Legislature(2003 - 2004)

03/25/2003 01:32 PM Senate L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
        SB 111-PUBLIC CONSTRUCTION PROJECT REQUIREMENTS                                                                     
CHAIR BUNDE announced SB 111 to be up for consideration.                                                                        
SENATOR STEVENS arrived at 1:38 p.m.                                                                                            
MR.  ED  FISHER, Deputy  Commissioner,  Department  of Labor  and                                                               
Workforce  Development  (DOLWD),  said  SB  111  is  designed  to                                                               
eliminate  the  requirement  that  contractors  on  public  works                                                               
projects submit  weekly certified  payrolls to the  Department of                                                               
Labor and Workforce Development. He continued:                                                                                  
     In place of the  certified payroll, all the contractors                                                                    
     and subcontractors  will be required  to file  a notice                                                                    
     of intent  to perform public  work along with a  fee of                                                                    
     $100. The  notice would  be on a  form provided  by the                                                                    
     department  and include  identifying information  about                                                                    
     the  project and  the contractor  and a  statement that                                                                    
     the   contractor   fully   understands   his   or   her                                                                    
     responsibilities  to workers  under Title  36 and  will                                                                    
     comply with  those requirements.  The notice  of intent                                                                    
     would  inform the  department that  each contractor  is                                                                    
     aware of  the proper  prevailing rates  of pay.  At the                                                                    
     end of  its project,  each contractor  or subcontractor                                                                    
     would file  with the Department  of Labor  an affidavit                                                                    
     of  compliance on  a form  provided  by the  department                                                                    
     along  with  another  $100 fee.  That  affidavit  would                                                                    
     state  that the  contractor has  completed the  work of                                                                    
     the  project  and  complied with  the  requirements  of                                                                    
     Title  36 with  the  regard to  the  payment of  proper                                                                    
     prevailing   wages  and   resident's  preference.   The                                                                    
     affidavit  of compliance  would  provide an  instrument                                                                    
     for  closure on  projects  and a  sworn attestation  of                                                                    
     compliance with the act.                                                                                                   
     The advantage  to contractors would be  that they would                                                                    
     no longer  have to  file the certified  weekly payrolls                                                                    
     with  the  department.  However, in  most  cases,  when                                                                    
     federal  money is  involved, certified  weekly payrolls                                                                    
     are already  being filed  with the  contracting agency.                                                                    
     This would  eliminate the duplication of  the filing of                                                                    
     those certified  payrolls. The payrolls would  still be                                                                    
     accessible  for  audit  purposes  in  the  event  of  a                                                                    
     complaint or  an investigation. The  contracting agency                                                                    
     would not  be required to audit  the payrolls, although                                                                    
     the  Department   of  Transportation/Public  Facilities                                                                    
     already  performs  certain  tasks  to  satisfy  federal                                                                    
     grants  on  most  of   its  projects.  Presently,  many                                                                    
     contracting  agencies do  not make  final payment  on a                                                                    
     project until  they have clearance from  the Department                                                                    
     of Labor. Under this plan, that  is the plan in SB 111,                                                                    
     the  department would  check its  files  for the  final                                                                    
     affidavits and  that would make the  process of issuing                                                                    
     a clearance  much more responsive. Final  payment could                                                                    
     be released  to the contractor sooner.  This bill would                                                                    
     enable  the  department to  put  its  resources in  the                                                                    
     field rather than in the office filing paperwork.                                                                          
     The expectation  is that the  fees will generate  - and                                                                    
     the savings from eliminating  a clerical position would                                                                    
     generate annual revenue of $115 million.                                                                                   
CHAIR BUNDE  said he was  confused about the  filing requirements                                                               
and  flexibility as  any Little  Davis Bacon  project requires  a                                                               
weekly payroll filing.                                                                                                          
MR.  FISHER replied  that is  true  at present  because Title  36                                                               
requires  that   the  payroll  information  be   filed  with  the                                                               
Department of Labor.                                                                                                            
CHAIR BUNDE asked if SB 111 removes that requirement.                                                                           
MR. FISHER  replied contractors  would no  longer be  required to                                                               
file a certified  payroll with the department, but  they would be                                                               
required  to  file a  certified  payroll  with their  contracting                                                               
