#LiquorLeaks wonders: what is the booze review endgame?

Parliamentary Secretary John Yap -- yes, the same Freedom of Information-subverting John Yap who quit cabinet amid the Quick Wins scandal -- pushed the button on a glitzy website and social media campaign on Sept. 14 to elicit public opinion on changes to B.C. liquor laws.

The cash-strapped BC Liberal government is desperately seeking to cut costs and increase revenue, and the Liberals think booze can help it tick both boxes. While the Legislature stays dark for the fall because Premier Christy Clark would rather not face Question Period, the ruling party is exploiting the eternally divisive debate over liquor policy to help divert attention from political minefields, like troubled BC Hydro and its imminent rate hikes. 

Yap will be reporting recommendations by the end of November to Attorney General/liquor minister Suzanne Anton, who is quietly plotting the transformation of the Liquor Distribution Branch into a Crown agency or corporation. Every other province has such a body, either as a standalone organization or merged with its lotteries and gambling monopoly. 

More changes are coming to LDB. On Sept. 13, LDB quietly confirmed that it contracted Sedlak Management Consultants of Cleveland, Ohio to create the business case for moving out of the Vancouver Main Distribution Centre and into a new warehouse somewhere in the Lower Mainland. Sedlak’s website says it has worked closely with BC Liberal-connected Exel -- the same company that lobbied for privatization for seven years. 

Eighteen companies responded to the supply chain management expert request for proposals and the list is below. But LDB won’t disclose the names of the two companies on the shortlist with Sedlak and its explanation why is vague.  

What is the endgame for this whole exercise, especially the contracting of Sedlak, a company that makes no secret of its connection to Exel? Perhaps a second sip of privatization? Read my analysis in The Tyee here.

LDB hires supply chain management expert to help find a new main warehouse location 

Successful Proponent:
·         Sedlak Management Consultants, Inc. 

Unsuccessful Proponents:
·         BizTechMasters Inc.
·         CGI Information Systems and Management Consultants Inc.
·         CGR Management Consultants, LLC
·         Deloitte Inc.
·         Devencore Company Ltd. dba Newmark Knight Frank Devencore - 
·         IBM Canada Ltd.
·         KOM International Inc.
·         KPMG LLP
·         Kurt Salmon Canada Ltd.
·         LIDD Consultants Inc.
·         Metro Supply Chain Group
·         Protiviti Inc.
·         PricewaterhouseCoopers LLP
·         Sierra Systems Group Inc.
·         Stantec Consulting Ltd.
·         Tompkins Associates, Inc.
·         Trybec Management Services, Inc

Liberals pondered liquor store privatization

One of the biggest provincial stories of 2012 was the BC Liberals' controversial, aborted attempt to privatize the Liquor Distribution Branch's warehousing and distribution.

There was no business plan and no formal industry consultation. There was plenty of intrigue, because BC Liberal backroom boy and BC Rail adviser Patrick Kinsella was lobbying for Exel Logistics. The government did its best to wrap the deal in a shroud of secrecy. We still don't know precisely how and why it was kiboshed before the shortlisted bidders could make their final presentations.

But the government didn't count on me and my li'l library of #LiquorLeaks shining some much-needed light on the specious process. Thanks, also, to good ol' fashioned brown paper envelopes and the documents inside. (I'm not finished yet. Far from it.)

So, what's the latest, you say?

Remember when the government released Treasury Board and Cabinet reports in late May? They were so heavily censored that the only information visible had been cut-and-pasted from already published service plans and financial reports. I appealed and pressure from the Office of the Information and Privacy Commissioner caused the government to uncensor portions of those reports. I'm not satisfied yet, but I am happy to report what the government was hiding from you.

Specifically, that the government was studying the sale of its chain of 197 B.C. Liquor Stores, along with the LDB logistics! I revealed this in Business in Vancouver on Dec. 13. The documents are below, which indicate anticipated opposition from the B.C. Government and Service Employees' Union was the biggest obstacle.

The government opted to keep the stores, but tried to sell the warehouses and distribution. Then, on Sept. 27, it agreed to a new two-year deal with the BCGEU that included a moratorium on any LDB privatization. This happened after liquor minister Rich Coleman spent six months banging the drum for a private warehouser and distributor to come along and help government save money (despite industry players warning that higher prices would be the outcome).

Cabinet & Treasury Board documents recommending privatization of liquor distribution in British Columbi...

#LiquorLeaks - still pouring

Coleman

In this Nov. 2 Business in Vancouver story, I revealed how the British Columbia government conducted secret consultations with select industry players about the plan to privatize the Liquor Distribution Branch's warehousing and distribution.

The internal documents on which the story is based are below. They are from briefings for Liquor Minister Rich Coleman and then-Finance Minister Kevin Falcon. They show that the government was concerned with the well-being of ContainerWorld, the largest of the pre-distribution warehouses on contract with LDB. ContainerWorld is owned by B.C. Liberal supporter Dennis Chrismas, who met with Coleman on March 2.

Falcon

Chrismas was originally opposed to any change in the liquor distribution system. When bidding opened, ContainerWorld was involved because the privatization would have phased out the pre-distribution program. In this May 29 Business in Vancouver story, I detailed the interesting relationship between ContainerWorld and Exel, the company that lobbied the B.C. Liberals heavily for seven years to privatize. From an observer's point of view, two of the four shortlisted companies may have been too close for comfort.

On page 89 of the documents below, you'll even find that an unidentified person scrawled "Dennis Chrismas." Either Mr. Chrismas's name came up during the ministerial briefing or it was top-of-mind for one of the participants.

The privatization was scrapped Sept. 27 when the government and B.C. Government and Service Employees' Union agreed on a new contract. The premature cancellation was announced the next day. And we still don't know the real reason why.

