ANNAPOLIS, Md. — Maryland’s lottery director is defending the agency’s recommendation to choose the most expensive of three contract proposals for a new lottery central system, writing in an internal email to lottery staff last week that the “technical” criteria of the $262 million contract over eight years “is vastly more important” than the cost differences when compared to overall lottery sales.
In an internal email obtained by The Associated Press, Gordon Medenica responded to news reports last week about two companies that are protesting the lottery’s decision to recommend Scientific Games International Inc. of Las Vegas, for the contract. The lottery declined to comment in detail last week when asked about London-based IGT Global Solutions Corp.’s protest, which was first reported by the AP. The lottery said it could not comment on an open procurement process. The other bidder, Gaming Innovations, also has filed a protest with the lottery.
“Of course, ‘technical’ criteria is vastly more important than ‘financial,'” Medenica wrote in the Sept. 22 email. “The price difference between the high and the low bids was about $5 million per year, or 0.26 percent of our annual sales. The difference between SGI and IGT was half that, about $2.5 million per year, or 0.13 percent of our sales.”
Medenica noted that SGI received the top ranking by a lottery committee on “technical” criteria. That includes the data center, hardware, software, communications, field service, operations, marketing, game support and more, he wrote.
In its protest letter, IGT contended that the lottery inflated the contract to include kinds of internet gambling that aren’t currently allowed under the law. The company says that “materially flawed” the evaluation of the three competing bids.
IGT wrote that it wasn’t told why the internet gambling components were included until a debriefing with lottery officials — after the lottery made its recommendation last month to select SGI. In its protest, IGT wrote that lottery officials explained they included the internet gambling components “simply to avoid future review and approvals” by the Maryland Board of Public Works, which still would have to approve the contract.
In its protest letter, the company wrote that lottery officials said the board’s process “is so complicated and burdensome” they made the contract “as extensive as possible from the onset,” so they would not risk going over the not-to-exceed price, which would require the lottery to return to the board for later review and approval.
Lottery officials told IGT that having to get such an approval could bring lottery operations to “a screeching halt,” the company’s protest letter said.
The board, which is comprised of Gov. Larry Hogan, Treasurer Nancy Kopp and Comptroller Peter Franchot, must approve all state contracts over $200,000. Hogan, a Republican, and Franchot, a Democrat, have criticized the state’s procurement process. They have focused extra scrutiny on contracts that come before them at public meetings.
Medenica wrote in his email to staff last week that it the lottery is not launching an internet lottery sales program.
“We have made it clear, many times, that we will not even consider launching an iLottery product without the agreement and cooperation of our retailers, as well as enabling legislation,” Medenica wrote in a follow-up email to the AP.
He also noted that the lottery submitted a “not-to-exceed” price in order to fully disclose all the possible expenditures under the contract, because the lottery sought numerous options for services, equipment, products, marketing and more.
“The claims by losing bidders that we have ‘inflated’ the contract costs to avoid BPW scrutiny is precisely the opposite of what we are doing, which is to fully disclose all potential spending under the contract for BPW approval,” Medenica wrote.