Legislature(2005 - 2006)BELTZ 211

04/05/2005 01:30 PM Senate LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
<Pending Introduction & Referral>
Bills Previously Heard/Scheduled
Including But Not Limited to:
Heard & Held
Moved SJR 11 Out of Committee
Moved CSSB 142(L&C) Out of Committee
           SB 160-STATE PROCUREMENT ELECTRONIC TOOLS                                                                        
CHAIR CON BUNDE announced SB 160 to be up for consideration.                                                                    
SENATOR SEEKINS  moved to adopt  CSSB 160(L&C), version  X. There                                                               
were no objections and it was so ordered.                                                                                       
CHAIR  BUNDE explained  that the  committee  substitute adds  the                                                               
Alaska  bidder  preference that  was  deleted  from the  original                                                               
SENATOR ELLIS  said previous legislatures  had debated  about the                                                               
extra  preference  to in-state  bidders  and  disabled folks.  He                                                               
asked  if a  preference for  disabled business  owners was  still                                                               
included in the CS.                                                                                                             
CHAIR BUNDE  replied that he  understands the CS  replicates what                                                               
is in existing  statute. He went on to explain  how the bill came                                                               
about.  Internet   technology  has   created  ways   to  increase                                                               
efficiency and  lower costs in  state procurement. So,  the state                                                               
had a pilot program to show if that was possible.                                                                               
KEVIN BROOKS,  Deputy Commissioner, Department  of Administration                                                               
(DOA), said  the genesis of  this project occurred two  years ago                                                               
in HB 313, which established a  pilot project that included up to                                                               
two state departments and two  instrumentalities of the state and                                                               
provided for a  sunset date for the pilot. SB  160 eliminates the                                                               
sunset date and the restriction  on the number of departments. It                                                               
enables  him to  go forward  with analyzing  the benefits  of the                                                               
efforts that were undertaken.                                                                                                   
     In this day  and age, we are  looking for opportunities                                                                    
     to  streamline  and  make  government  more  efficient.                                                                    
     Certainly E-commerce  tools and procurement  tools have                                                                    
     come a  long way and  the state's method  for procuring                                                                    
     goods and services  is a bit antiquated  in that regard                                                                    
     - a  very paper  driven process.  And so,  we certainly                                                                    
     share the interest in trying  to make that process more                                                                    
     efficient.  Currently, there  has only  been one  state                                                                    
     agency,  the  Department  of Transportation,  and  more                                                                    
     specifically,  the  Southeast  Region,  that  has  been                                                                    
     involved  in  the  pilot. That  has  really  only  been                                                                    
     during the current fiscal year.                                                                                            
     We   started    last   summer   and    the   successful                                                                    
     contractor...Alaska  Supply   Chain  Integrators,  Inc.                                                                    
     began working  with DOT.... The  contractor has  done a                                                                    
     great  deal of  work in  bringing his  system into  the                                                                    
     state agency.  There is  a lot  of groundwork  that has                                                                    
     been  laid. We  have done  some analysis  of the  first                                                                    
     quarter of  the fiscal  year. We're finishing  a review                                                                    
     of  second   quarter  procurements  and  now   we  just                                                                    
     completed  the  third  quarter.... Currently,  at  this                                                                    
     point, from the  administration's perspective, the jury                                                                    
     is still  out. We  don't have enough  data to  say it's                                                                    
     been a success  or a failure, but  it's certainly worth                                                                    
     continuing  the process  to see  how this  is going  to                                                                    
     work out  and so this  bill would allow us  to continue                                                                    
2:13:22 PM                                                                                                                    
CHAIR BUNDE  asked if he  thought the  state might need  a larger                                                               
sample to be able to judge if this is effective or not.                                                                         
MR.  BROOKS  replied that  he  personally  thinks the  department                                                               
needs 2nd  and 3rd quarter data  from the fiscal year.  That will                                                               
provide a basis in expanding the  sample size. It must go through                                                               
a feasibility  process, which  includes documenting  cost savings                                                               
on  paper  before  proceeding.   There  is  also  a  notification                                                               
2:15:54 PM                                                                                                                    
SENATOR ELLIS  asked since the jury  is still out, how  does that                                                               
square with extending the model to all state agencies.                                                                          