EGM-2012-00187

#LiquorLeaks and the Exel six-pack

Foreman

Exel, the BC Liberal-connected company thirsty to take over the B.C. Liquor Distribution Branch, sent a six-pack of its big guns to the Vancouver head office and booze warehouse on Aug. 29, according to an LDB sign-in sheet obtained via Freedom of Information.

They were: vice-president Greg Foreman, director of operations Robert MacLellan, business development manager Stephen Dougans, director of human resources Mark Osborne, operations director Dave Martin and a sixth person, whose name I cannot read (reader tips are gladly appreciated).


Despite what it says, they were not guests of Pele. Sorry folks, the Brazilian soccer great that thrilled us all for a moment during the London Olympics closing ceremony (it was better in person, believe me) doesn't work at LDB. Whoever signed them in at the security office meant to sign "Pelle," as in Pelle Agerup, the B.C. government's senior director of procurement.

Agerup

South African-born Foreman, a part-time poet, is based in California, but shuttles to Alberta whenever needed by Connect Logistics. That's the Exel-owned company that has the Alberta liquor logistics monopoly. Exel wanted to expand across the Rockies and take over the B.C. LDB. Foreman, according to the "Project Last Spike" internal memo, was to become the new head of the B.C. LDB's non-retail operations if Exel's seven-year quest to win the business succeeded.

Aug. 29 was the last Wednesday before Labour Day weekend. Less than a month later, on Sept. 28, the government put a cork in the privatization of the LDB when it announced a new, two-year deal with the B.C. Government and Service Employees' Union.

Did a sudden, favourable labour deal with the biggest provincial public sector union really kibosh the most-controversial privatization in years? Or was there something else lurking behind the scenes that scared the cash-strapped B.C. Liberals into sobriety on this file?

Exel visits LDB

#LiquorLeaks reveals the latest Ask Roger email

This whole liquor logistics privatization, which was announced Feb. 21, has produced more questions than answers. Mainly because it was not accompanied by the publication of a business plan or cost/benefit analysis that would justify the sell-off. Also because of the contents of the intriguing internal Exel Logistics memo that came to light in my Business in Vancouver story on May 8, revealing the leading bidder's deep connections with the ruling BC Liberals and its clever strategies to gain the monopoly.

Roger Bissoondatt, last Movember.

Does a business plan exist? Liquor minister Rich Coleman told NDP critic Shane Simpson in budget estimates that it doesn't, yet. A list provided to me by the Liquor Distribution Branch via Freedom of Information indicates there are several reports that examine the dollars and cents of selling the warehouses and moving the business to a private operators. They don't want me to see the actual reports.

That does not inspire confidence in the process or the people involved. The uncertainty is multiplied for those who work for LDB, who wonder what the future holds under a private operator.

On June 4, two days before he secretly tendered his resignation (and 10 days before it went public on this blog), LDB general manager Jay Chambers invited employees to send him questions by email. He said he would make an effort to answer them. His interim replacement, chief financial officer Roger Bissoondatt (right), has carried on the gimmick.

Highlights of Bissoondatt's Sept. 11 email to employees include: 

• LDB will become a customer of the private warehouser and distributor, but Bissoondatt writes, "until the agreement is signed, we will not know what these delivery costs will be."
• Eighty-three LDB head office employees are retiring in 2012. Those who are displaced from the warehouse under the new operator can bump retail workers with less than three years of service out of their jobs.
• There remains confusion and skepticism over the March 21-signed memorandum of agreement with the B.C. Government and Service Employees' Union that is supposed to grant warehouse workers post-privatization job security and buyouts or early retirement. 
• Bissoondatt does not fully answer a question about the rumoured $200 million replacement cost of the Vancouver LDB warehouse being a reason for privatization. Instead, he sticks to the government line about improving the current distribution model and selling the warehouse to realize a financial gain for the province.
• Question 18 wonders "how can the general public be assured that the system of awarding the best company was done honest and fairly?" Bissoondatt parrots more government lines about the process being managed by "professional public servants" and that a fairness monitor, George Macauley, was hired. (NDP critic Shane Simpson found that Macauley's power to ensure and enforce fairness is somewhere between slim and none.)
• And, we find out that Viti Wine and Lager general manager Ralf Joneikies did get his 10 cases of Rogue Voodoo Doughnut Bacon Maple Ale order filled on May 22, despite his July 20 anti-LDB op-ed in the Vancouver Sun. Bissoondatt wrote that he was "troubled" when he read the Joneikies article: "We considered responding to him but decided that a response would draw attention to his unfounded allegations." (Huh? If there was an error, why not seek to have it corrected?)

Below is the Sept. 11 company-wide email in its entirety:

________________________________

From: Dahlke, Cindy LDB:EX

Sent: Tuesday, September 11, 2012 3:49 PM 

To: LDB D All Employees 

Subject: AskRoger - LDB's Wholesale and Distribution Services 

Message from Roger: 

Over the past month, a number of employees have sent questions to my AskRoger@bcldb.com email address regarding the privatization of the LDB’s Wholesale and Distribution services.  Thank you to those who have taken the time to write me.
Attached are the questions I have received and my responses. Some questions have been slightly abbreviated because of their length. Please do not hesitate to send any other questions you may have to AskRoger@bcldb.com.
With regard to the RFP process, the government evaluation team is currently working with the four shortlisted bidders to provide them with information they have requested so that they can refine their proposals. It is expected that the bidders will submit refined proposals in early October and the evaluation team will recommend the successful bidder by the end of October.  The four shortlisted bidders, in alphabetical order, as announced in my July 20, 2012 email to you, are: ContainerWorld Forwarding Services Inc.; Exel Canada Ltd.; Keuhne + Nagel Ltd. (sic); and Metro Supply Chain Group Inc.
Roger Bissoondatt
Acting General Manager

Questions and Answers.

