Legislature(2003 - 2004)

03/30/2004 09:04 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                                                                                                                                
     SENATE BILL NO. 40                                                                                                         
     "An Act relating to construction of highways by the Department                                                             
     of Transportation and Public Facilities."                                                                                  
                                                                                                                                
                                                                                                                                
This was  the second  hearing for  this bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken explained  that this  bill would  limit the  use of                                                            
Force Account  Construction funds  to highway construction  projects                                                            
that  cost  less than  $250,000.  He  noted that  bill  version  23-                                                            
LS0381\A, which was initially  heard during the First Session of the                                                            
Twenty-Third Legislature, is before the Committee.                                                                              
                                                                                                                                
SENATOR  JOHN  COWDERY,  the bill's  sponsor,  explained  that  this                                                            
legislation  was introduced  in response  to  concerns from  private                                                            
construction  contractors  regarding the  fact that  a $2.4  million                                                            
highway  construction  project at  St. Mary's  in  Rural Alaska  was                                                            
conducted  by  the  State through  the  Force  Account  process  and                                                            
without  abiding  by the  State  Procurement  Code that  requires  a                                                            
competitive bid process be utilized.                                                                                            
                                                                                                                                
Senator Cowdery stated  that the legislation was developed following                                                            
conversations  with contractors and discussions with  the Department                                                            
of Transportation  and Public  Facilities (DOT).  He noted  that DOT                                                            
was also  asked to develop  a Statewide  Delivery Order maintenance                                                             
contract that would require  a 24-hour call-out for a job. He stated                                                            
that  this  legislation  would  be in  the  State's  best  interest.                                                            
Contractors  throughout   the  State  support  the  $250,000   limit                                                            
specified for Force Account highway construction projects.                                                                      
                                                                                                                                
Senator  Dyson  asked   that  additional  information   be  provided                                                            
regarding past situations  of abuse of this issue. He also asked how                                                            
Governor Frank  Murkowski's Administration is addressing  the issue.                                                            
                                                                                                                                
Senator Cowdery explained  that in the past, and particularly in the                                                            
notorious St.  Mary's project, the State circumvented  the system by                                                            
utilizing State  employees or hiring  construction crews  and paying                                                            
State employee  wages rather than  paying higher, contractor  Davis-                                                            
Bacon  wages.  He characterized  the  State's  behavior  in the  St.                                                            
Mary's project operation as being "very creative."                                                                              
                                                                                                                                
Senator Cowdery voiced  support for the $250,000 State Force Account                                                            
limit and  stated that  it an appropriate  level  as the purpose  of                                                            
such  an account  is to allow  the State  to respond  to  unforeseen                                                            
projects.  He stated  that this limit  would assure,  in a  workable                                                            
manner, that  DOT would operate using  the competitive bid  process.                                                            
                                                                                                                                
Senator  Hoffman  asked whether  this  limit  is pertinent  only  to                                                            
general funds expenditures.                                                                                                     
                                                                                                                                
Senator  Cowdery  responded  that  it would  apply  to  any  project                                                            
exceeding  $250,000  regardless  of  whether  the funding  for  that                                                            
project was State or federal.                                                                                                   
                                                                                                                                
Senator  Olson asked  whether this  legislation  would specifically                                                             
apply to Department  of Transportation  and Public Facilities  (DOT)                                                            
highway construction projects.                                                                                                  
                                                                                                                                
Senator Cowdery responded  that the legislation could be expanded to                                                            
include all  State departments, as  the intent is to address  abuses                                                            
within the State procurement system process.                                                                                    
                                                                                                                                
Senator  Olson asked  whether  this bill  could therefore  apply  to                                                            
other departments.                                                                                                              
                                                                                                                                
Senator  Cowdery  pointed  out that,  as  reflected, in  the  bill's                                                            
title, this legislation is specific to DOT.                                                                                     
                                                                                                                                
Amendment #1:  This amendment deletes  language in Section  1, lines                                                            
eight through eleven, on page one that reads as follows.                                                                        
                                                                                                                                
