Executives Say Bidding Agencies Didn't Follow State Guidelines

By Published on .

A correction has been made in this story. See below for details.

SAN FRANCISCO ( -- Media buying issues have cause one, and possibly two, California state advertising contracts to come under scrutiny.

The California State Lottery on Monday announced it is holding a new review for its four-year, $100 million advertising account. Meanwhile, the state Department of Health Services is embroiled with Aegis Group's Carat USA regarding the media portion of the account awarded to Ground Zero in 2000.

Win protested
In January, California

Related Stories:
Selected for $100 Million State Lottery Advertising Account
lottery awarded Omnicom Group's DDB Worldwide, Los Angeles, its creative and media contract. Grey Global Group's Grey Worldwide, Los Angeles, the incumbent, protested the win, charging DDB did not reveal it would buy media from Omnicom sibling OMD.

Joan Wilson, director of California lottery, yesterday wrote to advertising agencies involved in the pitch to say that while she had dismissed Grey's allegations, she was calling for a new review because both DDB and Grey failed to comply with state regulations requiring agencies to disclose the names of officers and directors and other information related to their media partners.

'Frustrated' by review
Despite its complaint against DDB, Grey, though it disclosed it would be working with sibling MediaCom, apparently also did not reveal the names of the media shop's executive corps.

Grey had no comment.

DDB CEO Dave Park said he was "obviously frustrated" by the commission's decision because the owners and shareholders of OMD are essentially the same as those of DDB. He said his agency won the pitch on merit, while the decision to scrap it was made on a technicality.

"Although I considered obtaining all of the omitted disclosures and, depending on background checks, making an award, the statute clearly requires disclosures at the time of bid submission," said Ms. Wilson. "I believe it is in the best interests of the lottery to exercise my discretion" and begin the process again.

DDB, Mr. Park said, will gladly repitch the account.

Lottery marketing director Jim Hasegawa said the requests for proposals would be available within about a month.

History of disputes
Disputes over the lottery account have a long history in California. In 1992, Interpublic Group of Cos.' Dailey & Associates, Los Angeles, sued the state body for illegal termination of contract when the account as awarded to WPP Group's J. Walter Thompson, San Francisco. The suit was settled out of court.

Meanwhile, the Department of Health Services has been challenged on another media-buying issue by Carat USA.

The media-buying shop said it had partnered and helped independent Ground Zero win the five year, $125 million anti-smoking account in August 2000. But after Ground Zero won the account, it established its own media-buying operation to handle the business.

A spokesman for the department said that complaint is still under review.

$400 million in state contracts
Overall, California awards an estimated $400 million in advertising and public relations contracts each year.

"California needs to get real on how they do these things and follow a private-sector model, and even should consider hiring professional review consultants for the process," said Jerry Gibbons, executive vice president of the American Association of Advertising Agencies.

California is not alone in its wrangles over state contracts. Issues also have arisen in Pennsylvania and New Jersey among other states.

~ ~ ~

CORRECTION: An earlier version of this story incorrectly reported that Grey did not disclose it would be working with MediaCom. The text above has been corrected to reflect that Grey did report that fact but did not reveal the names of MediaCom's executive corps.

Most Popular