MINUTES
Advisory Commission on Intergovernmental Relations
Thursday, April 27, 2006

The Louisiana Advisory Commission on Intergovernmental Relations (ACIR) met on April 27, 2006, in the John J. Hainkel, Jr. Room located in the State Capitol Building. Chairman Ronnie Harris called the meeting to order at 1:50 p.m.

Chairman Harris dispensed with the roll call and approval of minutes due to the lack of a quorum. The following members were present:

Mr. Guillot said today's meeting is a follow-up to a directive by the legislature in 2003 that authorized political subdivisions to receive electronic bids in public works contracts subject to uniform standards being developed jointly by ACIR in cooperation with the chief information officer of the state. He said the commission has been receiving information to try to develop the standards.

Mr. Guillot said House Bill 820, which passed the House and is out of Senate committee, would allow political subdivisions to independently, working the contractors' associations, come up with standards for electronic bids in public works contracts until such time as uniform standards can be developed statewide by ACIR and the chief information officer.

Mr. Guillot said the Office of Facility Planning conducted an electronic survey, through a list serve of the National Association of State Facility Administrators, on who was bidding for construction projects, electronically. He said the responses are provided in the handout materials entitled "E-Procurement." The survey indicated places where there were some efforts in public works construction but they still don't have a good feel in terms of the degree and how broad it has been in each of these states.

Chairman Harris, referring to House Bill 820, asked if another piece of legislation will have to be introduced and adopted in order to implement the uniform standards for electronic bidding or does this bill allow for uniform standards once they are accomplished by the administration.

Mr. Guillot said if House Bill 820 passes as currently written, a political subdivision, if it is able to come up with an understanding with the contractors' associations, could develop standards and work independently until such time as there was a uniform standard set statewide. The uniform process will be implemented by administrative rules issued by the state and would not require further legislation.

Chairman Harris asked if the uniform standards will supercede House Bill 820 and Mr. Guillot said yes.

Councilman Roussel asked if the state presently has an electronic device mechanism.

Mr. Guillot said the state is doing electronic procurement for goods, supplies, and materials.

Councilman Roussel said the information from the state of Idaho in the handout materials references a joint military system that was developed for this purpose and is available at no cost for states that want it.

Mr. Guillot said he will obtain more detailed information about the system.

Chairman Harris asked if something uniform exists for procurement on the government side.

Mr. Guillot said that a survey conducted by Denise Lea with the National Association of Procurement Officials, which is also included in the handout materials, indicates that 40 different states are conducting electronic procurement, at some level. It is not unique, he said, the uniqueness is applying it to public works contracts. He added that only four other states responded that they had worked with electronic bidding in public works contracts.

Mr. Guillot introduced individuals that own and develop products to do electronic procurement, Mr. Brian Utley, CEO and Chris Kennedy, VP of Professional Services of Periscope.

Mr. Utley said Periscope is based out of Austin, Texas and they have an electronic procurement system they have implemented in New Orleans. In New Orleans, he said, they do purchase orders and contract management electronically but they can't do the electronic bid process. Mr. Utley said they have learned everyone does it a little differently. He said they like to see states set up uniform rules that allow the local governments to set in place their rules for how they are going to handle that process.

Mr. Kennedy said they have worked with counties, cities, and school boards all around the country. He said he will comment on some of the concerns they see at the local level relating to accepting electronic bids both internally and also from the vendor community. Mr. Kennedy said often the challenge is the concept of electronic signatures and how that will stand in court. Despite the fact that you can cite a number of attorney general findings throughout different states that electronic signatures are accepted, there is still a lot of reluctance there. He said a statewide approach to electronic signatures makes sense and can help deal with some of those concerns.

Mr. Kennedy said another major area of concern they see is from the vendor community, related to security. If I am submitting a sealed envelope, I know it will not be opened until the bid opening. How do I know that will be the case with something I put online? It is really important that you approach these things where there are requirements for encryption, for use of something like a lock box, where until the bid opening date and time that you can't access the bid unless you are the actual bidder.

Mr. Kennedy said that at the local level one of the biggest issues is concern around the access for local companies. He said we do a lot of business with the "mom and pop" store down the street and if we are going to go to a fancy electronic system they may not be able to deal with that. How can we make sure that they still have access to our bid opportunities? Frankly, he said, they think it is best not to restrict it to electronic bidding, but to also maintain some paper-based process.

