The state of New Jersey yesterday signed a five-year extension with longtime lottery manager GTECH Corp., despite a competitor's offer to do the job for $32 million less.
State records show that GTECH's bid, which totaled $107 million over five years, was accepted because of concerns over the experience and equipment offered by rival Scientific Games, which said it could do the job for $75 million.
"In general, the committee bases its recommendation on the overall technical superiority of GTECH's bid proposal," a six-person evaluation committee reported in late October.
In particular, the committee's analysis showed, the state evaluation team was concerned the system of terminals and data links proposed by Scientific Games might be susceptible to breakdowns that would cut into the $2 billion of revenues the state counts on from the lottery each year.
"Considering all the risks outlined above, the committee firmly believes that the difference in cost between the two proposals is far outweighed by GTECH's clear technical superiority," the committee's report concluded.
Both GTECH, which is based in Rhode Island, and Scientific Games, a Georgia firm, were notified of the state's decision yesterday.
The decision comes after six months of high-stakes lobbying and salesmanship for the right to outfit and manage the nation's eighth largest state lottery, but it is not likely to be the end to the process. Scientific Games has 10 days to file a protest, and GTECH must clear the state's review for compliance with limits on political contributions by state contractors.
A spokesman for Scientific Games declined comment yesterday, and attempts to reach a GTECH spokesman were not successful.
When bids were first opened in July, Scientific Games proposed collecting $75 million, while GTECH bid $142.5 million.
In October, after judging that GTECH's proposal was technically superior to the plan submitted by Scientific Games, the state asked each bidder to submit a new "best and final offer."
In response, Scientific Games declined to amend its bid, while GTECH cut its bid to $107 million -- a reduction of more than $35 million.
GTECH has run the New Jersey Lottery's ticket sales and instant games for 22 years. Its current 10-year contract, which cost the state $38 million per year, is scheduled to expire in June. The new deal approves GTECH for five years at about $21 million a year, with optional one-year extensions that would stretch the new deal another five years.
"It's certainly a significant state savings," said Tom Vincz, a spokesman for the Treasury Department. "The procurement process was done in a way that achieved the objective of a high-quality product."
Both competitors fielded potent teams of lobbyists to help in the bidding process.
Scientific Games used Princeton Public Affairs Group, whose principal, Dale Florio, is Somerset County Republican chairman, and Public Strategies/Impact, headed by Harold Hodes, a key advisor to acting Gov. Richard Codey.
GTECH countered with Hazel Gluck, a longtime firm representative who is a former state Cabinet officer and advisor to former Gov. Christie Whitman, and the MWW Group, a lobbying firm whose public relations arm handles promotions for the Lottery.
Across the country and around the world, GTECH and Scientific Games are embroiled in controversy surrounding their lobbying for public work.
Ten years ago, after GTECH landed its latest New Jersey extension, one of the firm's national sales officers was convicted of accepting $170,000 in kickbacks from a politically connected New Jersey company hired to help persuade state officials to set up Keno games in the state.
In their latest annual report filed with the Securities and Exchange Commission, GTECH notes: "There have been and may continue to be investigations of various types, including grand jury investigations, conducted by governmental authorities into possible improprieties and wrongdoing in connection with efforts to obtain and/or the awarding of lottery contracts and related matters."
Scientific Games, meanwhile, is the subject of a criminal investigation for its use of lobbyists in North Carolina, where the firm allegedly helped draft key portions of the legislation that authorized a state lottery there earlier this year.