Monday, March 16, 2009

The Chairman (not the CEO) Responds

The following letter from PLCB Chairman PJ Stapleton to state Senators Orie and Eichelberger (who publicly questioned both the courtesy contract and its award to Solutions 21) was posted, in full, on the website of WGAL-TV and other places. I've re-posted here (in what I believe constitutes fair use, since this is a letter between two public officials) in order to comment on Chairman Stapleton's points; I've also added emphasis at times. It's an informative view into how the thinking on the other side of the issue goes.

Dear Senators Orie and Eichelberger:

Thank you for your letter regarding professional development at the Pennsylvania Liquor Control Board. I would like to take this opportunity not only to answer every one of your questions, but also to make certain you and all those who care about public policy in Pennsylvania understand that the PLCB is a careful and responsible steward of the resources entrusted to us. We know that the taxpayers of Pennsylvania expect nothing less than our very best in managing those precious resources – particularly given the vulnerable state of our nation’s economy.

Unfortunately, the media coverage that led to your inquiry was profoundly misleading. A $173,000 contract on teaching manners – as has been widely reported – would be ridiculous. It would also be unnecessary, as our employees already are widely regarded as being welcoming and polite to our customers.
  • (No offense to the clerks, but this is news to me, as in, I've never seen that reported. I've generally found State Store employees to be adequate at best, and at times mulishly uncooperative. I have heard from a few people about exceptions to that average. If there is a more scientific survey available, I'd be happy to report on it.)
But that’s not what this contract is about. The contract is a 65-page document covering a host of professional development priorities aimed at giving our employees the resources they need to be even more helpful when interacting with our customers
  • (There's about two pages in the document that deal with those priorities; the rest is boilerplate).
Specifically, the contract requires the contractor to: (I've located the amended RFP for this contract (and Solutions 21's proposal, and the contract) at the PA Treasury site if you'd like to have a look.) Provide for 24 training sessions for more than 2,800 clerks plus training for more than 800 managers (a cost of about $2 per employee per session) (which kind of looks like a lowball bid for a a company used to training heavy hitters like Pfizer and Heinz, doesn't it?). The training subject matter includes improving sales skills, improving customer service,
  • ("1. Improve basic customer service skills, such as greeting customers appropriately, servicing customers, and completing sales with professionalism and courtesy." (Yet Stapleton says characterizing this as 'teaching manners' is "ridiculous.") "2. Promote a positive atmosphere and attitude towards customer service in the PLCB stores; one in which providing excellent, knowledgeable customer service is celebrated and encouraged.")
complaint resolution, creating a positive atmosphere in the workplace, improving product knowledge (and this is where we depart from complete accuracy; what the RFP actually required on "product knowledge" training is this: "Improve sales skills, including the ability to translate product knowledge into relevant and effective conversations with customers that result in increased sales and increased satisfaction among customers." Not the same thing as "improving product knowledge," and there is no further mention of improving product knowledge; in fact, the overview of the PLCB in the contract makes it sound like they've got that whole product knowledge thing well under control), internal communications, and training on other LCB initiatives such as dealing with minors and dealing with visibly intoxicated persons;
  • (nothing specific about this in the contract either, just a vague "Encourage engagement with the PLCB's current agency-wide initiatives..." and something about "managing difficult customers.")
Train LCB employees to continue the training process after the contractor has left; Provide all the training materials for the training sessions; and Provide a mechanism to evaluate - and to evaluate - (interesting phrasing...) the effectiveness of the training provided.

  • (So the party providing the mechanism of evaluation of the contractor's the contractor, not the PLCB. Sweet.)
This contract is appropriate – both in its content and in the way it was awarded. I am eager to share with you those facts. And we would welcome the opportunity to sit down with you or any of your colleagues in the General Assembly to discuss this issue in further detail.
  • (And I hope the Senators take him up on this, and do their homework first.)
Our professional development program for our retail employees is a key component of our effort to deliver on Governor Rendell’s mandate to transform the PLCB from a prohibition-era government bureaucracy into a 21st century business that puts the customer first. (It is not, and cannot be, a business!) That is our focus today and will be tomorrow, as it will ensure that this agency gives Pennsylvanians the service they deserve while continuing to responsibly grow the revenues that we transfer to the General Fund, revenues that help millions of Pennsylvanians.

