Michigan government officials are preparing to award a first-of-its-kind contract to sell advertising on lottery tickets, after denying a protest by an agency that includes a former state senator.
The State Administrative Board on Tuesday is expected to act on the $100,000 Bureau of State Lottery contract, recommended by a board committee to go to Troy-based Simons Michelson Zieve Inc.
But the Rebecca Kelly Agency, a Grosse Pointe Park venture that includes former Sen. John Kelly, D-Detroit, protested the state's original selection of Simons Michelson Zieve, the lottery's current ad agency.
The Kelly agency said its bid met specifications, would have provided the highest substantiated revenue to the state and included a team of experienced individuals. The firm, formed for the contract by Kelly's daughter Rebecca, includes advertising sales executive James McNulty, CEO of the Troy-based McNulty Media Group, and former Detroit News columnist Pete Waldmeir.
Sen. Kelly said the lottery advertising idea had been a longtime interest and he discussed it with former lottery commissioners Bill Martin and Don Gilmer and current Commissioner Gary Peters. "I just saw it as a marketing bonanza for the state if it was done the right way," Kelly said.
The lottery wants a vendor to create and oversee a program to place ads on the back of terminal-based online games, play slips, and $10 and $20 instant-game tickets. Ad time will also be sold on Club Keno video monitors in bars and restaurants.
Other contract bidders were Stratus Marketing Group of Holly and Southfield-based Yaffe & Co.
Kelly said benefits of his team's bid included an online auction site to sell lottery advertising and outreach beyond national advertisers, to Michigan companies that might advertise products.
But a state evaluation committee did not rank the proposal highly, citing factors that included incompatibility of the auction site and small advertisers with lottery plans. The lottery expects national advertisers, like soft-drink and snack-food manufacturers whose products are in stores where tickets are sold, will be most likely to find the new advertising medium attractive.
The committee also said the Kelly agency's revenue analysis was in-depth, but its $45 million revenue estimate for the state "was exponentially higher than those of other bidders and even that of the lottery's at the outset of this endeavor."
In a letter denying the Kelly agency's protest, Department of Management and Budget Acquisition Services Director Sean Carlson said the agency's proposal "presented an innovative approach to marketing advertising for the lottery" and individuals in the proposal "have demonstrated expertise" in some areas relevant to the proposal and bid requirements.
"However, the proposal does not demonstrate their experience in working together in this team, for this company, or in implementing the particular approach proposed," Carlson said.
Kelly said last Thursday the agency is "in a very constructive dialogue" with Acquisition Services and he hopes the board will award a joint contract that would include his agency and maximize revenue to the state.
In originally selecting Simons Michelson Zieve, the state evaluation committee said the agency demonstrated a comprehensive plan, qualifications and staffing, and presents "the best value" to the state. The committee also said the agency's work handling lottery advertising and business tenure were assets.