MR.  BROOKS answered  that all  departments wouldn't  necessarily                                                               
participate; it would  make more sense for some  than others. The                                                               
Department  of Law,  for instance,  doesn't  deal with  a lot  of                                                               
2:17:32 PM                                                                                                                    
CHAIR BUNDE said Mr. Brooks  mentioned there is a procedure where                                                               
some savings are possible before  this could go forward and asked                                                               
if this bill passes, would those  procedures stay in effect. If a                                                               
department would qualify, it could move forward.                                                                                
MR. BROOKS replied that is correct.                                                                                             
2:17:50 PM                                                                                                                    
SENATOR  ELLIS  said  it's  been   reported  to  him  that  state                                                               
employees in  the affected agency wanted  to bid on some  sort of                                                               
change in  the procurement system and  the administration decided                                                               
to preclude them  from getting together and making  a proposal to                                                               
compete  with   the  private  contractors.  He   asked  him  what                                                               
MR.  BROOKS replied  that he  didn't have  personal knowledge  of                                                               
that, but would get back to  committee. He disclosed that he came                                                               
into his position just last summer.                                                                                             
SENATOR  ELLIS said  that  he believes  competition  is good  and                                                               
leads to efficiencies and further:                                                                                              
     If state employees wanted to  come up with a new system                                                                    
     that was  equal or superior to  the private contractor,                                                                    
     we ought to  have a contest of ideas and  see who comes                                                                    
     out  on  top  and  provides the  state  with  the  best                                                                    
MR.  BROOKS responded  that  automating  the state's  procurement                                                               
process is  a good idea and  the pilot uses a  private contractor                                                               
that might  do it more  effectively. He  said he would  look into                                                               
Senator Ellis' question.                                                                                                        
SENATOR  ELLIS said  he was  told that  the state  employees were                                                               
precluded from even trying to do that.                                                                                          
MR. BROOKS said that he would  check into that. He also wanted to                                                               
comment that  he supported the preferences  amendment. Often they                                                               
are clumsy  and awkward  and asked if  he could  provide language                                                               
that  would  not  change  the preferences,  but  make  them  more                                                               
efficient and straight-forward within the bill.                                                                                 
2:21:02 PM                                                                                                                    
SENATOR  ELLIS  said  he  wanted   to  make  sure  that  existing                                                               
preferences were included in the committee substitute.                                                                          
MR. BROOKS said  that is the case,  specifically the disabilities                                                               
Another item he  mentioned was on page 1, line  10, that says the                                                               
contract  would   be  awarded  under  AS   36.31.100  through  AS                                                               
36.31.190. Expanding  the reference from AS  36.30.100 through AS                                                               
36.30.265 was recommended. This would  give the state the ability                                                               
to award  this contract via competitive  sealed proposal process.                                                               
And now the statutory reference stops short of that.                                                                            
2:22:20 PM                                                                                                                    
SENATOR  SEEKINS   said  he  has   no  objection  to   an  Alaska                                                               
preference,  but  has concern  about  extending  a preference  to                                                               
disabled  people  unless  they  are the  actual  operators  of  a                                                               
business. He has seen several  contracts awarded to people with a                                                               
disability preference and  they were just a  subcontractor to one                                                               
of the other people that bid on the project in the first place.                                                                 
CHAIR BUNDE asked him to work on language with Mr. Brooks.                                                                      
MR. BROOKS responded:                                                                                                           
     We   are  certainly   interested  in   the  appropriate                                                                    
     implementation  of  these  preferences and  share  your                                                                    
     concern that  they be afforded to  people who genuinely                                                                    
     deserve them and not any body else.                                                                                        
CHAIR  BUNDE said  that Scott  Hawkins is  the contractor  who is                                                               
discussed and he owns a business within his Senate district.                                                                    
2:23:48 PM                                                                                                                    
SCOTT HAWKINS,  Alaska Supply Chain  Integrators (ASCI),  said he                                                               
