Legislature(2003 - 2004)

03/15/2004 03:43 PM House L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 529-ALASKA RAILROAD TRACK WORK                                                                                             
CHAIR ANDERSON announced  that the final order  of business would                                                               
be HOUSE  BILL NO. 529,  "An Act  relating to the  performance of                                                               
railroad   track  construction   work  for   the  Department   of                                                               
Transportation  and  Public  Facilities by  the  Alaska  Railroad                                                               
Corporation."   [HB  529 was  sponsored  by the  House Labor  and                                                               
Commerce Standing Committee.]                                                                                                   
Number 0269                                                                                                                     
WENDY LINDSKOOG,  Director of  External Affairs,  Alaska Railroad                                                               
Corporation   (ARRC),   Department   of  Community   &   Economic                                                               
Development  (DCED),  came  forward   at  the  request  of  Chair                                                               
Anderson  to  explain  HB  529, noting  that  Tom  Brooks,  chief                                                               
engineer, was  on teleconference to  answer questions.   She said                                                               
HB 529  fixes a problem ARRC  is having in terms  of what happens                                                               
in  relation  to  some  Department  of  Transportation  &  Public                                                               
Facilities   (DOT&PF)   projects   that   involve   track   work.                                                               
Currently, no  subcontractors are interested in  bidding on track                                                               
work for  DOT&PF projects  if a  crossing is  involved in  a road                                                               
project.  The goal of the bill  is to create a solution that will                                                               
allow those projects to move forward.                                                                                           
MS. LINDSKOOG referred to the  written sponsor statement provided                                                               
by ARRC  and said HB  529 amends  the procurement code  so DOT&PF                                                               
can work directly with ARRC  on track work through a reimbursable                                                               
services agreement (RSA),  similar to other utilities.   If there                                                               
is  a  line for  water  or  power,  for  example, DOT&PF  can  go                                                               
directly to a utility under an  RSA or utility agreement and have                                                               
the utility do the work and then get reimbursed for the cost.                                                                   
MS. LINDSKOOG  reported that  prior to  1996, ARRC  could conduct                                                               
track  work  for  DOT&PF  under utility  agreements.    Then  the                                                               
procurement code  was amended, requiring  DOT&PF to  contract for                                                               
track  work under  the  competitive  bid process.    For a  time,                                                               
contractors bid  for and won  such work,  but they now  show less                                                               
interest.  They don't have  the specialized, expensive equipment,                                                               
and costs are  high to meet the specifications  required for rail                                                               
work.    She remarked  about  the  high  cost of  mobilizing  the                                                               
specialized, large rail  equipment from the Lower  48, where many                                                               
subcontractors have come from.                                                                                                  
MS.  LINDSKOOG said  HB  529  tries to  remedy  the situation  by                                                               
allowing  DOT&PF the  flexibility to  either use  the competitive                                                               
bid process or  go directly to ARRC under a  utility agreement to                                                               
do the  work.  She  offered her  belief that DOT&PF  will realize                                                               
some cost  savings from this,  as well  as streamlining in  how a                                                               
project gets done,  and said ARRC feels there is  a quality issue                                                               
at stake.   "That's what  we do for  a living," she  pointed out.                                                               
"We work on  track."  She concluded by saying  ARRC believes this                                                               
is good bill.                                                                                                                   
Number 0466                                                                                                                     
REPRESENTATIVE  GUTTENBERG  noted  that   this  is  an  agreement                                                               
between DOT&PF and ARRC.  He  asked whether this allows any level                                                               
of  contract work  to  be done  or whether  there  is a  monetary                                                               
point, under  statute elsewhere, at  which something must  go out                                                               
to bid.                                                                                                                         
MS.  LINDSKOOG answered  that this  leaves the  discretion up  to                                                               
DOT&PF.   She said  although this issue  had been  discussed with                                                               
AGC [Associated  General Contractors],  which has  voiced support                                                               
for  this bill,  it was  decided it  would be  worthwhile to  get                                                               
together in a  task force arrangement that  includes AGC members,                                                               
DOT&PF, and  ARRC to discuss  parameters for when  projects would                                                               
or wouldn't  be put out  to bid, for example.   As for  coming up                                                               
with  a dollar  figure, they'd  tried initially  to do  that, but                                                               
couldn't figure  one out.   "The railroad, in particular,  is not                                                               
