MINUTES OF THE ASSEMBLY COMMITTEE ON GOVERNMENT AFFAIRS Sixty-eighth Session January 31, 1995 The Committee on Government Affairs was called to order at 8:00 a.m., on Tuesday, January 31, 1995, Chairman Lambert presiding in Room 330 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Mr. Douglas A. Bache, Chairman Mrs. Joan A. Lambert, Chairman Mrs. Deanna Braunlin, Vice Chairman Mr. P.M. Roy Neighbors, Vice Chairman Mr. Max Bennett Mrs. Marcia de Braga Mr. Pete Ernaut Mrs. Vivian L. Freeman Mr. William Z. (Bill) Harrington Ms. Saundra (Sandi) Krenzer Mr. Dennis Nolan Mrs. Gene Wines Segerblom Mrs. Patricia A. Tripple Mr. Wendell P. Williams COMMITTEE MEMBERS ABSENT: None GUEST LEGISLATORS PRESENT: None STAFF MEMBERS PRESENT: Denice Miller, Senior Research Analyst OTHERS PRESENT: Ande Engleman, Nevada Press Association Henry Etchemendy, Nevada Association of School Boards Tom Tatro, Administrator, Nevada State Purchasing Ray Moran, Purchasing Director, University and Community College System of Nevada Norm Starrett, Public Purchasing Study Commission Greg Bretts, Nevada Rural School Districts Dallas Coonrod, Las Vegas Association of General Contractors Carole Vilardo, President, Nevada Taxpayers Association ASSEMBLY BILL 37 - Makes uniform in all counties certain provisions governing advertising of contracts for purchases by local governments. Henry Etchemendy, Executive Director of Nevada Association of School Boards, spoke first in favor of A.B. 37. Mr. Etchemendy pointed out an obvious inequity of the current Bill, in determining which counties are required to advertise contracts and those that are not according to their respective population and amount of the contract. He indicated the proposed amendment would create uniform provisions in those areas. Mr. Etchemendy also stated the two main purposes for advertising: one, to obtain the best bids; two, to give adequate public notice of purchases. He said bids are also generated by sending notices out to lists of vendors who would be interested in that type of contract. Mr. Etchemendy called attention to the fact that another group had already asked for a bill draft on the same topic. Identified as Senate Bill 20, it was heard in Senate Government Affairs a couple of weeks ago and given a Do Pass recommendation. There was one additional amendment regarding records retention, changing the length of time records should be kept to 72 months. Mrs. Krenzer questioned the proportional relationship of size of city to size of budget and the costs associated with each. Mr. Etchemendy explained the cost of advertising and purchasing smaller, similar items would be the same no matter what the city or budget size. Relatively speaking, it would be more appropriate for the contract amount requiring advertising to be the same. Mr. Bennett inquired whether Mr. Etchemendy would rather see A.B. 37 or S.B. 20 enacted. Mr. Etchemendy replied that he would just as soon see A.B. 37 processed. Mrs. Lambert drew attention to the fact that A. B. 37 repeals NRS 332.035, the section that S.B. 20 amends, and S.B. 20 repeals 332.039, the same section that A.B. 37 amends. If they both pass, neither section of the law will be in place. Mr. Etchemendy acknowledged that either Bill would accomplish the same purpose, even with the amendments. Mr. Norm Starrett, Vice Chairman of the Public Purchasing Study Commission, originally submitted S.B. 20 in an effort to make the bid threshold for all contracts consistent throughout the state. Currently, it is extremely confusing as agencies vary in their bid requirements. Making the bid threshold consistent on a Legislative level would at least eliminate some of the confusion. Whether or not the raised bid threshold is adopted is up to the county. If a higher limit is not desirable, the county may maintain a lower limit. Mrs. Lambert asked why a limit of $25,000 instead of $10,000. Mr. Starrett responded we already have the $25,000 limit and in the case of federal grants, federal statutes require a formal bid of $25,000. Mr. Neighbors noted the need for consistency in the bid process as the size of the budget is not applicable to the amount of the bid. He also mentioned the many delays faced when purchasing small articles as opposed to utilizing the bid process. Mr. Greg Betts, representative of the 15 rural school districts in Nevada, recognized A.B. 37 would be appreciated by those entities for the opportune savings for small districts. He felt that the proposed bid threshold was reasonable and would provide needed consistency for the state. Ande Engleman, Nevada Press Association, spoke against A.B. 37 as well as S.B. 20. She asserted both Bills would be bad for small businesses. She explained the Senate Government Affairs Committee had no rural representation on this and the Bill has no effect on Clark County or Wahsoe County. Ms. Engleman clarified that this Bill does have a small financial effect on some newspapers in the state, but the NPA is primarily concerned with accountability and the reasons for the bid process. In 1993, the Senate killed a similar bill because the smaller budgets in rural counties would have significantly reduced the number of bids. Ms. Engleman expressed consistency in the bid process