COMMONWEALTH OF PENNSYLVANIAHOUSE OF REPRESENTATIVES
APPROPRIATIONS COMMITTEEBUDGET HEARING
DEPARTMENT OF GENERAL SERVICES
STATE CAPITOLHARRISBURG, PENNSYLVANIA
ROOM 140, MAJORITY CAUCUS ROOM
WEDNESDAY, MARCH 1, 20173:00 P.M.
BEFORE:HONORABLE STANLEY SAYLOR, MAJORITY CHAIRMANHONORABLE JOSEPH MARKOSEK, MINORITY CHAIRMANHONORABLE KAREN BOBACKHONORABLE JIM CHRISTIANAHONORABLE SHERYL DELOZIERHONORABLE GEORGE DUNBARHONORABLE GARTH EVERETTHONORABLE KEITH GREINERHONORABLE SETH GROVEHONORABLE MARCIA HAHNHONORABLE SUE HELMHONORABLE WARREN KAMPFHONORABLE FRED KELLERHONORABLE JERRY KNOWLESHONORABLE NICK MICCARELLIHONORABLE DUANE MILNEHONORABLE JASON ORTITAYHONORABLE MIKE PEIFERHONORABLE JEFF PYLEHONORABLE BRAD ROAEHONORABLE JAMIE SANTORAHONORABLE CURT SONNEYHONORABLE KEVIN BOYLEHONORABLE TIM BRIGGSHONORABLE DONNA BULLOCKHONORABLE MARY JO DALEYHONORABLE MADELEINE DEANHONORABLE MARIA DONATUCCIHONORABLE MARTY FLYNN
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BEFORE (continued):
HONORABLE EDWARD GAINEYHONORABLE PATTY KIMHONORABLE STEPHEN KINSEYHONORABLE LEANNE KRUEGER-BRANEKYHONORABLE MIKE O'BRIENHONORABLE PETER SCHWEYER
NON-COMMITTEE MEMBERS:HONORABLE DAVE MILLARDHONORABLE DAVE ZIMMERMANHONORABLE MARK KELLERHONORABLE DAN MOULHONORABLE WILL TALLMANHONORABLE RUSS DIAMONDHONORABLE MARTY CAUSERHONORABLE KRISTIN PHILLIPS-HILLHONORABLE ERIC ROEHONORABLE BOB GODSHALLHONORABLE CRIS DUSHHONORABLE DARYL METCALFEHONORABLE EDDIE DAY PASHINSKIHONORABLE MARK LONGIETTIHONORABLE PAUL COSTAHONORABLE THOMAS CALTAGIRONEHONORABLE MORGAN CEPHAS
COMMITTEE STAFF PRESENT:DAVID DONLEY
MAJORITY EXECUTIVE DIRECTORRITCHIE LaFAVER
MAJORITY DEPUTY EXECUTIVE DIRECTOR
MIRIAM FOXDEMOCRATIC EXECUTIVE DIRECTOR
TARA TREESDEMOCRATIC CHIEF COUNSEL
T i f f a n y L . Ma s t • Ma s t Re p o r t i n gma s t r e p o r t i n g @g ma i l . c o m
( 7 1 7 ) 3 4 8 - 1 2 7 5
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I N D E X
TESTIFIERS
* * *
NAME PAGE
CURT TOPPERSECRETARY,DEPARTMENT OF GENERAL SERVICES..............4
BEVERLY A. HUDSONDEPUTY SECRETARY FOR ADMINISTRATION,DEPARTMENT OF GENERAL SERVICES.............55
SUBMITTED WRITTEN TESTIMONY
* * *
(See submitted written testimony and handouts online.)
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P R O C E E D I N G S
* * *
MAJORITY CHAIRMAN SAYLOR: Mr.
Secretary, would you and Bev rise to be sworn
in?
(All testifiers were duly sworn by
Majority Chairman Saylor.)
MAJORITY CHAIRMAN SAYLOR: Thank you.
You may start with any opening comments
that you may have, Mr. Secretary.
SECRETARY TOPPER: Thank you, Mr.
Chairman.
I have submitted testimony for the
record, and I think that will suffice today.
I'll be happy to move to questions.
MAJORITY CHAIRMAN SAYLOR: Very good.
We'll start with Representative Santora.
REPRESENTATIVE SANTORA: Thank you,
Mr. Chairman. Thank you, Mr. Secretary.
SECRETARY TOPPER: Thanks.
REPRESENTATIVE SANTORA: Welcome. I
want to focus on real estate. Let's start with
the five prison closures.
When the Governor recently announced the
closing of Pittsburgh, some issues have come to
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light. One of them was, for the final
disposition of Greensburg, it involved a $7
million buyout required in connection with the
sale of the property.
Are we going to face that same type of
thing here with the Pittsburgh closure and sale?
SECRETARY TOPPER: No, Representative.
I don't believe there are any outstanding
liabilities of that sort.
REPRESENTATIVE SANTORA: Excellent. So
were you involved in the recommendations on how
to dispose -- are you involved in the
recommendations on how to dispose of these
properties?
SECRETARY TOPPER: The Department of
General Services provided some information to
the Department of Corrections having to do with
outstanding capital debt, so pre-existing
capital projects that had been performed at the
property. And we also, I believe -- hang on.
That's right. And we provided a survey
of utility costs associated with all of the
properties that were under consideration by the
Department, but that was the extent of our
involvement prior to the decision.
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REPRESENTATIVE SANTORA: Now, once the
decision is made, are you going to handle the
disposition?
SECRETARY TOPPER: We will. That's the
role that DGS has under current statute. We did
take a relatively extraordinary step, though,
this year in an effort to try to accelerate the
sale and try to accelerate the disposition.
So where, typically, the Department
would wait until the property had been vacated
and would wait until the property was formally
declared surplus, this year, as soon as the
announcement was made, we got together with the
Department of Community and Economic Development
and with the Department of Corrections, and
we've already begun the pre-sale survey work
that has to be done, the appraisal. And you
know, we intend to do everything we can to get
it -- to get the property off the books as
quickly as possible.
REPRESENTATIVE SANTORA: That's where I
want to go. That's one of the things that
concerns me, get the property off the books as
soon as possible. And I understand that, from
DGS, it would be $3 million a year to mothball
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it and keep it during that process.
Has there been any thought given to
being a real estate seller in the sense of
bringing developers to the table, let them come
to you with what the value is post-development
and maximize the revenue coming in to the
Commonwealth on a per unit basis or what the
overall property is worth?
I believe we have waterfront property
there in Pittsburgh. For example -- I'm told
it's 24 acres -- I just did some quick math on
10 acres with the DGS, 500 units at $100,000 a
door, I've got $60 million or so.
It's just, there is some great potential
to sell it as an apartment complex, as
residential condos, whatever it is. I'm told it
is in a very good area. And you know, I said it
yesterday, except for that there's a prison
there. That problem is being solved. There's
very low demo costs with the amount of steel in
that property.
So are we looking at those opportunities
to maximize revenue for the Commonwealth?
SECRETARY TOPPER: Yes, Representative,
we do intend to look at those opportunities.
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Current statute is really quite
prescriptive, though, in terms of what we're
allowed to do when it comes to disposition of
real property. It's likely that the best path
to get to a scenario like the one you've
described would be to work through local
redevelopment authority and use the authority to
engage local developers, members of the
community, in order to do some planning.
It may be that the entire facility
doesn't have to be razed in order to turn the
property into something that's productive and
valuable. I think that study has to be done.
REPRESENTATIVE SANTORA: Okay. But you
say there's legislative work that would need to
be done for you to do a direct sale?
SECRETARY TOPPER: Well, any time we
make a direct sale, the statute is really pretty
prescriptive, we're required to get an appraisal
of the property, and we're required to sell it
to the highest bidder --
REPRESENTATIVE SANTORA: Okay.
SECRETARY TOPPER: -- without really
taking into consideration what the highest and
best use for the property might be. We would
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certainly love to have greater flexibility to be
able to approach the marketplace in a more
commercial fashion.
REPRESENTATIVE SANTORA: I know I'm out
of time. There's much more I'd like to talk
about. If there's a second round, I'd like to
get on that list.
Thank you.
MAJORITY CHAIRMAN SAYLOR: Very good.
Representative Briggs.
REPRESENTATIVE BRIGGS: Thank you,
Chairman.
Thank you, Secretary, for your time this
afternoon.
As you know, your Department and
yourself were very helpful on a couple of
instances in my Legislative District when
Representative Kampf and I joined together to do
a land conveyance for our township, for Upper
Merion Township in Valley Forge Park, and the
other was trying to assist, and it ended up
working, with a State store opening in our area.
And both times, there were a lot of
challenges and delays in terms of the processes
that you had to go through, not because of you,
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just because of the processes set forth. Last
year at this hearing, you discussed a little bit
of some modernization efforts that you were
thinking of bringing forward.
Could you update us on some ideas that
you may have to streamline the process a little
bit?
SECRETARY TOPPER: Sure, Representative.
Thank you for the question.
I think with respect to real estate
modernization, it really falls into two
categories, things that we'd like to do. First,
with respect to sales, basically, when property
becomes surplus, the key thing is to minimize
the amount of time that the property remains on
the books.
It turns out that for the portfolio
property that we carry that sits vacant, it will
no doubt cost us more to maintain it while we're
prepping it for sale and putting it on the
market and getting it sold than the property
will ultimately return once it is sold.
That's because we still have to secure
it. We still have to do the landscaping, pay
for all of the utilities, et cetera. So the
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cycle time really matters for the sale of
surplus property. We'd love, along the lines of
what I just referenced, we'd love to have more
flexibility to be able to move those properties
faster when they're declared surplus.
On the leasing side of the real estate
business, there are a number of things that I
think we can do and could work on together. The
process that we follow for real estate, for
commercial leasing in the Commonwealth, is
largely laid out in statute that was created in
the 1930s.
The real estate market has, you know,
has evolved. And our ability to use sort of a
modern approach or modern tools to engage with
the market would be much appreciated.
We plan, actually in March, to hold
what's called a kaizen event or a lien
management event involving the Treasurer's
Office, the Office of the Budget, and our own
folks, in an effort to really look at, end to
end, the entire process from start to finish,
from when an agency decides that they need new
space to when we are ultimately able to move the
agency into that new space.
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And we hope that, by virtue of going
through that process and that analysis, that
we'll be able to pull, you know, hopefully, more
than a month out of the current process. It
just takes time to decide where the agency is
going to locate, whether or not we can have the
agency co-locate with other agencies in the same
municipality, find a downtown location, do a
public bid, and then finally, get a lease
executed and through the entire signature
process, which involves the Board of
Commissioners for Public Grounds and Buildings,
the Treasurer and the Comptroller's offices.
