In a special telephone meeting today, the Arkansas Lottery Commission approved a three-year contract extension with Intralot, a supplier of on-line and instant lottery games, that will eventually reduce Intralot’s take and save the lottery an estimated $5 million over the duration of the contract, through August 2019.
All the commissioners except Bruce Engstrom voted for the extension. Engstrom said the proposed new deal was at the “upper end” of comparable costs a committee study had found considering costs, services and populations of states with similar contracts. He said seeking new bids for when the contract expires in 2016 could produce competition and encourage Intralot to reduce its charge, given what it had invested to be in the state. Lottery Director Bishop Woosley said it was a “good offer” and “good for the lottery.” He said a conversion to a new operator would be difficult and there was no guarantee others would come forward. He and some commissioners also complimented the service Intralot had provided. Intralot gets about $10 million a year from the lottery.
Intralot was the sole bidder for the initial contract in 2009. Another bidder, Gtech, withdrew because of the emphasis on price in the formula for awarding contracts. It has indicated it would be interested if the contract was again open for bids.
The negotiations faltered in early December when Woosley accepted a new deal reducing Intralot’s take on sales from 2.45 to 2.11 percent of net revenue. But there was confusion. The lottery thought the new terms would take effect immediately. Intralot intended for them to take effect in July 2015. Negotiations continued and Intralot offered a reduction to 2.165 percent of net beginning in July. Intralot also agreed to provide $100,000 for marketing and to pay $25,000 a year to a charity of the lottery’s choosing and contribute $25,000 to the cost of an annual audit. Intralot said this was its final offer and any counter-proposals would nullify it.
Woosley said that, based on existing sales, the deal could save the lottery about $5 million over the remainder of the contract, savings that go to the pool of money from which college scholarships are awarded.
Commissioner Dianne Lamberth said there could be a downside to bidding. There’d perhaps be no bids. She said the fact of a single bid for the original contract doesn’t mean it was a bad bid. Commissioner Julie Baldridge brought up a recent new contract bid by the Montana lottery at a rate higher than that charged in Arkansas. The smaller the state and the smaller the revenue, the higher the percentage take by vendors, she indicated.
As a backdrop to this, the legislature has been conducting an independent study of the lottery through a British gambling company. That study was critical of the Intralot contract. There have been hints that key legislators are interested in asserting control over the lottery and changing some aspects of operation. Intralot’s contract extension becomes a significant factor in that.