ALASKA STATE LEGISLATURE
HOUSE STATE AFFAIRS STANDING COMMITTEE
February 9, 2017
3:02 p.m.
MEMBERS PRESENT
Representative Jonathan Kreiss-Tomkins, Chair
Representative Gabrielle LeDoux, Vice Chair
Representative Chris Tuck
Representative Adam Wool
Representative Chris Birch
Representative DeLena Johnson
Representative Gary Knopp
MEMBERS ABSENT
Representative Andy Josephson (alternate)
Representative Chuck Kopp (alternate)
COMMITTEE CALENDAR
HOUSE BILL NO. 91
"An Act relating to fees for certain persons filing disclosure
statements or other reports with the Alaska Public Offices
Commission; relating to a tax on legislative lobbyists; and
providing for an effective date."
- HEARD & HELD
HOUSE BILL NO. 50
"An Act relating to the procurement of architectural,
engineering, or land surveying services for state-funded
contracts."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 91
SHORT TITLE: APOC REGISTRATION FEES; LOBBYIST TAX
SPONSOR(s): REPRESENTATIVE(s) KITO
01/30/17 (H) READ THE FIRST TIME - REFERRALS
01/30/17 (H) STA, FIN
02/09/17 (H) STA AT 3:00 PM GRUENBERG 120
BILL: HB 50
SHORT TITLE: PROF. SERVICES IN STATE-FUNDED CONTRACTS
SPONSOR(s): REPRESENTATIVE(s) KITO
01/18/17 (H) READ THE FIRST TIME - REFERRALS
01/18/17 (H) STA, FIN
02/09/17 (H) STA AT 3:00 PM GRUENBERG 120
WITNESS REGISTER
REPRESENTATIVE SAM KITO
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 91, as prime sponsor.
HEATHER HEBDON, Executive Director
Alaska Public Offices Commission (APOC)
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
91.
CRYSTAL KOENEMAN, Staff
Representative Sam Kito
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Answered questions on HB 91 on behalf of
Representative Kito, prime sponsor.
KEN ALPER, Director
Tax Division
Department of Revenue (DOR)
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
91.
REPRESENTATIVE SAM KITO
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 50, as prime sponsor.
DALE NELSON, Chair
Legislative Liaison Committee
Alaska Professional Design Council (APDC)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 50.
ACTION NARRATIVE
3:02:47 PM
CHAIR JONATHAN KREISS-TOMKINS called the House State Affairs
Standing Committee meeting to order at 3:02 p.m.
Representatives LeDoux, Tuck, Wool, Birch, Knopp, and Kreiss-
Tomkins were present at the call to order. Representative
Johnson arrived as the meeting was in progress.
HB 91-APOC REGISTRATION FEES; LOBBYIST TAX
3:04:21 PM
CHAIR KREISS-TOMKINS announced that the first order of business
would be HOUSE BILL NO. 91, "An Act relating to fees for certain
persons filing disclosure statements or other reports with the
Alaska Public Offices Commission; relating to a tax on
legislative lobbyists; and providing for an effective date."
3:04:37 PM
REPRESENTATIVE SAM KITO, Alaska State Legislature, presented HB
91, as prime sponsor. He stated that HB 91 would establish a
fee for candidates, groups, and public officials filing
financial reports, as well as a 2.5 percent tax on lobbyists.
REPRESENTATIVE KITO stated that a couple of years ago the Alaska
State Legislature provided additional receipt authority to the
Alaska Public Offices Commission (APOC) and directed it to
increase fees to address budgetary shortfalls. He said that
APOC currently has statutory authority to collect a $250 fee per
lobbyist client. Representative Kito offered that since APOC
has no other way to collect revenue, he looked for a legislative
solution. He mentioned that he worked with the former executive
director of APOC, Paul Dauphinais, to identify a means to
increase program receipts and to increase staffing levels to
accommodate lobbying reporting activities.
REPRESENTATIVE KITO relayed that HB 91 would raise approximately
$425,000 under the proposed 2.5 percent tax and an additional
$100,000 in registration fees. He said that the revenue would
support the $750,000 budget and allow APOC to hire additional
staff in the lobbyist section of the organization. He explained
that the reason HB 91 proposes taxes instead of an additional
fee is that increasing the fee on the lower paying clients would
be inequitable. He maintained that a percentage [of income] tax
would be graduated based on lobbying fees.
