ANNAPOLIS, Md. (AP) - The Maryland Board of Public Works on Wednesday approved a contract that could run as high as $341 million over a dozen years for the lottery’s central monitoring and control system.
Gov. Larry Hogan and Treasurer Nancy Kopp voted for the contract for Las Vegas-based Scientific Games International. Comptroller Peter Franchot voted against it, citing concerns about awarding such a large contract to the highest bidder.
The huge state contract created controversy on several points. For one thing, the lottery recommended it over two other companies, whose proposals were millions of dollars less than SGI’s. Both companies, Gaming Innovations and IGT Global Solutions Corp., protested the lottery’s recommendation, but both later dropped their protests.
Critics also said the company had insufficient minority hiring goals.
Gordon Medenica, the lottery director, told the board Wednesday that the winning proposal provided the best value for the state, with a $113 million revenue advantage.
The lottery came to that conclusion after reviewing a variety of factors, such as SGI’s ability to continue an agreement with an Australian company that will keep an existing virtual horse racing game operating in Maryland. The lottery does about $170 million in sales on that game alone, Medenica told the board. Medenica also cited SGI’s higher staffing levels devoted to retail recruitment as a factor.
“So, it was clearly advantageous on a financial analysis to go with SGI,” Medenica told the board.
Medenica also said SGI, which holds the current contract for the information technology system that monitors wagers, initially had a goal of 15 percent minority participation, and the company has increased that to 18 percent. Medenica said the lottery is confident the company will reach the 20 percent level.
Tessa Hill-Aston, president of the Baltimore City Branch of the NAACP, told the board she opposed awarding the contract to a company that did not make a greater commitment to giving back to minority communities, which account for a large amount of lottery sales.
Michael Johansen, a representative for SGI, noted that about $570 million generated by the lottery goes to good-cause beneficiaries, including public education and other state services. About $20 million a year goes to Baltimore city schools, he said. He also noted that the average retailer who sells lottery tickets gets about $40,000 a year.
Questions about minority participation goals have been raised by members of the Legislative Black Caucus of Maryland. The issue played out during a debate over Medenica’s Senate confirmation vote in February, when he was confirmed on a 27-17 vote, more than 21 months after Hogan appointed him to the post. Caucus members have noted that Gaming Innovations, a joint venture with African-American top management who together run the lottery in the District of Columbia, could have done the work for about $50 million less.
“This is an agency that exists … to generate revenue, and right out of the box, they’re giving away $51 million, which we submit will not be recovered,” Ralph Tyler, a representative of Gaming Innovations, told the board Wednesday.
Medenica said the lottery believes the actual price difference was about $20 million, or about $2 million a year, and he noted the $113 million revenue advantage in SGI’s proposal more than made up for that.
Critics also noted part of SGI’s proposal that could facilitate the sale of lottery tickets on the internet, which is not legal now in Maryland, but Medenica said the lottery has no plans to move forward with internet sales.
The contract is for eight base years, for as much as $217 million. It includes a three-year renewal option for $93.4 million and a one-year transition option for about $31 million.
In fiscal 2016, lottery ticket sales generated a record $1.9 billion in sales in Maryland.
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