CJRW's triumphant bid for the Arkansas Scholarship Lottery's $34.5 million marketing and public relations contract, which stirred great interest earlier this month in the Little Rock advertising world, has now drawn a formal protest from a competitor.
Ghidotti-Vines, a partnership of Natalie Ghidotti of Ghidotti Communications and Brooke Vines of Vines Media LLC, made its protest in a letter dated Dec. 14 and hand-delivered to Bishop Woosley, director of the Office of the Arkansas Lottery.
The letter, drafted by Alex T. Gray of the Steel Wright Gray & Hutchinson law firm of Little Rock, contends that CJRW did not disclose in writing that it represents a lottery competitor, Oaklawn Park, violating provisions of the state's bidding process requiring the disclosure of any conflicts of interest.
"We did file a protest yesterday, and will wait to hear back on the next stage of the process," Ghidotti said in an email to Arkansas Business on Thursday.
More: Read the complete protest letter here.
Spokesman Jake Bleed of DF&A said in an email that the state had received a protest and that Procurement Director Edward Armstrong will "provide a determination of that protest at the appropriate time." Until he does, "it'd be inappropriate for us to comment on it."
CJRW's Gary Heathcott, who was involved in the winning agency's presentation, said after the winning bid was announced that he couldn't comment during a 14-day window for protests, but he said in November that neither the lottery nor Oaklawn considered working for both entities to be a conflict of interest, and an Oaklawn spokesman, David Longinotti, confirmed that CJRW had the racetrack's blessing to double up.
But Gray's letter, which asks Woosley to disqualify CJRW and grant the five-year contract to Ghidotti-Vines, the second-highest scorer in the judging, argues that the lottery office itself required listing Oaklawn as a competitor for the purposes of conflict-of-interest disclosure in an addendum to its bid request.
Addendum 1 says that "vendors may use the list of competitors identified in the OAL's 5 Year Business Plan in determining potential conflicts of interest." That plan mentions Oaklawn as such a competitor. The letter went on to cite several news items from the Arkansas Democrat-Gazette and Arkansas Times describing Oaklawn's competition with the lottery for state gaming dollars.
"CJRW never disclosed in writing any conflicts of interest in its response to the RFQ," Gray's letter said, referring to the shorthand for the formal name for the bid-request document, a Request for Qualifications. "Therefore, because CJRW was required by Section 2.5H of the RFQ to disclose in writing any existing or potential conflict of interest and because it failed to do so, CJRW's response to the RFQ must be disqualified…"
Sharon Vogelpohl, president of Mangan Holcomb Partners, the other contract finalist and the agency that has handled lottery marketing work for two years, agreed with Ghidotti's conflict-of-interest concerns.
"There is a clear and significant conflict of interest between Oaklawn and the lottery that needs to be addressed," she said. "It's not in the best interest of the state or the program to have the primary competitor identified in the Camelot Global strategic plan working as an 'insider' on strategy and execution of marketing plans for the lottery."
The state hired Camelot Global, a London-based consultancy, to create a five-year plan to grow the lottery's revenue. The state is paying Camelot $3 million plus incentives for strategic advice.
Asked if Mangan plans to file a protest, Vogelpohl said her firm is still evaluating information acquired through freedom-of-information requests while staying focused on finishing the year strong for the lottery to benefit scholarship funds. Numbers reported this week for November showed that the lottery experienced a $4.3 million increase over last November.
CJRW's winning marketing presentation focused on "strong brand positioning and equity, heightened awareness of and support in leveraging new opportunities, a highly engaged target constituency, and highly innovative approaches to public education and outreach."
The lottery, which has awarded millions in college scholarships to state students since it was authorized by the state Legislature in 2009, recorded sales of $456 million in the last fiscal year, up 12 percent, and had revenue of $140.5 million in the first four months of the current fiscal year.
Camelot's plan envisions revenues of $463 million this year, $517 million in fiscal 2018, and up to $614 million by 2021.
A discussion reviewing the marketing contract was scheduled for Thursday's meeting of the Arkansas Lottery Oversight Subcommittee of the state Legislature, but the item was pulled from the agenda, apparently in response to the protest letter.
After the procurement office announced CJRW's victory on Dec. 6, Ghidotti pointed out arithmetic and tabulation errors in score sheets judges used in assessing the three agencies' proposals, though she noted that none of the discrepancies would have altered how the agencies finished. CJRW was first, followed by Ghidotti-Vines and Mangan Holcomb.
The panelists judging the presentations were Joe David Rice of the Arkansas Department of Parks & Tourism, Donna Bragg of the Arkansas Scholarship Lottery and Esperanza Massana of the Arkansas Economic Development Commission.
The lottery was responsible for selecting the judges, Bleed said.
Heathcott expressed annoyance last week after Arkansas Business reported that CJRW is the longtime advertising agency for Parks & Tourism, which has announced that its $15 million a year contract will be open for bids in March, and that CJRW also has the AEDC as a client.
He pointed out in an email that Mangan Holcomb also does work for Parks & Tourism as well as AEDC, and argued that a mention of that business should have been included in the report.
Vogelpohl confirmed Thursday that her agency "proudly" represents the Keep Arkansas Beautiful Commission, which she described as an independent entity that has an administrative tie to Parks & Tourism. The budget for fiscal 2017 is $354,000.
Vogelpohl added that of the three separate contracts granted earlier this year by the AEDC, Mangan's affiliate company, Team SI, competed for only one, digital marketing; CJRW won the other two, a $550,000 per year contract for marketing and branding, and a $350,000 per year deal for public relations.
Vogelpohl said Team SI's digital marketing contract is for $550,000 in the 2017 fiscal year, and that Team SI employees do not report to either Massana at AEDC or to Rice at Parks & Tourism.