D.C. Council Shameless in Lottery Dispute

From Marc Fisher's blog, Raw Fisher

The long and complicated standoff over the contract to operate the D.C. Lottery boils down to one simple fact: Even though one company would do the work more cheaply and the other company has done a lousy job of running the lottery, the D.C. Council refuses to do the right thing, openly conceding that its obstinacy is based on one factor: politics.

This is the most brazen display of cynicism and shady dealings we've seen in the District in decades, and that's saying a lot. No, this isn't a corruption scheme of the sort we saw in the massive rip-off of $50 million from the Office of Tax and Revenue. But this is the everyday sleaze that makes this city's government something special in the world of public affairs.

Lottery Technology Enterprises (LTE), the company that has held the $120 million contract to operate the District's lottery since the games were introduced nearly a quarter-century ago, has been fined $1.4 million for security breaches involving fraudulent winners and stolen tickets. LTE gets lousy scores from the city on the quality of its work. LTE proposes to charge the District about $5 million more than its competitor in the bidding for the city contract, W2I, a joint venture of the national gaming firm Intralot and the family of local businessman Warren Williams Jr.

Despite a fair bidding process, the council has refused for months to vote on the contract. Now, a memo from the D.C. Lottery's chief operating officer, Jay Young, puts the situation plainly: If the council rejects W2I's bid, Young writes, "it will do so on grounds not related to the substance of the offers, the soundness of the proposed solution, or the administration of the procurement process, but rather . . . by legislative fiat."

And that fiat will result from what council members frankly say is raw political power. When I asked several council members why they couldn't bring themselves to approve the better deal for D.C. taxpayers, they were good enough to tell me that the obstacle is the political donations and power of LTE's Leonard Manning. (Manning has consistently failed to return calls from me and other reporters; his spokeswoman, Ann Walker Marchant, says the city is unfairly fining and otherwise punishing LTE even though it has done a good job.)

On WAMU's "The Politics Hour," I asked the District's interim attorney general, Peter Nickles, about the council's intransigence, and he said, "I am absolutely disbelieving." The city had an "open process," Nickles said, and concluded that D.C. taxpayers could save between $5 million and $8 million by switching vendors. "But we cannot even get a yes or no vote," he said.

Strangely, despite the near-total consensus that W2I's bid is superior, there are voices on the council and in the press calling not for W2I to get the contract but for the whole process to be restarted. That is, in effect, the same as giving the deal to LTE and its partner, GTech, because W2I and its partner, Intralot, would not participate in a rebidding.

As the Washington City Paper's "Loose Lips" columnist, Mike DeBonis, has reported, the underlying problem is the District's overly rigid insistence on minority and local business participation in big contracts. Most state and local lotteries are operated by one of three giant international corporations; that might not be ideal, but it's how that world works. The District is a rare bird in requiring those companies to team with local companies, mainly to boost minority-business development. DeBonis suggests simply dropping that requirement. But the set-aside is a deeply ingrained piece of D.C. politics, and it's certainly not changing over a contract as politically sensitive as this one.

In his memo opposing a rebid, Young notes that "there is a high probability" that putting the contract out to bid again would produce exactly one bid -- from LTE. The reason no one else would submit a bid: "The perceived flaws in the political environment," in Young's words. To make matters worse, Young says, the new bid would probably come in at a "substantially higher" price than the existing bids.

With the D.C. Lottery suffering what Young calls increased "service outages, software malfunctions and performance delays," now is the time to make the change. The alternative, he says, is "a major decline in financial results."

But do council members care about that? Try asking them at any of the remaining candidate forums between now and Election Day. Watch them wriggle.

Join me at noon today for a debate on the future of Virginia's Republican Party on "Raw Fisher Radio" athttp://www.washingtonpost.com/rawfisherradio.