ALASKA STATE LEGISLATURE
SENATE STATE AFFAIRS STANDING COMMITTEE
April 6, 2010
9:04 a.m.
MEMBERS PRESENT
Senator Linda Menard, Chair
Senator Kevin Meyer, Vice Chair
Senator Hollis French
Senator Albert Kookesh
Senator Joe Paskvan
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 73(FIN)
"An Act relating to special fire fighter and emergency medical
service provider license plates; and providing for an effective
date."
- MOVED CSHB 73(FIN) OUT OF COMMITTEE
HOUSE JOINT RESOLUTION NO. 53
Urging the United States Congress to pass H.R. 1034, designating
the Honor and Remember Flag as an official symbol to recognize
and honor members of the armed forces of the United States who
died in the line of duty.
- MOVED HJR 53 OUT OF COMMITTEE
COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 225(FIN)(CORRECTED)
"An Act relating to the State Procurement Code; relating to the
procurement of supplies, services, professional services,
construction services, state fisheries products, state
agricultural products, state timber, and state lumber; relating
to procurement preferences; relating to procurement by the
office of the ombudsman, the Alaska Industrial Development and
Export Authority, the Alaska Energy Authority, and other state
agencies and public corporations; and providing for an effective
date."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 73
SHORT TITLE: FIREFIGHTER/EMT LICENSE PLATES
SPONSOR(s): REPRESENTATIVE(s) LYNN
01/20/09 (H) PREFILE RELEASED 1/16/09
01/20/09 (H) READ THE FIRST TIME - REFERRALS
01/20/09 (H) STA, FIN
03/12/09 (H) STA AT 8:00 AM CAPITOL 106
03/12/09 (H) <Bill Hearing Canceled>
03/24/09 (H) STA AT 8:00 AM CAPITOL 106
03/24/09 (H) Moved CSHB 73(STA) Out of Committee
03/24/09 (H) MINUTE(STA)
03/25/09 (H) STA RPT CS(STA) NT 6DP
03/25/09 (H) DP: JOHNSON, SEATON, GRUENBERG, WILSON,
PETERSEN, LYNN
03/12/10 (H) FIN AT 9:00 AM HOUSE FINANCE 519
03/12/10 (H) Moved CSHB 73(FIN) Out of Committee
03/12/10 (H) MINUTE(FIN)
03/15/10 (H) FIN RPT CS(FIN) NT 11DP
03/15/10 (H) DP: THOMAS, GARA, DOOGAN, JOULE,
AUSTERMAN, SALMON, KELLY, FAIRCLOUGH,
03/15/10 (H) N.FOSTER, STOLTZE, HAWKER
03/19/10 (H) TRANSMITTED TO (S)
03/19/10 (H) VERSION: CSHB 73(FIN)
03/22/10 (S) READ THE FIRST TIME - REFERRALS
03/22/10 (S) STA, FIN
04/01/10 (S) STA AT 9:00 AM BELTZ 105 (TSBldg)
04/01/10 (S) -- MEETING CANCELED --
04/06/10 (S) STA AT 9:00 AM BELTZ 105 (TSBldg)
BILL: HJR 53
SHORT TITLE: HONOR AND REMEMBER FLAG
SPONSOR(s): RULES BY REQUEST OF MILITARY & VETERANS' AFFAIRS
03/10/10 (H) READ THE FIRST TIME - REFERRALS
03/10/10 (H) MLV
03/16/10 (H) MLV AT 1:00 PM BARNES 124
03/16/10 (H) -- MEETING CANCELED --
03/23/10 (H) MLV AT 1:00 PM BARNES 124
03/23/10 (H) Moved Out of Committee
03/23/10 (H) MINUTE(MLV)
03/24/10 (H) MLV RPT 4DP 1NR
03/24/10 (H) DP: LYNN, BUCH, RAMRAS, HARRIS
