Lottery bidding now politicized, contractor says

November 30, 1990|By C. Fraser Smith | C. Fraser Smith,Annapolis Bureau of The Sun

ANNAPOLIS -- The political and legal pressure exerted by competitors for Maryland's new $75 million lottery computer system escalated sharply yesterday, as one of the bidders asserted that Gov. William Donald Schaefer has politicized the process.

In a protest filed with the State Lottery Agency, the Control Data Corp. claims that changes ordered by the governor "removed the procedural safeguards and established a process that may invite unwarranted political intervention."

On Nov. 9, well after the official bid specifications were issued by the Lottery Agency, Governor Schaefer ordered the formation of two committees to review the bids and to rate them on financial and technical grounds.

In addition, the governor established Charles L. Benton Jr., his budget secretary, as the overseer of the process and the Board of Public Works as the final authority.

At the time, Mr. Schaefer said the changes were designed to insulate him and state legislators from suggestions that they were steering the contract to one lobbyist or another with whom they are politically allied.

At least four of the state's most active and well-paid lobbyists are representing competing companies pursuing this lucrative contract.

In its protest filed yesterday, Control Data, the current computer contractor, charged that "procedurally and substantively [the changes] represent a departure if not [a] violation of the accepted purposes and policies of the state procurement article."

Control Data asks the Lottery Agency to rescind the governor's procedural changes or, failing that, to apply a series of procedural safeguards.

"While CDC has only the highest regard for the governor, the Board of Public Works and the other officials now empowered to select the lottery vendor, we are quite concerned about the new processes and procedures," the corporation says in its letter to the Lottery Agency, signed by Marcel Helou, a vice president.

Mr. Schaefer's press secretary, Paul E. Schurick, said the governor "is not involved in procuring these computers."

"However," he added, "the attorney general's office has had a team of lawyers monitoring the entire process from the very beginning, and they have assured us that the request for proposals and the changes are appropriate and legal."

Control Data sees it differently: Though Mr. Schaefer's intervention may have been inadvertent, the complaint said, it "signals the return of unknown standards and changing directives" to the bid process.

Modernization of the Maryland procurement law arose from the events surrounding the resignation of Spiro T. Agnew as vice president of the United States in 1973 amid charges that, while governor, he had taken kickbacks from contractors, the protest document recounts.

It also observes that in 1977, then-Transportation Secretary Harry R. Hughes resigned while alleging political tampering with the procurement process in subway contracts. The governor was Marvin Mandel, later convicted on unrelated corruption charges that were overturned only after he had served time in federal prison.

Mr. Mandel, now acting as a lobbyist, represents GTECH Corp. of Providence, R.I., one of the bidders competing against Control Data.

Other lobbyists involved in the competition include Alan M. Rifkin, a former chief legislative officer for the Schaefer administration, representing Control Data; Bruce C. Bereano, one of Mr. Schaefer's top fund-raisers, also representing GTECH; and Joseph A. Schwartz III, one of the top-earning lobbyists in Annapolis, and James J. Doyle Jr., dean of State House lobbyists, representing two other competitors.

Control Data says in its protest that after the scandals of the 1970s, "legislation was enacted and regulations promulgated to insulate the competitive negotiations for architectural/engineering contracts from the influence of the political process."

Control Data, which has had the lottery computer contract for nine years, has been locked in a struggle, primarily with GTECH, for about a year. The Lottery Agency wants to expand the number of terminals and increase computer capacity to permit additional games.

The state has been anxious to complete the procurement, hoping the expanded system will bring revenue needed to reduce a budget deficit estimated at up to $300 million. The Lottery Agency is the state's third-best revenue source, after income and sales taxes.

Control Data asserts that the governor's procedural changes occurred because "some, but not all, prospective vendors managed to communicate with state officials other than the procurement officer. It is a mystery which verbal communications with which state official, if any, led to the issuance of [the changes]."

Vendors who had been unhappy with the set standards sought to put the issue before legislators, the company says: "Some competitors elected to invent their own process."

This observation was directed primarily at Mr. Bereano and his client, GTECH. Mr. Bereano has contended that Control Data held an advantage over its competitors because it has the current computer contract. Mr. Bereano has taken his case to legislators and others in an effort to have the process altered.

Asked to comment on Control Data's contentions yesterday, he called them "a maligning of the integrity and honesty of Governor Schaefer."

Mr. Rifkin, representing Control Data, declined to comment yesterday. He referred questions to Scott Livingston, a Washington attorney for the company, who said only, "The document speaks for itself."

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