Mr. Kennedy said, more technologically, another concern particularly important with public works projects are how do you deal with things like bid bonds, certifications from different associations, like minority or small business certification authorities, and licensing agencies, etc. He said with most systems that is something that is done manually. He said you do see some electronic means for authenticating bid bonds and certifications with a licensing agency. Mr. Kennedy said this is something that has affected the efficiency of dealing with things like public works projects.

Mr. Utley said they are here to answer questions and offer assistance. He said it is a great process to put in place for efficiencies and the costs you are going to save but, at the same time, how does everyone benefit instead of being lost in an electronic system.

Councilman Roussel asked how many government agencies did they deal with and in those dealings how many mistakes did they run across.

Mr. Utley said they find a lot of mistakes in every implementation they do. He said the biggest problem is when they move someone over to electronic bidding or electronic registration, is how to take them from the vendor data base and port them over to the system? He said a lot of local entities make the mistake of thinking it will be real easy and it is not. It is a marketing process to get them moving. The best thing I have seen an entity do is bring key vendors to the table, small, medium and large to help them understand how to market when they go live.

Chairman Harris said in Louisiana we have all these jurisdictions that we are trying to make uniform so that everybody can get on board but your first comment made me understand that there are so many states out there and some standards, such as electronic signatures, have to be alike. This could be defined by legislation.

Chairman Harris asked where, in comparison to other states, is Louisiana in the development of this process? Are we still so new that everybody is reluctant or is the process getting to a point of proficiency that more states can pick up and we can almost be like E-Bay.

Mr. Utley said the standards they implemented in more than 30 states are username and pass code. He said that's the security measure. They have never had an instance where that doesn't work for a digital signature. So if you're going to sign a document with a digital signature the person that holds that username and pass code that implements that onto the document makes it legal.

Chairman Harris asked the name of the product used for electronic bidding. Mr. Utley said the product is Bi-Speed. Mr. Utley said there are hundreds of products. He said they also work with the National Institute of Governmental Purchasing and they manage a product with them called NIGP Code and it codes products and services.

Chairman Harris asked if that could be a type of governmental committee that could help standardize the definitions.

Mr. Utley said they talked with them last week and suggested NIGP contact the commission about some of the standards they have seen. He is also talking with a client from Tennessee on the NIGP that helped set up the rules in Tennessee. He said NASFA is another great organization that has gone through this. He said the rules are there, people have done this already, so they would be a good resource in looking at the kind of standards they are setting up.

Chairman Harris said he wants to make sure there is an independent body that can give oversight and that we are not listening to one vendor.

Chairman Harris, referring to Mr. Kennedy's comments on access, bid bonds, certifications, mistakes etc. said in paper bidding someone usually leaves something out of the document. In the electronic bidding process, because it is an electronic check list, in your experience have you found proficiency in the application to a greater degree than hand written bids.

Mr. Utley said he has not seen a situation where someone got disqualified for leaving out in the electronic bid process.

Mr. Kennedy said with a manual process, typically, there is someone looking and keying into a bid tab system and with some public works projects there may be innumerable lines they have to key in. Whereas, the premise of most electronic bid systems is that it is done by the vendor and once submitted it is never touched.

Councilman Roussel said from what he understands the system could be set up where it would not accept a submittal if they forget a category.

Mr. Utley said yes. The commission might want to include that in their rules, notification if all information isn't provided.

Chairman Harris said he is excited about the concept and he sees the possibilities and capabilities. Referring to the concerns previously expressed about the "mom and pop" businesses he thinks they are a lot more advanced than we give them credit for. Due to the technicalities and requirements of doing work for government it seems they could come up to speed rather quickly. He said he doesn't see it as a big hurdle.

Mr. Utley said it actually increases participation. He said there is a state they work with that is prohibited from putting out what is called a bid holder's list, which is a list of who is bidding on the project. He said to have access to a bid holder's list really promotes underutilized businesses and it could help you better identify businesses to participate. Mr. Utley said the commission may want to include the requirement of a bid holder's list as it is also an access point the larger vendors can choose from to help them on projects.

Chairman Harris acknowledged Mr. Utley's willingness to help and that the NIGP would be interested in conferring with the commission and said he'd like to take them up on both offers.