I think there's a lot of opportunity
there for us to be able to move much more
quickly.
REPRESENTATIVE BRIGGS: Thank you for
that answer.
Thank you, Chairman. That's all I have.
MAJORITY CHAIRMAN SAYLOR:
Representative Dunbar.
REPRESENTATIVE DUNBAR: Thank you,
Mr. Chairman. Welcome, Secretary.
In your '16-'17 budget, GGO line item
for DGS was decreased. You had mentioned in
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your own information here today -- you had
stated that last year's budget decision to
capitalize our Public Works Program was a key
component of our success. That decision
provided nearly $14 million of relief for the
General Fund, but more importantly, it enabled
DGS Public Works to adopt a more flexible and
scalable model.
Excuse me for my confusion, but I hear
the words capitalize our public works, and I
understand that this, essentially, was a bond
issuance?
SECRETARY TOPPER: Well, technically, it
wasn't a bond issuance by itself. What the
change last year enabled was, it enabled us to
pay for the administration of the billion dollar
portfolio of capital projects out of bond
proceeds.
REPRESENTATIVE DUNBAR: Out of bond
proceeds?
SECRETARY TOPPER: Yes.
REPRESENTATIVE DUNBAR: So it wasn't --
and I'm thinking out loud here, but if you have,
let's say, you're refinancing a bond package,
then there are essentially proceeds that can be
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utilized as profits to help reduce your other
items.
But this, essentially, you did use bond
proceeds to pay employees, then?
SECRETARY TOPPER: We did, beginning
with the current fiscal year.
REPRESENTATIVE DUNBAR: Okay. And I
have concerns there. Tax exempt status, our
bond borrowings are tax exempt. I believe there
are some limits of how much of bond proceeds you
can use and still maintain your tax exempt
status. If you can please just check on that
for me and get back.
SECRETARY TOPPER: I'd be happy to. I
can share with you, though, that it was pretty
thoroughly vetted by the Office of General
Counsel and by the Office of Budget Counsel.
REPRESENTATIVE DUNBAR: I'm sure it was,
but I'd love to see it in writing.
SECRETARY TOPPER: Sure.
REPRESENTATIVE DUNBAR: Also, in this
year's budget information, I see that in the
Governor's budget document, it says that six
positions are being transferred from the Office
of Budget to DGS.
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How -- first off, what is that about?
And how are we paying for that?
SECRETARY TOPPER: Sure. Those are
General Fund-funded positions; they're not
within the Public Works deputation. Those
positions are moving over to join our facilities
management deputation in real estate and in
maintenance.
It's really just the result of our
ongoing effort to consolidate like operations
from across agencies within the enterprise.
REPRESENTATIVE DUNBAR: So they will not
be paid out of the same pot of money that the
bond proceeds went into; is that correct?
SECRETARY TOPPER: That's correct.
REPRESENTATIVE DUNBAR: Okay.
SECRETARY TOPPER: It is only -- bond
proceeds are only going to fund the staff that
are working directly on capital projects that
are also funded by those bond proceeds.
REPRESENTATIVE DUNBAR: I understand.
And I mean, I do have concerns, though, of going
down that road of how it affects our bond
ratings, as well as even in your testimony, you
said, indeed, it is possible to run the business
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of a government like a business.
I would assert that this is not running
like a business would run; it's something a
business would not do.
SECRETARY TOPPER: Forgive me, I can't
call to mind the exact statistics from last year
when we did the study, but we would be among, I
believe, 15 or 16 other states that currently do
approach their funding for their capital
portfolio this way, as well as many major
universities like the one that I left in order
to take this position a couple of years ago at
Georgetown.
It is a relatively common practice, at
least among those kinds of organizations. And
in our instance, it really did create the
opportunity for us to scale, to be flexible, and
to begin to address what had become really an
unacceptable backlog of capital projects.
REPRESENTATIVE DUNBAR: I appreciate
that, and I'm not denying that the use may have
been beneficial, but my preference would not be
to use bond proceeds to do it. I'd rather use
regular funding, other funding streams, to do it
as opposed to bond issuances.
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SECRETARY TOPPER: Understood.
REPRESENTATIVE DUNBAR: Thank you,
Mr. Chairman.
MAJORITY CHAIRMAN SAYLOR:
Representative Krueger-Braneky.
REPRESENTATIVE KRUEGER-BRANEKY: Thank
you, Mr. Chairman.
Thank you, Secretary; this side.
SECRETARY TOPPER: Thank you.
REPRESENTATIVE KRUEGER-BRANEKY: How are
you?
SECRETARY TOPPER: I'll get it right
sooner or later.
REPRESENTATIVE KRUEGER-BRANEKY: It's
going to be like a volleyball match the whole
time.
So I've got a question about
procurement. I fundamentally believe that we
can maximize the power of our State dollars when
we're doing business with Pennsylvania-based
companies.
Research shows that when you spend your
money at a locally owned company as opposed to
an out-of-state corporation, about three times
as much of that money circulates in the local
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economy.
So can you tell me first -- I know that
there was an executive order from Governor Wolf
directing his agencies to ensure diversity and
inclusion in state contracting. I'm curious to
hear how that's going and if you could give me
some numbers if you've got them or follow up
with them, particularly regarding minority-owned
businesses, women-owned businesses,
disadvantaged-owned businesses, and
veteran-owned businesses.
How are we doing with contracting with
them?
SECRETARY TOPPER: Sure, I'll be happy
to.
You've got the numbers, right? Okay.
Wow, you really do have the numbers; I have
charts.
REPRESENTATIVE KRUEGER-BRANEKY:
Wonderful.
SECRETARY TOPPER: Thanks,
Representative.
I can share with you that two years ago,
when we came into office, the percentage of the
Commonwealth's business, as a matter of the
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total percentage of total payments that the
Commonwealth was making to vendors who are
either self-certified small businesses or
minority-owned or women-owned or what we call
diverse small businesses, that percentage had
been in decline for going on five years. It had
fallen from just under 10 percent for diverse
businesses -- I'm sorry; for small businesses
overall -- to just under eight percent when we
arrived.
I'm pleased to be able to say that based
on the latest data, we've at least interrupted
the decline. And I have a lot of confidence
that we're going to be headed back in the right
direction.
You know, as a convenient benchmark, if
we look at neighboring states like Maryland and
New York State, they routinely see small
business participation north of 20 percent. And
I see no reason why we couldn't also be doing
more, doing that level of small business
contracting here in Pennsylvania.
Here's what we've done in the last
couple of years here, particularly in the last
year, to help make that happen. The first thing
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we did was we established an empirically valid
metric for how we measure it.
This is a metric that had been
generating a lot of confusion over the years as
successive administrations had defined it in
different ways. We've tried to clear that up.
We've included LGBT businesses and
businesses owned by folks with handicaps. We've
included small businesses for the first time in
our RFP process.
REPRESENTATIVE KRUEGER-BRANEKY: Can you
tell us how you are defining small business,
because that's a term that folks define very
differently?
SECRETARY TOPPER: Got you. So it's a
term that's partially defined in statute and
partially defined by policy. So the statutory
part would be businesses must have fewer than
100 employees.
REPRESENTATIVE KRUEGER-BRANEKY: Okay.
SECRETARY TOPPER: And the policy part
pertains to different revenue limits that are
established. So for the most part, it's
businesses with less than 20 -- right, it's
businesses with less than $20 million a year in
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revenue.
REPRESENTATIVE KRUEGER-BRANEKY: Okay.
SECRETARY TOPPER: For IT businesses,
the limit is a little higher, it's $25 million.
We've incorporated new provisions into our
contracts, requiring subcontracts with firms
that make commitments to small businesses so
that those commitments are actionable in the
event that they're not followed through on.
We've adjusted the scoring process so that we
could make it more likely that businesses that
commit to doing business with small businesses
in Pennsylvania are going to win our contracts.
REPRESENTATIVE KRUEGER-BRANEKY: Okay.
SECRETARY TOPPER: And as I said, I'm
comfortable that we're going to -- that we're
making a dent here and the rate is going to
start climbing back up.
REPRESENTATIVE KRUEGER-BRANEKY: And
do you have any stats particularly on
contracting with minority-owned businesses,
women-owned businesses, and veteran-owned
businesses?
SECRETARY TOPPER: Sure. I don't know
if we can break it out here.
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REPRESENTATIVE KRUEGER-BRANEKY: If it's
something that you can submit, folks are --
SECRETARY TOPPER: I got it.
REPRESENTATIVE KRUEGER-BRANEKY: --
welcome to submit data afterwards; I know that I
saw the light change.
SECRETARY TOPPER: Okay.
REPRESENTATIVE KRUEGER-BRANEKY: But
thank you for your work on this effort. I hope
that we can look to best practices from other
states, as well, to make sure that we're doing
business with Pennsylvania-based businesses
whenever possible.
MAJORITY CHAIRMAN SAYLOR: Secretary,
you can send that, but you're welcome to finish
answering her question.
SECRETARY TOPPER: Thank you, Mr.
Chairman.
I'll be happy to provide a report in
full. In fact, next week we issue our annual
report, which will have all of these statistics.
I would respond, though, just briefly to the
request that we do more business with
Pennsylvania small businesses.
And I would just say that I, and that we
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as an Administration, would like nothing more
than to do more business with Pennsylvania small
businesses, and that's certainly our intent.
There are challenges with attempts to
approach that statutorily and to limit the
Commonwealth's ability to do business with firms
that are located or headquartered outside of
Pennsylvania. To the extent that we start
erecting those kinds of preferences, formal
preferences, they do kick off certain
reciprocity arrangements that potentially make
our own businesses less competitive elsewhere.
So I think we need to approach that with
some care. Thanks.
MAJORITY CHAIRMAN SAYLOR: Okay. If you
would see that Chairman Markosek and I have
that, I would appreciate it.
SECRETARY TOPPER: Thanks.
MAJORITY CHAIRMAN SAYLOR: I also wanted
to recognize that we've been joined by
Representative O'Brien, Representative Wheeland,
and Representative Phillips-Hill.
Our next questioner is Representative
Keller on that side of the room.
REPRESENTATIVE F. KELLER: Thank you,
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Mr. Chairman, and thank you, Mr. Secretary.
I want to get back to where
Representative Dunbar was on the $14 million.
And it's in your testimony, on page 2, that last
year we saved $14 million in relief for the
General Fund.
