ASSEMBLY COMMITTEE ON GOVERNMENT AFFAIRS

MINUTES OF THE meeting

of the

ASSEMBLY Committee on Government Affairs

Seventy-First Session

April 5, 2001

The Committee on Government Affairswas called to order at 8:14 a.m., on Thursday, April 5, 2001. Chairman Douglas Bache presided in Room 3143 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Mr. Douglas Bache, Chairman

Mr. John J. Lee, Vice Chairman

Ms. Merle Berman

Mr. David Brown

Mrs. Vivian Freeman

Mrs. Dawn Gibbons

Mr. David Humke

Mr. Harry Mortenson

Mr. Roy Neighbors

Ms. Bonnie Parnell

Mr. Bob Price

Mrs. Debbie Smith

Ms. Kathy Von Tobel

Mr. Wendell Williams

GUEST LEGISLATORS PRESENT:

Speaker Richard Perkins

Assemblyman David Parks

STAFF MEMBERS PRESENT:

Eileen O’Grady, Committee Counsel

Dave Ziegler, Committee Policy Analyst

Linda Utt, Committee Secretary

OTHERS PRESENT:

Daniel K. O’Brien, Manager, State Public Works Board

Cheryl Blomstrom, Lobbyist, Nevada Chapter of Associated General Contractors

Steve Holloway, Executive Vice President, Associated General Contractors

Jim Sala, Director of Organizing, Nevada Carpenters Union

Colleen Wilson-Pappa, Lobbyist, Clark County

Ted Olivas, Purchasing and Contracts Manager, Clark County

Mary Walker, Lobbyist, Carson City, Douglas and Lyon Counties

Madelyn Shipman, Lobbyist, Washoe County

Warren Hardy, Lobbyist, Associated Builders and Contractors Association

Mark Stotik, Nevada Independent Council for Worker Justice

Assembly Bill 414: Authorizes removal of manager of state public works board under certain circumstances. (BDR 28-670)

Chairman Bache opened the hearing on A.B. 414 and stated the committee would act as a subcommittee until they reached a quorum. He introduced Speaker Perkins to present A.B. 414.

Speaker Perkins, Assemblyman representing District 23, introduced A.B. 414, which provided another vehicle to remove the Public Works Board manager if the need arose.

Speaker Perkins gave the members of the committee a background on what prompted a request for the bill. He said as a current and longstanding member of a “money” committee who met during the interim session they often dealt with the Public Works Board projects. Also, at any given time they had as much as a half a billion dollars worth of projects under construction. He became alarmed because currently the Public Works Board manager served the board and the Governor appointed all members. There was no immediate connection between the manager, who was in charge of a half a billion dollars worth of projects, and any elected official who was responsible to the citizens.

Speaker Perkins stated prior to the current manager they had some real difficulties with projects that were being built. The most prominent project of concern was the Lied Library in southern Nevada. Up to the day the library was to open, the Public Works Board manager said they would be on schedule. The library was not only delayed, but was a full year late in opening with approximately three to four million dollars worth of change orders. Change orders were instituted at the field level and any such orders were presented in front of the Interim Finance Committee or the money committee members. Those members looked at the change order and had an option to either approve or deny the change that required more money. If they denied the change order someone would not get their building and it would not open.

Speaker Perkins said the Public Works Board had difficulties with many current projects and another project was the Veterans’ Home in southern Nevada. The money committee’s only recourse was to deny additional money for projects. The committee did not wish to harm people that would benefit from the use of the projects like the veterans in the Veterans’ Home or the students at the Lied Library on the University of Nevada, Las Vegas (UNLV), campus.

Speaker Perkins respected as a whole the diverse group of the Public Works Board who contributed to the job on their own time in a volunteer-type situation and were appointed from various sectors of the state. The budget director was the chairman of the board but was in a part-time situation with a full-time manager. Speaker Perkins always believed somebody accountable to the voters should be the person or persons that controlled over half a billion dollars worth of projects in our state.

Assemblyman Lee expressed concern when the lines of authority included both the Governor and the board and both duties were given to individuals. He looked at the checks and balances. If the Governor was unhappy with the manager for cost overages then he could ask for his or her resignation. However, if the board felt the Governor did not understand, they could try to resolve the problem. Mr. Lee said an example would be his partner firing his general foreman without coming to discuss the situation with him.

Speaker Perkins said A.B. 414 was his concept and he did not give the bill drafters much direction. Speaker Perkins also explained he would have wanted more legislative oversight and because of the separation of powers, the decision fell in the Executive Branch. Speaker Perkins said he would not have trouble if the decision were left entirely up to the Governor. He worked in an organization with strict chains of command and only one boss. He understood receiving conflicting direction from two separate authorities caused confusion and if the committee wished he would have no trouble changing the chain of command.

Assemblyman Lee replied the chain of command would be from the Governor to the manager and then to the board. He questioned if the person who served at the “pleasure” of the Governor also served more than the “pleasure” of the board.

Speaker Perkins said the manager could be appointed by the Governor and serve at the “pleasure” of the Governor. The Governor appointed the board and worked in conjunction with the board managing whatever processes occurred under review.

Assemblywoman Berman asked if a manager was poorly appraised would he be given a period of time to correct errors or would he be out of work immediately. She stated A.B. 414 looked like they would immediately have to pack up and leave.

Speaker Perkins advised Ms. Berman he understood the current manager was an “at will” employee of the board and therefore if the board felt the manager did not perform their job at a sufficient level in their mind they could request dismissal immediately. However, the board would need grounds to remove that person.

Assemblyman Lee asked Speaker Perkins if he would have a problem removing the “board” referenced in the bill and replacing it with the “Governor” may remove the manager. Speaker Perkins stated he personally had no quarrel but others might have reasons why that would not work. Speaker Perkins said he could not think of a reason why that would not work.

