote. She explained that the aggregate vote
allows all the residents, both of the area to be annexed as well
as of the existing borough, to vote, and if, via that combined
vote, it is approved, the area could then be annexed. She
clarified that SSHB 133 says that both the area to be annexed
and the area of the existing municipality each have to approve
annexation by a majority vote; this will eliminate the
possibility of a "hostile takeover" of an un-annexed area by an
existing municipality.
MS. MOSS pointed out that Section 1 says that the Local Boundary
Commission may not amend a petition or impose conditions on the
incorporation, which, she said, is a change in statutory
language, but noted that the constitution clearly says that the
Local Boundary Commission will do "this" as prescribed by law,
that being statutory law passed by the legislature. She turned
attention to Section 2, and said that under current
constitutional authority, the Local Boundary Commission can take
a proposal to the legislature for its approval without a vote of
the people; Section 2, in contrast, says that there needs to be
at least two public hearings and that there should be a vote of
the people. Ms. Moss noted that Legislative Legal and Research
Services told her that Section 2 probably would not survive a
constitutional challenge. She said that she had an amendment
prepared that would take out the election provision so that the
bill could withstand such a challenge.
REPRESENTATIVE GRUENBERG commented that he had asked that this
bill be referred to this committee specifically to deal with the
constitutionality of the bill. He suggested that the language
on page 2, line 5, "and shall notify the director of elections
of the incorporation proposal", be deleted from the bill.
REPRESENTATIVE COGHILL, speaking as the sponsor, said he would
prefer to delete the language rather than approaching it from a
severability issue because of the costs associated with trying
to defend it. He said:
I appreciate the severability issue, but I don't want
the rest of the bill to get put in a place where a
court can put the whole thing under a cloud when all I
wanted was a simple, little fix. ... Under this bill
we're testing the legislative authority against the
boundary commission authority, and I'm asserting,
rather strongly, legislative authority here. However,
there [are] ... some real constitutional reasons for
the boundary commission, and when we go back and we've
studied it in the different committees that we've been
in, I would be satisfied in taking this portion out
because it still then allows two public hearings in a
community, which, to me, ... kicks a door open for
more public process. And then the vote wouldn't be
required.
3:35:00 PM
REPRESENTATIVE GRUENBERG agreed with Representative Coghill and
therefore announced that he would not offer his amendment
labeled 24-LS0512\Y.1, Cook, 4/13/05, which read:
Page 3, following line 22:
Insert a new bill section to read:
"* Sec. 6. The uncodified law of the State of
Alaska is amended by adding a new section to read:
SEVERABILITY. Under AS 01.10.030, if any
provision of this Act or the application of it to any
person or circumstance is held invalid, the remainder
of this Act and the application to other persons or
circumstances are not affected."
Renumber the following bill section accordingly.
REPRESENTATIVE GRUENBERG commented that he didn't see any
serious problem with requiring the Local Boundary Commission to
hold two public hearings.
REPRESENTATIVE COGHILL noted that the Local Boundary Commission
was amenable to having two hearings, but [language on page 2,
line 5] became problematic.
MS. MOSS relayed that former Lieutenant Governor Jack Coghill
testified at a House State Affairs Standing Committee hearing
during which he was asked about Section 1. She said that he
offered his belief that the bill put into statute what the
intent was of the constitutional convention. She commented, "I
think those are some very strong words that support
Representative Coghill's desire for the legislature to make sure
that the Local Boundary Commission is not stepping out of ...
[its] bounds."
REPRESENTATIVE GRUENBERG explained that his [un-offered]
amendment really just calls attention to the general
severability statute, but it really doesn't add anything. He
reiterated his belief that the committee should instead adopt
Representative Coghill's suggested change.
3:37:00 PM
REPRESENTATIVE GRUENBERG asked whether the Department of Law
(DOL) would have any problem defending Section 1 of the bill.
