HB 225-STATE PROCUREMENT CODE  9:06:59 AM CHAIR MENARD announced the first order of business to come before the committee would be HB 225. [CSHB 225(FIN)(CORRECTED) was before the committee. It was heard previously.] SENATOR MEYER moved to adopt the work draft committee substitute (CS) for HB 225, labeled 26-LS0791\C, as the working document. Senator French objected for the purposes of discussion. CRYSTAL KINEMAN, staff to Representative Anna Fairclough, noted that Version P [CSHB 225(FIN)(Corrected)] exempted Alaska Industrial Development and Export Authority (AIDEA) and Alaska Energy Authority (AEA) from the procurement code. The new committee substitute, Version C, [CSHB 225(STA)] eliminates that wording leaving AIDEA and AEA under the procurement code. Technical changes were made to Section 36 of Version P [amending AS 36.30.999(l)] which referred to AIDEA and AEA as agencies. Section 19 of Version P was taken out of Version C for purposes of clarity; the offerors preference is left in regulation. 9:10:53 AM SENATOR FRENCH said the committee wrestled with two provisions at the last hearing: whether to put AEA and AIDEA under the procurement code and whether to eliminate the Alaska offerors preference. He asked if [Version C] does that or not. MS. KINEMAN said Version C takes AEA and AIDEA out of the equation and leaves the offerors preference as it exists in regulation. SENATOR FRENCH clarified that Version C leaves the offerors preference as it is right now, untouched. MS. KINEMAN responded that was correct. SENATOR PASKVAN said he sensed a major problem in the system and would like to hear from Mr. Jones. He asked about the sponsor's position on Version C, Version P or the original legislation of a $5,000 veterans preference. 9:12:51 AM MS. KINEMAN replied that the Alaska Veterans Preference is still important to Representative Fairclough. Questions about Version C remain, but the sponsor will adapt to the will of the committee. SENATOR PASKVAN questioned how objective criteria are determined if they do not come from statutory authority. Perhaps a preference should not be maintained if it can skew a bid result, has no basis in statute and may not have an objective standard. MS. KINEMAN replied that the sponsor holds the same concern and the chair may decide whether that is addressed today or not. 9:15:57 AM CHAIR MENARD said the legislation is very confusing and she wants to give it due diligence. She opened public testimony. SCOTT THORSON, Network Business Systems, said that he would like to see the Alaska bidder's preference clarified in statute. The state should support locally owned businesses because the vast majority of Alaskans work for Alaskan small businesses. 9:18:37 AM DENNIS MEINERS, Intelligent Energy System, Anchorage, supports the committee's decision to take Section 6 [amending AS 36.30.015(f)] out of HB 225, Version P. Legislative Audit 08- 30048-08 found that procurement policies and procedures for the AEA Rural Energy Group Projects need to be rewritten. Procurements for the Rural Power Systems Upgrade (RPSU) projects were not consistently made in compliance with the rural energy group, bulk fuel upgrade program, rural power system upgrade program project reference manual guidelines or the underlying federal regulations. Section 6 of Version P strengthens the agencies' ability to create their own procurement provisions in spite of past problems. They are a small section, maybe 3 or 4 people, who have managed about $300 million worth of projects over the last eight years. Very few of those have been bid out. 9:21:05 AM AEA has accumulated traditions or ways of doing things over the years, surrounding the way bids are put together. Procurement procedures may exist but projects are directed to particular contractors; innovation and competition is restricted. He gave an example of a 2007 multiple-year software contract going to the son of one of the workers at the agency. It was not advertised; his company and others did not have the opportunity to bid. The complexity and lack of public information about the procurement practices at AEA eliminate some contractors from even understanding the bids. The lack of oversight is harmful. CHAIR MENARD asked Mr. Meiners to wrap up. MR. MEINERS summarized that it is not appropriate to strengthen the procurement abilities of the agency without a management review. 9:24:10 AM TOM WICKWIRE, attorney, Power Corps Alaska, Fairbanks, said Power Corps Alaska is a plaintiff in pending litigation against AIDEA and one of its employees. HB 225 would amend AS 36.30.015(f), effectively allowing AEA to draft its own regulations and adding AIDEA to the list of agencies that are excluded from the state procurement code. In pending litigation, Power Corps, has proven that AIDEA, acting through one of its employees, has succeeding in giving over $1 million worth of contracts to an out of state corporation. CHAIR MENARD interjected and said a committee substitute [Version C] is currently before the committee. MR. WICKWIRE asked if Version C allows AEA to draft its own procurement regulations. CHAIR MENARD replied no. MR. WICKWIRE asked if Version C excludes AEA from the state procurement code. CHAIR MENARD replied no. MR. WICKWIRE asked if AEA will be subject to the state procurement code. CHAIR MENARD replied yes. MR. WICKWIRE said if AEA is excluded from the procurement code, this change will occur while litigation is pending against AEA. Trans Power has alleged, and submitted proof to the AG, that a certain AEA employee has intentionally violated the procurement code. It looks like the AEA has drafted this provision of HB 225 to get itself out of a difficult box. It is inappropriate for an agency to try to amend a law while litigation is pending. 9:28:00 AM CHAIR MENARD closed public testimony. SENATOR PASKVAN said he is uncomfortable rewriting legislation without more information and would like Mr. Jones to weigh in. SENATOR MEYER said the legislation is attempting to fix certain areas of the procurement code. Version C deletes Section 20 and Section 6, which puts AIDEA and AEA back under procurement code and leaves the offerors preference the way it was. Some testimony supports this, however, the procurement officer remains frustrated with the number of accumulative preferences. He suggested getting rid of the offerors preference and increasing the Alaska bidders preference. He also believes the criteria, six months, for Alaska business residency, is not enough. 9:30:20 AM CHAIR MENARD asked if Mr. Meyer would suggest a year. SENATOR MEYER said a year requirement should be considered as that is consistent with other Alaska residence requirements. He has also heard concern about Sections 33 and 34 which allow the procurement officer to go outside the procurement code and join up with a cooperative made up of several western states in attempt to get a better rate for the state. AEA and AIDEA also want to be outside the procurement code. He reiterated that the state needs to be able to keep better track of money spent with an automated and centralized system. His inclination is to leave the procurement code as it is and take more time to find a comprehensive solution. CHAIR MENARD said that is why she would like to hold Version C and go back to HB 24 which deals with the veterans' preference. The procurement code needs more work and discussion. SENATOR KOOKESH said he has no problem with Chair Menard's plan as long as we have some control over AEA and AIDEA. He said he is not willing to let them have state money and not be subject to the procurement code. CHAIR MENARD said she appreciated his argument that it is all state money. [HB 225 was held in committee.] HB 225-STATE PROCUREMENT CODE  10:09:42 AM SENATOR KOOKESH asked Chair Menard not to adjourn before stating for the record what she would like to do with HB 225. CHAIR MENARD replied that HB 225 is being held in committee.