Auditor General: "The Board and the vendor lost credibility..."

I'm back from vacation...and apparently just in time! Auditor General Jack Wagner's audit of the wine kiosk fiasco -- sorry, program -- is out today, and it's pretty much unforgiving. Well, the man's an auditor; of course it's not forgiving, that's not his job, and this was a fiasco. Some pertinent stuff (the full report's here in PDF format; the AG's statement is here (added emphases are mine, of course)):

Wagner’s special performance audit...chronicled the problems that existed from the beginning of the ill-fated kiosk program. The six findings, are:

• The board used kiosk technology that effectively controlled the purchase of alcohol (about the only positive statement in the whole report)
  
• The board followed state procurement requirements, but the request for proposals did not enable fair and just competition
  
• The board and the sole responding vendor negotiated the kiosk contract in ways more advantageous to the vendor than necessary
  
• The board spent $1.12 million more than it took in over two fiscal years and has invoiced the vendor for the losses. But the vendor has not paid
  
• The board and the vendor lost credibility when the kiosks malfunctioned,
  
• The board overstated the convenience of the kiosks

Note that he says "effectively controlled the purchase of alcohol." Not "efficiently," or "nonintrusively." The same thing could have been "effected" by a live person standing at each kiosk -- which the malfunctions eventually also required -- and the statement would have still been true. But weak competition on an RFP, vendor-favorable negotiations (when the vendor is heavily invested in campaign contributions to a sitting governor), losing money on a supposedly cost-free project, operation failures during the busiest sales season of the year, and the total cluelessness on the definition of "convenience?"

Look, read the statement, which covers most of this. Read the actual report, and pay particular attention to Section C, beginning on page 71, where the Board responds to the report. The AG's report takes that response and pretty much shreds it, saying over and over that the Board simply chose not to respond to some (the most awkward) of its findings.

But the message here? The wine kiosk program was a failure. Black and white, accountant-certified, this thing was a catastrophe. The break-even point -- as stated by the PLCB -- was 210 bottles a week per kiosk; only 3 out of 32 machines met that threshold; 17 -- over half! -- sold under 100 bottles a week. They simply didn't work: in the first three months of operation, "auditors determined that 1 out of every 21 transactions was problematic." That's leaving the general shadiness of the contract and the apparent lack of any escape hatch for the Board aside!

And the response from PJ Stapleton (who apparently may have been reading a different report)? "As it has done throughout this process, the Board will attempt to take whatever steps it can to maximize the possibility that the wine kiosk program will succeed."

PJ. Dude. It's over. Walmart blew you off. Wegmans blew you off. Where are you going to put these things? In Post Offices? In courthouses? Wait, wait, I know: how about in the State Stores! 

As I have said for a long time, the major problem at this agency -- beyond the tonedeaf attitude, beyond the terrible business model, beyond the insane insistence that the little stores out in the sticks carry thousands of SKUs when there's no demand for them, beyond the personnel system that doesn't properly reward product knowledge and sales competence, beyond all these serious problems -- is hubris. PJ and his Pals on the Board, Joe Da CEO, and their lieutenants have consistently responded to criticism with an attitude of 'you don't understand, what you call failure is innovation; what you call unethical is faithful to the letter of the law; what you call inconvenient is controlling the best interests of the people of the Commonwealth.' As if we are somehow too stupid to see that this is simply very bad management.

Let me lay this out in such straightforward terms that it can't be ignored.

• The wine kiosks are a public relations and sales disaster that have indeed cost the Board credibility
• The very real disaster of the PLCB's Oracle-based inventory system (subject of another audit) that wound up costing the Board hundreds of thousands in ruined wine (though they say it's fine, and what the hell do they care) and ad hoc storage fees in an absolute orgy of managerial ignorance
• The "courtesy contract," which exposed the PLCB's total lack of basic sales skills and was awarded in a way that showed poor judgment and created the appearance of a conflict of interest, not to mention being an expense that was not worthwhile...according to the AG again (in...yeah, another special audit)
• The embarrassing spectacle of over 20 workers at the PLCB's Philly warehouse being fired for undisclosed "financial irregularities" -- and they are still "undisclosed" 10 months after Joe Da CEO promised an investigation
• The PLCB's large number of unprofitable stores -- in a police-enforced monopoly -- and questionable business models
• The beer registration raid fiasco, where the PLCB's ineptly-kept beer registration database led to pathetically comic 'raids' by armed BLCE officers on three respectable Philly restaurants and one respectable Philly wholesaler, costing them thousands in lost time and sales (read it all here and here)
• The terrible record on nuisance bars (sure, it's the BLCE doing the enforcement, but the PLCB does the administrative punishment, and it's soooooo sloooooowwww....)

