HB 294 - BIDDING FOR VILLAGE WATER/SEWER FACILITIES Number 028 REPRESENTATIVE VEZEY stated he understood previous testimony to indicate there would be a conflict of the statutes regarding contracting out the projects and force accounting. He was not aware of any conflict. Another area of conflicting testimony was regarding local hire. He pointed out that one of the incentives to local hire was that communities did not have to pay Little Davis Bacon wages. If that option was extended to contractors, he felt it would be a great incentive for them to hire locally. He felt that the issue of prevailing or legally mandated wages might be an issue the committee would want to investigate. He indicated the wages should apply equally. He felt that going to a competitive wage system would in no way restrict a local community from participating in the construction projects. CO-CHAIR IVAN opened the testimony to teleconference participants. The first site was Bethel. Number 120 WALTON SMITH, City Manager of St. Mary's, stated that he supported the intent of the legislation; however, he felt that force accounting had provided quality work and excellent prices on their projects. He disagreed with the sponsor's statement that "only by competitive bidding can we be assured that the funds spent for these construction projects will result in the greatest value to the state and the communities involved." He did not believe that competitive bid process did that. The bidding process would require more engineering work, time to develop bid documents, etc., and delay the projects considerably. He was also concerned that contractor profit would increase the cost of the projects. With the city managing the project, profit was not a concern and local hire was maximized. This also facilitated training locals to care for and operate the systems once completed. He wondered what kind of ethical standards were going to be implemented that weren't already in place. He expressed concern that contractors would subcontract parts of the jobs with little oversight. It was his opinion that currently both options, force accounting and competitive bidding, existed and changing the system would not be cost effective or efficient. Number 262 REPRESENTATIVE VEZEY stated that he felt the procurement procedures allowed for greater flexibility and didn't anticipate that the competitive bid process would be more costly or time consuming. Number 293 MR. SMITH indicated that he felt the flexibility was already in the statutes. He thought the proposed legislation restricted that flexibility. He was concerned that this method would require considerable more documentation and procedures which would be more costly and inefficient. Number 348 REPRESENTATIVE VEZEY responded that standard specifications were commonly utilized on all similar projects. He was concerned that a system was lacking to judge the efficiency of the programs. Contractors routinely bid on unit prices and did not require change orders just because work was added or deleted. Number 390 MR. SMITH reiterated his fear that this would not allow for the necessary flexibility to accomplish the project efficiently and cited examples of situations he had been involved in where there had been problems. He reinforced his support of force accounting and local hire. Number 464 BOB CHARLES, Vice President of Operations, Alaska Council of Village Presidents, and Chairman of the Rural Alaska Sanitation Coalition, expressed his opposition to the legislation. He supported the force accounting concept and believed it promoted and stimulated the local economy. It gave the communities the ability to determine how the sanitation project would be implemented. He felt it was important for the community to establish a feeling of ownership of the project. He questioned whether the lowest bidder was always the best. He felt it was essential that an understanding of village life and the problems involved be a strong consideration in developing the projects. Most often contractors did not have this insight or personal investment in the community. He thought the state should be promoting flexibility instead of limiting them. He stated that the people he represented were opposed to the bill. Number 525 GREG CAPITO, Village Safe Water Program (VSWP), Department of Community and Regional Affairs, stated that it was his responsibility to assist with the planning, design, and building of safe sanitation facilities in the bush. The facilities, once completed, became owned and operated by the community and are not owned by the state. He indicated the department opposed the legislation. It was the VSWP's belief that local government should decided how a project must be built since they have to own and operate the facility. Ownership was integral to successful operation and maintenance of the facility. He stated that administrators and city managers need as many alternatives as possible to complete the projects. VSWP encourages a mix of force accounting and contract construction to accomplish the projects. He noted that approximately $8 million worth of projects were currently being bid. The communities need the authority and responsibility to make these decisions. He felt it was the contractor's responsibility to adapt to the needs of the remote communities. Number 584 REPRESENTATIVE VEZEY asked if it was accurate that local wages were 60 percent of the Little Davis Bacon wages. MR. CAPITO answered that yes, 60 percent was correct. For a force account job, the local prevailing rate varied depending on the area of the state. The wage rate is adjusted up according to the skills of the job required. He estimated that, for an entry level position, the hourly rate would be $12-12.50 and up to $17-18 per hour for a journeyman or skilled person. REPRESENTATIVE VEZEY estimated those rates to be 35-40 percent of the Davis Bacon rates. He stated that Davis Bacon rates would run from a low of about $31-32 to upwards of $41-44 per hour. He inquired as to why Mr. Capito felt that the contractor would have to pay Davis Bacon wages. MR. CAPITO indicated that if local government does the job using force accounts, the prevailing wage rate of that community is the one that is employed. If a licensed contractor does the same work under