REPRESENTATIVE KITO concluded by saying that the goal of the
proposed legislation is to support the activities of APOC: to
ensure campaigns and lobbying activities are adequately
reviewed; to ensure reports are audited in a timely fashion; and
to generate enough resources to protect the public's interest in
reporting lobbying activities, campaign activities, and
financial disclosures.
3:09:29 PM
REPRESENTATIVE KNOPP asked why HB 91 proposes to reduce
registration fees if the goal is to raise revenue. He mentioned
that some of his campaign staff, who had national experience,
considered Alaska's APOC reporting requirements to be among the
most stringent in the country. He asked if there has been
further discussion about APOC reforms.
REPRESENTATIVE KITO responded that the registration fee would be
eliminated in favor of the 2.5 percent tax. He maintained that
this tax would double the amount of revenue from lobbyists to
APOC. He stated that the drafters of HB 91 intentionally
avoided policy discussions about the operations and statutes of
the commission. He added that even though Alaska has some of
the most stringent campaign finance laws in the country, some
Alaskans support them. He emphasized that the intent of HB 91
is to ensure there is receipt authority and resources available
for APOC to do its job.
3:12:00 PM
REPRESENTATIVE BIRCH asked if Representative Kito solicited
comment from anyone in the lobbying community. He said that
looking at the figures, he estimates that lobbyists are spending
about $150,000 per legislator.
REPRESENTATIVE KITO stated that he had several conversations
with members of the lobbying community after introduction of the
bill. He reported there were no serious concerns. He added he
received a few comments from lobbyists who were glad to
participate and help with APOC's fiscal situation. He
emphasized that the revenue would not go into the general fund
but would go toward better oversight and reporting by APOC. He
asserted that when APOC can conduct reviews and audits before
fines accumulate, then lobbyists, campaigns, and the public all
benefit.
3:14:13 PM
REPRESENTATIVE BIRCH asked if the comments were solicited
anonymously.
REPRESENTATIVE KITO answered he did not know if those commenting
wanted anonymity. He maintained written or oral testimony to
the committee is certainly welcome.
REPRESENTATIVE BIRCH commented that the issue could be delicate
and asked what the cost would be for a candidate.
REPRESENTAIVE KITO responded that for candidates and groups, the
registration fee would be $100 and $50 to file financial
disclosures. He relayed a Department of Administration (DOA)
suggestion: for a campaign spanning two years, a single
registration may be more appropriate. He said his staff is
working actively with DOA to identify enhancements to HB 91 that
will not change the intent of the bill.
3:15:53 PM
REPRESENTATIVE LEDOUX stated that there is lobbying and there is
consulting, and since there has been no tax on lobbyists
previously, there would have been no incentive to characterize
one's activities as one or the other. She asked if HB 91 would
include consulting activities. She questioned whether income
from work done outside of the capitol building, which was more
in the category of strategizing, might be labeled consulting and
consequently shielded from HB 91.
REPRESENTATIVE KITO said that the APOC statutes have clear
definitions for what constitutes the activity of lobbying,
including the amount of time in direct contact with legislators
and payment for activities that involve influencing legislators.
He asserted that whether one calls oneself a lobbyist or a
consultant, the APOC lobbying definition would still apply and
the category of people required to pay the registration fee
would not change. He added that HB 91 wouldn't change the
definitions for lobbying, only the mechanism for paying the fee.
3:18:28 PM
REPRESENTATIVE LEDOUX asked, "Since this is a tax on only one
professional category, is there any thought that this might run
into First Amendment problems?" She suggested that lobbyists
may "petition" their government, which is considered free
speech. She offered that because free speech is a fundamental
right, it receives the greatest amount of scrutiny by a court.
She asked if there has been any legal analysis of that aspect.
