HB 50-PROF. SERVICES IN STATE-FUNDED CONTRACTS  3:59:49 PM CHAIR KREISS-TOMKINS announced that the final order of business would be HOUSE BILL NO. 50, "An Act relating to the procurement of architectural, engineering, or land surveying services for state-funded contracts." 4:00:16 PM REPRESENTATIVE SAM KITO, Alaska State Legislature, presented HB 50, as prime sponsor. He stated that the concept behind HB 50 is championed by the Alaska Professional Design Council (APDC), a coalition of professional organizations that represent members of the design community. He mentioned that he is professionally affiliated with the council through his membership in the Alaska Section of American Society of Civil Engineers (ASCE). He relayed that through the proposed legislation, the predominant factor for selection of design services for a construction project would be the qualifications of those services rather than cost. He asserted that the Department of Transportation & Public Facilities (DOT&PF) already uses this selection process for projects it funds directly, and HB 50 would extend that requirement to projects funded by the State of Alaska through grants to municipal governments. REPRESENTATIVE KITO attested that the goal of HB 50 would be to ensure that projects funded by the State of Alaska are the most efficient and cost effective. He relayed that the activities performed by architects, engineers, land surveyors, and landscape architects are not cost-based. He asserted that these professionals would not be competing based on their ability to minimize the cost of their services, but on their knowledge and experience in their area of expertise. He said for most design projects, design services constitute about six to eight percent of the cost of a project. He offered that HB 50 would allow the hire of a design professional who could provide the service most efficiently and who has the best experience for the work. REPRESENTATIVE KITO said that when an owner has identified a short list of candidates, he/she can work directly with the number one scoring individual or firm to negotiate a fee for doing the work. If the owner is not able to negotiate an acceptable fee, then those negotiations can be terminated, and the owner can negotiate with the number two scoring company or individual. He said in that way, the State of Alaska can ensure that the people doing this state-funded work are the most qualified. 4:05:23 PM DALE NELSON, Chair, Legislative Liaison Committee, Alaska Professional Design Council (APDC), testified in support of HB 50 on behalf of the APDC Legislative Liaison Committee. He said that he also represents the American Society of Civil Engineers Region 8, which includes nine states and soon will include two territories and two provinces of Canada. He mentioned that he also sits on the board of the American Society of Engineers (ASCE). He directed the committee's attention to the APDC position statement in the committee packet. He stated that APDC represents the Alaska Society of Professional Engineers (ASPE), the Alaska Society of Professional Land Surveyors (ASPLS), the American Institute of Architects (AIA) Alaska Chapter, the American Society of Civil Engineers (ASCE) Alaska Section, the American Society of Landscape Architects (ASLA) Alaska Chapter, and the American Council of Engineering Companies of Alaska (ACEC-Alaska). MR. NELSON relayed that the State of Alaska requires that design professionals for state-funded projects be selected using qualifications based criteria, and HB 50 would implement that requirement at the community level. He explained that Qualifications Based Selection (QBS) procedures are specified by the U.S. Brooks Architect-Engineers Act [of 1972] ("the Brooks Act"), more than 40 mini Brooks Acts, and the American Bar Association's (ABA's) Model Procurement Code for State and Local Governments. 4:09:34 PM MR. NELSON paraphrased from the ASCE policy statement in the committee packet, which read [original punctuation provided]: Often a contracting entity "owner" may believe that the pivotal issue in the selection of a professional engineer is the cost of the necessary services. Also, an owner may perceive that accepting the low price to perform the work produces the project with the lowest total cost. In this case, the owner is of the belief that the required engineering services are completely described and the qualifications of all engineers are equal. MR. NELSON went on to say that it is impossible to completely describe the scope for required professional services. He continued paraphrasing from the ASCE policy statement, which read [original punctuation provided]: A poorly defined scope of services can result in numerous change orders. Lacking specifics, each firm may be compelled to, in order to be competitive, submit a price for the least amount of work reasonably envisioned. MR. NELSON concluded by saying, "APDC strongly believes that it is in the public's interest to utilize QBS for all public projects while allowing for subsequent fee negotiations." He contended that HB 50 would do this. 4:12:10 PM REPRESENTATIVE TUCK asked where QBS is located in HB 50. REPRESENTATIVE KITO replied that a new statute, AS 36.90.110, proposed in Section 1 of HB 50, discusses how procurement of engineering services would be performed and the use of qualifications as the selection criteria for design services. REPRESENTATIVE TUCK asked if there was a standard for the qualifications used for selection criteria. REPRESENTATIVE KITO explained that a typical project would be advertised with a request for proposal (RFP). He said that qualified candidates would then submit proposals for providing the services designated in the scope. He relayed that the proposals would be reviewed according to identified criteria in the [RFP] notice. He added that the criteria typically would include the individual resumes, the corporate experience, the team experience, and the workload of the designer. These are all qualifications of