Legislature(1995 - 1996)

04/25/1996 01:50 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
  HOUSE BILL 482                                                               
                                                                               
       "An  Act  relating to  state procurement  practices and                 
       procedures; and providing for an effective date."                       
                                                                               
  DUGAN  PETTY,  DIRECTOR,   DIVISION  OF  GENERAL   SERVICES,                 
  DEPARTMENT OF  ADMINISTRATION, stated  that HB  482 was  the                 
  result of  an effort  which began  in the  Summer, 1995,  in                 
  order to streamline  the State's  procurement practices.   A                 
  Procurement   Advisory  Council   was   established.     The                 
  responsibility of the council is to:                                         
                                                                               
       *    Look at the  procurement law and note  the changes                 
            needed to be implemented to streamline it.                         
                                                                               
       *    Rewrite  regulations  and  review all  procurement                 
            policies to  conform with the  revised regulations                 
            and statutes.                                                      
                                                                               
       *    Target non-responsive procurement practices.                       
                                                                               
  Mr.  Petty  spoke  in support  of  HB  482  and provided  an                 
  analysis of the substantive changes  between current law and                 
  HB 482.  [Copy on file].  Mr. Petty provided four amendments                 
  which the Department requests be adopted.  [Copies on file].                 
                                                                               
  Representative  Parnell asked  why  Legal  Services was  not                 
  subject to the competitive  bid process.  Mr. Petty  replied                 
  that it did not make sense to award Legal Services contracts                 
  through the competitive bid  process.  An invitation  to bid                 
  usually  is awarded to the low-responsive  bidder.  The only                 
  specifications  would  be  that the  bid  complies  with the                 
  document.  Although, the process for legal services does not                 
  allow consideration of factors other than cost.                              
                                                                               
  Representative Parnell  questioned if the Department  of Law                 
  currently uses  the Request For Proposal (RFP) process.  Mr.                 
  Petty suggested  that they do  for some of  their contracts.                 
  Often  times,  a  suit will  be  brought  against the  State                 
  requiring legal services to defend the State.                                
                                                                               
  Representative  Parnell  indicated concern  with  a contract                 
  copy  which the  Department  of Law  entered  into in  1983,                 
  stipulating that  the  State should  not pay  more than  $75                 
  thousand dollars for the contract.  By 1995, the State added                 
  an amendment  to that  contract bringing  the  amount up  to                 
  $19.9  million  dollars.    He  objected  to  the  disparity                 
  implicated, and requested  proof that the Department  of Law                 
                                                                               
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  is not "sole  sourcing" contracts.  The  procurement process                 
  needs to be competitive.                                                     
                                                                               
  Mr.   Petty  pointed   out   that  Legislative   Audit   had                 
  investigated the Legal Services contracts, finding  problems                 
  with the Department of Law's procurement process.                            
                                                                               
  Representative Kelly  asked  the  difference  between  "sole                 
  source"  and "single source" return.  Mr. Petty replied that                 
  "sole source" means  that there is only one source available                 
  to do the work.  The  statute currently reads "sole source".                 
  HB 482  proposes  a "single  source" allowing  the State  to                 
  enter  into  a   contract  with  a  "single   source"  after                 
  determination is  made that  the bid  process  would not  be                 
  practical to use.                                                            
                                                                               
  Representative  Kelly questioned  the  need  for a  business                 
  proposing  to  bid to  be required  to  have a  valid Alaska                 
  business license.   Mr.  Petty interjected,  to receive  the                 
  license  would  cost $50  dollars  including and  a returned                 
  application.                                                                 
                                                                               
  Representative Kelly recommended adding  language clarifying                 
  that the bidding  contender would only need  to have applied                 
  for an Alaskan  business license.   Mr. Petty repeated  that                 
  under current law, if a bidder submitted a bid, and they did                 
  not  have the license, the bid would  not be considered.  In                 
  order to be on that list,  there must be a business license.                 
  If the business has  a license, has operated a  business for                 
  six months in Alaska, and is a resident of the State,  or if                 
  in a partnership, all are residents of the State, they would                 
  then  qualify  for  the  Alaska  Bidders  Preference   which                 
  provides  a 5%  evaluation preference.   To  change the  law                 
  would encourage people  to compete  from other states;  that                 
  was not the intent of the original legislation  when passed.                 
  Mr.  Petty  added,  current   statutes  requires  that   the                 
  Department not send bids to out-of-state bidders.                            
                                                                               
  Representative  Mulder  asked  if  the  Division  of General                 
  Services  kept  a list  of  legal service  contracts  in the                 
  State.   Mr. Petty  noted  that they  do keep  on file,  the                 
  professional  service contracts  over $25  thousand dollars.                 
  Those reports are  kept in the Department  of Administration                 
  (DOA).    That  Division  is  required  by  law  to  keep  a                 
  procurement  report.    Representative Mulder  inquired  the                 
  number of contracts currently on file within the Department.                 
  Mr. Petty offered to provide that information.                               
                                                                               