Mr. Guillot said Ms. Denise Lea will provide the commission with information from a NASFA survey conducted by Jerry Jones. Mr. Guillot said he will check back with the state of Tennessee and the NIGP to see if they have information we could use.

Chairman Harris said knowing that we have some other things to check on how are we doing with the pending legislation.

Mr. Guillot said House Bill 820 is going to the Senate floor next week and would become effective upon signature of the governor. It should not deter us from coming up with uniform standards that are workable.

Chairman Harris asked what happens if the law passes, all the parishes and municipalities start developing their own standards and then a year later we have uniform standards. Is everything they did for naught? He asked how quickly can we implement uniform standards for electronic bidding.

Mr. Guillot said the process that would finalize the recommended standards would be through an administrative rule. Mr. Guillot said the CIO could promulgate emergency rules that would take effect immediately and then it would take 120 days for a permanent rule.

Chairman Harris asked if there is a prime governmental body that is pushing this thing so much. You mentioned New Orleans has it on the front end, are they ready to jump on this. Mr. Utley said they are ready.

Chairman Harris said he doesn't want to stand in anyone's way if they are ready to proceed because he believes in the concept. He said he doesn't want rules to be promulgated to where their investment in time and consultants to get their own uniformity is radically changed by some rule that we adopt.

Mr. Guillot referred the commission to "Workgroup recommendations" in their handouts. He said the workgroup is offering these recommendations to the commission to consider as a beginning point for minimum standards, particularly "C" which lists the online service provider minimum requirements. Mr. Guillot read the Workgroup recommendations which provide that an electronic bid is to be an alternative, rather than exclusive method to a paper bid; additional advertisement information required for accepting bids electronically; and minimum requirements for online service provider. The standards are more fully described in the document.

Chairman Harris said they covered a lot area that a vendor can provide. I guess we'd be relying on the vendor for the security/encryption, they are the ones that would be the secure body. So, how do we develop specs for the vendors because there are hundreds of companies that would like our business.

Mr. Guillot said we need to get feedback from the CIO's office.

Mayor Normand asked about protests (microphone was not working and tape did not capture the specific question).

Mr. Utley said he has never seen a protest because the bid was done electronically.

Mr. Guillot said we are not starting from ground zero with the CIO and the legislature, as we have enacted the Uniform Electronics Transactions Act and the electronic signatures. We have an administrative rule at the executive level on electronic signatures and we also have a series of standards and policies applicable to the executive branch that covers several areas, including security.

Ms. Denise Lea, state purchasing director, said she listened to the discussion of procurement online which was directed at public works but are you also trying to address your materials and goods, which is in R.S 38:2212.1? Ms. Lea said you are not addressing that.

Chairman Harris said due to the testimony last meeting I was thinking more of materials and supplies than other projects.

Mr. Guillot said it is confusing. He said the legislation was amended in the part of the law that only applies to public works contracts. That, he said, is the reason for the difficulty, where you have the additional impediments such as the bid bonds and a few other things that wouldn't necessarily occur in just procurement of supplies and goods. Mr. Guillot said if we are interested in going that route, of opening up to political subdivisions the procurement side of this for goods and supplies, we need to get with legislators to try to amend legislation that may in the process because right now political subdivisions do not have that authority.

Chairman Harris said he misunderstood. He said he thinks it is the will of those present that we do want to make sure something is addressed. Please guide us and/or mention this to a legislator. If we had a quorum, I would ask for a vote for an official recommendation.

Mr. Guillot said the ACIR had been asked to study alternative methods or electronic procurement, particularly in the area of reverse auctions. He said there is no authorization at any level of government in Louisiana to conduct reverse auctions. Mr. Guillot provided the commission with the following: Senate Bill 738, authored by Senator Duplessis, which authorizes the use of reverse auctions under the Procurement Code and by political subdivisions. He said the legislation was submitted from the standpoint of having an instrument in the system should the will of the commission be to move forward on the issue.

The next document provided to the commission is the result of a survey of the National Association of State Procurement Officials conducted by Denise Lea.

Ms. Lea said it is important to note that in most states the offices will be divided into the office that is handling construction and then another office that is handling materials, supplies, and services. Her survey, she said, did not duplicate what Jerry Jones is doing by surveying the facility planning organizations throughout the states, as she is surveying all the state purchasing offices throughout the states.