won  the contract  for the  procurement pilot  project. ASCI  was                                                               
founded  in 1999  to provide  purchasing,  warehousing and  other                                                               
aspects  of  procurement and  material  operations  to the  North                                                               
Slope oil fields and gradually to  other clients. It has grown to                                                               
150 employees  and has developed  a suite of E-commerce  tools to                                                               
help clients.  It is up  against national competitors who  have a                                                               
lot  of capital  behind them.  He  sees a  future in  back-office                                                               
business process  operation in both  public and  private sectors.                                                               
He  has  delivered  substantial,   documentable  savings  to  his                                                               
2:25:59 PM                                                                                                                    
He  explained that  his  business model  doesn't  buy and  resell                                                               
goods. It operates the administrative  processes on behalf of the                                                               
     Our vision  is that the back-office  overhead that does                                                                    
     these types  of administrative services is  a necessary                                                                    
     function you have to have  in order to operate. But the                                                                    
     more  money  that  can  be  saved  in  those  types  of                                                                    
     activities,  the  more  can  be  poured  directly  into                                                                    
     program  expenditures -  things  that  really meet  the                                                                    
     needs of constituents and stakeholders.                                                                                    
2:28:57 PM                                                                                                                    
He  said  a memorandum,  written  by  Suzanne Dallimore  to  Beau                                                               
Grant,  opponents  of  the  program,  had  been  circulated  that                                                               
reflected on the  program and him as a contractor.  It alluded to                                                               
cases of  outsourcing programs  gone awry, even  one item  on the                                                               
current  program. It  contained unsubstantiated  allegations that                                                               
are  primarily scare  tactics. Some  of the  issues did  not even                                                               
concern the  pilot project and  there seemed to be  an incomplete                                                               
understanding as to how the program works.                                                                                      
The memo  erroneously says that  the bill  prematurely privatizes                                                               
100    percent   of    Alaska   procurement    without   economic                                                               
justification.  In  reality,  the  bill  does  not  set  forth  a                                                               
schedule   and   doesn't   require  any   further   privatization                                                               
whatsoever  if the  administration is  not so  inclined. However,                                                               
the  bill  does authorize  expansion  at  the discretion  of  the                                                               
administration  and  only  if feasibility  can  be  shown.  Union                                                               
bargaining  agreements require  that  feasibility  be shown.  The                                                               
agreements have a  tremendous amount of due  process that enforce                                                               
that requirement.                                                                                                               
MR. HAWKINS said the memo  suggests that the savings are illusory                                                               
and he referred  the committee to the feasibility study  and to a                                                               
subsequent   compliance  audit   conducted  by   the  Office   of                                                               
Management and  Budget to  reassure and  verify members  that the                                                               
savings are quite real and significant.                                                                                         
He  said  the bill  is  alleged  to  not mandate  competition  in                                                               
procurement   and  gives   the  contractor   carte  blanch   over                                                               
procurement, which  it doesn't do.  On the contrary, he  said the                                                               
program  does  mandate competition  and,  much  like the  current                                                               
procurement code, it requires a  certain amount of competition at                                                               
certain levels of "spend."                                                                                                      
MR. HAWKINS said the rules in  his contract are similar in spirit                                                               
to the current procurement code, but  there is a lot of excessive                                                               
red tape  in the procurement  code that he  is not bound  by. His                                                               
contract requires  competition at  different levels of  spend; it                                                               
does   not   eliminate   competition   and   preserves   bidder's                                                               
The  memo  says  that  privatization favors  a  few  large  firms                                                               
headquartered  elsewhere  and  he   admitted  that  his  firm  is                                                               
headquartered in Anchorage. It also  alleges that the bill favors                                                               
a single  firm, but he  said the  expansion and extension  of the                                                               
pilot  does not  guarantee his  company  any business.  He has  a                                                               
current  contract  for a  current  scope  of  work that  is  very                                                               
limited and it expires on  June 30, 2006. The administration will                                                               
then  have three  options.  It  can renew  the  contract for  one                                                               