Q1:         What guarantee is there that the stores will not be privatized shortly after?
R1:          Government has said on numerous occasions there are no plans to privatise government-operated liquor stores. 

Q2:         Dear Jay/Roger,
On Thursday May 31st, Minister Rich Coleman was the guest on “The Voice of BC” – a local talk show hosted by Vaughn Palmer.  At about the 36 minute mark, Matthew Phillips of Phillips Brewery asked this question:
We’re concerned about the Liquor Distribution Branch distribution costs and service levels and so we’re wondering if he [Rich Coleman] can commit that the new privatized scheme will have the same price and the same service levels that we’ve been accustomed to?
In response, Minister Coleman offered the following:
But really what it all comes down to is:  Is there a way to better distribute and warehouse liquor to the advantage of us and find savings and efficiencies to get service up?  We actually do get a number of complaints about service from our private sector partners whether it be liquor stores, pubs and those things about how we are servicing them in our present distribution systems.  So, to find out whether there is a better way of doing it, I don’t think anybody should be afraid of that.
As the Foreman of the Parts Department, which oversees the order picking for the Wholesale Customer Centre, it is my job to ensure that our private sector customers get the best possible customer service in terms of timeliness, productivity, accuracy and general load quality.  If there are complaints in this regard, it is my responsibility to follow-up on them and then to initiate corrective measures that will lead to improvements.  So, my question is:
Is there anything I can do, within the context of my current responsibilities, to address the complaints that Minister Coleman has received from our private sector partners?
Thank you for giving me the opportunity to ask my question.
R2:          I am confident that we provide our customers with good service and work hard to address any concerns they may have.  As Minister Coleman and Government have noted, the purpose of the RFP process is to determine if a privately operated liquor distribution model will be an improvement over the current one. 

Q3:         I was wondering if this RFP is considered to be a done deal? There are protests going on about this process, the public is beginning to question why this is being done, is there any chance the government is going to reconsider?  Or, is it already too late?
R3:          The decision of whether to proceed with privatizing the warehouse and distribution services rests with Government. Minister Coleman and Minister MacDiarmid have said on a number of occasions that in order to proceed there must be a benefit for taxpayers and the liquor industry. The RFP process will allow government to determine if there is a benefit to proceeding with privatization. 

Q4:         Thanks for the update to the RFP.  I have a question though. After March 2013, how will I know I will still have a job to come to every day?  I imagine that there is a lot of controversy around who will lose their positions, and probably lots of rumours flying around but nobody seems to have a definitive answer to this question.  Perhaps you could let us know where our positions are headed (like mine [IS Security] team …).
R4:          Until a new distribution/wholesale model has been approved and the related system requirements are determined, the LDB will not know the extent to which LDB positions could be affected.  If an employee is affected, then Article 36.2 of the Collective Agreement will apply. This article outlines the employee options with respect to placement should positions be affected. I appreciate that this uncertainty is stressful and I will ensure that employees are provided with timely information as it becomes available. 

Q5:         …In the meantime, I refer you to the Sun article by Ralf Joneikies on July 20, 2012 (attached) where he fires a number of criticisms at the LDB including WCC errors, reprisals for speaking up about service, order cancellations, Spec product appropriations and last but not least (if you can believe it) the Stockholm Syndrome.  In his article he alleges that we cancelled an order for 10 cases of Rogue’s Voodoo Bacon Maple beer and insisted that it be released to another customer. Well, I looked into this and found that Ralf Joneikies’ order for 10 cases of Rogue Voodoo Bacon Male Ale – SKU # 206730 was filled on May 22nd.  So, my second question is:
Are we (meaning the LDB) going to craft a response to Mr. Joneikies in an effort to reassure him that we do indeed take customer service seriously and that we are dedicated public servants acting in good faith at all times – this includes the men and women who work in the Wholesale Customer Service Centre and the many others, like me, who support them?
Again, thanks for allowing me to ask my questions!
R5:          Like you, I was also troubled when I read Mr. Joneikies’ letter in the Vancouver Sun and I wholeheartedly agree with your description of the people who work in our organization.
We considered responding to him but decided that a response would draw attention to his unfounded allegations. During this time of significant public and media attention on the distribution privatization issue, we can expect many people to express a range of opinions.  Rather than get drawn up in the debate, I believe that our best approach is to remain calm and continue to work hard to serve our customers. 

Q6:         What is the Provincial Government of BC’s issues with the present LDB operations that have driven them to put the privatization of the Distribution Centres out for bid?
R6:          Government has stated on a number of occasions that they are interested in determining if a private sector distribution model will be an improvement over the current system and will benefit taxpayers and the liquor industry.  Government has also stated that privatizing distribution will free up the LDB’s warehouse real estate that could be sold to help balance the budget. 

Q7:         How is selling and privatizing the warehouse and distribution of the LDB going to directly and indirectly affect the Liquor Stores and its employees?
R7:          The RFP is not related to our government-operated liquor stores, however if a private service provider is selected we can anticipate there will be a number of implications for our retail operations. For example, BC Liquor Stores will become a customer of the new service provider and the full impact of this will not be known until a formal agreement is implemented.
There is a possibility that BC Liquor Store employees could be affected depending on the decisions of displaced Distribution Center employees, some of which may elect to remain within the LDB. According to the Collective Agreement, only regular employees with less than three years of service seniority can be displaced or bumped. Currently, the majority BC Liquor Stores regular employees have seniority levels greater than this. 