Is that the salary and benefits of the
people that manage these capital projects?
SECRETARY TOPPER: It is. It would be
the salary, the benefits, and the operating
dollars associated with it, yes.
REPRESENTATIVE F. KELLER: Okay. So the
personnel costs?
SECRETARY TOPPER: Yes.
REPRESENTATIVE F. KELLER: If they
weren't managing those projects, would we still
have need for those employees?
SECRETARY TOPPER: No, I don't believe
so.
REPRESENTATIVE F. KELLER: We would not
have need for those employees. So they're
strictly -- but they are Commonwealth employees?
SECRETARY TOPPER: They are.
REPRESENTATIVE F. KELLER: So prior to
last year, we paid their salary, I'll say on
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a -- we didn't capitalize it; it was expensed on
a -- every month, it was part of our budget?
SECRETARY TOPPER: That's correct. They
were General Fund expenses.
REPRESENTATIVE F. KELLER: Okay. So
since we borrowed money to pay salary and
benefits, that now becomes debt service this
year, correct?
SECRETARY TOPPER: It does.
REPRESENTATIVE F. KELLER: Which leads
me back to my next thing. Because once you
start to do this, you start to spiral and it
creates other problems.
Because now I understand that this year
there's a proposal to borrow money against the
Farm Show Building to pay debt service; is this
correct?
Is that what the proceeds from that are
being used for?
SECRETARY TOPPER: I believe that's
correct.
REPRESENTATIVE F. KELLER: Okay. So we
increase our debt service by borrowing money to
pay payroll expenses. And then this year, we
borrow money to service the debt that we
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borrowed to make payroll expenses last year.
Chairman Markosek wanted me to tell a
joke; I don't know if I can come up with one
better than that, quite frankly.
Thank you for laughing, Mr. Chairman.
MINORITY CHAIRMAN MARKOSEK: I promised
the gentleman that I would laugh if he at least
tried to tell a joke --
REPRESENTATIVE F. KELLER: Well, it
would be --
MINORITY CHAIRMAN MARKOSEK: -- even if
it wasn't funny.
REPRESENTATIVE F. KELLER: Hey,
Chairman, you're taking up my five minutes,
please.
So I guess what I --
MINORITY CHAIRMAN MARKOSEK: Time is up.
REPRESENTATIVE F. KELLER: Well, you
know, it probably -- you know, people at home
aren't laughing. Okay. It's not a joke because
we are making decisions that are lumping debt on
future generations. These are projects that
have been managed last year.
How long are we financing these bonds
for?
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SECRETARY TOPPER: Most of these capital
projects, I believe, are financed with 30-year
debt.
REPRESENTATIVE F. KELLER: So my
granddaughter who is six, when she goes to work,
will be paying off work that was done last year?
SECRETARY TOPPER: I believe that's how
it works.
REPRESENTATIVE F. KELLER: The labor
that -- goodness gracious. You know, I could
keep going. I do have one question.
SECRETARY TOPPER: Sure.
REPRESENTATIVE F. KELLER: The Farm Show
Building, is that in a flood plain?
The reason I ask is because if we borrow
money against it, I'm just wondering if we're
going to have to take out flood insurance.
SECRETARY TOPPER: I believe that within
the context of the lease-leaseback provision
that's included in the budget, I believe the
Commonwealth would retain the insurance
responsibility for the facility and would
continue to insure it as part of our own
self-insurance program, which is managed by my
Department.
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REPRESENTATIVE F. KELLER: Right, but
you know, like when I have a mortgage on my
house, if it's in the flood plain, I'm required
to have flood insurance.
SECRETARY TOPPER: It's -- the
property --
REPRESENTATIVE F. KELLER: It is in the
flood plain. I do know the answer to that.
Sorry for answering a question I know, but it is
because I have the map.
SECRETARY TOPPER: The property is
insured.
REPRESENTATIVE F. KELLER: Again, I
could go on and on, but I just -- I hope that
the Governor is watching and realizes how much
of a hole we're digging for our future
generations by borrowing for payroll and then
mortgaging our assets to pay that payroll.
Thank you, Mr. Chairman.
MAJORITY CHAIRMAN SAYLOR:
Representative Daley.
REPRESENTATIVE DALEY: Thanks, Mr.
Chairman.
Secretary Topper, it's good to see you.
I just wanted to ask you a few questions about
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some of what you're doing related to energy
savings. The budget materials indicate that
you've been aggressively pursuing energy savings
across the Commonwealth.
Could you just expand on that work with
the State agencies, because my understanding is
it has something to do with determining demand?
SECRETARY TOPPER: Sure, I'd be happy
to.
Really, what the program amounts to is
making a serious effort to aggregate and
leverage the demand for electricity and natural
gas across the vast enterprise that is the
Commonwealth. So rather than have the agencies
go to market on their own and then also rather
than take each individual facility's
requirements to the market on their own, and
rather than just pay the standard rate without
making an effort to aggregate and set pricing
competitively, we have been working for a number
of years now with the Penn State facility's
Engineering Institute to be a lot more strategic
about how we take our electricity demand in
particular to market.
And these have been very good times to
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be doing that because of the characteristics of
the market. We are in what's called -- what
they call a backwardation scenario, where the
cost of electricity on a long-term contract, it
actually gets lower as you go further out. So
we have been leveraging that pretty aggressively
here over the course of the last year.
Over the last two years, we've
identified and contracted for electricity,
basically generating more than $4 million in
annualized cost savings and bringing our total
cost per kilowatt hour down to, I think, 5.4
cents, which is quite a competitive rate. And
the beauty of it is that most of that demand is
now locked in, in some cases, for as long as
four years.
So we have stable, low utility costs,
you know, for at least the next three to four
years. And that's really all as a result of
some creative strategy and a great effort on the
part of our Department here.
REPRESENTATIVE DALEY: That's great. So
I understand you're also using renewable
energies for a portion, I think a good portion,
of the demand.
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SECRETARY TOPPER: That's correct,
Representative. We did -- we took a small
portion of the savings and allocated that
savings to restoring the Commonwealth's purchase
of green energy. So 30 percent of the
Commonwealth's electricity demand is now coming
from renewable sources.
REPRESENTATIVE DALEY: That's great.
That's great.
I'm also just interested -- you've hired
a Director of Business Transformation to
spearhead a lien management operation. I think
you referred to it briefly in one of your
previous answers.
SECRETARY TOPPER: Yes.
REPRESENTATIVE DALEY: Did you have
anything you wanted to add since I have a little
bit of time left on the clock?
SECRETARY TOPPER: Sure. It's just --
it's an initiative that I'm probably -- probably
the one I'm most excited about this year.
We are joined up with the Office of
Administration and their GO-TIME office and have
become a lead agency here for the Commonwealth
to roll out these, you know, a new approach to
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the way we manage our Department. We are
adopting basically the same management
principles that were developed by Toyota in
order to rethink the way that we work.
Basically, it entails the provision of a
bunch of training, training to our staff,
training to our management, to get them to begin
to see our business processes in a new way, to
get them to organize in a new way, and to get
them to pursue standardization in a new way.
And the net of it is that you can eliminate huge
amounts of waste, you know, by simply focusing
on what your customer wants and needs and
eliminating the effort that's going into
everything else.
REPRESENTATIVE DALEY: So is that just
in DGS, or does that extend through the
Administration?
SECRETARY TOPPER: It's been rolled out
Administration-wide. DGS is one of the early
adopters, and I'm excited about where we'll be
able to take it because I think it's the key to
us being able to operate in a much more
efficient way.
REPRESENTATIVE DALEY: Well, it's nice
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because I think a lot of businesses have been
using lien management. So they can then see
that the State is doing it, and that's a good
thing.
Thank you.
MAJORITY CHAIRMAN SAYLOR:
Representative Delozier.
REPRESENTATIVE DELOZIER: Thank you,
Mr. Chairman.
Secretary, I'm over here; far side. We
keep making you turn, both sides.
SECRETARY TOPPER: That's okay.
REPRESENTATIVE DELOZIER: I have a
couple of questions, so I'm going to try and hit
a bunch of them pretty quick. The COSTARS
Program that you have in the Department, I
appreciate the mailing that we got with a lot of
the project rejects.
Quickly, the question, requirements for
bidding for the COSTARS Program, if I read the
language correctly, everything over $25,000, or
if the municipality has a lower setting, is
competitively bid; is that correct?
SECRETARY TOPPER: The contracts
themselves are all competitively bid, the State
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contracts that the Department puts in place.
REPRESENTATIVE DELOZIER: But these are
for municipalities to use the COSTAR Program,
but they are required to competitively bid
contracts?
SECRETARY TOPPER: The requirements that
the local municipalities are under, I believe,
are determined by their local regulations and by
working with their local solicitor.
REPRESENTATIVE DELOZIER: Correct, but
if you read the COSTARS Initiative that you had
mailed to us, it said that it's an either/or
situation, where it's either the stipulation as
to what they have in place, as you mentioned, so
if their threshold is $15,000 or $25,000,
whichever is less.
SECRETARY TOPPER: Yes, that's correct.
Certainly, we would recommend that they compete
as much as they can. These contracts are all
multiple award contracts. They operate a lot
like a GSA schedule, and there is often a lot of
benefit to the municipality to taking the extra
step --
REPRESENTATIVE DELOZIER: Sure.
Absolutely. I guess the complaint that I have
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received on a couple different bases is that
they're not being competitively bid and they're
sole sourcing, and that is not a good savings.
I know you listed here the savings for
our municipalities; I wholeheartedly support,
obviously, the fact that we can have that for
the local taxpayers, but the issue comes back to
the fact that they're not being competitively
bid. And so, therefore, we're missing out on
that competitive edge and that ability to bid
down the price.
So the price is being offered at one
price only, and that is what's being accepted.
So we have a conversation, I guess, that we need
to have about the fact of the need to -- who
oversees the fact that they're competitively
bid, is it the State --
SECRETARY TOPPER: I do not believe --
REPRESENTATIVE DELOZIER: -- to enforce
it?
SECRETARY TOPPER: I do not believe that
the Department of General Services has an
enforcement responsibility vis-a-vis all of the
municipalities and their use of the contracts.
REPRESENTATIVE DELOZIER: So it's an
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honesty system?
SECRETARY TOPPER: I don't know the
answer --
REPRESENTATIVE DELOZIER: Okay. Could
we just find --
SECRETARY TOPPER: But I'm happy to
investigate it.
REPRESENTATIVE DELOZIER: -- out who has
that enforcement --
SECRETARY TOPPER: Yeah.
