Lack of Bidders Prompts Audit of Lottery : Government: Officials in the governor’s office say they are troubled that two competitors pulled out at the last moment, leaving only the current operator seeking the $250-million contract for computerized games.

The Wilson Administration ordered an internal audit Wednesday of the California Lottery’s bidding process after only one company responded to a request for bids on a $250-million contract to run its computerized games.

Officials said they found the lack of response from other bidders troubling and wanted to examine the bid specifications to ensure that “we have a fair and open competitive process.”

“We are not comfortable at this point with the process,” said Administration spokeswoman Kassy Perry. “We want to make sure that the (bid specifications) were written to ensure the whole process allowed for competition.”

At this point, she said, the Administration has no specific evidence that the process was unfair other than comments from competitors who declined to bid.

On Tuesday, Automated Wagering International, a Hackensack, N.J., company, withdrew from the competition for the contract, charging that the process was biased in favor of GTECH Corp., which now operates the lottery’s computer games.

At the 3 p.m. Wednesday deadline for submitting bids, another potential bidder, High Integrity Systems, presented a letter saying it too would not vie for the contract.

The lone bid came from GTECH, a Rhode Island-based corporation that since 1986 has held the lottery contract for computer-run games, including Super Lotto, Keno, Daily 3, Decco and Fantasy 5.

“We have lots and lots of boxes of (bid materials) but they only come from one place,” said Lottery spokeswoman Joanne McNabb.

High Integrity and AWI said in letters to state officials that their prime reason for declining to bid was an Oct. 14 deadline set by lottery officials for installing a new computer system and a vast network of terminals. AWI officials contended that the deadline could only be met by a company that was already operating the California games and therefore gave GTECH an advantage.

Lottery Director Sharon Sharp insisted that the timetable was standard for the industry. She complained that AWI’s decision to go public with its complaints about the contracting process one day before the deadline for submitting bids was highly irregular and could discourage others from entering the competition.

“Their behavior is low,” she said. “For them to do this the day before bids are due . . . is absolutely unforgivable.”

Upon learning of the Wilson Administration’s decision to order an internal audit, McNabb said the lottery would welcome and cooperate with any probe. In the meantime, she said it would complete the bid process by examining the materials submitted by GTECH to make sure they complied with all bid requirements.

“We are very, very satisfied that our process is impeccable,” she said.

Others, however, said it was an embarrassment to the Wilson Administration to have only a single bid on such a large contract. The five-year deal is expected to result in payments of about $250 million for the winning bidder and another $250 million if the lottery exercises its option to extend the contract for an additional five years.

“It’s important, and it’s in the best interest of schools and the citizens of California that we have competitive bidding,” said William Johnston, a three-time lottery commission chairman who resigned last year.

“We made every effort in the past to ensure that we would have competitive bidding because it’s one way to guarantee that we’re getting the best service and product for the best price,” Johnston said.

Perry said the governor’s office will consult with the five-member lottery commission--all of whom are gubernatorial appointees--and Sharp in the next few days to determine how the internal audit will be conducted.

“When you’re talking this kind of money--potentially $500 million--it behooves the state to ensure that the process is open, fair and competitive,” Perry said.

Richard Martland, a lawyer for AWI, said his client was “pleased” that the governor’s office was looking into the matter and “giving it the attention it deserves.” GTECH declined to comment.

Although it is unusual for only one company to bid on a contract as large as the one being offered by the California lottery, it is not unprecedented. In the last three years, Louisiana, West Virginia and South Dakota awarded similar contracts after receiving only one bid each.