Legislature(2003 - 2004)

03/18/2003 01:32 PM TRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
            SB 40-CONSTRUCTION OF HIGHWAYS BY DOTPF                                                                         
MR.  MARK  O'BRIEN, Chief  Contracts  Officer  for Department  of                                                               
Transportation and  Public Facilities  (DOTPF), told  members the                                                               
effect of SB  40 would be to prohibit DOTPF  and agencies that it                                                               
transfers projects  to from  using their  own employees  when the                                                               
project  costs  exceeded  $250,000,  but  by  statute  DOTPF  may                                                               
exercise the use of a force  account in two instances. One is for                                                               
community  and boardwalk  projects where  an agency  such as  the                                                               
Bureau  of  Indian Affairs  (BIA)  has  a  project and  DOTPF  is                                                               
providing access to  that project. DOTPF may  transfer [funds] to                                                               
the BIA to accomplish that project.  In many cases, a transfer is                                                               
in the  interest of  all agencies  and is  cost effective.  SB 40                                                               
would also  affect municipalities  and cities because  they would                                                               
be  prohibited  from  asking  for and  receiving  transfer  of  a                                                               
project if the cost exceeded $250,000.                                                                                          
MR.  O'BRIEN said  the second  instance under  which DOTPF  could                                                               
exercise a force  account is when they use  their own maintenance                                                               
staff to  accomplish capital projects. DOTPF  has been addressing                                                               
close to  $200 million in  deferred maintenance by  using federal                                                               
aid funds and  state maintenance staff to  perform those projects                                                               
during the  summer. The  types of  maintenance projects  that are                                                               
eligible include cracked ceilings,  bridge repair, chip seal road                                                               
surfacing, and others. The program  benefits DOTPF in a number of                                                               
ways. It  provides the  ability to transfer  costs of  the winter                                                               
maintenance program to a federal  aid project, thereby preserving                                                               
general fund  dollars for  severe winter  events. DOTPF  can then                                                               
retain  year-round  skilled,  knowledgeable  employees.  It  also                                                               
allows DOTPF to fund a portion  of its equipment costs and defray                                                               
some  of the  state costs  of maintaining  equipment by  charging                                                               
those costs to the federal  aid projects, which further stretches                                                               
the dollars for deferred maintenance.                                                                                           
MR. O'BRIEN said  another key factor is the size  of the program.                                                               
DOTPF's  summer maintenance  program represents  less than  three                                                               
percent of the federal aid program.  More than half of that three                                                               
percent is contracted out to the  private sector now. He said the                                                               
impetus for this legislation was the St. Mary's project.                                                                        
CHAIR COWDERY remarked the St.  Mary's project did stir things up                                                               
a bit but he knows that DOTPF did  a 35 mile chip seal project on                                                               
the Old Seward  Highway a few years  ago and referred to  it as a                                                               
maintenance  project.   He  said   other  states   use  different                                                               
standards  for maintenance  and construction.  He has  no problem                                                               
with DOTPF  doing maintenance work, but  he believes construction                                                               
projects should  go out to  competitive bid. He said  some states                                                               
consider  any   project  that   costs  over   $50,000  to   be  a                                                               
construction project rather than a maintenance project.                                                                         
He pointed  out that before the  state came into its  oil wealth,                                                               
the state got a non-construction  rate from the unions during the                                                               
winter  and hired  equipment operators  from the  union halls  to                                                               
plow  the  snow.  He  said  those are  some  of  the  reasons  he                                                               
introduced this  legislation. He placed  a $250,000 limit  in the                                                               
bill because  DOTPF said some  projects cost less  than $100,000.                                                               
He said  he believes the  competitive process  is a good  one and                                                               
that everyone  should be entitled  to the same  Davis-Bacon wages                                                               
in both rural and urban Alaska.                                                                                                 
1:40 p.m.                                                                                                                     
SENATOR OLSON said the St. Mary's  project is in his district. He                                                               
clarified that project was completed  ahead of schedule and under                                                               
budget.  He pointed  out  that  it looks  like  there  will be  a                                                               
request  for  a  significant  amount of  money  to  complete  the                                                               
Anchorage  International Airport,  which he  finds appalling.  He                                                               
then asked  Mr. O'Brien if  he had a  breakdown of the  source of                                                               
funds used  for force account projects,  specifically federal and                                                               
general fund money.                                                                                                             
MR.  O'BRIEN said  almost all  of the  funds used  for the  force                                                               
account  programs  are federal  aid  funds.  DOTPF receives  very                                                               
