Md. seeks scandal-free lottery bid State will consider only price to choose next contract winner; 'Enormously depoliticized'; Last round of bidding led to investigations, lobbyist's conviction


Maryland's lucrative lottery contract is up for grabs again, and state officials say they are determined to keep it scandal-free this time around.

The last time the state awarded a contract for lottery computers, the lobbying was so intense and the results so controversial that two sets of prosecutors launched investigations into allegations of insider leaks and unfair manipulation of the process.

Those inquiries ultimately led to the conviction of Bruce Bereano, the state's highest-paid lobbyist, who had represented the winning bidder, though the charges were unrelated to the contract.

To avoid a repeat of such public embarrassment and to "depoliticize" the process, Gov. Parris N. Glendening and lottery officials have taken the unusual step of deciding to award the next contract based almost entirely on price.

When bids are opened Oct. 10, the winner could land a contract worth as much as $100 million over the next five years, with a state option to renew it for another five.

What Maryland is buying, in part, are replacements for than 4,000 lottery terminals at outlets across the state, as well as the computers and software that run them.

That equipment churned out more than $1 billion in business last year and generated a state record $385 million -- making lottery games the state's third largest source of revenue.

All previous lottery contracts in Maryland -- and in most other states -- have been awarded through a two-part process known as a Request for Proposals. In an RFP, price is a major consideration, but of equal importance is a subjective evaluation of the technical aspects of the proposal.

To keep subjectivity out of the equation this year, lottery Director Lloyd W. Jones has opted for a process more often used in construction projects known as an Invitation for Bids. In an IFB, the lowest bid wins as long as the bidder can demonstrate it is qualified.

"This isn't rocket science anymore," said Mr. Jones. "We're one of the oldest and most successful lotteries in the country. We know what we want. We've said, 'Give it to us and give it to us at the lowest price.' "

Mr. Jones and Mr. Glendening, who were in other jobs when the last lottery contract was awarded, are candid about their desire to avoid another scandal.

"We're going to make sure that this process is not only absolutely clean, but has every appearance of being handled properly and professionally," said Mr. Glendening, who last month fired off a memo to all Cabinet secretaries and senior staff prohibiting them from even discussing the contract with any lottery company or its lobbyists.

The half-inch-thick bid document also requires that all questions be sent to lottery officials in writing, promises all answers in writing, and says that except for a pre-bid conference this month, lottery officials will not verbally discuss the contract.

Mr. Glendening said the traditional RFP process was so open to pressure from lobbyists "that even if the right decision was made for the right purposes, it doesn't appear that way."

Reaction to the lottery's new approach from two of the firms considered likely to bid was mixed.

Stephen White, a spokesman for the incumbent lottery contractor, GTECH Corp. of West Greenwich, R.I., said Maryland "should be commended for wanting a process whose aim is to be objective and not controversial. But by taking this unusual route, they have potentially exposed themselves to much larger problems and greater risks.

"The cheapest proposal is not necessarily the most cost-effective, revenue-generating proposal," said Mr. White, whose company won the Maryland contract in 1991 by underbidding the previous incumbent, Control Data Corp., by a whopping $17 million.

GTECH's $64 million winning bid was augmented in late 1992 when the administration of Gov. William Donald Schaefer awarded the company a no-bid, $49 million add-on to bring Keno to Maryland. The firm is the worldwide industry leader in lottery FTC computers and has contracts with 27 of the 37 states that have lotteries.

Mr. Jones said he hoped the process will give all qualified companies an equal chance to bid. Scott A. Livingston, a lawyer representing Automated Wagering International of Atlanta, one of the expected bidders, said he thinks it will.

"It appears that politics will likely play a zero role in the selection of a contractor. And that is how it should be," said Mr. Livingston, whose partner, Alan M. Rifkin, represented Automated Wagering's predecessor company, Control Data, during the 1990-1991 lottery contract bids.

"It is enormously depoliticized since the last round," Mr. Livingston said.

Automated Wagering has lottery contracts with only seven states, including Delaware and Pennsylvania. But in March, it underbid and ousted GTECH in Arizona, where GTECH had held the lottery contract since 1984.

For Maryland, said one knowledgeable industry insider, the timing could not be better. "This is in the heart of the price war," he said. "It's an opportunity to get an incredible deal for the state."

When Maryland hired GTECH, it agreed to buy not only the company's computer software, but its monitors, terminals and other hardware as well -- just as it had done for Control Data in a prior contract.

The new contract calls for the winning bidder to supply completely new equipment, although this time it will be leased rather than purchased. Mr. Jones said if the lottery had decided to continue to use the GTECH equipment, GTECH would have been the only firm that could have bid on the new contract.

He said the lottery intends to keep the GTECH monitors and hopes to find a use for the rest of the old equipment. If not, he said he thinks it can be sold, perhaps to a foreign country. He said the equipment has performed well, but has been eclipsed by newer generations of computers and would be quickly outdated in a contract that will stretch into the next century.

Copyright © 2019, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad