Half-price lottery contract

October 15, 1995

THE STATE of Maryland held the winning lottery ticket in last Tuesday's big drawing. When officials opened two sealed bids for supplying and maintaining lottery computers for the next five years, they were shocked at the bargain-basement price they got. The low bid was $40 million -- less than half the $95 million the state is currently paying. Now that's a good deal.

Automated Wagering International Inc. is the apparent winner. It is no newcomer to the computer lottery business since it provides similar services to the neighboring states of Pennsylvania and Delaware. It is the successor company to Control Data, which had the first lottery computer contract here, only to lose out to GTECH Corp. five years ago in a controversial -- and fiercely disputed -- award.

This time, though, state officials steered clear of interference in the procurement process. Lottery director Lloyd Jones deserves credit for devising a plan that took advantage of the intense battle among computer gaming companies. He did so in a way that excluded political manipulation. Instead of basing the award on a combination of technical merit and price, Mr. Jones opted to offer the contract strictly on the basis of the lowest bid.

There was no room for lobbyists to apply leverage to get rules bent or influence decision-makers. Once lottery officials certified that GTECH and AWI were capable of delivering state-of-the-art computer services, the only remaining question was price.

Ironically, five years ago GTECH vastly underbid Control Data for the Maryland contract, leading to accusations of low-balling in the hope of gaining profitable add-ons later. That's exactly what happened when keno was introduced -- without competitive bids. This time, Control Data's successor, AWI, sharply undercut GTECH, but there's no chance of winning add-ons because Mr. Jones has announced any new lottery ventures would be put out for bids.

AWI insists the company's advanced computer architecture made it possible to bid low and still turn a profit. If that's the case, it raises questions about the profit margins GTECH has been earning on its Maryland contract. It will be up to state officials to carefully scrutinize AWI's bid to be sure it is legitimate and that the company can deliver on its promises.

Attempts to discredit the winning bid are likely. Mr. Jones and the Board of Public Works should resist any attempt by lobbyists or politicians to interfere. This is one case where price, and price alone, was the deciding factor. That's good for the state and good its taxpayers.

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