interested  in really  large projects  like  the Whittier  tunnel                                                               
was," she  noted, saying it would  take away so much  from ARRC's                                                               
efforts  in  terms  of  needed  maintenance  each  summer.    She                                                               
concluded by predicting that there  would be a determination, but                                                               
not necessarily a hard-and-fast dollar amount.                                                                                  
REPRESENTATIVE GUTTENBERG asked whether  this proposed task force                                                               
was part of an agreement for supporting the bill.                                                                               
MS.  LINDSKOOG  replied that  she  thinks  it is  a  "gentleman's                                                               
agreement" and that other issues  have been discussed with regard                                                               
to doing track work.                                                                                                            
Number 0599                                                                                                                     
REPRESENTATIVE   GATTO  observed   that  the   sponsor  statement                                                               
indicates this  could possibly result  in lower costs.   He asked                                                               
whether  that  also means  it  could  possibly result  in  higher                                                               
costs.    He  pointed  out  that  this  says  there  could  be  a                                                               
competitive or  noncompetitive bid  process, and said  it strikes                                                               
him that this has just eliminated the competitive bid process.                                                                  
MS. LINDSKOOG disagreed that this  eliminates the competitive bid                                                               
process, and  said it's up  to DOT&PF's discretion whether  to go                                                               
that  route.     She  suggested  perhaps   DOT&PF  could  address                                                               
Representative Gatto's  concern from its perspective.   She added                                                               
that  she doesn't  think  it  would result  in  higher costs  for                                                               
DOT&PF, and indicated ARRC has  the equipment in Alaska and won't                                                               
have to mobilize  it [from the Lower 48]; has  the workforce; has                                                               
the know-how; and is familiar  with the industry standards, which                                                               
ARRC works  with every day.   She acknowledged that  she couldn't                                                               
provide any guarantee.                                                                                                          
CHAIR  ANDERSON said  he thinks  the assumption  is that  it will                                                               
save money.                                                                                                                     
Number 0682                                                                                                                     
REPRESENTATIVE  DAHLSTROM  asked  whether a  particular  incident                                                               
spurred this legislation.                                                                                                       
MS.  LINDSKOOG replied  that  she believes  DOT&PF  has had  some                                                               
trouble finding subcontractors for this  type of work in the last                                                               
couple of years.   This at least provides a  tool and lets DOT&PF                                                               
work directly  with ARRC  when the department  has run  into that                                                               
situation.    She conveyed  her  understanding  that one  of  the                                                               
companies that  used to  do rail work  in Alaska  had demobilized                                                               
its equipment, gone back to the  Lower 48, and "basically told us                                                               
they are no  longer interested in bidding the small  jobs."  Thus                                                               
no  one is  bidding  on the  work,  and yet  ARRC  has the  right                                                               
equipment and workforce, and can do  it.  As for ARRC's not using                                                               
the competitive  bidding process,  she explained, "We're  not set                                                               
up to pay  prevailing wages and get into  the federal contracting                                                               
business.   We're not set  up to act  as a contractor,  so that's                                                               
why the  railroad has  not ...  acted as a  contractor to  do the                                                               
work in the past."                                                                                                              
Number 0758                                                                                                                     
REPRESENTATIVE  ROKEBERG  inquired  about AGC's  support  of  the                                                               
bill, pointing out  that it isn't documented in  the bill packet.                                                               
He asked whether AGC was planning to write a letter or testify.                                                                 
MS.  LINDSKOOG replied  that she  could certainly  ask AGC  to do                                                               
that, but  didn't have a  letter.  She offered  her understanding                                                               
that Thyes Shaub,  lobbyist for AGC [of Alaska], had  talked to a                                                               
few  committee  members, but  then  she  said maybe  that  hadn't                                                               
happened yet.                                                                                                                   
CHAIR ANDERSON asked whether she'd been told [of AGC's support].                                                                
MS. LINDSKOOG answered in the affirmative.                                                                                      
Number 0826                                                                                                                     
MARK O'BRIEN,  Chief Contracts Officer;  Contracting, Procurement                                                               
and   Appeals;  Office   of  the   Commissioner;  Department   of                                                               
Transportation & Public Facilities,  began by voicing support for                                                               
