#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

Showing the oaths

When she announced her open government policy in July 2011, Premier Christy Clark said she was encouraging public bodies to issue information on a proactive basis.

Is it working? I'd say it isn't. Here's one test. The oaths sworn by members of cabinet and their appointment certificates should be posted publicly the day they are signed. Instead, they are still subject to a Freedom of Information request. Below are the swearing-in certificates I obtained for all members of the B.C. cabinet, including the Premier. 

The appointments were formally made and oaths sworn before Lt. Gov. Steven Point. Look closely at the certificates and you'll notice his first name is incorrectly spelled as "Stephen."

Lt. Gov. Point's first name is spelled Steven on the Office of the Lieutenant Governor website and in an Oct. 1 news release announcing the appointment of his successor, Judith Guichon.

B.C. Cabinet Swearing-In Certificates: Collect the Whole Set!

Exclusive: Stadium sinks staff sea cruise - mutiny to follow?

B.C. Place Stadium has a retractable roof. And an operations budget under apparent restraint. 

General Manager

Just three days after the first anniversary of its reopening from renovation and the day before a scheduled staff appreciation boat cruise, general manager Howard Crosley sank the scheduled excursion. Tickets for staff were $10 each and guests $35. 

On the morning of Oct. 3, staff received the following memo. While many of the workers had reason to talk like a pirate ("arrr"), others took a more humorous strategy. The theme songs to the Love Boat and Gilligan's Island were heard on the in-house walkie-talkie system during the Oct. 3 Vancouver Whitecaps 4-0 win over Chivas U.S.A. 

I'm still waiting for spokesman Duncan Blomfield to respond with comment. B.C. Pavilion Corporation is now under the presidency of Dana Hayden, the former Jobs, Tourism and Innovation deputy minister. Cabinet responsibility was recently shuffled to Rich Coleman, whose portfolio includes energy, mines, natural gas, gambling, liquor and housing. 

This could have been the first salvo fired in what could be a fall of labour strife. Stadium workers, represented by the B.C. Government and Service Employees' Union, are negotiating a new deal. In 2011, they reached an agreement with management and avoided a strike that could have jeopardized the Grey Cup.

Will it be smooth sailing in 2012 or is a course being charted for choppy waters?

To All Staff: 

I know many of you were looking forward to the Staff Appreciation Boat Cruise scheduled for tomorrow, Thursday, October 4th. The response has been very positive; however, due to fiscal constraints and budgetary considerations, unfortunately, it is necessary to cancel the event. We will look at another staff appreciation function to be held at BC Place in the near future. 

We truly appreciate your dedication and apologize for the inconvenience. 

Captain

Skipper

How do you get your ticket refund? 

• Wed Oct 3, before 1600, Admin Office, see Irene. From 1600 to 1730, before your game shift, outside Level 1 Break Room.
• Oct 4 and 5, 0900 to 1700, Admin Office, see Irene
• Sat Oct 6, 1600 to 1730, before your game shift, outside Level 1 Break Room
• Oct 9 onward, 0900 to 1700, Admin Office, see Irene 

Howard Crosley
General Manager

Boessenkool, Burns Lake & Booze: 3 Bombshells

What a week.

Alberta import Ken Boessenkool got pushed/jumped from his job as chief of staff to Premier Christy Clark. Boessenkool submitted his resignation on Sept. 23, the morning after the B.C. Conservatives were licking their wounds after 71% of one-third of the party voted against reviewing John Cummins's lacklustre leadership.

It turns out this was one of those "uh-oh, they noticed, now we've gotta do something" matters. 

Global TV's Jas Johal was tipped-off about Boessenkool getting in trouble at a Victoria pub on Sept. 7 after Liberal caucus members and Press Gallery members had a round of golf in Metchosin. Clark started the week with a press conference where she released Boessenkool's resignation letter, but hid behind privacy laws and would only call it an "incident of concern."