the statutes, Davis Bacon wage rates kick in. REPRESENTATIVE VEZEY felt that the law stated that Title 36 wages were not required on village safe water projects and indicated that it was not the intent of the legislation to do so. He stated the funding source was a significant factor in whether the Davis Bacon wages were used. He also felt that if a contractor hired locally there was not a need for the cost of a camp. MR. CAPITO stated that he had never seen a project where a contractor came into a village and didn't bring his own people. Housing, water and sewage are considerable problems under those circumstances. REPRESENTATIVE VEZEY felt that if a contractor could get employees for $15 instead of $35, he would hire locally. MR. CAPITO indicated that the funding source was not the issue, but that the statute clearly stated that, if the contractor paid the people, they received Davis Bacon wages; if the local government employed the workers, the local prevailing wage was used. TAPE 95-15, SIDE B Number 000 CO-CHAIR IVAN stated that the complexity of some projects automatically excludes force accounting in communities, but those that could be handled at the local level were encouraged, particularly because of the bad economy. Number 024 CO-CHAIR AUSTERMAN indicated it was his understanding that, if it was force accounting, the workers were municipal employees and not subject to the Davis Bacon; but if the municipality goes to competitive bid and contracts it out, those contract employees are subject to Davis Bacon. REPRESENTATIVE VEZEY stated that it was his understanding the village safe water project were exempt from Title 36 if the funding came through that source. Number 062 TOM QUICK, Vice Mayor of Ouzinkie, President of the Kodiak Island Village Utility Council, and representing the Kodiak Area Native Association on the Rural Alaska Sanitation Coalition, wanted to emphasize cost isn't the only factor. He was concerned about the quality and on-going serviceability and viability of the projects. Under force accounting, the local government wasn't in need of the profit factor as was a private contractor. Contractor interest tends to be very short-term. Use of local people provides a community resource and knowledge. He cited problems he had encountered with contractors working in the villages, such as abuse of the equipment, use of subcontractors, and a desire to get the job done too quickly. He expressed a strong concern for maintenance as an ongoing resource in the state of local Alaska people to work with when there are problems or needs for future planning of projects. Number 230 WILLIAM J. HUNTER, City Manager of Bethel, supported the idea of competitive bidding in general; however, he felt local governments needed options other than competitive bidding. Number 272 CHUCK EGGENER, Sanitary Engineer and Bush Contractor, explained that he had been a contractor and brought a camp in to do the projects; however, in the last ten years, he had gone to a small core group and utilizing local workers, essentially becoming a force accounting construction management company. He felt that they build contractor quality projects at 35 percent less cost. He felt they had an excellent reputation for quality and efficiency. He thought that the mechanism allowing communities to do force accounting was working and there were a lot of spin-off benefits to the local community. He opposed the legislation. Number 346 REPRESENTATIVE VEZEY asked if there was an effort to establish a regional wage scale. MR. EGGENER stated that you couldn't get good performers who are skilled at their jobs to leave Anchorage for less than Davis Bacon wages. Local people are available, have a vested interest in the outcome of the construction, and view it as an opportunity. Number 375 REPRESENTATIVE VEZEY asked if Mr. Eggener was able, as a contractor, to pay local or regional prevailing wages, would it influence his decision as to the source of labor. MR. EGGENER indicated that it may to some extent, but the bidding contractor, not knowing his labor, would bid a large contingency just in case he couldn't get the quality of labor needed. REPRESENTATIVE VEZEY asked if he was testify the productivity wouldn't be any more or less, but that in a fixed price or unit price bid a contractor would have to allow for contingencies. MR. EGGENER indicated that you were paying a lower wage, but you were training the individuals. REPRESENTATIVE VEZEY asked if by hiring workers at 35 percent less, couldn't you afford to train them. MR. EGGENER said he thought a contractor would take advantage of that opportunity. Number 426 MARIE SANSONE, Assistant Attorney General, Department of Law, stated that the Department of Environmental Conservation had asked the Department of Law to review the legislation. She indicated there were three areas of concern: 1) the bill as drafted conflicted with the state procurement code in at least one and possibly several areas that would require amendments to the procurement code in order to avoid the conflict; 2) the bill was ambiguous as to whether the recipient of a grant under the village safe water program under Title 6 could continue to use force account labor, and there was some ambiguity as to the other recipients of the other types of grants that are covered by this bill; and 3) there were a number of provisions, terms and definitions in the bill that conflicted or differed from other terminology that was used in the procurement code, in Title 36, Title 37 or Title 46. She elaborated on these issues and felt that they needed to be clarified in order to carry out the true intent of the legislation. Number 566 REPRESENTATIVE VEZEY asked if she would provide her comments in writing. He asked for clarification between AS 36.30 regarding exempting grants. MS. SANSONE stated the provision of the procurement code that exempts the grants from the procurement code has the effect of allowing the grantee to elect to use force accounting. When the grantee chooses to contract, they were required to follow the procurement code which would trigger the Little Davis Bacon Act. Number 604 CO-CHAIR IVAN informed the committee that HB 294 would be held for more hearings because of the affect it had on over 200 villages in the state.