Friday, October 5, 2012

#LiquorLeaks wonders: who really corked privatization?

The news broke on Sept. 28 at the Union of B.C. Municipalities Convention in Victoria.

Premier Christy Clark, addressing mayors and councillors from throughout the province, revealed that a settlement had been reached in negotiations for a new contract with the B.C. Government and Service Employees' Union.

A one-liner in the news release said:
"As part of the agreement, the Negotiated Request for Proposal process for the privatization of liquor distribution was cancelled."
That's all. No further explanation. The LDB's warehousing and distribution arms would remain publicly owned. The broke BC Liberal government desperate to show a balanced budget in time for the 2013 election dropped the controversial privatization that it stubbornly defended since February.

A stunning turn of events. The bizarre procurement process that unfolded since the April 30 publication of the request for proposals drew comparisons to the bungled 2003 privatization of BC Rail. Three of the bidders' parent companies -- Deutsche Post DHL, Kuehne + Nagel and Schenker -- were caught price-fixing by the European Commission. Two of the bidders -- ContainerWorld and Exel -- had donated to the ruling BC Liberals. One of them -- Exel -- had been lobbying the Liberals for seven years and even contracted party insider Patrick Kinsella, who chaired Clark's 2011 leadership victory. (Kinsella de-registered on March 30, a month before bidding began.)

LDB made a $911.1 million profit on $2.89 billion sales in 2011-2012 and the government never showed any evidence to justify the planned privatization. People across the industry, from hard liquor to craft brewing, said higher costs would be the result of a private monopoly on booze hauling. The burden would be passed on to customers. Exel Logistics' "Project Last Spike" internal memo, dated Oct. 6, 2009, even said so.

Liquor minister Coleman
The very week that the BCGEU returned to talks, shortlisted bidders ContainerWorld, Exel, Kuehne + Nagel and Metro were meeting with the joint LDB/Citizens' Services evaluation committee. The bids were supposed to be refined, completed and considered by the committee. Treasury Board was supposed to approve the committee's recommendation and announce a preferred proponent on Oct. 16.

Walker was savouring the victory. The second time in less than a decade that the BCGEU had thwarted liquor privatization at the bargaining table. But was it so simple? Was the BCGEU solely responsible?

My request to interview Liquor Minister Rich Coleman was refused. Same went for my request to the office of Finance Minister Mike de Jong. His staff sent me this statement:
It became clear in the late stages of negotiation that this was an important element to close the deal. The NRFP remained a significant issue for the BCGEU. The fact that government reconsidered the NRFP shows our commitment reaching a settlement under the Cooperative Gains Mandate.
NDP liquor critic Maurine Karagianis doubts the official version.

NDP critic Karagianis
"They have heard very clearly that it was a bad deal for British Columbians, a bad deal for industry, a bad deal for consumers and they needed a way to get out of it," Karagianis told me, for my Business in Vancouver story on the day.

The day before privatization was kiboshed, the government was still communicating with the public about the merits of the process. A reader provided me a Sept. 27 letter he received via email, from Coleman and copied to Ben Stewart, the Citizens' Services minister. It contains nothing new. All the lines were culled from Coleman's script. Even this gem:
"In order to proceed, government must be satisfied that British Columbia taxpayers will benefit from having a private sector provider warehouse and distribute liquor in the province."
Why did the government send such a letter when it knew or ought to have known the privatization was over or on the death knell? Who put the cork in the privatization bottle? Why?

And why was a copy of the letter sent to Stewart? We were led to believe that Stewart was not going to be involved in this file because of the potential for the appearance of a conflict of interest. He has a blind trust ownership of Kelowna's Quail's Gate Estate Winery, which is a supplier to Alberta's Exel-owned monopoly Connect Logistics and to the B.C. LDB. The 2011-2012 LDB statement of financial information shows LDB paid Quail's Gate $2,273,529.

The privatization is over. For now. The questions? I won't stop asking them.

More #LiquorLeaks to come.

Rich Coleman, Sept. 27, 2012 letter

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