Assemblyman Neighbors said he thought of three different areas that had projects with the Public Works Board. He also confirmed a nursing home and a multimillion-dollar project had created an undesirable situation in southern Nevada. Mr. Neighbors expressed his support on what they attempted to accomplish with A.B. 414.

Speaker Perkins summarized by describing the level of frustration the money committee had experienced when trying to do things for veterans, the university system, and other projects that, through oversight, ended up months behind schedule. Another example was located at one of the state prisons in the south. There was a decision made by somebody, not the Legislature, to not build a gymnasium at one of those prisons for recreation for the inmates. Speaker Perkins felt the decision was one of public policy and should have been made by the Legislature. Speaker Perkins brought the bill on his behalf for the committee to review and the examples he spoke about were just some of the difficulties he had experienced.

Assemblyman Mortenson mentioned to Speaker Perkins he disagreed with Assemblyman Lee and thought A.B. 414 was better the way it was written. Mr. Mortenson felt the board had more intimate contact and would see problems arising before the Governor became aware.

Speaker Perkins explained to the committee the current make up of the board and the current manager were moving a lot more smoothly than they were a year and a half ago. He worried about future potential difficulties that might occur based upon the history of some of the projects.

Mr. Bache said he liked the way the language was set up because if there was a disagreement between the Governor and the board, it would become a public item and would be handled appropriately. He also liked the language “inefficiency, neglect of duty, malfeasance or for other just cause,” which clearly showed where the focus was and why you would want to remove a director of public works.

Daniel K. O’Brien, Manager, Public Works Board, stated he reviewed A.B. 414 and as it was written would have no problem with its functions. He understood the situation where you had two bosses and the questions that might occur. Mr. O’Brien remarked if the committee took a position where he answered directly to the Governor or the Governor was responsible for him he would have no problem. Hypothetically when entering similar positions you became an at-will employee and if there was unsatisfactory work one should move on. He had no problem with the way the bill was written or if it should be modified to have the Governor take over that control. He was open to discussion.

Chairman Bache stated he liked the bill as written because if there was a dispute between the Public Works Board and the Governor it would come out in the public.

Assemblyman Berman asked Mr. O’Brien how the change orders would become so out-of-control they took a year to finish a project. She also wondered if everything was up to him because he was the last person in the chain of command.

Mr. O’Brien noted the manager had the authority to approve those change orders. One concern was a change order with a major change in scope. Mr. O’Brien understood the Interim Finance Committee or the Legislature had problems if something was cut out of the project and they were not aware of it. Mr. O’Brien made a commitment to the Legislature any time there was a major change in scope there would be a review as to the purpose of the change. He also said they would fully examine and work on the definition of a change of scope. Obviously, if they put a 1000 bed unit into a nursing home and the bed count was changed to 999 he questioned whether that should be considered a major change. Those were the things that had to be worked out, but he thought that eliminated this type of a problem. If the board was to approve change orders on hundreds of projects that were minor in nature there would be numerous construction delays. Some changes necessitated working during the time the project was going on so they would not have to wait 45 days or up to two months for approval. The board still had to have that approval process but only if it was quick. Mr. O’Brien confirmed the major problem he and the board had dealt with was the change of scope issue.

Assemblyman Brown questioned Mr. O’Brien about projects like the Lied Library and asked if the Public Works Board typically had someone full time at the site. Mr. O’Brien confirmed they had two full-time inspectors on location at the site. He noted they had problems with inspector turnovers and had a hard time keeping them in the southern part of the state. Mr. Brown asked if the project manager was an employee of the state. Mr. O’Brien stated yes.

Assemblyman Neighbors said the Veterans’ Nursing Home had problems way beyond change orders. They had cracked walls and some doors did not shut. He was aware they were trying to fix everything. Mr. Neighbors said to Mr. O’Brien he knew he was trying to fix the problems that had occurred and felt he would be the right man for the job.

Assemblyman Mortenson stated he thought one of the big problems at the UNLV campus Lied Library was not a change order, but an under-design of certain beams that needed to be replaced. When that happened, he asked, who was to blame? Mr. O’Brien replied there was one change order that was submitted and theorized it was not the fault of any specific individual or structural engineer. There was confusion on the original design for the book stack areas and unfortunately the library people and University unknowingly requested and approved a different shelf stacking setup. When that happened, the load on the floor increased. Originally the floor was designed for 150 pounds per square foot but the new type of stacking system was denser and had a greater load per square foot and required the floor be strengthened. The problem stemmed from a communication issue and the Legislature was never advised.

Assemblyman Neighbors asked if one of the reasons the inspectors quit was lower wages. Why was there such a turnover? Mr. O’Brien stated there was competition with Clark County and the cities of Las Vegas and Henderson for inspectors. The state’s wages were significantly lower and therefore the state was losing one inspector per week. He knew of one inspector they lost last week from the south and was now working for Washoe County with a $15,000 increase in pay. Those inspectors looking to improve themselves moved on to other positions. The same problem occurred throughout the state and after the state spent time to train the employees, they were enticed to better paying jobs elsewhere.

Cheryl Blomstrom, Lobbyist, representing the Nevada Chapter of Associated General Contractors, supported A.B. 414. The contractors had a keen interest in public works construction because it was the lifeblood of their industry. They had observed the problems with the State Public Works for a number of years and had spoken to Speaker Perkins about a year ago. One of the contractors’ suggestions was to encourage the board to convene more often. After discussions with members of the board they were told the board was willing to be on top of current situations. The contractors suggested a change might be made in the second sentence where it said, “the board or the Governor.” Ms. Blomstrom suggested a change to “board and the Governor,” so that those two worked together and made the decisions whether the manager stayed or left.

Chairman Bache closed the hearing on A.B. 414.

Assembly Bill 428: Revises provisions governing state public works board. (BDR 28-229)

Chairman Bache opened the hearing on A.B. 428.

Mr. O’Brien testified he worked closely with Assemblyman Hettrick because of concerns regarding the change in scope of a project and some of the problems that went on within construction. Both Mr. Hettrick and Mr. O’Brien had no major concerns with A.B. 428.