As you know, the Liquor Control Board operates 620 Wine & Spirits stores, which had sales of more than $1.7 billion in 2007-08. These sales generated some $428 million in 2007-08 for the Commonwealth’s General Fund in taxes and profits (please keep in mind: the taxes are about 3/4 of the take, and would be the same -- or more likely significantly larger -- under a private store regime). This makes us a significant retailer, whose successful financial management has a tremendous positive impact on the Commonwealth. The most successful retail business leaders know that creating and maintaining first-rate customer service is vital to their survival and success. So like our retail colleagues in the private sector, we are making this critical investment in our business. The fact that the LCB is a monopoly does not diminish this imperative. Our customers and your constituents still deserve a top-notch retail experience. (As we have for years -- still waiting -- and could have had with a privatization resolution.)

Our customer surveys have shown that our 3,000 union store employees generally provide good, and at times exceptional (I'd like to see the measures and definitions used), customer service to the citizens of this Commonwealth – a perspective that was repeatedly reinforced in much of the television news coverage this week. But it is our desire to provide excellent customer service consistently to all customers -- all the time. So, for the first time in many years, this program endeavors to give our hard-working employees the education and tools needed to provide our valued customers the superior service they expect and deserve.

This initiative is not news. In May 2008, we announced a series of steps to transform the shopping experience both inside our stores and online. It’s part of our comprehensive effort to put our customers first. At that news conference, which was well attended by the media, I announced that our efforts would include a fresh, new and welcoming look for our stores and, yes, more training for store staff to give them the tools they need to offer customers an outstanding shopping experience. Investing in such training is standard operating procedure in retail environments nationwide.

Training Industry Inc., which monitors employee training trends, reported that U.S. companies spent $129.2 billion last year on the sort of professional development we have planned. A recent survey by the National Retail Federation found that more than 40 percent of retailers spend at least $500 per employee, per year, on training. The contract in question here amounts to less than $50 per employee (again: lowball bid? Too little to be effective?). Other state agencies have also recognized the importance of educating their employees to provide the best possible customer service.

Investing in improved customer service is a proven way to sustain sales – and thus sustain our support of the Commonwealth’s General Fund – during an economic downturn. Publications such as Business Week have reported that some companies are fighting to preserve customer-service initiatives during the recession while others are adding to these programs. If our customer-service initiative raises our sales just 1 percent for just one week – or $339,706 based on 2007-08 figures – it will have paid for itself more than twice over. (By increasing the gross by that amount? Doesn't ROI work on net? will you know the increase came from the training? By using the measurement tools Solutions 21 designed?)

To fulfill the policy we announced last May, the LCB in November 2008 posted a public Request For Proposals (“RFP”) to solicit proposals for a contract under which the winning bidder would provide professional development training to the LCB’s retail store employees. Further, the winning bidder would provide leadership training to allow supervisory employees to continue the professional development initiative once the contract has expired. The LCB received five (5) qualified bids that were evaluated by a committee chosen for this task. The bids consisted of a technical submission and a cost submission, which are evaluated separately, when determining the winning proposal. After review of the technical submission of the proposals and in accordance with the Procurement Code, the cost submissions of the three highest scoring bids were reviewed. The winning proposer, Solutions 21, submitted a bid of $173,000. The other two bids were $453,521.76 and $1,212,175.00 (wow, that Solutions 21 bid is low). This fact has been left out of every news report on our awarding of the contract to Solutions 21. The only inappropriate use of our resources would have been to reject a qualified proposal to pay two-and-a-half or even seven times more.