little in terms of general funds.                                                                                               
SENATOR OLSON  asked how many  DOTPF employees would  be affected                                                               
by the passage of SB 40.                                                                                                        
MR. O'BRIEN said  he hadn't done that calculation but  one of two                                                               
things would happen.  Without the ability to use  the federal aid                                                               
to subsidize the general fund,  DOTPF would either have to reduce                                                               
its  summer employment  or it  would not  be able  to respond  to                                                               
severe  winter  events with  overtime  hire.  He said  management                                                               
would  have  to  decide  which alternative  to  take  and  either                                                               
alternative would result in a  different number of employees that                                                               
would be affected.                                                                                                              
SENATOR OLSON  asked what kind  of effect this  legislation would                                                               
have on future supplemental budgets.                                                                                            
MR. O'BRIEN  said in  order to respond  to severe  winter events,                                                               
DOTPF  managers would  have to  make some  tough choices.  Either                                                               
additional funding would have to  be provided to pay for overtime                                                               
work  to address  such an  event or  DOTPF would  have to  reduce                                                               
summer employment. He  said a budget increase  would be necessary                                                               
to  maintain a  consistent  work force  throughout  the year  and                                                               
respond to winter events.                                                                                                       
SENATOR OLSON asked  how much of DOTPF's capital  budget would be                                                               
affected by this bill.                                                                                                          
MR. O'BRIEN  said since nearly all  of the force account  work is                                                               
done with  federal funds,  SB 40 would  affect all  projects that                                                               
cost over $250,000.                                                                                                             
SENATOR OLSON said he was asking for a definitive number.                                                                       
MR. O'BRIEN said he has not computed the numbers in that manner.                                                                
CHAIR  COWDERY referred  to Senator  Olson's comment  on the  St.                                                               
Mary's project  being completed  under budget  and said  there is                                                               
nothing to  compare that cost  to because it  was not put  out to                                                               
competitive bid.  He said he believes  an audit is being  done on                                                               
that project  now and added  that DOTPF has been  very supportive                                                               
of the  concept of day  labor contracts, which would  assure that                                                               
local people get the work.                                                                                                      
SENATOR OLSON said the numbers  that were forwarded to his office                                                               
show  that DOTPF  budgeted over  $3  million for  the St.  Mary's                                                               
project while total expenditures were about $2.7 million.                                                                       
CHAIR COWDERY said his point  was that a private contractor might                                                               
have bid  that project at $1.7  million. He said there  is no way                                                               
to know what the private sector  might have estimated the cost to                                                               
SENATOR  LINCOLN said  her questions  about Administrative  Order                                                               
199 (AO 199)  hadn't been answered and although  she doesn't know                                                               
its status,  she believes it  plays into  SB 40. She  pointed out                                                               
that as a  resident of Rampart she has seen  what happens when an                                                               
outside contractor comes in and  doesn't believe in the day labor                                                               
contract concept. She  has seen outside contractors  bring in all                                                               
of their  own food,  manpower, equipment,  some housing  and even                                                               
furniture. Her  community pushed for  the runway project  and had                                                               
to be  very vocal to  get just two  local people hired.  She said                                                               
the letter from  Mr. James of the Tununak IRA  Council shows that                                                               
such jobs are  the lifeblood of many small communities  and SB 40                                                               
would have a devastating impact. She  urged to look at what is in                                                               
the best  interest of the entire  state and repeated she  is very                                                               
uncomfortable  that   her  questions  about  AO   199  have  gone                                                               
CHAIR COWDERY asked if the  equipment was available in Rampart to                                                               
do the runway job.                                                                                                              
SENATOR LINCOLN replied some equipment was available.                                                                           
CHAIR COWDERY  said he worked  on a  number of projects  in rural                                                               
Alaska and needed to import a  lot of things. He hired and rented                                                               
locally  as much  as possible.  He  said the  day labor  contract                                                               
concept is pretty much tailored to the local people.                                                                            
SENATOR  WAGONER commented  that he  understands the  concerns of                                                               
rural communities  but he  also understands  the position  of the                                                               
contractors.  A  woman  from Nome  recently  testified  that  her                                                               
company would  bid on any size  project in rural Alaska.  He said                                                               
he sees the  need for force accounting but believes  it should be                                                               