  Representative Therriault referenced  Section #23, Page  11,                 
  the delivery of supplies.   Mr. Petty noted that  "supplies"                 
  is well defined  in statute as  equipment and services.   He                 
  referenced AS 36.36.90 which  requires that supply purchases                 
                                                                               
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  be delivered to  locations within the State.  The Department                 
  shall determine that  a point of delivery  outside the State                 
  must be in  the best interest of the  State.  The Department                 
  is not proposing a change under that statute to the existing                 
  reference.  Current  procurement code has sections  that are                 
  applied to preferences for Alaskan business.                                 
                                                                               
  (Tape Change, HFC 96-138, Side 2).                                           
                                                                               
  Representative Kohring agreed with  the legislation's intent                 
  to save costs,  although, pointed  out the excessive  fiscal                 
  notes attached.  Mr. Petty commented that some of the fiscal                 
  notes reflect savings.  The  central purchasing fiscal notes                 
  require  action which  will take  additional time to  show a                 
  savings.   He added, to date, the State of Alaska has widely                 
  decentralized procurement.  Regardless of the  fiscal notes,                 
  the legislation will make the State run more effectively.                    
                                                                               
  Mr. Petty spoke to Amendment #1.  [Copy on file].  Amendment                 
  Hanley noted that  the "a" should not be deleted.  Mr. Petty                 
  agreed.   Representative Parnell MOVED the amended Amendment                 
                                                                               
  Mr. Petty spoke to Amendment #2.  [Copy on file].  Amendment                 
  legislation with the Senate version.  Representative Navarre                 
  MOVED to adopt Amendment  #2.  There being NO  OBJECTION, it                 
  was adopted.                                                                 
                                                                               
  Co-Chair  Hanley  asked  if   bidder  preferences  would  be                 
  cumulative.    Mr.   Petty  replied   that  some  would   be                 
  cumulative.  The  net effect does not  always accomplish the                 
  intended  net  result.   The Department  requests to  have a                 
  uniform  way  of  applying  the   preferences.    Discussion                 
  followed between Co-Chair Hanley and Mr. Petty regarding the                 
  possible bidder preferential percentage reaching 20%.                        
  Representative  Brown  MOVED  to  change  the  semicolon  in                 
  Amendment #2 to  a comma so  that it would be  grammatically                 
  correct.  There being NO OBJECTION, it was amended.                          
                                                                               
  Mr. Petty explained Amendment #3.  [Copy on file].  He noted                 
  that  the   amendment  would   reduce  the  rent   threshold                 
  requirement   for  lease  concessions   from  15%   to  10%.                 
  Representative Kohring  suggested that  drop was  too steep.                 
  Mr. Petty replied, under authority granted, leases have been                 
  extended for 5 years in return for a 10% rent concession.  A                 
  number of lessors were  below market, and he thought  that a                 
  15% rent concession would be fair.                                           
                                                                               
  Representative Kohring  questioned the percentage  of profit                 
  on a lease payment received by  the lessee through the State                 
                                                                               
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  of Alaska.  Mr. Petty explained that the State considers the                 
  indirect costs to  be about  35% of the  lease; beyond  that                 
  would be operating and maintenance costs.  The 35% number is                 
  the one used by the State to determine the profit margin.                    
                                                                               
  Representative  Brown   asked  if   there   would  be   rent                 
  adjustments in the  10 year extensions.   Mr. Petty  pointed                 
  out that the base rent in the extensions would be reduced by                 
  10%,  and that the  Consumer Price Index  (CPI) always would                 
  affect the base rent.                                                        
                                                                               
  Representative Brown  MOVED to  adopt Amendment  #3.   There                 
  being NO OBJECTION, it was adopted.                                          
                                                                               
  Mr.  Petty  explained Amendment  #4.   [Copy  on file].   He                 
  stated  that  the  added  language  would  conform  to  that                 
  established  in  the Senate  State  Affairs Committee.   The                 
  intent would be  to use  the Government Service  Information                 
  (GSI) schedules when purchasing from State vendors.                          
                                                                               
  Co-Chair Hanley recommended amending the amendment by adding                 
  "made" and then insert "from persons located in the  state".                 
  Representative Mulder MOVED to adopt the  amended amendment.                 
  There being NO OBJECTION, it was adopted as amended.                         
                                                                               