CHAIR BUNDE asked if the department  has just been getting a copy                                                               
of  the  paperwork  contractors  were  filing  with  the  federal                                                               
MR.  FISHER  replied  that  is correct  and  said  the  certified                                                               
payrolls  fill about  27 file  drawers every  year and  amount to                                                               
about 20,000 pieces of paper in a month.                                                                                        
CHAIR BUNDE asked if a subcontractor  who finishes a project in a                                                               
day or two  would still have to  file and pay the  two $200 fees,                                                               
and  whether the  subcontractor would  get paid  before the  main                                                               
contractor filed his paperwork.                                                                                                 
MR.  FISHER  replied  the  intention  of the  bill  is  that  the                                                               
subcontractor  would file  payroll  information. The  department,                                                               
upon  receiving  the affidavit  of  completion,  would check  its                                                               
files and  provide the proper  release so that  the subcontractor                                                               
could be paid.                                                                                                                  
CHAIR BUNDE asked  if that would apply if  a subcontractor worked                                                               
one day or less.                                                                                                                
MR. FISHER replied that is correct as presently written.                                                                        
CHAIR BUNDE  asked how the  $100 fees equate  to the cost  of the                                                               
work that would be done.                                                                                                        
MR. FISHER replied that the fee  was not designed in terms of the                                                               
cost. He stated, "It's a revenue generator."                                                                                    
SENATOR SEEKINS pointed out the  fiscal note contains a breakdown                                                               
of  2300  projects  with  an  average  of  five  contractors  per                                                               
project. He  asked Mr. Fisher  if he  could tell how  large those                                                               
projects were.                                                                                                                  
MR. FISHER said he couldn't,  but based on Southeast Alaska only,                                                               
about 15  percent of the projects  have a value of  about $5,000;                                                               
another 25 percent have a value of about $10,000 or less.                                                                       
SENATOR SEEKINS  asked how long  it would take the  department to                                                               
do the certification so people could get their final payment.                                                                   
MS.  HALI DENTON,  Acting Director,  Division of  Labor Standards                                                               
and Safety, said they don't have  a solid number for that because                                                               
it's  not something  the  department  has had  to  keep track  of                                                               
before. She noted, "It's intended to streamline the process...."                                                                
She said  the division would  be releasing the  subcontractors as                                                               
they filed their affidavits so they  would not have to wait until                                                               
the entire project is completed.                                                                                                
SENATOR SEEKINS asked  what percentage of a  contract is normally                                                               
held out for final payment.                                                                                                     
MS. DENTON said she would get back to him with an answer.                                                                       
SENATOR SEEKINS said  he was concerned that on  a small contract,                                                               
for  example  a  $5,000  contract,  the  whole  amount  would  be                                                               
withheld and none of the  contractors or subcontractors could get                                                               
paid until  the department  got to  that point.  He asked  if the                                                               
division has  envisioned the final  process and whether  it would                                                               
be based on  the affidavit or whether the division  would look at                                                               
other documents  to make sure  that people had complied  with the                                                               
many Davis Bacon requirements.                                                                                                  
MS. DENTON replied  that the affidavit is intended to  be a sworn                                                               
document. The  division would look  at that if  problems surfaced                                                               
and it would be auditing  the payrolls. Absent any complaints, it                                                               
would just reference the affidavit.                                                                                             
MR. DON ETHERIDGE, Alaska AFL-CIO,  said the AFL-CIO has concerns                                                               
with the bill  as drafted and wants to see  the certified payroll                                                               
requirement remain with  the department. The fees  should also be                                                               
earmarked for the  department so they can do  this project right.                                                               
The problem now is that  the department doesn't have enough staff                                                               
to follow up on complaints  about certified payrolls. The AFL-CIO                                                               
also wants  to see a graduated  fee instead of charging  the same                                                               
amount for a $5,000 contract or larger one.                                                                                     
He  explained  that if  you're  trying  to track  down  certified                                                               
payrolls right  now on  the federal level,  you don't  know where                                                               
you're going  to find  them. It could  take forever.  His members                                                               
know when they  are being paid the wrong amount;  now they can go                                                               
to the department.                                                                                                              