limited. He asked how many  projects Mr. O'Brien foresees using a                                                               
force account on  during the next year that would  cost in excess                                                               
of $250,000.                                                                                                                    
MR.  O'BRIEN said  using  the year  2000 as  a  baseline for  the                                                               
number of  projects, two  were below $250,000  and the  rest were                                                               
more. He said, "... just looking  back through the lists, a price                                                               
tag of  $1 million would probably  take care of 60  to 70 percent                                                               
of them - allow  them to be done. A price tag  of half that would                                                               
probably let 15 to 20 percent of them through."                                                                                 
SENATOR   THERRIAULT  asked   whether   any  communities   formed                                                               
construction companies  to bid projects  or were they  are barred                                                               
from doing  so. He pointed  out those communities should  be able                                                               
to  underbid other  contractors because  they would  not have  to                                                               
mobilize anyone.                                                                                                                
MR.  O'BRIEN said,  in  order  to do  a  construction project  in                                                               
excess  of $100,000  in  Alaska,  an entity  must  be bonded.  In                                                               
addition,  that  entity must  meet  the  requirements set  for  a                                                               
licensed  and  bonded  contractor.  A  surety  company  looks  at                                                               
expertise,  past performance,  equipment capability  and capacity                                                               
before it agrees  to bond an entity.  He said he is  not aware of                                                               
any consortiums  or groups that  have been created to  respond to                                                               
state bids in rural Alaska.                                                                                                     
SENATOR    THERRIAULT   commented    those   hurdles    are   not                                                               
insurmountable. He  questioned whether those  requirements should                                                               
be waived.                                                                                                                      
MR. O'BRIEN said there may a  way to assist those entities. DOTPF                                                               
is  restricted   by  statute  to  doing   business  with  certain                                                               
entities.  He said  if that  barrier  is broken  down, an  entity                                                               
could bid a project on a competitive basis.                                                                                     
CHAIR COWDERY  said the Native  corporations have the  ability to                                                               
bond small groups.                                                                                                              
MR.  O'BRIEN said  if  there  is no  licensed  surety within  the                                                               
state,  there  is an  option  under  the bonding  for  individual                                                               
sureties  to   bond  construction  companies.  It   requires  two                                                               
individual  sureties to  provide  identical bonding  at the  full                                                               
CHAIR COWDERY asked  if the purpose of bonding is  to assure that                                                               
all employees get paid and to guarantee performance.                                                                            
MR. O'BRIEN said that is correct.                                                                                               
SENATOR LINCOLN responded to  Senator Therriault's question about                                                               
why a village  could not compete for a bid  and said what usually                                                               
happens  with  a  force  account project  is  that  a  particular                                                               
village does a  particular project, but they  aren't ongoing. She                                                               
said the Doyon  Corporation did get involved  in construction for                                                               
a very  brief time, but  none of  the 38 village  corporations in                                                               
the  Interior have  a  construction company  because  it is  cost                                                               
prohibitive for small villages.                                                                                                 
SENATOR WAGONER said in his area  just about all of the oil field                                                               
contract  work has  been taken  over by  Native corporations.  He                                                               
said they hire  both Native and non-Native employees.  He said he                                                               
believes  strongly in  bidding out  any project  and using  force                                                               
accounting when no bids are received.                                                                                           
SENATOR  THERRIAULT moved  SB 40  from committee  with individual                                                               
recommendations with its zero fiscal note.                                                                                      
SENATOR  LINCOLN objected  because  the only  other committee  of                                                               
referral  was the  Senate Finance  Committee  and this  committee                                                               
didn't  even know  how many  projects would  be affected  by this                                                               
legislation or what is happening with  AO 199. She said there are                                                               
too many unanswered  questions to pass this  legislation from the                                                               
one and only committee that would scrutinize it.                                                                                
SENATOR  OLSON   stated  his  objection   as  well   saying  this                                                               
legislation is  less palatable than  the version  introduced last                                                               
year  because the  limit  has  been reduced  from  $1 million  to                                                               
CHAIR COWDERY called for a roll call vote.                                                                                      
The motion to  move SB 40 and its attached  zero fiscal note from                                                               
committee carried  with Senators Therriault, Wagoner  and Cowdery                                                               
voting in favor and Senators Lincoln and Olson opposed.                                                                         

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