  Representative  Martin  MOVED  to  adopt  Amendment  #5,  9-                 
  GH2020\F.3, Bannister, 4/24/96.  [Copy on file].  He pointed                 
  out that the  amendment would provide  a title change  while                 
  addressing lobbying  concerns.   Co-Chair Hanley noted  that                 
  the amendment would prohibit the agencies listed from hiring                 
  a contract lobbyist.                                                         
                                                                               
  Representative Navarre  commented that the language  on Page                 
  2,  Line   5,  would   prohibit   having  employees   lobby.                 
  Representative  Brown  disagreed,  indicating  that  it   is                 
  necessary  for the agencies listed to have some contact with                 
  the  Legislature  regarding  their   interests.    Following                 
  discussion  among  Committee  members, Representative  Brown                 
  MOVED to delete  Page 2, Line 5.  There  being NO OBJECTION,                 
  the amendment was amended.                                                   
                                                                               
  Mr.  Petty  advised  that  the  proposed amendment  did  not                 
  address procurement  issues.   He stated  that the  Division                 
  would   not  support  the   amendment  from   a  procurement                 
  perspective,  suggesting   that  these     were  operational                 
  decisions which should be made by each individual agency.                    
                                                                               
  Representative Navarre  OBJECTED to  Amendment  #5 in  order                 
  that Legal  Services could provide an opinion  on the single                 
  subject rule  prohibition.  He  noted that he  supported the                 
  intent.   Co-Chair Hanley  advised that  he would  request a                 
  legal opinion and if there was a problem, that portion would                 
                                                                               
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  be removed from the bill.  Representative Navarre agreed and                 
  WITHDREW the OBJECTION to the amendment.                                     
                                                                               
  Representative  Brown  asked  why   only  Alaska  Industrial                 
  Development and Export Authority (AIDEA) had been referenced                 
  in  the  title.   Representative  Martin responded  that the                 
  intent was to place  AIDEA under the procurement code.   Co-                 
  Chair  Hanley  understood the  intent  was to  include AIDEA                 
  under the prohibition on hiring.                                             
                                                                               
  (Tape Change, HFC 96-139, Side 1).                                           
                                                                               
  Co-Chair  Hanley  pointed   out  that  Senator   Pearce  had                 
  submitted the amendment.   He noted that he agreed  with the                 
  intent, although, questioned the referenced section.                         
                                                                               
  Representative Mulder MOVED  to amend Amendment #5,  Page 1,                 
  Line 2, striking "," and then deleting material:  "Including                 
  entities  owned  and  operated   by  the  Alaska  Industrial                 
  Development  and Export  Authority,"; and deleting  Lines 16                 
  through 18 beginning with the ","  on Line 16.  There  being                 
  NO OBJECTION, it was amended.                                                
  Representative  Navarre  recommended  that   Legal  Services                 
  provide an opinion on the amended amendment.  There being NO                 
  OBJECTION, Amendment #5 was adopted.                                         
                                                                               
  Representative  Parnell  spoke to  Amendment  #6.   [Copy on                 
  file].  Mr. Petty noted that Amendment #6 would add language                 
  to  allow  for  accredited youth  education  programs  to be                 
  exempted  from  the  procurement  statute.    Representative                 
  Parnell  MOVED  to  adopt  Amendment  #6.    There  being NO                 
  OBJECTION, it was adopted.                                                   
                                                                               
  Co-Chair  Foster  MOVED to  report CS  HB  482 (FIN)  out of                 
  Committee  with  individual  recommendations  and  with  the                 
  accompanying fiscal notes.  There being NO OBJECTION, it was                 
  so ordered.                                                                  
                                                                               
  CS  HB  482 (FIN)  was reported  out  of Committee  with "no                 
  recommendations"  and  with  zero fiscal  notes  by  the (2)                 
  Department of Administration dated 2/9/96, the Department of                 
  Commerce   and  Economic   Development  dated   2/9/96,  the                 
  Department of Community and  Regional Affairs dated  2/9/96,                 
  the Department of  Health and Social Services  dated 2/9/96,                 
  the  Department of Labor dated 2/9/96, the Department of Law                 
  dated  2/9/96,  the  Department  of  Military  and  Veterans                 
  Affairs dated  2/9/96, the  Department of  Corrections dated                 
  2/9/96,  the  Department  of  Education  dated  2/9/96,  the                 
  Department of Environmental  Conservation dated 2/9/96,  the                 
  Department of  Fish and Game dated 2/9/96, the Department of                 
  Natural Resources  dated  2/9/96, the  Department of  Public                 
  Safety dated 2/9/96, the Department of Revenue dated 2/9/96,                 
                                                                               
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  Statewide  dated  2/9/96 and  a  fiscal impact  note  by the                 
  Department  of Transportation  and  Public Facilities  dated                 
  2/9/96, and the Department of Administration.                                

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