Legislature(1993 - 1994)
02/03/1994 01:35 PM Senate L&C
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SENATE LABOR AND COMMERCE COMMITTEE
February 3, 1994
1:35 p.m.
MEMBERS PRESENT
Senator Tim Kelly, Chairman
Senator Steve Rieger, Vice-Chairman
Senator Bert Sharp
Senator Georgianna Lincoln
Senator Judy Salo
OTHERS PRESENT
Senator Dave Donley
COMMITTEE CALENDAR
SENATE BILL NO. 208
"An Act relating to the employment of certain state employees and
officers seeking election to state or national office."
SENATE BILL NO. 212
"An Act relating to publications produced by state agencies and to
the procurement of property, property interests, and services by
state agencies."
PREVIOUS SENATE COMMITTEE ACTION
SB 208 - NO PREVIOUS ACTION.
SB 212 - See Labor & Commerce minutes dated 11/17/93 and
1/27/94.
WITNESS REGISTER
Josh Fink, Aide
Senator Tim Kelly
State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Presented SB 212.
Dugan Petty, Director
Division of General Services
P.O. Box 110210
Juneau, Alaska 99811-0210
POSITION STATEMENT: Administrative support for SB 212.
Josh Warner
Alaska Corporation Printing
10006 Crazy Horse Drive
Juneau, Alaska 99801
POSITION STATEMENT: Supports SB 212.
Christopher Gates, Director
Division of Economic Development
Dept. of Commerce & Economic Development
P.O. Box 110804
Juneau, Alaska 99811-0804
POSITION STATEMENT: Supports SB 212.
Resa Jerrel, State Director
National Federation of Independent Business
9159 Skywood Lane
Juneau, Alaska 99801
POSITION STATEMENT: Supports SB 212.
Loren Rasmussen, Chief
Design, Construction Standards
Dept. of Transportation & Public Facilities
3132 Channel Drive
Juneau, Alaska 99801-7998
POSITION STATEMENT: Supports SB 212.
ACTION NARRATIVE
TAPE 94-6, SIDE A
Number 001
CHAIRMAN TIM KELLY called the Labor and Commerce Committee meeting g
to order at 1:35 p.m.
SENATOR KELLY introduced SB 208 (CANDIDATES MUST RESIGN STATE
EMPLOYMENT) and invited the sponsor, SENATOR DAVE DONLEY to
testify.
SENATOR DONLEY explained the purpose of the bill is to require that
anyone who chooses to run for office and raise money to do so, must
resign from their state employment. He also explained that once a
letter of intent has been filed with the Alaska Public Offices
Commission, a person becomes a candidate and can raise money for
their campaign. SENATOR DONLEY thought currently state employees
have an unfair advantage in raising funds for their election due to
the position of power they might hold with their state employment.
SENATOR DONLEY said he would make a specific exception for those
people who currently hold elective state office, or who are running
for another state position, because of their place in the political
mainstream, being elected to that position in the first place. He
explained the classified, partially exempted have already been
prohibited from running for state office, since people in an
exempt position are typically political appointees. He thought it
would be a good government idea to keep them from utilizing their
public position as a springboard during the election process, also.
SENATOR DONLEY suggested the committee might want to narrow the
scope to include only those employees over a certain range, and he
explained his reasons.
SENATOR KELLY admitted he liked the bill.
SENATOR SHARP asked SENATOR DONLEY about the definition of state
employees and whether it went into such agencies as ADA, the
University of Alaska, and Alaska Housing Finance.
Number 052
SENATOR DONLEY thought anyone who receives a salary from the state
government would be covered under the parameters of the bill.
SENATOR SALO suggested there are some gray areas such as the Alaska
Railroad and thought there might be some questions directed at the
legislation.
SENATOR DONLEY said he had no problem being more specific in
listing the exemptions.
SENATOR KELLY directed staff to work on a committee substitute for
the next meeting, and he listed some of the possible inclusions to
the list.
SENATOR KELLY returned SB 212 (STATE PROCUREMENTS AND PUBLICATIONS)
to committee and explained a proposed committee substitute had been
written which removed any reference to the Permanent Fund. He
asked his Aide, JOSH FINK, to give an overview of the committee
substitute.
Number 102
MR. FINK spoke to the committee substitute, saying there had been
substantial changes made to SB 212. He gave some history on the
bill and explained it had been introduced by request of the Senate
Economic Task Force.
