Augusta senator questions bidding process for state liquor contract

Posted Sept. 25, 2012, at 7:09 p.m.
Last modified Sept. 26, 2012, at 7 a.m.

AUGUSTA, Maine — A Republican senator on the Legislature’s Appropriations Committee says he’s “uneasy” with the process the state plans to use to invite vendors to bid on Maine’s wholesale liquor contract, which the state’s Bureau of Alcoholic Beverages and Lottery Operations plans to either renegotiate or terminate in the coming months.

Sen. Roger Katz of Augusta is recommending the state use a more traditional “request for proposals” approach in which the state publishes a detailed, written description of what it’s seeking and interested vendors submit bids in response. A traditional request for proposals also outlines the criteria against which the state plans to score the proposals it receives.

Administrative and Financial Services Commissioner Sawin Millett and Gerry Reid, director of the state’s Bureau of Alcohol Beverages and Lottery Operations, told lawmakers earlier this month that the state plans first to bargain competitively with interested and qualified parties. If that process fails, Reid told members of the Appropriations Committee that the state would resort to the more traditional request-for-proposals system.

“My unease about this approach is that I just do not understand how it works and how losing bidders would know they had been treated fairly,” Katz wrote to Millett in a Sept. 21 letter. “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?”

A spokeswoman for Millett said late Tuesday the commissioner wasn’t prepared to comment on Katz’s letter.

Maine is one of a handful of states that controls the distribution of hard liquor. In 2004, the state leased its wholesale liquor business for 10 years to Maine Beverage Co. in exchange for a $125 million upfront payment and an annual cut of the sales revenue.

The contract on that lease comes due in 2014, and the current state budget requires the state to renegotiate the liquor contract by June 2013 in order to secure revenue for transportation and drinking water programs as well as state reserves.

Millett and Reid told Appropriations Committee members they plan to negotiate a new deal that secures more revenue for state coffers and results in lower retail prices for consumers, a change that could return some liquor sales to Maine that have traditionally gone to neighboring New Hampshire, where liquor prices are cheaper.

Maine Beverage Co. officials couldn’t be reached for comment late Tuesday.

Ford Reiche, who formed Dirigo Spirit Co. in February in anticipation of bidding on the state liquor contract, told the Bangor Daily News he was fine with whatever process the state uses to award the next contract, “as long as it’s an open, competitive process.”

“Dirigo Spirit Company will work within whatever process the state puts in place and only seeks a level playing field and objective assessments of the proposals, however they are submitted and considered,” he said.

Katz said there are too many unanswered questions about what he called a “negotiated bid” process.

“To what extent is proprietary information of the bidders shared with the others by the [state official negotiating the contract]? Is there any kind of a scoring system in this process similar to the RFP process? What are the appeal rights following such a negotiated bid process?” Katz wrote in his letter. “These are the kinds of questions others and I have been asking, yet no one seems to have clear answers.”

While the request-for-proposals system is a known entity among state officials and vendors, the state’s process for issuing such requests and reviewing the bids has come under scrutiny after the recent decision by a state appeals board to invalidate a state award that would have given Maine Natural Gas the rights to build a Windsor-to-Augusta pipeline that would supply natural gas to state offices.

One of the losing bidders, Summit Natural Gas of Maine, appealed the decision over the summer and a committee threw out the award earlier this month, citing flawed request for proposals and inconsistent scoring processes.

In response, Millett said his department planned a “top-to-bottom” review of the state’s process for putting requests out to bid.

BDN business editor Whit Richardson contributed to this report.

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