Lottery opens floor to bidders

Only Scientific Games offers the one-shop-fits-all service the commission seeks

The state lottery Tuesday officially asked for bidders to help run the numbers games, and said players should expect to see four instant-winner scratch-off games when the lottery begins by April 5.

But there is concern that the request for proposals from the lottery on one of its most important contracts will point the state to only one company: Scientific Games.

That's because the request specifies that the "instant ticket" contractor must also handle the warehousing, distribution and marketing of tickets for the lottery.

Only one company, Scientific Games of Georgia, does all of those entirely on its own.

Competitors must team up with each other to provide all of those services. In recent cases where states have structured contracts the way North Carolina has, Scientific Games has won.

The value of the contract isn't yet known, but it is expected to be worth millions each year to the winning company or companies.

Jim Nulph, a vice president of a competing ticket printer, Oberthur Gaming Technologies of Texas, had urged lottery commissioners Monday to "unbundle" those printing, marketing and distribution services.

He said the state won't get competitive bidding from ticket printers -- there are four major ones in the lottery field -- unless it does.

Nulph said Tuesday that the request for proposals did not address his concern and that ticket printers will have to find a partner -- GTECH Holdings of Rhode Island is the major one -- to compete.

Officials at GTECH said Tuesday they were closely studying the situation and have made no decisions whether it will seek a partner and bid.

"We're evaluating and trying to determine if and how we will respond," said GTECH spokeswoman Angela Geryak Wiczek.

Lotteries in the United States use a variety of methods to seek bidders to help operate the two major lottery games -- scratch-off tickets that produce instant winners and "online" lotto games in which players choose numbers.

In the most recent start-ups of lotteries, states have chosen to include the actual printing of tickets with other services, limiting the number of contracts in an effort to get started quickly.

Several states with established lotteries, though, have moved recently to have printers bid against each other for supplying the tickets. Other services, such as warehousing and distributing, are part of other contracts or separate contracts. Arizona sought bids from all the printers, for example.

"It allowed for a competitive process to have all four in it," said Trish Phillips, director of customer services and investigations at the Arizona lottery.

She said that states do it many ways for a variety of reasons -- "it just depends on the objectives of management," she said.

North Carolina lottery director Tom Shaheen could not be reached Tuesday.

Lottery chairman Charles Sanders said he did not know the details of the issue but wants "the best price and the best product."

Scientific Games has been at the center of controversy over the lottery from the beginning and is under a state investigation for possible lobbying law violations.

The company declined comment Tuesday.

The requests for bids provide new details on the games, too, including that about 5,000 locations are expected statewide.

In all, the lottery wants to introduce 50 to 70 instant games a year, costing from $1 to $10 each.

The state expects to offer its first "online" pick 3 or pick 4 lotto game by June 14. Video terminal games -- keno or other animated type games -- are expected at 2,000 locations. In other states, those places typically are bars and restaurants.

Bids on the seven-year contracts are due Jan. 13.