State dumps bargaining plan for liquor contract in favor of bid process

Posted Sept. 26, 2012, at 11:45 a.m.
Last modified Sept. 27, 2012, at 6:43 a.m.
Roger J. Katz
Roger J. Katz

AUGUSTA, Maine — The LePage administration plans to use a more traditional “request for proposals” process to invite vendors to bid on Maine’s wholesale liquor contract, the state’s administrative and financial services commissioner said Wednesday.

Commissioner Sawin Millett was responding to concerns raised by Sen. Roger Katz, R-Augusta, who recently wrote to Millett to say he was “uneasy” with the process the state was planning to use to solicit bids for the state’s liquor contract. The state’s Bureau of Alcoholic Beverages and Lottery Operations plans to either renegotiate or terminate the contract in the coming months in an effort to secure additional revenue for state coffers and potentially lower prices for consumers.

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

In a letter sent to Katz on Wednesday, Millett said his department held internal discussions about how to handle bids and settled last week on a traditional process in which the state will publish a request for proposals that includes a detailed, written description of what it’s seeking and outline the criteria against which the state plans to score the bids it receives.

“We have carefully considered which options — RFP or bargaining — would provide the fairest and most transparent process for securing a new liquor contract while maximizing the return to the Maine taxpayers,” Millett wrote. “A decision was reached internally last week that the RFP approach would provide the most objectivity and fairness, with a clearly delineated appeals process defined by statute and rule.”

In his letter to Millett last week, Katz said there were 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?” he wrote. “These are the kinds of questions others and I have been asking, yet no one seems to have clear answers.”

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

That contract expires 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.

Lawmakers and gubernatorial candidates have started looking to the liquor contract in recent years as a source for new revenues.

The state potentially forfeited about $100 million in revenues over the 10-year life of the liquor contract, MaineBiz reported last year. Under the current arrangement, MaineBiz reported, the state received its $125 million upfront payment and could count on about $60 million in profit-sharing with Maine Beverage Co. over the 10 years of the contract.

Reid, the Alcoholic Beverage and Lottery Operations director, outlined a plan earlier this month for renegotiating the liquor contract that he said could result in $29 million in additional revenue for the state annually.

The new arrangement, he said, would result in a $41.5 million increase in cash flow for the state’s liquor business, a sum that could help the state lower its wholesale prices. And lower prices at Maine’s agency liquor stores, Reid said, can help the state recapture millions of dollars in sales lost to neighboring New Hampshire, where liquor prices are cheaper.

Maine Beverage Co. president Dean Williams said he preferred not to comment on the bid process or other details surrounding the renegotiation of Maine’s wholesale liquor contract. Maine Beverage Co.’s parent company, Massachusetts-based Martignetti Companies, also supplies liquor to New Hampshire’s state-run retail outlets.

“We do look forward to the opportunity to discuss extending our successful relationship with the state of Maine,” he wrote in an email.

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

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