HB 529.   He  commended Ms.  Lindskoog for doing  a great  job of                                                               
characterizing the difficulties that  DOT&PF has been having with                                                               
these projects.  He also pointed out  that ARRC buys a lot of its                                                               
supplies  and materials,  including railroad  ties, in  quantity,                                                               
and  thus is  probably able  to  offer better  pricing than  some                                                               
contractors; this will benefit the state, he suggested.                                                                         
REPRESENTATIVE GUTTENBERG asked  whether discussions had included                                                               
a  "casual   labor  contract"  whereby   a  contractor   bids  on                                                               
something, for  any scope of work  under some definition up  to a                                                               
certain level.   He said this is  done on the North  Slope and on                                                               
[military] bases,  for example,  so that everything  doesn't have                                                               
to be bid  on incrementally.  For instance, it  could be done for                                                               
the maintenance  of track crossings  up to  a certain level.   He                                                               
asked whether that had been part of the dialog.                                                                                 
MR. O'BRIEN said no.   He surmised that Representative Guttenberg                                                               
was referring  to what is  typically called a "term  contract" or                                                               
"indefinite  quantity/indefinite  delivery"  contract  whereby  a                                                               
contractor is, in essence, on  retainer to provide those services                                                               
on an  as-needed basis.  Mr.  O'Brien added that he  doesn't know                                                               
that it would  help here because of the need  for a contractor to                                                               
tie  up  expensive,  heavy,  difficult-to-mobilize  equipment  in                                                               
order to be  able to respond on an as-needed  basis.  He surmised                                                               
that this  might actually  account for some  of the  reasons that                                                               
local contractors haven't been able  to survive in that industry;                                                               
there isn't  enough consistent, repetitive track  work outside of                                                               
what ARRC does for them to stay in business.                                                                                    
Number 1017                                                                                                                     
REPRESENTATIVE GATTO  asked what ARRC's connection  is to [state]                                                               
MR.  O'BRIEN replied  that it's  a public  corporation under  the                                                               
[Department of Community & Economic Development].                                                                               
REPRESENTATIVE GATTO surmised that ARRC  is charged with making a                                                               
profit.   He remarked  that he'd  always thought  it did  its own                                                               
work.  Citing  an example, the new interchange  between the Glenn                                                               
Highway and the  Parks Highway, he said the railroad  is at grade                                                               
right there; the new interchange  will now have the railroad pass                                                               
underneath  an overpass.   He  asked whether  that's the  kind of                                                               
work  ARRC will  contract  for  [with DOT&PF]  now  or whether  a                                                               
[private] contractor will do it.                                                                                                
MR. O'BRIEN replied that it would  depend on the scope and extent                                                               
of the project.  He explained:                                                                                                  
     In  our conversations  with the  railroad, they're  not                                                                    
     prepared to tie  up all of their resources  for a large                                                                    
     project.   For  instance,  you may  have  seen on  Bird                                                                    
     Flats, where  they relocated  the railroad  further out                                                                    
     into the  inlet, that that  was a significant  piece of                                                                    
     work.   And it's  a discussion we'd  have to  have with                                                                    
     the railroad as  to whether they would  have taken that                                                                    
     whole piece on themselves.  ... And, as [Ms. Lindskoog]                                                                    
     mentioned, the Whittier tunnel  is another example. ...                                                                    
     There  are some  projects they  just will  not take  on                                                                    
     because they're  not equipped to,  in which  case those                                                                    
     projects  are large  enough to  mobilize equipment  in,                                                                    
     and we can get bids on that kind of work.                                                                                  
REPRESENTATIVE  GATTO  surmised, then,  that  ARRC  is more  into                                                               
maintenance.  He asked about realignment.                                                                                       
MR. O'BRIEN answered:                                                                                                           
     It depends  on who  is driving the  contract.   If it's                                                                    
     ... a federal-aid highway job  where the realignment is                                                                    
     part of our  highway job, then our  contractor is going                                                                    
     to  do   all  of   the  relocation   and  all   of  the                                                                    
     [preparation] work, up through  sub-base.  And then the                                                                    