Ms. Lea said that in material, supplies, and operating services 40 of the states are doing electronic procurement in some form or fashion. She said that could be from posting bids on the internet to receiving bids online, to doing bid tabulations to being integrated into the financial system where the requisition starts from the beginning and goes all the way to the end to electronic payment. In Louisiana, she said, we have the ability to do an online procurement all the way up to posting the bids to skip receiving the bids on line but then doing the tabulation all the way to paying the check. Ms. Lea said we have pieces and parts already in place but we do not do online bidding yet. The survey, she said, is self-explanatory but pointed out that just because a state says they are doing online procurement does not mean they are doing the full breadth.

Chairman Harris asked and Ms. Lea clarified that state governments were surveyed, not local governments. She also added that, typically, your colleges and universities are operating independently in these states. She said Virginia and Maryland are probably the most progressive.

Chairman Harris, referring to Senator Duplessis' bill, said it states that the bidding provisions shall not apply when a political subdivision purchases materials, supplies, or equipment using a reverse auction. Does the way it stands negate the information you have acquired.

Mr. Guillot explained the bill stating the current law does apply for it so we are creating an exception to paper.

Ms. Lea stated that we are dealing with materials and supplies in reverse auctions.

Mr. Guillot said the bill, at this point, only deals with materials, supplies and equipment, not construction.

Chairman Harris said a couple of years ago the LA Municipal Association had a presentation by the Kentucky League of Cities who is very much into reverse auctions. A lot of time has passed since that presentation but it did impress me and it would be worth our while to look into it. At our last meeting, I noted a lot of disenchantment with the construction aspect and I don't want to treat that line of thinking as a run away train. I would like to take a good hard look at what is possible and if there is another side to that story. Chairman Harris said he is going to contact the executive director of the Kentucky League of Cities to see if she can't send us some information relative to reverse auctions and to see what experience they have had relative to construction projects.

Ms. Lea said she also saw the presentation by the Kentucky League of Cities and it was very impressive.

Ms. Lea also provided a study the state of Minnesota conducted. She said this is the only state she is aware of that conducted the study to where every time they did a reverse auction they also received a hard copy bid. In some of the cases, she said, the sealed bid beat out the reverse auction. There is a theory, she said that typically, when you go into the reverse auction the vendors will get to a point where they low ball and they will hurt their profit margin and they won't service the product. This study proved the sealed bid was in fact coming in low in some of the cases and it also showed some commodities where it didn't work and reflects very little participation from the vendor community on those commodities. Large vendors tend to participate in the auction more than small vendors. It showed reluctance from the agency standpoint of wanting to venture off to this type of procurement.

Chairman Harris said electronic bidding is something everyone is fairly comfortable with and reverse auction is yet another type of animal. Is it a progression type of thing, more specific, more entailed?

Ms. Lea said that reverse auction, in other states, has been the first thing they have done because it has been an easy win. She said we have been one of the few states that have not ventured off into reverse auctions. All the other states have been doing it for some time now.

Chairman Harris asked why is that, in your opinion?

Ms. Lea said she doesn't necessarily think it is a bad thing. A few years ago there was a wave where reverse auctions was introduced and everybody was financially in good shape and many of the states jumped on, created systems, and got into contracts. Then, all of a sudden, the states went through a budget crunch all over and we saw everybody slow down. Now we've seen reverse auction almost peak and now it is starting to taper off. The fact we didn't do it, I don't consider a bad thing. Financially, she said, we were having trouble coming up with funds to fund basic needs so why spend that on a reverse auction tool.

Chairman Harris, referring to the legislation in 2003 that instructed ACIR to look at electronic bidding, asked where else has this been spoken of in the state of Louisiana? He said he thinks it has just been absent. Other states have discussed the issue and implemented it and we are still at the point of discussing. Has anything else been done that we ought to learn from the experience of someone else?

Ms. Lea said, at the state level, a lot of the colleges and universities have implemented systems and the state has implemented a system. She said these systems cost quite a bit of money and so I think, initially, when the wave began the initial outlay of cash was not there and states were looking at different funding models. She said some of these states got very creative in their funding models and went out on bid and had the vendors pay for the system. Ms. Lea said some of these states were putting transaction fees onto the vendor community every time they put out a purchase order through the system. Those states, she said, have a lot of lessons learned because they did it that way and their systems basically failed because the vendor community came out in an uproar because they didn't want to pay for those transactions. Ms. Lea said not necessarily being on the cutting edge is a good thing, there are a lot of lessons learned. We do have experience in it but I think we are better off. The funding piece is what has been holding everybody back.

