H.B. 511 Procurement Amendments: transcript

Motion to approve. Thank you all, all, uh,

Thank you committee. I saw it was Laura was gonna run back up to my office and I was like, I don't think I see anyone else here. So I'll stick around for a second. Um, thank you for your time today and thank you for your patience. I know it was on last time's agenda and so excited to be here today. Uh, this is, is this is dealing with the procurement office and the director of procurement is back here. And I'm sure he'd be happy to answer any questions and speak to the bill. Um, but this comes from sort of a Utah first approach with procurement. When the state does bidding on different projects and you submit a proposal or a request for abstract or a request for information, you're bidding on a project to win the bid. This is for when they have like a scoring matrix and they're gonna give scores off, like the proposal background, the people's background, the qualifications, the bidding, the project bid, uh, the pricing. And we want to, uh, make sure that if these projects are going out, if the scores are relatively close at all, and there's bidders that are in Utah or in state bidders, Utah companies or outstate bidders, if the final scores are close at all, we would prefer to give that money to the Utah bidder to keep the money in Utah and let those companies in Utah gain that experience, gain that knowledge, and continue to improve and provide those jobs both in experience, in growth for, uh, in jobs and keep the money in Utah. And so that's the gist of this bill, is, uh, if it's reasonably close at all, we'd like to do sort of a Utah first approach and, and keep that money, jobs, everything here in Utah. So this bill is designed, so on that scoring matrix, uh, it would give, uh, 10% bonus to the, the Utah bidders, the in, in the in-state bidders. I was talking to Representative Cutler before this outside of the bill, and he's like, so are they getting 10% more funding? Are we giving out more funding? That's not the case. It's just part of the scoring matrix as they decide who the bid goes to. It doesn't affect anything with the pricing, so it's not giving out more money. Um, Representative Loubet brought up maybe some concerns. Uh, does this affect any constitutional concerns about prejudice or Commerce Clause stuff? No, it does not. Uh, so the, the reason being is the Constitution is there to protect individuals, not corporations on, uh, on whether there's prejudice. It's okay to pick a winner or loser for a corporation. And if you're familiar with the dormant commerce clause or the Commerce Clause, that means you can't apply these laws, uh, that affect in-state commerce or across state boundaries. Uh, compared to other states, this would not apply in that because it is coming from a state purchasing the state's spending their money. They're, they're like a buyer for a program. It's not creating a statewide policy that affects UANs differently than non Utahans. It's a program where they're spending money as a buyer would. And so that would not apply for a constitutional violation. Um, I think that answered the questions that I've, uh, had brought up to me. Uh, I'd love that. The, my presentation. I'd love any questions or comments that you may have.

Thank you, Mr. Chairman. I, I think my question's pretty simple. Um, these are mostly competitive bid, um, procurement process Yes. Uh, assignments. Right. And I noticed there's no fiscal notes, so I'm just curious. Um, uh, normally our process is looking at a couple of factors and prices, a big part of them. So is this, are, is procurement saying that a, that a 10% bonus to our resident, uh, companies is not gonna affect, uh, overall pricing

For these bids? Yeah, it doesn't affect the, the bid on the project at all. Just when they're, as they're analyzing the different bids, they're making a scoring matrix, a scoring sheet, uh, it might be a portion of the contract is going to how thorough the bid is put together, how thorough is their project proposal, how, uh, you know, how qualified are these people, uh, how, what's their background, what's their experience in similar programs? And they would get like a score, like out of 10 or out of 20 assigned a different criteria. Pricing would be one of those. And then they add 'em up and it usually goes to one of the bidders. And so we would add a line that says, if you're a local company, you get, uh, a bonus 10%. So I've, I've bid on programs like this in other states or other places where on that scoring matrix for certain criteria, you might be a certified small business. Mm-hmm. That might be worth bonus points. 'cause they've decided that's an important thing. Uh, some places decide if you're a disadvantaged community member, that would, that's worth bonus points. That would be, uh, sometimes military veterans, uh, members of a minority community, a woman owned company, something like that. But to be clear, the expectation here is that even though this may change the awards process, um, there's not an expectation that will increase the price of those contracts for the state.

Correct. Okay.

Looks like? Yeah, and I'm speaking to substitute one, which outlines that process. It says, uh, it, it specifies two things. The, a company, in order to be considered a Utah company, needs to be registered in Utah, have their primary place of business in Utah, and have to have been registered for at least a year so that someone can't game the system right before a bid and jump in line and then lower on, uh, in there it outlines that a maximum of 10% of the bidding price would be for the, for the Utah reference. Good question. Thank you. Thank you. Alright. Thank you.

