SB 117-PROCUREMENT; CONSTRUCTION; CONTRACTS  3:40:33 PM CHAIR SHOWER announced the consideration of SENATE BILL NO. 117 "An Act relating to the state procurement code; establishing the construction manager general contractor procurement method; and providing for an effective date." He listed the invited testifiers. 3:41:11 PM MIKE LESMANN, Legislative Liaison, Department of Transportation and Public Facilities (DOT&PF), Juneau, Alaska, stated that the purpose of the bill is to grant the department the authority to write regulations for the existing process between DOT&PF and its contractors. SB 117 seeks to amend the state's procurement code under AS 36.30 by codifying the department's current practice of using the construction manager general contractor (CMGC) construction contracting method. MR. LESSMANN explained that the CMGC contracting method has a two-phase contract that allows the same contractor to provide construction related services during both preconstruction and the construction phase of a project. While the existing state procurement law does not offer this procurement method as a specific option, the department has been using CMGC under the innovative procurement guidelines in AS 36.30.308. MR. LESSMANN reported that CMGC has been used for the last 15 years in Alaska for public facility projects, federal aid highway and bridge projects, and new vessel construction. This contracting method is recognized in the Federal Highway Administration regulations and is a commonly accepted practice in the construction industry. DOT&PF's experience is that CMGC can decrease contractor change orders, decrease administrative delays, and leverage resources to improve Alaska's infrastructure. MR. LESSMANN advised that should this become law, the department will collaborate with stakeholders to adopt the regulations needed to further refine and standardize the CMGC contracting method in Alaska. 3:45:27 PM SENATOR KAWASAKI highlighted that the fiscal note analysis indicates that the CMCG contracting method has been used for just 20 projects over the past 15 years. He asked why it had been used for so few projects and how the department expects that to change should the bill pass. MR. LESMANN answered that it is not right for every project, but it is a tool for the department to use. He deferred further comment to Mr. Lund who has experience using the CMGC contracting method. 3:46:58 PM MIKE LUND, Construction Engineer, Northern Region, Department of Transportation and Public Facilities (DOTPF), Fairbanks, Alaska, explained that CMGC is a procurement tool that involves a contractor, prior to committing to costs, giving input into the phasing of a project. This is not needed on all projects that are done on a regular basis, but sometimes it is to the state's advantage and the public interest to do so. The department has been successful in using CMGC under the innovative procurement statute. CHAIR SHOWER asked for examples of projects that would use CMGC. MR. LUND explained that this method is generally used for more complex projects. He cited University Avenue in Fairbanks that involved complex phasing and staging with underground and overhead utilities, and the Kivalina School site access road that involved complex logistics to get materials and heavy equipment to rural Alaska. He said it is heavily used and useful in the vertical construction industry. Using the CMGC process on the UAF engineering building allowed flexibility for the project to shut down when there were fiscal constraints and restart without contract closure and a lengthy claims process. SENATOR KAWASAKI summarized that DOT&PF uses the innovative procurement code to get a construction manager general contractor. He asked why the CMGC method has not been used more frequently since it has been available under the innovative procurement statute. MR. LUND agreed with the summary. Responding to the question, he explained that the innovative procurement statute effectively allows the department to use CMGC to partner with the local contracting community, but it is on an ad hoc basis. It is difficult to develop regulations and adopt overriding policies without codifying the process. SENATOR KAWASAKI asked how the department would select the best contractors. MR. LUND answered that while there is a price component to the process, the contractor is selected based on qualifications CHAIR SHOWER asked for the sectional analysis. 3:55:02 PM MR. LESMANN paraphrased the following sectional analysis for SB 117 [original punctuation provided]: Section 1. AS 36.30.200(c) is amended to add CMGC (Construction Manager/General Contractor). This section ensures that the Department only uses the contracting method on appropriate projects by requiring that the Commissioner of Transportation and Public Facilities first determine that doing so is advantageous to the State. Section 2. AS 36.30.250 is amended to add the Department may exclude price criteria when awarding a preconstruction services contract under the CMGC contracting method. Section 3. AS 36.30 is amended to add a new section AS 36.30.309. This section is the operative provision of the CMGC bill. It identifies the CMGC method as requiring a two-phase contract: one contract for preconstruction services and another for construction services. The Department awards the construction services contract only if the parties can reach an agreed price for construction services for a specific project scope and schedule. If the parties cannot reach an agreed price, the Department may contract with another contractor for construction of the project using any other contracting method under the procurement code. Section 4. AS 36.30.990 is amended to add the definition for "preconstruction services". Section 5. Authorizes the Department to adopt regulations that further implement the Act. Section 6. This section specifies that Section 5 takes effect immediately. 3:57:30 PM CHAIR SHOWER found no questions and opened public testimony on SB 117. 3:57:50 PM CHARLES MCKEE, representing self, Anchorage, Alaska, testified off topic during the hearing on SB 117. CHAIR SHOWER asked if he supported or opposed SB 117. MR. MCKEE said he supported it and then asked the committee to understand that there was no statute of limitations for slander. 4:01:44 PM ALICIA SIIRA, Associative General Contractors of Alaska (AGC), Anchorage, Alaska, stated that AGC supports having CMGC as an alternative project delivery method for DOT&PF. It has been used in Alaska for decades. AGC believes that CMGC can be a great tool when properly used and prepared. However, it is not the only tool and when it is used there should be ample review to ensure the best value for the state. She offered her belief that codifying the CMGC procurement process will benefit the construction industry and the state. It would allow the department to use the CMGC process without having to submit an innovative procurement request to multiple agencies for each project. She said SB 117 will modernize, clarify, and improve the state's procurement process and align Alaska with the majority of other states. It will also allow the construction industry to have a voice in developing regulations, which will remedy concerns about consistency in the use of CMGC projects. She asked that AGC be given a seat at the table throughout the regulatory process. She said AGC looks forward to sharing the list of best practices it has compiled. CHAIR SHOWER asked if AGC would like to see any changes to the bill. MS. SIIRA replied they have suggested language changes but nothing substantial. CHAIR SHOWER suggested she send the suggestions to ssta@akleg.gov. 4:05:04 PM SARAH LEFEBVRE, representing self, Fairbanks, Alaska, stated that she has worked in the construction industry in civil contracting for 23 years. She agreed with Ms. Sirra's comments and said the bill will ensure that CMGC will be applied more consistently across the three DOT regions. She noted that this has been a concern to the contracting community on past projects. She referenced Senator Kawasaki's question and offered her experience that each CMGC has progressed in a silo and the lessons learned have not necessarily been applied in subsequent projects and procurements. She offered her belief that having the CMGC procurement method in statute allows the department to establish clear regulations and eventually implement a consistent CMGC handbook. She said that industry partners look forward to participating in this process to help improve the application of CMGC in Alaska. She suggested that the CARES Act and federal infrastructure packages offer an opportunity for DOT&PF to get future year projects onto the street. CMGC could be a valuable tool to fill the gap left by accelerated project funding. She said she is an ADC member, and her company has minor edits for the bill that she would submit to this committee and the Transportation Committee. She noted that the edits had been vetted by department staff. CHAIR SHOWER said he would appreciate receiving the documents. 4:07:43 PM CHAIR SHOWER closed public testimony on SB 117 and advised that written comments would be accepted at ssta@akleg.gov. 4:08:21 PM CHAIR SHOWER held SB 117 in committee.