Chairman Harris asked if the funding piece is a high threshold to get into it or is it a vendor driven type of thing.

Initially, Ms. Lea said, it is very expensive, now it is tapering off. She said you can now get contracts where you pay per auction. The way the budgets are set up, if state purchasing implemented a system to do a reverse auction, state purchasing would pay for the reverse auction and the savings would be realized by the agencies. Those are some of the pieces that need to be worked out.

Mr. Guillot said the next item in the handout is information that was given to the Workgroup by Derrell Cohoon which is a white paper on reverse auctions from the Associated General Contractors of American. He said this is the position paper from the construction end on reverse auctions. As stated at the last meeting, the construction industry is not in favor of being subject to a reverse auction setup.

Mr. Guillot referred the members to the next handout which is a copy of SB 640 filed by Senator Duplessis which authorizes political subdivisions to sell surplus movable property over the Internet. He said Senator Duplessis filed the bill as a result of discussions at the last meeting and it is already on the Senate floor. Basically, you still have to go through the process of the governing authority declaring its property no longer needed but then it would allow you to sell it over the internet.

Chairman Harris asked Mr. Price, a newly appointed member of ACIR representing the Louisiana School Boards Association, for comments regarding the issues discussed today.

Mr. Price stated that he was very impressed and this is the line we need to be proceeding insofar as electronic bidding and reverse auctions. He said the local school system has looked at trying to get electronic bidding on some projects and other school board systems are also being approached to look at electronic bidding because of the cost savings. He said they believe there is a cost savings to be realized and they want to save money wherever they can to enable them to put more money into the classroom.

Ms. Johnston, representing the Department of Education, said they try to utilize the internet wherever possible. She said the department doesn't buy the same as school boards buy but they do go through a lot of paper and similar items. She said their grants management system that they just instituted was piloted with some of the bigger federal grants and they are also doing electronic payments to local school boards. Ms. Johnston said the department is looking to streamline in any way they can and she believes it would be something they would utilize.

Chairman Harris referred to Ms. Lea's comments about the cost of the system. He said Councilman Young from Jefferson Parish is a big proponent in getting the individual, uniform law passed because Jefferson Parish is ready to move forward. Whether it is a parish or a combination of parochial, municipal, and school boards, if somehow there can be some understanding and coming together to say this system can work, we want to do it but we share in the cost of implementation in order for everyone to benefit. I don't know if that should be done at a parish level or at individual school boards and councils of the parish and municipalities or if it should be done through associations. Chairman Harris said he is trying to figure out if there is a high threshold in cost, whether it is the implementation of electronic bidding or reverse auctions. He said he doesn't want to see someone left on the sideline because they don't have the resources to get involved.

Mr. Guillot said we could at least start with the associations in terms of getting representatives of the associations to see what the problem is and let us work it out. As Ms. Lea mentioned, the methodologies of financing can come from a myriad of different ways. Probably, the difference at the state level, state purchasing is considered different from the Department of Education and in the general scheme of the appropriation process, at times, feels they are sort of going for the same dollars. There will have to be coordination at both the state level and with other levels of government in terms of how we can do it, i.e., an arrangement where it can be more vendor driven in terms of the financing; state driven; multiple level driven; combination of the above; or participation fees at the vendor level and at the governmental level. He said there are a number of ways we can approach this and all those need to be explored.

Chairman Harris said we all operate under Louisiana law so anything I do in Gretna you have to do in your community. Possibly, he said, we could look into the possibility of the legislature providing a special appropriation to fund the system for all of us to share in and benefit. Chairman Harris said he thinks that is what government is suppose to do and that is what he'd like to broach with the commission.

Mr. Guillot said the remaining documents contained in the handouts are information he gathered from the Internet relative to the states of Florida, Maryland, and Washington as it relates to what they are doing with electronic bidding.

Following discussion, the next meeting was tentatively scheduled for May 25 at 1:30. (The meeting date was later moved to June 1)

There being no further business before the committee, Councilman Roussel made a motion to adjourn. Mayor Normand seconded the motion and there being no objection, the commission adjourned at 2:55 p.m.

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Ronnie Harris, Chairman