REPRESENTATIVE DELOZIER: -- just to
find out what -- to switch issues real quick, a
few weeks ago, we had a little break-in here in
the Capitol Police.
What have we done to increase that issue
of security?
SECRETARY TOPPER: Sure. So --
REPRESENTATIVE DELOZIER: And I might
speed you up because I have a bunch of other
questions to follow that up.
SECRETARY TOPPER: Well, you know, do
you want a complete answer?
REPRESENTATIVE DELOZIER: Well, I just
-- if not, we can have it submitted afterwards
if it is -- I only have five minutes; that's
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all. I'm just trying to --
SECRETARY TOPPER: Okay. So immediately
following the break-in, we did ask Capitol
Police to come up with some additional ideas
around what we could do for enhanced security,
things like window sensors, you know. We're
currently evaluating those options.
To be honest, though, the best thing we
could do would be to make sure that the windows
get locked at night. That's by far the --
REPRESENTATIVE DELOZIER: Or we don't
have drunk people wandering around the campus, I
guess, is another issue.
SECRETARY TOPPER: Well, there's that,
but you know, the security in the Capitol is
actually quite good. It's important, I think,
to just be aware of the facts here.
That individual was apprehended within
about 14 minutes, which is not -- you know,
certainly, I'd love for it to have been shorter,
but at 2:00 in the morning, you know, in a
facility like this, this is the sort of thing
that we don't really anticipate.
We had the guy nabbed within 14 minutes,
and we have him on video, basically from
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virtually the moment he left the
Representative's office, all the way through the
Capitol into the Senate. We can make his
identity, you know, quite easily.
REPRESENTATIVE DELOZIER: And I know you
have him and everything else. And I'm not --
I'm just trying to understand, you know, what
changes we're going to make because of it. We
need to learn from each situation.
But quickly, moving on from that with
the Capitol Police and everything, what is the
relationship with the Capitol Police and backup
and service to HPD?
SECRETARY TOPPER: Capitol Police is
available to HPD to be called in as backup.
REPRESENTATIVE DELOZIER: Do they do
shifts with the Bureau?
SECRETARY TOPPER: They do not.
REPRESENTATIVE DELOZIER: So Capitol
Police does not do shifts with the Bureau?
SECRETARY TOPPER: No.
REPRESENTATIVE DELOZIER: My
understanding was that Capitol police officers
do work with HPD, so my questions after that
were going to be, do they do that on voluntary
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time; how do we get reimbursed, those types of
things?
SECRETARY TOPPER: Representative, my
understanding is that we're not formally
performing shifts with HPD. So I'm not sure
where that -- I'm not sure where you're getting
your information.
REPRESENTATIVE DELOZIER: Okay. I have
a police bureau, you know, job assignment, and
it does say that Capitol Police are supplying
two uniformed officers to assist with the
detail. So I'm just trying to -- my thing goes
to who's paying them, and are we getting
reimbursed for those officers?
SECRETARY TOPPER: So that must be a
specific security detail. I'd like to -- for
certain events, and I don't know which ones, but
say big political rallies, things of that
nature, you know, Capitol Police will
participate along with HPD and State Police in
order to provide adequate security for those --
REPRESENTATIVE DELOZIER: And is that on
their duty shift, or is that like on their own
volunteer time and they get paid by Harrisburg,
or they get paid by --
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SECRETARY TOPPER: No, typically, they
would be on duty.
REPRESENTATIVE DELOZIER: So they'd be
on duty for the Capitol?
SECRETARY TOPPER: That's correct.
MAJORITY CHAIRMAN SAYLOR:
Representative, your time is up.
REPRESENTATIVE DELOZIER: Sorry, I
wasn't looking. I was trying to avoid the red
light.
But if you could, I'd just be curious to
get some more answers on how that is, and just
in the payment of who's paying who.
Thank you.
SECRETARY TOPPER: Sure.
MAJORITY CHAIRMAN SAYLOR:
Representative Bullock.
REPRESENTATIVE BULLOCK: Thank you,
Mr. Chairman. How are you doing today? I'm
right in front of you; right on top. Hi.
So first, I want to thank you for your
answers to my colleague, Representative Leanne
Krueger-Braneky, in regards to inclusion of
small businesses, minority and women businesses;
and I look forward to seeing the report, as
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well, next week.
I wanted to dig in a little deeper to
your RFP process. I understand you've made some
recent changes to streamline that process to
reduce the timing for the review of those
proposals.
Can you talk a little bit more about the
changes you made and how you anticipate that
improving the process?
SECRETARY TOPPER: Sure. So finding a
way to streamline the RFP process is really a
critical part of our overall strategy, both to
bring down costs and to enhance opportunities
for small businesses and small diverse
businesses.
The reason for that is because,
generally speaking, the default manner that the
Commonwealth uses for procurement, which is a
traditional sealed bid, seldom gets us the
lowest possible cost overall, once you take into
account everything that is involved.
If it were a great way to buy things,
then that is what the commercial world would do,
but they don't. The commercial world does
virtually everything on a best value basis,
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which is why we've been keen to do more of it.
Today, only about 30 percent, less than
30 percent of the Commonwealth's dollars, are
spent on a best value basis, and that mean that
the rest is done via sealed bid. So we need --
we really do feel like we need to change that
percentage.
It's also true that the only instance
where we can consider the characteristics of the
business that's bidding, such as whether or not
they're here in Pennsylvania, whether or not
they're a small business, whether or not they've
subcontracted with a small business, all of
those considerations only come into play when
we're using an RFP here in Pennsylvania. And so
it's important for us to use an RFP if we want
to try to drive those numbers up.
The old process was a real hurdle there
because it was taking nine to 12 months for an
agency to conduct a best value procurement using
an RFP. So we started applying lien principles
and taking out unnecessary steps, really
stripping it down and looking at, okay, well,
what's minimally required by the Procurement
Code and then building back in a process that is
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just a whole lot more efficient; it doesn't
waste time and energy.
That new process is going to get rolled
out this spring. We've piloted it a couple of
times, and we have reason to believe that it's
going to pull probably half of the cycle time
out, enabling the agencies to do more on a best
value basis so we can do more business with
small and minority-owned businesses and also so
that we can negotiate better costs going
forward. So it's a lynchpin to a number of
things.
REPRESENTATIVE BULLOCK: I look forward
to seeing that as you roll it out.
A quick question in regards to the
report that you shared with Representative
Krueger-Braneky that would be coming out. Does
it also include, in addition to the percentages
of the minority and women-owned businesses, the
small business, the actual dollar amount of
those contracts?
SECRETARY TOPPER: It does
REPRESENTATIVE BULLOCK: Okay. I'll
look for it. I just wanted to make sure that
that number was in there.
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And my last question is a question that
I share with each agency, and it's in regards to
your own hiring within your Department. If you
can share with me your own diversity numbers in
regards to both your staff and management.
SECRETARY TOPPER: Sure. Thanks,
Representative. We'll be happy to submit this
in writing, as well, but out of 874 total DGS
employees, minority females account for 9
percent or 77; minority males are 113 or 13
percent; white females are 169 or 19 percent.
In our executive staff, 39 percent of our
executive staff are women and minorities. That
would be Bureau Director and above.
That number actually does not include
the recent appointment of our new Deputy
Secretary for Diversity, Inclusion & Small
Business Opportunities, Kerry Kirkland. So that
percent will go up a little bit.
REPRESENTATIVE BULLOCK: Great. If you
could just send that in writing, I'd appreciate
it. I missed a few of those numbers.
Thank you.
SECRETARY TOPPER: Yeah, no problem.
Thank you.
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MAJORITY CHAIRMAN SAYLOR:
Representative Knowles.
REPRESENTATIVE KNOWLES: Thank you,
Mr. Chairman. Thank you, Mr. Secretary, for
being here.
I want to continue along the lines of
the public safety. There's a line item in the
general service budget for $5 million for
Capitol fire protection.
I wonder if you could talk briefly,
because I do have another question, about the
process in which the city received that money,
and when is it paid each year?
How is it paid, and when is it paid?
SECRETARY TOPPER: Sure. So the payment
is basically a payment in lieu of taxes in
return for fire and safety protection here for
the Capitol Complex. And I don't know the exact
timing.
REPRESENTATIVE KNOWLES: Is it paid in
installments, or is it paid --
SECRETARY TOPPER: It's paid in a lump
sum on an annual basis.
REPRESENTATIVE KNOWLES: Okay. And a
follow-up.
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Is there any stipulation, or are there
any stipulations within the agreement that
require the city to spend that money on fire
equipment for firefighting purposes?
Is there anything that requires them to
do that?
SECRETARY TOPPER: I don't believe so,
Representative.
REPRESENTATIVE KNOWLES: I would just
suggest that that may be something you want to
consider, because I mean, with all due respect,
I think there's a fine firefighting organization
within the city, but I've seen some of that
equipment. Some of those engines, some of those
trucks look like they're going to need to be
towed to a fire.
I would just suggest that you consider
that in negotiating with the city. The other
thing, in terms of -- and Representative
Santora, I thought, brought up a good point in
terms of disposition of State property.
You know, is it a requirement that when
we are disposing of State property that, number
one, it has to be offered to a government
entity, any government entity, and they would be
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first to get it?
And secondly, if that's not the case,
then a development authority?
Is there anything to that?
Can you fill me in on that?
SECRETARY TOPPER: Sure. The process,
as it currently stands, is that when an agency
declares a property surplus, DGS first will
offer it, you know, make sure that the other
agencies are aware of it.
We usually have a pretty good handle on
what the other agencies' incremental spaces are.
So we can suggest to an agency that it move into
an agency that's about to become vacant.
But if there are no needs from other
State agencies identified, then we turn to
whether the property, you know, how the property
can most efficiently get sold. We do have the
authority to convey a property to a local RDA
without a statute being passed, and we do
exercise that authority on occasion.
However, for major properties, our
practice has been to work with the General
Assembly as if the General Assembly -- as if an
Act was required.
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REPRESENTATIVE KNOWLES: Is that
process, or is that law?
SECRETARY TOPPER: Well, I believe the
authority is statutory; the rest is process.
REPRESENTATIVE KNOWLES: Okay, just a
comment. And I really think that we need to
take a close look at how we dispose of State
property.
I mean, I'm looking in this book, and it
says that in 2016, 12 properties were sold for
$332,000. That's $27,600 on an average
property.
I do believe -- I get it that we don't
want to, you know, we don't want to mothball
them. I get that, but I think that
Representative Santora brought up an excellent
point. I think that we -- I had my real estate
license until most recently.