Mr. O’Brien said one item in Section 1 referred to the board member who failed to attend three successive meetings. Board members who missed the three meetings were not informed and the Governor was allowed to appoint another individual to replace the missing member. The board had no objections to that provision.

Another key item was members of the board having knowledge of specific areas such as administration, engineering and architecture. Mr. O’Brien felt it was important and necessary for members of the Public Works Board to have expertise. Mr. O’Brien stated he thought they had expertise already on the current board but knew Assemblyman Hettrick wanted to make sure criteria was established for expertise. Mr. O’Brien said he knew the Associated General Contractors (AGC) made additional requests for criteria on the board and would like to address that section of the bill at that time.

Mr. Steve Holloway, Executive Vice President, AGC, spoke both for the northern and southern part of his agency. Mr. Holloway said he worked with Mr. O’Brien on A.B. 428 and both supported the bill with some amendments.

Mr. Holloway said the AGC asked that in the section referred to by Mr. O’Brien at least one of the appointed members have experience as a prime contractor. One of the things they both noticed over the years was that a few years ago designs of public works were on average 90 percent complete. In recent years, they were lucky if a design received from a public works entity was 75 percent complete. Subcontractors took advantage and submitted extraordinarily low bids knowing there would be change orders. An experienced contractor on the board helped facilitate the review of some of those designs for constructibility. Very few architects had actually built something and some designs were not constructible. Both wanted a provision for the state Public Works Board to employ a contractor as part of the design team to ensure that the design could be constructed. Twenty years ago almost every public works project went to a contractor they knew for advice before they approved their plans, resulting in fewer problems compared to the problems they currently experienced.

Mr. O’Brien gave an explanation of Section 3, subsection 7, regarding the change in scope. The requirement stated before any change in scope occurred in either the design or the construction, legislative approval was needed. Mr. O’Brien felt the legislators should establish criteria through the regulation process that would set criteria for a change of scope. He understood criteria would be reviewed by the Legislative Council Bureau (LCB) in order to protect the interests of the Legislature but suggested they add the phrase “criteria for determining a change in scope shall be developed by the board.” Another item of concern was the specific period of time in which the design professional prepared and submitted the authorized change order from the board. In the past there was a long period of time from Construction Change Directive (CCD), authorized by the architect or the project manager out in the field, and modifications made followed by change orders. The provision allowed them to set up the contract that a design professional must present as soon as possible and the contract specified the time in which they needed to complete the process.

Mr. O’Brien sought to change the word “board” which referred to the “design authorized by the board.” Line 31 would be changed to the “design professional” because it was a change order that had been authorized by the “design professional” originally out in the field. Mr. O’Brien said other changes proposed referenced the lowest bidder and should be changed to the “best” bid. Lowest bidder also was referenced in line 48 and line 5 on page 3. The best bid provisions were what the state tried to receive and was why they wanted to change the “lowest bid” to “best bid.” He was aware “best bid” caused problems with a lot of entities even though the section only referred to the state Public Works Board, but since there were other references to “best bid” they would leave A.B. 428 the same way it was currently worded.

Mr. O’Brien said Section 5 had a provision that was already in statute that referred to where they could hire a contractor to assist the board in designing construction. The provision was there with approval of the Interim Finance Committee or the Legislature and stated it would assist the architect. After review, all references to “their” were changed to the “board” and the “and construction” was added to the design “and construction that services” which assisted the board in the design and construction.

Mr. Holloway then went through the amendments he and Mr. O’Brien agreed upon with AGC and presented Exhibit C to the committee. Proposal 1 insured that one of the members of the board would be an experienced contractor. Proposal 2 was to substitute “best bid” for “lowest responsible and responsive bid.” The only major change that this amendment provided was to delete section 5, lines 6 through 49 on page 3, and lines 1 through 18 on page 4. What AGC wanted to do, on page 2 of the amendment, in order to provide state government with another tool, especially the state Public Works manager, was to provide the capability of employing a contractor to assist in the design but not preclude that contractor from bidding on the job. Secondly, as an alternate means of ensuring the completeness of designs and the constructibility of design the architects and engineers also employed a contractor to review that design to ensure that it was both complete and constructible. There was also proposed cleanup language with the amendments submitted.

Chairman Bache asked if their amendment in Section 5 would amend NRS 341.149. Mr. Holloway replied that was a mistake. Chairman Bache reviewed with the committee NRS 341.161 and stated the language was confusing and wanted to clarify in Section 5 their proposal was to delete that section altogether. Mr. Holloway replied yes and that was because of the expirations in that section and also they did not like the language and wanted to have the section completely deleted.

Mr. Holloway suggested the proposed changes be looked over once again to make sure they were in agreement and then resubmitted to the committee at a later date. They proposed to change the phrase “best bid” to “lowest responsible and responsive bidder” and requested that the change be to the “state.” The board could accept bids on either the whole or a part of the construction equipment, or furnishings, and may have separate contracts for different and separate portions of any project or a combination contract for structural, mechanical, electrical construction. If savings resulted it said “original to the lowest bidder,” but instead of “lowest bidder” the savings were actually to the state. His wording would say, “If savings would result to the state.” Again, he proposed they go back and work with Mr. O’Brien to make more sense of their proposals and bring them back to the committee.

Assemblyman Brown asked if the public works used construction managers for any of the projects or would they only use a general contractor. Mr. O’Brien replied they have not been using construction managers.

Assemblyman Brown expressed concern over the proposed change in Section 5 where the contractor was able to consult on the project and turn around and submit a bid. Mr. Brown said he might be able to work through that, but did have some discomfort with the process. He wondered if they could hire a construction manager to do that review for the board rather than a general contractor who would be competing with others for the bid.

