Move to Do Away with Competitive Bidding in Not in States Best Interest
Move to Do Away with Competitive Bidding is Not in State’s Best Interest
The State of Alaska is jumping into the world of non-competitive bidding under a pilot project that Governor Frank Murkowski signed into law last June. The results could be devastating for Alaska businesses. The new law began as an idea to save money, but is a major step toward doing away with competitive bid-ding, including the 5 percent bidder preference for Alaska contractors that has been law for many years. The project exempts two huge areas of the state from the State Procurement Code, and globalizes purchasing by allowing a private firm to outsource Alaska business through the Internet.
The pilot project initially affects the Southeast and Central Regions of the Department of Transportation and Public Facilities (DOT/PF). These Regions are responsible for all competitive bidding, engineering and architectural services, and equipment and supply purchases in an area that includes Bethel, the Aleutians, Anchorage, the Kenai Peninsula, parts of the Parks and Glenn Highways, and extends as far south as Ketchikan and Prince of Wales Island. The project also includes the Alaska Marine Highway System.
Billions of dollars of state road, airport, and building projects and Marine Highway vessel repair, maintenance, and overhaul, as well as purchases of parts, heavy equipment, food, and retail sales items will be controlled by a private contractor who will not be bound by the competitive requirements of the State Procurement Code.
During testimony on the bill before the State Legislature, Rep. Lesil McGuire, the bill’s sponsor, said the program could save the state between $5 and $20 million dollars over its three-year life. While the bill might result in this up-front savings on state purchasing, it could end up costing the state much more as Alaska public-sector jobs and private-sector business go south or overseas. The elimination of skilled public-sector professionals, along with competition from the bidding process, could result in a return to a system that is open to abuse.
Alaska’s state procurement laws are stringent because safeguards were recommended by a grand jury that investigated an office lease deal that nearly led to impeachment of Governor Bill Sheffield in 1985. The grand jury advised adoption of procurement regulations “… designed to deter intervention on behalf of favored political interests, while at the same time not hamper the efficient delivery of governmental services.”
The grand jury report resulted in an exhaustive five-month review by a legislative committee of state procurement practices which found there was confusion among those wishing to contract with the state, and there had been “a dramatic increase in litigation concerning contract disputes because the state does not have a comprehensive procurement law.” The committee report said: “Public procurement is a highly technical process and involves millions of state dollars annually. Expertise is required to make the process work efficiently and effectively.” In 2003, the Central and Southeast Regions of DOT/PF handled billions of dollars of public money.
The attempt to update the state’s procurement system is not a new idea. Several years ago the DOT/PF worked with the Association of General Contractors (AGC) to investigate the possibilities of going to an electronic bid-ding process. The working group found that the current construction contracting system is already highly accessible electronically. The working group also raised concerns that 100 percent online bidding would make it far easier for non-Alaskan and foreign bidders to compete for bids, raising a whole array of concerns if bids are won by firms unfamiliar with Alaskan conditions.
By concentrating so intently on reducing operating expenses, state legislators and administrators are losing sight of the intent of the State Procurement Code to protect state businesses and ensure that state funds are fairly spent on behalf of all Alaskans. The employees who currently oversee state procurement understand the peculiarities of competitive bidding and purchasing in Alaska’s construction environment.
The attempt to streamline Alaska’s procurement process may have been well intentioned, but the result could be the loss of competitive bidding, Alaska jobs and business, and a return to a politicized system of contracting.
Editor’s Note: Contributors to this month’s Guest Findings include Jim Duncan, Business Manager, Alaska State Employees Association; Bruce Ludwig, Business Manager, Alaska Public Employees Association; Don Valesko, Business Manager, Alaska Public Employees Local 71; and Darryl Tseu, Regional Director, Inland Boatman’s Union of the Pacific.
