SB 141-PROCUREMENT: CONTRACTS/SUBCONTRACTS CHAIRMAN COWDERY announced that only order of business before the committee would be CS FOR SENATE BILL NO. 141(L&C), "An Act relating to construction contracts and subcontractors; relating to design-build construction contracts; and providing for an effective date." Number 0080 REPRESENTATIVE PORTER moved to adopt HCS CSSB 141, Version LS0827\S, Bannister, 5/7/99, as the working document before the committee. REPRESENTATIVE BERKOWITZ objected. He commented that he would like to see the work done by the other committees prior to this meeting before adopting a committee substitute (CS). CHAIRMAN COWDERY noted that there has been over seven hours of work on this legislation prior to this hearing. There have been some legal questions. He pointed out that there are three memos in the committee packet. One memo is from Legislative Legal Services, one from the Attorney General's Office, and the third memo is from a private attorney. He noted that there have been two different opinions on the title issue from the legislative attorneys, therefore outside counsel, Gross & Burke, was sought. Chairman Cowdery asked if Representative Berkowitz maintained his objection. Number 0223 REPRESENTATIVE BERKOWITZ said that he maintained his objection. It is conceivable with an amendment, Section 6 may fall within the single title rule. REPRESENTATIVE PORTER noted that there are members from the previous committee of referral which would be available for information during debate. CHAIRMAN COWDERY announced that it was his intention not to take testimony, but questions can be answered. In response to Representative Berkowitz, Chairman Cowdery asked if there was anyone present from Legislative Legal Services. No one came forth. Chairman Cowdery asked if there was anyone present from the Attorney General's Office. There was a representative who indicated that she was present to listen only and noted that the committee has the opinion from the Attorney General's Office. Chairman Cowdery noted that Susan Burke was present for questions. CHAIRMAN COWDERY requested a roll call on the motion to adopt the proposed HCS CSSB 141, Version S. Upon a roll call vote, Representatives Porter, Phillips, Kott, and Cowdery voted in favor of the adoption of the proposed HCS CSSB 141. Representatives Green and Berkowitz voted against the adoption of the proposed HCS CSSB 141. Representative Joule was not present. Therefore, the proposed HCS CSSB 141, Version S was adopted with a vote of 4-2. Number 0417 SUSAN BURKE, Attorney, Gross & Burke, informed the committee that she was asked to review the bill, its title, and whether certain provisions could be included under the existing title. She noted that the committee has her opinion. Ms. Burke expressed concern with two provisions of the CS adopted by the House Judiciary Committee, the design-build procurement section and the price per bed day section. Ms. Burke concluded that the price per day section which was part of the House Judiciary Committee CS was not sufficiently related to the subject in the title of the bill. However, the design-build provision was acceptable. She pointed out that the Attorney General's Office issued an opinion this afternoon in agreement with that conclusion. REPRESENTATIVE BERKOWITZ asked if the clause, "the agreement to lease subsequent to a design-build construction contract" inserted in that paragraph would effect Ms. Burke's opinion. MS. BURKE said that it could help a bit, but it would depend upon the purpose. She believed the underlying purpose of that kind of section is to establish a ceiling on at least the first year's price provision in the agreement. The reference to the design-build contract would be ancillary. Ms. Burke stated that the reference to the design-build in the other provision is an integral part of the whole purpose underlying that provision. "In other words, if the municipality adopts this kind of a procurement, that is a design-build construction type of procurement, then it would comply with the other requirement, the procurement requirements under the other legislation." Therefore, Ms. Burke felt even with the insertion of Representative Berkowitz's language there would still be problems. REPRESENTATIVE BERKOWITZ asked if that clause was inserted in the subsequent section, would it make any difference. MS. BURKE explained that the difficulty is that the price mechanism is not a term of the design-build construction contract, but rather a term of the lease agreement between the state and the City of Delta Junction. She clarified that she was not taking any position on the merits of either provision, but rather if the provisions can logically fit within the existing title. CHAIRMAN COWDERY surmised then that Ms. Burke believed that the title fits. MS. BURKE clarified, "The one, but not the other and I'm not sure that the amendments that Representative Berkowitz mentioned would go terribly far to cure what I think is the problem with the price provision." REPRESENTATIVE BERKOWITZ said that he imagined that much of Ms. Burke's opinion was conditioned on the definition of a design-build construction contract. He asked if the definition of design-build contract would be binding. MS. BURKE stated that she did not believe the