03/24/10 (H) NR: KAWASAKI
03/29/10 (H) TRANSMITTED TO (S)
03/29/10 (H) VERSION: HJR 53
03/30/10 (S) READ THE FIRST TIME - REFERRALS
03/30/10 (S) STA
04/06/10 (S) STA AT 9:00 AM BELTZ 105 (TSBldg)
BILL: HB 225
SHORT TITLE: STATE PROCUREMENT CODE
SPONSOR(s): REPRESENTATIVE(s) FAIRCLOUGH
04/10/09 (H) READ THE FIRST TIME - REFERRALS
04/10/09 (H) STA, FIN
04/14/09 (H) STA RPT CS(STA) 4DP
04/14/09 (H) DP: GRUENBERG, WILSON, PETERSEN, SEATON
04/14/09 (H) STA AT 8:00 AM CAPITOL 106
04/14/09 (H) Moved CSHB 225(STA) Out of Committee
04/14/09 (H) MINUTE(STA)
04/16/09 (H) FIN AT 8:30 AM HOUSE FINANCE 519
04/16/09 (H) <Bill Held Over to 1:30 Meeting>
04/16/09 (H) FIN AT 1:30 PM HOUSE FINANCE 519
04/16/09 (H) Scheduled But Not Heard
02/08/10 (H) FIN AT 1:30 PM HOUSE FINANCE 519
02/08/10 (H) Heard & Held
02/08/10 (H) MINUTE(FIN)
03/11/10 (H) FIN AT 9:00 AM HOUSE FINANCE 519
03/11/10 (H) Heard & Held
03/11/10 (H) MINUTE(FIN)
03/17/10 (H) FIN RPT CS(STA) 9DP
03/17/10 (H) DP: THOMAS, GARA, DOOGAN, JOULE, KELLY,
AUSTERMAN, N.FOSTER, FAIRCLOUGH,
03/17/10 (H) STOLTZE
03/17/10 (H) FIN AT 9:00 AM HOUSE FINANCE 519
03/17/10 (H) Moved CSHB 225(STA) Out of Committee
03/17/10 (H) MINUTE(FIN)
03/19/10 (H) CORRECTED FIN RPT CS(FIN) 8DP 1NR
03/19/10 (H) DP: JOULE, AUSTERMAN, DOOGAN, N.FOSTER,
THOMAS, FAIRCLOUGH, KELLY, STOLTZE
03/19/10 (H) NR: GARA
03/22/10 (H) CS(FIN)(CORRECTED) RECEIVED
03/22/10 (H) TRANSMITTED TO (S)
03/22/10 (H) VERSION: CSHB 225(FIN)(CORRECTED)
03/23/10 (S) READ THE FIRST TIME - REFERRALS
03/23/10 (S) STA, FIN
04/01/10 (S) STA AT 9:00 AM BELTZ 105 (TSBldg)
04/01/10 (S) -- MEETING CANCELED --
04/06/10 (S) STA AT 9:00 AM BELTZ 105 (TSBldg)
WITNESS REGISTER
REPRESENTATIVE BOB LYNN
Alaska State Legislature
Juneau, AK
POSITION STATEMENT: Sponsor of HB 73.
NANCY MANLY
Staff to Representative Lynn
Alaska State Legislature
Juneau, AK
POSITION STATEMENT: Provided information for HB 73.
SUZIE KOKLICH
Alaska State Firefighters Association and
Alaska Director, National Volunteer Fire Council
Valdez, AK
POSITION STATEMENT: Testified in support of HB 73.
KAREN SAWYER
Staff to Representative Carl Gatto
Alaska State Legislature
Juneau, AK
POSITION STATEMENT: Presented HJR 53 for the sponsor.
DAVID CASWELL, director
Honor and Remember - Alaska
Sterling, AK
POSITION STATEMENT: Testified in support of HJR 53.
CRYSTAL KINEMAN
Staff to Representative Anna Fairclough
Alaska State Legislature
Juneau, AK
POSITION STATEMENT: Presented HB 225 for the sponsor.
VERN JONES, chief procurement officer
Division of General Services
Department of Administration
Juneau, AK
POSITION STATEMENT: Testified in support of HB 225.
STEVE BOYD
National Electrical Contractors Association
Anchorage, AK
POSITION STATEMENT: Testified with concern about exemption AIDEA
and AEA from the state procurement code.
