For more than two hours Thursday, a D.C. Council committee discussed the merits of the lottery contract.
No, not that lottery contract. Not the one for the city’s electronic numbers games, which has been a pox on city politics for five years now, prompting numerous hearings, lawsuits, reports, investigations, newspaper articles, editorials, and much embarrassment.
This lottery contact is a smaller one, worth $9.7 million over four years to produce and distribute scratch-off tickets, awarded earlier this month to Georgia-based Scientific Games International. And while lawmakers have little stomach for another high-profile contracting battle, the matter is certain to appear in some form on the D.C. Council’s agenda at its July 10 meeting.
Lottery Director Buddy Roogow told the council’s Finance and Revenue Committee Thursday that if the contract is not approved then, “we in a very short period of time will not be able to sell instant tickets,” which account for roughly one-fourth of the lottery’s $250 million in yearly sales.
In this age of District politics where bribery, fraud and campaign finance corruption are topics of daily conversation, this intrigue behind this contract disappoints. The political machinations on this lottery contract, unlike the previous one, are by and large in public view, and they center around a fairly well-defined question: Has Scientific Games hired enough subcontractors?
Not just any subcontractors, understand, but businesses certified by the city as being small, local, minority or woman-owned. Under District law, with certain exceptions, 35 percent of the value of all District government contracts worth more than $250,000 must be subcontracted to those certified firms. Scientific Games is pledging to subcontract only 17 percent, which has drawn strong objections from parties with ties to the small-business community — including Barbara Lang, president and CEO of the D.C. Chamber of Commerce, who on Thursday called the Scientific Games award a “terrible mess that speaks to chronic dysfunction in our procurement system” and called for a rebid of the contract.
Thursday’s testimony laid out other noteworthy facts: The request for instant-ticket proposals drew only one other bidder, a joint venture that did not win the requisite certification in time and was thus disqualified. The Office of the Chief Financial Officer, which evaluated bidders and awarded the contract, worked with the city agency in charge of business certifications to secure a waiver from the 35 percent requirement for Scientific Games, but it has neither granted nor denied the waiver after nearly six months. With a late July deadline approaching and the council pressing to review the Scientific Games deal, the OCFO’s contracting director earlier this month granted the waiver himself.
Now OCFO and lottery officials say there is nothing illegal about any of that, and while critics challenge that interpretation, the conflict boils down to whether Scientific Games should and could do more to hire certified subcontractors.
The company’s corporate counsel, Philip Bauer, made the case Thursday that it could not: The contract is, at its core, for the manufacture of lottery tickets, which, Bauer said, can be done in only Scientific Games’s Georgia factory using special Scientific Games paper and Scientific Games ink. The company, he said, also uses a special high-security transportation contractor to deliver the tickets to the city, but most everything else — including distribution to retailers — can and will be handled by a local certified business.
But two council members did not show much patience for Bauer’s explanations. Vincent B. Orange (D-At Large) and Jack Evans (D-Ward 2) both pressed Bauer to do better. “It’s becoming clear you have to meet the 35 percent,” said Evans, who suggested he was ready to extend Scientific Games’s temporary contract while the long-term contract was rebid.
Bauer said he had “no idea” how to get to 35 percent. To hire additional companies, he said, “we would have had to create a need to hire them.” At what additional cost to taxpayers he did not mention.