was not an overwhelming reason to raise the threshold. She also pointed out some of the problems associated with purchasing in rural counties and again, stressed the need for accountability. Mr. Neighbors did not believe rural and larger counties should be treated any differently in this matter. He indicated the open meeting law provided clear access to the bidding process and newspapers were protesting the loss of a few dollars on advertising. He felt taxpayers were better served on smaller issues with the informal bid process and there should be no discrimination between larger and smaller counties. Ms. Engleman interjected many items go on a consent agenda in county meetings and do not go to an open meeting. Mrs. Lambert asked Mr. Neighbors why it took three or four weeks for the advertising process. Mr. Neighbors replied under the open meeting law it must be noticed first and then it must be published. He noticed Mr. Hadfield and solicited an opinion from him. Mr. Hadfield, Executive Director of the Nevada Association of Counties, pointed out in rural counties they have weekly newspapers which often used to come out on the day the county commission met. So the language of the law made sure the advertisement would not show up in the weekly newspaper on the day the commission met. That is why there is a lag time and the reason for allowing adequate time before any action would be taken. Mr. Starrett brought out the fact all bids, whether advertised or informal, all bid openings are public and all bid records are available for perusal at any time. Internal and external auditors monitor all activities for inconsistencies, providing checks and balances in the system. He mentioned the actual impact for fiscal year 1993-1994 and stated out of 24 bids, if the bid threshold is raised to $25,000, that number would have been reduced by four. Mrs. Lambert closed the hearing on A.B. 37. ASSEMBLY BILL 39 - Revises provisions governing state purchasing. (BDR 27-841) Tom Tatro, State Purchasing Administrator, testified first in favor of the bill. A.B. 39 was requested by the Purchasing Division to make several changes to the State Purchasing Act that will allow increased efficiency and flexibility in operating the Division and providing service to their customers, while expanding competition, easing the vendor interface and expanding the potential for greater partnerships with the private sector, saving taxpayer dollars. His complete testimony (Exhibit C) included all pertinent information explaining the amendments to A.B. 39. Mrs. Lambert requested he review the written material rather than read it to eliminate confusion that might arise. He proceeded to cover each section, emphasizing in sections 3 and 5 the agency's desire to move into the realm of electronic distribution, making bids more readily available and reducing processing time. He referred to a similar program now in use in Oregon. Another change brought out in section 5, patterned after the state of Oregon, will make bids available through the public library system without the Purchasing Division having to distribute the bids. This is being made known only to Nevada vendors to provide support for the Nevada library system. Mr. Bennett asked if the intention of section 5 was to go totally high-tech, thereby deleting notification of contractors who are not high-tech. Mr. Tatro indicated the intention was to delete the requirement in the statute that written notice of bids be sent to vendors. An appropriate alternative must first be developed that is cost effective and makes access to the state's business easier to the vendor. Mr. Bennett inquired about the procedures in section 4 regarding termination costs. Mr. Tatro stated termination clauses were already in place and would be available for long term contracts as well. Noting section 6, Mr. Bennett called attention to the fact that FAX's are not secured and next day air mail was available for secured bids. Mr. Tatro responded with plans for an internal procedure to pull bids off the FAX, place an I.D. number on the cover, put into an envelope and securely store. He stressed the loss of significant competition and higher prices paid as a result of not accepting FAX bids. Mr. Harrington had a real problem with the changes in sections 3 and 5. He felt important safeguards were being jeopardized by eliminating notification to vendors as to available bids. Mr. Tatro justified the changes saying bids over $25,000 would still be advertised and relative information would be more available than it is today. He referred to the state of Oregon setting a precedent with their program and how the resultant expanded competition reflects the success of this plan. The provisions of this approach will expand the current vendor list, increasing the number of bids received. Mrs. Freeman wondered if local needs should be addressed in the same manner. Mr. Tatro responded in the affirmative. He also iterated a need to continue tracking vendors until it has been proven competition has been satisfactorily obtained through the new methods. Mrs. Freeman was nervous with the idea of accepting bids via FAX's. Mr. Tatro reiterated the idea of implementing safeguards into the plan. Mrs. Freeman asked