State scales back plan to privatize contracts

Original plan would have jeopardized federal transportation funds

Posted: Tuesday, October 14, 2003

The state's plan to privatize contracts for supplies, services and construction in some agencies may get scaled down, following complaints from unions and the discovery that it would result in a loss of millions in federal transportation dollars.

The privatization plan was established by the Alaska Legislature this year under House Bill 313 by Anchorage Republican Rep. Lesil McGuire.

The bill establishes a three-year pilot program to hire a private contractor to use e-commerce tools to purchase office equipment and other goods for the state. The program is authorized to include up to two state departments and two state enterprises, such as the Alaska Railroad or the Alaska Housing Finance Corp.

In a House Finance committee meeting in May, McGuire said the program could save the state $5 to $20 million.

The Department of Administration chose to include DOT's Southeast and Central regions and the Alaska Marine Highway System in the pilot program. But the department now says it likely will not include DOT's Central region because a department review showed that it would jeopardize the state's eligibility for federal highway funds, said Kevin Jardell, assistant commissioner for the Department of Administration.

"The study found that services in Central do not lend themselves to the private funding," Jardell said. "Federal highway funds have a lot more restrictions. It's a much more complicated process."

Jardell said allegations that the pilot program would hurt state jobs or allow for sole source contracting are premature, considering that the Department of Administration has not yet finalized a plan.

"We are doing a thorough preproposal analysis," Jardell said. "This isn't a shoot-from-the-hip sort of thing."

He said a final plan for the pilot program is expected to be released within the next few weeks.

Under the plan, a private contractor would purchase office materials and ferry supplies, such as toilet paper, napkins and soap, for DOT in Southeast.

Plans for DOT's Central region, which includes Bethel, Anchorage, the Kenai Peninsula and parts of the Parks, Seward and Glenn highways, would have focused on procurement of engineering and construction contracts. The private contractor running the program for the state, however, would be exempt from following any of the state's procurement statutes, which unions say would open the door for awarding single-source contracts.

"A controlled pilot program is a responsible approach to this opportunity," according to McGuire's sponsor statement on HB 131. "It will let the Alaska Legislature monitor progress, validate the cost savings and review other benefits (and drawbacks) before making a full commitment."

Alaska unions argued that the Department of Administration's plans for the program were far from responsible.

At the end of September, business managers for the Alaska Public Employees Association, the Alaska State Employees Association, Public Employees Local 71 and the Inland Boatmen's Union of the Pacific denounced the program.

"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 businesses and a return to a politicized system of contracting," reads a letter sent to publications across the state.

But the Department of Administration's decision to leave procurement of construction and engineering contracts out of the pilot program could resolve the issue between the unions and the state.

Heath Hilyard, a member of McGuire's legislative staff, said the pilot program was not intended to go outside the scope of purchasing office equipment and other commodity goods and services. Hilyard said McGuire has been in touch with the Department of Administration to give the agency direction in implementing the program.

• Timothy Inklebarger can be reached at

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