From the Sponsor Statement, MR. FINK read, "State government is one
of the largest purchasers of goods and services in the Alaskan
economy, purchasing everything from road design and construction
services to copy machines and paper and pencils. The use of
services and products provided by Alaskan businesses stabilizes and
diversifies Alaska's economy. SB 212 aims to help strengthen
Alaska's economy by increasing the share of State government
contracts for goods and services going to Alaskan businesses."
MR. FINK described how the legislation would establish an
Innovative Construction Procurement Methods Pilot Program within
the DOT/PF for a period of two years to implement an Alaska Bonus
Program to replace the current preferences.
MR. FINK reviewed some of the present incentive programs as largely
unworkable, under-utilized, or not utilized at all. He explained
SB 212 proposes to provide bonuses at project completion, would
encourage policy goals for the vendors, reduce administrative costs
and bid protests, and could likely be used in joint federal/state
projects where State preferences are currently not allowed.
MR. FINK continued by explaining the Commissioner of DOT/PF would
establish the program through regulation and would report to the
Legislature on the program's progress 15 and 27 months after the
implementation. If successful, the legislature could expand and
extend this program indefinitely, otherwise, it sunsets in two
years.
MR. FINK concluded by talking about the incorporation of provisions
from the "Make-it-Alaskan" legislation from the 17th Legislature,
House Bill 245, which would also increase the amount of State work
going to Alaskans. He said this bill would:
Number 144
1) "Encourage procurement officers to restrict notice of
contract solicitation to Alaskan suppliers and providers of
services desiring to compete for state contract work, as is
standard practice in DOT/PF; (MR. FINK said there was a four year
sunset on this provision to see how it works.)
2) Require the Commissioner of DOT/PF to include in his report
to the legislature on State procurements the number of bidders
located in-state and out-of-state that bid or make proposals on
procurements; (MR. FINK said there would be tracking on the number
of Alaskan businesses bidding, how many receiving contracts, and an
idea of the competition.)
3) Replace the statutory requirements that State publications
be produced at State-operated facilities with a requirement that
State publications be produced at a private sector facility located
in the State when practicable. In addition, standards for the
production of publications would be established by the Department
of Administration, and a cost box would be required for all
publications exceeding $1,500 in cost." (He explained the use of
the cost box which was initiated a number of years ago by SENATOR
DRUE PEARCE.)
SENATOR KELLY called on DUGAN PETTY, Director of the Division of
General Services in the Department of Administration.
MR. PETTY said the Department of Administration was supportive of
efforts that foster Alaska businesses and brings efficiencies to
the State procurement process, and he brought a zero fiscal note
from the Division of General Services. He explained they have made
changes in their bidder list as required under AS 36.3050 over the
last two years.
MR. PETTY said, in reference to the proposed committee substitute,
there would be minor additional reporting requirements, and he
pointed out, on a statewide basis, from division records over the
last seven years they had 34 bid awards go out of state. He quoted
the most recent data which has the number reduced to 24 bid awards,
and he claimed the average amount of funding captured in Alaska
with SB 212 would be about $2 million over four years if the bill
was 100% effective.
Number 206
MR. PETTY thought the FY94 data gave a more accurate trend, and he
predicted the bill, SB 212, would be about 66% effective in terms
of capturing out-of-state awards, bringing them in-state. He
predicted a cost differential of about $250 thousand for awarding
to the low Alaska bidder over what would have been the low out-of-
state bidder, and he discussed several elements of the bid,
including the sunset provision.
SENATOR RIEGER questioned the figure of $1.6 awarded out-of-state
for 1993 for the Department of Administration, and MR. PETTY
explained it was for the invitations to bid, issued on behalf of
state agencies, but did not include small procurements initiated
under the department's own authority.
Number 259
SENATOR SHARP reviewed the publications sections to ask about how
the cost of publication would compare to the standard costs of
private industries such as depreciation costs.
MR. PETTY commended the question and explained their current
process of refining the department's pricing schedule to reflect
all of the costs. He also explained his department's operation
within the amount of receipts and the difficulty of doing so.
SENATOR SHARP commented the governmental printing shops he has seen
have state-of-the-art equipment, which he didn't think had been
factored into the price of the printing.