     "when  the estimated  cost of  a construction  project is  less                                                            
     than $100,000 or when  it appears to be in the best interest of                                                            
     the state  and the estimated cost of a construction  project is                                                          
     $250,000   or  less,  the  department  may  perform   the  work                                                          
     notwithstanding any other provisions of law.                                                                               
                                                                                                                                
In addition,  the following language  would be inserted on  page one                                                            
following line seven in Section 1.                                                                                              
                                                                                                                                
     the department  may perform the work notwithstanding  any other                                                            
     provisions of law when                                                                                                     
          (1) the estimated cost of a construction project is less                                                            
     than $100,000;                                                                                                             
          (2) the construction project is not connected by a land                                                             
     road to the main road  system of the state and the commissioner                                                          
     determines  that  [OR  WHEN}  it  appears  to be  in  the  best                                                          
     interests of the state; or                                                                                               
          (3) the construction project is connected by a land road                                                            
     to the main  road system of the state, the estimated  cost of a                                                          
     construction project  is $250,000 or less, and the commissioner                                                          
     determines  that it appears to be in the best  interests of the                                                          
     state[, THE DEPARTMENT  MAY PERFORM THE WORK NOTWITHSTANDING AN                                                          
     Y OTHER PROVISIONS OF LAW].                                                                                                
                                                                                                                                
     New Test Underlined [DELETED TEXT BRACKETED]                                                                             
                                                                                                                                
Senator Olson moved Amendment #1.                                                                                               
                                                                                                                                
Co-Chair Wilken objected  for clarification. He noted that Amendment                                                            
#1 is accompanied  by a sponsor statement  from Senator Olson  and a                                                            
copy of Administrative Order No. 199 [copies on file].                                                                          
                                                                                                                                
Senator Olson  stated that  this amendment  addresses the fact  that                                                            
the legislation,  as presented,  would require  all DOT public  road                                                            
projects  exceeding $250,000  to be subject  to the competitive  bid                                                            
process.  This  process  could limit  the  economic  feasibility  of                                                            
numerous  Rural construction  projects.  Therefore,  this  amendment                                                            
would  exempt Rural  road projects  that  are not  connected to  the                                                            
Alaska road system  from the competitive bid requirement.  Questions                                                            
regarding the  use of the competitive bid process  in these areas is                                                            
best answered  by language  in Administrative  Order No. 199,  which                                                            
addresses  construction  projects in  rural Alaska.  This Order  has                                                            
been in effect since October 2002.                                                                                              
                                                                                                                                
Senator Olson  noted that  Administrative Order  No. 199 is  working                                                            
effectively and  was, when developed, supported by  a vast number of                                                            
people in  the construction  industry, including  State contracting                                                             
agencies,  the Associated  General  Contractors,  labor unions,  and                                                            
rural construction entities.                                                                                                    
                                                                                                                                
Senator  Olson stressed  that  $250,000  oftentimes  might not  even                                                            
provide  for the required  air transportation  and mobilization  and                                                            
demobilization   of   equipment   and  materials   relating   to   a                                                            
construction projects in Rural areas.                                                                                           
                                                                                                                                
Senator  Dyson asked  whether  the  intent of  the amendment  is  to                                                            
provide local people an opportunity to work.                                                                                    
                                                                                                                                
Senator  Olson   responded  that   is  correct.  He  cited   several                                                            
successful  "Force  Account"  projects,  including  the  St.  Mary's                                                            
project,  that were  completed below  budget, on  time, and with  no                                                            
worker's  compensation  claims.  Another  benefit  of  hiring  local                                                            
residents  and having local  expenditures,  including equipment,  is                                                            
that a community is able  to continue to utilize purchased equipment                                                            
to  maintain its  roads  and airports.  He  stressed  that were  the                                                            
$250,000 limitation  in place, construction projects  costs would be                                                            
driven  upward due  to equipment  transportation  and other  related                                                            
expenditures  rather than  being the  result of  labor expenses.  He                                                            
exampled  the 1998  Selawik  Boardwalk  Improvement  project as  one                                                            
whose  $75,000  labor  costs  were  minimal  when  compared  to  its                                                            
$310,000  cost  relating  to  equipment  transportation   and  other                                                            
associated  things. He referred the  Committee to the "DOT&PF  Force                                                            
Account  Report" [copy  on file] dated  February  12, 2003 that  was                                                            
provided by the sponsor  that depicts Force Account projects for the                                                            
years 1998 through 2002.                                                                                                        
                                                                                                                                
