The Washington State Liq-uor Control Board has threatened to end its multimillion-dollar contract with a national vendor, saying the firm is falling months behind in its obligation to provide a functioning computer system to monitor the agency's massive booze inventory.

The new system, priced at $4.7 million, was supposed to be up and running in 157 state liquor stores by the end of September. It's supposed to replace a system from the 1980s that breaks down daily and leaves customers waiting at the till, state officials have said.

The old system cannot keep pace with the 17,500 cases of liquor products that move through the state system daily, officials said.

The still-inoperable replacement system, which is being developed by GERS Retail Systems, failed to pass key tests in July, and a June 30 trial scheduled in four stores hasn't occurred, according to documents released last week to The Olympian by the liquor agency and the state Depart-ment of Information Systems in response to a records re-quest.

GERS won its $4 million contract through a competitive bidding process, and the state has spent close to $3.8 million on the system as of September, government documents show. The company, which convinced the state to pay it an extra $464,000 for work related to the system, has told the state it is complying with its contract.

Spokesmen for GERS - a name that derives from General Electric Retail Services - reiterated that point of view Friday, even denying there is a contract dispute.

"We believe we have met the terms of the contract along the way. We've been very upfront with the state of Washington all along," said Phil Kenney, the company's vice president-marketing. "It's not trouble yet. We are work-ing through it with them."

That said, the San Diego-based firm faces a Nov. 17 deadline for showing the state it can perform up to its contract standards, of which state officials have expressed doubt.

If not, the state will break off the relationship - poten-tially at a loss of $1.5 million to $2 million, according to testimony agency officials gave to the state's Information Ser-vices Board in September.

"We're currently negotiating with the company to try to resolve some of the issues with respect to development of this system," liquor agency spokesman Bob Burdick said.

In response to a public records request, the Liquor Control Board later released copies of letters it has ex-changed with GERS, announc-ing the state's intent to sever its contract in early November if GERS cannot demonstrate it's meeting the state's objectives.

Two-week extension

At the request of GERS's chief executive, James Hender-son, the state agreed to grant a two-week extension until Nov. 17, giving GERS more time to show it can meet the state's standards for inventory control.

GERS insists its system has worked for Pier 1 and for the state of Utah, but that Washington's needs for inventory tracking are different, said Pat Kohler, administrative director of the liquor agency. The state has been up front about that from the beginning, Kohler said.

"That's where we're at odds. ... It doesn't work in our state. It works for Utah and they say, therefore, it should work for Washington," Kohler said.

Washington, for instance, does not have to pay for its inventory until it actually moves from a warehouse to stores. And, the state needs to include tax data with its sales-price data, as well as keep track of tax allocations to different local and state governmental jurisdictions.

The contract with GERS was signed last year after the liquor agency issued a request for proposals, or RFP, for what's being called its Merchandising Business Systems project. GERS had good credentials, according to state documents, and on its Web site describes itself as a "leading supplier of software solutions for the retail marketplace" with about 300 installations worldwide.

And GERS, which recently was purchased by Symphony Technology Group, always has delivered satisfactorily to its government clients in the past, said Kenney, the company vice president.

In an effort to keep its contractual relationship on track, the state hired a consulting firm, Sterling Associates, to assess the liquor agency's handling of the contract and the vendor's performance.

Julie Boyer, a representative of Sterling, has found fault with GERS's work, recom-mending that the state suspend further development work on the project until project-management issues can be resolved.

Money withheld

To date, some $700,000 of the contract has been held back from GERS as leverage to get the company to perform, according to Linda Villegas Bremer, director of information technology services for the liquor board.

The project is considered vital to the liquor agency's improved efficiency. The agency generates some $220 million a year in revenue for state government.

Liquor Control Board Chairman Merritt Long told the state Information Services Board in September that a replacement inventory system is needed, because the agency's existing system breaks down and is not efficient.

"Quite simply, our agency cannot continue to operate a half-a-billion-dollar annual business with an out-of-date, unstable, patched-together computer system," Long said, according to a draft transcript of the meeting that was prepared by the ISB.

"During the Y2K transition, unfortunately, the Liquor Control Board had the dubious distinction of being one of the only two state agencies to experience a major computer outage. Totally unacceptable," Long said.

"On any given day an aver-age three stores may experience short-term outages," Kohler told the same ISB group on Sept. 11

The new system, which the Legislature authorized using money in the agency's equip-ment fund, is supposed to let the liquor agency's clerks manage inventory with better accuracy, as well as let the agency track shipments electronically and do other tasks electronically.

In a comparison to retailers such as The Bon-Macy's, Koh-ler said the clerks could know immediately what alcoholic beverages are in stock, and in what quantities in storerooms - including at other stores if an individual outlet lacked the item.

A 'mature' system

But that hasn't happened, the state contends. And GERS failed to meet several project milestones, the state says, complaining that it was prom-ised a "mature" system but has received one that is still in the developmental stage.

If the state walks away from the contract, it could salvage about $1.8 million to $2.3 million value from its investment to date, most of it for hardware and software, Kohlertold the ISB.

"We are still in negotiations with them. We want to resolve this fruitfully," Bremer said Friday. "What we don't want is to have any more expenditures we cannot justify to our tax-payers and would not result in the product we need to run our business."

The Olympian

Wash. Liquor System Hit by Glitches

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