Q8:         Given the time frame for the completion of the RFP, the closing date could possibly put 7 full time regulars in #079 Columbia Place in jeopardy of being bumped to the auxiliary list from the Kamloops or Vancouver Distribution Centre (KDC or VDC) employees;
a)      How does the LDB promote privatization as a positive move when we will have present full-time employees in jeopardy of losing their homes and vehicles due to a drastic cut in hours and now being in Auxiliary positions and getting part time hours?
b)      How would a present fulltime Regular employee be affected by being bumped out of a fulltime position into an on call Auxiliary position? I.e.  Loss of benefits, wage rate, etc.
c)       What is the plan from Store Operations for having the stores affected by a large number of bumps transition through training and successfully operate by getting as many as 7 people from the warehouse in Full time Regular positions with no customer service skills, product knowledge, till training, shelf stocking, beer and liquor invoice receiving, picking, staging, or the shipping of licensees from a liquor store perspective?

R8:          (a) The LDB is not promoting privatization.  Government has made the decision to examine the distribution model and determine if it can be better operated by the private sector.
(b) A regular store employee who is displaced or bumped and chooses to move to the auxiliary recall list is covered under Article 13.3 (4) of the Collective Agreement.  The employee would maintain their regular status (benefits) unless they have not worked 1,200 hours within the previous 26 pay periods. The employee’s wage rate and benefits would not be impacted. However, the employee would be considered to have auxiliary status for the purpose of vacation scheduling (15.3) and layoff notice (15.4).
(c) According to the Collective Agreement, only regular employees with less than three years of service seniority can be displaced or bumped.  Currently, the majority BC Liquor Stores regular employees have seniority levels that make it unlikely that any one store will have a significant number of displaced employees.
Prior to being offered a BC Liquor Store position, a displaced LDB employee would have to be deemed suitable and qualified. These employees will receive appropriate training similar to that provided to all new LDB employees and the ongoing training regular employees receive. 

Q9:         What is the projected profit in dollars for the LDB in what used to be called the Distribution Channel or Warehouse contribution for the fiscal year 2013 encompassing a full year of Private Distribution?
a.       What are the five year numbers for projected profits?
b.      What are the ten year numbers for projected profits?
R9:          The LDB’s warehousing and distribution system is a cost center for the LDB, not a profit center.  One of the objectives of the RFP process is to determine if a private sector service provider can operate the system more efficiently.

Q10:       What will the process be for the distribution of alcohol to stores?
a.       Who will be buying the product from the Wineries, Distilleries, and Breweries?
b.      Who will be receiving the initial mark-up dollars before selling it to wholesale channels?
c.       What will the discount % be for the BC Liquor Store Chain from the supplier?
d.      What will the discount be for the wholesale sector (LRS, RAS, etc...)?
e.      What will the profit margin be for BC Liquor Stores?  

R10:

(a)    It is anticipated that suppliers would own the inventory that would be stored in the private sector service provider’s warehouse(s). The process for ordering the product into the warehouse(s) would depend on the agreement between government and the service provider.
(b)   It is anticipated that the LDB would purchase the liquor at the time it is shipped and sell it to the wholesale customers. The LDB’s mark-up would be collected when the LDB sells the liquor.
(c)    , (d), (e) At this time, consideration has not been given as to how pricing policies may be impacted by the new distribution model. 

Q11:       Will all customers be on a level playing field for product availability? Specifically SIPS products and cold beer being available for all sellers of beverage alcohol in 1BC?
R11:       The RFP process relates to warehouse and distribution services, not services provided by government liquor stores.  At this time, there are no plans to change services offered by government stores. 

Q12:       How will the stores be affected in terms of the numbers of deliveries we now get being reduced to maximize profits by the distributing company trying to deliver more products less often? Example – a few years back Commercial Logistics/BDL cut the number of Beer deliveries from three to two deliveries per week in larger stores and from two to one in some others as it was more cost effective for them.
R12:       One of the key components of the RFP for the privatization of the LDB’s warehousing and distribution services is product delivery. The RFP evaluation team will be looking closely at how each of the four shortlisted companies plan to deliver products to our network of 195 stores across British Columbia.

Q 13:      How will delivery costs affect BC Liquor Stores?
R13:       If a contract is signed with a private service provider, BC Liquor Stores will become a customer of the service provider, along with private liquor stores. Until an agreement is signed, we will not know what these delivery costs will be. 

Q14:     How will delivery costs affect the present Wholesale Channel Customers given they have been subsidized for the past few years and will now have to pay the full shot?
R14:       Until an agreement is finalized, we will not know what the delivery costs will be. As a result of the new model, there may also be other changes. We will not know the total cost structure of the new model until all of the pieces are in place. 

Q15:       How will delivery costs vary dependant on where you are located in the Province of BC under the new distribution system?
R15:       The Wholesale and Distribution Services RFP requires all potential service providers to base their proposals on a “postage stamp” pricing model (same price for product delivery anywhere in BC).

Q16:       What is Store Operations plan in the event that a Wholesale Customer who is presently getting deliveries from the Wholesale Centre chooses not to order their product from the new distributors (due to increased delivery costs, concerns of customer service drop off, etc...) and decides on going back to getting their product from BC Liquor Stores, thus putting increased pressure on the stores? (less staff on the floor to provide customer service to Counter Customer thus affecting sales  and lost warehouse space due to more custom orders)
What contingency plans are there to combat the above scenario as far as labour control, picking charges, etc...?
R16:       An important consideration in choosing the successful bidder for the RFP will be the level of service they will provide to wholesale customers.  I am confident that an agreement signed with the successful bidder will ensure that the LDB’s direct delivery wholesale customers will receive a high level of service and will not have an interest in accessing products from our stores. 