Usually the cost goes up. Um, I mean this is, you're, they're gonna be using an Excel spreadsheet or a Google sheet. There's one line item where it says, are they a local company and they've submitted some paperwork and it's just a yes or no on, on the bid review. So they're not adding any additional costs on, on the cost of the program, the cost of the awarded, uh, bid, anything like that. It was just, it would just be a line item on the scoring matrix as they tabulate the scores.

Um, I mean, it depends on what the point allocation is for the scoring matrix. I've bid on a lot of programs over the last 30 years. Normally I've had, I've seen bids where pricing is 10% of the value of the contract. So if I'm the highest bidder, then it's only gonna be worth 10 points or 10% of the, the, the bidding process. There's other times where, so there's been times where we've been the highest priced bidder. There's also been times where we've been the lowest price bidder and we've won and lost bids on either. So it, the, taking a step back, it's basically saying it's, and so the price, it would just be one of the scoring items. It might be worth 10% of the bid. It might be worth 60% of the bid, depending on how the department puts their bidding structure together and the value, the weight they wanna give it in their scoring matrix. So that is a possibility. The, the intent and the purpose behind it though, is saying if the bids are relatively close, if the final scores are relatively close, we would want that just to tip in favor of the Utah group.

Yeah, thank you Mr. Chair. I think it'd be safe to say, and an just answer this if I'm incorrect. Uh, this, this is like giving, giving a veteran's preference to somebody in a, in a, in a, in a job interview. It's very similar. You're giving them a preference because they're a state owned company. The, the question that I have though, is that correct? Uh, not a state owned company, but, uh, in-state company. In-state, yeah. The question that I have is, uh, from a legal perspective, um, because we all know about lawsuits and frivolous lawsuits, uh, folks love to sue deep pockets. So the question is, did you consult counsel? And was there any risk to the state if we implement this, of, of frivolous lawsuits or, or lawsuits from people that feel disadvantaged?

The, the discussion did come up. Uh, there's preferential bidding, uh, clauses like this in other states that have been around for quite a while. And as we looked into it, the response sort of came back is like, I don't know why we haven't been doing this already. So they were, they thought there was something already in statute like this and there wasn't.

Thank you, Mr. Chair. And I apologize, I had a new question come up from the conversation, but, so, um, back to Representative Cutler's. Uh, I, I guess question has there, because I don't see anything in the fiscal note that outlines this, but if we're awarding then in those circumstances, perhaps a, a vendor that may have a slightly higher cost, for example, because they're a Utah preference, has there been any analysis done? I I assume that in that scenario, we're then capturing tax revenue now from that local company as far as, uh, wages we're cap capturing corporate income tax, if they're resident Utah Company has written any, uh, comparison is what those offsets might be is if we're awarding it to a company that's outta state, um, and they're gonna be paying taxes, um, potentially outta state, then I, I'm just wondering if, if that's ma made any calculations in this process.

No, that's a good question. I haven't gone down that rabbit hole yet. Um, I, I would like to respond to that though. With, um, sometimes the state, sometimes people tend to just go with the lowest bid offer, uh, or the lowest bid proposal or, or bid. I, I'd wanna make sure that that's not confused with the best offer. Uh, and construction, it often happens, the people go with the lowest offer. Those, then they then later regret that 'cause they're gonna get out on prices coming back later and going with one of the middle offers or higher offers would've just been better to begin with. 'cause it ends up not being as great of a deal as they thought they were getting. So I don't wanna get confused that just going with the lowest offer is the best offer.

There we go. Thanks for the double dip. I just wanted to clarify. I don't see, you used the hype, you used a 10% in the scoring matrix. Was that hypothetical? What I see in the bill is just a preference, but not that preference is not quantified. Is this substitute one? Uh, that's my problem Looks like on lines 2 33. So why, I guess why put in a, a numeric value instead of just a preference, like a veteran's preference? Because it seems like that what's the thought process?

That just came from my, my experience, I've, for 20, not for the first 10 years, I was a technician, blowing out insulation, doing the lights. But after going getting an engineering degree, Uintah Law School, I then was writing proposals. So for the last 15 years, I've written proposals and I've seen, uh, preference given to small bidder certified companies or small business certified companies or, uh, veterans or women owned or minority companies. 10% is, is used in a lot of industries and it's, I didn't see a problem with it. It was seemed fairly standard and you got it or you didn't. And sometimes we got the bid, sometimes we didn't. It seems like a lot, but, but that just, you just arbitrarily picked that it could be 5%, could be 2%. Yeah, I just arbitrarily arbitrary. I just picked that based on my own experience, uh, bidding on projects over the years. And so if Representative MacPherson changed it, then you A hundred percent. I like that. Thank you. Okay, thank you. So it was trying to be enough. I've seen it where it, it's enough that it might tilt the scale a little bit in Utah's favor, but not enough that it's going to shift the entire project to somebody that is significantly less qualified.