Senator  Olson  argued  that  the $250,000  limitation  would  be  a                                                            
logical approach  for a construction  project that could  be reached                                                            
via the  State's connected  road system;  however,  the fact  that a                                                            
project is  not on a road  system has significant  financial  impact                                                            
that, adhering to the competitive  bid policy, would not serve to be                                                            
in the best interest of the State.                                                                                              
                                                                                                                                
Senator Hoffman, referencing  the aforementioned Force Account list,                                                            
stated that  projects such  as boardwalk projects  do not require  a                                                            
high level of skilled labor;  however, the costs associated with the                                                            
project mobilization  and the demobilization  expenses could  either                                                            
increase the costs  associated with the project or  serve to provide                                                            
"less  of a project."  In  addition, he  noted that  in addition  to                                                            
providing jobs to rural  residents, experiences indicate that when a                                                            
community is  involved in a project,  it becomes invested  in it and                                                            
subsequently  takes care of  it. Therefore,  he summarized  that the                                                            
benefit of Force Account  projects include getting a better product,                                                            
local  control  and  investiture,  and  dollars  being  spent  in  a                                                            
community  which   has  few  other  financial  opportunities.   "The                                                            
Amendment makes a lot of sense."                                                                                                
                                                                                                                                
Senator  Cowdery  spoke  against  the  amendment,   particularly  in                                                            
regards to Davis  Bacon wages not being paid, the  State procurement                                                            
code being  circumvented,  and there being  questions regarding  the                                                            
liability of  using city rather than  private contractor  equipment.                                                            
Rural  contractors have  testified that  they have  been denied  the                                                            
opportunity  to   bid  on  rural  projects  because  Force   Account                                                            
operations were  conducted. He noted that local contractors  support                                                            
the development  of a DOT day-labor  Delivery Order Contract,  which                                                            
would specify a 24-hour  callout timeframe through which maintenance                                                            
projects could be conducted.  Development of this contract would not                                                            
be difficult  as DOT is quite  good of estimating  what a job  would                                                            
cost. This would assure  that the public is served at the best price                                                            
and  would  allow  local contractors  an  opportunity  to  bid  jobs                                                            
accordingly.                                                                                                                    
                                                                                                                                
Senator Hoffman,  referencing the sponsor's position  that the Force                                                            
Account program  has been abused,  characterized that position  as a                                                            
"stretch" as the aforementioned  Force Account report indicates that                                                            
the jobs conducted  in this manner  between the years 1998  and 2002                                                            
amount  to  less  than  three  percent  of  the total  construction                                                             
projects of  the Department. Therefore,  he stated that legislation                                                             
that  would  prevent Rural  residents  from  working  these  limited                                                            
projects "is going a little bit too far."                                                                                       
                                                                                                                                
Senator   Dyson  voiced   appreciation   for  the   intent  of   the                                                            
legislation;  however, he understood  that this amendment  would not                                                            
preclude  the use  of Davis  Bacon wages.  In addition,  the use  of                                                            
local qualified  applicants  and equipment  would be beneficial.  He                                                            
questioned how limiting  the price of a contract would prevent State                                                            
government from utilizing State employees.                                                                                      
                                                                                                                                
Senator Cowdery explained  that the initial purpose for allowing use                                                            
of Force  Accounts  was to address  unforeseen  problems that  might                                                            
occur relating to a job  that was already under contract. The use of                                                            
Force Accounts  "was never intended"  to fund a job "from  scratch."                                                            
                                                                                                                                
Co-Chair Wilken  asked that Committee discussion focus  on Amendment                                                            
#1.                                                                                                                             
                                                                                                                                