Q17:       If costs are going to increase due to delivery charges from the Private Distributor, then how will the shelf prices be affected one month later when the HST is gone on April 1st 2013 and we go back to the old system of PST/GST?
R17:       Delivery charges will not be known until a final agreement is signed with a private service provider.  When the HST was introduced in July 2010 and the provincial portion of liquor sales tax was reduced from 10 per cent to 7 per cent, LDB  liquor mark-ups were increased to generally keep shelf prices constant.  The PST rate of 10 per cent on liquor will be reinstated with the re-implementation of the PST and liquor mark-ups will be reduced to their pre-HST levels to generally keep shelf prices constant. 

Q18:       With the bad press that was received by Excel Transport and leaked documents how can the general public be assured that the system of awarding the best company was done honest and fairly?
R18:       The process to select a service provider is being managed by professional public servants that have been involved in many government procurement projects and will ensure fairness and integrity in the process.  The Government has also hired a Victoria lawyer, economist and consultant George Macauley to augment the process and serve as a Fairness Monitor. In this role, Macauley is responsible for the following:
a) Review the procurement documentation so as to understand the RFP process;
b) Monitor the procurement process for adherence to the terms of the RFP, including participating at the Proponents’ meeting, site visits, oversight during evaluation of submissions and subsequent Proposal refinement process as well as final selection of the Selected Company; and
c) Prepare a fairness summary based on observations made during delivery of the procurement process. This report will be available to the public. 

Q19:       What are the anticipated changes to the BC Liquor stores ordering programs and procedures and timeline to transition into a new system supported by the new distributor?
R19:       The private sector service provider would be expected to have a robust ordering system to facilitate orders from LDB stores and private stores.  The details of the ordering system and the timing of implementation will be based on the agreement that government and the service provider would negotiate. 

Q20:       How can the employees be positive in their future job prospects when the Captain of the ship and other long term employees in major areas of Head Office are leaving in large numbers to other jobs outside of the LDB?
Q21:       Why are so many employees leaving Head Office?
R20/21: The number of employees throughout the Branch who have left the LDB so far in 2012, for reasons other than retirement, is consistent with previous years – about one per cent. However, a large number of employees are reaching retirement in 2012 – 83 to this point.
The LDB continues to have a strong core of experienced employees and will fill vacancies as they arise with competent replacements.
With respect to Jay Chambers, he clearly stated that after 15 years as the LDB General Manager, he felt it was time for a change. 

Q22:       Why are most recent Head Office postings only temporary positions?
R22:       This is nothing new at Head Office. From June to September, it is peak vacation time at LDB Head Office. This is the time when many long term Head Office employees take extended periods of time off and these key operational positions are back filled by posting them as temporary opportunities. Backfilling these roles provides employees with an opportunity to expand their knowledge and skills. When regular, full-time opportunities become available, they are posted as a vacancy not a temporary position. 

Q23:       How are jobs that are coming available in the next year being affected by the possibility of VDC/KDC employees that don’t choose to go to the new employer?
R23:       A Memorandum of Agreement (MOA) has been signed between the government and union regarding the privatization of the LDB’s Distribution and Wholesale operations. Auxiliary employees will be converted into vacant positions where possible.
Vacant positions (e.g. supervisory positions) will continue to be posted. However, these positions will be reviewed to determine if a potentially affected employee might be eligible for the position. 

Q24:       It was once brought into the public spotlight that one of the reasons privatization has surfaced is the VDC Warehouse is in need of replacement and it would cost in the neighbourhood of $200 million to replace it in a new Lower Mainland or Fraser Valley location, can you comment on this?
R24:       Government has stated a number of times that the interest in considering privatization is to determine if the current distribution model can be improved and to realize a financial gain from the sale of the LDB’s warehouse real estate. 

Q25:       What is the estimated selling price for the Distribution Centre/Service and how does it compare to the annual revenue now?
R25:       The intent of the RFP for Warehousing and Distribution Services is to determine if there is a private sector company that can assume the warehousing and distribution services in a manner that meets the needs of taxpayers and the liquor industry.  Government will not receive a cash payment from the service provider.
With respect to the VDC and KDC property, government intends to sell these through a separate process in the future. The value of those properties will depend on their market value at the time of sale. 

Q26:       Will buyouts be offered?
R26:       Government has signed a Memorandum of Agreement with the BCGEU to address impacted LDB Distribution and Wholesale Center employees.  One of the options that will be available to employees, depending on their circumstances is a Voluntary Departure Plan.

As always, stay tuned to this space for more developments and documents.

#LiquorLeaks examines Clark's "liquor cabinet"

When Premier Christy Clark shuffled her cabinet on Sept. 5, she also refreshed her "liquor cabinet." 

Several cabinet ministers and MLAs are involved in one of the government’s biggest, most controversial priorities of 2012: to sell the warehousing and distribution operations of the Liquor Distribution Branch to a private operator. 

No business plan has been published by the government to justify the Feb. 21-announced breakup of LDB, which made a $911.1 million profit for government coffers on $2.89 billion of sales last year. 

Much has been written about Exel Logistics, which operates Alberta’s private since 1994 system and hired high-powered BC Liberal insiders Patrick Kinsella and Mark Jiles to lobby for the B.C. gig since 2005. No other company that submitted bids by the June 29 deadline has been as aggressive as Exel, which originally wanted to do a private-public partnership and skip a public tendering process altogether.

Clark is head of cabinet and, what I call, the liquor cabinet. Kinsella was co-chairman of her successful 2011 leadership campaign, a guest at her swearing-in on March 14, 2011 and a guest at the B.C. Place Suite for the Sept. 30, 2011 reopening of B.C. Place Stadium. Kinsella ended his lobbying registration for Exel on March 30, a month before the request for proposals was published.