CHRIS RUTZ, procurement officer
AIDEA and AEA
Anchorage, AK
POSITION STATEMENT: Testified in support of HB 225.
RALPH KIBBY, president
Chatham Electric
Juneau, AK
POSITION STATEMENT: Testified in opposition to Section 6 and
Section 20 of HB 225.
WAYNE STEVENS, president and CEO
Alaska State Chamber of Commerce
Juneau, AK
POSITION STATEMENT: Testified in support of HB 225, with one
suggested amendment to put the offerors preference in statute.
SHELLY WRIGHT, executive director
Southeast Conference
Juneau
POSITION STATEMENT: Testified against the removal of the Alaska
offerors preference from the procurement code.
ACTION NARRATIVE
9:04:06 AM
CHAIR LINDA MENARD called the Senate State Affairs Standing
Committee meeting to order at 9:04 a.m. Present at the call to
order were Senators French, Paskvan, Meyer, and Menard.
HB 73-FIREFIGHTER/EMT LICENSE PLATES
9:04:54 AM
CHAIR MENARD announced the first order of business to come
before the committee was HB 73 [CSHB 73(FIN)].
REPRESENTATIVE BOB LYNN, sponsor of HB 73, said the purpose of
the bill is to recognize and thank volunteer and paid
firefighters and emergency services persons. A "side effect" of
HB 73 is to encourage volunteerism.
CHAIR MENARD recognized Senator Kookesh as joining the meeting.
REPRESENTATIVE LYNN said the bill packet includes petitions
signed by over 200 supporters.
9:07:29 AM
CHAIR MENARD asked if this had been effective in recruiting more
firefighters.
REPRESENTATIVE LYNN has heard that is the case anecdotally.
NANCY MANLY, staff to Representative Lynn, said that the
Firefighters Association thinks the license plate will work for
them.
CHAIR MENARD said she was curious about how many other states
have done something similar.
SUZIE KOKLICH, Alaska State Firefighters Association and the
National Volunteer Fire Council, said recruitment and retention
has been a big problem nationwide. People want to belong to
something good and be proud of it; a perk like a license plate
does help. HB 73 is a feel good bill to help people feel better
about what they are doing. A license plate is a small gesture
for people who give their lives or take time away from their
families in training.
9:10:16 AM
SENATOR PASKVAN said he likes the idea of public recognition. He
noted that volunteers are also first responders in rural Alaska
and identification on their vehicles can provide the easier
access to the scene.
REPRESENTATIVE LYNN said he believes Senator Paskvan is correct.
SENATOR MEYER asked what kind of proof a person must present to
get the license plate.
MS. KOKLICH replied a form will be available at the fire
department or possibly from the Division of Motor Vehicles
(DMV). The fire chief or EMS director will verify that the
applicant is an active member or is retired. She noted that
supporter plates will also be available and don't require proof.
9:12:45 AM
SENATOR MEYER asked commented that he was sure the DMV would
administer the program but he wonders how difficult it will be.
He commented that the plate costs a little extra which balances
the DMV's extra time; the fiscal note is zero.
REPRESENTATIVE LYNN said Whitney Brewster, with the DMV, has
testified in HB 73's previous hearings.
CHAIR MENARD said it would be helpful to hear from the DMV.
SENATOR MEYER said he will take the sponsor's word for it that
the DMV has testified favorably previously.
CHAIR MENARD said she would do so as well.
SENATOR KOOKESH said HB 73 is a feel-good bill. He appreciates
the bill and has no objection to it.
9:15:04 AM
CHAIR MENARD closed public testimony.
SENATOR MEYER moved to report HB 73 from committee with
individual recommendations and attached fiscal note(s). There
being no objection, CSHB 73(FIN).
At Ease from 9:16 a.m. to 9:18 a.m.
HJR 53-HONOR AND REMEMBER FLAG
9:18:03 AM
CHAIR MENARD announced the next order of business to come before
the committee would be HJR 53.
