HOUSE BILL NO. 445 "An Act relating to a rural school construction and planned maintenance pilot program; and providing for an effective date." Co-Chair Mulder spoke in support of HB 445. He observed the expense and difficulty of building in rural Alaska. The legislation creates a pilot program to see if there is a better way to build schools in rural Alaska. He pointed out that there are four functions involved in building: financing, design, construction, and maintenance and operation. He maintained that these four functions tend to be segregated. Each has its own contingency. The biggest contingencies are generally in design and construction and can range up to 15 percent. Bonds are sometimes let far in advance of when the money is actually needed for the project. There are no time limits between when bonds are let and when the money is needed. He maintained that there would be less money lost through interest paid if the time between the bonding and building were reduced. Co-Chair Mulder summarized that the bill unites the four facets of school construction under one umbrella and reduces costs associated with timing, contingency-planning dollars, and change orders. The goal of the bill is to have school construction without change orders. The bill provides coordination and allows all components to work together, while building a facility to the specifications of the school district and employing local hire standards without contingencies and cost overruns. This process is not new to the private sector. Co-Chair Mulder explained that the legislation would authorize the department to enter into a RFP process to see if there are entities that would bid as a package and oversee the construction as a package in order to guarantee savings to the state of Alaska. In response to a question by Representative Grussendorf, Co- Chair Mulder noted that he worked with the department and other individuals on the legislation. He maintained that the department wants direction from the legislature. He did not anticipate that there would be a fiscal impact note accompanying the legislation. Co-Chair Therriault observed that the department did not anticipate submitting a fiscal impact note. A House Finance Committee zero fiscal note would be submitted with the bill. Representative Phillips recalled discussions, which indicated that the management contractor would oversee the project for three years after its completion. The legislation provides for "a private sector facility maintenance plan" for "a period of time following completion." She questioned if a "period of time" was included over a "three-year period" because it is a test project. Co-Chair Mulder agreed that the anticipation is that there would be supervision for a three-year period following completion. He thought that the department would like to have some flexibility in regards to the "warranty" period. Representative Austerman referred to a handout provided by Co-Chair Mulder titled Rural Schools Capital Construction and Planned Maintenance Pilot Project (copy on file.) Co- Chair Mulder observed that Mark Pepper, was the consultant. Representative Austerman noted that the legislation pertains to all schools. He emphasized that schools in Kodiak would have different needs than schools in Nome. Co-Chair Mulder pointed out that the legislation reads: A request for proposals required under this subsection must solicit proposals for development of all school construction projects funded for construction in fiscal year 2001 and located within rural educational attendance areas. He observed that Kodiak is not within a rural educational attendance area. He noted that there are existing designs for many of the schools that are on the list. The intent is not to impose a prototypical design, but to have proper management of the design, construction and maintenance phases in order to increase efficiency and reduce change orders. Representative Grussendorf recalled similar legislation in a previous year. Representative J. Davies referred to page 2, line 10 and questioned the definition of "development". Co-Chair Mulder responded that the intent is to provide management, but that development was used because it is more encompassing. Representative J. Davies pointed out that the legislation focuses on FY01 construction projects and that projects may take more than one fiscal year to complete. Co-Chair Mulder clarified that the legislation pertains to projects that are funded in fiscal year 2001. The legislation would be a pilot program. He observed that some communities do not have much experience with school construction. The intent is to provide assistance and technical oversight to make sure the state gets the best value for its dollars. Representative J. Davies expressed concern that each school be put to bid as an individual package, so that different people around the state might work on the projects. Co-Chair Mulder affirmed that it was his intent that the projects are put out as separate bids and not focused toward one entity. Vice Chair Bunde expressed concern that savings can be realized through an economy of scale. Co-Chair Mulder stressed that most of the projects have completed the design phase. In response to a question by Vice Chair Bunde, Co- Chair Mulder observed that he did not know how many schools would be affected. Representative G. Davis acknowledged the use of prototypes but emphasized concerns regarding local input. JON STOLLE, PRESIDENT, AMERICAN INSTITUTE