The N.C. Education Lottery Commission on Wednesday made two of the biggest decisions in its first 10 years, choosing vendors to manage its gaming systems and to print and distribute scratch-off tickets for its next 10 years.
Both contractors have a history with North Carolina’s lottery, which sold its first tickets in 2006, and provide lottery services in other states as well.
A new contract for lottery systems will result in new game technology that should make ticket purchases faster for players, allow for new types of games and make life easier on store clerks, lottery officials said. The new contracts are expected to begin in April 2017.
The new deals also should save the lottery money, meaning more dollars for education, the primary beneficiary of lottery proceeds. The percentage of lottery revenue that will go to contractors is expected to be less than under existing deals.
Costs of the new contracts would be $26.5 million, a savings of $6.3 million, if applied to ticket sales estimates for fiscal year 2017.
The contracts are the lottery’s largest with private vendors.
Final terms still must be negotiated and approved by the state attorney general’s office.
The nine-member commission chose each contractor unanimously upon recommendations by lottery staff. Teams of lottery employees reviewed proposals received through a competitive bidding process that spanned roughly two years.
International Game Technology, or IGT, of Rhode Island, won the gaming services contract. It will supply computer equipment, software, marketing, support and other products and services needed by the 6,900 retailers that sell lottery tickets across North Carolina.
IGT was the lowest of three bidders and also scored the best on a rating system created by the lottery. It narrowly edged out Scientific Games, of Georgia, by four points out of a possible 1,000. A third company, Intralot, also bid on that contract.
The length of the contract is 10 years, with a possible five-year extension if upgrades are made by the eighth year.
IGT currently holds the gaming systems and instant ticket contracts with the lottery. During the 2015 fiscal year, which ended in June, the lottery brought in $1.97 billion in ticket sales, awarded $1.23 billion in prizes and gave $521 million to the state to spend on education.
The commission chose Scientific Games to print, store and distribute instant lottery tickets. That contract is for eight years, with a possible two-year extension. The lottery sells 45 to 50 types of instant tickets each year. Scientific Games already prints many scratch-off tickets for the state lottery through a contract with IGT.
“I am totally confident that we have in both situations picked the best proposal,” said Alice Garland, lottery executive director. “I cannot emphasize enough the rigor that we went through, constantly focused on integrity.”
Compensation to the contractors is based on a percentage of ticket sales. Combined, the two contracts will cost the lottery roughly $300 million over 10 years.
Commission members debated at length the gaming services contract, which came down to IGT and Scientific Games, both of which had representatives at the meeting at the lottery headquarters. IGT’s slim 4-point margin led to pointed questions by commission members about the ranking process and how many possible points were allotted to certain categories.
“I’m willing to stand by our process, that it was done with integrity, transparency,” said Quan Kirk, lottery general counsel.
Lottery officials said IGT ultimately will get the contract because it bid $465,000 less annually than Scientific Games.
“After the committee’s thorough review of all aspects of the proposals, price is essentially the deciding factor,” said William Jourdain, the lottery’s deputy director of finance, administration and security.
Spokeswomen for Scientific Games and IGT declined to comment.
Patrick Gannon is the editor of the NC Insider.