Critics Blast Lottery's Renewed Deal With GTECH

"Check your ticket" lottery machine in an Austin, TX gas station.
"Check your ticket" lottery machine in an Austin, TX gas station.

Citing performance issues and alleging a conflict of interest, critics blasted a decision announced Friday by the Texas Lottery Commission to renew a 10-year operations contract with Rhode Island-based GTECH Corporation, the state’s primary lottery vendor since its 1992 inception. The agreement, one of the largest awarded by the state, is worth up to $1 billion.

State Rep. Garnet Coleman, D-Houston, has called for an immediate investigation of GTECH’s performance and its relationship with the commission. “I believe the vendor and the lottery commission operate as one,” he said. “It eliminates competition — and if it’s not competitive, we’re not getting the best price for the operation.”

In December of last year, Gartner Inc., a Connecticut consulting company that the commission hired to help shape the specifications for bidding, acknowledged that it was also getting paid by GTECH, creating what Gary Grief, the commission’s executive director, described as a “terrible perception problem.”

John Pittman, a vice president of Intralot, another bidder, complained to the commission in an April 30 letter: “It may limit competition and the savings that lotteries are seeing as a result of competition.”

The lottery subsequently fired Gartner in January, conducted an internal review in which lawyers found no evidence of improper information sharing and — on three different occasions — pushed back the deadline for prospective vendors to submit bids.

 

Texas Lottery Commissioner Winston Krause said the issues that were discovered early in the bidding process did not affect the ultimate contract decision. “We vetted the thing pretty closely,” he said.

That GTECH beat out Intralot and another bidder, Scientific Games International, did not surprise critics who have been questioning not only GTECH’s relationship with the state but its performance record. Fewer Texans are playing the lottery, and the gaming revenues make up a smaller percentage of the state’s education budget. The commission’s research shows that currently 40 percent of adults in Texas play the lottery, compared with 70 percent in 1994. Texas ranks 28th in per capita sales out of 44 states that have a lottery, and while state budget numbers show public education costs in the state have increased by 200 percent since 1992, the lottery’s contribution to the public education coffers has remained the same: about $1 billion per year.

“Exactly what is the state getting for the $100 million per year we are paying to GTECH?” Coleman asked in an Oct. 18 letter to lawmakers.

Echoing Mr. Coleman’s concerns, State Rep. Pete Gallego, D-Alpine, the chairman of the House Select Committee on Government Efficiency, formally requested information about the bidding process as well as the identity of the commission staff member who negotiated GTECH’s previous deal.

Calls to GTECH were not returned Friday afternoon, and Grief was not available for comment, according to the commission. But Krause defended the specifications of its new contract, which call for equipment changes as a means of increasing participation back to mid-1990s levels.

“We are using this opportunity to make a quantum leap in technology,” Krause said. “It will make the whole thing far more productive.”

 

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