     railroad would simply come in  and do tracks, ties, and                                                                    
     ballast over our realignment.                                                                                              
Number 1138                                                                                                                     
REPRESENTATIVE ROKEBERG related  his understanding that typically                                                               
DOT&PF  retains  a general  contractor  and  that other  work  is                                                               
[performed] by subcontractors.  He  asked if DOT&PF would rely on                                                               
the  contractor or  it would  be drafted  in the  specifications,                                                               
depending upon whether it's a major or minor project.                                                                           
MR. O'BRIEN  answered, "That's  correct."   He explained  that if                                                               
the project will  include ARRC's doing the work,  that portion of                                                               
the  work will  never  see the  department's bid  specifications.                                                               
However, on larger  projects for which ARRC can't do  the job in-                                                               
house, ARRC  will provide  the plans  and specifications,  as has                                                               
been the case since 1996, to  DOT&PF to place in the solicitation                                                               
to be  bid by the  contractor.  In the  aforementioned situation,                                                               
ARRC would subcontract that rail work with the contractor.                                                                      
Number 1222                                                                                                                     
REPRESENTATIVE ROKEBERG  inquired as  to where  ARRC fits  in the                                                               
scheme of  the contract  when ARRC  has a  problem with  the work                                                               
done on a major realignment.                                                                                                    
MR. O'BRIEN explained  that placing ARRC in  charge of developing                                                               
and  executing  the  specifications  it relieves  DOT&PF  of  all                                                               
responsibility in terms of warranting  the product because [ARRC]                                                               
is responsible for  it from beginning to  completion.  Therefore,                                                               
DOT&PF views the  aforementioned as an advantage.   He noted that                                                               
under the  previous arrangement,  if the subcontractor  failed to                                                               
properly  put in  the  ties, railroad,  or  alignment, then  ARRC                                                               
would've  turned   to  DOT&PF  to   enforce  against   its  prime                                                               
contractor.  The aforementioned  would subsequently result in the                                                               
prime contractor's [going  to] the subcontractor for  the fix for                                                               
the failed work.                                                                                                                
REPRESENTATIVE   ROKEBERG  posed   a  situation   in  which   the                                                               
subcontractor   under  the   general   [contractor],  under   the                                                               
department's  specifications,  didn't  perform  properly  on  the                                                               
"road bed" underneath the tracking of  the railroad.  He asked if                                                               
the  aforementioned  would  be  resolved  under  normal  dispute-                                                               
resolution methods.   He surmised  that there will be  a separate                                                               
entity that will be involved in  the general scope of work, while                                                               
DOT&PF will have an agreement directly with ARRC.                                                                               
MR.  O'BRIEN agreed,  noting  that even  under  the new  scenario                                                               
there are several parties involved.   He explained that the prime                                                               
contractor  will  be  responsible  for  the  project,  while  the                                                               
subcontractor  will be  responsible for  up through  sub-base and                                                               
ARRC will be  responsible for track ties and ballast.   A failure                                                               
in the  sub-base could be  the result of a  number of things.   A                                                               
design  error  would  potentially  return to  ARRC  as  a  design                                                               
failure in  the sub-base.   Mr. O'Brien  explained, "If it  was a                                                               
failure  in having  ...  installed or  ...  the gradations  being                                                               
handled  correctly  through  the subcontractor,  then  there's  a                                                               
liability  on  the  prime  [contractor]  who's  working  for  the                                                               
sub[contractor].   And it  depends on  why it  fails, and  how it                                                               
fails, and who's responsible."                                                                                                  
REPRESENTATIVE  ROKEBERG   surmised  that   all  the   plans  and                                                               
specifications will  come from ARRC.   He asked if that  has been                                                               
the case in the past.                                                                                                           
MR. O'BRIEN replied yes.                                                                                                        
Number 1375                                                                                                                     
REPRESENTATIVE  ROKEBERG  asked  if currently  all  the  [DOT&PF]                                                               
contracts  fall  under the  prevailing  wage  Act or  the  Little                                                               
Davis-Bacon Act [AS 36.05].                                                                                                     
MR. O'BRIEN replied  yes.  In further  response to Representative                                                               
Rokeberg, he specified  that ARRC isn't subject to  the same wage                                                               