I think we really need to look at that
in terms of generating revenue that we could be
generating by putting more effort into that
process.
SECRETARY TOPPER: Representative, we'd
like nothing better than to work with you to
come up with a better process. And I know that
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we've been working pretty hard to pull together
some ideas for statutory changes. And you know,
we'll continue to work here with the Governor's
Office and with you and we'd love to see
something get introduced this session.
REPRESENTATIVE KNOWLES: Thank you very
much, Mr. Secretary.
Thank you, Mr. Chairman.
MAJORITY CHAIRMAN SAYLOR: Representative
Kim.
REPRESENTATIVE KIM: Thank you,
Mr. Chairman.
I see that my good friend, Representative
Knowles, is throwing shade at some of my city fire
trucks. I'm happy to pass a plate around and collect
donations, Representative Knowles.
Mr. Secretary, I'm sorry. I didn't mean
to put you in the middle there.
SECRETARY TOPPER: It's quite all right.
REPRESENTATIVE KIM: I was happy to see
Governor Wolf appoint Kerry Kirkland as Deputy
Secretary of Diversity, Inclusion & Small
Business Opportunities in DGS, so I appreciate
that. I think that's a great hire.
Even though my district has 50 percent
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tax exempt properties, we are still very glad to
have the Archives Building coming into the City
of Harrisburg. We believe that area will
improve economic development and spur more
growth.
How will that project be funded; and
what is the timeline for completion?
SECRETARY TOPPER: Sure. Thank you,
Representative.
The Archives Building was a project that
was underway prior to our arrival. A site had
been selected up in Susquehanna Township, up off
of Elmerton Avenue by the State Police
Headquarters.
When we discovered that project upon
taking office, the Governor felt strongly that
the property -- that the building should move
back or should remain in the city, that Archives
should remain in the city. So we went through a
process to identify a site within the city
limits and had to get pretty creative, putting
together lots and acquiring lots in order to
find a space that was large enough. I'm happy
to say that that is very nearly complete.
REPRESENTATIVE KIM: Great.
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SECRETARY TOPPER: We anticipate that we
will begin the first phase of the work, which is
basically demolition and site prep, this summer.
You know, so you'll begin to see work underway
there this summer. And the plans will get
finalized, and I think, you know, we'll be in
construction this time next year, I would
imagine.
REPRESENTATIVE KIM: Very good. And
Mr. Kirkland will reach out to the small, the
minority businesses, small business owners, to
help with the RFP process, right, to include
everybody?
SECRETARY TOPPER: Absolutely.
REPRESENTATIVE KIM: Awesome.
And then my last is more of a statement
than a question. I know that you're trying to
sell the grounds of the old State Hospital. And
it's -- Sue Helm and I, you know, share that
area, but I just need to speak up on behalf of
the non-profit that's there that is on the front
lines of the opioid and heroin crisis and doing
a lot of good work to help people with their
addictions, and I just hope that you will take
care of them.
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I know that's not your responsibility,
but I wanted to speak publicly on behalf of
them, that they're doing good work and if you
could, take care of them in this whole
complicated process.
SECRETARY TOPPER: Thank you,
Representative. I appreciate it.
I have met personally with Gaudenzia,
and I know that they were included as part of
this large process where we collected a lot of
stakeholder input. We've also been working with
DDAP. I think we're as interested as anyone in
finding a viable solution there.
REPRESENTATIVE KIM: Okay.
SECRETARY TOPPER: The challenge is that
it's one small corner of a much larger property,
and hence, a much larger ongoing financial
liability for us. So I think, you know, I
believe we need to find a path forward that
accommodates them, as well, and that certainly
has been among our goals here.
REPRESENTATIVE KIM: I understand the
challenges --
SECRETARY TOPPER: Yeah.
REPRESENTATIVE KIM: -- and I thank you
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for your consideration.
Thank you, Mr. Chairman.
SECRETARY TOPPER: Sure.
MAJORITY CHAIRMAN SAYLOR:
Representative Kampf.
REPRESENTATIVE KAMPF: Mr. Secretary,
just a budget detail question to get started.
Page 2 of your budget book, in section 3, do you
have that?
Looking at your complement, it says
2017-2018 budgeted, and then it has State funds
authorized 473, filled 454.
Do you see that?
SECRETARY TOPPER: Yes.
REPRESENTATIVE KAMPF: Okay. So then,
flipping back to the page before it, page 1,
under number two, detail by major object
personnel, '17-'18 for State funds is
$40,197,000.
Is that personnel State funds amount,
$40 million and change, for the authorized
number of 473 or the filled number of 454?
SECRETARY TOPPER: So I believe that's
the amount sufficient -- the budget is a number
based on the number of the filled complement,
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plus funding half of the authorized vacancies.
So we're funding a vacancy at 13 weeks.
REPRESENTATIVE KAMPF: I'm sorry; at
what?
SECRETARY TOPPER: I'm sorry. At 13 pay
periods.
REPRESENTATIVE KAMPF: At 13; so half a
year.
SECRETARY TOPPER: That's right. I
believe that's how that number is put together.
We can confirm with the Budget Office.
REPRESENTATIVE KAMPF: Okay. So then
the $40,197,000 is for 454 people, that is
filled positions -- you know, just looking at it
a different way -- and funding half of the
authorized positions, or all of them, for half a
year?
SECRETARY TOPPER: That's right.
REPRESENTATIVE KAMPF: Okay. Can you
tell me what that number is?
Because I was under the impression that
all of the budgets were only for filled
positions.
So can you tell me what the number, the
dollar number, is to pay the unfilled, but
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authorized for 13 pays?
DEPUTY SECRETARY HUDSON: So I'll take a
stab. So you're looking at the General
Government Operation page. You really have to
consider also the other funded positions because
we have a number of positions which are
considered GGO, but for which funding comes from
other places.
For example, our procurement operation
is funded through a shared services billing that
the agencies share.
REPRESENTATIVE KAMPF: I just -- I'm
looking at section 3, pages 1 and 2, which for
GGO, reading them together, personnel and then
complement, is $40 million dollars, and then
either 473 authorized, 454 filled, or 473
authorized, but only a few of them for half a
year.
DEPUTY SECRETARY HUDSON: Sure. So
we'll get you the specific calculation that was
used, but I guess what I'm getting at is, my
position, for example, is GGO; but the funding
for my position comes from various sources. In
fact, part of my position is funded from the
Purchasing Fund because I maintain two entities
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that are funded through the Purchasing Fund.
So this calculation, it's not
necessarily as easy. I can get you how we
calculated it, but I wanted you to understand
that, really, it's the totality of the General
Fund positions, the funding for which comes
from, largely, from augmentations, which are
listed in the Governor's Budget Book.
REPRESENTATIVE KAMPF: Okay. Well, let
me just drill down on it, then.
So the $40,197,000, is that in any way
for authorized, but not filled, positions?
DEPUTY SECRETARY HUDSON: Yes, as the
Secretary referenced, we do fund some vacancies
for some portion of the year.
REPRESENTATIVE KAMPF: Okay. And so the
question I'm asking is, how much of the
$40,197,000 is for not filled, but authorized?
DEPUTY SECRETARY HUDSON: I will have to
get you that number.
REPRESENTATIVE KAMPF: Okay. Thank you.
MAJORITY CHAIRMAN SAYLOR: All righty.
REPRESENTATIVE KAMPF: I thought that
was a very simple question. I'm sorry.
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MAJORITY CHAIRMAN SAYLOR:
Representative Helm.
REPRESENTATIVE KAMPF: If there is a
second round, I'd love to be part of it.
REPRESENTATIVE HELM: Thank you,
Mr. Chairman, Secretary Topper.
SECRETARY TOPPER: Thank you,
Representative.
REPRESENTATIVE HELM: I'd also like to
talk about the Harrisburg State Hospital
grounds, which the majority is in my district,
and like Representative Kim said, partly is in
her district also. But about two years ago, I
had a bill, Act 100, that gave the Department of
General Services the authority to survey,
appraise, and provide the General Assembly with
a plan for the disposition of the Harrisburg
State Hospital grounds.
About two weeks ago, I was provided a
well organized, impressive document regarding
this property, which was assembled by an outside
consulting firm. In the full disclosure, the
price to accomplish all of this was $286,000,
which was published. Since then, I've had a
number of constituent calls regarding this.
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Most of the questions I was able to answer, but
I'm hoping that you'll be able to answer a few.
Like why did it take so long to do this
study?
And why was an outside firm contracted
to do this study versus DGS employees doing the
report?
How much is it costing the Commonwealth
of Pennsylvania to maintain this property?
Like I had figured $6 million, but in
the report, it said $5 million. Basically, my
concern is saving taxpayer money.
SECRETARY TOPPER: So the Department did
not perform this work on its own using its own
staff because the report, in order to do it with
the level of quality that you saw in the report,
really required a set of expertise that the
Department doesn't maintain.
It wouldn't be cost effective for the
Department to hire and maintain full-time real
estate appraisers. We just don't have
sufficient demand for that type of work.
REPRESENTATIVE HELM: Do you have any
appraisers?
I know at one time you did, but do you
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still or --
SECRETARY TOPPER: No longer. All of
the appraisal work that's done for the
Commonwealth is done by contract.
REPRESENTATIVE HELM: Okay.
SECRETARY TOPPER: And you mentioned
operating costs. So the costs are roughly $5
million a year in order to maintain the
property. That breaks down to about $3 million
in personnel costs, about $1.6 million in
utility costs, and the balance is general
operating dollars, so you know, everything from
office supplies to equipment.
REPRESENTATIVE HELM: So do you think
it's $5 million or $6 million?
SECRETARY TOPPER: I believe it's five.
REPRESENTATIVE HELM: Okay. And why did
it take so long to do this study?
I know it was a change in
administration, so maybe that held something up,
but why was it so long to get back to us?
SECRETARY TOPPER: Well, we took office
on January 20th of 2015. I believe by the fall,
we were -- we had a strategy together, and we
were in the market to get the study done. Then
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it took some time to get the study done.
I think we moved about as, you know,
about as quickly as we could.
REPRESENTATIVE HELM: I know it's back
in our court now.
SECRETARY TOPPER: Yeah.
REPRESENTATIVE HELM: Now we have to get
back to you, but like I said, I've been getting
these calls after it was published, and I just
wanted the public to know why.
SECRETARY TOPPER: What I would say,
Representative, is that we endeavored to do
something unprecedented here with that report.
We wanted to put together a process that would
engage the community, that would consider the
property for multiple, you know, in terms of
multiple different types of disposition,
different types of ultimate use.