Mr. Holloway responded to Mr. Brown’s concerns and stated contractor, prime contractor, construction manager, and general contractor were almost synonymous and most general contractors do very little of the work themselves. They usually functioned primarily as a construction manager. For some public works projects the construction managers were required to do at least 15 percent of the work but if that was troubling they could delete the area that allowed the contractor to subsequently bid. Mr. Holloway said it did give them an advantage but sometimes it could persuade them from bidding if they knew about the job and therefore it could work both ways.

Assemblyman Lee asked Mr. Holloway what he considered a responsive bidder. Mr. Holloway said a responsive bidder would be somebody who responded to the form, the manner and scope of the specifications in a timely manner.

Mr. Lee noted from their testimony they received a lot of bids but were not getting the communication coming back and the paperwork submitted was not adequate. Mr. Holloway replied most public works agencies kicked out bids if they received forms that had not addressed all the specifications.

Mr. Lee commented he did not see a problem with a company looking at the plans and then bidding on the job later. He knew plans for different projects were made and in order to lower prices there were substitutions in materials. Requests for Information (RFI) happened often when waiting on the architect to return to the job and the general contractor required work to be continued. Mr. Lee remarked a contractor would do drywall and then the architect would change his mind and drywall was not wanted. That became a change order because they did not receive timely responses from the architects. Mr. Lee indicated many of the problems stemmed from cost overruns because architectural decisions were not completed fast enough. Mr. Lee wondered if the contracts needed tightening up to be more responsive to the subcontractor.

Mr. O’Brien felt the board should examine their policy and procedures to prevent consultant delays in responses. Mr. O’Brien said that was a contributing factor along with delays in Requests for Information. The Public Works Board needed to develop procedures to currently review all of those delays like the library and the veterans’ home and knew improvement was necessary.

Mr. Lee explained another concern was saving money. He questioned if another mechanism would work after the job was awarded to the contractor and a discovery was made that would reduce the cost of the job. “A lot of people felt that they are looking down the barrel of a gun.” Sometimes they worked for free because if they did not do the job the way they were told it would upend the rest of their contract.

Assemblyman Brown asked if A.B. 428 governed the counties or just the state. Mr. Holloway replied it just governed the state.

Chairman Bache asked Mr. O’Brien how many members were on the board. Mr. O’Brien said there were seven members including the director of administration. Mr. Bache asked if they had a problem with members not being present when the board met. Mr. O’Brien said he understood there were problems with absences and thought that was what prompted the provision.

Mr. Bache mentioned he was most concerned with the language in subsections 7 and 9 in Section 3. He wanted to see more control with the board and wondered if approval could be obtained from the Interim Finance Committee when the Legislature was not in session if a change was issued in scope of design or construction of a project. He wanted to be sure they were not micromanaging those projects for every change order or change in scope of a project.

Mr. O’Brien appreciated Mr. Bache’s concern, but projects like the gymnasium at the High Desert State Prison were affected by not waiting for the proper approvals. His biggest concern was the definition of a change in scope and their commitment to bring them back for review.

Assemblywoman Berman asked if scope had anything to do with money and what the monetary figure was on a project and if it depended on square footage. She needed to have clarification. Mr. O’Brien said sometimes something would happen in the project, which required the contractor to move money from one part of the project to another part. If money was moved it was not available to do some of the other work. Mr. O’Brien said because of unforeseen things on the sites they ended up having to reduce the money available. He felt it very important to let the Interim Finance Committee or the Legislature know when they were moving money and part of the problem was lack of communication and awareness of ramifications of that kind of a change order.

Ms. Berman asked Mr. O’Brien if he tried to put a square foot size and monetary amount in a statute. Mr. O’Brien said they asked to be allowed to set criteria through regulation that defined a “change of scope.” He did not want to bring every little change order before the Interim Finance Committee and the Legislature. Mr. O’Brien said the definition was most important because if they left one bed out in a prison that would change the scope of the project.

Ms. Berman asked legal counsel Ms. O’Grady if it was possible to define scope. Ms. O’Grady said they could, either by square foot, price or size of a project.

Mr. Brown stated scope would be relative to talking about magnitude in terms of a percentage of the total contract price or in terms of time for construction. An example would be anything that impacted a project more than 30 days. Mr. Brown suggested a “catch all” discretionary phrase that said “also at the discretion of the manager or the board when deemed of sufficient impact on the project.” Also, those were terms of the criteria he felt they discussed when they mentioned terms of a regulation.

Mr. O’Brien said that was correct and it was Assemblyman Hettrick’s concern that when something changed so significantly they should not leave decisions up to the manager, as had been done in the past. Mr. Brown added they also needed to consider time for construction, and change of scope was not just a monetary issue. Mr. O’Brien confirmed Mr. Brown’s statement.

Mr. O’Brien noted he would also be discussing the next bill, which was A.B. 461 and suggested they move some of the provisions included in that bill to A.B. 428. He said the qualifications of bidder provisions as they related to the state might fit better in A.B. 428 and wanted the committee to know discussion was made to move those provisions. Mr. O’Brien knew Assemblyman Hettrick was supportive of anything to help make better projects and improve the provisions of the qualified of bidders.

Chairman Bache closed the hearing on A.B. 428.

Assembly Bill 461: Revises provisions relating to qualification of bidders on certain contracts for public works in this state. (BDR 28-591)

Assemblyman David Parks, District 41 in Clark County, stated he represented A.B. 461, which revised procedures relating to the award of bids for state and local government public works projects. He said often the lowest bid was not always the best bid and gave several examples. A contractor might underbid everyone else only to come back later demanding changes and asking for greater compensation. Another may submit a faulty bid and realize he was unable to do the job for the money amount. Lastly, a bidder could be inexperienced and unable to perform up to expectation. Over the last two years the Public Works Board saw two projects where contractors who were given large contracts on construction projects were not prepared to perform per specifications. The results were substandard workmanship, long delays, disputes, and numerous costly change orders.

Mr. Parks stated the intent of the bill was to better prequalify bidders in order that the work would be performed to specification, constructed in a timely manner, and not result in costly renegotiations. The additional up front work on the part of the owners would lessen the likelihood of future problems.