Rich Coleman (upper right) is the minister responsible for the Liquor Distribution Branch and Liquor Control and Licensing Branch. His business card became more crowded in the shuffle with the designation of Deputy Premier. Coleman's name is mentioned in the Exel "Project Last Spike" internal memo: company vice-president Scott Lyons told his superiors that the company's relationship with Coleman could be used to influence the writing of the RFP. 

Mike de Jong (middle right) replaced the resigned Kevin Falcon as Finance Minister and was given the responsibility to “lead the work on the possible asset sale,” according to a Finance Ministry representative on condition of anonymity. De Jong was the waffling Attorney-General when Dave Basi and Bob Virk made surprise guilty pleas on Oct. 18, 2010 after the ex-Liberal ministerial aides accepted $6 million of taxpayers' money to pay their legal bills. A still-secret transaction that the Auditor-General John Doyle and intervenor/ex-Liberal MLA John van Dongen are seeking a court order to bring to daylight. (Hear more about the controversial sale of BC Rail to CN in The Investigators documentary here.)

Ben Stewart (lower right) replaced Margaret MacDiarmid as the Citizens’ Services Minister. Stewart is responsible for government-wide buying and contracting and it is the staff of his ministry who are handling the LDB tendering process. Three executives of the Coleman-overseen LDB (including acting general manager Roger Bissoondatt) and four executives from the Stewart-overseen Citizens' Services are on the evaluation committee, weighing the bids from four companies (Exel, ContainerWorld, Kuehne + Nagel and Metro Supply Chain Group).

“They will continue in their current roles in the procurement process,” said the Finance Ministry representative.

”Given Minister's Stewart's previous involvement in the industry, out of an abundance of caution and to ensure no perception of conflict, responsibility for this project was transferred to the Minister of Finance.”

Let’s not pussyfoot around the issue, eh? Stewart is both a client of B.C.’s LDB and Exel’s Alberta monopoly, Connect Logistics, through his family company Quails’ Gate Estate Winery of Kelowna. He was also lobbied by Lyons. Stewart advocates private distribution and said in the Legislature on May 7, the day before my story exposing Exel’s "Project Last Spike" broke and NDP critic Shane Simpson stood up in the Legislature during Question Period to demand answers from Coleman. 

Coincidentally, I spoke with Stewart on Sept. 4, the night before he was sworn into cabinet. (Stewart gave no hint about his imminent job promotion). Here's what he said about Exel's push to privatize: 

“We probably only have a very very tiny piece of the utilization of that, we've been working with LDB successfully almost 25 years and this new model is probably comparable a little bit to the Alberta model... 
“Sometimes it takes the initiative of some catalyst to make sometimes these things to happen. I think that Exel may have asked the question. Is the province willing to consider it. They knew that there was other competitors. There's people that house and store wine for imported wines and other products here int he province. The LDB doesn't have the capacity or the interest to be becoming a warehousing depot is what I think Exel is probably more their field of expertise.
“My only point of contact is I knew the distribution systems around the country and other parts of the world because of my background. That's the only reason I probably talked to Scott at any point and was supportive of the concept that if they thought they could do it better, we should look at an open process.” 

Stewart told me he had spoken with Lyons over a year ago. Lyons, we found out in July, had also spoken with Stewart’s brother, Tony Stewart. 

“I think Scott mentioned that he had met with my brother, my brother is responsible as CEO of our company to essentially maintain and do what's necessary to run our business.
“When I chose to go into politics I completely moved everything into a blind trust and have a friend that actually is the trustee, I have no contact at all with the winery. I don't know what my brother is doing in terms of whatever discussions. On a personal note we see each other for Christmas and family events, but it's not about the business. I have the trust in the trustee and him and the board of directors I put in place beforehand to make certain these things were done in a proper manner before I considered giving up a business that I'd spent 35 years creating.” 

Meanwhile, De Jong chairs Treasury Board, the 10-member committee that will approve the winning bidder in mid-October. Coleman and Stewart are also on Treasury Board. Same goes for Jobs and Tourism Minister Pat Bell, Ex-Finance Minister (and co-father of the Harmonized Sales Tax) Colin Hansen and John Les, who was liquor minister in 2005. Exel lobbyist Mark Jiles held several meetings with Les from 2005 to 2007, at which Les apparently expressed his encouragement. De Jong's vice-chair on Treasury Board is Justice Minister Shirley Bond, who was lobbied on Aug. 25, 2011 by Lyons in a meeting at the Premier's Vancouver Office and signed reports to Treasury Board and Cabinet supporting the Exel proposal to privatize LDB's logistics. Earlier that summer, Lyons had lobbied another Treasury Board member, Ida Chong, who helped connect Lyons with Tony Stewart. 

#LiquorLeaks - Jay and the 8-Day Delay

On June 4, general manager Jay Chambers sent a memo to staff, assuring them he would guide them through the process that is the privatization of the Liquor Distribution Branch's non-retail functions.

He also invited staff to send him questions and even had a dedicated email address, askjay@ldb.com

LDB, through its parent, the Ministry of Energy and Mines (Rich Coleman, minister), shared modified versions of two of the emails with me via Freedom of Information, plus the prepared response. Were there more emails? Who sent them?

Ten days after Chambers invited questions from staff, he announced his resignation to join the Motor Vehicle Sales Authority of B.C. The sudden and inconvenient June 14 announcement had all the appearances of getting out of the kitchen while the privatization pot was burning. Predictably, both Coleman and Chambers claimed otherwise: Nothing to see here, move along. NDP critic Shane Simpson didn't buy it and unsuccessfully attempted to have the privatization's so-called fairness monitor, George Macauley, halt the tendering process. Macauley's power is extremely limited. He's a monitor, not a referee.