KAREN SAWYER, staff to Representative Gatto, said HJR urges
Congress to move forward a bill that designates the Honor and
Remember flag as an official symbol recognizing members of the
armed forces who have died in the line of duty. The flag was
conceived by George Lutz, whose son died in Iraq. Mr. Lutz and
other families who lost a loved one realized that an official,
national symbol honoring those who died in service does not
exist.
MS. SAWYER held up a depiction of the flag and said the
committee packets explain the meaning of the design and colors.
Mr. Lutz's congressman introduced the bill into Congress but it
is sitting in committee. Thousands of flags have been given out
by Mr. Lutz's organization and he would like to see states pick
up the Honor and Remember Flag as an official emblem.
Representative Gatto is hoping to put in a bill to make the
Honor and Remember Flag an official symbol in Alaska; two other
states and several cities have already done so. Veterans groups
have endorsed the flag and it is made in the USA. She pointed
out that many people think the American flag honors those that
have fallen but it is a symbol of freedom and America's history.
9:21:06 AM
The bill in Congress says the Honor and Remember Flag will be
flown under the American flag on certain days of the year like
Memorial Day and Veterans Day.
CHAIR MENARD asked if the bill in Congress is H.R. 1034.
MS. SAWYER replied yes.
CHAIR MENARD asked about support in other states.
MS. SAWYER replied that other states have similar legislation.
Mr. Lutz's organization is going to every state to push this
movement. Alaska has an instate chapter.
SENATOR KOOKESH asked if Representative Gatto has any problem
changing history and making history. Senator Kookesh said he was
referring to Representative Gatto's comments about not wanting
to change history but preferring to keep things the same in
reference to a bill that Senator Kookesh feels strongly about.
He asked Ms. Sawyer to pass the question on to Representative
Gatto. He said he supports HJR 53.
9:23:41 AM
SENATOR FRENCH said he is curious about the interplay between a
non-profit corporation and government. He wonders if any members
of Congress are concerned about putting a flag developed by a
non-profit on a flag pole under the American flag.
MS. SAWYER responded that after doing research and speaking to
Mr. Lutz, she is certain this movement is not about money. She
is unsure why the bill is stalled in Congress.
SENATOR FRENCH said he does not want to stall HJR 53 nor is he
assuming that profit is a motive. He said, "It just seems a
little funny" to put a non-profit's flag with the American flag
even though he supports the concept.
SENATOR PASKVAN said he is somewhat troubled by flying a flag
over the nation and the capitol other than nation's flag. Doing
so could potentially be divisive as not all wars have been
supported by all people.
MS. SAWYER clarified that Senator Paskvan meant flying the Honor
and Remember flag in addition to the nation's flag.
SENATOR PASKVAN replied yes.
MS. SAWYER noted that other flags are flown under the American
flag, including the state flag and the POW MIA flag. She is not
sure there is cause for concern and noted that the Honor and
Remember flag would be flown only on certain memorial occasions.
SENATOR PASKVAN noted that the private group is advancing an
honorable and appropriate cause. But whether or not to elevate
the flag to a national symbol is the question.
9:28:25 AM
CHAIR MENARD asked how Ms. Sawyer envisions the flags laid out.
MS. SAWYER replied that the flag would be third down.
SENATOR KOOKESH said everyone who dies in the line of duty
receives an American Flag. He asked if this flag would be in
lieu of or in addition to the American flag.
MS. SAWYER replied that the Honor and Remember Flag would be
given in addition to the American flag.
DAVID CASWELL, director, Honor and Remember - Alaska, said three
states have adopted the Honor and Remember flag as a symbol
recognizing the sacrifice of military personnel that have died
in the line of duty. Several cities and local organizations are
also participating. The Honor and Remember flag would fly
underneath the American flag. If the POW MIA flag is flying, it
would fly directly underneath that flag. He noted that the Honor
and Remember campaign started in 2008 and is quickly spreading.
The POW MIA flag took 18 years to be accepted nationally.
While many think the U.S. flag honors and remembers fallen
heroes; however, it stands for what we believe, the unity of the
people and the diversity of the nation. The 13 stripes represent
the original colonies. The stars represent the 50 states. Red
symbolizes heartiness and valor. White symbolizes purity and
innocence. Blue represents vigilance, perseverance and justice.