Assemblyman Williams requested a clarification on the reference Mr. Parks made to the problems incurred by using the lowest bid. He asked what criteria would be used other than the lowest bid and if they would have prequalified as a standard to determine if they could do the job.

Mr. Parks stated Mr. Williams was correct in his assumptions and would then be able to establish who would be qualified for a potential construction project before the bids would be solicited. Often there had been the acceptance of a low bidder knowing full well the lowest bidder had a series of problems on prior construction activities. Either the quality of the construction work had been inferior or the project resulted in lengthy delays. The prequalification took a number of factors into consideration and was fairly detailed in how it asked for requirements that needed to be satisfied. Mr. Parks said the process was not going to be easy for any of the public works managers to put together and would require a tremendous amount of up front work. Mr. Parks acknowledged the up front work would outweigh the poor quality that potentially resulted.

Mr. Williams verified those questionable companies and also the relatively new companies would seek those contracts only to find out their high hopes and visions really did not meet the standards for the job. He hypothesized they would then have an opportunity to know exactly what they would need and possibly would obtain help in the pre-bidding process. Also, the pre-qualification would, over the long term, be an advantage because construction companies would not get the reputation as a failure during the process they wanted to use in A.B. 461.

Mr. Parks responded to Mr. Williams’ statement and clarified it did present a problem for smaller contractors who were just starting their businesses and had no track record. Mr. Parks noted the two projects that seemed to have the highest profile currently with the State Public Works Board were the Lied Library on the UNLV Campus and the Veterans’ Home in Boulder City. Those two projects used contractors who had never done a project as big or had no past experience in the type of construction required. Consequently, they encountered significant problems and difficulties.

Mr. Williams commented, based on Mr. Parks’ last statement, for someone new and just starting business, how would the state be fair in their prequalification process? Mr. Parks deferred his answer to an expert on the provisions of the current statute who could answer his concerns.

Assemblywoman Parnell stated she would like to add another project to the list just given by Mr. Parks and that was the infamous swimming pool in Carson City that was still not complete. She liked many things about the bill and felt it was a disservice to all involved to only use the lowest bids. The quality and reputation of the company were very important. The selection process of prequalifying would take a number of issues into consideration besides just the lowest bid. Ms. Parnell said it was critically important for jobs to be completed in a timely manner with the quality that was expected. She thought again “best bid” was certainly what they were looking for rather than just low bid.

Assemblywoman Freeman asked why they were taking out the public hearing. Mr. Parks said there was current policy or procedure in place at the present time and was only substituted with a different procedure. Mr. Parks said his proposal had the same amount of hearings but more steps than the existing statute. Mr. Parks stated the payoff was going to be, hopefully, a much better project and a little less risk of having to possibly end up accepting a facility or structure or project that did not live up to our initial expectations.

Chairman Bache advised that Mr. Parks’ bill coordinated with Mr. Hettrick’s bill and since he referenced “best bid” was concerned that best bid, in and of itself, opened the door to things not intended and asked Mr. Parks to comment. Mr. Parks said he really had no comment other than the possibility of some unintended consequences. He hoped A.B. 461 would better address those issues. Mr. Parks was open to suggested amendment revisions and knew it would be a substantial change from the way things were currently done.

Mr. O’Brien testified he was in support of the intent of A.B. 461 and knew it would help the state facilitate successful construction projects (Exhibit D). As the manager, he was responsible for a significant amount of the state’s money when it came to the construction of state projects and felt the qualification of bidder provisions within the bill were one tool that was really needed to make sure they had successful projects. As currently written, the qualification of bidder provisions in NRS had no “teeth.” Mr. O’Brien said in 1997 criteria was set and would have worked well with the Public Works Board but the Seventieth Legislative Session basically “gutted” the provisions. Of all the real provisions that allowed them to qualify bidders, the current criteria were so limiting it would be a waste of the state’s time to prequalify. Under those current provisions there would be no contractor who would be disqualified. The proposed changes were intended to help local government address some of the construction problems that allowed better provisions.

Mr. O’Brien said the State Public Works Board held meetings with local government and they had some concerns with “best bid” and it is definition. Mr. O’Brien said he represented the state and tried to look out for the best interests of the state. If someone hired a contractor to do a major addition to their home they would not choose an individual who had prior experience building storage sheds. The same situation applied if they had a $47 million project and a contractor had never built a project like that before. Mr. O’Brien was not sure someone would want to hire that contractor and questioned if they were even qualified for that project.

Mr. O’Brien stated the “best bid” provisions that were in the proposal might not be workable by local government and he understood their concerns; therefore, he recommended they be allowed to go back to subcommittee where he believed Mr. Holloway could address some of his provisions and get wording that allowed them to pick the bidder that had the best past performance. Mr. O’Brien said he could revise the wording in a few days and would also look at the section regarding public hearings and knew Mr. Holloway preferred that section be left in the bill. The reason they proposed to take it out was that NRS 233B already had provisions for the board to adopt regulations and within that section it set up the public hearings and notification of the agencies. The board was required to notify anybody who wished to be on the mailing list. The contractor could post higher bonds if not qualified, and then become qualified. Currently the wording stated the decision by the governing body was final and did not allow for appeals. However, with the final decision the contractor could post additional bonds and become a qualified bidder again. Therefore, the board was requesting that provision be removed.

Mr. Brown asked Mr. O’Brien where that particular language or provision was located. Mr. O’Brien said it was located in Section 338.1383 of NRS and was located in Section 15 of the bill. Mr. Brown stated it was a good idea to go back and work on A.B. 461 because there were some touchy issues regarding past performance that should be reviewed. If there was a problem with design it could trickle down to the contractor or subcontractor in terms of qualifying for bidding due to past problems. Any time a “laundry list” was created for disqualification or evaluative purposes they were subject to review. Someone could question a contractor’s judgment but have no other complaint or show favoritism that would “kill” a bid.