SENATOR  FRENCH asked  if the  certified payrolls  were going  to                                                               
stay with the  contracting agency, which might be  the Village of                                                               
Hoonah or some other small agency.                                                                                              
MR.  ETHERIDGE  replied   that  is  correct.  It   could  be  any                                                               
department of  the state, municipalities,  etcetera, and  that is                                                               
why it would be so hard sometimes  to try and track them down. He                                                               
also  noted that  many times  contractors look  at the  certified                                                               
payrolls to make sure their competitors are staying above board.                                                                
SENATOR FRENCH asked if certified  payrolls basically tell you if                                                               
the appropriate wage is being  paid to the appropriate individual                                                               
under the Little Davis Bacon Act.                                                                                               
MR. ETHERIDGE replied yes.                                                                                                      
CHAIR BUNDE asked a where  the federal certified payroll goes and                                                               
whether there is  a central repository where  people could access                                                               
that information.                                                                                                               
MR.  SCOTT JOHANNES,  Association  of  Builders and  Contractors,                                                               
said he saw a  lot of problems with the bill.  One is the Village                                                               
of Hoonah.  Now the state  knows how  to review the  payrolls and                                                               
once this bill goes into  effect, hundreds of agencies across the                                                               
state, the village  of Hoonah being one, will  be responsible for                                                               
doing that  review. They don't have  anyone on staff to  do that.                                                               
This new  system will be less  efficient and the person  doing it                                                               
will be less qualified.                                                                                                         
MR. JOHANNES second concern was  the fee. Basically, the state is                                                               
charging the contractor  the fee on projects  the contractors are                                                               
doing for the state, so the  state is charging itself and they're                                                               
asking  the  contractor to  pass  it  through. He  surmised,  "So                                                               
they're going to increase the cost to themselves."                                                                              
SENATOR STEVENS  asked if it would  be of concern to  him to have                                                               
contractors investigated.                                                                                                       
MR.   JOHANNES   replied   that    until   the   department   has                                                               
certifications for  everyone on the  project, it is not  going to                                                               
be   able  to   release  the   certification  verifying   that  a                                                               
subcontractor is  in compliance  so the  subcontractor can  get a                                                               
final payment.                                                                                                                  
SENATOR STEVENS asked  if that would be any different  than it is                                                               
MR.  JOHANNES   replied  yes.  Currently,  department   staff  is                                                               
responsible for reviewing those and have the means to do it.                                                                    
CHAIR BUNDE  asked if, under  the current  system, subcontractors                                                               
are required  to provide  the certified  payroll under  the Davis                                                               
Bacon Act and, if they don't,  the major contractor would be held                                                               
up from payment as well.                                                                                                        
MR. JOHANNES replied that is correct.                                                                                           
MR.  CHARLES WIEGERS,  Associated Builders  and Contractors,  was                                                               
opposed to SB  111 for many of the reasons  already expressed. He                                                               
said the  department is shifting  this effort to  the contracting                                                               
agencies and  some are capable  but some are  already overwhelmed                                                               
with   the  administration   of  contracts.   In  addition,   the                                                               
department is  asking to derive  revenues from this bill.  He was                                                               
skeptical  that  the  $115  million  the  department  intends  to                                                               
receive  from  the  fees  would  be  added  on  to  the  cost  of                                                               
construction [which the state would have to pay for].                                                                           
Another concern he  expressed with is the clearance  of the final                                                               
contract. He  said if a  subcontractor doesn't file,  the general                                                               
contractor's  payment  could be  held  up  and the  subcontractor                                                               
might do it maliciously.                                                                                                        
MR. WIEGERS said  another concern is that  it removes enforcement                                                               
from the  process because the  department will no  longer enforce                                                               
Title 36  wages. It  is going  to rely  on a  piece of  paper. He                                                               
added, "If  someone is dishonest  enough and  disingenuous enough                                                               
to pay  less than prevailing wages  on a project, I  wouldn't put                                                               
it past them to sign a certification saying that they did."                                                                     
He said he  is aware of the large amount  of paperwork because as                                                               
a  contractor  he  dealt  with  it. He  suggested  moving  to  an                                                               
electronic submission to eliminate the huge volumes of paper.                                                                   
MR. TIM ROGERS, Legislative  Program Coordinator, Municipality of                                                               
