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Lottery is more than a game for contractors

State's deal means millions to ticketmakers

www.txlottery.org

Lottery is more than a game for contractors

State's deal means millions to ticketmakers

By Kelley Shannon Special to the Standard-Times

San Angelo Standard Times

Posted November 9, 2011 at 9:16 p.m.

AUSTIN — Lottery scratch-off tickets offer Texans immediate gratification — a chance for the player to become a winner right away.

Yet landing the state's scratch-off contract is far from instant or easy for the companies vying for the multimillion-dollar deal. That high-stakes competition is about to begin as the Texas lottery prepares to issue a request for proposals for scratch-off ticket production.

Lottery officials won't say much, but they've confirmed that the request could be made public any day now.

Once the winner is chosen, lottery players will see the results in dozens of scratch-off games showing up at their local convenience stores, like this year's Break the Bank, Super 8's and Red Hot Cherries.

"Annually, Texas introduces more instant games than any other North American lottery jurisdiction," the Texas Lottery Commission said in a report in August, noting that 90 scratch-off games were introduced the previous year.

Potential bidders include Scientific Games International, the primary vendor for the current instant ticket agreement; GTECH Corp., the lottery's overall operator and a secondary instant ticket vendor; and Pollard Banknote, another secondary scratch-off vendor.

The existing Texas scratch-off contract is valued at $116.8 million, said John Barton, spokesman for the Legislative Budget Board. That's about $16 million per year. The main agreement was signed in 2004.

Instant tickets are the most popular type in the Texas lottery, accounting for nearly 75 percent of sales.

Overall lottery sales were $3.8 billion for fiscal year 2011, which ended in August. After prize money, retailer commissions and other administrative expenses, 27 percent of that money, or about $1 billion last year, goes into a fund for public education.

The companies likely to contend for the new instant ticket contract are well known in the lottery world, and two of them employ influential lobbyists to help smooth their way in Texas.

GTECH is spending between $400,000 and $600,000 this year on four lobbyists, according to filings with the Texas Ethics Commission. Cliff Johnson, a friend and former aide to Gov. Rick Perry, is on the GTECH lobby team, along with Reggie Bashur, another lobbyist close to Perry.

Scientific Games is spending between $100,000 and $200,000 on four lobbyists. Among them are Luis Saenz, the campaign manager for Perry during his 2006 run for governor, and former Texas House Speaker Gib Lewis.

Perry's office does not choose the winning company, but his office is represented along with other state agencies on a panel that reviews large state contracts and bids.

When it comes to selecting private-sector companies for lottery business, the waters can get rough. Last year's competition for the lottery operations contract grew contentious with leading lottery firms arguing over alleged conflicts of interest and preferential treatment.

Lottery officials found no impropriety, and incumbent GTECH Corp. was once again chosen as the operator. It won a nine-year contract valued at $750 million, or $83 million per year, that lottery executive director Gary Grief said represented a savings over the previous contract.

"Maintaining a modern state lottery that is secure, reliable and fun for our players is the top priority for the Texas Lottery," Grief said in announcing the new contract in December 2010.

GTECH, Scientific Games and Pollard Banknote are saying little publicly about the upcoming instant ticket competition. GTECH spokesman Bob Vincent confirmed that his company has expanded its instant ticket business and is interested in the Texas contract. The other two likely bidders did not want to comment.

The Texas Comptroller's Office and five other agencies that make up the state's Contract Advisory Team review large contract requests like this one "to help ensure the state would get what it asks for," said comptroller spokesman R.J. DeSilva.

That team reviewed the lottery commission's request for proposals and made recommendations to the commission in late October, he said. So the next step is for the lottery commission to proceed.