CONTESTED CONTRACT CLAUSE CUT BY CALIF. LOTTERY

Issues Final RFP for $100 Million Worth of Advertising Work

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SAN FRANCISCO (AdAge.com) -- Bowing to advertising agency complaints, the California Lottery has cut a controversial clause from the final request for proposals
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it issued for its four-year, $100 million contract.

The final RFP, issued late Monday, does not include proposed wording that would have made the winning agency legally responsible for defending the state if any other bidding agency protested the decision or sued regarding the contract's final outcome. The original clause drew heavy criticism from agencies, which said it had the potential to bankrupt the account winner.

Previous failures
The lottery's last two attempts to award the contract, beginning in 2001, were abandoned after a series of protests and a threat of a lawsuit from participants.

Lottery CEO Anthony S. Molica said in a letter on the commission's Web site that the final RFP "was constructed with a spirit of showing the advertising community that the California Lottery listened to their concerns and welcomes them to participate in this review." Mr. Molica said the Lottery is "seeking a partner with strong strategic thinking towards our business; innovative creative that is on strategy and inventive media planning and media buying that can stretch budgets."

Jerry Gibbons, executive vice president of the American Association of Advertising Agencies, advised the Lottery on construction of the contract and said the offensive clause was removed after complaints from agencies.

'Inclusive as possible'
"The Lottery has been very responsive to my suggestions," Mr. Gibbons said. "They made every effort to be as inclusive as possible so that all agencies could compete for the business."

Mr. Gibbons said several items in earlier RFPs were "changed drastically" in the newer document, including a drop in the requirement of a $50 million performance bond, which is now down to a $2 million. Performance bonds are typical for state contractors providing materials or services such as construction. Several smaller ad agencies interested in the Lottery business believed they would not have been able to secure a $50 million performance bond.

The Lottery also dropped from the process a points system for rating agencies in favor of a more subjective process similar to that used in the private sector.

Media judging
Another change involved how agencies would be judged in regards to media services, with a chance for shops to demonstrate strategic capabilities.

The Lottery's 95-page RFP's schedule requires interested shops to participate in a mandatory bidders' conference Nov. 21. Intentions to bid are due Nov. 26, with a case study released to agencies Dec. 5. Final proposals are due to the Lottery Dec. 15, with finalists notified Jan. 7. Final presentations are scheduled for Feb. 9-13; the apparent successful bidder is scheduled to be announced Feb. 25, with a final vote by the commission scheduled for March.

The four-year contract carries an optional two-year extension at an additional $25 million per year, bringing total billings to $150 million.

Tangled history
The latest RFP comes after a review that began in 2001 and has ended twice without a final decision. Omnicom Group's DDB Worldwide won the first contract but was knocked out following a protest by Grey Global Group's Grey Worldwide, Los Angeles, the incumbent. A second pitch was called, with Interpublic Group of Cos.' Foote Cone & Belding, San Francisco, named the apparent winner, but protests over stated media costs from Interpublic sibling Initiative Media resulted in a rebid of the media portion of the account. An FCB faux pas on a technicality -- faxing instead of delivering hardcopies of its rebid -- resulted in FCB sibling McCann-Erickson, Los Angeles, being named apparent successful bidder.

Grey, meanwhile, has continued to handle the business on an interim basis pending completion of this review.

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