renewal term,  it can  choose to  rebid or it  can choose  to not                                                               
renew it and replace his contract service with state employees.                                                                 
2:35:20 PM                                                                                                                    
CHAIR  BUNDE said  he assumed  if  the state  employees wanted  a                                                               
competitive bid, they wouldn't be  treated any different than any                                                               
private  firm.  He  asked  Mr.   Hawkins  if  he  supported  that                                                               
MR.  HAWKINS replied  that  he  wouldn't be  in  any position  to                                                               
oppose it.  He understands that collective  bargaining agreements                                                               
allow a  period of time for  affected unions to respond  and that                                                               
response is entirely out of his hands.                                                                                          
2:35:55 PM                                                                                                                    
SENATOR ELLIS asked  if the state precluded  state employees from                                                               
putting their proposal forward.                                                                                                 
MR. HAWKINS replied no.                                                                                                         
SENATOR  SEEKINS said  if  the  state employee  were  to use  his                                                               
position or  the knowledge of  any privileged  information within                                                               
his  position to  try to  compete for  a contract  like that,  he                                                               
might run into severe ethics problems.                                                                                          
2:36:40 PM                                                                                                                    
CHAIR BUNDE said collective bargaining agreements allow it.                                                                     
MR. HAWKINS returned  to commenting on the memo  that accuses the                                                               
bill of  mandating a  one-size-fits-all privatization  model that                                                               
might not be  appropriate for all agencies. However,  he said the                                                               
feasibility  assessment   would  determine   if  the   model  was                                                               
appropriate  for all  agencies. The  memo sites  specific federal                                                               
requirements  for the  use of  federal funds  in procurement  and                                                               
those are a factor that could  be worked through on an agency-by-                                                               
agency  basis. It  could be  a limiting  factor in  terms of  the                                                               
scope of the pilot.                                                                                                             
The  memo  also  accuses  the   bill  of  raising  constitutional                                                               
concerns in  terms of allowing  the contractor to set  the rules.                                                               
However, these  concerns have  come from  the Arizona  Center for                                                               
Alaska  Constitutional  Studies. But,  HB  313  didn't appear  to                                                               
raise any  constitutional issues  and he doesn't  get to  set the                                                               
procurement rules. He has to follow them.                                                                                       
Another section  claims that  the bill will  expose the  state to                                                               
litigation because it might impair  existing contracts that other                                                               
vendors would have with the state.                                                                                              
2:38:16 PM                                                                                                                    
MR.  HAWKINS  said  his  model  does  not  have  him  contracting                                                               
directly  with  vendors  or  contractors.  His  company  performs                                                               
administrative  functions;  the  contracts are  state  contracts.                                                               
When he takes over an office,  as with DOTPF Southeast Region, he                                                               
inherits  a  portfolio of  contracts  to  administer under  their                                                               
existing   terms   and   conditions.  That   administration   and                                                               
subsequent actions have to be  consistent with the contracts, but                                                               
also have to occur under the state's procurement code.                                                                          
The  contractor is  accused of  having  an economic  relationship                                                               
with a  government official, but he  wanted to put on  the record                                                               
that no  one associated with  ASCI has any relations  with anyone                                                               
in the Alaska government.                                                                                                       
2:41:36 PM                                                                                                                    
MR.  HAWKINS said  there are  several reasons  to privatize  this                                                               
function. These activities have  become more system-oriented with                                                               
web  tools and  management  specialization and  the  cost of  the                                                               
overhead infrastructure  can be shared across  other entities. He                                                               
brings exposure to other ways of  doing things in doing this type                                                               
of activity for multiple clients.  Another benefit is elimination                                                               
of  long-term retirement  obligations as  procurement and  supply                                                               
chain personnel are moved to private sector employment.                                                                         
2:44:29 PM                                                                                                                    
