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ABC boosts liquor contract where auditor found waste

May 15th, 2019

— The state Alcoholic Beverage Control Commission has increased a warehousing contract that the state auditor criticized last year, apparently after the vendor shipped thousands of cases of liquor for free for years.

The commission voted on the increase in March, agreeing to pay LBB Associates $2,000 for every load the company moves beyond the 333 loads a month it agreed to handle in a contract that dates to 2011.

LBB doesn’t produce the liquor, but it warehouses it and delivers it to local ABC boards. Before this amendment, the company’s contract totaled about $8 million a year.

The State Auditor’s Office said last year that poor management of the contract, and excess liquor warehouse space in Clayton, cost the state nearly $14 million over more than a decade, and it criticized the ABC for failing to properly evaluate past contract increases.

The commission accepted the audit’s results when it was released last year, though ABC leadership had largely turned over from the period state auditors reviewed. LBB pushed back, saying increases over the years were “more than reasonable” based on the amount of liquor shipped as demand increased.

ABC Commission Administrator Agnes Stevens said this month that it was only fair to increase the contract after LBB pointed out it was shipping far more liquor around the state than the contract covered.

“We had to say, ‘You’re correct,'” Stevens said. “The amount of work and the number of places that are needing additional deliveries is in fact increasing.”

LBB officials didn’t respond to WRAL News requests for comment made Friday and Tuesday.

The ABC Commission voted on the change at its meeting in March, but the matter wasn’t included on a commission agenda published before the meeting. Stevens said that’s because ABC staff struck an agreement with LBB after the agenda was published, and the item was added.

“It happens all the time,” she said.

The contract isn’t paid using tax dollars, but bailment fees, which are warehousing charges tacked on when local ABC boards purchase product from distillers.

LBB will get paid more money under this amendment only when it delivers beyond the 333 loads it got a flat fee for under the old contract, Stevens said. For April, that totaled 115 loads, or $230,000.

Stevens said that’s probably about what the increase will be each month going forward, on average. If that math keeps, the contract would pay about $10.7 million a year.

The contract’s term didn’t change, and it will still expire in 2021. The ABC Commission plans to rebid it and is looking for a consultant to assist the state’s purchasing division in drafting the terms, commission spokeswoman Kat Haney said in an email.

Until then, “with this contract amendment, the boards are receiving increased deliveries that they need, and the vendor is being compensated fairly for services that it will be doing that are over and above what it agreed to provide under the terms of the 2011 contract,” Haney said in her email.

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