requirements.   If the department  enters into an  agreement with                                                               
ARRC  as a  utility, as  envisioned in  HB 529,  ARRC would  be a                                                               
government  entity  contracting  with DOT&PF.    Therefore,  ARRC                                                               
wouldn't be considered a contractor  under the Little Davis-Bacon                                                               
Act and thus wouldn't be required to take prevailing wages.                                                                     
CHAIR  ANDERSON announced  that a  letter from  the AGC  had just                                                               
been  provided  to the  committee.    He  noted that  the  letter                                                               
relates AGC's support of HB 529.                                                                                                
REPRESENTATIVE ROKEBERG  continued, and  asked if money  is being                                                               
saved by  utilizing a governmental  entity to do the  work rather                                                               
than a private contractor.                                                                                                      
MR. O'BRIEN  said that  wasn't mentioned as  one of  the savings.                                                               
He deferred to ARRC.                                                                                                            
CHAIR ANDERSON related his understanding  that part of the reason                                                               
for HB 529 is that no one is bidding on these projects.                                                                         
MR. O'BRIEN responded, "That is,  in part, correct."  He informed                                                               
the committee that for one of  the last contracts [DOT&PF] had on                                                               
the Bird  Flats, ARRC had  to step  in for the  subcontractor and                                                               
finish the project.                                                                                                             
Number 1500                                                                                                                     
REPRESENTATIVE ROKEBERG  asked if there  is a particular  type of                                                               
ballast material that couldn't be  provided by a contractor other                                                               
than ARRC.                                                                                                                      
MR. O'BRIEN deferred to ARRC.                                                                                                   
REPRESENTATIVE  ROKEBERG  related   his  understanding  that  the                                                               
legislation  doesn't  provide  a  provision  for  a  break  point                                                               
between  a major  and  minor scope  of  work.   He  asked if  Mr.                                                               
O'Brien wanted to  make a statement with regard to  the policy in                                                               
terms of the commissioner's discretion.                                                                                         
MR. O'BRIEN responded:                                                                                                          
     As a  result of the  meetings with the task  force that                                                                    
     we've   established    (indisc.)   Associated   General                                                                    
     Contractors,  we will  be  establishing guidelines  for                                                                    
     the use of  the railroad for this work, and  that it is                                                                    
     our intent  that major  projects -  and I  can't define                                                                    
     that  because  we were  unable  to  agree on  either  a                                                                    
     length of  track segment or  a dollar amount to  try to                                                                    
     put [a] box  around - but for major  projects where the                                                                    
     railroad is  just not staffed  to handle those  for us,                                                                    
     those will be put out to competitive bid.                                                                                  
REPRESENTATIVE  ROKEBERG  surmised,  then,  that  if  ARRC  can't                                                               
perform the work,  the department will have to go  to the private                                                               
sector to find someone to do  the work.  Therefore, ARRC would be                                                               
in the default  position to perform the work  unless ARRC doesn't                                                               
want to do the work.                                                                                                            
MR. O'BRIEN replied no, and  specified that this is a negotiation                                                               
process between the department and ARRC.   If DOT&PF felt that it                                                               
couldn't reach  an agreement  on the  cost and it  was of  a size                                                               
that could entice a contractor  to enter, then [a competitive bid                                                               
process]   could   be   used.     He   further   specified   that                                                               
competitiveness and the size of the  work could be reasons to [do                                                               
a competitive bid process].                                                                                                     
REPRESENTATIVE ROKEBERG inquired as  to Mr. Brooks' impression of                                                               
today's testimony.   Specifically,  he requested that  Mr. Brooks                                                               
comment on  ARRC's position  on the prevailing  wage Act  and how                                                               
those labor costs compare.                                                                                                      
[Chair Anderson passed the gavel to Vice Chair Gatto.]                                                                          
Number 1646                                                                                                                     
TOM   BROOKS,  Chief   Engineer,  Alaska   Railroad  Corporation,                                                               
Department of  Community &  Economic Development  said, generally                                                               
speaking, folks have covered everything  accurately.  In terms of                                                               
wages, Mr.  Brooks said he  hasn't reviewed a  comparison between                                                               
