Maine news, sports, weather from Portland Press Herald / Maine Sunday Telegram, Portland, Maine

September 25, 2012

Maine Republicans question fairness of state-liquor negotiations

The contract will likely be worth hundreds of millions of dollars.

By Jessica Hall jhall@pressherald.com
Staff Writer

The LePage administration's proposal to directly negotiate a contract for more than $100 million a year in liquor sales in Maine is raising concerns among members of the Legislature's Appropriations Committee.

At least two members say they would prefer that the state make a traditional request for proposals, to ensure fair and consistent treatment of all bidders for the lucrative deal.

"My unease about this (direct negotiations) approach is that I just do not understand how it works and how losing bidders would know they had been treated fairly," Sen. Roger Katz, R-Augusta, said in a letter to Sawin Millett, the state's financial and administrative services commissioner.

A copy of the letter, dated Sept. 21, was obtained by the Portland Press Herald.

"Assume three interested bidders. Are they figuratively in three separate rooms with the responsible state official going back and forth between the three rooms conducting three parallel negotiations?" Katz said in the letter. "Does the State Representative tell each prospective bidder the bids of the others and ask them to do better?"

Another committee member, Rep. Tom Winsor, R-Norway, said all state contracts should come from requests for proposals. "Generally, I think you do an RFP if you have the time and make it an open proposal process," he said.

The state faces a June deadline to secure a new wholesale liquor contract. The current contract, held by Maine Beverage Co., expires in 2014.

Maine Beverage generated $130 million in sales in 2011 and made about $36 million in profits, before taxes and amortization of a $125 million payment to the state.

With the next contract, the state's Bureau of Alcoholic Beverages and Lottery Operations wants to increase the amount of money the state collects from liquor sales, while lowering retail prices by $2 to $7 per bottle to make Maine more competitive with New Hampshire's state-run liquor stores.

The state wants to restructure the wholesale contract. Its 10-year agreement with Maine Beverage included a $125 million payment in 2004 that helped the state close a $1.2 billion budget deficit.

Maine Beverage gets a guaranteed annual profit margin of 36.8 percent based on sales of all liquor. It subcontracts with Pine State Trading of Augusta for warehousing and distribution. The state retains authority for liquor pricing and determines what products are sold.

That contract came from a request for proposals. The request drew four initial bidders, three of which made it to the final review.

Rather than making a request for proposals for the new contract, the state may allow interested parties to bid, then negotiate with each party. Millett outlined the approach in a presentation to the Appropriations Committee earlier this month.

Katz raised concerns about what type of scoring process would be used and what appeal rights a losing bidder would have.

"Unless the department can set forth a fully explainable 'negotiated bid process' within a very short time frame, I respectfully suggest that the department use a more traditional Request for Proposals that is drafted in a detailed, understandable and fair way," Katz said in his letter.

In a telephone interview, Katz said, "I just want to make sure we get it right. We want to maximize returns for the state and have a transparent process."

Millett could not be reached for comment. Katz said he has not received a response from Millett.

The final decision about the bidding process has not been made, said members of the Appropriations Committee.

"An RFP would seem the more likely approach, but we haven't heard formally what process will be used," said Rep. Kathleen Chase, R-Wells, a committee member. "As long as it's a fair and transparent process, whichever way we decide to put it out there is fine as long as everyone is aware of what's involved."

Maine Beverage could not be reached for comment Tuesday. Dirigo Spirit, a new company that has expressed interest in bidding for the next contract, also could not be reached.

Other potential bidders have not emerged publicly. Gerry Reid, director of the state's liquor bureau, has said that another party has indicated it will present credentials soon, and other people have said they would like to be notified when the selection process starts.

Staff Writer Jessica Hall can be contacted at 791-6316 or at:

jhall@mainetoday.com

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