He said this  program is very new, but the  major milestones have                                                               
been  met.  The operation  is  on  schedule. "We  have  delivered                                                               
significant   personnel  cost   savings.   We've  achieved   some                                                               
significant historical firsts in E-commerce...."                                                                                
However, he said  the engagement was way too small  to be able to                                                               
bring the full resources of what  he could bring to the table. He                                                               
can offer value  in pooling volume of several  state agencies and                                                               
get better  pricing. It's hard to  show the value of  the program                                                               
using such a small corner of business.                                                                                          
2:48:30 PM                                                                                                                    
The  Office of  Management and  Budget (OMB)  contract compliance                                                               
report says  the contract has been  complied with. He went  on to                                                               
explain  that  in a  previous  position  he  used to  spend  time                                                               
promoting Anchorage  as a  supply chain  and logistics  hub. Some                                                               
years ago  he formed a company  that is attempting to  do that in                                                               
the private sector.                                                                                                             
2:52:43 PM                                                                                                                    
CHAIR  BUNDE  said that  the  pilot  program displaced  10  state                                                               
workers  and  asked  if  he  was  obligated  to  try  to  provide                                                               
employment for those workers.                                                                                                   
MR.  HAWKINS  said   he  tried,  although  he  did   not  have  a                                                               
contractual  obligation. He  scheduled assumption  of duties  and                                                               
schedules  in  such  way  as to  minimize  impacts  on  impending                                                               
retirements. He  spent a fair  amount of time in  the preparatory                                                               
month interviewing  and working  with the affected  staff members                                                               
who were  being eliminated. Every  single one in  the procurement                                                               
office was  offered a  job at comparable  pay. None  accepted it.                                                               
They were able to find similar positions in other agencies.                                                                     
2:55:14 PM                                                                                                                    
JIM DUNCAN, Business Manager,  Alaska State Employees Association                                                               
(ASEA),  opposed this  legislation. He  represents a  significant                                                               
number of  people who would be  impacted by this project  as well                                                               
as those  who lost their  jobs. He  is concerned about  the long-                                                               
term impacts on his members.                                                                                                    
Procurement of  goods and  services for  state governments  is an                                                               
important issue and must be  handled carefully to maintain public                                                               
trust  and  the integrity  of  the  system. He  applauded  adding                                                               
bidder preferences on page 2, but  he asked the committee to look                                                               
at page  1, line  14 that  says "a  procurement conducted  by the                                                               
person selected under (a) of this  section is not subject to this                                                               
chapter or  to AS 36.15."   That means that any  procurement that                                                               
is  conducted  by  the  contractor who  is  selected  under  this                                                               
project is exempted from the Procurement Code.                                                                                  
2:58:36 PM                                                                                                                    
The  Procurement Code  was not  just thrown  together lightly  or                                                               
quickly. It  was done with  much forethought and study  to ensure                                                               
that  the  public  trust  was  being  maintained.  In  1986,  the                                                               
Legislature adopted the  Model Procurement Code (MPC)  and it was                                                               
endorsed by  the American Bar  Association. He thought  it should                                                               
be strengthened to  make sure the public trust  was maintained to                                                               
the fullest. He  was concerned that one sentence on  page 1, line                                                               
1,  would  say  that  the   contractor  is  not  subject  to  the                                                               
Procurement Code that has been in place since 1986.                                                                             
3:02:27 PM                                                                                                                    
As  a  commissioner  of the  Department  of  Administration,  Mr.                                                               
Duncan said he oversaw the  procurement process and he thought it                                                               
worked well.                                                                                                                    
3:03:14 PM                                                                                                                    
He  pointedly thought  this is  premature and  there is  no clear                                                               
indication that the pilot project  is successful or not. His best                                                               
information indicates  first quarter  cost of goods  increased 20                                                               
percent and the audit on the  next quarter isn't complete. He was                                                               