And you know, really, we wanted to be
able to provide the General Assembly with a
greater volume and greater quality of
information so that the decision we make would
ultimately have a greater likelihood of being
accepted by the community.
Too often, these properties, these State
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hospital properties in particular, when we go to
sell them, they get bogged down in disputes over
what the property ultimately should be used for.
And we were hoping that by hiring a firm to
perform the study, we could short circuit some
of that delay that inevitably seems to ensue,
which isn't to say that this has been fast.
You know, for one thing, we -- it's
taken quite a lot of time just to migrate the
State employees off of the property and back
into downtown.
REPRESENTATIVE HELM: Well, I think that
should be noted that part of the reason that
employees went to the Verizon Building was part
of the Harrisburg Strong Plan.
SECRETARY TOPPER: That's correct, but
it also enables us to move forward with the
disposition of the property in a way that, like
it would be that much more complicated if I
still had those 750 employees still working and
living on the property.
REPRESENTATIVE HELM: I agree there.
And you did have the public meetings, and people
were able to come and express their opinion.
SECRETARY TOPPER: Yes.
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REPRESENTATIVE HELM: So I thank you for
that, and we'll proceed with it.
SECRETARY TOPPER: Thank you.
REPRESENTATIVE HELM: Thank you.
MAJORITY CHAIRMAN SAYLOR:
Representative Greiner.
REPRESENTATIVE GREINER: Thank you,
Mr. Chairman.
Good afternoon, Secretary.
SECRETARY TOPPER: Good afternoon.
REPRESENTATIVE GREINER: I'm going to
switch gears a little bit. We're going to go
back to a topic that was discussed pretty
heavily last year, and it's Act 127 of 2012,
which established the Public Works Employee
Verification Act.
This Act, of course, is enforced by you,
by DGS, and requires contractors and
subcontractors on Public Works projects to
verify new employee eligibility using the
E-Verify.
As I said, I do remember this last year.
You had shared that there were some challenges
related to the Administration enforcement of
this Act. I just wanted to follow up with a
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series of several questions.
Can you please share with us an update
on how the provisions of Act 127 are being
administered and enforced? That's question
number one.
SECRETARY TOPPER: Sure. So in the
current fiscal year, as of January 26th, the
Department had completed 229 audits pursuant to
the Act. We had issued 28 civil penalties with
a total value of $7,000; 19 civil penalties have
been collected, the total value of $4,750; six
audits were performed of State agency controlled
projects.
The breakdown is as follows. So six
were DGS-controlled projects; 71 were State
agencies that were not DGS-controlled projects;
and then 104 were local government -- 104 were
local government; 54 were school districts; and
27 were higher ed-controlled projects.
REPRESENTATIVE GREINER: Let me just
follow up because we have limited time.
SECRETARY TOPPER: Yes.
REPRESENTATIVE GREINER: Because of the
number of -- are you confident with the number
of compliant audits -- compliance audits we're
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having, or do you think we should have more?
I mean, I don't know whether that's
enough or not enough. I don't know whether
that's five percent or what number that might be
of the total projects.
SECRETARY TOPPER: So we --
unfortunately, the Department of General
Services doesn't have jurisdiction over all
construction in the Commonwealth. So I'm not in
a position where I could tell you the percentage
of the total projects we're actually capturing
via audit.
What I can share with you is that in the
last year, we've more than doubled the rate at
which we're performing the audits, simply by
virtue of, again, applying some lien principles
and moving the administration of the project out
of the Public Works deputation and into
procurement. That's been a big boom for it, but
I would only point out that I think the bigger
challenge is that the Department does not have
enforcement authority to be able to walk onto a
site that isn't one of our own projects and
ensure that it's being complied with.
So this is effectively a paper audit
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process, which, you know, in my view, you know,
could be defeated pretty, you know, fairly
easily.
REPRESENTATIVE GREINER: Do you have the
-- I mean, do you have an idea -- you might not
know, then, what are the annual costs associated
with enforcing this?
Or what are the costs that we, you know,
that the legislature, the taxpayers, have to
incur to do this?
SECRETARY TOPPER: Yeah, right now this
represents, basically, it's less than one
full-time person's effort to perform these
audits on an annual base.
REPRESENTATIVE GREINER: Wow.
SECRETARY TOPPER: So we have one person
doing it on a part-time basis.
REPRESENTATIVE GREINER: Okay. It
sounds like maybe more needs to be done.
What, if any, changes to this Act would
you recommend?
I mean, if the legislature has an
opportunity to change the Act or amend it, can
you let me know what you think needs to be done
or what we need to change?
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SECRETARY TOPPER: My sense of it is
that if you wish for the E-Verify program to
become a more effective deterrent or a more
effective mechanism through which you might
actually discover the presence of undocumented
personnel working on public construction
projects, then I would either have the program
reside within an agency that has the authority
already to walk onto those sites and perform
on-site audits; or I would grant DGS the
authority and sufficient funding to do it.
REPRESENTATIVE GREINER: I appreciate
the insight. I know it's a big issue today for
employers. And like I said, I thought we should
follow up because I know there was a discussion
with it last year, so thank you so much.
SECRETARY TOPPER: You're very welcome.
REPRESENTATIVE GREINER: Thanks,
Mr. Chairman.
MAJORITY CHAIRMAN SAYLOR:
Representative Peifer.
REPRESENTATIVE PEIFER: Thank you,
Chairman.
Thank you, Secretary, for being here.
The last several years, the Fish and
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Boat Commission had to drain some of their high
hazard dams based upon downstream issues and
basically structural deficiencies that they have
in those dams. In Wayne County, we've got
several of those lakes that have been drained
and are now just, you know, pass-through with
small streams going through them right now.
I think last year or the year before,
the Governor was able to free up some funds in
his office to help pay for those dams, the
repair of those dams, for the Fish and Boat
Commission. We also passed Act 89 that captured
some of the moneys going into motor boats to
help pay for some of those high hazard dams.
But when I meet with the Fish and Boat
Commission on a regular basis, they kind of
explain that the dams in Wayne County have been
given to you for like over a year, and they're
still not out to bid.
I was just wondering, is that a problem
with the design and build phase of those
replacements?
I mean, typically, we don't have money
to fix problems, but here's a situation where
the money has been approved by the Governor's
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Office and Act 89 to fix these projects, but
every time we ask, they're somewhere in DGS's
queue of work to be done.
SECRETARY TOPPER: Sure.
Representative, I don't have the details of
those projects at the top of my mind. I'd be
happy to either respond in writing or to meet
with you offline and provide as much information
as I can.
There could be any number of reasons for
delays that occur, you know, in the design
process.
REPRESENTATIVE PEIFER: Right. And
look, I understand they're rather large
projects; I understand that. But I think, based
upon my calendar, it's been well over a year now
that they've been in a design and build phase,
and they're still not out to bid yet. And I
think we have some money there ready to get the
project started.
SECRETARY TOPPER: Yeah, I am very much
aware of the backlog of capital projects that
we've been working our way through. It was
significant on the day that we arrived, in large
part because during the prior administration,
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significant resources had been cut from the
Department's Public Works staff, and the number
of projects in the queue grew as a consequence.
This year, as part of that modernization
effort and the installation of the new E-builder
system and our effort to transform the way
Public Works operates, we have seen a dip in
some productivity as we've migrated from the old
system to the new system.
But as things are ramping back up, they
are ramping back up at a much greater rate, and
I anticipate our productivity will be
significantly higher than it's ever been. But I
can't speak to whether the specific projects
you're talking about are delayed as a
consequence of our modernization effort or
whether they've been delayed as a consequence of
something that's more specific to the project.
I'd be happy to dig into it, though.
REPRESENTATIVE PEIFER: Right. So there
are safety issues here. There are environmental
issues here. So I understand that. And I don't
know either, but if I could help you out there,
I mean, if you could just get back to me, that
would be fine. That 's all I ask.
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SECRETARY TOPPER: Great.
REPRESENTATIVE PEIFER: Thank you.
MAJORITY CHAIRMAN SAYLOR:
Representative and Chairman Metcalfe.
REPRESENTATIVE METCALFE: Thank you,
Chairman Saylor.
Good afternoon.
SECRETARY TOPPER: Good afternoon. How
are you?
REPRESENTATIVE METCALFE: Good. Good.
Thanks for being with us today.
The Department of Human Services Health
Choices re procurement --
SECRETARY TOPPER: Yes.
REPRESENTATIVE METCALFE: -- are you
familiar with the issues that we've had there
and the error-ridden process that they've been
floundering in since the last 18 months, I
believe?
SECRETARY TOPPER: I'm familiar with
much of it, perhaps not all.
REPRESENTATIVE METCALFE: So when they
first -- my understanding is that in the first
round, they were reprimanded by the Commonwealth
Court for using secret evaluation criteria.
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Then I think it was the second round when they
came back and said, well, those awards were not
going to be correct because they had used the
wrong multiplier.
Are you familiar with that problem?
Was your Department involved with that
process, working with them on that?
Who caused -- I mean --
SECRETARY TOPPER: Sure.
REPRESENTATIVE METCALFE: -- where did
the error come from?
SECRETARY TOPPER: Yeah. I am familiar
with the latter part, quite familiar, because
Secretary Dallas and I together spent a day
making calls to all of the competing firms in
order to be as transparent as we possibly could
be and to share with all of them the reasons for
-- the reasons why the proposals had to be
rescored.
Here's what occurred. Whenever a
Commonwealth agency conducts an RFP process, the
portion of the score that is related to
Diversity, Inclusion & Small Business
Opportunities gets -- the portion of that
proposal gets sent to DGS, and DGS scores that
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component.
In this case, regrettably, it was
basically a clerical error. A mathematical
error was made by the staff that was responsible
for performing the scoring portion of those
proposals.
It stems from the -- it stems from the
fact that the total number of basis points in
the procurement in Health Choices was different
than the standard total number of basis points
that typically pertain to most best value
procurements in the Commonwealth.
That difference wasn't caught at the
right time, so the wrong formula was applied.
And the Diversity, Inclusion & Small Business
Opportunities points that were assigned
originally were one-tenth the size that they
should have been.
When the error was discovered, we moved
immediately to correct it, to rescore all of the
proposals. And as I said, Secretary Dallas and
I, you know, had to spend the day talking to all
of the vendors.
In every conversation, I took full
responsibility on behalf of the Department for
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the error. It's regrettable.
All I can tell you is that we have taken
significant steps to make sure that it can't
happen in the future.