I don't buy it either. Chambers had a conference call on April 12 with the MVSA's hired headhunter George Madden, on LDB company time. It's in Chambers's daily LDB agenda!

Here's the kicker. Chambers told Coleman's deputy minister Lori Wanamaker on June 6 that he was resigning! That's eight days before the June 14 memo! Why the eight-day delay in telling staff?

"It is with very mixed emotions that I have made this decision," Chambers wrote to Wanamaker, giving her a month's notice. See the letter below.

Chambers's last day of work was July 4. He left two days early with an afternoon office party at the LDB headquarters. Roger Bissoondatt took over in the interim and is leading the committee vetting bids to take over LDB's warehousing and logistics.

Jay Chambers' resignation letter

Ask Jay FOI

#LiquorLeaks has more questions than answers

There is no longer a six-pack of companies seeking to privatize liquor warehousing and distribution in British Columbia.

Four bidders were shortlisted July 20: Exel, ContainerWorld, Kuehne+Nagel and Metro Supply Chain Group. It was supposed to be a list of three, but there apparently was a third-place tie in the merit points rankings. The rankings were not released. 

Schenker and Hillebrand Westlink didn't make the cut.

Read my story in Business in Vancouver here. I asked a Schenker executive if he felt the process was fair. He said it was "very straightforward," but refused to say whether it was fair.

Listen to Minister Margaret MacDiarmid's teleconference above. She was peddling the usual government line about the importance of the role of the fairness monitor, George Macauley. NDP critic Shane Simpson found in June that Macauley is really powerless. He is not a referee, but an observer. Big difference.

You'll hear me questioning MacDiarmid about whether Exel and ContainerWorld are really bidding independently and whether the government is doing anything to ensure that is so. I tried to get her "off-message," to get a real answer. Not political spin. It was obvious that she came better-prepared to handle an agitator after being embarrassed July 12 by Vaughn Palmer's grilling, which you can hear here.

I still have so many questions for Minister MacDiarmid, such as: 

Why is the government delaying my Freedom of Information request on the list of times and dates that the six bidders submitted their formal proposals? Your ministry is stewarding the Distribution of Liquor Project bid process, but the disclosure has been delayed until Sept. 27 so that Energy and Mines can be consulted. You're also the minister of open government. Is your ministry really in charge of this process, or are you part of an elaborate communications strategy to deflect attention from liquor minister Rich Coleman, who has never been made available for me to interview? In Exel's own words, it pondered using its relationship with Mr. Coleman to influence the writing of the request for proposals.

Why did Mr. Coleman tell CKNW's Simi Sara in a Tweet on July 19 that bids closed June 30? The request for proposals states very clearly that the deadline was June 29 at 4 p.m. Did Mr. Coleman mis-speak or were the rules bent for any applicants? Kindly provide me the list of date(s) and time(s) that the formal bids were received (see above). 

Your ministry has released the transcript of the May 10 bidders' meeting. It has not released a transcript of the May 9 industry information meeting. Why? Is it because several industry stakeholders asked questions and were of the opinion that LDB privatization would harm the industry and raise costs? I was there and I posted a recording of the question and answer session. Listen here.

Again, I ask, what assurances does your ministry have that no bidders are working in collusion? I have evidence in Exel's own words, in its Oct. 6, 2009 "Project Last Spike" internal memo that says an alliance with or an acquisition of ContainerWorld was among Exel's strategies to become the warehouser and distributor. Exel's sister company Giorgio Gori has a longstanding business relationship with ContainerWorld and an option to buy the Richmond warehouse. ContainerWorld owner Dennis Chrismas met with Mr. Coleman on March 2. Has anyone from ContainerWorld met with anyone involved with Exel, directly or indirectly, since the RFP was published? 


Mr. Chrismas has not responded to my phone calls or emails. 

Does fairness monitor equal fancy monicker?

As the old proverb goes, all is fair in love and war. But is it fair in British Columbia government privatization?

The last week of June began spectacularly with the shocking Alex Tsakumis revelation of a 2003 Dave Basi memo-to-file that alleged Christy Clark (then Deputy Premier, now Premier) breached her oath of confidentiality. Yet another reason why a public inquiry into the BC Rail privatization scandal is a must.

The week ended with the British Columbia Government and Service Employees' Union announcing a brief strike at three LDB sites, including headquarters in Vancouver. The BCGEU hit an impasse with the government on talks for a new government-wide contract and it says it is fighting back against LDB privatization. Meanwhile, there are serious questions about two ex-BCGEU executives who were lobbied by LDB privatization frontrunner Exel Logistics, but refused to do interviews.

The BCGEU strike notice was made June 29, the same day that bidding closed for the Distribution of Liquor Project. That's the fancy name given the controversial privatization of the LDB warehousing and distribution.

NDP critic Shane Simpson complained in a June 22 letter to George Macauley, the so-called fairness monitor who has a $74,900 contract to oversee the process. Simpson wanted Macauley to recommend the government postpone tendering until a business case is released, industry consulted and a replacement hired for LDB general manager Jay Chambers. Chambers drives away from his job as the head drink retailer in B.C. on July 6 to preside over the Motor Vehicle Sales Authority of B.C. Roger Bissoondatt will act as g.m. until a replacement is hired.

Simpson, who cited my May 8 story in Business in Vancouver during Question Period, already called the privatization "tainted" because of the cozy relationship between Exel Logistics, B.C. Liberal lobbyists Mark Jiles and Patrick Kinsella and the liquor minister, Rich Coleman.

Simpson got his answer from Macauley on June 25. In a nutshell: the Victoria lawyer and economist says he has no power to intervene, because of the terms of his contract that were set by the government. He is watching the process and making sure bidders follow the RFP requirements. He will submit a report next March, after the contract has been awarded. He can't do anything else.

