No Contract, No Conflict: Logic of a Lottery Ad Bid

No Contract, No Conflict: Logic of a Lottery Ad Bid
Sharon Tallach Vogelpohl

Natalie Ghidotti was fired up the morning of Jan. 5, fighting the urge to say too much.

The Little Rock PR exec was angry but amused, caught up in a wrangle over a $34.5 million marketing contract for the Arkansas Scholarship Lottery that has been the talk of the Arkansas advertising world for weeks.

She had been disappointed days earlier when she protested rival firm CJRW’s provisional success in winning the five-year contract, rejected on technical grounds that Ghidotti saw as dubious.

State Procurement Director Edward Armstrong found she had no legal standing to protest because her joint venture seeking the contract wasn’t a distinct legal entity and was ineligible, even though Ghidotti had finished just behind CJRW in the judging. The conclusion was that Ghidotti Communications’ joint venture with Vines Media LLC did not constitute a single prime contractor and was thus an unfit bidder.

“If they really didn’t think we qualified — which is wrong because by state law a joint venture is a legal entity — why did they name us a finalist and invite us to make an oral presentation?” Ghidotti asked. “That meant a lot of time and money to our agency.”

On Thursday, Ghidotti said she was planning to meet with Armstrong, possibly on Friday, to hear more on his reasoning on the disqualification.

She also hoped to hear more from Armstrong on why he had not addressed the main thrust of her protest — that CJRW had not disclosed that its marketing work for Oaklawn Park might be a potential conflict of interest in serving the Arkansas Scholarship Lottery. The lottery’s consultant, Camelot Global Services, had cited Oaklawn as a competitor for state gaming dollars.

Armstrong did deal with the conflict issue in his response to a separate protest by Mangan Holcomb Partners, the Little Rock ad firm that has handled lottery marketing for more than two years.

Armstrong rejected Mangan’s conflict objection, using legal logic that stunned both Ghidotti and MHP President Sharon Tallach Vogelpohl. He ruled that CJRW had not violated the bidding process because only a “successful vendor” must disclose potential conflicts. Since no contract had yet been awarded officially, there was no successful vendor, just an “anticipated successful vendor.”

Vogelpohl put it this way: “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 …”

Saying that she was “more than disappointed,” Ghidotti agreed. “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 ... why would we be scored on this and why would it be addressed in the RFP [request for proposals] documents?”

Ghidotti said she hoped to persuade Armstrong that her joint venture, formed before the bidding process, did have “the authority to work as one prime contractor under Arkansas state law.”

Armstrong’s finding that conflicts must be revealed only after a contract is issued puzzled several other Little Rock ad professionals, who raised questions: What exactly constitutes a “successful vendor, and if a potential conflict is to be revealed after a contract is issued, how will that conflict be handled?

Armstrong’s letter to Vogelpohl on Jan. 5 said that “once a vendor becomes the successful vendor (by being awarded a contract), then [the vendor would have] an ongoing duty to disclose, in writing, any conflict of interest.” A footnote indicates that the judging of any conflict-of-interest disclosure would hinge on assessing the “incompatibility” of an agency’s plan to serve both the lottery and other clients.

Armstrong said the Office of the Arkansas Lottery, now part of the Arkansas Department of Finance & Administration, will judge an agency’s ability to prioritize its services to the Lottery over the needs of other clients by applying its “sound business judgement on a case by case basis.” He added that “unless the competing demands of another client actually are directly adverse so as to render the successful vendor incapable” of giving the lottery the service it requires, “there is not an incompatibility that arises merely from having multiple clients in the same market.”

In other words, the lottery will know a conflict when it sees one.