R.I. firm is lottery pact low bidder Panels favor GTECH computer proposal

February 15, 1991|By C. Fraser Smith | C. Fraser Smith,Annapolis Bureau of The Sun

ANNAPOLIS -- After a fierce and highly political bidding war between national computer giants, a Rhode Island firm apparently has won preliminary approval to supply new computers for Maryland's lottery -- underbidding the current contract holder by a surprising $20 million.

GTECH of Providence, R.I., outdueled Control Data Corp. of Minneapolis, which has held the contract for the last nine years. GTECH's bid of $60.06 million was far below the $81.45 million quoted by Control Data.

The fight for Maryland's business was the latest skirmish in a high-cost, state-by-state contest for supremacy in the lottery computer business. Preparation of the bids cost both sides hundreds of thousands of dollars.

Lobbying costs -- $60,000 at least, according to those involved -- were extra.

A spokesman for Control Data suggested that the competition in Maryland could have significant long-range implications.

"If they can do it at that price, we certainly have to re-evaluate our participation in the lottery computer business," said Marcel Helou, a Control Data vice president. "We can't stay in at these prices."

Mr. Helou said Control Data would analyze the state's conclusions and decide whether to appeal. The price difference between his company's and GTECH's, he said, was "unprecedented."

GTECH's chairman, Guy Snowden, would not comment on the difference between the bids but said, "This was one we really wanted." He said his company had been selected by a number of states when it was not the low bidder.

"People have seen the merit in our proposals -- the technical ability and the ability to enhance revenue," he said.

Control Data and GTECH have gone head-to-head in pursuit of lottery contracts in five states over the last 18 months, with three of the last four going to Control Data. In none of the other states did either side win by such a wide margin, Mr. Helou said.

The new system is needed, the state says, to allow the addition of up to 600 additional lottery-equipped businesses and to accommodate more technologically demanding lottery games -- while boosting lottery revenue. The state wants the new system in operation by midsummer.

State Budget Secretary Charles L. Benton Jr., who has supervised the procurement process, said the lottery agency estimates that it will collect another $30 million annually with the added reach of a modernized system offering the latest betting opportunities. Now generating about $335 million per year, lottery players provide the state's third-largest source of income.

After the computer procurement process became mired in political influences and complaints about the original request for bid specifications, Gov. William Donald Schaefer appointed the two evaluating committees that announced their decision yesterday.

The current process calls for the Board of Public Works to approve or reject the study panel recommendations, announced at a news conference convened by Mr. Benton. The panel's recommendations are to be reviewed and forwarded by Mr. Benton to the board.

The bids were submitted in two parts -- technical and financial -- with the two specially appointed panels working independently.

GTECH was found superior by both panels. The company edged Control Data on the technical criteria, impressing the panel members with its marketing proposal. But it virtually guaranteed victory with its price, which several members of the review committees said yesterday was very advantageous to the state. The technical evaluation panel recommended an award to GTECH even if its bid were slightly higher than Control Data's.

State officials were at a loss to account for the wide difference between the bids -- but the difference did not seem to concern Mr. Benton or the panel members. Since the state and GTECH will be negotiating a detailed contract in which the computer company is paid a percentage of the lottery revenue, Mr. Benton observed, the company's income could increase with lottery volume.

Michael Huffenberger of the Battelle Memorial Institute in Columbus, Ohio, a computer consultant hired by the state, said the wide difference between the bids, while "not common" in computer procurement battles, was "not an unprecedented low number." The procurement process became increasingly politicized when Bruce C. Bereano, the lobbyist for GTECH and close associate of the governor, complained that the request for bid proposals prepared by the State Lottery Agency tilted in favor of Control Data.

Mr. Bereano, who was paid $5,000 a month by GTECH, hired a former governor, Marvin Mandel, as his assistant and paid Mr. Mandel $2,000 of his monthly fee.

For its part, Control Data was represented by Alan M. Rifkin and the firm of Rifkin, Evans, Silver and Lamone. Mr. Rifkin was a former legislative director for the governor. Mr. Silver is also a close friend of the governor and of William F. Rochford, the lottery director.

With all of these interconnections at play, the governor appointed his special review panels in an effort to introduce new technical expertise and impartiality to the process.

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