Anchorage,  said  he has  some  concerns  with the  bill.  First,                                                               
municipalities will become the record  keepers for the Department                                                               
of Labor  and they don't  have the expertise  to do that.  He was                                                               
also concerned  about the fees,  especially for  smaller projects                                                               
around $5,000.  Two hundred dollars  is a  significant percentage                                                               
increase  on  a  smaller  project.  He also  noted  there  is  no                                                               
provision for  emergency work and  his city  is faced with  a few                                                               
million dollars worth  of emergency work caused by  a wind storm.                                                               
There  is  no  provision  allowing  the  municipality  to  get  a                                                               
contractor   to  do   the  repair   work   immediately  and   the                                                               
municipality would  have to wait  for the department to  say it's                                                               
okay  to  put   a  contractor  on  the  job.   This  could  cause                                                               
significant  problems  for  the  municipalities  in  some  cases.                                                               
Municipalities  also  have to  get  the  department to  sign  off                                                               
before they  can issue final  payment. He explained they  do have                                                               
significant  retainage, especially  on the  larger projects,  and                                                               
are required by  state law to pay interest if  there is any delay                                                               
on the  payment. He concluded  by saying they wouldn't  object if                                                               
municipalities were exempted from this bill.                                                                                    
SENATOR SEEKINS  asked if  municipalities are  currently required                                                               
to  make sure  their  contractors are  sending  in the  certified                                                               
payroll affidavits.                                                                                                             
MR. ROGERS  replied that he  couldn't answer that, but  would get                                                               
the answer for him.                                                                                                             
MR. RAYMOND  SMITH, Business Manager,  INPAT, opposed SB  111 for                                                               
the  same reasons  already  given. He  said,  "The Department  of                                                               
Labor needs to monitor certified payroll. That's their job."                                                                    
He spoke of  one contract that included the  Loussac Library, the                                                               
East High School  Teen Career Center, and  Anaktuvuk Pass Housing                                                               
projects. He said if he reads  this bill correctly, he would have                                                               
to go to the Mat-Su Valley,  the school district, and to find out                                                               
who the  housing authority  is in Anaktuvuk  Pass to  monitor the                                                               
certified payrolls. He contended:                                                                                               
     It's just  not feasible. We have  a clearinghouse here.                                                                    
     That's  where the  certified  payrolls  are turned  in.                                                                    
     That's where  interested parties  can go to  find them.                                                                    
     It only makes sense,  gentlemen, and we'd appreciate it                                                                    
     if  you would  take a  little more  care in  looking at                                                                    
     this bill. I don't think  it's right for the workers of                                                                    
SENATOR SEEKINS asked if INPAT monitors the payrolls now.                                                                       
MR.  ROGERS   replied  it  monitors   certain  projects   -  some                                                               
contractors and sometimes their own contractors.                                                                                
SENATOR SEEKINS asked for an estimate of the amount of time it                                                                  
MR. ROGERS replied that it takes about 20 percent of his                                                                        
organizer's time and about 7 percent of his own time.                                                                           
CHAIR BUNDE asked Mr. Rogers if he was aware of any federal                                                                     
government clearinghouse and whether folks would have access to                                                                 
that information.                                                                                                               
MR. ROGERS replied that the federal Department of Labor is and                                                                  
that one must write to Seattle to request copies of certified                                                                   
MR. SCOTT BRIDGES, Teamsters Local 959, told members:                                                                           
     This bill  as drafted is disruptive  to workers because                                                                    
     it  seriously  dilutes  the practicability  to  enforce                                                                    
     rights that  are afforded  under this  body of  law. By                                                                    
     scattering  compliance with  Title  36  and other  wage                                                                    
     statutes,  workers are  placed in  further jeopardy  of                                                                    
     losing  earned  wages  to unscrupulous  contractors.  I                                                                    
     don't  know that  any of  us could  accurately estimate                                                                    
     the amount  of loss to  workers that exists  today with                                                                    
     the  staffing levels  that exist  at the  Department of                                                                    
     Labor.  At a  time when  economic pressures  attack the                                                                    
     worker at  home with greater influence  is greater than                                                                    
     any other  element of our  society, this  bill proposes                                                                    
     to add a little more pressure to that.                                                                                     
     The  bill suggests  that it  would  eliminate a  double                                                                    
