Pennsylvania Liquor Control Board awarded a major, no-bid liquor warehousing and distribution contract Thursday despite objections from GOP lawmakers and questions from Auditor General Eugene DePasquale.
Despite business protests, legislative concerns and auditor general questions, the Pennsylvania Liquor Control Board quickly and quietly approved Thursday a 10-year, $475 million contract to move its bottled wine and spirits through Philadelphia and its suburbs.
The 3-0 vote came despite 11th-hour questions and complaints about the no-bid process from top House Republican leaders, state Auditor General Eugene DePasquale, and the firm that stands to lose the business.
The new contract – the largest executed by the PLCB so far this year – goes to KLS Logistics of Westerville, Ohio, concluding what the deal’s critics have called a whirlwind, nine-day process that ended up denying competitors a fair chance to bid.
Not that there was much discussion about that before Thursday’s vote.
The only thing put on the record at the board meeting about the contract, other than the board’s motion to award, came from Andrew Giorgione, an attorney for Buchanan Ingersoll & Rooney who appealed to the board to table the contract and seek public bids.
Giorgione was representing XTL Inc., the Philadelphia based warehousing firm that holds the contract now, and whom he noted has already received approval of preliminary land development plans for a new facility for the LCB.
Noting XTL’s contract was recently extended to August 2020, Giorgione contended the board has plenty of time to publicly seek proposals that would ensure “competitiveness and fairness” in the procurement process.
The contract in question covers the warehousing of PLCB’s wholesale wine and liquor purchases, and distribution of that product to all of the state-owned liquor stores in Philadelphia and its suburban counties, as well as some of the larger private liquor licensees.
According to PLCB filings, this particular liquor cabinet holds nearly half of the agency’s stock in any given year.
After the meeting, however, the Liquor Control Board released a sole source determination that noted its accelerated search was triggered by two factors:
XTL told PennLive earlier this week that its bankruptcy filing was necessitated in part because of garnishments on its PLCB payments due to a separate legal case in Iowa. But company president Lou Cerone also said that the firm is well on the way to paying off its creditors, and that it has never failed to meet its business obligations to the Liquor Control Board.
In his determination, however, PLCB Executive Director Charlie Mooney said "KLS has the global resources to be able to quickly secure a new location that not only better serves the PLCB’s current and growing needs but is also a safer and more efficient operation.
“The build-out of the new facility is expected to be completed prior to the expiration of XTL’s contract so as to avoid any disruption of product distribution.”
Earlier this week, the proposed contract drew the ire of state House Speaker Mike Turzai, R-Allegheny County, and Majority Leader Bryan Cutler, R-Lancaster County, who argued it was too large a deal to go down without public bids.
They were joined Thursday by state Auditor General Eugene DePasquale.
"Competitive bidding helps to ensure that state agencies receive the best possible price for goods and services,” DePasquale said in a statement issued shortly before the meeting. “I share the concerns of legislative leaders who feel this deal is just too large to be a sole-source contract.”
PLCB has said that it did solicit quotes from “approximately 10 qualified vendors" this summer, including its current logistics partners in central and western Pennsylvania, but that only KLS Logistics engaged.
PennLive reached out to Kane, the Scranton-based trucking firm that handles PLCB distribution for the rest of central and eastern Pennsylvania to seek its thoughts on the procurement process, but a spokesman for the company declined comment.
Giorgione said XTL is disappointed by the board’s action Thursday, but not necessarily giving up on a deal that provides work for about 100 employees. "We’re going to look at what options are available to XTL” as it learns more about the steps PLCB followed in this procurement, he said.
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