Senator  Dyson  understood  that in  order  to  provide a  good  bid                                                            
package, such  things, as core samples are required.  Continuing, he                                                            
opined that the  development of a DOT Delivery Order  Contract would                                                            
be useful in  managing the many small  jobs that do not require  in-                                                            
depth investigation. Funding  of these jobs through the use of Force                                                            
Accounts would be more  cost efficient. The question is, what is the                                                            
threshold.  He agreed with Senator  Olson that were local  equipment                                                            
and labor available,  their use would be more economical.  Therefore                                                            
he  asked  the sponsor  whether  $250,000  is  the  right  threshold                                                            
limitation for Force Account work.                                                                                              
                                                                                                                                
Senator  Cowdery   supported  the  $250,000  limit.   Originally,  a                                                            
$100,000  limit was entertained.  Continuing,  he noted that  DOT is                                                            
responsible  for  providing contractors  with  such  things as  soil                                                            
analysis because  jobs that go to bid should not be  misrepresented.                                                            
A job that has a soil problem could become very expensive.                                                                      
                                                                                                                                
Senator Dyson clarified  that rather than referring to jobs in which                                                            
a contract has been awarded,  he is referring to small jobs in which                                                            
it would  not be  cost effective  to prepare  a bid  package and  go                                                            
thought the competitive bid process.                                                                                            
                                                                                                                                
Senator  Cowdery stated  that during  previous,  separate  Committee                                                            
discussions  with  local  contractors  in  Nome,  Bethel  and  other                                                            
communities,  testimony supported  a limit, as it would allow  local                                                            
contractors to participate in a competitive bid process.                                                                        
                                                                                                                                
Senator Dyson asked whether DOT could respond to his question.                                                                  
                                                                                                                                
Senator  Olson  stated  that  the  amendment   was  patterned  after                                                            
language  in  Administrative  Order  No.  199. The  purpose  of  the                                                            
amendment is to provide  an opportunity for local hire as opposed to                                                            
addressing Davis  Bacon wages. He referenced Order  language in this                                                            
regard on page two, section 3.(a) that reads as follows.                                                                        
                                                                                                                                
     3.(a)   Grant  agreements   for  projects   first  funded   for                                                            
     construction  after the date of this Order under  the following                                                            
     state programs  shall include a requirement for  the payment of                                                            
     prevailing  wages,  including  contributions  to  a pension  or                                                            
     retirement  account,  equal to  the prevailing  wages under  AS                                                            
     36.05,  as  modified  through   the  use  of the  progressive,                                                             
     graduated  pay scale developed under (b) of this  paragraph, on                                                            
     all public construction projects:                                                                                          
                                                                                                                                
Senator  Olson stated  that the inclusion  of this  language  in the                                                            
Order was  the reason that  contractors and  labor unions  supported                                                            
it. This language does address wage concerns.                                                                                   
                                                                                                                                
Senator Hoffman  noted that, based  on the Force Account  Report for                                                            
the years 1998  through 2002, less  than one half of one-percent  of                                                            
the jobs  depicted  are under the  $250,000  limit. Therefore,  were                                                            
this  amendment  not  adopted  it  would  "slam  the  door"  on  the                                                            
potential for local hire  in Rural Alaska, as, it could be said that                                                            
"basically  this bill"  would  not allow  the use  of Force  Account                                                            
projects  in rural Alaska  due to the high  cost of construction  in                                                            
those areas. He  reiterated that while there is a  lack of a skilled                                                            
workforce in  those areas, things  such as boardwalk projects  could                                                            
use local  hire and  therefore  benefit a community.  Therefore,  he                                                            
voiced support  for the amendment, which would preserve  "the status                                                            
quo"  of less  than  three-percent  of  available  DOT construction                                                             
projects and thereby provide  jobs and revenue to Rural areas. "This                                                            
is not asking too much."                                                                                                        
                                                                                                                                
Senator  B. Stevens  questioned  how  Administrative  Order No.  199                                                            
could relate to  Force Account projects conducted  in Rural areas in                                                            
1998 through  2002, as  it was not  enacted until  October 1,  2002;                                                            
specifically  that it is unknown whether  Davis Bacon wages  were or                                                            
were  not being  paid  during  that time.  He  also noted  that  the                                                            
legislation  would not prevent  DOT from  awarding three percent  or                                                            
more of its  projects to rural areas  regardless of whether  a Force                                                            
Account were utilized.                                                                                                          
                                                                                                                                
