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Nashua warehouse could lose most of its business unless Liquor Commission decision is overturned

New Hampshire Union Leader

January 27. 2013 11:02PM
Owner Brian Law gives a tour of the Law liquor warehouse in Nashua on Thursday. Law says a Liquor Commission decision will cost his business 90 percent of its revenue. (DAVID LANE/UNION LEADER)

NASHUA - It's hard to imagine how a business could survive after losing more than 90 percent of its revenue, but that's the situation Brian Law will face by the end of the year unless he can successfully challenge a decision by the New Hampshire Liquor Commission to end a relationship with his warehouse and trucking firm that spans nearly half a century.

Law is the fifth-generation president of a company founded by his great-great grandfather in 1882 with a single horse and buggy in downtown Nashua. Law Warehouses and Motor Freight is not just another company in the Gate City; It is deeply woven into the fabric of community life, a major employer with 120 good jobs and a taxpayer to the tune of $500,000 a year.

Law's father, Jack Law, now retired, was Nashua's Citizen of the Year in 2009, and the company is one of the most active supporters of nonprofit groups in the community. All of that is now at risk as Law fights for his company's life and legacy.

That's not the Liquor Commission's problem, he acknowledges. If the NHLC can prove its decision to award a 20-year contract worth $200 million to an Ohio-based firm owned by a German company is in the best interest of New Hampshire, then so be it.

But Law says everything he has seen so far raises serious questions about whether the state's competitive bidding statute was followed, whether he and other bidders were on an even playing field with Exel of Westerville, Ohio, owned by German company Deutsche Post DHL.

He has pursued a Right-to-Know petition in Superior Court to prove his suspicion that the Ohio firm enjoyed favored status in a process that was continually modified to suit the timing and content of its proposal. Under careful examination, he says, the extensive and costly review of five bids on the lucrative contract appears to have been designed to achieve a pre-determined outcome in favor of Exel.

Started on a handshake

In a 44-page history of the bidding process posted on its website, the Liquor Commission Evaluation Committee that unanimously recommended Exel dismisses those suspicions, and suggests it was Law who tried to inappropriately influence the bidding process.

The tension between Law Warehouses and the Liquor Commission is clear in the lengthy document, and a mystery to Law, whose father began business with the commission in 1970 on a handshake and continued on that basis until 1997, when the company first had to engage in competitive bidding to retain the warehouse and trucking contract. Law was able to successfully rebid on the business every five years thereafter, until last year.

In its history, the commission goes into significant detail on the references provided by other bidders, but said none were necessary for Law: "The NHSLC has had a good working relationship with Law for decades. Its recent history is well-known to the NHSLC."

"We grew with the Liquor Commission over the years," Law says, as he looks over an automated sorting system for mixed-box orders. The company invested $500,000 to install the system in 2007 in one of five buildings dedicated to NHLC business at a sprawling complex on Airport Road, off Route 101A.

In announcing the new contract with Exel on Nov. 20, the commission acknowledged "with gratitude its long-term working relationship with Law Warehouses."

But Law is not feeling much gratitude or fairness from the commission. He says its evaluation committee makes several factual errors about Law's proposal in its report, which he declined to specify on the advice of counsel since they could surface as grounds for an appeal.

He claims the commission cherry-picked figures to make the Exel proposal look more competitive when it cited savings in the first 30 months of the new contract as high as $7 million. Those projections are based on rates that Law was willing to waive or renegotiate, if given the chance, he said.

Law finds its suspicious that his firm and another top bidder, XTL-NH, Inc., had documented real estate solutions for a new warehouse when the bidding process began, but Exel did not. He claims deadlines were extended seven times, and conditions modified, until the Exel proposal achieved competitive status.

Headed for court

In its report, the commission's evaluation committee points out, "The (competitive bidding) process has always provided that the RFP (request for proposals) may be amended, deadlines may be extended and additional information may be requested from vendors at any time. Some questions prompted changes to the RFP."

Law says many of the emails and documents that would enable him to make his case have been withheld or redacted. Even though a Superior Court judge has ruled that the state is not required to produce all the documents, Law says he and his lawyers will review the list of what has been withheld, appeal to the courts to have more of the information released, then appeal to the commission to reconsider its decision.

If all that fails, he expects to file a civil suit and seek an injunction to block the new contract until the lawsuit is resolved.

"If there is no legal protest process, we'll end up in court," he said. "We would prefer not to go to court, but we have not been shown there is a legal process that provides a remedy."

The Liquor Commission Evaluation Committee, in its report, notes that any challenge must be based solely on factual content, yet it acknowledges that "most of the decisions made by the EC (evaluation committee) were subjective. ... Whatever scoring was used by the EC, the commissioners must ultimately form their own judgment in determining which proposal best meets the needs of the (liquor commission)."

The scoring among the top three vendors was close, with Exel at 93 points, XTL-NH at 91 and Law Warehouses at 82. The category that hurt Law's ranking the most was in IT capabilities, which Law says he does not understand and for which there is little detail in the committee report.

Legislative oversight

A House committee established last year to investigate several controversies surrounding the Liquor Commission included a review of the warehousing contract, but key staffers refused to testify, citing confidentiality of the RFP process, so the committee reached no conclusions on that issue.

The warehouse contract would have been subject to review by the Executive Council, if not for the Liquor Commission Modernization Act, which the Legislature approved in 2009. The act was designed to enable the commission to operate more like a private business so it could enhance state revenues from liquor sales.

The New Hampshire attorney general later rendered an opinion that the law exempts Liquor Commission contracts from Executive Council review. Former NHLC Chairman Mark Bodi, who stepped down last year, says he drafted the legislation and that was never its intent.

"While the attorney general's opinions are important," he said, "they are not always accurate, and in this case I believe it was not, and it's had very severe consequences. I think it would have been prudent regardless of the AG opinion to bring that contract before the Executive Council. It is my view that should still take place now."

Law will take a review wherever he can get one - in the Legislature, Executive Council or through the courts - as he faces the prospect of downsizing to a much smaller company, if he survives at all.

"If someone can prove to me that we lost fair and square, then I will apologize and move on," he said. "But that hasn't happened."

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