Boessenkool lost his nearly $200,000-a-year gig and, under B.C. government employment rules, he must not lobby the B.C. government for the next year. That could hurt him in the wallet, since Boessenkool was a former Hill and Knowlton executive whose client list included Enbridge, Taser and Merck. 

Boessenkool allegedly got drunk and groped a junior female staffer in the Bard and Banker pub. Clark claimed the Public Service Agency investigated Boessenkool. But in a startling lack of leadership, it was revealed that Clark did not suspend her chief of staff, but instead let him carry on as the ultimate supervisor of the woman who was the alleged victim. 

Instead of giving Boessenkool the heave-ho on Sept. 20, BC Christy heralded the poaching of star third-place Chilliwack 

by-election candidate John Martin from the Conservatives. Politics before people, that's the Clark way. 

The million-dollar question: Why didn't the police become involved in the Boessenkool incident?

Boessenkool was replaced by Dan Doyle, the BC Hydro chairman who was the executive vice-president of construction for VANOC. Doyle was CC'd on the famous March 24, 2009 John Furlong email, revealed by CBC in February 2011, that indicated there were major safety concerns at the Whistler Sliding Centre. 

On Feb. 12, 2010, Georgian luger Nodar Kumaritashvili flew off his sled near the end of his last training run, struck an unpadded pole and died. The track's construction was partly to blame. Almost $2 million more is being pumped in to correct the flaws. 

Furlong under fire for Burns Lake secrets

Vancouver 2010 Olympics chief executive John Furlong wasn't in London for the opening of the 2012 Olympics on July 27. His absence was odd, to say the least. Furlong and London 2012 chairman Sebastian Coe both told me in 2010 how they struck a friendship, as Furlong advised Coe on the ups and downs of running an Olympic organizing committee. Furlong served as VANOC chief executive at the pleasure of Premier Gordon Campbell, now Canada's High Commissioner to the United Kingdom. Campbell told CKNW's Philip Till in July that he hadn't spoken to Furlong for "months." 

On Sept. 27, Furlong was slammed with allegations in the Georgia Straight that he abused students at a Burns Lake, B.C. Catholic elementary school after he came to Canada as a teenager. The RCMP confirmed it is investigating. 

Furlong vehemently denied their claims, which are contained in eight affidavits obtained by Georgia Straight contributor Laura Robinson. He suggested he was the victim of a blackmail attempt. Furlong and his lawyer Marvin Storrow said they would sue for defamation. They refused to answer questions from reporters. 

Furlong, however, conceded that he had actually lived in Burns Lake. He said it was a "brief" and "uneventful" time. That was news to anyone who bought his book, Patriot Hearts, or paid to hear one of his speaking engagements. It was also news to his co-writer, Gary Mason. Furlong's memoir only indicates he arrived in Canada with his wife and two children 

in 1974 at Edmonton and settled in Prince George. 

Odd that an immigrant to Canada would omit any mention of his first impressions of his new country. Also odd that he would use the word "uneventful" to describe a period of his life in which he married his first wife who bore his first two children.

Read more from The Tyee here. 

BCGEU beats Booze Barn bid

And then the third bombshell of the week. The Liquor Distribution Branch privatization was cancelled 220 days since it was announced and 18 days before the successful bidder was scheduled to be announced. 

This one came wrapped by the government inside the new deal for the B.C. Government and Services Employees' Union. BCGEU president Darryl Walker said the prospect of thwarting the government's planned sale of warehousing and distribution came as a surprise to him earlier in the week. Read more in Business in Vancouver here.

The government appears to have made the right choice by putting a cork in the plan. It published no business plan to justify the privatization and conducted no formal industry consultation. The privatization push was driven by the persistence of BC Liberal-allied lobbyists in an environment of a cash-strapped government seeking solutions to balance the budget before the May 14, 2013 election. 

Every step of the way, I discovered more questions than answers. Freedom of Information delays, denials and censorship. And, of course, the minister responsible for liquor, who avoided all my interview requests. 