confused with  the language  on the  Alaska bid  preferences, the                                                               
competitive bid process  and request for RFP. The  jury is really                                                               
out on the pilot project.                                                                                                       
3:04:38 PM                                                                                                                    
He responded  to Mr.  Hawkins' comment about  rules and  asked if                                                               
the negotiated rules would be  identical to the procurement code.                                                               
Could  employees have  a  high level  of trust  in  them? Is  the                                                               
integrity of the procurement process protected?                                                                                 
3:06:07 PM                                                                                                                    
He  asked  why  the  legislature   would  want  to  give  up  its                                                               
responsibility to  set the procurement  process in statute  to an                                                               
administration  that would  negotiate different  rules for  every                                                               
contract. "That's not where the rules in procurement should be!"                                                                
3:06:43 PM                                                                                                                    
MR.  DUNCAN applauded  the legislature  for wanting  to look  for                                                               
ways to  bring about more  efficient government. His  union wants                                                               
to bring about  more efficient government. He said  the union did                                                               
not  have  a  chance  to  respond  when  the  pilot  project  was                                                               
originally  let. It  did not  have an  initial chance  and has  a                                                               
grievance filed that will probably go to arbitration.                                                                           
On February  11, 2004, ASEA  received a letter  from Commissioner                                                               
Miller, DOA, giving notice of  the results of a feasibility study                                                               
to  determine  the  potential  cost and  benefits  of  the  pilot                                                               
project  in the  Southeast Region.  The study  stated that  there                                                               
would be a project savings of  more than $260,000 and a projected                                                               
approximate $200,000  each year after that.  He requested further                                                               
information on  March 3  relating to  the detailed  cost analysis                                                               
ASCI performed in building their  budgets and operation plans and                                                               
that analysis was referred to in the ASCI bid document.                                                                         
     On  March 5,  the state  refused to  provide a  copy of                                                                    
     that detailed cost analysis stating  it was an internal                                                                    
     document prepared by ASEA. It  was not a requirement of                                                                    
     the RFP and  the cost analysis was not  received by the                                                                    
     state. The state  said they couldn't provide  it to us,                                                                    
     because they didn't get it.                                                                                                
On  March  12   ASEA  did  submit  an  alternate   plan  and  the                                                               
commissioner rejected  it on March 19.  He was told at  that time                                                               
the cost  analysis was  not available.  ASCI's cost  analysis was                                                               
not provided to the  union and it had no way  to determine it was                                                               
correct and neither could the state.                                                                                            
3:10:05 PM                                                                                                                    
BEAU   GRANT,  President,   Beau  Geste   Enterprises,  said   he                                                               
specializes in  procurement management and  is here on  behalf of                                                               
the  unions. He  has over  30 years  of experience  in government                                                               
procurement  at   the  federal,   state  and  local   levels.  He                                                               
specializes  in  general  procurement  management  and  strategic                                                               
planning, investigative  consulting, expert  witness work  and he                                                               
is also a certified mediator and arbitrator with AAA.                                                                           
He handed  out a new  response. He said that  government business                                                               
is  not  the same  as  private  business. Government  procurement                                                               
consumes approximately 23 percent  of the nation's gross national                                                               
product  and services,  which  translates  to approximately  $1.7                                                               
trillion per year. It is the biggest company on the planet.                                                                     
The first difference is the law.  In the private sector he can do                                                               
whatever the  law does  not explicitly  prohibit him  from doing.                                                               
But  in the  public  sector,  people can  only  do  what the  law                                                               
specifically  allows them  to do.  Because  of the  legislature's                                                               
fiduciary authority it must have  enabling legislation to receive                                                               
the authority to  spend public dollars. You can't  just give that                                                               
to a company and  excuse them from the code. If  there is no law,                                                               
if there  are no  guidelines assurances  as to  how the  money is                                                               
spent, then whoever  is spending it has no  authority. The market                                                               