MR. PETTY said he had checked on public sector printing and found
factoring in the equipment costs has been a problem in the
industry, but he couldn't speak for the private sector. He thought
the goals of the legislation were important to both the State and
the private sector.
Number 310
SENATOR KELLY introduced JOSH WARNER with Alaska Corporation
Printing in Juneau.
MR. WARNER, also representing other local printing businesses, gave
enthusiastic support for SB 212 and explained how his own printing
business could be competitive with the State's Central Duplication
Department. He claimed there were no incentives for production,
quality, promotion, creativity, or efficiency during his working
period with Central Duplication, and he expressed his preference
for the struggle of his own business.
MR. WARNER accused Central Duplication of unfairly controlling the
market and not competing on the open market. He gave a pitch for
the competitive spirit of Alaska and reiterated his support for the
legislation.
Number 367
Next to speak was CHRISTOPHER GATES, Director for the Division of
Economic Development.
MR. GATES said he had attended the meeting to support one aspect of
SB 212 dealing with the Innovative Construction Procurement Methods
Pilot Program in Section 13 of the bill. He thought it represented
a substantial improvement over the present product preference
incentive program, and he described the efforts of participating
staff to craft a bonus program that will work.
MR. GATES explained the goal was a bonus program that will work to
accomplish the objectives originally set out for the program that
are being frustrated for many reasons, not the least of which is
the complications associated with the bidder preference, the lack
of federal involvement in procurement projects at present, and the
penalties associated with failing to use the specific products that
are shown in a bid. He further explained the product preference
bonus, which currently exists under AS 36.30.322-.338, is not
accomplishing what was intended by the state departments, so he
thought the legislation would assist the existing system.
Number 411
MR. GATES said the present system is a bid based program, and the
incentives cease at the time of the bid. Under the bonus program
the bonus is paid at the end of the contract, and an incentive
would continue throughout the life of a contract to purchase Alaska
products and use Alaskan sub-contractors. He explained why he
thought this was a major improvement over the existing system,
which is confusing to general contractors.
MR. GATES outlined the present cumbersome process of determining
the low cost bidder on a project, where there are classes of
Alaskan products that must be checked to be sure they are going
into a project, components of bids, and substantial adjustments
made to the bid amount for a low bidder determination. He deemed
it an administrative hassle which would be eliminated under the
bonus program.
MR. GATES summarized the poor performance of the existing program
as being due to the severe penalties associated with failures to
use specified products; the inability of the program to be used on
federal grant monies; the cumbersome administrative requirements;
and the inability to be paid for substitutions of Alaskan products
after bid award.
MR. GATES quoted their conclusion as, "The substitution of Alaskan
products after the bid is addressed by the establishment of an
after-the-fact bonus system that is simpler to administer, provides
ongoing incentives to use Alaskan products and services throughout
the life of the contract, better assists Alaskan sub-contractors to
take advantage of the program, and would possibly allow expansion
of the incentive program to federal construction contracts
administered by the State. For these reasons, the Department of
Commerce and Economic Development urges the support of the
committee for the innovative construction procurement methods pilot
program as contained in Section 13 in SB 212."
SENATOR LINCOLN expressed concern on the bonus v. preferences, and
how the bonus program would protect the minority businesses.
MR. GATES quoted on page 5 of the committee substitute, lines 27
through 31, Section 8, "Within six months after the effective date
of this section, the commissioner of transportation and public
facilities shall begin a two year pilot program for the use of
innovative methods for the procurement of construction services by
using bonuses to replace the preference required under AS 36.30."
MR. GATES explained there was history and implementation associated
with the sentence, and he assured SENATOR LINCOLN the participating
agencies have been working to be certain minority preferences are
still included in the bonus program.
Number 450
SENATOR LINCOLN still had concerns about the commitment for Alaskan
hire, and she referred to page 2, line 10, Section 1, to challenge
the meaning of "local."
MR. GATES said he believed "local" would include the minority
provisions, and he explained his involvement with major general
contractors for a number of years. He described the process of
putting together a bid for major construction as pandemonium on the
day of the bid, and the lack of incentive by the general contractor
to consider "local" contractors. He explained how this would
change under SB 212 to maximize a bonus at the end of the contract
by hiring "local" subcontractors.
SENATOR LINCOLN indicated she would like to see the committee add
a definition of "local" in the bill to provide incentives for real
"local" contractors.
Number 499
SENATOR KELLY said there was no intention of moving the bill, so
there would be time to work on amendments.
