CON­TRACT DIS­PUTE:

State lottery agency gave 8-year, $262M con­tract to Las Ve­gas-based com­pany

Baltimore Sun - - FRONT PAGE - By Michael Dresser mdresser@balt­sun.com twit­ter.com/michaelt­dresser

Two los­ing con­tenders for a con­tract worth as much as $263 mil­lion for the com­puter net­work that runs the Mary­land lottery are protesting a de­ci­sion to award the busi­ness to a ri­val, charg­ing that a state agency chose the high­est bid­der after a tainted process.

Two los­ing con­tenders for a con­tract worth as much as $263 mil­lion for the com­puter net­work that runs the Mary­land lottery are protesting a de­ci­sion to award the busi­ness to a ri­val, charg­ing that a state agency chose the high­est bid­der after a tainted process.

Lan­ham-based Gam­ing In­no­va­tions LLC and Lon­don-based IGT Global So­lu­tions filed the protests with the Mary­land State Lottery & Gam­ing Con­trol Agency after the agency awarded the eight-year con­tract to Sci­en­tific Games In­ter­na­tional of Las Ve­gas.

Both los­ing bid­ders charge that the agency made “ar­bi­trary and capri­cious” choices in eval­u­at­ing the bids in a way that fa­vored the in­cum­bent ven­dor.

Con­tracts be­tween the lottery agency and its prime com­puter con­trac­tors are lu­cra­tive and have faced ques­tions of im­proper ac­tiv­ity in the past, in­clud­ing an award in the 1990s that prompted a fed­eral in­ves­ti­ga­tion.

This week, los­ing bid­der Gam­ing In­no­va­tions, a joint ven­ture with African-Amer­i­can top man­age­ment, said the lottery agency showed “un­de­ni­able bias” against award­ing the con­tract to a mi­nor­ity busi­ness en­ter­prise. It said the agency re­fused to give the joint ven­ture credit for the ex­pe­ri­ence of its two mem­bers, which to­gether run the D.C. Lottery.

And IGT has ac­cused the agency of im­prop­erly try­ing to run up the con­tract’s long-term value in an at­tempt to min­i­mize fu­ture over­sight by the state Board of Pub­lic Works. The com­pany said the agency did so by re­quir­ing bid­ders to in­clude in their pro­pos­als the cost of pro­vid­ing ser­vices that aren’t cur­rently le­gal in Mary­land, in­clud­ing in­ter­net sales of lottery tick­ets.

A spokes­woman for the lottery agency de­fended the awards process, say­ing it “was con­ducted with the high­est stan­dards of in­de­pen­dence, in­tegrity and ad­her­ence to the law.”

Doug Mayer, a spokesman for Gov. Larry Ho­gan, de­clined to com­ment. He said the gover­nor’s of­fice will take a look at the con­tract if it comes be­fore the pub­lic works board.

The lottery agency de­cided last month to award the con­tract to Sci­en­tific Games, which en­tered a “not to ex­ceed” bid of $263 mil­lion. That is roughly $50 mil­lion more than Gam­ing In­no­va­tions bid and $25 mil­lion more than IGT.

A not-to-ex­ceed con­tract sets a ceil­ing for spend­ing un­der the pact. The to­tal amount spent could prove to be less.

The agency ranked Sci­en­tific Games high­est in its tech­ni­cal score, which re­flects its judg­ment of a bid­der’s abil­ity to do the job. IGT ranked sec­ond and Gam­ing In­no­va­tions third.

Bid protests to the agency that awards a con­tract are al­most al­ways de­nied, but they are a nec­es­sary first step be­fore a chal­lenger can bring a case be­fore the Mary­land State Board of Con­tract Ap­peals, an in­de­pen­dent agency with the author­ity to over­turn pro­cure­ment de­ci­sions. The protests could de­lay the planned June 2017 tran­si­tion to a new con­tract for months if they go to ap­peal, but they are not ex­pected to af­fect lottery op­er­a­tions.

The win­ning ven­dor will sup­ply the machines re­tail­ers use to sell lottery tick­ets and the net­works that con­nects sales out­lets to the agency.

IGT al­leges that lottery of­fi­cials told them the bid re­quest in­cluded in­ter­net lottery sales be­cause the agency wanted to avoid fur­ther “bur­den­some” re­view by the pub­lic works board if law­mak­ers were to ap­prove an ex­pan­sion of gam­bling to in­clude lottery ticket sales over the in­ter­net.

Ac­cord­ing to the com­pany, agency of­fi­cials said seek­ing board ap­proval of a con­tract mod­i­fi­ca­tion to in­clude such ca­pac­ity could bring lottery op­er­a­tions to a “screech­ing halt.”

The no­tion of al­low­ing gam­bling on the in­ter­net via lottery ticket sales has won few friends in the Gen­eral Assem­bly.

“I’d say we’re strongly op­posed,” said Sen. Ed­wardJ. Kase­meyer, whochairs the Se­nate Bud­get & Tax­a­tion Com­mit­tee. TheHoward County Demo­crat ques­tioned whether the agency should be tak­ing steps in that di­rec­tion with­out law­mak­ers’ ap­proval.

Ellen Valentino, a lob­by­ist who rep­re­sents ser­vice sta­tion and con­ve­nience store own­ers, said her clients are con­cerned about a pos­si­ble “can­ni­bal­iza­tion” of their lottery sales at a time when the state’s casi­nos are al­ready tak­ing a toll.

Lottery di­rec­tor Gor­don Me­denica played down the agency’s in­ter­est in in­ter­net lottery sales, say­ing that based on re­sults from other state the rev­enue po­ten­tial is “mod­est.”

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