HB 24-PROF. SERVICES IN STATE-FUNDED CONTRACTS  9:09:29 AM CHAIR LYNN announced that the final order of business would be HOUSE BILL NO. 24, "An Act relating to the procurement of architectural, engineering, or land surveying services under state-funded contracts." 9:09:49 AM REPRESENTATIVE SAM KITO, Alaska State Legislature, presented HB 24, as prime sponsor. He stated that HB 24 would require a municipality that receives state funding for a construction project to utilize Qualifications-Based Selection (QBS) in selecting a design professional for the design component of the project. CHAIR LYNN asked Representative Kito to define Qualification- Based Selection. REPRESENTATIVE KITO responded that there are already quite a few municipalities that require Qualifications-Based Selection. He explained that Qualifications-Based Selection of a design professional means that when hiring an architect, an engineer, a lands surveyor, or a landscape architect, the contracting person must issue a request for proposal (RFP) based on the individual's or firm's qualifications, as opposed to the price of the services. He explained that one of the key components driving QBS is the Brooks Act [Selection of Architects and Engineers statute, a U.S. federal law passed in 1972] requiring that federal procurement for design professionals utilize Qualifications-Based Selection. He said that the State of Alaska has a "mini" Brooks Act requiring state-funded projects use Qualifications-Based Selection, which is already being used with Department of Transportation & Public Facilities (DOT&PF) construction projects in the state. CHAIR LYNN asked for clarification that Qualifications-Based Selection refers to the consideration of professional qualifications for procurement as opposed to price only. REPRESENTATIVE KITO responded that HB 24 requires that qualifications be the selection factor for design services for projects that are funded by the State of Alaska. He gave himself as an example: As a civil engineer whose expertise is in coastal and transportation engineering, if he were to submit a proposal for a building foundation, even though he is technically qualified to do the work, his skills and experience would not make him the most efficient. He went on to say that HB 24 would require that if the state provides money to a municipality for a capital project, the contracting person must look at the qualifications of the individuals that are proposing the design of the project. 9:13:58 AM CHAIR LYNN asked, "Would not the RFP specify the requirement for qualification in a certain type of construction, as well as price?" REPRESENTATIVE KITO responded, "Not necessarily, although it does happen at times." He said that an owner, with a construction budget of $100 million for a project, budgets for the design, which is typically four to eight percent of the cost of the project. He said that design costs could be higher if the project is a very complex structure. He went on to say that after selection of the designer with the best qualifications, the owner then starts negotiating the price. If the designer comes back asking for a design cost that is 20 percent of the cost of the project, then the owner has to reassess. Representative Kito maintained that the owner still has complete control over the design cost of the project. He said the design cost could range as high as ten or 12 percent depending on the complexity of the project. 9:15:57 AM CHAIR LYNN mentioned that he remembered Representative Kito discussing this concept with him before Representative Kito became a representative. REPRESENTATIVE KITO agreed that he has worked actively with a group called the Alaska Professional Design Council through which various design entities collaborate and lobby to the legislature on various issues that are important to them. 9:16:40 AM REPRESENTATIVE KELLER asked if HB 24 was a risk management tool and, if so, what risk would be managed. REPRESENTATIVE KITO voiced his belief that the proposed legislation would offer a management tool for municipalities in their attempt to spend public money most efficiently in the face of a declining budget. He added that the proposed legislation would ensure that appropriate qualified professionals are being utilized for projects paid for with public funds, therefore decreasing the overall construction cost of a project. REPRESENTATIVE KELLER repeated Representative Kito's claim that the proposed legislation was not so much a risk management tool as a tool to promote efficiency. He asked what the efficiency would be and mentioned specifically the effect HB 24 might have on nonprofits that receive state money but operate on a limited budget. REPRESENTATIVE KITO stated his expectation that an entity soliciting for the design of a project funded by state money would select the most qualified architect, who is accustomed to working on smaller commercial buildings and can be more efficient than another who doesn't have that experience. He said that HB 24 would also be a risk management tool in that an appropriately qualified designer poses less risk for that project to go over budget or to be constructed incorrectly. 9:20:07 AM REPRESENTATIVE KELLER opined that if procurement is in the position to define qualifications, then the scope of qualified professionals becomes narrower. He stated that he appreciated the concern for qualified professionals but wondered if the competition would be diminished. REPRESENTATIVE KITO stated his belief that competition would not be diminished under HB 24. He opined that most engineers, architects, and land surveyors are accustomed to competing for work, and competition creates a healthy environment for the profession. He added that HB 24 would keep professionals engaged in their field, resulting in greater efficiency in their design work. He added that in the engineering profession, of which he is familiar, a new engineer is mentored by a more experienced engineer to gain experience and, ultimately, brings that experience to his/her proposals. 