Co-Chair  Wilken  characterized  Senator  B. Stevens's  comments  as                                                            
pertaining  to the  bill in  general. Therefore,  he  stated that  a                                                            
further discussion  in this regard would continue  after discussions                                                            
relating to Amendment #1 are concluded.                                                                                         
                                                                                                                                
Senator  Dyson  asked  whether  DOT  has  "a  policy  or  threshold"                                                            
regarding how  minor construction projects in Rural  Alaska would be                                                            
addressed "on a Force Account  basis, and if so," is utilizing Force                                                            
Account funding  more efficient than  utilizing the competitive  bid                                                            
process.                                                                                                                        
                                                                                                                                
FRANK  RICHARDS,   State   Maintenance  and   Operations   Engineer,                                                            
Statewide  Maintenance Division,  Department  of Transportation  and                                                            
Public Facilities,  testified via teleconference from  Anchorage and                                                            
responded  that  the funding  source  of  a project  is  one of  the                                                            
primary determining  factors in both Rural and urban  area projects.                                                            
Before  any work is  advanced, the  Department must  conduct  a cost                                                            
analysis to determine what  method of construction would be the most                                                            
cost effective.                                                                                                                 
                                                                                                                                
Senator  Dyson  asked   whether  Amendment  #1  would   provide  the                                                            
Department, after  its cost analysis is conducted,  more flexibility                                                            
to address Rural construction projects.                                                                                         
                                                                                                                                
Mr. Richards  responded  that the  $250,000 ceiling  denoted in  the                                                            
Amendment "would  still limit" the  Department's ability  to perform                                                            
work.  Another   issue  would  be  the  definition   of  what  would                                                            
constitute  a Rural  area. Were  this designation  applied to  Rural                                                            
roads that  are part of  the State's continuous  highway system,  it                                                            
would be "severely limit" the Departments work efforts.                                                                         
                                                                                                                                
Senator  Dyson understood  that the  amendment  would eliminate  the                                                            
$250,000  limitation  on  construction   jobs  in  Rural  areas  not                                                            
connected to the highway system.                                                                                                
                                                                                                                                
Mr.  Richards  responded  that  were  the  amendment  to  allow  the                                                            
Commissioner to  remove constraints pertaining to  projects in Rural                                                            
areas that are not part  of a contiguous road system, the Department                                                            
would view it  as favorable. This would apply to villages  primarily                                                            
in Western  and Northwestern Alaska  as well as some communities  in                                                            
Southeast Alaska. However,  were it to apply to Rural places such as                                                            
Tok and  Northway  that are  on the  contiguous  highway system,  it                                                            
would be limiting.                                                                                                              
                                                                                                                                
Senator Dyson understood  therefore that the amendment would provide                                                            
the Department  more flexibility on projects that  are not connected                                                            
via the contiguous road system.                                                                                                 
                                                                                                                                
                                                                                                                                
SFC 04 # 62, Side B 09:51 AM                                                                                                    
                                                                                                                                
                                                                                                                                
[NOTE: Due  to a technical  malfunction, Side  B of Tape 62  did not                                                            
record; however,  the minutes continue, uninterrupted,  on Side A of                                                            
Tape 63.]                                                                                                                       
                                                                                                                                
                                                                                                                                
SFC 04 # 63, Side A 09:51 AM                                                                                                    
                                                                                                                                
                                                                                                                                
Senator   Dyson  voiced   the  understanding,   however,  that   the                                                            
Department  is  uneasy  about the  lack  of a  definition  for  what                                                            
constitutes a Rural area."                                                                                                      
                                                                                                                                
Mr. Richards viewed Force  Accounts as being "a tool in the toolbox"                                                            
that  the   Department  could  use   to  support  its  maintenance,                                                             
construction   and  operation   responsibilities   to  the   State's                                                            
transportation system.                                                                                                          
                                                                                                                                