Okay. Thanks. Um, Jason, um, I jolly I'm representing myself. Um, this is just more question because I find this fascinating. Um, I'm just wondering what prompted, uh, the bill in the first place? Like, is there a problem that's trying to be solved or is this just, um, you know, putting a preference out there to put Utah first? Um, so it's more of a question than, um, a statement.

Oh yeah. I reside in Orem. In Orem. Okay. Or Utah. Alright. Yeah. Okay. And then House District 56, if that helps.

Thank you Mr. Chair. I'll, uh, make a motion to favor favorably recommend HB five 11 First substitute. Oh, do we need to adopt still the first sub? First sub? I'll withdraw my motion and make a new motion to adopt the first substitute.

Will th make a motion if that is in the chair's, uh, desires then that, uh, we pass out, uh, SB five 11 first substitute, uh, from this committee with a favorable recommendation.

Just, uh, I, I think it's a very interesting, fascinating, uh, idea. Um, I, I'm curious about how, uh, what, what the fiscal side might say about, um, you know, additional captured revenue even from, um, preferencing Utah companies in some ways. Um, I'd be curious to find a little bit more, but I think it's a discussion worth bringing to the floor and, and discussing. So that's my motion. Thank You.

Thank you. And, uh, there is an amendment on line now with a one word change. There is an amendment on line. Uh, would you like to explain the amendment? Yeah, it, uh, just as a technical change on line 2 41, that changes the word bidder to vendor, uh, in the technical system and the procurement. The, what is, what this would apply to is, uh, vendors is what this section of the procurement code it would actually describe and not bidders, so legal term. Okay. Alright.

You. Uh, I move amendment one in Representative Shallenberger's name.

So the concept behind this bill is, uh, looking at, uh, the procurement as companies, uh, uh, applied to different projects across the state. This is for, uh, projects where you'd, uh, applied to an RFPA request for proposal, an RFA request for, um, application, I think, or, and A RFI request for information. And you would apply. And for these projects, and typically they base these awards, uh, to a vendor off of a scoring matrix. What is your bidding, uh, application? Your ba your background, what is your proposed method of accomplishing this project? What is your price? What is your, uh, expertise in this field? And you get a score on a line item for each of these things. And the intent behind this is as people bid on these programs, especially in-state versus out-of-state bidders, if scores are pretty similar on the outcomes between an in-state bidder and an out-of-state bidder, we would prefer to give the edge a slight edge to a Utah bidder, uh, that keeps the money in the state. That helps Utah companies and Utah people develop those skills, develop the know-how, and develop those, uh, uh, attributes and become better, uh, at what they do. So it helps improve, sorry, it helps improve the skill and experience with the company, with the individuals and the money in our Utah economies. So that, with that background, uh, in this bill, it, it directs procurement to, as the bids come in to look at the companies are, have they been registered in Utah for at least a year? Are they headquartered in Utah? And are they registered and in good standing with the division of corporations and commercial code? So it'd be easy to implement on their side. If a company submits a one page, it's called Cate certificate of Existence, it lists all that stuff. When did they, when were they established? Are they in good standing and what their address is? So it'd be fairly easy to implement. And uh, and, uh, we would give them a, as they do their look at their matrix, their evaluation points, we'd give them a 10% bonus. So if it's within a 10% window, we would prefer the Utah company to get that slide edge. And that's the presentation. Okay. And would welcome any questions or comments. All right.

Yes. Thank you Madam Chair question, um, on this 10%, uh, and I, I think really see what you're doing here with giving preference to, to our, uh, people who are residents or businesses that provide jobs and stuff in Utah, I like that. But on the 10%, is that tied any way to the price? Because that could be really expensive on 10%. That's a good point. I, uh, then that came up before I meant to clarify that it doesn't affect the price, uh, the bidding price. It doesn't affect the price paid out on the contract. All it, the only thing it does affect is, is they create their scoring criteria. Uh, it gives them a total overall criteria score. It doesn't affect the contract price or the bidding price. And it does not apply to, uh, like low lowest bidder type contracts. So it doesn't affect any of the pricing stuff, only the scoring to award the actual contract.

So I, I worry about, uh, competitive neutrality. I, I think we have to worry about taxpayers, right? What's the value to taxpayers, payer payers? What's the transparency? So this bill explicitly requires, uh, one that you should use resident suppliers if possible, right? Uh, giving re resident suppliers greater opportunity to compete. I that, that's not too bad awarding additional evaluation points. It's, this is not neutral encouragement though. It's, it's a structured favoritism. And I, I think that these type of protectionist policies tend to reduce efficiency. They reduce, uh, com competition. They could increase long-term cost. Uh, artificial advantage sometimes reduces pressure to innovate. And, uh, so so you're saying they have to be a Utah based company, so that means they, how, how, how is that defined?