9:32:25 AM
The 1.6 million service men and women that have died in military
service should be honored and remembered with a nationally
recognized symbol designed and intended for that single purpose.
9:33:57 AM
CHAIR MENARD closed public testimony.
SENATOR MEYER moved to report HJR 53 from committee with
individual recommendations and attached fiscal note(s). There
being no objection, the motion carried.
At Ease from 9:34 a.m. to 9:36 a.m.
HB 225-STATE PROCUREMENT CODE
9:36:29 AM
CHAIR MENARD announced the next order of business to come before
the committee would be HB 225 [CSHB 225(FIN)(Corrected)].
CRYSTAL KINEMAN, aide to Representative Fairclough, said HB 225
makes numerous changes to the procurement code, allowing for
more consistency and efficiency. HB 225 streamlines the
application of the bidder preferences and eliminates the vendor
list as everything is accessed online. HB 225 adds in language
allowing for multi-step revised sealed bidding process which is
done mainly in the private sector. The House State Affairs
committee added a section for reporting language to see the cost
savings to the state. HB 225 exempts construction from multi-
step bidding and adds conforming language for the (Alaska Energy
Authority) AEA and Alaska Industrial Development and Export
Authority (AIDEA) exemption. HB 225 directs procurement officers
to consider only preferences in statute, essentially eliminating
the Alaska offerors preference which is set out in regulation.
Vendors and bidders who qualify for the Alaska bidder preference
also qualify for the Alaska offerors preference which gives them
an additional 10 percent preference. HB 225 increases the
threshold for the informal procurement process from $50,000 to
$100,000 for goods and services and from $100,000 to $200,000
for construction and increases lease space procurements from
3,000 to 7,000 square feet. HB 225 consolidates the Alaska
bidder preference and other related preferences into one
section. HB 225 includes a 5 percent preference for Alaskan
veterans up to $5,000.
9:40:15 AM
HB 225 eliminates the preference for employers of persons with
disabilities. HB 225 adds in a $250 protest filing fee and adds
a provision for the procurement officer to temporarily delay the
award of a contract due to a protest. HB 225 adds in a
definition for electronic signature for electronic filing.
CHAIR MENARD asked about the renegotiation section, [page 12,
Section 27 of HB 225 amending AS 36.30 by adding a new section]
which states the procurement officer can go back and renegotiate
the conditions.
MS. KINEMAN replied that this section has been added and Vern
Jones, chief procurement officer, can explain the reasoning.
CHAIR MENARD referred to Page 1, Section 1 [amending AS
24.55.275], line 13, and the 5 percent preferences for bidders
and said that getting preferences to Alaska companies is of
utmost importance.
SENATOR MEYER asked if the sponsor's bill was originally a
simple veteran's preference.
MS. KINEMAN said the sponsor introduced HB 24, the veterans
preference, was then approached by Mr. Jones, and thought that
updating the procurement code would be a good piece of
legislation to carry.
SENATOR MEYER agreed that the procurement code needs to be
cleaned up and noted some preferences have been abused. He asked
how the $5,000 cap for the veteran's preference was settled on.
MS. KINEMAN replied that a good balance is needed: to help
veterans without burdening the state. Current preferences are
"stackable" and a qualified bidder could be awarded several
preferences up to about 25 percent.
CHAIR MENARD commented that would be ok with her.
MS. KINEMAN said the cost to the state has to be rationalized
and so a cap of $5,000 was chosen. Projects up to $100,000 would
qualify for the full 5 percent.
9:45:21 AM
SENATOR MEYER asked if the sponsor favors the cap of $5,000 even
though HB 225 gets rid of the offerors and other preferences.
MS. KINEMAN replied that the sponsor favors the $5,000 cap.
SENATOR MEYER confirmed this was true even with other
preferences being eliminated.
MS. KINEMAN answered yes but noted it is the will of the
committee.