     recording requirement.  There are many  practical means                                                                    
     of  overcoming that  particular problem,  which is  not                                                                    
     quite  so monumental  to the  individual contractor  as                                                                    
     some  might have  us  believe.  Eliminating a  clerical                                                                    
     position  at the  Department of  Labor,  which is  also                                                                    
     suggested  by  those  who  proposed  this  legislation,                                                                    
     would   further    cripple   the    DOL's   enforcement                                                                    
     capability.  At this  time, after  I  have spoken  with                                                                    
     several   of   the   enforcement  officers   with   the                                                                    
     Department  of Labor,  they have  suggested to  me that                                                                    
     they  get  so  many  complaints  but  they're  able  to                                                                    
     enforce  only  those that  are  pretty  much slam  dunk                                                                    
     cases. They simply  do not have the time  in their work                                                                    
     week to handle the load that exists today.                                                                                 
     In  our  state's  effort   to  stimulate  the  stagnant                                                                    
     economy,    we    need    to   be    looking    towards                                                                    
     entrepreneurialism as an  economic stimulus for greater                                                                    
     growth rather than regulations of  this type. With that                                                                    
     entrepreneurialism  we're going  to  get that  economic                                                                    
     growth and we'll have enhanced  revenues that the state                                                                    
     so drastically  needs. I appreciate  the time.  I think                                                                    
     that this bill  is one that in its  present form should                                                                    
     go  away  and  I   would  appreciate  this  committee's                                                                    
     assistance in taking a much harder look at this.                                                                           
CHAIR BUNDE asked  how he proposes to pay for  the service so the                                                               
state can continue to provide the same level of service.                                                                        
MR. BRIDGES  replied that eliminating  one clerical  position was                                                               
going to  be a drop in  the bucket in the  suggested $115 million                                                               
fiscal note. He suggested keeping the  "$100 in and $100 out" and                                                               
putting that money in the hands  of the workers so they can spend                                                               
it at  the businesses  in his community.  Whatever taxes  come in                                                               
from  those  construction  dollars   would  enhance  the  state's                                                               
revenues even under the current tax structure.                                                                                  
SENATOR  SEEKINS noted  that Mr.  Wieger's  earlier reference  to                                                               
$115  million was  two decimal  places off.  The amount  is $1.15                                                               
MR. BRIDGES said  a clerical position would not  account for much                                                               
of that.                                                                                                                        
MR. JOE SMITH,  part owner of Gastineau Contractors,  said he has                                                               
concerns about  shifting the recording of  certified payroll from                                                               
the  Department  of Labor  to  the  contracting entities.  For  a                                                               
company that bids on Davis Bacon  jobs, it's important to have an                                                               
agency monitoring  their competition. A contracting  agency might                                                               
be less inclined  to dedicate the resources needed to  do the job                                                               
as  its hands  are full  administering the  contract. They  don't                                                               
have the  expertise or  the motivation  to monitor  the certified                                                               
payroll, which would be especially true of small jobs.                                                                          
MR. SMITH  explained that $2,000  is the lower limit  where Davis                                                               
Bacon kicks in so a $200 in  and out fee represents 10 percent of                                                               
a job that size. A sliding scale makes a lot more sense.                                                                        
CHAIR BUNDE asked  if he believes this is a  valuable service and                                                               
if a sliding  fee scale was used, whether he  would be willing to                                                               
pay additional funds so the state could maintain the service.                                                                   
MR. SMITH replied he would.                                                                                                     
MR.  THOMAS  BOEDEKER,  City  Manager of  Soldotna,  said  he  is                                                               
chairman of  the Alaska  Municipal League  legislative committee.                                                               
He noted the statute requires  withheld money due a contractor to                                                               
accumulate at a 10.5 percent interest  if it's not paid within 30                                                               
days  of  billing.  Right  now  municipalities  are  not  earning                                                               
anything near 10.5 percent on  their investments. This bill would                                                               
not let  him make a final  payment to a contractor  that might be                                                               
due because  of a  subcontractor or any  number of  other issues.                                                               
Under this bill,  a municipality would be required by  law to pay                                                               
10.5  percent interest  while  it waited  for  the Department  of                                                               
Labor to resolve a dispute.                                                                                                     
TAPE 03-14, SIDE B                                                                                                            
