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Mich. OKs Cigarette Tax Deal Despite Complaints

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LANSING (AP) - A state board on Tuesday approved a $9.6 million cigarette tax collection contract with Xerox two weeks after delaying the decision so objections raised by two other finalists could be investigated by Gov. Rick Snyder’s office.

The State Administrative Board voted 7-0 to OK the Michigan Treasury Department’s recommendation for a five-year deal with Xerox State & Local Solutions.

The Associated Press reported last month that Xerox was in line for the contract despite allegations of bias in the selection process and an offer from a competitor to do the work for at least $1.7 million less. Xerox will provide 450 million counterfeit-resistant stamps a year that are applied to cigarette packs to show taxes have been paid.

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 15-month process of choosing a company to provide the new technology led to official protests being lodged.

One of Xerox’s competitors, De La Rue North America, said it could provide the stamps for at least $1.7 million, or 18 percent, less. It and another finalist, SICPA Product Security, said state evaluators arbitrarily raised their bids by $626,000, without consulting them, after Xerox said it could continue providing an ordering system at no additional cost.

State officials have stood by the Xerox recommendation, saying the contract provided the best value. After the administrative board delayed action, De La Rue officials met last week with Snyder aides and other state officials to discuss the contract.

Jeff Brownlee, chief procurement officer in the Michigan Department of Technology, Management & Budget, then wrote a letter to De La Rue on Friday saying the bidding process complied with laws and procedures and “best value is not always the lowest priced bid.”

De La Rue’s representatives in Lansing had no immediate comment late Tuesday on the contract decision.

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.

© Copyright 2013 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.

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