Assemblywoman Von Tobel asked if the language stated the contractor had violated any Occupational Safety and Health Administration (OSHA) standards within the past 36 months and asked if it was common to have violations on projects. Mr. O’Brien hoped that was an uncommon situation and suggested possibly a representative from the contractors’ association might better address her question.

Ms. Von Tobel thought if someone walked on a job site and saw one person without a hard hat they would be in violation and huge projects could have several violators. Mr. O’Brien said Mr. Holloway suggested wording that addressed her concern and included contractors with not more than five serious safety citations during the past two years. He had explored quantifying the wording because if fined they would have been found in violation of a safety or health standard. Again, it was not just one violation but would set criteria for repeat offenders. That was why a lot of the proposed provisions needed to be quantified.

Mr. O’Brien stressed if local government had concerns they might put this bill with the other bill. Right now the provisions, the qualifications of bidders, were a requirement of the State Public Works Board. It was an option to local government and Mr. O’Brien did not support a change in any way, but thought they would be able to improve both bills.

Jim Sala, Director of Organizing, Nevada Carpenters, said he did not work for a public agency and was not a lobbyist or lawyer. Mr. Sala stated he supported the intent of A.B. 461 but did not support the bill in its current form. The pre-qualification of bidders was important. He believed that the pre-qualification or qualification of bidders had been mixed with the best bid concept which was basically a performance-based issue based on the performance on projects that already took place. Pre-qualification worked well with the school district in southern Nevada and was the only group to fully implement the process. In 1997 and 1998 the Clark County School District had a terrible time with their projects, creating cost overruns, numerous change orders, and costly delays on their projects. After the implementation of pre-qualification, their projects were better managed and timely in completion. Contractors who worked on the Veterans’ Home and the Lied Library on the UNLV campus were not qualified to do school construction projects. Mr. Sala noted he was concerned if A.B. 461 deleted the public hearing that allowed public comment. The school district held public hearings, which he stated was a good process. The AGC, interfaith coalition, some community groups, and the carpenters in building trades all participated in that process and came up with good pre-qualification language. The other issue that should be deleted was 338.1383 in NRS, which gave an exemption for unlimited licensed contractors. In conclusion, Mr. Sala believed combining pre-qualification and best bid language would be very confusing. He felt those two issues needed to be handled separately.

Ms. Colleen Wilson-Papa, Lobbyist, Clark County, testified they sympathized with the issues faced by the Public Works Board but were concerned with the effect A.B. 461 would have on some of their bidding processes. Clark County met with the State Public Works Board and local governments but other affected parties did not attend the meeting. Ms. Wilson-Pappa requested AGC and all parties work on the bill to gain concurrence.

Chairman Bache stated she spoke in general terms and requested to know what portion of the bill they specifically objected to.

Mr. Ted Olivas, Purchasing and Contracts Manager for Clark County, responded to Mr. Bache and said their concerns centered on the two-step process for evaluating. Mr. Olivas said the process identified some additional criteria up front through the hearing process that needed to be reviewed and noted the pages that included those elements. They started on page 5, line 43, through page 6, line 10. On page 11, line 38, he asked what happened after the bids were received, after the contractors became qualified to submit a bid on a particular project. After all the bids were received the bill then said evaluations were made on violations of OSHA standards, civil judgments and violations regarding wage, hours, standards and other things. They believed all those items should be reviewed up front before the contractor became qualified for a bid. Once contractors went through the qualification process and the Public Works Board reviewed all of those elements, then the bidding process was just a question of whether they submitted the bid appropriately rather than looking at all the responsible elements. He said additional factors should not be reviewed after the bidding process but once a contractor became qualified.

Mr. Olivas said there was discussion about the best bid. When the best bid provision was put into NRS 338, it specifically dealt with bidder’s preference and was awarded to the lowest responsive and responsible bidder unless bidder’s preference was going to change the board’s mind. Mr. Olivas gave an example of what bidders preference meant, using a million-dollar project with bids received for a million dollars and a million and forty thousand respectively. The million and forty thousand-dollar bid was within five percent of the lowest bid and the lowest bid had not met the requirements of bidder’s preference. The award would go to best bidder, which in that case would be the bidder who was within five percent of the lowest bid who met requirements for bidder’s preference. Mr. Olivas explained there should be clarification between a low responsive and responsible bidder and a best bidder. There were some concerns with the use of the term and the board only dealt with the best bidder if bidder’s preference changed their position on how to award the contract.

Assemblywoman Berman thought the board took the “best bid” that was responsible and responsive and those two words appeared in NRS. Mr. Olivas responded he could not speak on behalf of the previous bill since he had not participated in those discussions but “best bid” and “low responsive and responsible bidder” were located in NRS 338 and awarded to the low responsive and responsible bidder and the term best bidder came in if there was a bidders preference. Ms. Berman confirmed the bid would go to the first one in his example but then it would go to the “best” if it were in the five percent range. Mr. Olivas stated she was correct.

Cheryl Blomstrom, representing both chapters of the Associated General Contractors (AGC), the Nevada Chapter as well as the Las Vegas Chapter, applauded the intent of A.B. 461, but they could not support contractors deliberately bidding to become the lowest bidder only to request a change order or anything else that was discussed during the hearing. Ms. Blomstrom believed up front work, which might include prequalification, additionally included complete constructible plans and an adequate review of what was going into the building before a bid could be accepted. The AGC felt those changes made a larger impact on public works bidding in the state of Nevada than other parts of the bill. The AGC proposed some amendments and would be happy to work with the sponsor of the bill and Mr. O’Brien at the State Public Works. Ms. Blomstrom said AGC’s major concerns were with the bill as drafted and how it might create unintended consequences unless the criteria were more objective and measurable. Ms. Blomstrom referred to the testimony from Mr. O’Brien regarding the range of OSHA violations. OSHA had individual inspectors who might score differently for a missing hard hat or might never look at a particular job site. The AGC worked hard to ensure that serious violations never occurred but worried criteria could be perceived as somewhat subjective. She said additionally they were concerned for the language that said “any additional factors.” That was unclear to them and they wanted that verbiage more clearly delineated.

