AUGUSTA (AP) – A state appeal panel has begun hearing arguments over whether the governor’s administration had followed procedure in awarding the state’s wholesale liquor distribution contract to a Massachusetts company.

Rebecca Wyke, commissioner of the state’s Department of Administrative and Financial Services, testified about the contract review process during what is expected to be a three-day hearing before a state appeal panel.

“I think it’s fair to say we were committed to a competitive bid process,” Wyke said, responding to questions about whether her department’s review followed state law when awarding the bid.

Wyke said the committee worked to foster a bid process that would result in the best relationship for the state and its some 275 liquor sellers.

The Legislature agreed last year to privatize the state’s wholesale liquor business at Gov. John Baldacci’s request. That allowed the state to book an extra $125 million in the current budget cycle, helping to balance the books in the face of a $1.2 billion budget shortfall.

At the time, critics argued that the $125 million deal was not a good one because the state gets about $26 million a year from the wholesale operation, which adds up to about $260 million over the 10-year life of the lease.

MaineCentric of Auburn and Maine Liquors, a subsidiary of Pine State Trading Co. of Augusta, are appealing the state’s decision in January to award the liquor deal to Martignetti Cos. of Norwood, Mass.

Both companies bid for and lost the 10-year, $125 million contract.

The 37-page appeal alleges the state allowed Martignetti to alter its proposal in violation of state rules, that Martignetti failed to meet all of the state’s requirements, that Maine Liquors filed a stronger proposal and that Maine Liquors submitted more and better references than Martignetti.

While many central Maine business owners and legislators have questioned whether the contract should have gone to an out-of-state company instead of a Maine business, the appeals have focused on possible flaws review process used by a Department of Administrative and Financial Services committee to award the bid.

Officials are expected to decide this week whether to uphold the process.

Attorneys for MaineCentric, Maine Liquors, Martignetti, the state and two intervening parties – a distilleries trade group and two distilleries that sell products in Maine – questioned witnesses in Monday.

Most asked about whether the panel that reviewed the bids should have set specific rules for the process and whether the Legislature was adequately represented in the review process.

Kay Rand, a spokeswoman for Martignetti, said she was glad Martignetti had a chance to discuss some of the specifics of its proposal.

“I hope that they’re hearing that the review panel did a thorough job in reviewing the proposals,” Rand said.

But Pine State General Manager Nick Alberding said he wants the appeal panel to see that there was a lack of rule making and that the scoring was inconsistent.

“I hope that they hear that potentially the award committee skewed our point-sharing,” Alberding said.

AP-ES-02-24-04 0216EST