Mr. Richards  stated  that in response  to the  furor that  resulted                                                            
after the  Force Account  was utilized for  the St. Mary's  project,                                                            
the Department  worked with contractors and labor  unions to develop                                                            
Administrative  Order No.  199. As  a result, the  Order provided  a                                                            
framework through  which either the  Force Account or a competitive                                                             
bid process  would be utilized to  address Rural area projects  on a                                                            
fair basis.                                                                                                                     
                                                                                                                                
Senator  Olson  pointed  out  that while  there  is  some  ambiguity                                                            
regarding  the definition  of Rural,  the Amendment  is specific  to                                                            
off-road system construction projects.                                                                                          
                                                                                                                                
Senator  Hoffman  asked the  Department  for justification  for  its                                                            
analysis reflected  in fiscal note #1, dated February  18, 2003 that                                                            
specifies that  there would be "lost savings" exceeding  $25 million                                                            
were this legislation enacted.                                                                                                  
                                                                                                                                
In response  to a  question from  Co-Chair Wilken,  Senator  Hoffman                                                            
pointed  out that  the  answer to  this  question is  important,  as                                                            
adoption  of Amendment  #1 might  serve to continue  savings  rather                                                            
than negating them.                                                                                                             
                                                                                                                                
Mr. Richards  responded that the calculation  used to determine  the                                                            
$25 million potential  lost cost savings is based  on annual savings                                                            
of four  million dollars  for six years that  would result  were the                                                            
State to use Force  Account funding rather than conducting  projects                                                            
utilizing  the competitive  bid process,  based  on historical  cost                                                            
analyses.  He noted that most  of the money  that could be  saved is                                                            
federal money with a General Fund (GF) match.                                                                                   
                                                                                                                                
Senator Hoffman  declared that he supports the amendment  because he                                                            
"would rather save money than blow it."                                                                                         
                                                                                                                                
Senator  B. Stevens  asked,  for clarification,  the  amount of  the                                                            
total $505 million  surface transportation program  expenditures, as                                                            
specified  in the  2002 Force  Account  Report, that  were  directly                                                            
related  to  construction  projects.  He  stated  that  this  is  an                                                            
important element of the  equation, as, as depicted, the calculation                                                            
that only 2.23 percent  of the total $505 million was spent on Force                                                            
Account projects, could be misleading.                                                                                          
                                                                                                                                
Mr. Richards  affirmed  that the  total amount  would include  other                                                            
components.                                                                                                                     
                                                                                                                                
Senator  B.  Stevens  stressed  therefore,  that  the  2.23  percent                                                            
depicted is on the low  side as were funding for Shakwak, the Marine                                                            
Highway  System, Trails and  Recreation Access  for Alaska  (TRAAK),                                                            
and other federal components  removed, the percentage of money spent                                                            
for Force Account Construction projects would increase.                                                                         
                                                                                                                                
Mr. Richards affirmed that  the $505 million amount is all-inclusive                                                            
in that  it does  contain such  things as Shakwak,  federal  highway                                                            
funding, and  other Community Transportation  Program (CTP)  funding                                                            
for surface  transportation  projects. He also  noted that  the 2002                                                            
projects  listed  on the  Force  Account  Report comprise  the  2.23                                                            
percent.  It  is  important  to note,  that  while  the  State  does                                                            
contract out for  the majority of the cost of materials,  equipment,                                                            
and supplies,  the  benefits  to the State  of using  Force  Account                                                            
funding  is garnered from  savings associated  with State  personnel                                                            
and equipment costs.                                                                                                            
                                                                                                                                
Senator B.  Stevens understood that  and commented that the  purpose                                                            
of  his comments  was  to  clarify  that the  percentages  of  Force                                                            
Account construction  projects is actually higher  than depicted. He                                                            
also  noted  that  CTP  projects   in the   year  2002  amounted  to                                                            
approximately  $340 million.  For  further clarification,  he  asked                                                            
whether  projects in Southeast  Alaska communities  such as  Juneau,                                                            
Ketchikan,  Sitka,  and other  communities  that are  served by  the                                                            
Alaska Marine  Highway System rather than a contiguous  surface road                                                            
system, would be included under the auspice of this Amendment.                                                                  
                                                                                                                                
Mr. Richards reiterated  that the question of what  would constitute                                                            
"Rural" must be addressed.                                                                                                      
                                                                                                                                
