Disappointed bidder might challenge process to name private lottery manager

SPRINGFIELD -- A company bypassed as a finalist to operate the Illinois Lottery is contemplating whether to challenge the selection process, which could delay when the lottery is turned over to private management.

The state, meanwhile, is going ahead with plans to hold a public hearing next week, at which the two finalists will present their proposals publicly and the public will be allowed to ask questions.

The two finalists are Camelot Illinois, a subsidiary of a company that runs the national lottery in the United Kingdom; and Northstar Lottery Group, a consortium of GTECH Corp., Scientific Games and Energy BBDO.

GTECH provides lottery terminals to the state, while Scientific Games supplies instant lottery tickets, and Energy BDO is Illinois’ lottery advertising agency.

The state isn’t providing the names of any other bidders or even how many there were.

“We don’t comment on pending procurement matters,” said lottery spokeswoman Susan Hofer.

However, Intralot S.A., the second-largest operator of lotteries in the world, said it bid for the contract and wants to know why it wasn’t selected as a finalist.

“We have not been privy to the material that caused us not to be put forward in this process,” said Byron Boothe, vice president of government relations for Intralot. “We want to know why they thought there was the need to throw out the number two in the world.”

Boothe said the company filed a Freedom of Information Act request to get documentation about why Intralot wasn’t selected as a finalist.

“We’re told we can’t receive the material until after the announcement of a winner,” Boothe said. “They said, under FOIA rules, until they make an award, they are not obligated to give that information.”

“To disclose this information while the procurement process is ongoing would substantially deviate from standard operating procedures, potentially undermine the integrity of the process and potentially taint the outcome,” Lottery communications manager Tracy Owens said in an e-mailed response to questions.

Boothe said Intralot will review the information once it is turned over.

“We’re certainly keeping our options open, and certainly a protest is one of our options,” he said.

Northstar spokeswoman Carolyn Grisko said she had no comment about Intralot. Camelot spokesman Jerry Lawrence likewise declined to comment.

Boothe said Intralot’s concerns were “piqued” by the fact that the Illinois Lottery’s current vendors all combined into one consortium to bid on the contract.

“If you look at what the state is trying to accomplish, which is increase sales, why in the world would you allow all of your current vendors to combine into one company?” Boothe said. “They were involved in the sales over the years that got you in your bind today.”

State lawmakers authorized the lottery to hire a private management firm with the express idea of increasing sales and profits to the state. Over the last four budget years, sales have hovered between $2 billion and $2.2 billion. Profits to the state have ranged from $622 million to $676 million.

Some lawmakers think a private manager could boost profits by $150 million. No one can say that with certainty, though, because no state has embarked on private lottery management.

The contract is expected to be lucrative to whatever company is selected, but neither Northstar, Camelot nor the state would talk about how much a private manager might make from the arrangement.

“We don’t discuss any aspects of a contract until the contract is final,” Hofer said.

The state is required to hold a public hearing before the contract is awarded. It will be at 9 a.m. Wednesday in Chicago, but people can also participate by video conference at the Willard Ice Building in Springfield.

Gov. Pat Quinn is supposed to make the final selection Sept. 15.

Doug Finke can be reached at 788-1527.

Camelot proposal

Camelot Illinois released some additional details of its lottery-management proposal Friday.

The company said it will focus on attracting new players and “make the lottery less reliant on lower-income consumers.”

Camelot said it will meet a goal of having 20 percent minority, female and disabled participation in contracts and will create a foundation to support education grants. The company also said it will donate 10 percent of its profits — up to $35 million — over the 10-year term of the contract.

Camelot said it will be able to cuts costs because it is both vendor- and technology-neutral.

“That means Camelot can negotiate the best deal for the taxpayers without any conflicts of interest, since it holds no stake in any of the companies that currently supply the Lottery with goods and services,” said a release from Camelot.

That’s an apparent reference to the other finalist, Northstar Lottery Group, which is composed of current Illinois Lottery contractors.