the firm or individual providing the service. He mentioned that the RFP may also include local selection as a criteria. He stated that all of these criteria components are assigned a certain number of points based on their importance as determined by the project owner. A team of reviewers then would review and score the proposals according to the criteria set forth. He reiterated that the highest scoring proposer would be the first to be offered the opportunity to negotiate a fee. If that fee negotiation fails, then the next highest scoring proposer would be engaged to negotiate a fee. 4:15:29 PM REPRESENTATIVE TUCK expressed his irritation with design people who "don't know what they are talking about," which he experienced in his street lighting and traffic control work for DOT&PF. He offered that it is a huge process to try to resolve any design flaws "in the field." He stated that he sees the need to "qualify" the bid with experience and workload, rather than using the low bid as a qualifier. He opined that HB 50 does not state how selection is made but appears to leave that up to the judgement of the contracting person. He suggested that the criteria components, mentioned by Representative Kito, should be stated in the proposed legislation. He asked, "What in our procurement codes right now prevents you from doing this already?" REPRESENTATIVE KITO responded that the language in HB 50 is language copied from DOT&PF statutes, and that language is what provides DOT&PF the [procurement] flexibility. In response to Representative Tuck's first question, he opined that it would be difficult for the legislature to anticipate all of the types of projects that would be advertised. He added that providing direction on certain criteria could create limitations for the procurement officer issuing an RFP. He said that DOT&PF is already required by Alaska's mini-Brooks Act to select designers based on qualification. He offered that HB 50 would require municipalities receiving public money through the legislature to use QBS. He added that many municipalities already have ordinances with this requirement but offered that since some don't, HB 50 would "even the playing field" for municipalities receiving state money. 4:18:48 PM REPRESENTATIVE TUCK asked if HB 50 could have prevented "what happened with the Port of Anchorage," if that had been a state- funded project. He mentioned that the Port of Anchorage was a design flaw; many consultants were involved; much of the work was sole sourced; there were many judgement calls; and there were warnings from engineers. He offered that a project such as that gives a great deal of responsibility to the contracting person. REPRESENTATIVE KITO offered that he believes the [Port of Anchorage] situation to have been unique. He said he doesn't know enough about that project to say if HB 50 would have helped in that situation. 4:20:01 PM MR. NELSON responded that "sole source" is the key in Representative Tuck's testimony regarding the Port of Anchorage project. He said that sole source procurement is not included in HB 50; instead, HB 50 represents a process to be followed. He suggested that following the mini-Brooks Act might have prevented what happened with the Port of Anchorage project. REPRESENTATIVE TUCK expressed his concern that there be a process and stated that he doesn't see one in HB 50. He cited language in Section 1 of HB 50, on page 1, beginning on line 7, which read as follows: The contracting person shall, when selecting the contractor, negotiate with the most qualified and suitable professional person of demonstrated competence to perform the services. The contracting person shall award the contract for those services at fair and reasonable compensation as determined by the contracting person. REPRESENTATIVE TUCK attested that HB 50 doesn't identify the criteria; it is too subjective; and it is all determined by one person. He asked if there was any way a design engineer could appeal if he/she saw a design flaw in another engineering firm's proposal. REPRESENTATIVE KITO said that different projects are administered in different ways. He relayed that very large projects will often budget for value engineering, in which an engineer or architect will complete a design and forward it to another engineering or architecture firm to review. He mentioned that this probably wouldn't be done for a simple project, but might be for a major international airport or port project. He said it would be at the discretion of the procurement officer. He explained that if HB 50 becomes law, the procurement officer would not make all of the decisions. When selecting a designer, the procurement officer would write the RFP and assemble the selection team with the knowledge, experience, and responsibility to review the proposals and select the most qualified offeror. 4:23:33 PM REPRESENTATIVE JOHNSON asked if HB 50 would preclude awarding a contract based on low bid. REPRESENTATIVE KITO explained that there are two components to a construction project: the actual construction activities, which are generally awarded based on low bid; and the design work, which through HB 50 would be awarded based on the qualifications and experience of the designer. REPRESENTATIVE JOHNSON commented that she has seen some amazing design work portfolios, but unfortunately the firms were from out of state. She offered that the larger cities already follow QBS practices and asked how HB 50 would benefit smaller cities. REPRESENTATIVE KITO asserted that QBS would actually help in regard to smaller cities. He mentioned his experience with the Department of Education and Early Development (DEED), in which a district requested proposals to be submitted based on cost of services. He suggested that time drives the cost of an engineering project: lower cost engineers may take more time to complete a project and higher cost engineers less time. The discrepancy between engineers is based on experience and knowledge, not cost. [HB 50 was held over.]