VANCOUVER—The B.C. government branch responsible for buying and reselling liquor and nonmedicinal cannabis did not demonstrate impartiality and a “fair and open” process when it awarded contracts to businesses for goods and services worth $25 million of public funds, says a new report released by the Office of the Auditor General of B.C.

The report stated that when audits were done on 74 contracts awarded by the BC Liquor Distribution Branch (LDB) to businesses between April 2016 and July 2018, 73 per cent of the files “did not demonstrate nonpreferential treatment of contractors.”

At a Wednesday press conference, Auditor General Carol Bellringer said that LDB spends $100 million on support to its business operations such as building and outfitting stores and warehouses, or obtaining expert advice. The focus of the audit did not include spending on liquor and non-medicinal cannabis products for wholesale and retail.

According to LDB, it operates 197 retail outlets throughout the province under the brand BC Liquor Stores and serves more than 36 million retail customers every year.

According to the report, of the contract files, 55 per cent did not comply with the government’s procurement policy that stipulates when a contract is directly awarded, it is exercised only in exceptional circumstances.

One of the contracts Bellringer highlighted in the report was worth $8.5 million. It was awarded to JDA Software based in Arizona “for retail systems software and associated professional services.” The auditor general found that the contract was amended to $14.2 million without consulting the market.

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“As a result, the LDB could not demonstrate that the enhancements needed under the contract, and the higher cost, represented good value for money. There was also no analysis in the contract file to show the supplier was the only source for the product type,” stated the report.

Although the contractor JDA Software was selected through a competitive process in 2000, the report stated that LDB failed to disclose why it did not undergo a competitive process for the expanded contract.

“Government’s procurement policy is based on the principles of fair and open procurement to get best value,” said Bellringer in a statement issued Wednesday. “Only in exceptional circumstances may a government entity, like the LDB, directly award a contract to a supplier.”

The LDB management team responded to the report saying that they initiated an independent review of their procurement process in 2017.

“To date, significant changes have been made to the organizational structure and processes, including draft standard operating procedures (SOPs) in which we have incorporated the recommendations from this direct award audit.”

LDB also stated the findings in the report were “based on a lack of evidence available in the physical files.” In fact, LDB maintains that in many cases, it did comply with the government’s procurement procedures. But it “failed to include documentation of these actions within the physical files reviewed by OAG (office of the auditor general).”

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The list of the contracts examined by the auditor general is provided in the full report. Some include services worth $70,000 by The Deetken Group, conducting wholesale customer satisfaction surveys worth $25,000 by Corporate Insights, and “maintenance renewals on HP blade servers and 3PAR support” worth $395,000 by Hewlett Packard Canada.

Bellringer said the report will be going to the all-party public accounts committee of the Legislative Assembly, which will arrange a meeting with LDB staff. LDB staff will then be required to establish an action plan to address the report’s recommendations.

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