VERN JONES, chief procurement officer, Division of General
Services, Department of Administration, said a lot of discussion
went into the $5,000 cap for the veteran's preference. He
explained that most procurements are less than $100,000 and the
cap will not come into play for 80 - 90 percent of procurements.
The sponsor is sensitive to the cost to the state.
9:48:39 AM
SENATOR MEYER asked if preferences are nullified when federal
money is involved.
MR. JONES answered yes and said that federal requirements, which
come with some federal grants, prevent the implementation of
state preferences. The veteran's preferences would only apply
when state funds are involved.
SENATOR MEYER noted that procurement also entails services, such
as road building or hiring a consultant. He confirmed that
Alaska preferences apply when doing big projects with state
funds.
MR. JONES confirmed this and noted that Alaska will still have
ten accumulative preferences even if HB 225 passes. He noted
that HB 225 eliminates one of the three disability preferences.
9:52:13 AM
CHAIR MENARD asked if Mr. Jones likes HB 225.
MR. JONES responded that he had a big hand in drafting HB 225
and it is a compellation of things that need to be fixed. HB 225
simplifies, streamlines and de-mystifies procurement; it will be
good for government and businesses.
CHAIR MENARD asked if Mr. Jones feels he's had adequate time to
work on HB 225 or if another year would see more changes.
MR. JONES answered that he has kept track of needed changes and
the procurement code has not been updated in many years. He saw
the current code enacted in 1987 and watched it develop. HB 225
has everything needed to modernize and simplify procurement.
SENATOR PASKVAN asked for Mr. Jones' thoughts on preferences
discouraging competitive bidding.
MR. JONES responded that preferences can create a non-
competitive situation. HB 225 eliminates the Employers of the
Disabled preference, leaving two disability related preferences.
The Employers of the Disabled preference, which gives a ten
point break on price if 50 percent or more of a workforce is
disabled, has benefitted only two individuals who have taken
advantage of it.
9:56:02 AM
HB 225 also eliminates the Alaska offerors preference which is
in regulation but not statute. The offerors preference applies
to Request for Proposals (RFP) situations when cost and several
other factors are being evaluated. Ten points out of 100 is
reserved for the offerors preference and generally 60 percent is
allocated to cost. That leaves only 30 percent to evaluate the
qualifications, experience, quality of the proposal and other
factors while picking the best offer for procurements.
The Alaska offerors and bidder preferences can be achieved when
a place of business, staffed by the bidder at least 6 months
before the RFP issuing date, is in Alaska. Companies man an
office in Alaska for six months to get the ten point preference.
The original intent of the bidder's preference was to level the
playing field for Alaskan businesses as costs are higher here;
HB 225 does not affect the Alaska bidder's preference of 5
percent on price. However, the offerors preference goes beyond
that and has nothing to do with price.
9:59:29 AM
Several firms have told Mr. Jones that they did not submit a bid
because a competitor opened an office in Alaska and will get a
10 point preference. The Alaskan preferences are not being used
as intended. He noted that Legislature never had a say in the
offerors preference because it was enacted by the executive
branch.
SENATOR PASKVAN said preferences by price or rating structure
adjust the order of who wins and an imputed price is created
that is lower than the bid price. He asked what the difference
is between bid prices and imputed prices and how much the state
is subsidizing.
MR. JONEs said the procurement system is not automated and most
procurements happen outside his organization, in the agencies.
He does not have a mechanism that tracks that information but
can say preferences obviously cost the state money.
10:02:14 AM
SENATOR PASKVAN he asked for the "magnitude of the dollars" that
the state might be losing due to some companies saying they
cannot compete with those that get Alaska preferences.
MR. JONES responded that a statewide systems placement
procurement is coming up that has been estimated between $35 and
$100 million. Firms have told him they will not compete if this
preference stays in. Firms spend a lot of money and time to
submit a proposal and the stakes are high knowing that your
competitor has a ten percent overall advantage plus a five
percent cost advantage. The net result is a non-competitive
situation.
10:05:08 AM
SENATOR PASKVAN said the state is spending potentially millions
more than it needs to as the current structure effectively bars
bidders from entering a bid. The amount that the state is
subsidizing is currently unknown due to lack of a tracking
method.