Uh, it's, so it's defined on line 2 25 where preference for Utah suppliers, and the intent is not to stifle competition or anything like that. If so, if multiple in-state bidders are applying, everyone is treated equal, and if multiple out-of-state bidders are applying, everyone is treated equal. Uh, I've, so I've, I've helped write proposals over the last 20 and 30 years and it, it's fairly common practice depending on what type of area you're in. Sometimes, uh, people have designated maybe a certified small business that they want to help help certified small businesses. So they might give a bonus to that group or, uh, disadvantaged businesses that might be women owned or minority owned or veteran owned. Uh, and so we are looking at it this, this way, not trying to stifle competition just as the end score comes up saying if all things being equal, one is from Utah, one isn't, we would like to give the edge to a Utah company.

So, so you, you've eliminated then the possibility of like Shell Utah headquarters.

Well, It's not about, it's not about their access, right? It's no, it, everybody's welcome to, to provide, I mean, to compete, everyone's willing to bid on it. And so it tries to outline it and it's trying to pe to trying to stop people from game gaming the system or create a shell company. Um, so they wanna be registered in Utah, have a principal place of business here in Utah, and be in business for at least one year. And all of that is listed on the certificate of, um, of good standing that is issued by the Department of Corporations. So it's, it's this balance of trying to prevent, prevent people from gaming the system, but also not making it burdensome on, uh, the procurement office where they have to go through and grade all these, these things. And, and the intent is to work with the procurement office and over the year and see how it goes and, you know, is it gonna affect five contracts? Is it gonna affect a hundred contracts? And come back and say, this is the net e economic impact on the state of Utah. This is the, what it's doing for the state of Utah and tweak it or adjust it if we need to.

So does this mean like tomorrow we might have a rural supplier preference or veteran owned preference or minority owned preference or in county preference? I, I, I just don't understand.

Those are possible. Those are, those all exist right now in different communities and different bids out all over. So the, the all those are real things.

Well, and, and sometimes depending on what the project is, um, the cost might is definitely gonna be a portion of the scoring criteria. It might be 20%, it might be 80% and that they would get a score in the scoring criteria. But the state, or depending on what the project is, they might say the price is important, but expertise is significantly more important for this one, for a nuclear project or something for instance, or a mining project or something. You would want someone that actually knows what they're doing, not somebody that can just be the lowest bidder and it might vary. Or, Or if that's a Utah company, 'cause they might not. Or if it's Right. And so the, yeah. So price is gonna be a factor and it really is dependent upon the agency and what the project is to come up with how they create their weighted scores for their project. Okay. Thank you. Yeah.

Well, I, I, I hate to move the agenda, but I, I just, I, you know, Utah's procurement system has long been built on a simple principle fair competition and best value for taxpayers. And I, I just, I, I, I hate going down the road of giving preference to one group over another. And, uh, you know, if, if, you know, fair competition, best value for taxpayers, I, I don't think we should penalize people 'cause they're in state company, in state companies may be able to have an advantage on delivery times. Other things, you know, if they hold inventory. So, you know, to give them a 10% scoring advantage, though, I, I think, you know, does that outweigh, you know, it's easy to say, well, as long as everything else is equal, we're gonna give 'em a 10% advantage. But that's not really what it says. So I, I dunno, I just can't support this bill.

Yeah. Okay.

Thank you. I would encourage a, a positive recommendation if possible. I mean, I think this is a way to help the people of Utah, especially anytime that we're struggling, help give them the skills, the experience, and, and boost the economy in areas that we're looking for ways to help help the economy and help people out there. So it's a way to work forward. And if we come back next year and say 10% is maybe too high or too low, I, I don't know. It might, we might come back and adjust it, but I think it's worth trying out and let's see what the, what the positive effect is gonna be.

Nothing. Thank Okay.

Reading clerk First substitute house Bill five 11, procurement amendments by Representative Shallenberger. This bill was assert in government operations with the vote of 11 0 1 Representative Shallenberger.

Thank you Mr. Speaker Pro Tem. Uh, this bill comes from the question we were asking of, are there what looking at, uh, our state and finding ways to increase, uh, money into our economy, increase skills of the workers in our state and become a better overall stronger state. Uh, in the procurement division, their job is to, uh, produce bids, to analyze bids and, uh, proposals. RFAs, which are requests for abstracts, RFIs request for information. And so is what we're doing is, uh, passing a bill that as they take these bids for their different proposals, as they look at, uh, in-state bidders versus out-of-state bidders, and they look at the scoring matrix, whether it's the pricing or, uh, the experience of the bidder, the proposal that they're submitting, the background, where they're from, their, uh, their, just their different approach as they look at the different scoring matrix. Uh, we wanna give in-state bidders a little bit of an edge. So if the final scores are at all close, we want that edge to be given to Utah bidders. Let that money stay in the state, let that experience and the skill development stay within the state and become an overall stronger state.