California Lottery in review-yes, for the third time

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[Sacramento, Calif.] The California Lottery Commission is hoping three will be its lucky number.

After a nearly two-year odyssey marked with more hairpin turns than the Pacific Coast Highway, the account is up for grabs a third time. At a meeting of commissioners in the Lottery's Jackpot Room April 18, Commission Director-CEO Joan Wilson announced a new request for proposals for the creative and media contract, currently valued at $125 million over five years, following protests and threats of legal action from ad agency contenders.

All bidders, including the finalists, will be offered a clean slate. Timing of the new RFP, as well as the contract's value and duration-which could change-will be available sometime within the next three months.

Ms. Wilson, in a statement, said that during the 18 months since the Lottery began the process of choosing a new agency, she had "applied the requirements for government procurements to each bidder as fairly and honestly as possible. This is not private industry. Even if it would somehow result in a better deal for the Lottery, I just cannot waive a requirement for one bidder that would disadvantage another."

In the statement, she put the responsibility for the long-running review's difficulty on the agencies needing to "understand the higher standards involved in government contracting," particularly as they relate to disclosure of ownership. In an interview, she shunted aside criticism of the Lottery's lengthy review, saying "the Lottery always has to take into account the integrity of its process."

Grey Global Group's Grey Worldwide, Los Angeles, was awarded the account in 1997. In 2001, the Lottery put the four-year, $100 million business into review, later naming Omnicom Group's DDB Worldwide, Los Angeles, as its winner. Grey protested, arguing that DDB failed to disclose ownership of its media-buying arm, OMD. The Lottery then decided to conduct a second review, this time upping the ante to a five-year, $125 million contract.


Interpublic Group of Cos.' Foote, Cone & Belding Worldwide, San Francisco, was named apparent winner of the second review, but DDB, in letters from its attorney, characterized FCB's media-cost proposal as "lowball." Following an independent review by Deloitte & Touche, the Lottery decided there was no way to fairly compare the agencies' media bids.

Finalists Grey, DDB, FCB and Interpublic's McCann Erickson Worldwide, Los Angeles, were invited to place another bid for media only. DDB and Grey refused, alleging that the scores from creative and other aspects of the review were such that mathematically only FCB could win.

FCB faxed instead of hand-delivered hard copies of its media bid, resulting in disqualification. Last-place contender McCann was then named apparent winner, with the Commission vote finalizing the decision scheduled for last week.

DDB protested, noting that McCann failed to disclose ownership of Universal McCann, falling into the same disclosure quagmire that resulted in DDB's disqualification in the first round. McCann then countered, in documents filed with the commission, that DDB and Grey colluded in deciding not to file the media rebid (AA, March 31).

The result was last week's announcement declaring the entire process void. During the meeting, Michael S. Brockman, a Los Angeles TV executive who oversees the commission's marketing affairs, called on the Lottery to bring in an independent advertising industry expert to consult on the process. No decision was made on his recommendation.

Through a spokeswoman, the Lottery's legal counsel declined to comment on whether he would pursue the collusion allegations from McCann as well as other issues raised by the contenders.


Executives of the four competing shops declined to comment on the review. At least two of the finalists indicated they are considering participation in the next round.

The whole debacle has frustrated both participants and observers. "I'm upset as a member of the advertising agency community" over the Lottery review process, said Jerry Gibbons, exec VP, American Association of Advertising Agencies, based in San Francisco. "But I'm more upset because I'm a taxpayer."

contributing: claire atkinson and lisa sanders

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