definition was critical here. She indicated that the definition does not relate to the title problem. REPRESENTATIVE BERKOWITZ asked what the result would be if the definition were expanded. MS. BURKE commented then that she understood Representative Berkowitz to be pulling in the price section in with the other section. She said that it might help a bit, but hesitated to recommend that approach without reviewing the entire bill to determine if other problems would be created. Number 0860 REPRESENTATIVE BERKOWITZ indicated that those sort of problems could possibly be cured with a disjunctive. MS. BURKE said that she did not believe so. If one or the other applies, then that is the definition. REPRESENTATIVE BERKOWITZ inquired as to the effect if one section was left as it is and the "or" included agreements to lease. MS. BURKE replied then that the agreements to lease would always be design-build construction contracts. REPRESENTATIVE PORTER asked if there was anyone else to testify. CHAIRMAN COWDERY reiterated that this hearing was not taking testimony, but only answering any questions. REPRESENTATIVE PORTER commented that the discussion would get moving if a motion to report the proposed CS out of committee was made. REPRESENTATIVE BERKOWITZ informed the committee that prior to that motion he may have a conceptual amendment. He noted that he has not sat through the prior testimony. He understood that today the Mayor of Delta Junction expressed new reservations regarding the prison. Representative Berkowitz believed that Delta Junction was concerned about the possibility of a lawsuit based on procurement issues related to the prison. Would that be accurate? CHAIRMAN COWDERY understood that the City of Delta Junction was about 60-40 in favor of this with the outlying areas having a split of 50-50. Therefore, overall the majority of the people were in favor of this. He requested that a Delta Junction council member come forward to speak on the situation in Delta Junction. Number 1039 RICK JOHNSON, Member, City Council, City of Delta Junction, agreed with Chairman Cowdery's assessment of the vote. Mr. Johnson also agreed with Chairman Cowdery that currently there is a very vocal minority in Delta Junction. CHAIRMAN COWDERY asked if the city council approved this. MR. JOHNSON replied yes, the city council adopted Resolution 9904 which authorized the city to go to a sole source. In further response to Chairman Cowdery, Mr. Johnson said that the resolution was signed by the mayor. CHAIRMAN COWDERY understood the city council to be made of elected members who then elect a mayor. MR. JOHNSON replied yes. REPRESENTATIVE BERKOWITZ asked if the decision to go to the sole source contract was partially based on a concern that Delta Junction might be sued if it did not. MR. JOHNSON commented that it would be hard not to take that into consideration. Any threat of a lawsuit must be considered. Mr. Johnson stressed that the primary reason for going with the sole source contract was more of a time line issue. The city council adopted Resolution 99013 which authorized the city to release a RFP. In fact, the city hired a nationally renowned RFP writer for private prisons, Richard Crane(ph). He commented that Mr. Barton laid out the time line from design of the proposal through to actual design and construction and matched it with the Base Realignment and Closure Commission (BRAC) time line. The BRAC time line says that July 2001, the lights will be turned off. When the competitive process was compared to the BRAC time line it would not work. Mr. Johnson said that the only way to make the remodeling process was to go with the sole source contract which barely makes it to the deadline July 2001. REPRESENTATIVE BERKOWITZ stated that the problem with that decision is that it brings the decision before the committee today. The decision to go to sole source was clearly not the understanding of the legislature when it passed HB 53 last year. He reiterated his question regarding the threat of a lawsuit being a part of the decision to go to the sole source contract. Number 1256 MR. JOHNSON discussed the process leading up to Delta Junction's decision to go to a sole source. In February 1995, the BRAC Commission announced Fort Greely to be realigned from 1997-2001. In May 1995, the governor recognized a broad-based community coalition to be the local reuse authority (LRA). For two years, the reuse authority sought a tenant without receiving any solid proposals. In the fall of 1997, the LRA received a proposal from Allvest to use the facility as a private prison. In January 1998, the community had an election regarding whether the community should use the Allvest proposal which resulted in 62 percent voting in favor of the Allvest proposal. In the spring of 1998, Allvest and the Community Coalition entered into an agreement. Mr. Johnson stressed that at that time, there were no other interested bidders. He noted that there was interest from a company, CCA, who he understood to be interested in a design-build contract. Mr. Johnson pointed out that it was known that the design-build would not have been in Delta Junction, but in another part of the state. MR. JOHNSON continued with the passage of HB 53 in the spring of 1998. In September 1998, the city was