I would also take this opportunity to address the unfair implications of media reports involving a devoted and long-term LCB employee, Susanne Hobart, who is married to the president of Solutions 21. Ms. Hobart is the regional manager for our stores located primarily in the western and northern part of the state. Neither Ms. Hobart, nor any of the employees she supervises, was involved in the procurement process. Neither Ms. Hobart, nor any of the employees she supervises, were part of the committee that reviewed the bids submitted under this RFP.

The State Adverse Interest Act prevents a Commonwealth employee from influencing or attempting to influence the making or supervision of any contract with the Commonwealth in which the person has an adverse interest. The Act defines an adverse interest as being a party to such a contract or having an interest in a party to such a contract. Ms. Hobart does not have an adverse interest, and she was not involved in the making or supervising of this contract. She is not the contract administrator, nor does she supervise the contract administrator. Her only involvement in this contract is that she and employees she supervises will receive training under the contract (and spending the money Buddy brings home?). Similarly, the Ethics Act, which deals with the awarding of contracts to state employees or their family members was not violated through this public procurement process. We believe that any fair review of the process will find that both the Liquor Control Board and Solutions 21 acted appropriately at all times. We would wholeheartedly cooperate in any such review. (I would hope so. And I hope it is a full review.)

Finally, and despite media reports to the contrary, the awarding of the contract for professional development did not involve taxpayer money (Of course it did). As you are aware, the LCB is self-supporting and spends no tax money; as stated earlier, it generates several hundred millions of dollars each year for the Commonwealth General Fund in terms of taxes and profits. (And any money spent out of the PLCB's gross to support this training is money taken from the taxpayer that never gets to the general fund. The LCB takes in millions in tax monies; are we to believe that the money is not fungible? Of course it is.)

Thank you for giving me this opportunity to address the issues raised in your letter. If we can provide additional information in this matter, please do not hesitate to contact me again.

Very truly yours,

Patrick J. Stapleton, III Chairman, Pennsylvania Liquor Control Board

Perhaps the most "ridiculous" thing in this whole letter is the talk about the product knowledge of State Store System employees. Yet it is fairly widely believed that State Store employees are not allowed to make recommendations, and never specific brands. Not the kind of reputation you'd expect in a system full of subject matter experts.

I'd say this training was desperately needed...only what's desperately needed is privatization. This is embarrassing, this is frustrating, this is ludicrous, and it only points up how ridiculous the entire system, the entire concept is. Take this albatross from around our necks. Abolish the PLCB.


Rich said...

Wow, now everyone is under the microscope, the PLCB and our legislature. I think it is almost a requirement for the legislature to react, they were put to the task. The big fear I have here is that the money they spend researching the details of this, will be worth more than the actual contract bid itself.

The low-ball bid is strange makes you think why did they shoot so low unless they are just looking for business period...but the next closest competitor was 2.5X...that's a big jump. I'm sure if you dig into the "technical" details of the proposals, you will also find a vast difference in what each company is proposing. What I mean to say is I think the issue goes deeper than just cost.

Lew Bryson said...

Unfortunately, only the winning proposal is available on-line. There was stuff I didn't get into, because the original post was too long as it was. Like, Solutions 21 is eating a lot of travel costs and other expenses, making the lowball even more jolting. I mean, great, low bid, but it really makes me wonder whether they're planning on changes and additions down the timeline, and whether that's a nudge and a wink arrangement.

Don't call me cynical either, dammit, not when I'm looking at the big black Vince Fumo headline on the Inky this morning: GUILTY ON ALL COUNTS. Yeah, I'm suspicious of state government today. And we all should be.

ClockworkOrange said...

PCN Call-In will feature the PLCB tonight at 7PM

Tuesday, March 17: Liquor Control Issues

* PJ Stapleton, Chair, PA Liquor Control Board
* Joe Conti, CEO, PA Liquor Control Board

Lew Bryson said...


Thanks for the tip.