I have heard from only one bidder so far. ContainerWorld president Dennis Chrismas hired the Liberal-friendly Pace Group public relations company to send out a prepared statement. ContainerWorld opposed privatization at first, but then submitted a bid out of self-preservation. The province's largest pre-distribution warehouse in Richmond would have had an uncertain future if it didn't win the contract because the pre-distribution program was to be phased out. 

I will have more to say in the coming days and weeks. I'm confident there is a story behind this story. 

This had the appearance of another BC Rail-style scandal in the making. 

Starting with the title of the Oct. 6, 2009, internal Exel memo that flipped open the lid on this procurement plonk. 

It was called "Project Last Spike." 

B.C. Place imports director from CenturyLink

A busy Friday just got busier.

I can report that B.C. Place Stadium has a new director of engineering and maintenance, Mike McFaul.

Harvey Repp

McFaul is scheduled to begin Oct. 1 (the day after the first anniversary of B.C. Place's reopening) and is an import from Seattle's CenturyLink Field, home of the National Football League's Seahawks and Major League Soccer's Sounders. McFaul will replace Harvey Repp (right), who was supposed to sail off into the sunset (he's a recreational boater) earlier this year.

B.C. Place spokesman Duncan Blomfield said the job was advertised in unspecified stadium industry trade mags around North America. But what about complications of hiring an American to work at the taxpayer-owned, Canadian stadium?

"Regarding your question about a work visa, we cannot discuss personnel files of B.C. Place staff," Blomfield said.

As facilities director in Seattle, McFaul had experience overseeing the installation of temporary natural grass field systems in CenturyLink, formerly Qwest Field. Could that be in B.C. Place's future (as unsustainable as it may be)? McFaul was also widely cited in a thesis written by a student at Evergreen State College (home of the Geoducks!) about greenhouse gas emissions reduction at the stadium.

#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: notable quotes about potent potables

(Note: scroll down for new information added Sept. 27)

Why does the Sept. 6-sworn Deputy Premier Rich Coleman get so much media attention?

Luckily, Rich Coleman didn't fumble the Grey Cup.

Not only is he British Columbia's minister of natural gas, oil, hydroelectricity, dams, mines, social housing, gambling and booze, but the four-term Aldergrove-Fort Langley Liberal MLA often says outrageous things in the Legislature, in media scrums and to those reporters that he decides to speak to. (My requests for a one-on-one interview with Coleman, dating back to 2005, have been denied.)

Coleman, on at least three occasions in 2012, has made odd statements about the controversial Liquor Distribution Branch privatization that demand analysis.

Part I

On April 30, when the LDB logistics privatization request for proposals was published, Coleman told reporters in a scrum at the Legislature:

“They all have an opportunity, in the next 60 days, to come and make a presentation and an offer, a bid, whatever you want to call it... then they’ll come back with the selected, maybe a short-short list of one or two, and they’ll have to go through that and decide which one is the best deal for the government, and then we’ll move forward.”

The RFP, on page 40, stated “up to the top three proponents” would be shortlisted. That could be reasonably interpreted to mean any number from one to three. Coleman knew or ought to have known that, but he didn’t mention the number three.

Why was “one or two” on his mind? Why not the number three?

On May 8, the public learned through my story in Business in Vancouver that one company had positioned itself ahead of the pack and had been lobbying for seven years. That company is Exel. In its Oct. 6, 2009 "Project Last Spike" internal memo, Exel pondered using its relationship to Coleman to influence the writing of the RFP, if its proposal for a public-private partnership went nowhere. Another strategy involved the potential acquisition of ContainerWorld, the giant pre-distribution warehouse in Richmond on contract with LDB. 

As it happened, four bidders were shortlisted on July 20, because then-Citizens’ Services 

Minister Margaret MacDiarmid claimed there was a third place tie. The rankings, however, weren’t released. 