9:23:15 AM REPRESENTATIVE TALERICO referred to page 2, line 18-21, which he claimed would use price as an added factor in awarding bids, and read as follows: In order for the contracting person to include price as a factor in selection, a majority of the persons involved by the contracting person in evaluation of the proposals shall be registered in the state to perform architectural, engineering, or land surveying services. REPRESENTATIVE TALERICO stated his concern for school districts and municipalities in rural locations, where the selection process is generally done by committee or city council. He opined that he is not sure how many professionals would be available to serve on a selection committee, making it difficult to select based on qualifications. 9:25:32 AM REPRESENTATIVE KITO gave a two-part answer to Representative Talerico's question. He explained that cost selection can be used for services that are repetitive in nature, like structural inspections or surveys, and the language in HB 24 follows language from the Department of Transportation & Public Facilities (DOT&PF) procurement regulations, which require the appropriate design professional on the selection team. REPRESENTATIVE KITO cited the example of school construction in the second part of his answer to Representative Talerico. He said that there is current law requiring school districts utilize Qualification-Based Selection, and the appropriate professionals are invited to participate in the selection process. He added that typically schools are not looking for a cost-type procurement where they are soliciting for a repetitive service, but they would be using QBS. The statutes and regulations also provide that for schools wanting to do an alternative procurement - that is, design-build, construction- manger, general contractor, or some combination of design and construction together - the department can engage with the school district to make sure the technical aspects of that procurement are being done appropriately. 9:27:59 AM REPRESENTATIVE VAZQUEZ asked what this bill tries to prevent that is a current problem. REPRESENTATIVE KITO stated that the concern that prompted him to introduce the bill is the concern that any state money put into public projects would serve the purpose of the project as efficiently and inexpensively as possible and avoid design and construction failures. 9:29:18 AM REPRESENTATIVE VAZQUEZ referred to AS 36.90.110, in Section 1 of HB 24, and the existing statute AS 36.90.100, which mentions landscaping, and asked why landscaping architectural services are omitted from HB 24. REPRESENTATIVE KITO responded that he didn't know why except that state-funded projects for municipalities were typically not landscaping projects but building and infrastructure projects. 9:30:39 AM REPRESENTATIVE VAZQUEZ asked Representative Kito to define landscape architectural services. REPRESENTATIVE KITO explained that landscape architects are individuals who work on the grounds around facilities and open spaces within infrastructure projects. He added that landscape projects include vegetation and retaining walls. 9:31:36 AM REPRESENTATIVE VAZQUEZ reiterated that the proposed legislation omits landscape architectural services and asked if there was a reason or if that was an oversight. REPRESENTATIVE KITO said he was not sure if it was omitted but claimed that there are very few grants from the State of Alaska awarded specifically for landscaping. REPRESENTATIVE VAZQUEZ opined that landscaping architectural services would be an important inclusion. REPRESENTATIVE KITO agreed and related his experience as a new engineer trying to find landscaping components for the embankment of a roadway and to determine which types of vegetation were best suited based on a variety of variables. He maintained that landscape architects typically work for other design professionals within larger projects and would not be the primary applicant for a project. REPRESENTATIVE VAZQUEZ asked if it made sense to add landscape architecture to the proposed legislation. REPRESENTATIVE KITO agreed to consider doing that. 9:34:14 AM REPRESENTATIVE VAZQUEZ said that the concept [of HB 24] appears valid but asked how "sideboards" could be incorporated so that one doesn't get carried away and not look at the price tag. REPRESENTATIVE KITO stated the most important consideration is understanding the budget starting out and trying to contain it. He maintained that it is important to budget the amount of money available to complete the design and to pay attention to the work so that the budget is not exceeded. He added that if the budget is exceeded, then it is important to know why. He claimed that project management includes paying attention to the overall process to keep costs down. REPRESENTATIVE VAZQUEZ reiterated that she liked the concept of HB 24 but was uneasy with the lack of sideboards assuring that the price tag is not disregarded. 9:36:06 AM REPRESENTATIVE STUTES asked Representative Kito to expound on the mentoring programs offered by architectural firms. REPRESENTATIVE KITO responded that he could speak specifically to his profession. He said a graduate with a civil engineering degree does not have the ability to "hang out a shingle." He relayed that in order to become licensed in Alaska as a professional engineer, a person would need to demonstrate to the licensing board that he/she has had four years of increasing levels of responsible charge under a licensed engineer. 