This seems to contravene Coleman's answer to Simpson during the May 29 budget estimates committee hearing:

Simpson: (Does the fairness monitor) have any other authority to be able to direct the RFP process in any way if they have a concern during the process that they think…? You know, maybe it isn't anything major, but they have a concern, and they want to recommend or direct an adjustment in the process to keep it more balanced based on their view. Do they have authority or an ability to do that, and if so, how?
Coleman: Through the process, he has the ability to raise concerns, keep the balance, make recommendations — all of those things as the fairness monitor with regards to the process, if he has concerns.
Simpson: Who would he make those recommendations to? Would he make them to Mr. Chambers? Would he make them to the minister? Where would those recommendations go? Would they be expected to be of a private nature, or would it be of a more public nature?
Coleman: It's probably the project team or the two deputies that are responsible, which is probably the same thing.

A fairness monitor not empowered to ensure fairness is like a referee not allowed to blow a whistle or a linesman prohibited from raising a flag. Yet another reason to question the integrity of an already controversial process.

Coleman, the minister responsible, has not responded to any of my interview requests.

Read my story here in BIV and see Simpson's letter and Macauley's reply below.

NDP critic complains about integrity of LDB privatization

Response to Shane Simpson 2012-JUN-25

#LiquorLeaks: Curious about George

During the Distribution of Liquor Project -- the fancy name given the process to privatize the warehousing and distribution of B.C.'s profitable Liquor Distribution Branch -- liquor minister Rich Coleman has defended the process by heralding the hiring of a "fairness monitor." Coleman has also called the job "fairness auditor" and "fairness commissioner." More fancy words from the cabinet minister who has bucked all of my requests for interviews since the privatization was announced in the Feb. 21 budget. If the privatization is such a good idea, why does Coleman refuse to sit down with me to answer my questions and defend it?

The fairness monitor is George Macauley, a Victoria lawyer and economist who has extensive experience working on contract with the provincial government. Macauley and Associates has been paid $1.3 million for contracts over the last decade. Macauley's resume indicates that his primary work and specialty is government contracts.

Records requested and obtained by me via Freedom of Information (below) indicate Macauley was among six people invited to bid on March 12 and he was awarded the contract on March 26. Doug Benson, Alistair Duncan, Owen Pawson, Jane Shackell and John Singleton were the unsuccessful bidders. The contract is worth $74,900, which is $100 shy of the $75,000 threshold that triggers a public advertisement, and runs March 27, 2012-March 31, 2013. The contract states Macauley must:

a) Review the procurement documentation so as to understand the negotiated request for proposal process that will be used on the distribution of liquor project;
b) Monitor the procurement process for adherence to the terms of the NRFP, including participating at the proponents meeting, site visits (if any), providing advice related to fairness in the NRFP, oversight during evaluation of submissions and subsequent proposal refinement process as well as final selection of the selected proponent; and
c) prepare a written fairness summary report based on observations made during delivery of the procurement process.
...provide a draft written fairness summary report to the Province on the NRFP process within two weeks of notification to proponents, by the Province, of the identification of the selected proponent. A final written fairness summary document will be provided to the Province at a date to be stipulated by the Province and to take place no later than two weeks prior to the end of the Term of this Agreement. This report will be made publicly available by the Province.
The contractor may be required to provide verbal reports as required by the Province to the executive procurement steering committee, vendors, cabinet, public or media. 

Macauley's bid to the government shows that he had a hand in the oversight of some of the biggest government contracts awarded to private companies during the post-2001 BC Liberal era, such as:

• $572 million, 10-year revenue management contract with EDS Advanced Solutions;
• $324 million, 10-year health benefits operations with Maximus BC;
• $300 million, 10-year workstation services and IT contract with IBM Canada, and 
• $1 billion, 10-year telecommunications services contract with Telus. 

That's almost $2.2 billion of taxpayer-funded contracts!

NDP liquor critic Shane Simpson wrote a complaint to Macauley on June 22, seeking him to intervene and recommend the government postpone the tendering while various issues of integrity are resolved. Here's my story on BIV.com. See Simpson's letter at the bottom of this post.

Macauley politely declined my request for an interview and would not comment on Simpson's letter or provide me his response.

"My previous engagements with the projects you identified were different from the current DLP engagement.  My role then was of an ongoing advisory nature to provide advice and course correction if I identified any fairness issues as the process proceeded. I was not asked to provide a written report or documentation, and such reports and documentation were accordingly not created. In the present project, as you know, I will be preparing and providing a written fairness summary report in addition to providing ongoing advice and course correction on fairness matters."

Macauley was one of many people involved in those processes listed above, which were ultimately decided by cabinet. But the contracts were targets of criticism. The B.C. Government and Service Employees' Union drew attention to how a company related to Maximus was accused of fraud in the United States. The government battled to keep the Maximus contract secret. The government spent more than $125,000 to keep the whole IBM contract secret since 2004, but a B.C. Supreme Court judge ruled in June 2012 that it should be published. The omnibus telecommunications contract for Telus raised the ire of competitors Rogers, Shaw and Bell, who accused the government of breaking interprovincial trade accords and running an unfair procurement process.

And now there is the Distribution of Liquor Project, which is happening without a business plan or formal industry consultation. Frontrunner Exel Logistics, I revealed, considered how it could use its BC Liberal-connected lobbyists and close relationship with Coleman to influence the writing of the RFP and get the 10-year contract -- which it estimated in October 2009 was worth at least $55 million a year.

All that and more in the #LiquorLeaks files.

More to come...

Macauley Fairnessmonitor Mackin

NDP critic complains about integrity of LDB privatization