Competition hot for Texas lottery contract

June 24, 2010 1:29:02 PM PDT
If you buy scratch-off lottery tickets or enter the statewide jackpot drawings or play any other games in the Texas lottery, you help put billions of dollars into the state's bank account.

And big businesses want a piece of that action.

Companies that run lotteries around the world are expected to ante up by next week, proposing how they would oversee the Texas lottery if they land its lucrative operations contract. The Texas contract, currently held by GTECH Corp., rarely comes up for bid, so the stakes are high for the competing businesses and taxpayers.

It's a coveted contract, one that could pay the winning bidder as much as a hundred million dollars per year.

Three firms -- Scientific Games Corp., Intralot Inc. and GTECH -- are likely to submit bids, according to comments and actions by the companies since the beginning of the year, when the Texas Lottery Commission issued a request for proposals.

"The Texas Lottery is a highly valued customer of GTECH's and we are preparing to bid," said GTECH spokesman Bob Vincent, who wouldn't discuss the bidding process any further. Other likely bidders wouldn't offer any comment this week.

Since the request for proposals, the bidding process has been caught in conflict because a consulting company the commission hired to help write the bid request had been doing business with GTECH. That led to questions about whether GTECH has an unfair advantage in the selection system.

The consultant, Gartner Inc., had its contract revoked by the commission, and the deadline for bids was twice extended to remove any doubts about unfairness in the bidding, lottery officials said. The new deadline for bids is Tuesday.

A panel of lottery commission officials and a representative from the Texas comptroller's office will evaluate the bids, with a decision expected in September. The lottery commission hired a new consultant company, Battelle, to take the place of Gartner and help check the bids to see if they meet all the commission's specifications, said lottery spokesman Bobby Heith.

The bidders' financial proposals won't be revealed by state officials even after Tuesday's deadline passes. Only when the winning bid is selected will provisions of the new contract be public, Heith said.

GTECH, a subsidiary of the Italian firm Lottomatica SpA, holds the current 10-year lottery operator contract. Texas' lottery games generate some $3.7 billion in sales per year, and the company gets to keep a percentage. It was paid $101 million by the state in the last fiscal year.

Intralot, a Greek firm and an intense rival of GTECH, has been the competitor most outspoken about a potential conflict of interest between GTECH and Gartner. In the past, an Intralot consultant called for a third-party investigation of GTECH's dealings with Gartner and the company wrote a letter to the lottery commission this spring voicing concerns about a "potential patent unfairness" of the bid system.

GTECH and Gartner representatives have said the two companies had no improper communications about the Texas lottery. Lottery Commission officials said their internal review found no evidence of impropriety.

State Rep. Jim Dunnam, a Waco Democrat, wants state lawmakers to ask more questions about that business arrangement and any plans for generating additional lottery sales in light of the estimated $18 billion state budget shortfall legislators will face in 2011.

In a letter to several Texas House committee chairmen last week, Dunnam also questioned why the lottery commission makes a point of banning bidders from offering other gambling options such as slot machines, when those aren't even legal in Texas. And, he said, he would like to know if lottery advertising and marketing are targeting lower-income Texans.

"This is too big of an issue to not have some heavy duty discussions," Dunnam said.

(Copyright 2010 by The Associated Press. All Rights Reserved.)

APTV-06-24-10 1159CDT

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