Lottery Firm’s Contract Renewed Over Objections

The California Lottery Commission on Friday approved the extension of a multimillion-dollar computer contract with GTECH Corp., despite objections from competitors who accused state officials of favoritism toward the controversial company.

John J. Bergin, marketing vice president for a division of Control Data Corp., complained that senior lottery officials had assured competitors repeatedly over the past year that the lucrative contract would be open to competitive bidding this year.

But then late last year, he said, lottery officials suddenly began negotiating behind closed doors with GTECH. He said competitors were left in the dark about the negotiations and not told until late Thursday that an agreement had been reached and would be presented Friday for commission approval.

Lottery officials insisted that slumping revenues and budget cuts have given them no choice but to continue to work with the company that has held the contract to operate the lottery’s computer-assisted games for the past six years. Current computer-run games are Super Lotto and Decco.

“We now need GTECH more than they need us,” said Lottery Director Sharon Sharp.

In its search for more players, she said the lottery did intend to expand the computer system established by GTECH with equipment from other companies. But, she said, until GTECH could make major adjustments to its computers, the system would not be compatible with “foreign” equipment.

To transfer at this time to another company would be costly and chaotic, she added, and would prevent the lottery from initiating a variety of new games that officials hope will draw new players and stop a steady decline in revenue.

Although one member expressed some reservations, the commission voted unanimously to approve the contract that will provide the company at least $47 million in lottery business over the next 22 months.

Sharp argued that the contract was a “very good deal” for the lottery because it required the company to provide $3.4 million in additional services without additional costs.

GTECH, based in Rhode Island, is the only company that has ever held the contract to operate the California Lottery’s computer games. Its initial contract was for four years with an option for the lottery to extend three more years. The latest extension is the third and last available to the company, and when the contract expires in October, 1993, the lottery will be required to open the next one to competitive bidding.

GTECH is also the company that has been linked to a federal investigation of political corruption in California’s Capitol. Former State Sen. Alan Robbins (D-Van Nuys), who has pleaded guilty to racketeering and tax evasion, has claimed that he received a $13,500 contribution from GTECH in exchange for helping its lobbyist defeat a 1986 lottery bill.

Company officials, however, have maintained that they had no knowledge of any dealings with Robbins and had only given him contributions at the direction of their lobbyist, Clay Jackson. Through his attorney, Jackson has denied any impropriety.

In December, Sharp said she did not believe the Robbins matter should have any bearing on the lottery’s relationship to GTECH, since the company has never been accused of any wrongdoing.

On Friday, Sharp announced the starting dates for a variety of new games that she said she hoped will boost falling revenues. She said that on April 1, the lottery will start a new daily numbers game allowing players to pick three numbers from 0 to 9. Then on April 4, the lottery will simultaneously introduce three instant scratch-off games.

To attract interest in new games, she said many will have a sports motif. A new scratch-off game called Hot Shots will begin in February and offer as one of its prizes T-shirts with sketches of basketball team members on the front. One of the scratch-off games introduced in April will have a baseball theme.

By April, Sharp said, the lottery also hopes to make it possible for players to cash in instant prizes as high as $500 at retail locations where tickets are sold.