Crony Up Why the lottery contract doesn't have to be controversial

Whole Lottery Love: Brown and colleagues see no reason to shake up numbers contract.
Darrow Montgomery

If you’re looking for the real answer to why awarding a new lottery contract has turned into such a shitstorm, LL has some advice: Don’t bother actually examining the contract proposals. Don’t waste time reviewing any D.C. Council debates. And don’t look in the Washington Post.

You would have gotten a better clue by showing up at Ward 8 Councilmember Marion Barry’s re-election kickoff rally on June 21. There, the crowd was treated to a 45-minute documentary film about Barry’s career, Legacy Building: Five Decades of Service. Buried therein was the true reason barrels of ink and scads of political bloviation have been spewed during the debate over who is best qualified to run the D.C. Lottery.

First, a little recap: Since Mayor Adrian M. Fenty submitted the lottery contract for approval in April, the D.C. Council, in a virtually unprecedented move, has balked at awarding the contract to the vendor deemed best qualified by city authorities. That vendor would be W2I, a joint venture between Greek firm Intralot and the W2Tech outfit run by Alaka Williams, wife of connected businessman Warren C. Williams Jr. On the other side, you have the current contract holder, Lottery Technology Enterprises (LTE), the outfit comprised of Italian firm GTECH and connected businessman Leonard Manning that’s held the contract for well over 20 years.

The Sturm und Drang comes due to the fact that the Williams family has run afoul of certain politicians in this town, even though by most every measure their bid is superior. Yet right up through Post columnist Marc Fisher’s July 27 exhortation to let W2I have the contract already, virtually no media outlet has addressed this question: Why are the likes of the Williamses and Manning even involved with this in the first place?

After all, there’s only three large corporations that hold virtually all of the online lottery-system contracts in the United States: GTECH, Intralot, and an outfit called Scientific Games. All are publicly held, and none are based in the District.

Robert Vincent, a GTECH spokesperson, says that joint ventures on lotteries aren’t that rare, they’re just rare in this country—the District, he says, hews to “a model that’s largely embraced outside the United States.” Elsewhere, Vincent says, his company does much more than provide the technology, as they essentially do in the District. With the Texas lottery, for instance, which is all but privatized, GTECH pretty much runs the entire show, including the marketing.

Here’s where the Barry film comes in. During the flattering biopic, amid a litany of mayoral accomplishments and personal tributes, a figure flashes on screen: “35%”

And that tells it all: “35%” is perhaps the most momentous figure in all of District political history—it refers to Barry’s first-mayoral-term edict to city procurement authorities that at least 35 percent of city contracting dollars go to minority-owned firms. By the third Barry term, more than 40 percent of city contracts, nearing a half-billion dollars a year, were in minority hands.

It’s perhaps the most lasting legacy of the Barry governing model. The good is that “35%” helped created a thriving black middle class (most of which decamped for the suburbs) and broke the hold of white old-boy networks in local government contracting, particularly in road construction. The bad is that it enabled the cronyism that led to scores of newspaper exposés and federal investigations and still fuels District politics to this day. And every once in a while, a lottery contract or some other big city appropriation gets steered, wholly within the letter of the law, to firms with lots of connections and little expertise, for which District taxpayers undoubtedly pay a premium.

To be sure, “35%” no longer exists as practiced in the Barry years. For one thing, the Supreme Court struck down a minority set-aside program in 1989, and courts later declared the District’s program to be unconstitutional. In its place was birthed the “LSDBE” program—that’s local, small, and disadvantaged business enterprises—which awards preference points to businesses accounting for various factors; whether their owners live in the District, whether the businesses are located in “enterprise zones,” and so forth. And during the control-board era, the job of actually judging contracts was placed under the control of the independent chief financial officer, providing a certain buffer from politically motivated steering.

But the lottery contract demonstrates that echoes of the Barry way of doing business persist. By the city’s own accounting, there’s no need for Intralot to have dealt with the Williamses in the first place. Both LTE and W2I have the maximum allowable certification as LSDBEs, meaning they get extra points in otherwise open-bid processes. But the lottery-contract scoring, done by the chief financial officer’s shop, went like this: W2I tallied 3,279.7 points to LTE’s 2,645.5 points. W2I outscored LTE on seven of eight technical categories, totaling about 100 points over LTE’s score, and W2I crushed LTE on the price comparison, tallying more than a 500-point spread. The LSDBE preference, however, netted both firms only 360 points, meaning even if Intralot had no local participation whatsoever, it would have won the contract anyway, with plenty of points to spare.

So why even bother with politically problematic “joint ventures”?

Byron Boothe, a government affairs exec with Intralot, says that when his company first decided to go after the District’s business, it tried to get in touch with Manning. That’s because, he says, “we knew that LTE certainly had—respectfully speaking now—a hold on the business....We knew all roads to the contract really led through him.”

