The Office of State Procurement has rejected the second of two rival protests to the award of a five-year, $34.5 million contract to Little Rock advertising agency CJRW to market the Arkansas Scholarship Lottery.
Procurement Director Edward Armstrong on Thursday rejected a protest by Mangan Holcomb Partners of Little Rock, two days after rejecting a similar protest by Ghidotti-Vines, the joint venture that finished second in the bid solicitation process. The decisions ostensibly clear the way for CJRW to claim the contract.
Both protests hinged on allegations that CJRW had erred in not listing its marketing work for Oaklawn Park, the Hot Springs horse racing track and casino, as a potential conflict of interest in promoting the lottery. The lottery's own business plan had listed Oaklawn among its competitors for gaming dollars in Arkansas.
But in a letter dated Thursday to Jane W. Duke, the lawyer for Mangan Holcomb, Armstrong said that under his reading, the bid solicitation process requires the winning vendor to disclose conflicts only after it has been awarded the contract. The Office of the Arkansas Lottery is seeking a vendor for advertising, marketing and public relations services.
In rejecting the protest by Ghidotti-Vines on Tuesday, Armstrong did not address the conflict of interest objection, finding only that the joint venture between Natalie Ghidotti of Ghidotti Communications and Brooke Vines of Vines Media LLC did not "even appear to exist as an entity" and thus was ineligible under state rules requiring "a single vendor" to be identified as the prime contractor."
Armstrong offered no explanation for why the Ghidotti-Vines submission was not judged as faulty earlier in the process.
The decision rejecting Ghidotti-Vines upheld one section of the Mangan protest, which sought to have both CJRW and Ghidotti-Vines disqualified, but Armstrong found against Mangan on the merits of its protest involving CJRW's work for Oaklawn, a client since the 1970s.
He wrote that CJRW had received the highest total score assigned to the competitors and that it "appears reasonably susceptible of being selected for award." He added that he was not convinced that CJRW failed to meet requirements by failing to note its representation of Oaklawn as a potential conflict.
The duty to disclose a conflict falls to the "successful vendor," he wrote. "Given its plain and ordinary meaning… 'successful vendor' means the vendor who succeeds in being awarded the contract."
Since the contract hasn't yet been awarded, there is not yet a successful vendor, but "only an anticipated successful vendor."
The letter said that once the contract is awarded, "that vendor will have an ongoing duty to disclose, in writing, any conflict of interest" to the Office of the Arkansas Lottery "within 15 days of learning of such incompatible obligations."
The letter also rejected assertions in the Mangan protest that statements by CJRW representative Gary Heathcott to Arkansas Business had violated terms of the bid solicitation process. The Whispers column of Nov. 21 quoted Heathcott as saying that "the lottery didn't see it as a conflict and neither did Oaklawn; we asked specifically at the outset, and before we went forward, we sought approval from both sides."
Armstrong concluded that Mangan Holcomb could not have been aggrieved by those actions because "nothing in the protest nor in the Arkansas Business article shows or indicates that they affected the outcome of the evaluation in any way, or that they provided CJRW with some unfair advantage in connection with the solicitation."
The controversy over the contract has captivated the Little Rock advertising world for weeks, and CJRW's apparent triumph comes months before its longtime contract with the Arkansas Department of Parks & Tourism, the state's largest piece of marketing business at almost $12 million a year, comes up for review.
Heathcott called the rejection of both protests "very exciting news," but said CJRW was still bound by instructions that the competitors make no formal comment until an agreement has been executed between CJRW and the Arkansas Scholarship Lottery.
"The process of securing legislative approval is the next step in the process and we believe the terms that we offered will be readily accepted, as they save the state hundreds of thousands annually," Heathcott said.
Sharon Tallach Vogelpohl, president of Mangan Holcomb Partners, said she's discussing the decision with counsel.
"We do not agree with the idea of not addressing a clear conflict of interest until after a $34.5 million state contract is signed and don't completely understand the logic and rationale on which the decision is based," she said.
In a statement, Natalie Ghidotti said she is "more than disappointed" in the procurement office's response to the conflict-of-interest issue.
"It's been widely documented that CJRW has a conflict with the Lottery with its Oaklawn client, and Mr. Armstrong's logic in refuting this is flawed. As respondents to the RFP, we were specifically asked to disclose any conflicts of interest and even scored on this as part of the process. If this issue doesn't matter until after a state contract is awarded, as Mr. Armstrong states, then why would we be scored on this and why would it be addressed in the RFP documents? It makes no sense that a $34.5 million contract would be awarded to a contractor and only after the fact a conflict of interest would be disclosed. That is most definitely a flawed system if that is indeed the case."
She also called Armstrong's assertion that Ghidotti-Vines is not an existing entity "false."
"Our joint venture, formed prior to this bidding process, has the authority to work as one prime contractor under Arkansas state law," she said. "Either Mr. Armstrong failed to understand this or didn't want to, but Ghidotti-Vines is indeed a legal entity that was not only named a finalist in this process, but was also awarded the second highest score.
"As a legal finalist, our protest should have been heard, and it wasn't. That means we will have to pursue other avenues to ensure it is heard."