is different, the customer is different.                                                                                        
3:16:58 PM                                                                                                                    
He did not think that  all the impacts of privatizing procurement                                                               
had  been  thought  through  and  identified.  ASCI  has  already                                                               
indicated that things had happened  that weren't planned, because                                                               
they were doing  business in the private sector.  He also pointed                                                               
out that  no one  else bid  for the project  and he  thought some                                                               
would have if privatization had been successful somewhere else.                                                                 
MR.  GRANT  said   that  85  percent  of   all  privatization  is                                                               
contracting   out   and   that   is   what   public   procurement                                                               
professionals are trained to do.                                                                                                
     The    reality   is    [privatization]   hasn't    been                                                                    
     successful.... Unfortunately, 45 out  of 50 states have                                                                    
     suffered  severe deficit  budgets and  we have  found a                                                                    
     direct  relationship  between  those  budgets  and  the                                                                    
     over-expenditures caused  by [indisc.]  procurement and                                                                    
     no contract management. If you  don't manage it; if you                                                                    
     don't measure it; don't expect it to succeed....                                                                           
3:18:12 PM                                                                                                                    
He said  there are  good examples  of what  can be  done in-house                                                               
with having to pay someone else to do what you could do.                                                                        
3:20:58 PM                                                                                                                    
SENATOR BEN STEVENS asked him where he is located.                                                                              
MR. GRANT answered in Tampa, Florida.                                                                                           
SENATOR BEN STEVENS noted that page  16 of Mr. Grant's memo says,                                                               
"History teaches  us that if  anything, privatized systems  - the                                                               
only cost  savings a state  receives -  is by the  elimination of                                                               
He  asked  Mr. Grant  if  he  thought  the  only way  to  achieve                                                               
efficiency is to hire more people.                                                                                              
MR. GRANT replied that the only  way to achieve real savings that                                                               
will reduce  the need for  people is  to use E-commerce,  but you                                                               
don't need to go outside to get that done.                                                                                      
3:23:06 PM                                                                                                                    
SENATOR BEN  STEVENS said  the conclusion at  the bottom  of page                                                               
25-26 says,  "There is no  immediate budget crisis in  Alaska and                                                               
there is time to reflect." He  hadn't seen any entity put that in                                                               
writing before.                                                                                                                 
3:25:09 PM                                                                                                                    
SENATOR SEEKINS asked Mr. Grant for  a brief about the comment on                                                               
page 21 that this bill could have US Constitution issues.                                                                       
3:25:57 PM                                                                                                                    
KENNETH BROWN,  Anchorage, said  he is  a 30-year  state employee                                                               
and his is  one of the positions ASCI tried  to outsource. He was                                                               
involved in the union response to the RFP. He said:                                                                             
     I'm here today  to ask you not to  break two contracts.                                                                    
     Passing this bill will. Section  2 repeals the previous                                                                    
     statute that created the pilot  project and changes the                                                                    
     sunset  date and  the  way  I read  it,  it breaks  the                                                                    
     contract  that  the  Department of  Administration  has                                                                    
     with  Alaska's Supply  Chain Integrators.  Secondly, it                                                                    
     would   break  a   more   important   contract  -   the                                                                    
     Constitution  - the  contract  between  the people  and                                                                    
     their government....                                                                                                       
He  said the  pilot project  was  an enormous  disruption to  his                                                               
business and he said that costs  money that was not allowed to be                                                               
included in the studies.                                                                                                        
MR. BROWN  said he wrote most  of the counter proposal  for ASEA.                                                               
In it, he  assumed a fair and equal basis  of comparison would be                                                               
allowed and that  the union would be allowed to  deviate from the                                                               
Procurement  Code the  same  way ASCI  was  allowed. He  proposed                                                               
viable alternatives  including a  process that preserved  the use                                                               
of Alaska preferences and it  was rejected. Additional costs were                                                               