OF ARCHITECTS, ANCHORAGE testified via teleconference. He expressed concern that there had been insufficient debate on the bill. He added that there are unsubstantiated claims that the traditional method is slow and costly. He maintained that the selection criteria seems to be narrowly crafted and would exclude many design firms in Alaska. He emphasized that there are few entities that would meet all of the qualifications. He asserted that there are checks and balances in the current system and recommended that the legislation be held for further consideration. DR. JOHN DAVIS, SUPERINTENDENT, BERING STRAIGHT SCHOOL DISTRICT, UNALAKLEET testified via teleconference. He expressed concern that the legislation would affect FY01 construction. He observed that most of the projects that would be funded in FY01 would already be in the design phase. It would cost additional money to reengineered or rethink design plans. He expressed support for legislation that would remove the school district from the responsibility of constructing buildings. He stressed that they have been able to achieve cost savings through the use of a single architect on several projects. He pointed out that many schools built under the Bureau of Indian Affairs are prototypical in design. Co-Chair Mulder emphasized that the legislation is not an effort to force prototypical design. He acknowledged that there are three projects in Unalakleet that have gone through the design phase. KAREN REHFELD, DIRECTOR, DIVISION OF EDUCATION SUPPORT SERVICES, DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT testified in support of the legislation. The department supports the overall goal to efficiently manage school construction projects, to reduce costs, and to maximize the dollars available for schools. She observed that the department has had discussions with Co-Chair Mulder and his staff regarding the school construction management pilot program in HB 445 and understands that it is the intent to implement a pilot program for school construction projects that are funded in FY01. Ms. Rehfeld pointed out that the department does not know which projects would be included. The pilot appears to only involve REAA school district projects. There are concerns with the timing, preparing the RFP and some of the technical issues. There are some details that would need to be considered in order for the pilot program to be successful, but the department is supportive of efforts to address school construction. CARL ROSE, EXECUTIVE DIRECTOR, ASSOCIATION OF ALAKSA SCHOOL BOARDS expressed concerns with the legislation. He referred to experiences with cost overruns relating to a school built in Skagway. He stressed that availability of funds contributed to cost overrun problems. He observed that he was the president of an insurance company that replaced four schools that burnt down. He stressed that schools were replaced with the assistance of an architect and a contractor. It was in the insurance company's best interest to replace the schools promptly. He maintained that adequate funding reduced cost overruns. He stressed the need to identify the problem and cost. He questioned what insurance is there that equity and fairness would be provided in terms of the distribution of jobs. In response to a question by Co-Chair Mulder, Mr. Rose observed that schools are insured for replacement costs. Replacement costs are adjusted for a variety of factors. The company worked with the communities in all but one case the cost was contained. The needs of a community were balanced. Co-Chair Mulder pointed out that savings could be realized if there is someone responsible to assure that shipments are timely. Mr. Rose stressed that the availability of funding is the major issue. Costs would have increased if they had spread the work between seasons. He reiterated concerns regarding issues of fairness and questioned if the work would be single source to one person. Co-Chair Mulder spoke in support of providing sufficient funding for projects. Vice Chair Bunde stressed that the goal is to produce school buildings and not provide economic development. Mr. Rose responded that the issue is between a sole source contract and competitive bid. Co-Chair Mulder stressed that the department would protect competition. Representative Williams referred to a tribal government program where the tribe manages the construction of schools and provides local hire. The federal government pays for the local hire portion. Co-Chair Mulder stated that he would look into the concept. Representative J. Davies recommended that the bill require two or three private sector developers with different expertise in different areas of the state. He also suggested that there be some cost analysis regarding how the legislation would save money. Representative J. Davies questioned if the second use of "price" in line 16 was redundant. He also suggested that there be a sunset provision to remove pilot program from statue. Co-Chair Mulder emphasized that the department has the ability to implement the without legislation, but observed that the department prefers to have legislative direction. Representative J. Davies noted that some design firms have indicated concerns with the speed in which the legislation has advanced and the qualification list in subsection 2. (TAPE CHANGE, HFC 00 - 112, SIDE 2)  Co-Chair Mulder emphasized that he is open for suggestions. HB 445 was heard and HELD in Committee for further consideration.