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Liquor Commission sued over warehouse contract, unlawful favoritism alleged

New Hampshire Union Leader

February 22. 2013 11:42AM

NASHUA ­- Attorneys for Law Warehouses of Nashua, as expected, filed suit against the N.H. Liquor Commission late Thursday afternoon, asking for a restraining order to prevent implementation of a 20-year, $200-million contract with Exel Inc., of Westerville, Ohio, claiming the commission "orchestrated a bidding process that was tainted by unlawful favoritism from the start."

In addition to voiding the Exel contract, Law, which is requesting a jury trial, wants the court to declare that all bids are rejected and the project must be re-bid. The Nashua-based warehouse company that has done the warehouse work for the Liquor Commission since the 1970s is also seeking compensation for lost profits, attorney fees and costs it incurred in responding to the liquor commission's request for proposals.

The 42-page complaint, filed in Hillsborough County Southern District, Nashua, outlines in detail allegations against the Liquor Commission that Law attorneys had hinted at as they pursued a Right-to-Know petition designed to acquire as many details of the Exel contract as possible. A Superior Court judge rejected their effort to obtain complete copies of the agreement and related materials, with no redactions.

Nonetheless, the Law attorneys maintain they were able to see enough to support their case. Among other things, they allege that the Liquor Commission and Exel colluded to consistently revise the request for proposals and to extend deadlines in ways that favored Exel to the detriment of other bidders.

Law cites several examples of what it says were biased and unlawful practices, including claims that:

-- Exel's proposal did not meet the most critical requirement of the RFP - a secure warehouse that met certain specifications; nor did it submit a proposal that generates maximum revenues for the state.

-- The Liquor Commission changed the bidding process and retroactively amended the RFP to the exclusive benefit of Exel.

-- Exel was allowed to make its proposal look more cost-competitive by simply ignoring expensive requirements of the RFP, such as committing to an eight-hour turnaround on orders and guaranteeing sufficient storage space.

-- Exel did not cap rate increases after the first 30 months to the consumer price index, as required by the RFP.

-- The Liquor Commission added a criteria that none of the other bidders knew about - automation.

Changes 'not uncommon'

The liquor commission has stated previously that modifications to an RFP while bidding is under way are allowed and not uncommon, and that all requirements of the state bidding statutes were followed.

Law's attorneys argue that the commission went too far, writing that, "Although an agency may, in an RFP, retain the discretion to waive some or all of the requirements, it may not waive a defect that materially deviates from the RFP, places other bidders at a competitive disadvantage or undermines the competitive bidding process."

Law argues that the RFP was amended seven times after the June 7 deadline, and that each extension was to benefit Exel, allowing it more time to find a warehouse in New Hampshire and to apply for a warehouse license, both of which were initially RFP requirements.

"The Liquor Commission allowed Exel to dictate RFP amendments that benefitted Exel alone and exposed the state to delays and cost increases," the lawsuit states.

Law's attorneys say the Liquor Commission was so determined to help Exel find a warehouse site, that the commission engaged the state Department of Resources and Economic Development as a "conduit with local and state agencies to expedite the transition to a facility (Exel) has proposed." That was on Aug. 14, well before the contract award was announced in November.

Contract defended

Attorney General Michael Delaney told the governor and Executive Council on Feb. 6 that he was confident in the Liquor Commission's bidding process, even as he anticipated the Law legal challenge.

"My office has been involved in that process from the beginning," he said. "Not only did we review the process, but we had compliance people and counsel at the table at all times. We feel very comfortable that the Liquor Commission has undertaken a fair process."

Law was the third-place bidder. The second-place bidder, XTL-NH, has also challenged the RFP and bidding process with a direct appeal to the commission but was denied. XTL attorney James Bianco was unavailable for comment as to whether XTL would also consider legal action.

Legislation has been filed in the State House that would ensure future review of all Liquor Commission contracts by the governor and Executive Council, and would strengthen the Right-to-Know law regarding future requests for contract details once they are signed and approved by the state.

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