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· September 26, 2011

Controlling Board Should Stop Kasich’s No-Bid Lottery Contract

Later today, the Controlling Board will consider an administration request to grant a $9 million, no-bid contract to Greek Lottery vendor Intralot, in a deal to install systems necessary to support the introduction of video lottery terminals (VLTs) at the state’s seven racetracks. Controlling Board is a legislative body charged with approving unbid state contracts in an effort to avoid wasteful spending and sweetheart deals. Typically, exemptions from the mandatory competitive bidding process are allowed when only one vendor exists to provide a particular product or service. But in the case of Lottery backend systems, at least three firms are known and would be expected to bid for the work. Explaining its plan to award the contract with Intralot without reviewing other options, the administration stated:
Issuing an RFP could extend the process up to four additional months. For each month that a single track is not operating, the State could conservatively see an opportunity loss of nearly $2 million in revenue, or $8 million over a four-month time frame. Accepting this offered option from Intralot creates an opportunity to implement and capture revenue that could be lost due to a more lengthy bidding process.
The administration seems to be suggesting that competitive bidding is an optional activity that should be ignored when it delays the state’s efforts to “capture revenue.” By this logic, will we now see a request to waive competitive selection for every contract that supports revenue collection? Will liquor distributors – essential to the sale of liquor and thus collection of liquor taxes – now receive unbid contracts? What about firms that print traditional lottery tickets and vendors that help the tax department print, mail and process tax returns? It’s a dangerous precedent and not one that’s been previously endorsed by the Controlling Board. In 2009, when the Strickland administration argued for a similar waiver, Controlling Board members pushed back hard:
State Rep. Jay Hottinger, R-Newark, objected to the deal, saying that a competitive process is the only way to assure “we’re getting the best possible value for the state.” (Dayton Daily News, September 15, 2009)
In that case, speed was essential. A last minute deal included VLT revenue to balance the 2010-2011 budget, and getting slots revenue by May 2010 was needed to prevent the budget from unraveling. (Which ultimately happened, thanks to a lawsuit by LetOhioVote). Unlike in 2009, when the state budget depended on the timely launch of VLTs, revenue was never assumed when this state budget was put together. The Kasich administration only announced it was pursuing VLTs at racetracks two weeks before the budget’s passage, and no revenue from VLTs was assumed in the final document. So why the rush? And does such a rush serve taxpayers? How do we know that Intralot’s offer of $9 million for up to 9,000 terminals at 7 racetracks couldn’t be outdone by another vendor? And what assurance do we have that Intralot’s hiring of two of the Governor’s dearest friends as lobbyists did not influence their selection? We see no reason why it is not in the best interest of the taxpayers to spend the four months to conduct a thoroughly objective and competitive process and ensure the state is getting the best deal possible. We hope that Rep. Hottinger holds to his earlier position and his fellow Controlling Board members agree.

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