March 23, 2010

$800 million slot machine contract delayed by BPW

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By Andy Rosen
Andy@MarylandReporter.com

The state put off approval Wednesday of an $800 million contract that would allow officials to begin ordering the 15,000 slot machines that could eventually be installed around Maryland.

The Board of Public Works delayed action on a contract that would authorize nine companies to compete when the state either buys or leases batches of slots, citing concerns about whether there had been proper review of the nearly $60 million the state would likely borrow to get the machines in the next two years.

Comptroller Peter Franchot also raised concerns that the state hadn’t put aside the money for the machines before the contract came before the board of public works. The matter is expected before the BPW again in two weeks.

“I don’t think the state of Maryland should be entering into unfunded contracts,” he said. “I think it supersedes the budgetary authority of the General Assembly.”

One of the companies in the contract, New Brunswick-based Spielo Manufacturing, is owned by GTECH Corp.

Previous contracts for GTECH have been controversial, including a decision last year to hire the gaming contractor to help design and operate the central computer system for the state’s slot machines.

The Baltimore Sun reported in December that the company had been investigated for bribery and kickbacks as far back as the 1990s. An internal review of the computer contract found no wrongdoing.

During the bidding for the slot machines, the state changed the rules that prohibited companies from both operating the computer system and providing terminals. The Gazette reported last year that such an arrangement had previously raised concerns.

The issue before the BPW, made up of the governor, comptroller and the treasurer, is a so-called “master contract.” It selects companies that can provide slot machines. If the proposal wins approval, the state will be able to spend $600 million on slots over five years. A five-year extension could add another $200 million to the cost.

The Maryland Lottery Commission, which manages the slots program, plans to spend less than that. According to documents filed with the board, the nine companies will compete for the business on each batch, and the cost can’t exceed that maximum price.

Under state law, the commission acquires the machines to be used by the operators of the slots locations.