Ms. Blomstrom said the AGC shared Mr. Olivas’ concerns about the two-face process. If they received a pre-qualification process they believed the most appropriate way to award a public works job was to the lowest responsible, responsive bidder and they would continue to support that concept. Another concern related to criteria on page 12, line 3, which stated “any civil judgments . . . against the principal personnel of the contractor.” Ms. Blomstrom would not speculate on whether the judgment was a punitive-related activity. There could be a small claims matter over a bent fender, which would not necessarily relate to a contractor’s performance.

Mary Walker, Lobbyist, representing Carson City, Douglas County, and Lyon County, said her groups worked with the AGC and the interim committee on the design bill to come out with a design bill proposal, which was another bill in the current session. Ms. Walker said the Carson City Pool project was the “poster child” of poor construction. Their District Attorney’s office looked at the pre-qualification process as written into law and determined because of the way the law was written they could not eliminate anyone that was a poor contractor. Even if they determined the contractor was not qualified, the contractor could bond around to become qualified. Ms. Walker said that was why Carson City did not use the pre-qualification process for bidding on the Carson City Pool project. Stronger language would have resolved many problems. Several contractors saw some of the low bid contractors at the pre-bid conference and knew they would not receive the contract. The best contractors did not bother to bid because they knew the low bidders would receive the contract. Most comments from the counties she represented were in regards to “best bid.” Therefore, they requested time to work with the sponsor and other interested parties.

Madelyn Shipman, Lobbyist, representing Washoe County, said they concurred with other local governments but assumed there might be some amendments proposed today but understood they were not prepared. Washoe County needed time to work with the sponsor and would like to have Mr. Parks’ concept be heard in the next session. In Washoe County there was never any difficulty determining a responsible bidder. The County could turn down a bid if there was documented evidence that held up in a court of law to indicate a discretionary determination.

Warren Hardy, Lobbyist, Associated Builders and Contractors (ABC) in Southern Nevada and the Sierra Chapter, stated most of their concerns were referenced and he looked forward to working with the sponsor of the bill.

Assembly Bill 562: Revises certain provisions concerning qualification of contractors on public works projects. (BDR 28-715)

Jim Sala, representing the Nevada Carpenters Union, said A.B. 562 dealt specifically with the issues of pre-qualification and gave a brief history of how he became involved with the bill. His concerns addressed quality construction from contractors who avoided public works projects. The same contractors who worked on the public works projects cheated quality contractors repeatedly. Ordinarily when they cheated workers they cheated in other places, such as change orders, quality of construction, etc. Mr. Sala explained his organization began to work on this bill in 1999 and worked closely with the school district to put together language that closely mirrored the language in A.B. 562.

Mr. Sala stated prevention was very important and leaned towards prevention more than compliance. He commented that language which spoke about “lowest responsible and responsive bidder” was meaningless because there was no definition. No attorney would risk a case to disqualify the lowest bidder based on that language. Agencies stated that once the bids were in and one was awarded to the lowest bidder, if they tried to remove them they received lawsuits. Mr. Sala shared with the committee his feelings on prequalification. The advantage was if the bidder was not qualified they had no vested property rights so they could not sue if they felt overlooked in the bidding process on a project. The school district had disqualified contractors with the existing language in statute but Mr. Sala said the carpenters would like it to be stronger.

The Nevada Carpenters met with the school district, the AGC, ABC, the Interfaith Coalition, and the building trades and all agreed on the prequalification language, which primarily was mirrored in A.B. 562. Mr. Sala addressed some specific issues of the bill. On page 3, lines 30 to 33, where it talked about the principal personnel, the groups found they already practiced this procedure based on the existing statute. They wanted a good definition of what that meant if people violated the laws with either the labor commissioner, OSHA or other entity. Page 3, lines 17 to 20, pertaining to adding a records violation, any records that related to a violation or an alleged violation of a law regarding the prohibition or discrimination of employment, hourly wage, occupational safety and health standards or labor relations was not very clear. The school district added specifically the reason behind the violations. Prevailing wages in Nevada was of epidemic proportions and 95 percent of all wage projects had some kind of violation. There was misclassification, wrong payment of wages, no payment of overtime, and specifically on the Veterans’ Home there were charges where workers were being paid cash, no workers’ compensation, no Social Security, no taxes, and they were asked for kick-backs of $200 to $250 a week when they were paid. Most of those contractors took that money and if caught by the Labor Commissioner, would wait 18 months to 2 years and then make a settlement agreement. Contractors never went to a hearing over discrepancies and settled violations with an agreement that said, “We didn’t do anything wrong, but we are going to pay them all the money we owed them.” The carpenters thought the language in A.B. 562 was important and needed to be clarified.

The other thing left out last legislative session was the written safety program on page 3, lines 43 and 44. The Carpenters Union said they just entered what was left out to enforce a written safety program establishing the provisions of NRS 618.383. Most of the agencies had not checked the safety program but it was required to have that program. Currently there were contractors working on public works projects that did not have a program or a safety director. That could be one reason why contractors reported more safety violations.

On two separate issues on page four, lines 19 through 27, it said, “The State Public Works Board or governing body may: (a) maintain a list of the applicants whom it disqualifies for a project; b) Qualify an applicant for a single job or on an annual basis.” Mr. Sala emphasized the importance of the section because bids could not be done on a project-by-project basis and therefore completed. Lines 25 through 27 contained qualifications of a general contractor, which stated “As used in this section, ‘applicant’ includes a general contractor, a subcontractor or a specialty contractor who makes an application pursuant to this section.” That was important because the other interpretation by attorneys was that it only applied to the general contractor. Subcontractors and specialty contractors did 95 percent of all the work done on projects of construction. While the general contractor might have been reputable it was subcontractor bids that drove him from the lowest bid and those subcontractors were where 90 percent of the violations originated with safety violations and workers’ quality of performance. Even though the general contractor was held responsible, the awarding bodies needed to have some ability to weed out subcontractors who were habitually bad performers, as well as the general contractors. Mr. Sala supported the clarification of that definition.