ARRC's wages and  the Little Davis-Bacon Act wages.   However, he                                                               
noted that  ARRC's wage structure through  ARRC's union agreement                                                               
is  quite  different  from  AGC's   wage  structure  through  its                                                               
agreements.  In the broad sense,  he said, he believes [the wages                                                               
for ARRC wages and AGC] would be in the same ballpark.                                                                          
REPRESENTATIVE ROKEBERG asked if,  because [ARRC's employees] are                                                               
under collective bargaining agreements,  [its employees] would be                                                               
exempt from the prevailing wage Act.                                                                                            
MR. BROOKS  related that  ARRC is  under a  collective bargaining                                                               
agreement.    He further  related  his  understanding that  under                                                               
utility  agreements ARRC  wouldn't be  subject to  [Little Davis-                                                               
Bacon  Act]  because  it  would be  [a  contract]  between  state                                                               
entities.  If ARRC were to  be subject to the [Little Davis-Bacon                                                               
Act],  ARRC  would  look  at   trying  to  become  a  contractor.                                                               
However,  he  viewed  that  as  impediment  because  ARRC's  wage                                                               
agreements are so different [from  AGC's], and therefore it would                                                               
require  negotiation  with  ARRC's  union.    Additionally,  it's                                                               
difficult to  envision ARRC, as  a state-owned  entity, competing                                                               
in the private sector against another railroad contractor.                                                                      
REPRESENTATIVE  ROKEBERG  surmised that  the  scope  of the  work                                                               
seems to be  the key point with regard to  whether the work would                                                               
be competitively bid or not.                                                                                                    
MR.  BROOKS, in  response to  Representative Rokeberg,  clarified                                                               
that if  ARRC performs work as  a utility, then ARRC  wouldn't be                                                               
subject to the Little Davis-Bacon Act.                                                                                          
[Vice Chair Gatto returned the gavel to Chair Anderson.]                                                                        
MR. BROOKS related his belief  that the [determining] question is                                                               
regarding whether  ARRC acts  as a  subcontractor to  the general                                                               
contractor or whether ARRC has  a utility agreement directly with                                                               
Number 1778                                                                                                                     
REPRESENTATIVE GUTTENBERG  noted that  it seems  that one  of the                                                               
issues  is  the  availability  of contractors  who  are  able  to                                                               
perform  the  work.    Therefore,  he inquired  as  to  how  much                                                               
specialty and technical  knowledge would be necessary  to lay the                                                               
track and set the ballast.                                                                                                      
MR. BROOKS  explained that the  equipment used to lay  tracks and                                                               
ballasts  are the  tamper and  ballast regulator,  both of  which                                                               
cost  between  $300,000  and  $500,000.   The  tamper  is  fairly                                                               
sophisticated  controlled  by  a   computer.    He  informed  the                                                               
committee that  ARRC has the only  equipment of that type  in the                                                               
MR. BROOKS,  in response to Representative  Gatto, explained that                                                               
as  the chief  engineer  he sets  the  engineering standards  and                                                               
works with those within the  railroad's right-of-way.  In further                                                               
response to Representative Gatto,  Mr. Brooks confirmed that it's                                                               
in the scope of his position to see that ARRC prospers.                                                                         
REPRESENTATIVE GATTO  inquired as to  how the cost  [of projects]                                                               
could be  controlled when  ARRC is the  only entity  available to                                                               
perform the work.   He further inquired as to  whether ARRC would                                                               
have the  privilege of  making a  substantially higher  bid since                                                               
there is essentially no competition.                                                                                            
MR. BROOKS  informed the  committee that the  work ARRC  does for                                                               
DOT&PF under a utility agreement  is strictly a cost-reimbursable                                                               
arrangement.   The  audit  rates  don't allow  any  profit to  be                                                               
included in the rate.                                                                                                           
CHAIR ANDERSON, upon  determining no one else  wished to testify,                                                               
closed public testimony.                                                                                                        
Number 1892                                                                                                                     
REPRESENTATIVE ROKEBERG moved  to report HB 529  out of committee                                                               
with individual recommendations and  the accompanying zero fiscal                                                               
note.   There being no  objection, HB  529 was reported  from the                                                               
House Labor and Commerce Standing Committee.                                                                                    

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