Lottery lobbies for consultant hire in incentive-based deal

The Arkansas Lottery wants to hire Camelot Global Services as a consultant to develop a business plan, and to help it increase ticket revenue and net proceeds for college scholarships, lottery Director Bishop Woosley told lawmakers Thursday.

He said the lottery has proposed a performance-based contract with Camelot Global Services, which has offices in Philadelphia and London.

Camelot Global Services' expenses would be paid with part of the lottery's savings from renegotiations of the lottery's other vendor contracts. It also would be paid between 12.5 percent and 15 percent of the lottery's net proceeds beyond $72.3 million a year, depending on the level of net proceeds, Woosley told the Arkansas Legislature's Lottery Oversight Committee.

He said the lottery is proposing a five-year contract with Camelot Global Services with two one-year contract extensions available, based on negotiations that included the lottery's legal counsel, Jean Block; Carlton Saffa, an aide to Gov. Asa Hutchinson; and Woosley.

State Sen. Jimmy Hickey, R-Texarkana and co-chairman of the committee, asked for more details, so the committee can complete its review of the proposed contract soon. He said he wants to make sure the committee exercises "due diligence."

In September, the Arkansas Legislative Council voted to hire Camelot Global Services to review the lottery's operations and make recommendations, without taking bids at Hickey's request.

Camelot Global Services subsequently received $169,500 from the Bureau of Legislative Services for its work. The Capitol Advisors Group lobbying firm of Bill Vickery and Mitchell Lowe represents Camelot Global Services, according to the firm's lobbyist registration.

Lottery revenue and net proceeds raised for scholarships have dipped each of the past three fiscal years. The lottery raised $72.4 million for scholarships in the fiscal year that ended June 30, a $9 million drop from the previous fiscal year.

More than 30,000 college students have received lottery-financed scholarships during each of the past five fiscal years. The Legislature has cut scholarship sizes three times for some future recipients.

Woosley told the committee that Camelot Global Services, Delehanty Consulting LLC and QLot Consulting responded to the state Office of Procurement's June 15 request for qualifications, and an evaluation team scored Camelot Global Services higher than the others.

Delehanty Consulting LLC is based in Verona, Wis.; QLot Consulting has offices in Topeka, Kan., and Sweden, according to their websites.

Woosley said the proposed deal with Camelot Global Services "would serve the state best" because it would allow the company to "dedicate full resources to the state and have a significant amount of time to implement the changes and realize those changes and continue to move in response to market trends and consumer demand."

He said Camelot Global Services would help the lottery in negotiations of contracts with the lottery's other vendors, and 50 percent of the savings from contract renegotiations will be sent to scholarships.

The other 50 percent would be placed into a growth fund to pay for "any expenses that they have and ... will also serve as a fund that we will be able to, at their discretion and with [state Department of Finance and Administration Director Larry] Walther's approval, use to invest in the lottery and do studies and do things that will encourage growth based on the recommendations of Camelot," Woosley said.

"We've heard over the years that some of [the lottery's vendor] contracts were less than perfect, and we are still doing some repairs from prior years and, as we can lean up our contracts, that's going to yield money," Saffa said.

Hickey said he wants more details about the growth fund.

"Personally, I need a little more time to digest that," he said. "You all may have come up with a great idea. I just think that good business would require this stuff be in writing, so we know what it is going on."

Under the proposed contract, Camelot Global Services also would be paid 12.5 percent of any gains in net proceeds beyond $72.3 million up to $80 million a year, 13.75 percent of any gains in net proceeds above $80 million and up to $90 million a year, and 15 percent of any gains in net proceeds above $90 million a year, Woosley said. The $72.3 million figure is based on the lottery's last 12 months' returns, he said.

Sen. Joyce Elliott, D-Little Rock, questioned whether the contract is "commensurate with what is the norm in the industry or is this something different that we are doing in Arkansas."

Woosley said the proposed contract with Camelot Global Services is in line with "what's the new norm" in the lottery consulting industry.

"If they don't spur growth, they don't get paid, and that puts the burden on them to come up with strategies that will work within this state," he said.

Metro on 08/21/2015

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