Mr. Sala said the carpenters also would like to remove the exemption for contractors with unlimited license or bidder’s preference under 338.1383, as was referenced in A.B 461. They would like to see that portion deleted that referenced their exemption.

Mark Stotik, Nevada Independent Council for Worker Justice, supported the bill. He stated many workers claimed companies who worked on public works projects cheated them and those problems occurred repeatedly. The bill protected workers from abuse while being employed on public works projects. It was important for taxpayers so their money was not spent on illegal activities. Mr. Stotik said prior testimony questioned an OSHA citation. The council felt that might not be a reason for disqualifying someone but each body should have access to the creditability to make a decision.

Assemblyman Lee asked if Mr. Stotik could explain the Inter-Faith Council. Mr. Stotik said their membership included twenty-four Muslim, Christian, Jewish and Ukraine clergy. They had ten members in Reno and fourteen members in Las Vegas and all worked as advocates for better working conditions of low-wage and immigrant workers as well as improved employer behavior in the area.

Mr. Lee referred to page 3, line 13, and questioned, “experience.” If someone with experience was always allowed to receive the project then how would a beginner gain “experience” and contribute to a family’s success and a company’s future success? Mr. Lee asked Mr. Sala what his thoughts were regarding “experience.”

Mr. Sala stated the language regarding “experience” was from Fred Smith, Director of Construction Facilities for the Clark County School District, and Bill Hoffman. They utilized the concept in the school district elementary schools, middle schools, and high schools by prequalifying some contractors. Building costs were high and he gave price examples for the different grade levels of schools. An elementary school was up to ten million dollars; a middle school was closer to twenty-five million; and high schools were nearly forty million. If the construction facilities for the school district had a small beginner contractor they would start them at a level they thought they could handle; after they proved themselves they moved them to a more difficult project. The district construction facilitator bracketed that relative experience into types of constructions. If the contractor had built schools before or if they built block buildings or two-story buildings or whatever they happened to be building was the level of experience indicator. That was something that was more important to them when this criterion was developed by the school district.

Per Mr. Lee, line 32 stated, ”a foreman and a person who owns any part of the applicant” in principle or personnel, but if you correspond that with any civil judgment, criminal conviction against a principal personnel, that indicated to him a foreman could affect the whole company and a foreman could be someone who was just hired for that job. He hypothesized if the foreman was new in the area and was given a crew of men and they put ground work in and did not do a very good job, it reflected back on the new foreman. It seemed very broad to Mr. Lee and he wanted further discussion.

Mr. Sala explained specifically with subcontractors many times the highest-level person on the job site for that contractor was the foreman. He referred to a case he testified on in the Senate. It involved Keith Marias Drywall and Jet Stream Construction and both of those company’s foremen were engaged in the falsification of the documents on prevailing wage. They engaged in kickbacks and were the recipients of money along with going to houses of the workers to place threats. Mr. Sala said sometimes the employer needed to take a good look at their foreman and not assume things are not being done wrong. The carpenters did not want the owner to say, “I am the owner of the company, but I had no idea that was going on and you can’t hold me responsible for that,” because most of the time they were aware of the problem.

Assemblyman Brown stated he agreed with some of their comments and also earlier testimony from the AGC’s representative. He also agreed with the removal of the exemption that provided unlimited licensing.

Assemblywoman Smith was concerned about what the foreman mentioned on page 3, line 32, but looked at it from an opposite point of view. She felt the foreman might not be involved and not aware of what happened at other levels of the company. Often the foreman only worked on that one project for a company and did not really know anything more about the company. She understood for a foreman there were times when they could be intimately involved with different aspects of the company’s business. It could work both ways and she wanted the committee to take that into consideration.

Daniel K. O’Brien, Manager, State Public Works Board, felt they had covered all the main issues and felt they could incorporate some of the good provisions of the bill into what they were discovering in the hearing.

Ted Olivas, Purchasing and Contracts Manager for Clark County, confirmed they had a great deal of discussion with the Carpenters’ Union and the Inter-faith Council about the prequalification process.

Warren Hardy, representing AGC of Southern Nevada and the Sierra Nevada Chapter, understood and was in agreement with the intent of the legislation. AGC had concerns and objected in the strongest possible terms to some of the issues that were brought up in the hearing. The section that related to “civil judgment,” on page 3, line 15, and any records that related to a violation or an alleged violation presented an opportunity where due process could be eliminated and people would not have an opportunity to defend themselves. Any records that related to a violation presented an opportunity where due process could be eliminated and the potential existed where allegations could be made with the express purpose of eliminating somebody from prequalifying for bids on public works. They understood the intent and the reason that they needed that section but wanted to work on some verbiage.

Mr. Hardy said they were also interested in the verbiage on line 12 that said, “must give consideration” where it spoke to financial ability, it said, “may.” Mr. Hardy mentioned Mr. Sala’s testimony about occasions when people would settle these claims and pay the wages and perhaps cover up a bad activity. He summarized there needed to be some very specific clarification of that portion of this bill.

Chairman Bache closed the hearing on A.B. 562.

Chairman Bache spoke to the committee and stated he read through both A.B. 461 and A.B. 562 and his intent was to consolidate the two bills into one bill with the various parties working together to resolve issues. Chairman Bache spoke with Assemblyman Parks who would work with the AGC and Mr. O’Brien to resolve the proposed amendments by April 16,the committee deadline date.

Chairman Bache adjourned the meeting at 10:46 a.m.

RESPECTFULLY SUBMITTED:

Linda Utt

Committee Secretary

APPROVED BY:

Assemblyman Douglas Bache, Chairman

DATE: