Penn. Ready to Award a Slots Monitoring Contract

HARRISBURG, Penn. - In the coming days, the state is expected to award a multimillion-dollar contract for an elaborate computer system to monitor the proposed 61,000 slot machines at 14 locations across the state.

The contract will be a key component in the state's effort to establish slot machines during the next two years.

In addition, the so-called central-control system itself is controversial in the casino industry. Gaming operators don't like it, instead preferring a system that watches but does not control slot machines.

But Pennsylvania lawmakers required such a system, saying it would ensure that the state is on the leading edge of slot-machine technology and would allow more regulatory control because it can turn off any slot machine in the state with the touch of a button.

Last week, the state's Revenue Department, which is responsible for buying and running the system, said it had narrowed the list of competing companies from 10 to two.

One is Scientific Games Corp., which has long been considered the front-runner. It has run portions of the state lottery for 27 years and operates 10 of the central-control systems used in 17 other states.

The New York-based company also has formed business ties recently with a large slot-machine manufacturer that had a significant behind-the-scenes role in helping get the Pennsylvania gaming law passed last summer. It also lobbied for the inclusion of a central-control system.

The second bidder is GTECH Corp., an international lottery company based in Rhode Island, with yearly revenue of more than $1 billion.

What the companies are competing for is the contract to install and operate, for five years, the state's central-control system, which would record -- from Harrisburg -- how much money each slot machine takes in and how much of that revenue would be turned over to the state.

While the exact cost of the contract is not known, its worth would likely be in the tens of millions of dollars because the company would receive a fraction of a percentage of every dollar the slots take in.

But if Scientific Games wins the Pennsylvania contract, a beneficiary could end up being the company with which it has the new alliance, International Game Technology, already the world's largest slot-machine supplier.

Under their relationship, the two companies have agreed to exchange technical information, including Scientific Games' using proprietary computer language developed by International Game Technology that dictates how slot machines send data to each other.

As a result, industry experts say, International Game Technology slot machines would be able to interact with the central-control system more efficiently than competing machines and offer more options, such as detailed information on the activities of slot-machine gamblers, for less.

Both Scientific Games and International Game Technology said that the arrangement offers them no advantage but that it would help their customers by providing a better control system and better slot machines.

No slot-machine manufacturer has yet received a license from the state gaming board to sell machines in Pennsylvania.

International Game Technology has been working for years behind the scenes to help Pennsylvania lawmakers approve a gambling law. Company representatives met frequently with lawmakers to offer advice on the bill's wording and even ferried Senate staff members to gambling conferences. It has donated money to their campaigns and $125,000 to a national committee run by gambling supporter and House Democratic Whip Mike Veon (D., Beaver).

Most of that lobbying occurred when International Game Technology owned Automated Waging Inc., a company that makes central-control systems. In December 2003, International Game Technology sold the company to Scientific Games and stopped lobbying for the system. By then, bill sponsors said, they had already agreed to the central-control provision.

Last month's announcement of new ties between International Game Technology and Scientific Games surprised some lawmakers and even Gov. Rendell, who had met privately with the company in November 2003 to discuss the central system during a gambling conference at Mountaineer Raceway in West Virginia.

As Rendell left the meeting, he assured reporters that International Game Technology had no interest in supplying the computer system and noted that the company had recently sold off the division that made the systems for Scientific Games.

But after reassuring Rendell, lawmakers and bill writers that it had no interest in the central-control system, International Game Technology reversed course in January, announcing its alliance with Scientific Games.

At least one other bidder for the computer system is opposing the selection process, alleging that the Revenue Department did not fairly consider its proposal. While the gambling law, in the interest of time, exempted the state from following standard bidding procedures, the Revenue Department followed many of the guidelines for competitive bidding.

The company, Utilistar Process Automation, which supplies a type of central-control machine overseeing 20,000 machines in Louisiana, protested the bid process, saying revenue officials failed to research alternatives to the central system, failed to ask enough questions of the vendors, and did not properly evaluate the company, according to a letter dated Jan. 27 that they sent to Revenue Secretary Gregory Fajt.

"It seemed to us like they had made their mind up ahead of time," said Geoff Humphreys, Utilistar's founder and vice president.

Revenue Department spokesman Steve Kniley said of Utilistar's complaint: "You can't protest something that hasn't happened yet."