MR.  BOEDEKER  also  had concerns  with  the  dispute  resolution                                                               
process itself,  and asked  what kind  of disputes  would trigger                                                               
the  process.  He said  right  now  the department  enforces  the                                                               
prevailing wage  law. There  are a  number of  interpretations of                                                               
what work is  covered or not covered and  the municipalities have                                                               
neither  the jurisdiction  nor  the expertise  to  deal with  the                                                               
interpretations the  department has  made. He found  it difficult                                                               
to believe  that filing  copies with  the municipality  only will                                                               
allow the department  to make its determinations.  A burden would                                                               
be placed  on the  municipality "to  do all  the leg  work" every                                                               
time an issue arises.                                                                                                           
He also expressed  concern about how long  the municipality would                                                               
be required to  keep the records. Contractors  keep records while                                                               
they are active and don't organize  them to be researched after a                                                               
job  is closed.  He concluded  that an  amendment is  needed that                                                               
says if  a municipality is  withholding funds while  awaiting the                                                               
department's  certification,  it  is  not  subject  to  retainage                                                               
CHAIR BUNDE asked Mr. Fisher to look at the following issues:                                                                   
   · Electronic submission of the information                                                                                   
   · A graduated fee                                                                                                            
   · The interest concerns on retained payments                                                                                 
   · Emergency provisions                                                                                                       
   · The state's need to generate revenue                                                                                       
   · The percentage of private versus state contracts                                                                           
He asked  Mr. Fisher  to provide the  committee with  feedback on                                                               
those issues.                                                                                                                   
SENATOR STEVENS also asked Mr. Fisher  to look into the impact of                                                               
exempting municipalities.                                                                                                       
CHAIR BUNDE said  he also wants to know how  one would access the                                                               
federal repository's information if this bill becomes law.                                                                      
SENATOR SEEKINS  said he would  like to  know if any  other state                                                               
requirements have to  be met in addition to  the certification of                                                               
payroll  before  payout   is  made  and  how   many  reports  the                                                               
department  currently receives  on  certified  payrolls. He  also                                                               
wanted to know  what the volume of  the paper flow is  and, as it                                                               
comes in, whether  the reports are filed with  or without review.                                                               
He  further asked  if the  affidavit  includes the  same type  of                                                               
report  that is  filed  weekly  or whether  it  just states  that                                                               
prevailing wages were paid.                                                                                                     
SENATOR DAVIS asked  if there are one or two  filings between the                                                               
department and the contracting agency.                                                                                          
MR. FISHER said based on the  bill, the expectation would be that                                                               
the contractor  would file a  notice of intent to  proceed, which                                                               
would be  accompanied by a  $100 fee.  When the project  for that                                                               
particular contractor  was complete,  that contractor  would file                                                               
an affidavit  saying that  he/she had paid  proper wages  and the                                                               
contractor's portion  of the  contract was  complete, accompanied                                                               
by a $100 fee.                                                                                                                  
SENATOR DAVIS noted a clerk's  position costing about $30-$40,000                                                               
would  be eliminated.  She asked  where  the other  money in  the                                                               
fiscal note would come from.                                                                                                    
MR. FISHER  replied that the  revenue generation would  come from                                                               
the filing  fees. The  cost savings  of $40  to $50,000  are from                                                               
eliminating the position.                                                                                                       
SENATOR DAVIS  asked whether the  bill is  based on the  model of                                                               
the Little Bacon Davis Act.                                                                                                     
MR.  FISHER  responded  that he  just  recalled  they  eliminated                                                               
$67,000  from the  budget for  the clerical  position. He  didn't                                                               
have an answer to how the act came into being.                                                                                  
SENATOR DAVIS said  the reason she brought that up  is because SB
111  might  be eliminating  something  that  is required  by  the                                                               
federal government.                                                                                                             
MR. FISHER replied that he is  unaware of a requirement but would                                                               
ask the question and get a response.                                                                                            
CHAIR  BUNDE  held   the  bill  and  said  he   would  share  the                                                               
information with the committee when it came back.                                                                               

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