HOUSE BILL NO. 225 "An Act relating to the State Procurement Code; relating to the procurement of supplies, services, professional services, construction services, state fisheries products, state agricultural products, state timber, and state lumber; relating to procurement preferences; relating to procurement by the office of the ombudsman, the Alaska Industrial Development and Export Authority, the Alaska Energy Authority, and other state agencies and public corporations; and providing for an effective date." 3:48:19 PM Representative Fairclough introduced HB 225 as a technical and comprehensive way to streamline the procurement processes in the state of Alaska. She stated that her office started with the Veteran's Preference bill which has passed the House. She would like to hear from those who have voiced concerns regarding Section 18 of the bill. She noted that Vern Jones, Chief Procurement Officer, believes that technical issues raised in Section 18 are being misinterpreted. She wanted those who had flown to Juneau to testify regarding their concerns and then set aside the bill. 3:49:51 PM JOHN MACKINNEN, EXECUTIVE DIRECTOR, ASSOCIATED GENERAL CONTRACTORS OF ALASKA, voiced his concern regarding two areas of this bill. He referred to past history where there were commonplace practices among some contractors who won bids then would go back to subcontractors that bid with him and negotiate on the side. Many people considered unethical. This process was known as bid shopping. Many contractors in the industry enlisted the help of the Department of Transportation, the prime contractor in the state, to pass a bill resulting in AS 36.30.115 requiring a contractor to list their subcontractors within five working days of a bid opening. This process has worked very well. He referred to HB 225, Section 14, which allows for multi-step revised sealed bidding. This would allow the contracting agency to include successive sets of sealed bids in a process. He believed this was not intended for construction contracting business therefore it should be stated as such. Mr. MacKinnen elaborated that the present management in the Department of Transportation says that it would not use the multi-step revised sealed bidding and he believes them, but is concerned that some future management may change this. He indicated that Section 18 has a similar provision that allows multiple rounds of best and final offers. He would like language in the provision that says it is not for construction contracting. Representative Doogan asked how the language as Mr. MacKinnon fears it might be applied, would work. Mr. MacKinnen replied that a contracting agency would put a project out for a competitive bid and once the bids were in the agency might want to see if there was a better offer and put it out for a second round of competitive bids. He indicated that there are cases where projects are rebid which puts the contractors in difficult position because the numbers are known. Representative Doogan asked if this was a situation where the first successful bidder may be pitted against everyone else, including themselves. Mr. MacKinnon agreed. 3:56:10 PM VERN JONES, CHIEF PROCUREMENT OFFICER, DEPARTMENT OF GENERAL SERVICES, agreed with Mr. MacKinnon that the Department of Transportation does not plan to use this in construction procurement. The reason behind the changes is that there is seldom a chance to do a comprehensive review and updating of the procurement codes, so things were added that were believed could be useful at a future point. He noted that in Sections 14 and 18 there are techniques that private sector companies have used with some success. He pointed out that these changes were not aimed at construction. He thought it important to put in all the tools possible in the procurement codes to be successful to get cost effective contracts. He added that the points brought up by Mr. MacKinnon were valid and had no problem with making an amendment to limit or exempt construction. 3:58:19 PM Representative Fairclough explained it was never the intent of the bill to make unfair business practices. She wanted to propose a tool to save the state money. The Department of Transportation does not plan to use this practice so she is not opposed to an amendment. Representative Gara mentioned that in the past some procurement bills have been hugely divisive, but often it was a housekeeping method to make things work better. He wondered if there were cleanups necessary to get items for the state at a cheaper point than might be arrived with the bidding process. Mr. Jones responded there are many housekeeping provisions specific to modernizing and streamlining the procurement code contained in HB 225. One of the provisions raised the threshold for a formal bid from $50,000 to $100,000. Construction bids would be raised from $100,000 to $200,000. This would avoid the time consuming publicly noticed bidding process until the threshold is met thereby simplifying the process. Representative Gara wondered once the bids were turned in there might still be circumstances where going to the store to buy the item is easier and cheaper. Mr. Jones responded that the procurement officer must certify that the bids are appropriate in price. If an unanticipated high price occurs, then it can be revisited. 4:03:30 PM Representative Salmon noticed approximately 45 changes in the bill and wondered if this speeds up the procurement process. Mr. Jones replied that the bill attempts to streamline, modernize, simplify and speed up the procurement process. 4:05:17 PM Representative Fairclough interjected that she would like an opportunity to address the issues that have been raised and reach out to the business community for comments. Representative Kelly commented that if the Associated Builders and Contractors (ABC) have not weighed in then to try and get their comments before rather than after the bill is passed. Representative Fairclough raised her concern to make the extra efforts to get businesses to respond. She indicated talking with Wayne Stevens directly and asked him to look at Section 14 and 18 and ABC was in her office earlier. Both have been tracking the issue. She added that there is an elimination of two preferences that might be controversial to the two individuals that access that preference. Co-Chair Stoltze added that Wayne Stevens is with the Alaska State Chamber of Commerce and ABC is a building and construction organization. Representative Kelly suggested consulting the state bidders list. 4:09:10 PM Co-Chair Stoltze noted that bid shopping is a tool or dirty word depending on the individual perspective. SB 225 was HEARD and HELD in Committee for further consideration.