SARAH FELIX, Assistant Attorney General, Labor and State Affairs
Section, Civil Division (Juneau), Department of Law (DOL),
stated that she was attending the meeting on behalf of Marjorie
Vandor, who is assigned to the Local Boundary Commission's work
and who would be back in Juneau tomorrow. Ms. Felix stated that
Ms. Vandor had said that she is concerned about Section 1 of the
bill. Ms. Felix continued:
[Ms. Vandor] indicated that the Local Boundary
Commission is one of the few constitutionally created
commissions, and that the framers expressed an intent
that boundary decisions be made at a statewide rather
than a local level because of the statewide interests
in the municipal organization of Alaska. Case law,
interpreting the Local Boundary Commission authority,
has found that the commission has discretion to alter
boundaries presented in incorporation petitions. ...
Case law has also recognized the Local Boundary
Commission's constitutionally-based authority. ...
However, we know that not every issue has been
decided. I mean, there has been some litigation
concerning the authority of the Local Boundary
Commission but there are still a lot of unanswered
questions.
The line dividing the Local Boundary Commission's
constitutional authority and the legislature's
authority to enact laws restricting the Local Boundary
Commission's authority is not entirely clear.
Existing precedent suggests that removing the Local
Boundary Commission's authority to change boundaries
in incorporation petitions raises a constitutional
issue.
MS. FELIX added:
Ms. Vandor wanted me to stress that her reading of the
constitutional debate indicates that the framers
intended that the concept behind adopting the
constitutional provision authorizing the [Local
Boundary Commission] was that political decisions
don't usually create proper boundaries and that
boundaries should be established at the state level,
and that the advantage of the method proposed in the
constitution for the Local Boundary Commission lies in
placing the process at a level where areawide or
statewide needs can be taken into account, and that by
placing that authority in this third party - the
commission - the arguments for and against boundary
changes can be analyzed objectively.
3:40:39 PM
MS. MOSS noted that the case law is based on a state statute
that this bill would change. She also pointed out that the
constitution says that the [Local Boundary Commission] may
consider any proposed local government boundary changes, but
doesn't say that the commission can amend or alter it. She
opined, "I think the legislature definitely, under the
constitution, has the authority to change this statute and
direct the Local Boundary Commission." She stated that Article
XII, Section 11, [of the Alaska State Constitution] says that
"by law" and "by the legislature" can be used interchangeably
with regard to law-making powers; therefore, she concluded,
"prescribed by law" doesn't mean the constitution or the Local
Boundary Commission, but instead means statutes that are passed
by the legislature.
3:41:42 PM
EDGAR BLATCHFORD, Commissioner, Department of Commerce,
Community, & Economic Development (DCCED), offered his apology
for not advising the bill sponsor of the department's concerns
sooner. He stated:
The department has this obligation to be the advocate
for the unorganized borough and to promote
municipalities, whether they're cities or boroughs.
And our concerns are that [the bill] reverses the
Local Boundary Commission's authority to amend and
impose conditions on the petition. We're concerned
that the voters must first approve this annexation or
detachment before the legislature can take action. We
are also concerned that proposals for legislative
review must first be approved by residents of the
area. And we're concerned also that the annexation
into existing boroughs and cities would be almost
impossible or probably improbable without support of
the annexed areas.
As it is, it's unlikely that there would be any more
organized governments in the unorganized borough, and
the unorganized borough, we believe, can remain
confident that until they decide to incorporate, an
existing borough or city would not be able to attach
them to their boundaries. And looking at the bill as
it is ..., we believe this could impede development of
natural resources. We believe too that as the bill
... stands now, ... it would hinder the assumption of
the local responsibilities by local people. And we
also believe ... that the bill could prevent local
people from seizing the opportunities that come with
local government.
COMMISSIONER BLATCHFORD noted that he had not seen any of the
proposed [amendments].