REPRESENTATIVE METCALFE: I appreciate
that information. So the first time around,
when they had to rescind the contracts that were
being issued, it was due to the Commonwealth
Court slapping DGS down because of secret
evaluation criteria, as it was quoted, in that
process.
The second time around, it was an error,
clerical error, which occurred with your
Department's involvement with the process.
And now, with the new contracts having
been awarded, or with the awards that have been
issued, there have been allegations that there
have been ex parte conversations about that
procurement with at least one successful bidder
during the blackout period.
So you don't deal with -- you're only
dealing with one segment of this contract, but
coming from a procurement process, agencies, my
understanding is agencies are not allowed to
contact bidders during a blackout period and
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provide additional information that can then be
used and modify the contract so that they can
come back and then successfully put in a bid; is
this correct?
SECRETARY TOPPER: That's absolutely
correct, Mr. Chairman.
I would take any allegation, such as you
mentioned, quite seriously.
REPRESENTATIVE METCALFE: That's what I
-- I sent a letter to Governor Wolf on February
14th, expressing these concerns to him that
these allegations have been made and asking him
to intervene in this contract.
From your position as a Secretary, I
would ask that you would also talk to Governor
Wolf about the letter, and I would be happy to
have my office send a copy over to you because I
sent it to Secretary Dallas, related to the
error-ridden and just problem-ridden process
with this contract. I mean, it's just -- the
clerical error, things happen.
But to start with the secret evaluation
criteria, being slapped down by the courts, then
you have an error, with a clerical error, and
now you have further allegations that there's
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been these conversations and awards going to
companies that aren't even in the State, that
don't seem to have any ties to the State, it
just all doesn't match up with what you would
expect to occur in a procurement process with
transparency being a key that Governor Wolf
seemed to be looking for when he was first
elected.
SECRETARY TOPPER: I will be more than
happy to get involved personally and to help get
it sorted out. I think that --
REPRESENTATIVE METCALFE: I appreciate
that.
Would you like my office to send over a
copy of the letter that we had sent to Governor
Wolf to you?
SECRETARY TOPPER: That would be great.
REPRESENTATIVE METCALFE: Great. We'll
get that over to you.
SECRETARY TOPPER: Very good.
REPRESENTATIVE METCALFE: Thank you.
MAJORITY CHAIRMAN SAYLOR: Very good.
Mr. Secretary, I'm going to follow up with
similar questions.
SECRETARY TOPPER: Sure.
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MAJORITY CHAIRMAN SAYLOR: So you're
saying that your Department was completely at
fault for the second?
SECRETARY TOPPER: That's what I'm
saying, Chairman.
MAJORITY CHAIRMAN SAYLOR: Okay. You
said there's a different scoring system for this
contract for minorities.
Why a different scoring for this one
particular contract?
SECRETARY TOPPER: Mr. Chairman, that's
one of the problems that we're moving to correct
systematically. It's basically -- if, for
example, there are a thousand points potentially
allocated in a procurement, and 500 of them are
allocated for costs and 300 of them are
allocated for, say, technical quality and 200 of
them are allocated for the diversity component,
well, that would be a reasonable description of
what is standard.
MAJORITY CHAIRMAN SAYLOR: But that's
not what I'm asking. What I'm asking is, why a
different scoring for this contract versus other
contracts?
SECRETARY TOPPER: Yeah, well --
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MAJORITY CHAIRMAN SAYLOR: Why would
this contract be any different than anything
else?
Would you not do the same due diligence
to make sure that everybody in every company
who's bidding on any contract has the same
requirements?
It sounds to me like you made special
provisions for this contract, rather than the
scoring of all contracts that the State awards
to make sure that the minority community and
businesses are counted in.
SECRETARY TOPPER: I agree with you, Mr.
Chairman.
The reason for the difference had
nothing to do with this procurement, per se. It
had to do with what was common practice at DHS
versus what was common practice at the other
agencies.
So where the other agencies might
perform these evaluations on a 1,000 point
basis, the Department of Human Services was
performing the evaluation on a 10,000 point
basis.
MAJORITY CHAIRMAN SAYLOR: Yes, the
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Secretary told me that you did it on 200, and
they do it on 2,000.
SECRETARY TOPPER: Right.
MAJORITY CHAIRMAN SAYLOR: Well, why
didn't they score it, then?
I mean, first of all, if you're scoring
it, it's on your basis; if they're scoring it,
they should be scoring it. You can't have two
agencies with two different standards and then
you're scoring it, and then they say -- I mean,
this -- Representative Sims, Representative
Matzie and others have asked the Attorney
General, they have asked the Auditor General for
an investigation.
I mean, you're talking about thousands
and thousands of Pennsylvania jobs here that are
involved in this, and now uncertainty. And you
know it's a black eye for Governor Wolf, and he
doesn't deserve that in this whole system.
It seems to me that this contract is
getting treated different than other contracts,
and I don't think it looks kosher to the
taxpayers. And that is a concern I have because
I do believe the Governor is, and his
demonstration has been very much about
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transparency. This has been the biggest fiasco
I've seen in government recently.
And again, I'm just going to leave that
go at this point. But I do believe the
explanations I have received and heard are not
reasonable.
I believe that's why Representatives
Sims and Matzie and others have asked for an
investigation because they don't understand why
you would have different scoring systems for
different companies or contracts.
To me, if we're creating a system that's
fair to all minority companies, all minority
companies should be evaluated the same way; not
a company that's from some other state, who in
this case looks like they have a huge benefit
because we chose a different scoring system.
SECRETARY TOPPER: Mr. Chairman, they
were all evaluated the same way.
MAJORITY CHAIRMAN SAYLOR: No, I don't
mean the contract itself. I mean in other
contracts we've awarded, you're using a
different point system, you're telling me. You
used a different point system for other
contracts you've awarded. This one had a
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special scoring.
SECRETARY TOPPER: That's not the case.
MAJORITY CHAIRMAN SAYLOR: Well, you
said that earlier. You said it was a different
scoring system, that you used your scoring
system versus DHS.
SECRETARY TOPPER: The difference in the
total number of basis points had nothing to do
with this contract, per se. There was a
difference because DHS has historically been
using a different number of basis points than
the other agencies have. And we had a process
that should have taken that into account.
At the front end, when scoring of the
DISBO proposals began, that step was skipped by
the individual that was responsible for
performing the work. And we have since
corrected the process so that that can't happen,
but there was nothing about this particular
contract that dictated the different number of
basis points.
It just so happens that, you know, this
was the one, unfortunately, the one procurement
where this mistake was made, but it's really not
correct to say that the contracts were awarded
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on the basis of different systems or that any
supplier was treated in any way differently than
any other.
This was done in a uniform and fair
fashion, and we have been as transparent about
it, including our errors, as I know how to be.
MAJORITY CHAIRMAN SAYLOR: I don't know
if I agree with you, Mr. Secretary, but I'm not
blaming you completely for that.
SECRETARY TOPPER: Okay.
MAJORITY CHAIRMAN SAYLOR: I just want
to move on. In discussions with the Governor,
we've talked about the vacant properties that
the State owns. And the Governor has told me
that there is one property that costs us $5
million a year to maintain.
I don't know how many properties -- do
you know how many properties we have that are
not in current use?
SECRETARY TOPPER: That's a great
question. I know how many have been declared
surplus and how many are pending sale, but until
an agency actually takes the step to let us know
that a property is vacant, it's not on our
radar.
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The number we have pending sale, I
believe, is -- so we have 20 that we're
currently preparing for sale; five are currently
under agreement of sale; and 12 were sold within
the last year.
MAJORITY CHAIRMAN SAYLOR: You're saying
the Agency determines whether the building is no
longer of any use?
SECRETARY TOPPER: What I'm saying is,
it really speaks to a larger issue that we hope
to solve through an effort to modernize our real
estate system. Currently, the Department does
not have sufficient visibility on the whole
portfolio of real estate to be able to assist
the agencies effectively with whether all of the
buildings are efficiently utilized.
When a State agency decides to vacate a
property, say a building on State hospital
grounds, we are not automatically aware of that
fact. We have to be notified before we can take
action.
MAJORITY CHAIRMAN SAYLOR: And the
reason, again, in talking with the Governor, I
really think we need to do better at this. But
the other thing is, for instance, we had a
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property in the City of Harrisburg --
Representative Kim is gone; I was hoping she
would be here when I brought this one up -- that
was vacated recently, and we rented or leased a
property out in Cumberland County.
I mean, we're vacating a building in
downtown Harrisburg that's tax exempt to move to
a building out in Cumberland County, the
township. And again, that property needs to be
moved very quickly.
I don't -- I can't recall which property
it is off of the top of my head. When people
are looking at efficiencies in government,
agencies who are abandoning buildings have to
have a good excuse. Somebody has to be
answering to that. I don't know that we are
staying on top of how we manage properties in
this State.
And Mr. Secretary, I'm not necessarily,
again, blaming you, but we've got to develop a
system that manages these properties so we know
what's surplus. It is costing us, just in one
property, by the Governor's numbers, $5 million
for one property. That's $5 million that could
go into basic education or $5 million in some
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other program. And that's just one property.
So those are the concerns I think the
General Assembly has in the management of our
properties.
Why are they being vacated?
Shouldn't they be put on the sale list a
lot quicker?
And who's making these decisions to just
vacate a building and move to a nicer, newer
building in Cumberland County?
SECRETARY TOPPER: First of all,
Mr. Chairman, with respect to your general
comments, I couldn't agree with you more; we do
need a better system.
It's not the case that agencies can, you
know, sort of on a whim decide to vacate a
building; it's not quite that simple, but it is
true --
MAJORITY CHAIRMAN SAYLOR: But it is
close.
SECRETARY TOPPER: No, not really. Not
with our bureaucracy, no.
But what I would say is that, yes, it's
significant. Actually, the total number for
that portfolio of real estate that's currently
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pending sales in terms of annual maintenance,
it's more like $9 million, all in; it's not just
$5 million, which would be the State hospital
property.
We do need to do a better job of it, and
we're going to need your help to do it because
there are statutory constraints that are really
driving much of what we have to do. And I
would, as I've said, I would like nothing better
than to work with you on a solution.
MAJORITY CHAIRMAN SAYLOR: We would
welcome -- I think you've heard from members on
both sides of the aisle, we would welcome any
recommendations that you have to help make the
system better and work better for the taxpayers
of Pennsylvania.
The last, really comment, from myself
has to do with that I think the General Assembly
would like an update on where the SVI Phoenix
is.
As you answer that question, have the
taxpayers been billed more than what the
contract calls for?
