Liquor Commission contract dispute goes to trial

  • Employees on forklifts pull merchandise to fill orders inside the Exel liquor warehouse in Bow on Friday, Oct. 2, 2015. ELIZABETH FRANTZ

  • Employees on forklifts pull merchandise to fill orders inside the Exel liquor warehouse in Bow on Friday, Oct. 2, 2015. ELIZABETH FRANTZ

  • Visitors tour the Exel liquor warehouse in Bow on Friday, Oct. 2, 2015. ELIZABETH FRANTZ

Monitor staff
Published: 5/23/2016 7:03:09 PM

A dispute between the state Liquor Commission and a company that claims the agency flouted competitive bidding rules four years ago by choosing a competitor for a 20-year, $200-million warehousing contract opened for trial Monday.

The company, XTL Inc., of Pennsylvania, argues that the state negotiated a more favorable contract with Ohio-based Exel Inc., making concessions that it never made available to the rest of the field. XTL finished second behind Exel, which has since opened a distribution center in Bow.

Louis Cerone, president of XTL, testified Monday in Manchester that the state agreed to higher future price increases for Exel, which allowed the company to pitch lower upfront fees than the others.

“It would have given us the chance to reduce our rates on the front end knowing that there would be increases down the road,” Cerone said.

XTL made the cheapest bid overall, but scored lower in technical and project management scores, according to court records. Cerone said the bid had been low in part because the company planned to automate the operation far more than Exel or its next closest competitor, Law Warehouses Inc. It proposed using robots to sort and move product, and linking to a rail line to increase distribution to surrounding states, he said. The plan would have also ensured output during months of highest-demand, especially around the holidays.

A central tenet of competitive bidding is the assurance that every applicant has identical information to work with before submitting a proposal. The state can change or waive a requirement for a bid during the process, but XTL claims it has to do so for all applicants.

The company has requested $53 million in damages, according to court records. The trial this week, expected to last eight days, will focus only on whether the state violated its bidding procedures. If the court decides it did, a second trial will proceed on damages. Either way, the contract with Exel is set.

The trial comes a year after Law Warehouses settled similar lawsuits with the state for $2.5 million. It had been seeking $25 million, according to prosecutors. The settlement ended three separate complaints from Law, two of which have already been dismissed but were still open on appeal.

Law claimed officials from the Liquor Commission had colluded with lobbyists and Exel to rig the bid scoring process, and that they extended deadlines and secretly negotiated with the company.

The commission has maintained that its negotiations were legal and routine, and that there is no evidence to suggest it ever acted in bad faith, towards either company.

XTL lost out on part of its argument earlier this year when Judge Richard McNamara dismissed its motion for summary judgment, saying the state did not, as XTL had asserted, rely excessively on subjective ratings.

“Nothing in the competitive bidding statutes prohibits an agency from making subjective judgments on capabilities of vendors to complete the requested work,” he wrote in a January decision.

Cerone said on Monday that XTL was particularly equipped to handle the project, given its experience fulfilling a similar long-term contract with Pennsylvania.

“We thought it was just a great fit . . . right in our sweet spot,” he said.

(Jeremy Blackman can be reached at 369-3319, or on Twitter @JBlackmanCM.)

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