MR. JONES responded that Senator Paskvan is right. Some firms
don't compete because of the preferences which allow an
opportunity to charge more and still win.
SENATOR FRENCH asked if the state Chamber of Commerce supports
the HB 225.
MS. KINEMAN replied that she thinks the state chamber is
neutral. She said she has put out emails and phone calls and has
been waiting to hear from those who may be affected; pushback
has only come in the last couple of days.
SENATOR FRENCH said it would be helpful to see a one page break
down of how preferences add up and affect the state on a $10
million road project, for example. Seeing how HB 225 would
reshape that breakdown and result in better work and prices
would be helpful.
MR. JONES said he can do that but noted that a road project is a
poor example because many receive federal money.
SENATOR FRENCH suggested any other sizeable contract.
MR. JONES said he can do that.
10:08:40 AM
SENATOR MEYER asked the difference between an offerors
preference and a bidder preference.
MR. JONES answered that the Alaska bidder preference was
established in statute and is currently in AS 36.30.170. The
qualification for the 5 percent cost preference is six months of
operation prior to a bid. The Alaska offerors preference has no
basis in statute but was enacted in regulation. It only applies
to competitive, sealed proposals or RFP's. The preference is 10
points out of 100, or 10 percent, of evaluation criteria. He
reiterated that with RFP's, price and a number of other factors
are being evaluated.
SENATOR MEYER suggested that some bidders might find it too hard
to understand the preferences and not submit a bid.
MR. JONES replied that the higher the stakes, the more
sophisticated the firms are, the more they understand the
preferences and are able to take advantage of them. That has
become somewhat of a problem.
10:11:16 AM
SENATOR MEYER said he feels that the complicated procurement
code has eliminated some small businesses. The procurement
department needs to be updated and centralized. Purchase recs
and orders should be done electronically and tracked. Prices
cannot be negotiated because the dollar value that the state has
spent with various firms is unknown. The procurement department
does more leasing than procurement. The education department
wants to hire their own procurement officer but that should be
done from a centralized place. He asked if the same preferences
come into play with leasing.
MR. JONES replied yes. He noted that his department has a
central purchasing section and a leasing section with five
contract buyers in each versus 200 out in the agencies. Lease
procurements apply all preferences. HB 225 would exempt leases
from these preferences because the residency or disability
status of the owner of a building is not relevant.
10:14:23 AM
SENATOR MEYER noted that the Legislature is looking at leasing
or buying the Chevron Texaco building. He asked if they are
considered an Alaskan company.
MR. JONES replied that the code applies for office space lease
procurements but not when buying a piece of real estate.
SENATOR MEYER asked if the company would be considered Alaskan
if the building was being leased.
MR. JONES replied yes, that building would qualify. Its owners
have an operation in Alaska.
SENATOR MEYER noted that the Legislature is currently leasing
the building on 4th Street. He commented that people have asked
why AIDEA and AEA are exempt from the procurement code.
MR. JONES replied that procurement is unduly complicated for
those entities because they procure goods and services under his
authority and construction under Department of Transportation
(DOT) authority. They buy and procure on behalf of the Denali
Commission under federal process. They have four different sets
of rules. In many instances they are buying investment
instruments and looking at opportunities for development in
Alaska and those do not always lend themselves to the
competitive process. If HB 225 passes and they are exempted,
they will have to, through a public process, develop regulations
to govern their procurement. They would have one consistent set
of rules to follow.
10:18:05 AM
SENATOR MEYER said we should track how they [AEA and AIDEA] are
spending because it is state money. That information could be
leverage against various lenders and suppliers to get the best
rates.
MR. JONES said he hopes that his administrative systems
replacement project will facilitate an automated procurement
system to help capture the volume and be a smart consumer.
SENATOR PASKVAN reiterated that some reporting or tracking on
what we are "giving away by preference" would facilitate
accountability.
MR. JONES replied "certainly".
10:20:35 AM
CHAIR MENARD opened public testimony.
