"... the perception in the construction community is that the process has slowly deteriorated so that it is no longer fair or expeditious."
- Rep. Holm
"An Act relating to protests of state contract awards, to claims on state contracts, to the arbitration of certain state construction contract claims, and to hearings and appeals under the State Procurement Code; making conforming amendments in the State Procurement Code; and providing for an effective date."
Construction claims occur when the parties to the contract disagree as to whether a specific element of a project is within the scope of work defined by a construction contract. For projects undertaken by the State of Alaska, the Alaska procurement code defines a process for resolving these differences.
Ideally such a process should resolve differences in a fair and expeditious manner.
At this time, however, the perception in the construction community is that the process has slowly deteriorated so that it is no longer fair or expeditious. As now prescribed, when a contractor files a claim, the procurement officer involved with the claim initially evaluates the claim and issues a ruling on the perceived merits. If the contractor is not satisfied, an appeal is made to the procurement officer's supervisor.
There is no review by an independent party unless a contractor elects to appeal the supervisor's decision. Even then, the hearing officer is selected by the State, which raises a concern about the true independence of the hearing officers, since the State has sole discretion to maintain the hearing officer list. Delays are rampant. Justice is delayed. Contractors are forced to expend money defending their claim, but that money cannot be recovered in the process. Small contractors cannot afford to participate in the claims process because of these costs. Claims of less than $250,000 are frequently not pursued because of the great expense involved. The entire process is ripe for review and revision.
The purpose of HB 250 is to modify the construction claims process to once again create a fair and expeditious claims process. Specifically HB 250 will modify the procurement code pertaining to construction claims in the following manner:
If a procurement officer does not issue a written decision by the due date, the contractor may seek arbitration.
On appeals of all construction claims, the parties can agree to binding arbitration.
The timelines for decisions have been tightened, and redundant requirements have been eliminated.
An arbitrator or hearing officer who does not issue a decision by the deadline is disqualified for a year.
Qualifications for arbitrators and hearing officers will be established by the commissioner of administration in regulation.
The contractor is entitled to recover some of the claims costs incurred.
Prompt passage of HB 250 will expedite contractor's claims and return fairness to the process.