Should one of those four, namely Kuehne + Nagel, have been disqualified? I found out, through a Freedom of Information disclosure, that K+N submitted its proposal after the “prior to 4 p.m.” deadline on June 29! Read my Sept. 12 BIV story here. Government records show it was a minute late. K+N wouldn’t offer an explanation when I sought comment. A massive loophole means K+N remained in the game, because, as one bureaucrat said in an email: "There is no deadline in this process." See that shocking email below.

Five of the other bidders reasonably adhered to the deadline in the RFP. They submitted their proposals before 4 p.m. June 29. Why did K+N go into overtime? K+N wouldn't answer my questions. Neither would Finance Minister Mike de Jong. He is overseeing the privatization because Citizens' Services Minister Ben Stewart's blind trust-held Kelowna winery supplies both the B.C. LDB and Exel-owned Connect Logistics in Alberta. 

The six bidders, including K+N, are in an industry that is, in-part, based on deliveries according to schedule.

Part II

In a July 19 Tweet, Coleman (whose handle is @ColemanCountry) wrote to talkshow host Simi Sara of CKNW AM 980: 

“What I said on your show is no I don’t know who all LDB bidders are because the bid doesn’t close till June 30.”

The RFP stated that the close of bidding was June 29 “prior to 4 p.m.” Coleman knew or ought to have known that. 

Maybe he didn’t now who “all LDB bidders” were, but he knew or ought to have known who some were. Particularly "one or two" of them, such as Exel and ContainerWorld. 

Exel’s October 2009 internal memo indicated the company had discussions with Coleman about the desired takeover, and that Coleman offered his encouragement. His predecessor, John Les, had talks in 2005 with Exel lobbyist Mark Jiles. Les liked the idea of an Alberta-style system. Exel-owned Connect has held that booze hauling monopoly since 1994. 

ContainerWorld’s owner Dennis Chrismas and his lobbyist, Mike Bailey, met with Coleman on March 2. 

Bailey was originally hired in summer 2011 by Chrismas to oppose Exel’s proposal for a new liquor distribution system. Chrismas eventually had to shift gears and enter the bidding process because the RFP says pre-distribution warehouses, like his, would be phased out under the new, private operator. The survival of ContainerWorld may hinge on the outcome of this process.

Part III

The Globe and Mail’s Andrea Woo wrote a Sept. 8 feature on liquor regulation that said, in part: 

Industry enthusiasts have also called for the province to do away with the excise taxes and markups, or to consider a flat-tax system on alcohol similar to that of Alberta. Mr. Coleman said he doesn’t see that in the near future. 

“The biggest challenge is: How much can government afford? We have $800-million that comes into government coffers [each year]” through liquor,” he said.“If you take a couple hundred million off that, you have to find the revenue somewhere else. 

“It’s a significant contributor to the revenue of the province.”

The LDB annual report for 2011-2012 (which was addressed and presented to Coleman, the minister responsible) said the LDB’s profit was $911.145 million on $2.89 billion gross sales. On page 31, it says payments to the Province of B.C. for the year ended March 31, 2012 were $908,587,000.

That’s $108 million more than the $800 million that Coleman was quoted as saying in the Globe story. The difference is substantial. Coleman knew or ought to have known that $908.587 million came into government coffers from LDB in the most recent fiscal year. 

Liquor ministers say the darnedest things!

UPDATE (Sept. 27): On May 17, Coleman's office received an "advice to minister" information note (see "Rich Coleman's privatization script, by Jay Chambers" at bottom) written by then-LDB general manager Jay Chambers. It includes recommended responses to anticipated media questions about the LDB privatization. It is apparently the only briefing note prepared for Coleman between April 30 (the day the request for proposals was published) and July 31. I received it Sept. 27 after a Freedom of Information request.

"There is no deadline in this process."

Rich Coleman's LDB privatization script, by Jay Chambers

#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.