STEVE BOYD, National Electrical Contractors Association, said he
is concerned with Section 6 and its interface with Section 36 of
HB 225 which seem to exempt AIDEA and AEA from the procurement
code. He does not see a compelling reason to exempt AIDEA and
AEA; they already have some exemptions and should continue to be
defined as agencies, following the rules in place. He suggested
[the offeror preference] should be in statute if it is not
already. He also felt six months should not be enough to qualify
for the Alaska preferences.
10:23:56 AM
CHRIS RUTZ, procurement officer, AIDEA and AEA, said AIDEA and
AEA are not asking to be exempt from the procurement code but to
develop regulations like other public corporations in the state
that are distinct, separate, legal entities.
SENATOR FRENCH asked for examples of how the regulations that
Mr. Rutz would adopt would differ from state law.
MR. RUTZ noted that the procurements on behalf of the Denali
Commission were exempt from the procurement code and his
organization developed internal policies to conduct those
procurements. An audit found that his organization should follow
something comparable to the procurement code. His organization
began establishing internal procedures and he does not see a lot
of difference potential regulations, such as these, and the
current procurement code.
He noted that now, as a public corporation, subject to a board
of directors, his organization has statutes to comply with and
two different governing entities: DOT governing construction and
DOA governing the non-construction. In addition, his
organization also has exceptions when doing things on behalf of
other entities.
10:27:45 AM
He said his organization would develop procedures similar to
those used by DOT for construction and DOA for non-construction,
with the primary difference being under protests, claims and
disputes which would come back to the board instead of DOA.
RALPH KIBBY, president, Chatham Electric, said he is opposed to
Section 6 and Section 20 of HB 225. He is opposed to anything
that would make it difficult to put local people to work. A big
portion of the projects that come within his reach in Southeast
Alaska and in the bush communities have competition from others
outside of those regions and outside the state. He asked the
committee to remove Sections 6 and 20 until he has more time to
review them; they were not part of the original legislation. The
legislation should be no less stringent than [AS] 36 and [AEA
and AIDEA] should not be exempt.
10:31:34 AM
SENATOR PASKVAN asked how the offerors preference of 10 percent
affects his business and how Mr. Kibby's business would be hurt
if that preference were removed. He assumed Mr. Kibby agrees
with Mr. Boyd who wants to incorporate the offerors preference
into statute.
MR. KIBBY said he is not prepared to speak to that. He felt that
HB 225 is nebulous and did not realize the issue was there until
digging deeper into it in the last few days. He does not have an
opinion to share, only that there is cause for concern.
WAYNE STEVENS, president and CEO, Alaska State Chamber of
Commerce, said the procurement officer is recommending a number
of changes to clean up issues and conflicts in the state's
procurement process. His one concern is that 2 AAC 12.260(e)
[offerors preference] is a regulation but is not backed up in
statute. The preference should be statutorily in place.
SENATOR FRENCH asked if Mr. Stevens had seen the letter, dated
April 3, that Mr. Baldwin had drafted on the topic.
MR. STEVENS said has seen it but is not prepared to comment.
10:34:14 AM
SHELLY WRIGHT, executive director, Southeast Conference, said
her organization is a private membership organization that works
to advance the collective interests of the people and
communities of Southeast Alaska. Southeast Conference believes
that hiring within the state is necessary for the survival of
communities. The state's procurement preferences exist to
provide advantages to Alaska businesses over competing outside
interests. The removal of the Alaska offerors preference will
put Alaska companies at a huge disadvantage in competing against
outside firms. She noted that some smaller companies are aware
of Alaska preferences and take advantage of them to get
procurements and create jobs.
10:37:00 AM
CHAIR MENARD closed public testimony. She announced she would
hold HB 225 until Thursday and encouraged the bill sponsor to
get together with the state Chamber of Commerce and see if an
amendment can be made.
SENATOR MEYER apologized to the sponsor because the original
legislation was a simple veteran preference bill. He said
putting the offerors preference in statute is something he is
consistently hearing. He suggested the sponsor talk with Mr.
Jones about that.
10:38:16 AM
CHAIR MENARD, seeing no further business to come before the
committee, adjourned at 10:38 a.m.