SECRETARY TOPPER: Yeah, the answer is
no.
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MAJORITY CHAIRMAN SAYLOR: Great.
SECRETARY TOPPER: What I can say about
Phoenix is this. It's probably the most
difficult situation that I inherited when I
arrived. The project, as I'm sure you know, is
currently more than a year behind schedule.
It's a $340 million capital project; the largest
prison that the Commonwealth has ever built.
The contractor that is a joint venture
contractor, Walsh Construction, and Heery
performed the design, they have been
accumulating liquidated damages of more than a
million dollars a month. We actually stopped
payment on invoices associated with the central
scope of work some months ago, basically when we
realized that liquidated damages had accumulated
to the point where the project was going to be
unable to afford the total value.
Last month, we took the step -- I took
the step of personally sending a cure letter to
Walsh, to the principals for Walsh and Heery. I
have had them, both gentlemen, in my office in
mid-January. I anticipate having them back
again within a few weeks.
They responded to the cure letter, when,
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you know, basically we threatened them in the
letter with default and debarment, and they've
responded, I think, with a reasonable response
outlining the beginnings of a path to
completion.
We've also taken the step of shuffling
staff, putting different personnel on site from
DGS and from the Department of Corrections. I
believe that here within the next month, we
should have a firm schedule for completion, you
know, and I believe we'll be back on track. If
we're not, then we're likely to be in
litigation.
MAJORITY CHAIRMAN SAYLOR: Is there a
bond that covers in case they default that would
cover us to have another contractor finish the
job?
SECRETARY TOPPER: Yes. The project
does have a bond. It has the complication,
though, that the bond is currently held by six
different surety companies because of its
overall size. And what that means for us, in
the event of default, is likely quite a long
process as we sort out how best to collect on
the bond. And again, likely some long
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litigation.
So this is why there's been no easy
answer that gets us a completed project. I can
tell you that it -- presently, it's the number
one priority I have within Public Works. I have
zero interest in having this project linger much
longer.
We've done a couple of other things in
an effort to protect subcontractors. We've
taken the step to begin posting every time
payments, all payments that have been made, and
what they're for. We post that on our website
so the subcontractors are aware of when the
prime has been paid. And we also initiated an
Inspector General investigation, looking into
issues around subcontractor payment.
You know, we're doing everything we can
to hold the firms accountable here. And it's --
I have a lot of confidence that, in the end, we
won't spend more than was originally budgeted
for the project, but it is certainly going to
take a bit longer.
MAJORITY CHAIRMAN SAYLOR: Okay. I'm
going to allow Representatives Santora and Kampf
to ask an additional question. I'm only giving
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them three minutes. And I'm keeping the time,
so it will be three minutes.
Representative Santora.
REPRESENTATIVE SANTORA: All right;
twenty-three minutes.
So quickly, Representative Knowles and I
are ready, willing, and able to sit down and
talk to you immediately. Let's put together a
comprehensive legislative package, bring it
back, and let's get moving on it, because you're
right, you can't work in the 1930s in the year
2017. We've got to figure out a way that the
Commonwealth can maximize revenue coming in for
the sale of these projects or these properties.
A couple of things, the Mackenzie Report
that the Governor commissioned, it's showing 22
properties that they feel are either unused or
surplus; you just quoted 20.
Why is there a difference?
SECRETARY TOPPER: It could simply be
the timing of when this data was assembled and
when the data that was provided to Mackenzie was
assembled. As I mentioned, we have -- currently
there are five that are currently under
agreement of sale and pending. These properties
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move through this process with a certain pace.
REPRESENTATIVE SANTORA: All right.
I'll give you that. I'm looking at it. You've
got $6.8 million, according to the Mackenzie
Report, of recurring expenses that would go
away; $4.8 million in one-time sales in
2017-'18; then in '18-'19, it jumps to $10.8,
which could be the difference of the properties.
My question is, do you agree with these
assessments?
SECRETARY TOPPER: I do. My team worked
pretty extensively with the Mackenzie team while
they were here.
REPRESENTATIVE SANTORA: Good. You just
answered my second question.
SECRETARY TOPPER: Yes.
REPRESENTATIVE SANTORA: All right. The
next question. They also took a look at the
leasing, as well.
Do you agree with their assessment on
that, that we're under-utilizing lease space and
could save $3 to $5 million?
And I know a lot of people say, you
know, you're at $30-plus billion dollars, what's
$3 to $5 million, but $3 to $5 million here and
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there, it all adds up.
SECRETARY TOPPER: Representative, I
believe the conclusion was that we're
under-utilizing owned space and we could shrink
our lease footprint by better utilizing, and our
lease expense, by better utilizing our own
space.
The best example I can think of is the
Forum Building right here on the campus. The
majority of that building has sat vacant for
more than a decade, despite the fact that, you
know, the Commonwealth has had capital
appropriations sufficient to perform the
renovations that are necessary to make the
building inhabitable again and to be used as
office space.
We are taking --
REPRESENTATIVE SANTORA: So we're
under-utilizing our space, which in turn, we're
leasing other space that we don't necessarily
need to. It's a simple -- I'm sorry. I've got
three minutes.
SECRETARY TOPPER: Precisely. That's
the idea, that we can contract out of current
lease space into --
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REPRESENTATIVE SANTORA: Great.
SECRETARY TOPPER: -- owned space, and
it's a much more efficient way to operate.
REPRESENTATIVE SANTORA: All right. So
in your information, you had said that there are
just -- and I'll read it for you, there is a
fundamentally broken and slow -- it's
fundamentally broken and slow and unnecessarily
resulting in millions of dollars in annual
carrying costs when it comes to these
properties --
MAJORITY CHAIRMAN SAYLOR:
Representative, your time is up.
SECRETARY TOPPER: I don't know if those
are my words exactly, but I certainly could have
written them. I believe that that's the case.
I think it is fundamentally broken and slow.
REPRESENTATIVE SANTORA: So that's what
we're going to help you fix.
SECRETARY TOPPER: Wonderful.
MAJORITY CHAIRMAN SAYLOR: Secretary, I
will let you finish. You wanted to make a point
on the Forum Building. I'm willing to let you
have a minute to explain that if you want;
that's up to you.
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SECRETARY TOPPER: I was just going to
point out that we're getting that work underway
as we speak. The Governor and the Budget Office
have authorized us to begin work on the Forum
Building.
It will be going through design, but
ultimately, we will contract out of lease space
here in Harrisburg and back into our own
footprint.
MAJORITY CHAIRMAN SAYLOR: Very good.
Represent Kampf.
REPRESENTATIVE KAMPF: Secretary, the
same Mackenzie Report says that the Commonwealth
spends $5 billion annually on vendors, and they
analyzed $1.4 billion of third-party spending.
Apparently, they got a lot of that information
from you, according to their footnote.
They looked at non-IT professional
services, IT professional services, and a bunch
of others, and they indicated that in '17-'18
fiscal year, approximately $40 million in
General Fund savings was available; in-depth
contract reviews were recommended; category
spending reviews.
Is that $40 million in this budget?
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Forty million in savings, I mean.
SECRETARY TOPPER: Yes, it is,
Representative. The current year budget
proposal includes in it, basically, the savings
that are anticipated to recur from both our --
all our prior strategic sourcing efforts here
from the first two years of the Administration.
REPRESENTATIVE KAMPF: All right. But
since I only have three minutes, the yes is
great.
Thank you.
SECRETARY TOPPER: Got it.
REPRESENTATIVE KAMPF: They also
indicated that the private sector has 206
employees for one HR person; some of our
agencies have 72 employees per one HR person.
So we're -- we've got too many HR people is the
point. IT spending per employee in the
Commonwealth is $12,000 per employee; and in the
public sector across the country, it's only
$8,000.
Could you comment on that for us in your
Department?
SECRETARY TOPPER: So as you're probably
aware, the Administration has begun shared
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services initiatives formally for IT and for HR.
Those initiatives are designed, you know,
basically have been put into motion explicitly
to solve the very problems that Mackenzie
pointed out, and that you're citing here today.
Mackenzie -- I think we already
recognized that there were some issues there. I
think Mackenzie really helped validate them. As
a result of that shared services initiative, we
anticipate that, you know, DGS's current HR and
IT -- actually, our HR is already consolidated
with the Department of State, and IT. So we're
already consolidated with the Department of
State.
But I expect it will further contract
and ultimately be provided by essential shared
services operation and that span of control
issue will be remedied by virtue of that change.
MAJORITY CHAIRMAN SAYLOR: You finished
before the three minutes were up; wow.
Representative Markosek.
MINORITY CHAIRMAN MARKOSEK: Thank you,
Chairman. Mr. Secretary, Madam Deputy
Secretary, thank you.
SECRETARY TOPPER: Thank you.
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MINORITY CHAIRMAN MARKOSEK: You know,
the members on both sides of the aisle here
asked a lot of good questions, a lot of tough
questions, a lot of pointed questions. I
thought Chairman Saylor summed up some very
difficult questions, did a very good job of
making those inquiries of you. Some of those
issues, I have a little more background than
others, some very little, particularly, the area
with the contracts that he had mentioned, or the
contract that he mentioned.
But it made me feel good, the fact that
you took responsibility, admitted where your
office was incorrect, assured us that you would
be looking into making sure that those things
didn't happen again, and I think just an overall
sense that you were very accountable today to
this Committee. So I want to commend you for
that.
I am going to talk with my staff and
perhaps follow up on some of these issues
myself, so I get a little better feel for them.
But nevertheless, I just want to say that, and I
would be happy to say it about your colleagues
who appeared before you, it really sounded to me
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like you are willing to be accountable, take
responsibility for the activities that you
perform. That makes me feel good, not only as a
legislator, but as a taxpayer.
Thank you.
SECRETARY TOPPER: Thank you.
MAJORITY CHAIRMAN SAYLOR: Mr. Secretary
and Deputy Secretary, we appreciate your time
today to come in and answer the Committee's
questions.
Thank you very much.
SECRETARY TOPPER: Thank you.
MAJORITY CHAIRMAN SAYLOR: Best of luck.
SECRETARY TOPPER: All right.
MAJORITY CHAIRMAN SAYLOR: The Committee
will reconvene tomorrow morning at 10:00 a.m. to
hear from the Liquor Control Board.
(Whereupon, the hearing concluded.)
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C E R T I F I C A T E
I hereby certify that the proceedings
are contained fully and accurately in the notes
taken by me on the within proceedings and that
this is a correct transcript of the same.
____________________________
Tiffany L. Mast, Reporter
Notary Public