for evidence in the success of this procedure, for example in the state of Oregon. Mr. Tatro told her Oregon had all bids electronically transmitted and had no need for FAX's. He also mentioned many vendors in Nevada do not even have Fax machines, thereby precluding their use, let alone electronic processing. This would cause the loss of many local vendors. Mrs. Freeman queried whether the state would be liable for large lawsuits due to errors via FAX machines. Several agreed to the possibility. Mr. Tatro elucidated the merits of the program, however, restating suggested methods for safeguarding faxed bids. Mrs. Lambert wanted to know if the amended purchasing laws would include Public Works bids. Mr. Tatro replied in the negative, stating it would only cover other types of bids for products and similar items. Mr. Nolan suggested maintaining a dual bid process to best serve the public because the information super highway is not a reality in many parts of the state. Allowing both the sealed bid process as well as the FAX and electronic systems to co-exist will enable all entities to participate fully in current purchasing programs. Mrs. de Braga wondered whether the Department of Prisons was one of the institutions included in section 2 qualified for double committed commodities. Mr. Tatro said there were seven separate programs in the federal food distribution program. Prisons are eligible for two of the programs as a charitable institution under the emergency food assistance program. However, the program may be cut completely, or funding may be reduced by 69% under federal mandate. Mrs. Krenzer understood the amended bid process to completely eliminate the sealed bid requirement. Mr. Tatro agreed. Mrs. Krenzer felt that would be a terrible mistake. Mr. Ron Starrett supported A.B. 39 primarily in the interest of creating consistency in the advertised bidding limit. Under the joinder provisions in NRS 332 bids can be shared by counties, but until now, this has been very selective as the bid threshold varied between counties. Now, with a consistently advertised bid limits, saving money by sharing with other counties will be more easily accomplished. Mrs. Freeman questioned whether the same changes should be made for local governments for the purchasing statutes. Mr. Starrett stated eventually that is the way things would evolve. Adopting new technologies while maintaining security takes time and requires adjustments all around, but it must be done in order to function in the business world today. Ande Engleman, Nevada Press Association (N.P.A.), testified against A.B. 39. The N.P.A. insisted the information super highway is not as accessible and cost effective as everyone claims. They were also opposed to the bid threshold being raised to $25,000. Ms. Engleman claimed accountability, cost controls and eliminating vendors from the bid process were factors subject to loss if this Bill passes. Carole Vilardo, Nevada Taxpayer's Association, opposed A.B. 39 as well. She indicated no problem with the bid threshold, but maintained we are not electronically up-to-date at this point to warrant that type of change in the system. She expressed concern for unsealed bids and a lack of safeguards for the program at this time. Ms. Vilardo suggested exploring other options in the meantime. Mr. Nolan asked Ms. Vilardo what she felt regarding vendors being given the option on bidding formats. Ms. Vilardo thought we should find out what the liability to the state is beforehand. If there were a liability, then necessary safeguards would have to be put in to release the state from any liability. Otherwise, no, it would not be agreeable to offer an optional method of bidding. Mr. Harrington remarked that FAX's might be acceptable for smaller bids and items of lesser cost. There would be less chance of mischief and would perhaps facilitate things on lower levels. Ms. Vilardo suggested the possibility of a pilot program to glean more specific information on that type of program. Mr. Harrington commended Mr. Tatro on his willingness to innovate and take the heat for it. He also indicated most of the Committee members had some trouble with passage of this Bill at the present time. Mrs. Lambert decided to put the Bill into a subcommittee in order to explore the questions raised and resolve the unsettled issues. Mr. Dallas Coonrod, Las Vegas Association of General Contractors, was opposed to elimination of sealed bids and felt it would compromise the state's liability. He also repeated the opinion that removing the requirement to notify in-state bidders would hurt emerging businesses. Mrs. Lambert closed the public hearing on A.B. 39. She appointed a subcommittee composed of Mrs. Krenzer, Mrs. Freeman and Mr. Bennett to review the Bill along with Mr. Tatro and return with a perfect piece of legislation. MR. ERNAUT MOVED TO INDEFINITELY POSTPONE A.B. 37. MRS. KRENZER SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. A.B. 37 WAS INDEFINITELY POSTPONED. The meeting was adjourned at 9:35 a.m. RESPECTFULLY SUBMITTED: Denise Sins, Committee Secretary APPROVED BY: Assemblyman Douglas A. Bache, Chairman Assemblyman Joan A. Lambert, Chairman Assembly Committee on Government Affairs January 31, 1995 Page