Losing Bidder: Md. Lottery Inflated $262 Million Contract

ANNAPOLIS, Md. (AP) — Maryland lottery officials inflated a $262 million, eight-year information technology contract for monitoring wagers to include kinds of internet gambling that aren’t allowed under state law, according to one of the losing bidders.

As a result, the lottery chose the most expensive bidder, London-based IGT Global Solutions Corp. says, reducing by millions of dollars the money it provides for public education, health and safety.

By inflating the contract for the lottery’s central monitoring and control system on ticket sales, lottery officials created a “materially flawed evaluation” of the three competing bids, IGT says in an official protest letter to the state, a copy of which was obtained by The Associated Press.

IGT says it wasn’t told why unlawful internet gambling was included until after the lottery announced its decision to renew its contract with Scientific Games International Inc. of Las Vegas.

IGT said that lottery officials later explained that they included internet gambling “simply to avoid future review and approvals by the BPW” if and when lawmakers approve the expansion. That’s the state Board of Public Works, comprised of Republican Gov. Larry Hogan and two Democrats, Comptroller Peter Franchot and Treasurer Nancy Kopp, which must approve all contracts over $200,000 by state law.

Lottery officials told IGT that having to get such an approval could bring lottery operations “a screeching halt,” the company’s protest letter says.

Lottery spokeswoman Carole Gentry said the agency is barred by state law from commenting publicly until thecontract is officially awarded.

Doug Mayer, a spokesman for the governor, noted that the contract still needs board approval to move forward.

“Governor Hogan has a long and well-documented record of fighting for responsible budgeting and restraint in state spending — especially in regards to procurement issues,” Mayer said. “His position will never change.”

The lottery’s procurement officer, Robert Howells, informed IGT in an Aug. 17 letter that Scientific Games had been selected for recommendation for the upcoming contract.

“The technical merit of the first-ranked technical offeror was considered to outweigh its higher price, and was therefore determined to be the most advantageous offer to the state,” Howells wrote, without elaborating.

IGT points out that Scientific Games’ bid was about $25 million higher than its own, despite the fact that incumbent contractors are typically able to propose lower prices than competitors, because they already have staff and infrastructure in place. Angela Wiczek, a spokeswoman for IGT, said that without the internet component, its own bid would have been even lower, about $30 million under the winner.

Scientific Games’ senior vice president of Global Lottery Systems, Patrick McHugh, said it not only earned the highest technical score in Maryland’s procurement process; it also got the highest technical marks in eight of the last 10 U.S. lottery system procurements in which the company participated.

“Our high score reflects Scientific Games’ investment in new products and services designed to continue thelottery’s sales and profitability momentum for the beneficiaries of the state of Maryland,” McHugh said in a statement.

McHugh noted that fiscal year 2016 ticket sales generated an all-time record of $1.9 billion in sales in Maryland and $570 million for its good cause beneficiaries, including public education and other state services.

Copyright 2016 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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