That's just in three years. Three years! I mean, speaking pragmatically, PJ and Conti have been a godsend; they're making my job easier. But speaking as a PA taxpayer? When are they going to resign because of their incompetence?! These are major screwups, this is a terribly run agency that lurches from one disaster to another, reacting to the Legislature, arrogantly ignoring the Governor and lawyerly disagreeing with the black and white criticisms of the Auditor General. But who do they answer to? Apparently no one. Which is, in my mind, one of the biggest Reasons of all that they need to be completely restructured, and the retail monopoly taken away from them.

Wine Kiosks...what a beautiful debacle

The ridiculous Wine Kiosks have turned out to be a microcosm of the PLCB: corrupt, incompetent, inconvenient, bloated, and wildly unpopular with Pennsylvania citizens. They are, as I predicted, a public relations disaster for the PLCB.

• The bidding process was suspect (a single-bid contract).
• The company that made them, Simple Brands LLC (again...a "hi-tech" company with no website?), was suspect (company officers were mostly large Rendell donors, and the principal's main experience before was with neonized skeeball machines).
• The contract was suspect (the PLCB kept saying the machines didn't cost them anything...except maintaining and supplying them, and the drone employees looking at videocamera feeds in Harrisburg, and then the drone employees sitting beside the malfunctioning behemoths).
• The machines themselves were crap.
• The whole concept was flawed from the beginning...and the PLCB knew it.

Eh? What was that last bit? Crazy, but true: jump to this story in today's Pittsburgh Post-Gazette and read about how the PLCB received a report from an internal committee prior to signing the wine kiosk contract, a report that strongly advised against going forward with the contract. For instance, the committee pegged the top problem: the kiosk idea simply sucked.

"The committee has a general concern that the proposed process for purchasing products via the kiosk machine is cumbersome and may meet with public criticism for not being 'user-friendly,'" according to the evaluation memo submitted by Matthew Bembenick, a middle manager who recently left his position with the LCB.

The committee had real problems with Simple Brands, the way they operated, and the contract they presented.

The memo also addressed concerns that Simple Brands continually changed its business plan "on the fly as the committee has broached operational issues and concerns." According to the memo, "The committee is concerned that the lack of a coherent business plan will open the [LCB] up to public criticism and could contribute to a potential project failure."

Smart people they had working at the PLCB...too bad they not only didn't listen to them, they completely disowned the report, and 'disappeared' it in Orwellian fashion:

The day after the committee submitted its recommendation, an attorney for the LCB instructed employees to hand over all hard copies of the report and to delete all electronic copies.

Now...spokesperson Stacey Witalec is quoted in the piece saying that it's normal to destroy electronic copies, it's to maintain the integrity of the original; no bits and pieces floating around. As an old records management type, I can understand that. But...hard copy? That's damage control, and when you do damage control before something even goes public? DING DING DING DING! That's a serious red flag. Hope the upcoming AG audit on the wine kiosks knows about this.

Meanwhile, the PLCB is fighting an endgame with Simple Brands that  looks a lot like a desperate search for an exit strategy that will allow them to can the wine kiosks with a statement that clears them of any blame (or stupidity) while pinning the failure on Simple Brands. Have a look. Simple Brands is exposed as the fly-by-night operation it always was; the PLCB is lashing out in an attempt to blame the failure of the kiosks on the company that they were warned was problematic. No one wants these misbegotten monsters, and is that a surprise to anyone?

 

The kiosks are clearly a failure; they were flawed from Day One, functioned below expectations, were despised by the very people they were meant to enthrall, and every party involved is racing away from the stench of their rotting demise. The Philadelphia Inquirer editorial staff put it so well last month.

With any luck, though, the Commonwealth's beleaguered wine-droid army will someday have one proud distinction: It will be regarded in retrospect as the LCB's Waterloo. Rarely before has any government agency so succinctly, thoroughly, and convincingly made the case for its own elimination.

With any luck, indeed.

Didja Ever Doubt It?

Remember this?

