This story originally ran in The News & Observer on January 31, 2006.
The state Lottery Commission on Monday awarded a multimillion-dollar contract to GTECH Holdings of Rhode Island to operate scratch-off ticket and lotto numbers games in North Carolina.
Instant tickets should go on sale March 30, a week earlier than previously announced, lottery officials said.
Two months later, on May 30, the state should sell its first tickets for Powerball, a national numbers pick ‘em game with huge jackpots.
GTECH would pay North Carolina $100,000 a day if those dates are missed. Penalties would increase to $400,000 a day if instant tickets aren’t sold by April 5 or Powerball tickets by June 14.
To win the contract, GTECH beat out Scientific Games of Georgia, a company that is under investigation in North Carolina for possible violations of lobbying law related to startup of the lottery.
Rick Gates, a senior vice president at Scientific Games, would not comment on the controversy, which included a payment from the company to a lottery commissioner after he was appointed to the commission and the employment of a top political aide to House Speaker Jim Black.
“I just say that we wish North Carolina all the best as the state moves forward,” Gates said.
The lottery sought bids this month on separate contracts for each aspect of the lottery -- the instant tickets and the pick ‘em lotto numbers games.
Both companies were announced as bidders on the two contracts. But it turned out that Scientific Games’ submission for the pick ‘em lotto games contained general background information but no bid.
“They did not really bid for it,” lottery director Tom Shaheen said.
Both companies bid for the instant ticket contract, and GTECH was judged better on technical aspects. It also offered a lower price.
Then, over two days last week, lottery officials and GTECH negotiated a contract to handle both aspects of the lottery games.
On Monday, GTECH sent top executives to watch the vote, while Scientific Games officials did not know in advance that a deal had been struck.
Lottery commissioners approved the contract unanimously, and officials quickly signed the deal.
As the vote was cast, Timothy B. Nyman, a senior GTECH vice president, tapped a message on a Blackberry hand-held device to company CEO Bruce Turner.
“We got the nod,” it said.
Nyman said GTECH would do all it can to operate the lottery with integrity. Officials said GTECH employees would begin work in the state today.
Under the contract, GTECH will be paid 1.5999 percent of all lottery sales -- an estimated $19 million in the first year of the lottery.
With growth in lottery revenue projected at 10 percent per year through 2013, the seven-year contract is roughly estimated at $180 million for GTECH.
Shaheen, a past president of the national lottery association, called the deal one of the lowest-cost lottery contracts in the nation.
While comparisons among states are difficult to make, a review of contracts for comparable lotteries seems to bear that out.
Shaheen said he also negotiated for more instant ticket vending machines than GTECH first offered; to secure an additional 1,000 pick ‘em terminals that can be placed at store cash registers; and for the starting dates of March 30 and May 30, which are earlier than those first announced.
Shaheen said the negotiations resulted in about $30 million in savings to the state.
Most of that will come from more days of ticket sales for the lottery, which is expected to bring in $1.2 billion in its first year. Of that, 35 percent will go to education programs.
“I cannot stress enough,” he said, “how good I feel about this.”
Commission Chairman Charles Sanders acknowledged there was a bit of relaxation about not having to answer questions if Scientific Games had won.
“I suppose, yeah, there is some relief,” he said.