SB 117-PROCUREMENT; CONSTRUCTION; CONTRACTS  2:10:39 PM CHAIR MYERS 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." 2:10:50 PM ANDY MILLS, Special Assistant to the Commissioner; Legislative Liaison, Department of Transportation and Public Facilities (DOTPF), Juneau, Alaska, on behalf of the administration, stated that SB 117 was in response to the department's desire to work directly with the contracting community. SB 117 would amend AS 36.30, the state's procurement code, by codifying the department's current use of the CM/GC or construct manager/general contractor contracting method. He explained that the CM/GC method would provide a two-phase contract for both a project's preconstruction and construction phases. Although this method was not an option under current procurement law for competitive sealed bidding, the department has used the CM/GC contracting methodology under the state's existing innovative procurement statute for over fifteen years. He recalled that this process was used on over 20 complex projects. He said that CM/GC is included in Federal Highway Administrative regulations, in other states' regulations, and is a common and accepted practice in the construction industry. In the department's experience, CM/GC contracts could decrease contractor change orders, administrative delays and leverage department resources. 2:12:33 PM MR. MILLS said this process could allow the department and its contractors to improve Alaska's transportation infrastructure faster, which is its mission. Once the CM/CG contracting method is adopted in statute, the department would collaborate with the Associated General Contractors of Alaska (AGC) and other stakeholders to adopt regulations, policy and guidance materials, further refining this innovative contracting method for use in Alaska. 2:13:23 PM ALICIA SIIRA, Executive Director, Associated General Contractors of Alaska (AGC), Anchorage, Alaska, stated that AGC supports having the CM/CG tool as an alternative project delivery for DOTPF. She stated that AGC is a statewide construction trade association representing contractors, specialty contractors, suppliers and manufacturers in Alaska. AGC unites the construction industry to focus on balance and work to foster constructive legislation, regulation and standards. As previously stated, CM/CG has been used in Alaska for more than a decade. SB 117 will benefit the construction industry by modifying procurement statutes to codify the CM/CG procurement process, she said. It would allow DOTPF to use the process without submitting an innovative procurement request to the Department of Law and the Federal Highway Administration (FHWA) for each project. This will modernize, clarify and improve the state's procurement process and align Alaska with the majority of other states. 2:14:53 PM MS. SIIRA said SB 117 would allow DOTPF to add clarity and consistency for CM/CG use across all regions, which is a priority for the construction industry. She stated that the passage of this bill would also provide an opportunity for the industry to participate in the development of regulations that would remedy concerns about consistency in CM/CG projects. In closing, she said AGC supports this bill and looks forward to being included in further enhancing the CM/CG process. 2:15:48 PM SENATOR KIEHL asked how broadly this process would be used. He related his understanding that it was not appropriate to use this process in lots of projects. MR. MILLS agreed with Senator Kiehl. He stated that low-bid process was predominately used by the department for administrative ease. Given the nature of many DOTPF projects, he said it wasn't necessary to use CM/GC to add efficiency or complete the process. 2:17:10 PM CHARLIE DEININGER, Chief Procurement Officer, Department of Transportation and Public Facilities (DOTPF), Juneau, Alaska, responded that DOTPF has typically used CM/GC on one to three of the 100 to 120 total DOTPF projects per year. He explained that the department would develop criteria in regulation for CM/CG contracting. Further, it would require the commissioner's approval to use the CM/CG process. 2:18:48 PM SENATOR SHOWER stated that this bill was previously heard in the State Affairs Committee, which he chairs, so he was familiar with it. He pointed out that the administration made it clear that the department would work with smaller contractors on the process. He suggested that the committee consider a small amendment to require the administration to conduct outreach to inform contractors about this process and provide them with any assistance needed. He acknowledged that CM/CG would generally be limited to larger, more complex projects. 2:20:32 PM SENATOR KIEHL recalled slides during a presentation discussed using an independent cost estimator. He characterized it as an essential part of the process but he did not see any provision for an independent cost estimator in the bill. MR. MILLS related his understanding that many aspects would be included in regulations for CM/CG. He assured members that the independent cost estimator would be part of the process. SENATOR KIEHL said the independent cost estimator was a critical safeguard for the owner so he wants to be sure it is addressed. 2:22:30 PM CHAIR MYERS opened public testimony on SB 117. 2:22:51 PM SARAH LEFEBVRE, Office Manager/Contract Administrator, Exclusive Paving, Fairbanks, Alaska, spoke in support of SB 117. She provided her background, such that she has worked in the construction industry for over 20 years. She said she agreed with AGC's testimony. MS. LEFEBVRE spoke to her experience with the CM/CG process. She said that each proposal is different depending on whether best practices are incorporated into the proposal. From a contractor's perspective, she expected that the largest CM/CG project her company was involved in would provide the best experience. However, that was not the case. She predicted that the inconsistencies and flaws within the process would continue unless legislation were passed. Other than the state's steps to obtain the authority to use the CM/CG procurement method, the state does not have any defined processes. She said CM/CG was being used as a procurement concept. After that, how it was used depended on the specific DOTPF staff involved. Comparing the CM/CG projects from 2012 to 2021, the results would show the process varied widely and the sequence of changes did not track for developing or implementing best practices. Placing CM/CG in statute would create a pathway to develop regulations and clear guidelines to define the process and ensure that the best value was indeed being described and sought on behalf of the state. She said this is crucial to achieving the best competitive environment. MS. LEFEBVRE explained that contractors must make significant investments for CM/CG projects. In her experience, the internal costs ranged from $30,000 to $100,000 for her company to participate in the process. She suggested that the small business amendment would be better addressed by regulation. In closing, she urged members not to delay passing SB 117 for another year. With forthcoming federal funds state infrastructure projects will increase, she said. The CM/CG's procurement method will provide an opportunity for the state to ensure that Alaska can maximize the opportunities to use federal funding. She cautioned that it may take a year to complete the regulation process after passage of SB 117. She said the construction industry is prepared to actively participate in drafting regulations to ensure that Alaska is a sound platform to build future CM/CG Request for Proposals (RFPs). 2:25:45 PM CHAIR MYERS, after first determining no one wished to testify, closed public testimony on SB 117. 2:26:00 PM SENATOR SHOWER offered to work with the Chair on an amendment for small businesses. 2:27:02 PM SENATOR MICCICHE stated his desire for SB 117 to pass this year. SENATOR SHOWER offered to make a conceptual amendment. MR. MILLS interjected that an amendment was not necessary for public outreach. He offered to commit to initiating a public information campaign. Further, he said he had already discussed with Mr. Deininger ways to supplement the process to better inform contractors. SENATOR SHOWER indicated that he was comfortable with Mr. Mill's commitment. CHAIR MYERS informed members that HB 160, the companion bill passed the house. He wondered about the process for the companion bill. SENATOR MICCICHE explained that if SB 117 were to pass, it would meet up with HB 160 in Senate Rules. He expressed concern about any potential delays by holding SB 117 in committee. CHAIR MYERS said he was comfortable moving SB 117. SENATOR SHOWER stated that he was comfortable moving SB 117. 2:30:41 PM At ease 2:31:15 PM CHAIR MYERS reconvened the meeting. 2:31:23 PM SENATOR SHOWER moved to report SB 117, work order 32-GS1579\A from committee with individual recommendations and attached fiscal note(s). CHAIR MEYERS found no objection and SB 117 was reported from the Senate Transportation Standing Committee.