Next call: is there any patronage on the wine kiosk contract, anything that might benefit anyone related to someone at the PLCB, or the Governor's Office? (Does this guy know something?) Conti ducks it by saying it followed the same track as the courtesy contract, a track that he already questioned the effectiveness of, but said it was legal. Okay...so you heard it here: Conti is implying that there is no questionable connection between the PLCB or the Governor's office and Simple Brands LP, James Lesser president, of Bala Cynwyd, the only bidder on the contract, according to news stories on this project.

Now read this. Pittsburgh's ABC affiliate, WTAE, breaks the story: there is a Rendell-Simple Brands connection. "Two of the main investors with Simple Brands have given Rendell nearly a half-million dollars in campaign contributions." And Joe "CEO" Conti is right in there pitching it.

[WTAE reporter Paul] Van Osdol: "Any concerns about the perception that might be created from something like this?"
Conti: "As I said, of course, we're concerned about the perception. We understand the nature of your question and we understand why you're here today, but we think we -- in an abundance of caution -- went through a very fair and open bidding process."
Van Osdol: "Was it really fair if there was only one company that responded, and that company was the one that made the original proposal?"
Conti: "It was a very fair and open bidding process."

Sound familiar? Sound just like the "courtesy contract" the PLCB awarded to the company owned by the husband of a PLCB regional manager?

What does it take? How long are we going to continue to put up with this crap? We're told one of the reasons that privatization is a bad idea is because private businesses often defraud the government. Hello? Obviously that argument's a wash.

The kiosk idea is a dopey one -- stick your whole arm into a machine to buy a $15 bottle of wine? -- and the kiosk contract stinks like roadkill in August. It's time --past time to write your legislator and demand that privatization of liquor and wine sales in Pennsylvania be put on the legislative calendar immediately -- or at least, as soon as they've managed to pass a damned budget. The system is antiquated, the system is stupid, the system is corrupt...but worst of all, the system does not serve the citizens of the Commonwealth. The PLCB Should Be Abolished.

"Unless and until there is a general hue and cry, it is very unlikely there will be a privatization initiative that succeeds." -- John E. Jones III, former PLCB chairman.

Whose Money Is It To Spend?

The latest bone-headed idea from the PLCB? Change the name of the State Stores. Steve Twedt, at the Pittsburgh Post-Gazette, reported on this over the weekend. This is part of the $3.7 million "rebranding" boondoggle the PLCB has engaged in, for truly questionable reasons.

Happily, there is at least one person in Harrisburg who sees this for the worthless idea it is: Governor Ed Rendell. According the ever-spinning Chuck Ardo,

"The governor expressed his opinion that the PLCB stores as currently named were recognizable and had a brand value of their own and he strongly discouraged PLCB from attempting to change the names of the stores... The governor was vocal in making his opinion known."

However, as we're frequently reminded, the PLCB is an independent agency. Accordingly, Joe "CEO" Conti was not concerned about the governor's opinion. Indeed, it sounds like they may not have been at the same meeting:

[Conti] described the meeting with Mr. Rendell as "more a directional discussion" covering a wide range of topics. "The governor was delighted with everything he saw," said Mr. Conti.

Pardon my French, but one of these two guys is clearly full of crap. If you know Governor Rendell, you know what "strongly discouraged" and "vocal in making his opinion known" means. I'm pretty sure I know what "delighted with everything" means. I'm guessing the Governor is looking at Conti and feeling a bit like Victor Frankenstein.

But that's all silliness and name-calling. What this is really about is wasting your money. When this contract comes up, when the courtesy contract comes up, whenever the PLCB spends on consultants or signage or harassment of former Board members, the stock answer is always that it's not the taxpayer's money, they're a self-supporting agency and that their 'expenses' come out of the money they 'make' selling booze.

Could we cut the bull? The PLCB's real main argument for existence, the only reason they still have the monopoly on liquor and wine sales in Pennsylvania, is because of the money they funnel into the state's coffers. Three-quarters of that money is taxes, and we'll close our eyes and pretend that's a straight push-through. But a quarter of it is 'profits,' going into the general fund to be spent on programs to benefit the citizens of the Commonwealth. If this 'independent agency' is spending some of its gross on questionable stuff like changing the name of their monopoly stores, it is the taxpayer's money that is not going into the general fund.

Just how independent is the PLCB? Who exercises oversight on this agency? It's not the governor, clearly, as his "opinion" doesn't count for spit. Is it the Legislature? Don't know, although Conti and Stapleton were quick to dump most of the criticism of the PLCB's practices in their laps, as being responsible for The Almighty Liquor Code.

At least the PLCB is acting like a proper monopoly: high-handed, unaccountable, and arrogant.