REPRESENTATIVE KITO answered that his staff has had
conversations with Legislative Legal and Research Services
regarding this concern. He said it was less of an issue with
the "lobbying side" of the proposed legislation and more of an
issue with the "campaign side." He offered that with the $100
and $50 fees on the campaign side of the proposed legislation,
the restriction on speech would not be as much of a concern
because campaigns are already paying $100 for the brochure. A
$100 or $50 registration fee does not constitute a barrier to
registration. Lobbyists already pay the $250 fee, so are
already paying to participate in their chosen profession of
lobbying. He said HB 91 would adjust the fee by using a
different mechanism for collecting revenue. He opined that a
2.5 percent tax would not be a barrier to any client hiring a
lobbyist to come to Juneau to lobby.
3:21:12 PM
REPRESENTATIVE WOOL asked how much candidates pay now to run for
office.
REPRESENTATIVE KITO said currently candidates pay the Division
of Elections (DOE) a $30 filing fee. Each candidate pays $100
to have his/her information appear in the election pamphlet.
REPRESENTATIVE WOOL offered that the $100 for the election
pamphlet was not mandatory. He added one could run for office
and not appear in the election pamphlet.
REPRESENTATIVE KITO responded yes, but the $30 filing fee to DOE
is mandatory. He added that the $30 fee would cover DOE
administrative costs, and there are no fees to support APOC
activities.
REPRESENTATIVE WOOL stated that currently it costs a minimum of
$30 to run for office, and HB 91 would increase that cost
fivefold to $150.
REPRESENTATIVE KITO responded that HB 91 would raise the cost by
$100 per candidate. He said that the mandatory fee would
comprise the $100 [APOC registration fee] and the $30 [DOE
filing fee], and the $100 for inclusion in the election pamphlet
would be voluntary. He said the cost for groups would also be
$100. He mentioned there would be a separate fee of $50 for
filing financial disclosures.
REPRESENTATIVE WOOL offered that the total cost would be $180:
a $30 filing fee; a $100 registration fee; and a $50 fee for
filing financial disclosures.
REPRESENTATIVE KITO said correct. He added that an exempt
campaign, one that does not raise money, would not be required
to pay the registration fee.
3:23:53 PM
REPRESENTATIVE WOOL asked if Representative Kito considered
raising the lobbyist registration fee but keeping it a flat fee,
as opposed to charging a percentage of the revenue earned
through lobbying.
REPRESENTATIVE KITO responded yes. He relayed his concern that
if the registration fee was doubled from $250 to $500, it would
create a burden for those clients who are paying lesser amounts
to a lobbyist. He opined that making the fee a percentage of
income allows the clients who pay less in lobbyist fees to incur
less of the expense of APOC's fees.
3:25:57 PM
REPRESENTATIVE BIRCH asked for the number of registered
lobbyists. He offered that there are thresholds for time spent
meeting with legislators for registered lobbyists.
REPRESENTATIVE KITO responded that there are different classes
of lobbyists - representational, volunteer, and those employed
by an organization - and they all count their hours differently.
He said that MS. Hebdon would be able to provide that
information. He said that there are classifications for which
one doesn't have to register, but once one receives compensation
as a lobbyist, one must register oneself as a lobbyist and each
client that one has.
3:27:46 PM
HEATHER HEBDON, Executive Director, Alaska Public Offices
Commission (APOC), said that based on registration receipts, she
estimates there are between 450-500 registered lobbyists per
year. She confirmed for Representative Kreiss-Tomkins that this
number represents lobbyists who receive payment for services.
REPRESENTATIVE BIRCH referred to Section 9 on page 4 of HB 91
and noted that the proposed new section of statute, AS
43.98.020, specifies an income tax, not a fee. He expressed his
concern that most boards and commissions operate on a fee basis,
and this would be Alaska's only income tax. He suggested that
charging $500 per lobbyist would get APOC the needed revenue.
REPRESENTATIVE KITO replied that the 500 registered "actions"
are actually 500 registered clients. He added that since
lobbyists have multiple clients, the lobbyists would be paying
that fee multiple times. He conjectured that there are not 500
individual registered lobbyists. He conceded that the tax does
single out lobbying, just as a tax on mining activities or
fishing activities singles out those industries to raise
revenue.
