The stars are aligning for another bad deal for Illinois taxpayers, one that will dwarf the mistakes of Chicago's parking meter fiasco. At any moment, Governor Pat Quinn is set to receive a recommendation from his administration's secret Illinois Lottery evaluation committee on who will manage the day-to-day operations of the Illinois Lottery. Governor Quinn is scheduled to make his official decision by Wednesday.
I stand by my stance that Illinois should not allow a private company to manage the lottery. Illinois taxpayers would be better served by simply holding our current agency accountable for making the changes necessary to improve our lottery. The Illinois Lottery already has all the necessary tools. If they were implemented wisely, we would realize the lottery's earning potential. Still, Governor Quinn has ignored my warnings and continued to pursue a privatization plan.
But even I have been surprised and dismayed at the gall of the Quinn Administration in the selection process used to choose the lucky winner. The 10-year lottery management contract likely will be worth hundreds of millions of dollars. That is not an amount I or the taxpayers of Illinois take lightly. Yet, Governor Quinn and his administration have acted in secret and have not allowed rational input on which firm will get the award.
They have released virtually no information on the bids or the players involved. The content of the bids have not been made public. Lottery officials have declined to identify members of the committee reviewing the bids. Even names of the companies submitting bids were not made public until there were only two bidders left. Publicly naming bidders after proposals are received is routine in many states. Without transparency, the process is suspicious and gives the appearance of impropriety.
With so little transparency, many questions arise, including why were there only three bids submitted and/or entertained? The first draft of the private management agreement (PMA) was incredibly, unnecessarily and dauntingly arduous. This was arguably intentional on the part of the Quinn Administration, in an effort to discourage non-clout heavy bidders. With only three parties taking on the arduous first draft of the PMA, the Quinn Administration immediately eliminated one bid from contention when Greece-based Intralot was dropped without explanation. Intralot didn't mince words in blaming the decision on the Quinn Administration's lack of tolerance for healthy competition.
Left with only two bidders, Northstar and Camelot, the Quinn Administration trimmed the PMA to half its original size, eliminating more than half of the original language. Thus, the final PMA Northstar and Camelot tailored their submissions to was vastly different and simpler than the original PMA. It appears as though the original PMA was a tool used to stifle competition and allow for essentially a no-bid contract.
Furthermore, one of the remaining bidders, Northstar, has a position in this deal that must be considered with a cautious and discerning hand. The privatization plan includes developing new games, overseeing marketing and advertising, and potentially launching an experimental online lottery sales program. But the three connected vendors that make up Northstar - Gtech, Scientific Games and Energy BBDO/Chicago - already have contracts with the Illinois Lottery for those services. With these current contracts in place, Northstar would end up managing itself if awarded the PMA. This makes no sense from a business management standpoint and, in fact, should be illegal.
This deal stinks of unfair advantage and insider dealing. Governor Quinn must answer many questions before moving forward. Why are there only two bidders, one of which is a consortium with current contracts for the failing lottery? Why the reverse bait-and-switch of the original PMA to the significantly slimmer version to which bidders will actually respond? Why all the secrecy surrounding the committee members evaluating the bids? Why were the names of the bidders only released when only two were left?
I have some advice for Governor Quinn. Conventional wisdom is that transparency rarely taints the process. There is a reason lawmakers have passed laws to establish an open, competitive bidding process for companies wanting to do business with local governments. There is great fear that without transparency, clout-heavy bidders would unfairly win contracts based on their relationships rather than value to the taxpayers. In Illinois, there is particular sensitivity to this issue, as our last two governors are convicted felons. The sitting governor's actions should absolutely be under a microscope.
I urge Governor Quinn to rethink the privatization plan and instead keep the lottery state managed. And if he won't, I demand that the bidding process be restarted from scratch in a transparent and unbiased fashion. The citizens of Illinois cannot take any more unscrupulous and reckless deals. We've had enough.
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