Legislature(1999 - 2000)
02/16/2000 03:25 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 314-PROCUREMENT PREFS:PARTNERSHP/LTD LIAB CO CHAIRMAN ROKEBERG announced the next order of business would be HOUSE BILL NO. 314, "An Act clarifying the requirements for limited liability companies and partnerships to qualify for the Alaska bidder's and disability preferences under the State Procurement Code; and providing for an effective date." Number 0823 VERN JONES, Chief Procurement Officer, Division of General Services, Department of Administration, came forward to testify on HB 314. He stated that HB 314 clarifies the Alaska bidder's and disability preferences section of procurement statutes regarding limited liability partnerships (LLPs) and limited liability companies (LLCs). He said the procurement code was written in 1987 and became effective in 1988. This was before the inception of LLCs and LLPs, which were allowed to organize in the mid-1990s. The preferences section in the procurement code do not reference LLPs or LLCs. HB 314 inserts language which specifically mentions these types of businesses in the preferences sections and stipulates the qualifying factors required to receive those preferences. It is believed that this clarification is necessary and furthers the legislative objectives of the procurement code by ensuring that bonafide Alaskan businesses do receive preferences that are set out in statute. CHAIRMAN ROKEBERG asked, "Mr. Jones, there's nothing substantive here other than adding the LLC and LLP concept? Is that correct?" MR. JONES replied, "Exactly." Number 0897 REPRESENTATIVE HALCRO pointed out that he does not have a problem with the intent of HB 314. He referred to Section 1, paragraph 3, which reads: ["Alaska bidder" means a person who] has maintained a place of business within the state staffed by the bidder or an employee of the bidder for a period of six months immediately preceding the date of the bid. He said there are national companies who place one sales representative in an office somewhere and who receives Alaska preference when the majority of the work is done somewhere outside of the state. It is his opinion that there has to be a way to factor in more of an Alaska bidder preference. He thinks many Alaskan businesses are losing out. MR. JONES said that complaint has been heard before. When bids are received from businesses that are questioned, the division does extensive research on these businesses. The businesses have to have operated in the state for six months, which is different than having a post office box, a phone or a fax machine. Several vendors have been disqualified for trying to claim that preference by having office space but not operating a business in that space. He has yet to hear a better definition of an Alaskan business. He thinks the notion of lengthening the time for operating a business in Alaska could be entertained. He cautioned it needs to be recognized that the qualifying factors which currently exist sometimes disqualify bonafide Alaskans. For this reason, the division is very careful about changing the length of time. REPRESENTATIVE HALCRO wondered about the possibility of mandating that a certain percentage of the work or product be completed in Alaska. MR. JONES said the makes sense in concept. The difficulty of that idea comes into play with the analysis required each and every time quotes are received, even on a small procurement, because the bidder preferences are applied by policy. He commented: What we try and do is make this fairly bulletproof, black-and-white decision for procurement folks to make out there. The way our procurement system is distributed, or rather decentralized, a lot of times we have state employees conducting procurements that aren't necessarily experts in procurement. They're doing this as something off to the side, aside from their regular duties, because of the decentralized nature we have a very small central procurement staff in general services. And we try and make these things as simple as possible. It's a six month rule. You qualify or you don't. Something along the lines of what you suggested would complicate things substantially which goes against the trend that we're trying to develop or maintain. But it is worth looking at, I suppose. CHAIRMAN ROKEBERG asked Representative Halcro what he suggested. Number 1153 REPRESENTATIVE HALCRO responded: Well, here's the situation. I have a constituent of mine who owns a printshop, and he regularly bids on state business through competitive bid process. Well, he has a competitor that prints basically everything out of state. He has one sales rep[resentative]. He gets the Alaska bidder's preference so he gets the work, sends it to Salt Lake City, it's printed and comes back to the state. Meanwhile, this guy has all the equipment and all the employees and doesn't get a lion's share of the work. Furthermore, there's been several cases. As a matter of fact, he had an administrative hearing last year that he appealed where you have some procurement; As Mr. Jones says it's kind of a decentralized process so you have people that don't normally do the procurement doing the procurement. And there have been proven times where certain friendships or relationships exist where, you know, the Alaska bidder preference really isn't, it's not fairly applied. I mean I would think that Alaska bidder preference means that it's printed or built or whatever the case may be in Alaska with Alaskan employees not just one sales rep who then in turn forwards the PO [purchase order] to Salt Lake City or Denver. CHAIRMAN ROKEBERG asked Representative Halcro if he would like the bill to go to a subcommittee. REPRESENTATIVE HALCRO responded that he would prefer that. MR. JONES pointed out that there are a number of issues that his division has long been concerned with the Alaska bidder preference. The foremost concern is that it would cost Alaska more money. He explained: We have some situations, for example, we have microcomputer contracts which are large contracts, very big numbers of expenditures. We have Alaskan firms. By virtue of them having an office in Alaska who get a markup, only by virtue of this preference, they never see the computers that we buy from them. We place our order. They call down South. They relay the order. They collect the money. They skim the bidder preference off the top. You or I as an individual could call any of these companies direct and get a better price on certain brand computers than we as the state can because of this preference. So, I'm not defending the preference. I'm just saying there are a lot of different issues that if we're going to look at this we may want to consider some of those other issues as well. I don't have a solution for that particular one, but we might be able to write up something. CHAIRMAN ROKEBERG appointed a subcommittee on HB 314 with the following members: Representative Halcro, Chair; and Representatives Harris and Cissna. [HB 314 was held over.]
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