Panel OKs Lottery's $34.5M Advertising Contract With CJRW

Panel OKs Lottery's $34.5M Advertising Contract With CJRW
Gary Stubblefield

A legislative subcommittee gave a thumbs-up Tuesday afternoon to a five-year, $34.5 million advertising contract to CJRW for marketing the Arkansas Scholarship Lottery. But first, lawmakers got a primer on the limitations they face in reviewing contracts, and Lottery Director Bishop Woosley and State Procurement Director Edward Armstrong got a second earful on conflict-of-interest concerns.

In a roll call, the Performance Evaluation and Expenditure Review/Review subcommittee of the Joint Budget Committee voted 13-4 to give "review" approval to the contract, one of the most hotly contested state advertising jobs in recent memory.

The awarding of the contract to CJRW, which will reap 13 percent of the 77 percent of the budget devoted to media placement, brought official protests from the other two finalists for the work, Mangan Holcomb Partners and the joint venture Ghidotti-Vines. Armstrong rejected both protests, which focused primarily on a perceived conflict of interest in CJRW working for both the state lottery and for longtime client Oaklawn Park.

It was questions over disclosure of the work for Oaklawn, the Hot Springs racetrack and casino, as a lottery competitor that drew exasperation of several lawmakers, including state Sen. Gary Stubblefield, R-Branch, the committee co-chair; Sen. Joyce Elliott, D-Little Rock; and Sen. Jimmy Hickey Jr., R-Texarkana.

The legislators also questioned the role of Esperanza Massana as one of the three judges in the bid-solicitation process, pointing out that she is a former CJRW employee. Woosley said he had chosen Massana knowing that she had worked for CJRW a few years ago, but didn't see that as a disqualifying factor. Sen. Bryan King, R-Green Forest, replied, "To me, that's enough to say, "Wow."

Armstrong sharply defended the impartiality of Massana, who now works for the Arkansas Economic Development Commission.

"It would be unfair to say anything about Esperanza Massana to give the impression that she was unfair or biased," Armstrong said. "I'd like to hope that she wouldn't be off the table [as a judge] because we need her kind of expertise… And if you look at her scoring, her scores rebut the suggestion that she was biased. If you take her scores out, it does not change the results."

The subcommittee was voting on the review for the second time after essentially rejecting the CJRW contract with a vote not to review last Wednesday. The full Joint Budget Committee sent the matter back to the subcommittee for Tuesday's action. 

Before airing more concerns about bid scoring and a conflict-of-interest provision that was ruled to require the disclosure of conflicts only after the granting of the contract, the committee first heard from Marty Garrity of the Bureau of Legislative Research, who drew a restrictive picture of lawmakers' role in the review process.

"Could you explain the specifics of a review, a not-review, and a hold for members who may not understand?" Stubblefield asked. 

Garrity replied that the effects of a review and not-review vote were essentially the same, adding that "a hold is a vote to withhold [a contract] for consideration at another time. A vote for review is a recommendation… a not-review is a technical term, but actually it carries the same weight as a review... but that's the extent of the purview of the subcommittee."

Asked how long the panel could "hold" the contract, she cited a landmark case that held that the General Assembly "cannot withhold review of a contract. It also cannot by its actions or inactions in essence not review a contract." Garrity added that while any contract placed under a hold cannot advance legislatively, a legal argument could be made that the governor's office could move forward with the contract anyway.

Elliott pressed Armstrong to clarify future procurement language to assure that conflicts of interest are revealed "on the front end, rather than after the fact."

Camelot Global Services, a consultant being paid millions for its advice, had listed Oaklawn as a competitor for state gaming dollars in the five-year business plan it drew up for the lottery. In the previous subcommittee meeting, both Armstrong and Woosley said they didn't necessarily see every competitor as a potential conflict.

But on Tuesday, Armstrong gave the senator a personal assurance. 

"Senator Elliott, one thing I can guarantee you, if I'm still in this seat the next time they have an RFP or an RFQ, I will make sure that if they have conflict-of-interest language in there, it will be worded so as to require disclosures as part of the process," he said.

Stubblefield asked about articles in the Arkansas Democrat-Gazette suggesting that CJRW had avoided bidding for lottery contracts in the past because it viewed working for the lottery and Oaklawn as a conflict internally.

Armstrong replied that he had "seen that reported time and again, but I've not seen any attribution. I cannot confirm or deny because I have not heard anything except what I've read in the paper to support that assertion."

Stubblefield said that he wouldn't cast aspersions on the news media, saying reporters were held in higher regard "here than they are in Washington," bringing the biggest laughter of the hearing.

Eventually, Sen. Jonathan Dismang, R-Searcy, moved to draw proceedings to a close, saying that the lawmakers' obligation was to "ensure that the procurement process was properly followed." He said deficiencies in the bid solicitation language should have been flagged early by the competing ad firms. 

"The people who were involved in this process had attorneys, they were well aware … It is critical that at no point, with their attorneys and their expertise, at no point did they object to these provisions," he said.

Dismang called for a vote, which carried with Stubblefield, Hickey, Elliott and Rep. Monte Hodges, D-Blytheville, voting no.

Woosley said in a statement after the meeting that he appreciated the Legislature's interest in the procurement process and "their doing their job to ensure that these contracts are adequately and appropriately reviewed."

Sharon Tallach Vogelpohl, the president of Mangan Holcomb Partners, which handled the advertising work for two years until recently, issued a statement. 

"We sincerely appreciate the time the committee members dedicated to reviewing the contract and the issues with the procurement process. They raised all the right questions. Also, the extended review process resulted at least some savings for the state over the originally proposed compensation structure, which will benefit students and the state annually."

That was a reference to CJRW's accepting a 13 percent media commission after originally proposing a 15 percent commission.

"The next step, per procurement," Vogelpohl said, "is the disclosure of conflicts of interest and we will be acutely interested in how those will be addressed."

Natalie Ghidotti of the joint Ghidotti-Vines venture said she was "disappointed that a clear conflict of interest is still being, in my opinion, ignored," but she wished the lottery luck. 

"My hope is that this whole process has shed more light on a procurement system that needs to be re-examined and improved to better serve Arkansas companies looking to do business with the state," she said.

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