9:37:56 AM REPRESENTATIVE KELLER referred to page 2, line 30, and mentioned that HB 24 discusses contracting with regional education attendance areas (REAA) and asked if REAAs offer contracts. REPRESENTATIVE KITO responded yes, on a regular basis. He stated that from his experience working with the Department of Education & Early Development (DEED), the REAAs, or school districts, will hire an architect or engineer to do specific school projects. He added that the REAA board would review the proposals and hire the architect or engineer for the project. 9:38:51 AM DALE NELSON, Alaska Professional Design Council (APDC), testified in support of HB 24. He relayed that he is a registered professional civil engineer and has practiced in Alaska since 1967. He declared that he represents the Alaska Professional Design Council, as chair of the Legislative Liaison Committee, and is testifying in support of HB 24. He said APDC is a nonprofit organization, started in the 1970s, and includes a number of member organizations representing many licensed engineers. He noted APDC has been very involved with communities, the University of Alaska, and with the Science, Technology, Engineering and Mathematics (STEM) teaching program in schools. MR. NELSON asserted that HB 24 is needed. He said that APDC works with communities who are responding to pricing-first RFPs and assists with the selection process. He emphasized that QBS has real value. He cited the four supporting principles of the American Public Works Association (APWA) are to: lower overall cost, promote technical innovation and quality, benefit small firms, and satisfy project owners. He stated that the main advantage of QBS is that it promotes a collaborative spirit between the design professional and the client in maximizing the quality, value, cost-effectiveness, and usefulness of the final product. He maintained that the mandate for managers is to be good stewards of the funding provided to the communities for development. He stated that as a registered professional engineer, his oath is to support the health, safety, and welfare of the public. He asked for the committee's support of HB 24. 9:44:25 AM CHAIR LYNN asked why, if Mr. Nelson and the APDC have been promoting the concept behind HB 24 for several years, it has never passed. MR. NELSON responded that education is needed and ongoing and, as in the present hearing in the House State Affairs Standing Committee, APDC strives to promote understanding of the requirements of the state procurement code and what QBS would accomplish. 9:45:28 AM REPRESENTATIVE KELLER asked if APDC has standard designs that can be used across the state, citing the reuse of previously approved designs in the Matanuska-Susitna School District as an example, and if reusing designs is in the scope and mission of APDC to cut costs. 9:46:21 AM MS. NELSON replied no, that APDC's scope does not include that level of involvement in design recommendations. He stated that APDC's role is in understanding the process and value of looking for a qualified designer. He said that for a school district, the designer would be an architect, as the lead, and would have the support of structural, civil, mechanical, electrical, and landscaping architects. He added that once the qualified architect is identified, he/she collaborates with the school district to define the scope, and together they work toward the objective. 9:47:36 AM REPRESENTATIVE SPOHNHOLZ asked and received clarification on the four criteria by which the APDC supports the QBS process. 9:48:19 AM CATHERINE FRITZ, Architect, Alaska Professional Design Council, testified in support of HB 24. She relayed that she was a practicing architect in Juneau who began working in the architectural field in 1983 and has been licensed since 1990. She reiterated Representative Kito's claim about the time it takes to become a licensed design professional. She made reference to her letter in the committee packet. She pointed out that there is an existing statute on Qualified-Based Selection, and the proposed legislation is similar to that statute but would ensure that the provisions already practiced in the state are carried down to the municipal levels and local units who use state funds. She contested that implementing HB 24 is an issue of fairness in procurement. She related that the goal of any government procurement process is to have extensive competition that is open, fair, rigorous, and appropriate for the project, and she opined that this should be true at all levels of government. MS. FRITZ said that she has recently been working on projects for the Federal Aviation Administration (FAA) and stated that the FAA, along with most federal agencies, requires QBS for selecting design teams. She said that HB 24 would close a loophole. She maintained that design is not like construction but is more a service than a commodity. She offered that if a project is clearly defined, then a price can be appropriately associated with the project. She claimed that a pricing-first selection process attracts a bid without a scope, so that a facility, built using the cheapest bid, will reflect less time spent with the design team, less opportunity for innovation, and less consideration for efficiency in ongoing maintenance. MS. FRITZ asserted that the Quality-Based Selection process offers an opportunity for collaboration between the owner and the design team. She said that after identifying the qualifications that are important for a project and selecting the best design team for the project, an owner can negotiate a price with the design team. She maintained that if the owner and design team cannot decide on a price, then the owner can use the second choice team. She added that a contract for services would not be written until the negotiation is complete. She described QBS as a two-step process, resulting in clear expectations, collaboration, relationship building, and a design team that understands the owner's personal goals. [HB 24 was held over.]