Senator B. Stevens asked  the Amendment's sponsor whether the intent                                                            
of the  Amendment would  be to  include in  its Rural, off-the-road                                                             
system designation, communities  in Southeast Alaska that are served                                                            
by the Alaska Marine Highway System.                                                                                            
                                                                                                                                
Senator  Olson responded  that the  purpose of the  Amendment  is to                                                            
address the  high cost of transportation  construction in  Northwest                                                            
and Western Alaska. He  stated that he would either defer to or work                                                            
with the  bill's sponsor  to address questions  regarding  Southeast                                                            
Alaska communities.                                                                                                             
                                                                                                                                
Senator Hoffman  stated that the inclusion  of these communities  is                                                            
insignificant,  as, were their inclusion to equate,  for example, to                                                            
the 2002 CTP  program level of $340  million, their inclusion  might                                                            
increase Force Account expenditures "to a whopping 3.3 percent."                                                                
                                                                                                                                
Senator B.  Stevens pointed out that,  "there is nothing  to prevent                                                            
those projects from being included under the normal process."                                                                   
                                                                                                                                
AT EASE 10:00 AM/ 10:00 AM                                                                                                      
                                                                                                                                
Senator Olson stated that  there is no adversarial intent behind the                                                            
offering  of this amendment.  Its purpose is  to recognize  that the                                                            
bill raises  some concern and to make  its impact more palatable  by                                                            
furthering language  that was supported in Administrative  Order No.                                                            
199. He  stated that the  Amendment would  compliment the intent  of                                                            
the bill, which is to provide consideration for contractors.                                                                    
                                                                                                                                
Senator  Cowdery suggested  that adoption  of  this amendment  could                                                            
lead to increased  levels of Force  Account exemptions for  projects                                                            
in Rural Alaska.                                                                                                                
                                                                                                                                
Senator Olson  asked whether any federal highway penalties  might be                                                            
incurred  were the  amendment  adopted. He  also  asked whether  the                                                            
adoption  of  the bill  in  its current  form  might  incur  federal                                                            
penalties.                                                                                                                      
                                                                                                                                
Mr. Richards voiced being unaware of any penalties.                                                                             
                                                                                                                                
A roll call was taken on the motion.                                                                                            
                                                                                                                                
IN FAVOR: Senator Dyson, Senator Olson, and Senator Hoffman                                                                     
                                                                                                                                
OPPOSED: Senator Bunde,  Senator B. Stevens, Co-Chair Green, and Co-                                                            
Chair Wilken                                                                                                                    
                                                                                                                                
The motion FAILED (3-4)                                                                                                         
                                                                                                                                
Amendment #1 FAILED to be adopted.                                                                                              
                                                                                                                                
DON VALESKE, Business Manager,  Public Employees Local 71, testified                                                            
via teleconference  from  Anchorage  and shared  that the  Committee                                                            
discussion and testimony  has clarified that this bill is limited to                                                            
construction   projects  rather   than  to   both  maintenance   and                                                            
construction projects which was his concern.                                                                                    
                                                                                                                                
Senator Olson  asked whether Mr. Valeske  supports the legislation.                                                             
                                                                                                                                
Mr. Valeske  commented that due to  the fact that the bill  does not                                                            
apply to maintenance  projects, he  does not have a position  on the                                                            
bill. However,  he noted that he is  supportive of local  hire as it                                                            
is beneficial  to local people and communities. He  noted that Local                                                            
71 members were involved in the St. Mary's project.                                                                             
                                                                                                                                
EDEN   LARSEN,   President   and  CEO,   Associated   Builders   and                                                            
Contractors,  testified via  teleconference from  an offnet  site in                                                            
support of the bill.                                                                                                            
                                                                                                                                
Co-Chair Wilken  noted that Members' bill packets  contain a written                                                            
comment [copy on file]  from the Associated Builders and Contractors                                                            
(ABC).                                                                                                                          
                                                                                                                                
Senator Hoffman asked the reason behind their support.                                                                          
                                                                                                                                
