State Representative Wants Liquor Commission to Enforce Warehouse Contract Penalties

The contract, worth an estimated $200 million over 20 years, was awarded to a DHL subsidiary after a hotly contested bidding process

March 25--CONCORD -- A state representative is calling on the N.H. Liquor Commission to enforce penalty provisions in its contract with a new warehouse operator.

State Rep. Peter Hansen, R-Amherst, also wants the Attorney General to certify that the NHLC has properly enforced its contract with Exel, which took over warehousing and distribution for the liquor commission in November.

The contract, worth an estimated $200 million over 20 years, was awarded to the subsidiary of the German logistics giant DHL after a hotly contested bidding process that also involved Law Warehouses of Nashua, which had the contract for the past 20 years, and XTL-NH, a subsidiary of a Pennsylvania logistics firm.

Both of those companies are pursuing civil lawsuits against the NHLC, claiming it violated the state's competitive bidding statutes in awarding the contract to Exel.

The contract requires Exel to prepare a weekly, written status report, including service failures and corrective actions, and gives the NHLC the authority to levy fines for non-performance.

Anecdotal evidence suggests that there were many problems with the warehousing and delivery in the first four months of the contract, but the required reports were never submitted and no fines were considered, according to NHLC officials.

Chief Operating Officer Craig Bulkley told the New Hampshire Union Leader earlier in the month that the NHLC did not think it would be fair to Exel to enforce those contract provisions until the transfer of all liquor from Law Warehouses to Exel was completed.

"There are a number of disturbing issues surrounding that commission decision," wrote Hansen in an email to the House leadership, Attorney General and the NHLC.

"First and foremost is what appears to be a total disregard by the commission of the law and its intent as found in the state statutes," he continued. "That choice is one the commission has no authority to implement according to our Constitution."

Hansen said in a phone interview that both the NHLC and Exel had ample opportunity to remove the performance clause from the contract during the protracted negotiations.

"This contract was executed only after innumerable revisions over a lengthy period of time, granting both parties more than ample opportunity to review each and every clause and to negotiate changes deemed desirable by the parties," he said.

Hansen, who serves on the Executive Departments and Administration Committee, said the decision cost the state money in lost fine revenue and lost liquor sales.

"By refusing to require the submission of performance status reports and by choosing not to enforce the performance indicator monetary remedies within the contract impacts the state finances in two areas," he wrote.

"First it has a negative impact on state income from the loss of performance fees or fines; and second as it is performance being measured and that performance is failing to meet contractual specifications it is reasonable to assert that the service(s) provided our liquor outlets by the contractor are sub-par and therefore have a direct impact on liquor sales and/or costs from those sub-par serviced outlets."

The potential fines max out at 1-percent of warehouse operating revenue, which would put the dollars at issue in the thousands, not hundreds of thousands. No one can say for sure how much revenue was lost from sales that did not take place due to inventory problems.

"These are troublesome issues which impact state revenue and indeed the very core of our system of state government," wrote Hansen in his appeal for AG intervention.

"The Legislature shall, as it must, insist that its function not be diminished or infringed upon. I trust but look forward to verification that these issues have been addressed retroactively and expediently."

He asked that the Attorney General "certify to the Legislature full compliance with our laws and with all specifications in the contract retroactively and going forward."

The Amherst Republican said he is concerned about what he called a general lack of oversight by the Legislature on executive departments.

"This is just the tip of the iceberg," he said in an interview. "The House, it just seems, is not taking care of its responsibilities with respect to its charge in the Constitution, and it's not just the liquor commission, but perhaps other agencies. History will prove that we've let things slide and have not demanded that our Constitution be adhered to."

A spokesman for Gov. Maggie Hassan said the governor has not reviewed Hansen's request, but believes the Attorney General's office was in communication with the Liquor Commission throughout the contract approval and implementation.


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