REPRESENTATIVE COGHILL relayed that the following language in
Section 2 will be removed if the committee agrees:
and shall notify the director of elections of the
incorporation proposal. Within 30 days after
notification, the director of elections shall order an
election in the proposed borough area to determine
whether the voters desire incorporation. Only if the
voters approve the incorporation may the Local
Boundary Commission submit the proposal to the
legislature
REPRESENTATIVE COGHILL went on to say:
I think we need to organize in Alaska. We need to
organize in boroughs. But the [Alaska State]
Constitution has allowed for unorganized and organized
boroughs. It also said that as we begin to populate
and become an economy, that we are to be considered
organization along several different criteria. And so
we set up a boundary commission to help us figure
those things out. But at the end of the day, it's
going to be based on the law that we put together that
respects the right of the individual voter. And it's
our job to protect that. It's the administration's
job to administer. So I can recognize their
reluctance because they're going to advocate for a
particular style that they've been doing.
[The DCCED is] going to bring their proposals to us
and here's the action that we have: ... that the only
action that the legislature can do is disapprove
something. That's a huge negative vote. Almost
everything else we do in the legislature is
affirmative with the exception of this one issue. So
it gives the Local Boundary Commission a huge
authority. And so the authority then has to be
carefully crafted by law. And so I understand that
[the DCCED is] concerned about it, but ... [our]
constitutional duty is to make sure that the
individual voters in those areas are not forced into a
government that they don't want. ... We want a larger
agency looking at the need to organize.
3:48:13 PM
DEBBIE THOMPSON stated that she is a concerned resident of a
subdivision in Union Bay, near Meyers Chuck. She stated that
she strongly believes that the best way to reflect the desires
of the community is to be able to let the people of the
communities vote on the issues rather than just bypassing them
to go to the legislature.
3:49:56 PM
VIOLA JERREL, Ph.D., Alaskans Opposed to Annexation, stated that
she was also speaking for Doris Cabana. She testified in
support of SSHB 133 and said: "Regarding any attachments or
annexations, we want a vote of the people only in the area that
a city or another group is trying to annex. We do not want a
combined vote; we do not want an aggregate vote." She noted
that she and Doris Cabana hired Attorney Robert C. Erwin, who is
a former Alaska Supreme Court justice, to oppose annexation by
the City of Homer. She further noted that a superior court
judge in Anchorage remanded the Homer annexation case back to
the Local Boundary Commission to consider the effect that the
Homer annexation of 4.58 square miles had on the Kachemak
Emergency Service Area of 214 miles.
DR. JERREL referred to a meeting of the Local Boundary
Commission on January 5, 2005, during which the City of Homer
Annexation Remand was on the agenda, and offered the following
as a statement purportedly made at that meeting by Commissioner
Robert Harcharek:
I strongly believe that the judicial system was
totally out of line in remanding us to rehear this
action. It is not in the administrative code, it's
not a part of our legislative procedures. ... I feel
that if we're going to send a message, it's to tell
the judges to stay the hell out of it because it has
nothing for them to do with it.
DR. JERREL opined that this statement by Commissioner Harcharek
was illegal and inappropriate.
DR. JERREL expressed her belief that the current Local Boundary
Commission is not following the order of the court and therefore
the members need to be replaced. She continued: "Public money
cannot be used to deny people the due process of law. The
United States Constitution is the supreme law of the land and
everyone has to go by it, including the judges. The Local
Boundary Commission has to go by it. They have to be replaced."
3:53:50 PM
CHAIR McGUIRE closed public testimony on SSHB 133.
REPRESENTATIVE COGHILL made a motion to adopt Amendment 1, which
read [original punctuation provided]:
Page 2, line 5:
After the word "incorporation"
Delete all language through line 9, except the period.
REPRESENTATIVE COGHILL said that Amendment 1 "takes the election
out of it but leaves the public comment hearing in it."
CHAIR McGUIRE asked whether there were any objections to
Amendment 1. There being none, Amendment 1 was adopted.
3:54:42 PM
REPRESENTATIVE GRUENBERG moved to report CSSSHB 133(STA), as
amended, out of committee with individual recommendations and
the accompanying fiscal notes. There being no objection, CSSSHB
133(JUD) was reported from the House Judiciary Standing
Committee.
ADJOURNMENT
3:55:02 PM
The House Judiciary Standing Committee was recessed at 3:55 p.m.
to a call of the chair. [The meeting was never reconvened.]
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