Audit finds fault with state's choice of Pepsi

SPRINGFIELD -- Illinois' Coca-Cola loyalists can feel some vindication after an audit Thursday found crucial deficiencies in the way vendors' bids for a statewide soft-drink bid were evaluated.

A state lawmaker said he asked Gov. Pat Quinn to reconsider the Revenue Department contract that gave PepsiAmericas Inc. the exclusive July 2007 "pouring contract" for state facilities and estimated revenue for the state at $64 million over the 10-year pact.

An audit released Thursday showed Revenue disqualified Coca-Cola Enterprises Bottling Cos. for not receiving enough technical points from evaluators but didn't tell Coke until five months after accepting final financial offers from the two companies.

Auditor General William Holland's report also found defects in bid evaluations that, had they not occurred, might have given Coke enough points to qualify.

Evaluators' scores varied widely and there was insufficient documentation to explain why, Holland said.

Rep. Jack Franks, a Marengo Democrat who called for the audit last spring, said the state should repeat the entire process, seeking new bids.

"The whole thing should be re-evaluated to make sure the state is getting the best return," Franks said. "It doesn't appear it is."

Quinn's office did not immediately respond to a request for comment.

The audit affirmed Coca-Cola's concern that the process was flawed, said spokesman Kevin Morris.

"As a result of the deficiencies in the evaluation process, whether or not the state of Illinois received the best possible proposal remains unknown," Morris said in the statement, which did not indicate whether the company would further challenge the deal. Revenue denied a formal Coke protest in 2007.

The deal, finalized under former Gov. Rod Blagojevich, gives Pepsi the exclusive right to serve soft drinks in state facilities and at the University of Illinois and Northeastern Illinois University. The state will get 45 percent of Pepsi's profit, or an estimated $64 million, with $14.4 million guaranteed over 10 years.

Revenue spokeswoman Sue Hofer acknowledged the lack of documentation but said the process, while the department oversaw it, included reviewers from universities who use different evaluation standards. Ultimately, scores did not vary greatly and eight of nine evaluators chose Pepsi, she said.

"We have learned from the process and in the future will require additional documentation no matter who's involved," Hofer said. "But we don't think that it had any impact on the results of the contract bid. The bid went to the best proposal."

But Holland's report said evaluators' scores varied widely, there was no indication of meetings to discuss why, evaluators didn't ask one critical question of references but put scores down anyway and Revenue put zeros in empty scoring spaces where evaluators might have intended to put a score.

Holland's auditors also found an e-mail among state officials from May 2007 -- after each company had offered pricing proposals -- that noted Coca-Cola's lack of points to even qualify for submitting a pricing plan. The e-mail said there was discussion of starting over but suggested just getting Pepsi's final offer, rejecting Coca-Cola and explaining why.

The contract was awarded in July 2007 but Coca-Cola wasn't told of its shortfall until that October, when Revenue denied its protest.

Pepsi already has installed about two-thirds of its machines, Hofer said.