3:30:51 PM
CHAIR KREISS-TOMKINS requested clarification of the 450-500
statistic. He asked if that number refers to a discrete number
of clients who have retained lobbyists or to the number of
individuals receiving payment for lobbying services.
MS. HEBDON clarified that there are 450-500 registrations for
lobbyist clients. She reiterated that it is not the number of
lobbyists, since lobbyists often have more than one client.
CHAIR KREISS-TOMKINS asked how many professional lobbyists were
registered with APOC.
MS. HEBDON responded that she did not know, but would provide
that information to the committee.
3:31:51 PM
REPRESENTATIVE BIRCH said he is trying to get an idea of how
many lobbyists would be contributing to the 2.5 percent tax and
what the fee per lobbyist would have to be in order to yield the
quarter of a million dollars needed to support APOC activities.
REPRESENTATIVE KITO said that was one of the options his staff
looked at. He offered the example of a lobbyist with 10 clients
- one of those clients paying $10,000 for lobbying services and
another paying $60,000. He attested that if the lobbyist pays
$500 in registration fees for each of those clients, then the
amount of money paid is not commensurate with the amount of
money received from each client. He said the lobbyist, in that
example, would be taking a greater portion out of the smaller
client's payment than the larger client's payment to cover APOC
activities.
3:33:12 PM
REPRESENTATIVE LEDOUX asked why not make the tax a sales tax
rather than an income tax. She offered that "income" - referred
to in HB 91 - appears to be net income. She suggested it would
be simpler to tax the gross income, rather than the net income.
REPRESENTATIVE KITO replied that each client pays the lobbyist
the contract amount to do the work. He added that the lobbyist
takes his/her expenses out of that contract amount. He stated
that the contract amount, or gross payment, would be subject to
the tax under HB 91. He offered that taxing net income would be
a much more complicated method of collecting revenue, because
expenses would have to be identified and the net profit assessed
for each client.
REPRESENTATIVE LEDOUX read from Section 9, subsection (a) of HB
91, which would require payment of "a tax of 2.5 percent of the
person's income earned from lobbying activities". She suggested
that the language should instead read "2.5 percent of the fee
earned from each client". She offered that "fee" suggests the
amount after expenses were deducted and may be what
Representative Kito intended.
3:36:46 PM
CRYSTAL KOENEMAN, Staff, Representative Sam Kito, Alaska State
Legislature, on behalf of Representative Kito, prime sponsor of
HB 91, clarified that "income," in Section 9 of HB 91, does
refer to the fee, or gross amount, paid by the client to the
lobbyist.
3:37:32 PM
KEN ALPER, Director, Tax Division, Department of Revenue (DOR),
said that he interprets "income earned from lobbying" as being
broad enough to include the gross income. He mentioned that
some lobbyists are earning fees and some are salaried employees.
He suggested that if Section 9 of HB 91 were to be reworded, it
should include the employee lobbyists as well as contract
lobbyists.
REPRESENTATIVE LEDOUX asked if "2.5 percent of the person's
income" in HB 91 means "2.5 percent of the fees earned, before
deductions." She suggested that this interpretation would
differ from the federal income tax code's definition of income.
MR. ALPER responded that there is gross income, and there is
taxable income after deductions. He said although it is not
altogether clear, if he were writing regulations based on HB 91
as currently written, he would interpret it as being gross
income.
CHAIR KREISS-TOMKINS asked what the intent of the bill was in
the phrase cited.
REPRESENTATIVE KITO replied that the intent was to capture 2.5
percent of the gross client fee, and that was the direction
given to Legislative Legal and Research Services in drafting the
proposed legislation. He mentioned that he has been in contact
with Ms. Hebdon regarding employee or other non-group entities
that could be included in HB 91.
3:40:57 PM
REPRESENTATIVE BIRCH referred to the section titled, "Revenue
Estimate," on page 2 of the fiscal note prepared by DOR. He
cited the approximately $17 million average total fees paid to
lobbyists for the three-year period, 2013-2015, and the
estimated $425,000 annual revenue that would be generated by the
2.5 percent tax. He asked why the estimated revenue listed in
the HB 91 sponsor statement, which is $244,150, differs from
that on the bill analysis.
REPRESENTATIVE KITO responded that the sponsor statement was
based on information from prior years and the fiscal note
reflects more recent information.