even added  to his  proposal. But,  ASCI's cost  projections were                                                               
accepted  without  verification  including $120,485  in  start-up                                                               
expenses, which he thought was an unethical manipulation.                                                                       
3:31:59 PM                                                                                                                    
He also stated  that ASCI could not prevail  upon the legislature                                                               
to break or alter their agreement with the administration.                                                                      
BARRY  JACKSON, retired  state employee,  said he  served as  the                                                               
Acting  Director  of the  Division  of  General Services  in  the                                                               
Department  of  Administration,  as  a   Deputy  Director  and  a                                                               
Contracting  Manager for  decades.  He is  currently employed  by                                                               
Resources Data as  a programmer analyst, a project  manager and a                                                               
procurement  consultant.  Resources  Data performs  services  for                                                               
ASCI and he  has helped prepare the documents  for this contract.                                                               
He said:                                                                                                                        
     In the mid-80s,  when I was still a  state employee, we                                                                    
     were  faced  with  a   catastrophic  reduction  in  our                                                                    
     staffing capabilities.  My staff  in Anchorage  at that                                                                    
     time was  cut literally in  half. The only way  we were                                                                    
     able   to  cope   with  that   was  through   attempted                                                                    
     automation efforts.... I wrote  programs that were used                                                                    
     from 85' until  almost 1998 or so. It  was only through                                                                    
     the use of these automation  tools that we were able to                                                                    
     successfully carry  on. Otherwise  we would have  had a                                                                    
     crash and  burn in our  capacity to do the  business of                                                                    
     the state.                                                                                                                 
3:34:28 PM                                                                                                                    
CHAIR BUNDE handed the gavel to Senator Seekins.                                                                                
MR. BROWN continued:                                                                                                            
     What  ASCI  is offering  to  do  here  is to  give  the                                                                    
     legislature the  opportunity to  see that  coming again                                                                    
     as it certainly appears to  be. The time will come when                                                                    
     there will be a need  to cut state employees, including                                                                    
     in the  procurement function. There  will be no  way to                                                                    
     cope   with  the   work  that   is  generated   by  the                                                                    
     departments to  accomplish their missions  without some                                                                    
     form of continued automation. ASCI  has the tools. I've                                                                    
     seen them; I've  trained on them. They  are very useful                                                                    
     tools. They  fit Alaska's  state government  very well.                                                                    
     So, I'm very enthusiastic about  the use of those tools                                                                    
     and  I believe  that they  will make  a big  difference                                                                    
     when that  day comes that  the legislature has  to face                                                                    
     it and start cutting positions.                                                                                            
3:36:49 PM                                                                                                                    
BEN  MILAM,  Anchorage,  said  he has  30  years  of  contracting                                                               
experience, four professional certifications  and has worked with                                                               
Alaska businesses  helping them  to get government  contracts. He                                                               
has  also worked  as  a private  contractor.  He understands  the                                                               
philosophy  of  government   contracting  and  public  purchasing                                                               
better  than most.  "My  only comment  on this  is  this is  just                                                               
really poor public policy - to  contract out pursing in the first                                                               
MR. MILAM  said he belongs  to a  news clipping service  and sees                                                               
many ethics violations by government  officials in purchasing and                                                               
contracting who have let contracts to their friends, have rigged                                                                
contracts and those kinds of things. In government, that kind of                                                                
thing is illegal, although it's not in the private sector.                                                                      
     If a  private business  wants to  give business  to his                                                                    
     best friend,  that's okay.  It's his  money and  he can                                                                    
     spend it  the way he  wants to. But if  you're spending                                                                    
     public money as  we are, you can't do  that. That's the                                                                    
     reason, as Mr. Duncan said,  that we have a Procurement                                                                    
CHAIR BUNDE announced that the bill would held and adjourned the                                                                
meeting at 3:40:53 PM.                                                                                                        

Document Name Date/Time Subjects