The idea was that Manning would either be convinced to drop GTECH for Intralot or, more likely, that he would submit bids with both firms. But Manning never returned Intralot’s calls. “We knew we couldn’t bid it without an LSDBE partner,” Boothe says, and shortly afterward, the Williamses called “out of the blue.”

The proposed nature of the partnership between W2Tech and Intralot is along the lines of the LTE alliance—Intralot handles the tech; the locals the day-to-day operations—though Boothe says that the idea is that at some point, W2Tech would take over more and more of Intralot’s responsibilities, in what Boothe describes as a “learn to fish” sort of arrangement.

Now, hindsight being 20/20, Boothe knows that LSDBE participation wasn’t strictly necessary, but he says that Intralot is sticking with the Williamses. “You always take home the person you brought to the dance,” he says.

But that assumes Intralot decides to keep dancing. If the contract is rebid, Boothe says, his company would lose faith in the process and might not submit again. “When you get to the point where as a government official you don’t like the outcome and you try to change it, that’s not good government,” he says.

GTECH, of course, finds the District’s review of the contracts to be fundamentally flawed; Vincent says he’s confident a challenge that LTE has filed with the city’s Contract Appeals Board will be upheld.

A possible way out of this mess would be to rebid the contract, exempting it from any LSDBE considerations (which the council can do through legislation, though it would be unprecedented). Besides the fact that Intralot might take a hike, there’s two problems with that: Fenty has indicated he intends to resubmit the W2I contract, unmodified, when the council returns from its summer recess. More important, it’s virtually impossible to find anyone in the John A. Wilson Building willing to say that this might be an instance where keeping things local might not be such a good idea.

If there’s anyone in city government who’s taken on the 35 percent mantle, it’s At-Large Councilmember Kwame R. Brown, who’s been a strong supporter of LSDBE set-asides. In 2005, Brown pushed stronger standards on city contracting, including a requirement that all city contracts less than $100,000, with few exceptions, go to certified small businesses. Earlier this year, Brown’s efforts to step up compliance with LSDBE regs pissed off Fenty and business types. So needless to say, Brown hasn’t stuck his neck out on the lottery contract, and he did not return LL’s calls in time to weigh in on it.

In search of outrage, LL also called up At-Large Councilmember Carol Schwartz, who spent much of her career railing against Barry-era cronyism and contracting malfeasance, hoping to get some righteous indignity on the lottery issue. Didn’t get it, honey.

Schwartz says she supports a rebid but declined to take issue with the local partnerships. “Most of us want to see some of our local businesses get some of the local dollars,” she says, saying her only concerns are that there’s an “open competitive process.”

Jeez, where can LL score some outrage—maybe local activist and quotemeister Terry Lynch? “So much money’s at stake, so much integrity’s at stake...I think the public is losing confidence,” Lynch says. “At this point, we need the best team to restore public confidence.”

Close enough!

Political Potpourri

• In shocking-but-not-surprising news (or is it surprising-but-not-shocking news?), upstart Patrick Mara last week won the endorsement of the D.C. Chamber of Commerce’s political action committee over incumbent Schwartz in the Republican at-large primary.

Mara had already won the endorsement of the city’s other main business group, the Greater Washington Board of Trade, and the chamber’s nod solidifies the notion that biz is out to get Schwartz due to her support of mandatory sick leave for District employees (Loose Lips, “Bizzed Off,” 3/14).

LL asked Schwartz, was the fix in? “Very definitely,” she says.

Schwartz says she showed up to her interview last Thursday with a laundry list of her pro-business efforts over the years, including her sponsorship of the perennial back-to-school sales tax holiday—which, Schwartz implored LL to mention, runs until midnight on Aug. 10.

Kelvin Robinson, the former chief of staff to Mayor Anthony A. Williams turned consultant and chair of the chamber PAC, wouldn’t get into specifics of what led to Mara getting the endorsement, except to say candidates are judged “how they best align with the views and the issues the business community cares about” and “their fresh perspective on the issues of the day.”

As far as what those issues are, Robinson cited “level of taxation…and what can we do to stem the tide of excessive regulation that can stymie economic progress in the city,” in addition to general concerns about crime and education.

The sick-leave maneuver wasn’t a total political disaster for Schwartz: She’s been rolling in the union endorsements ever since, with nods from Service Employees International Union locals and the local AFL-CIO organization. The real proof of the fallout from the supposed biz-world abandonment will come Aug. 10, when the next round of campaign-finance disclosures are due. Mara, who raised eyebrows with strong early fundraising, says he’s continuing to raise money, with two fundraisers last week and two more scheduled before the filing deadline.

Mara cited the chamber and Board of Trade nods as further proof of his Republican bona fides, pointing out, “She’s endorsed by SEIU and the AFL-CIO. That just kind of says how we stand on these issues.…That certainly says something to Republican voters.”

Schwartz stands by her lack of ideological purity. “I am a balancer of interests, always have and always will be,” she says, “and I’m very proud of that.”

Got a tip for Loose Lips? Send suggestions to lips@washingtoncitypaper.com. Or call (202) 332-2100, x 460, 24 hours a day.

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