MS. KOENEMAN responded that the fiscal note was prepared by DOR.
She maintained that the initial estimates were based on prior
conversations with Mr. Dauphinais, the former executive director
of APOC, at the time staff began working on the proposed
legislation. She asserted that after HB 91 was introduced, DOR
was able to make estimates based on "official" numbers. She
relayed that the sponsor statement will be updated to reflect
the estimates in the fiscal note.
REPRESENTATIVE BIRCH asked about APOC's use of the excess
revenue.
MS. KOENEMAN responded that the intent of the legislation is to
offset some of the general fund revenue currently provided to
APOC, thus, making it more self-sustaining. She offered that
any additional revenue that would make APOC self-sufficient
would be good for the State of Alaska.
REPRESENTATIVE BIRCH expressed his concern with the large amount
of money that would go to APOC and said he still supports an
increased fee over a percent tax.
3:44:43 PM
MR. ALPER commented that he has a conflict of interest in regard
to HB 91, as he is a public official and would be subject to the
$50 registration fee proposed under HB 91. He stated that the
fiscal note drafted by DOR was specific to the tax impact of
Section 9 of the proposed legislation. He offered that since
the tax would replace the existing $250 administration fee, the
net fiscal impact would not be a positive $425,000. He added
that perhaps Ms. Hebdon or Ms. Koeneman could speak to the total
value of the reduction of funds due to the elimination of the
$250 per client administration fee. He attested that he does
not know the source of the data in the original sponsor
statement. He asserted that when preparing the fiscal note, he
used APOC's lobbying reports and its database of billings by
companies to the lobbyists. He said he arrived at the $16-17
million figure through that data.
CHAIR KREISS-TOMKINS requested that a reconciliation of the two
amounts be done before the next hearing of HB 91.
3:46:28 PM
REPRESENTATIVE JOHNSON asked if consideration of HB 91, which
would levy an income tax on a special group of people, is
premature in light of the anticipated introduction of a larger
income tax bill.
REPRESENTATIVE KITO responded that the purpose of the revenue
raised through HB 91 is to support APOC. He opined that a
general income tax would go into the general fund and would not
be designated to specific components of state government. He
reiterated that his goal in introducing HB 91 was: to allow
APOC to take advantage of the receipt authority that the
legislature had granted it; to provide additional revenue to
replace a position in Juneau that was lost to budget cuts; and
to make the reporting and auditing of lobbying activities more
transparent and efficient.
3:48:28 PM
REPRESENTATIVE JOHNSON asked if the fee would be prorated for a
lobbyist who did not perform lobbying activities all months of
the year but was employed in another job.
REPRESENTATIVE KITO claimed that APOC currently requests that a
lobbyist who is an employee of an organization identify the
amount of salary he/she receives for lobbying activities.
3:49:44 PM
REPRESENTATIVE WOOL asked if the $250 fee is per lobbyist and
not per client.
REPRESENTATIVE KITO answered no, the current $250 registration
fee is per client represented by a lobbyist.
REPRESENTATIVE WOOL commented that midwives pay $4,000 for a
license. He offered that lobbyists are passing the fees onto
their clients. He restated Representative Kito's concern that a
flat rate fee is inequitable among clients charging very
different amounts. He mentioned that he is also interested in
finding out how many lobbyists are registered in Alaska.
3:51:13 PM
CHAIR KREISS-TOMKINS asked Ms. Hebdon to provide his office the
number of individual professional lobbyists registered with
APOC.
3:51:35 PM
REPRESENTATIVE LEDOUX offered that there would be no requirement
for the revenue generated through HB 91 to be designated for
APOC.
REPRESENTATIVE KITO responded that technically that is correct
except the candidate fees proposed under HB 91 would go directly
to APOC. He added that it would be more of a challenge to
ensure the income tax was designated for APOC.
[HB 91 was held over.]
3:52:30 PM
The committee took an at-ease from 3:52 p.m. to 3:59 p.m.
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.]
4:27:22 PM
ADJOURNMENT
There being no further business before the committee, the House
State Affairs Standing Committee meeting was adjourned at 4:27
p.m.