SENATOR LINCOLN was also concerned about the "21 day notice" found
throughout the bill, and she pointed to page 2 and 3 of Section 2.
She wondered if 21 days were sufficient for publications to reach
the outlying areas and thought the time should be increased.
SENATOR RIEGER gave his understanding of how the bonus would work,
and MR. GATES said he was correct. They discussed the bidding
procedure, and MR. GATES expressed assurance the new process would
lead to lower capital construction costs in the state of Alaska.
SENATOR SHARP reviewed the bill and suggested Alaskans could be
identified by the permanent fund list.
SENATOR KELLY thanked MR. GATES, and called on RESA JERREL,
representing the National Federation of Independent Businesses,
who, she said, would like to see the bill go forward was soon as
possible.
SENATOR KELLY asked LOREN RASMUSSEN, from the Department of
Transportation, to explain the bonus system for clarity.
MR. RASMUSSEN, who introduced himself as Chief of Design,
Construction Standards, said the Department of Transportation is
supportive of the legislation and referred to Section 3, which
addressed advertizing outside of the State of Alaska.
Number 551
MR. RASMUSSEN explained their policy of not advertizing outside of
the State of Alaska, but they do advertize in the ADMINISTRATIVE
JOURNAL, which is widely distributed outside of Alaska. He said
the Department of Transportation presently does about $53 million
worth of work in the State, with about one million going to out-
side contractors. He said less than 2% of Alaskan contracts go to
contractors from the State, and some could never be done in Alaska,
such as ferries.
MR. RASMUSSEN referred to Section 8 on page 5 to discuss the bonus
program and beginning with many different areas such as prime
contractors, subcontractors, products preferences, minority
contractors, and equal opportunity. He was interested in letting
the committee know a bonus program would work, and he was able to
draw on knowledge from federal regulations on highways to look at
the minority business program, which required a certain level of
minority participation, resulting in better compliance.
MR. RASMUSSEN explained it was so successful with highways, they
tried the bonus program on some Federal Aviation Association
construction, which worked well. He thought more programs could be
tried with the proposed legislation, with less bureaucracy.
Number 585
TAPE 94-6, SIDE B
Number 001
MR. RASMUSSEN suggested the committee members might want to see the
procurement reports and copies of the contracts.
SENATOR KELLY asked MR. RASMUSSEN if he thought the legislation
would give him the flexibility to make the bonus program work, and
MR. RASMUSSEN seemed sure it would. He thought it would give the
department the chance to try procedures not tried before.
When asked the same question, SENATOR LINCOLN thought there needed
to be new approaches, and she quoted, "... programs are largely
unworkable and subsequently under-utilized or not utilized at all."
She wanted to be sure the same mistakes were not repeated, but she
didn't want to close out some important incentives.
SENATOR LINCOLN referred to page 6, line 10, to read, "... the
commissioner shall report to the legislature on the construction
contract awarded during the first year of the pilot program." She
said she would like to see included, as part of the report, the
contracts by area of the State awarded to minority contractors.
MR. RASMUSSEN explained the Department of Transportation does break
it out by regions, and he asked if she wanted it broken down into
election districts. SENATOR LINCOLN asked if it could be broken
down as far as minority contractors, and MR. RASMUSSEN said they do
a break down on minority contractors. He explained it wouldn't
appear in the procurement report, because most of the minority are
sub-contractors, and sub-contractors are not reported. He assured
SENATOR LINCOLN the statistics were available, because they track
these statistics.
SENATOR KELLY told SENATOR LINCOLN his staff would develop some
language to answer her suggestions.
SENATOR RIEGER asked if awarding the incentive was discretionary.
MR. RASMUSSEN explained the bid document would include how the
incentive would be calculated and would not be changed from the
time of bid opening.
MR. RASMUSSEN asked to comment on SENATOR LINCOLN'S concerns about
the minority business enterprise program, in which he explained
these type of programs are presently under a bonus type program.
Number 50
SENATOR LINCOLN said the present EEO programs were not working.
MR. RASMUSSEN explained the part not working is mainly in areas of
products preferences and cited problems in the bid process. He
thought the bonus program would improve that area.
SENATOR KELLY set the bill aside until Tuesday.
There being no further business to come before the committee, the
meeting was adjourned at 2:27 p.m. by SENATOR KELLY.
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