Ms. Larsen responded  that ABC's "fundamental principle"  is that an                                                            
"open and competitive  bidding process  is the best methodology  for                                                            
State procurements." Limits  on what the State could conduct through                                                            
the use  of Force Accounts  and the continuance  of the established                                                             
procurement process are appropriate.                                                                                            
                                                                                                                                
Senator Hoffman asked whether  ABC's position is mindful of the fact                                                            
that this  legislation  would serve  to lose the  State $25  million                                                            
dollars  in lost  savings over  the next  six year.  Continuing,  he                                                            
stressed  that no abuse of  the system has  been provided.  The fact                                                            
that Force  Account Construction projects  have cost the  State less                                                            
than three percent  of the total construction budget  and would save                                                            
the State  $25  million dollars  over the  next six  years makes  it                                                            
difficult  to understand why,  in these times  of a fiscal  dilemma,                                                            
anyone would support this legislation.                                                                                          
                                                                                                                                
Ms.  Larsen  responded  that  testimony  has been  provided  to  ABC                                                            
regarding the  fact that many small construction businesses  in off-                                                            
road  system  communities  have gone  out  of  business due  to  the                                                            
increased  usage of  Force Account  Construction  projects over  the                                                            
last eight  years. The  cost to  these communities  of losing  these                                                            
businesses and  their year-round employment opportunities  should be                                                            
a  consideration   in  "the   true  costs."   She  noted  that   the                                                            
justification  for using Force Account Construction  funding is that                                                            
money would be saved by  not being required to pay prevailing wages.                                                            
The ABC's  position is  that there  is a reason  for an established                                                             
wage scale  and that  this should  be considered  when allowing  the                                                            
State to avoid the competitive bid process.                                                                                     
                                                                                                                                
Senator Olson  asked the  number of people  in ABC who are  actively                                                            
involved in road construction.                                                                                                  
                                                                                                                                
Ms. Larsen  responded that  ABC has a minimum  of three contractors                                                             
who are actively involved in building roads and other roadwork.                                                                 
                                                                                                                                
Senator Olson  understood  Ms. Larsen to  say that some contractors                                                             
have  gone  out of  business  due  to  Force Account  Construction.                                                             
However,  he  countered  that  the  impetus  behind  the  number  of                                                            
contractors,  both in  rural Alaska  and on the  road system,  being                                                            
reduced is  that the number of State  road construction projects  in                                                            
the State have been diminishing.                                                                                                
                                                                                                                                
Ms. Larsen noted that she  is "only passing along" comments that ABC                                                            
has received from Rural contractors.                                                                                            
                                                                                                                                
Senator  Hoffman  and Senator  Olson  asked that  the  names of  the                                                            
businesses  that  have  gone out  of  business  in Rural  Alaska  be                                                            
provided.                                                                                                                       
                                                                                                                                
Ms.  Larsen   stated  that  she  would   attempt  to  acquire   this                                                            
information.                                                                                                                    
                                                                                                                                
JEFF ALLING, Representative,  ALCAN Builders Incorporated, testified                                                            
via teleconference from an offnet site in support of the bill.                                                                  
                                                                                                                                
Co-Chair Wilken  asked whether the  sponsor would be opposed  to the                                                            
legislation being subject to a four-year termination period.                                                                    
                                                                                                                                
Senator Cowdery responded he would not object.                                                                                  
                                                                                                                                
Conceptual Amendment  #2: This conceptual amendment  would establish                                                            
a termination date of June 30, 2008.                                                                                            
                                                                                                                                
Co-Chair Wilken moved to adopt Conceptual Amendment #2.                                                                         
                                                                                                                                
There being no objection, Conceptual Amendment # 2 was adopted.                                                                 
                                                                                                                                
Senator Bunde  moved to report the bill, as amended,  from Committee                                                            
with individual recommendations and accompanying fiscal note.                                                                   
                                                                                                                                
There being no objection,  CS SB 40(FIN) was REPORTED from Committee                                                            
with a zero  fiscal note, dated March  26, 2004 from the  Department                                                            
of Transportation and Public Facilities.                                                                                        
                                                                                                                                
AT EASE 10:15 AM / 10:16 AM                                                                                                     
                                                                                                                                

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