Arkansas officials signed a contract Monday with lottery consultant Camelot Global Services, which will develop a business plan for the state lottery and help implement the plan, a spokesman for the state Department of Finance and Administration said.
Lottery Director Bishop Woosley and finance department Director Larry Walther signed the contract, said spokesman Jake Bleed. Camelot has offices in Philadelphia and London.
"We are awaiting confirmation on their end that the contract has been signed. We are operating on the assumption that the effective date will be... Tuesday, Dec. 1," Bleed said.
Camelot Chief Executive Officer Nigel Railton received the contract Monday night in the United Kingdom and will sign the contract "the first thing in the a.m. [United Kingdom] time," said Camelot spokesman Laura Pearson.
Camelot will start work immediately and the business plan will be completed within 14 weeks of the effective date of the contract, Pearson said.
The Legislative Council on Oct. 16 authorized Gov. Asa Hutchinson's administration to contract with Camelot. Earlier this year, Hutchinson and the Legislature enacted legislation to put the lottery under the control of the state Department of Finance and Administration and eliminate the nine-member Arkansas Lottery Commission that oversaw its operations.
The lottery has helped fund more than 30,000 Arkansas Academic Challenge Scholarships in each of the past six fiscal years. However, the lottery's revenue and net proceeds for college scholarships have declined in each of the past three fiscal years, after peaking in fiscal 2012. The Legislature has cut the size of the scholarships for future recipients three times during the past several years, partly because the lottery's net proceeds fell short of projections.
But the lottery's revenue in September and October were the best for those months since 2011, leading some lawmakers and others to question whether the lottery is rebounding just as the Hutchinson administration contracts with a consultant for help.
Hutchinson spokesman J.R. Davis said Monday that "Camelot has a strong track record of strengthening lottery programs all over the world, and they are confident they can do the same for our state.
"The development of a business plan and the implementation of such a plan is an important and necessary first step towards a healthier lottery program in Arkansas," Davis said in a written statement.
"Furthermore, Camelot's contract with the state stipulates that if they are to make worthwhile profits from this venture, substantial growth must be recognized in the current program. In other words, if they don't succeed, they don't get paid," Davis added.
Under the contract, the consulting firm would receive base compensation and expense reimbursements up to $750,000 a year, but it also would be eligible for incentive compensation of at least 12.5 percent of the lottery's adjusted operating income above $72.28 million in a fiscal year.
Camelot wouldn't receive incentive pay if the business plan is rejected by lottery officials, according to an amendment to the proposed contract. "If the plan is rejected, we'll be obligated to pay restitution for any services provided by Camelot, with a maximum amount of $200,000," Woosley has said.
The contract also calls for Camelot to help the lottery renegotiate contracts with vendors; the savings would be used to help pay for Camelot's services. The contract will run through June 30, 2020, with options for two one-year extensions.
Camelot would get a percentage of any "adjusted operating income" of the lottery above $72.28 million in a fiscal year. The company would keep 12.5 percent of that income between $72.28 million and $80 million; 13.75 percent of that income between $80 million and $90 million; and 15 percent of any adjusted operating income above $90 million.
The contract defines "adjusted operating income" as operating income before charging any expenses relating to services provided by the state Department of Higher Education, the Arkansas Legislative Audit, legal and professional services, and depreciation. Adjusted operating income measures the performance of the lottery without consideration of expenses that are deemed beyond the lottery's control, according to Bleed.
State officials "have not received any protests" from the two other companies that sought the consulting contract. They are Delehanty Consulting LLC based in Verona, Wis., and QLot Consulting, which has offices in Topeka, Kan., and Sweden.
In September 2014, the Legislative Council voted to hire Camelot Global Services, without seeking bids, to review the lottery at the request of Sen. Jimmy Hickey, R-Texarkana.
The consultant, which received $169,500 for its services, told lawmakers last December that "the overriding strategy must be to move the lottery away from a gambling organization to a consumer goods sales and marketing organization." The consultant also said the lottery has too many scratch-off and draw games, lags behind its peers in per-capita sales and profits, pays more than its peers do to vendors and isn't perceived as trusted.
The lottery started selling tickets on Sept. 28, 2009. After raising $82.7 million for scholarships in nine months of fiscal 2010, the lottery raised $94.2 million during its first full fiscal year, 2011. Proceeds for scholarships climbed to $97.5 million in fiscal 2012, but dropped to $90.3 million in 2013 , to $81.4 million in 2014 and to $72.4 million in 2015.
Woosley projected the lottery's net proceeds at $79.5 million in fiscal 2016, which started July 1.