designated as the Implementing Local Reuse Authority(ILRA). He explained that for the BRAC process, the assets of the post are to be given to the state government. The governor identified that he wanted a local government to receive those. The LRA was merely a community coalition. Therefore, the city was designated as the ILRA which is how the city entered into the picture. In October 1998, there was a city council election in which the three incumbents lost there seats and three new members were elected as was Mr. Johnson, the mayor, and another member. He informed the committee, "I was for it, the mayor was against it, and the other person was for it, but had concerns." Mr. Johnson said that it was his consensus that the community wanted people of business to review this and make a good decision for the community. Number 1483 REPRESENTATIVE BERKOWITZ reiterated his question regarding why there were concerns of a possible lawsuit. CHAIRMAN COWDERY interjected that he did not know if there could ever be an answer as to why people sue. REPRESENTATIVE BERKOWITZ pointed out that Mr. Johnson testified that there was concern regarding a possible lawsuit. Representative Berkowitz clarified that he was interested in what the concern was and what the possible lawsuit might be. MR. JOHNSON informed the committee that in January 1999, another election was held in which the community supported the reuse of Fort Greely as a prison facility. In February, Richard Crane(ph) was hired. In March, a vote was taken to go with the RFP (Request for Proposal) process. Mr. Johnson emphasized that the threat of a lawsuit had no bearing on the city council's decision to go with a sole source process. The city Resolution 99013 authorized the city to RFP. The nationally renowned expert concluded that the city did not have time to do so. Only then was it decided to go with the sole source process. With that decision, they followed the portion of HB 53 which said "a procurement process similar to". Mr. Johnson noted that it was an extremely technical process and council had to relied upon. The council was extremely comfortable that there was a basis for that sole source. Number 1600 REPRESENTATIVE BERKOWITZ inquired as to why we are here then. MR. JOHNSON understood that when it was time to write the IGA, the Attorney General was uncomfortable. REPRESENTATIVE BERKOWITZ commented, "You said it had to be something similar to the procurement process and I would imagine it'd be similar unless there were some given exceptions. I was wondering if any of those exceptions came to bear in this case." MR. JOHNSON deferred to counsel. Number 1629 REPRESENTATIVE PHILLIPS stressed that the committee is present to address a bill that has questions regarding the title and a section of the bill. The task of the Rules Committee is to review that question and make a determination. The committee is not debating the issue. REPRESENTATIVE PHILLIPS clarified, in response to Representative Berkowitz, that Section 6 of the House Judiciary Committee CS which dealt with the price per day is removed in the proposed CS before the committee. REPRESENTATIVE BERKOWITZ understood that the prior section was inserted in order to balance that last section. Therefore, the removal of the price section would lose the balance achieved in the House Judiciary Committee CS. Number 1707 REPRESENTATIVE PORTER moved to report HCS CSSB 141, Version LS 0827\S, Bannister, 5/7/99, from committee with a letter of intent as included in the committee packet. REPRESENTATIVE BERKOWITZ objected. REPRESENTATIVE PORTER pointed out that the concern regarding the removal of the section by the House Rules Committee proposed CS is addressed by the letter of intent. The letter of intent indicates that the $70 cap be established. There is also a letter from the Commissioner Pugh, Department of Corrections, saying that if that is the intent that would be done. REPRESENTATIVE KOTT agreed with Representative Porter's comments. He stated, "When we in Judiciary inserted the $70 per day issue we dealt with, somewhat, the RFP process and competitive bidding recognizing that there was a provision in the procurement code that allowed for a single source. Then the next concern was well, if it went out to single source, let's make sure it is contained or restrained within the dollar amount that was discussed with the previous legislature, primarily in the Finance Committee. They used $70 as the main number for the per diem, per prisoner, per day and that was the reason why we stuck it in there. And when we stuck that provision in there, we recognized that perhaps, there was a constitutional problem with the title and those issues dealing with the single subject." Representative Kott believed that with the impartial opinion received by the Gross & Burke firm and the letter from Commissioner Pugh the intent of the legislature when HB 53 was passed will be maintained. Number 1821 REPRESENTATIVE PHILLIPS clarified that the letter of intent to which Representative Porter spoke is the House Rules Committee letter of intent. REPRESENTATIVE BERKOWITZ withdrew his objection. CHAIRMAN COWDERY asked if there were any other objections. There being no objections, HCS CSSB 141(RLS), Version LS 0827\S, Bannister, 5/7/99, passed out of committee.