LANSING, Mich. (AP) — A state board delayed voting on Michigan's new cigarette tax collection contract Tuesday at the request of Gov. Rick Snyder's administration, which is reviewing complaints about the selection process and a competitor's offer to do the work for less.
The five-year, $9.6 million contract was expected to be awarded to Xerox State & Local Solutions, since it won preliminary approval from a committee last week and is the Treasury Department's recommended winner of the bid. But the item was pulled from the State Administrative Board's agenda before Tuesday's meeting at the request of the governor's legal office.
"Legislators had some questions and there was a commitment to get them answers and information," Snyder spokeswoman Sara Wurfel said. "The current contract is still in place for another nine months so there is no adverse impact from deferring action at this point."
The administrative board approves state contracts and is comprised of representatives for the governor, lieutenant governor, secretary of state, attorney general, state treasurer, school superintendent and transportation director. Agenda changes are not that unusual if there are questions about a contract, Wurfel said.
The Associated Press reported earlier this month that Xerox was in line for the contract despite objections from two finalists alleging state bias toward Xerox. One of the competitors, De La Rue North America, said it could provide 450 million counterfeit-resistant stamps a year for at least $1.7 million, or 18 percent, less.
"We're pleased that the state has agreed to slow down the process and review the facts leading to a decision," De La Rue spokesman Robert Hutchinson said Tuesday. "In the end, we're interested in what is best for the taxpayers of Michigan, and we believe the administration is too."
Michigan's $2-per-pack cigarette tax, 11th-highest in the country, has made the state a target for smuggling, which hurts tax revenues. Switching from old, heat-applied stamps to higher-tech stamps with scanner-friendly barcodes is designed to help.
But the 14-month process of choosing a company to provide the new technology has led to complaints.
De La Rue said its bid would provide the best value to the state because it was significantly cheaper. The company also said the bid was incorrectly evaluated and accused the state of arbitrarily raising its bid and that of SICPA Product Security because Xerox offered to continue providing an ordering system at no additional cost. SICPA, whose bid scored highest but would cost the state more money than Xerox's, also protested the decision.
State officials have stood by the Xerox recommendation, saying the contract would provide the best value for the state. They note that De La Rue would do software development and updates outside the U.S. and argue that Michigan could avoid additional costs to change cigarette stamp ordering systems.
The other two finalists say they were not allowed to address the issue that led the state to add $626,000 to their bids, and De La Rue says despite that, it still is the least expensive option for the state.