The Pennsylvania Lottery said it has selected Scientific Games (SG) and a Canadian firm, Pollard Banknote Ltd., to serve as its primary and secondary suppliers of instant tickets for the next decade. The Lottery also picked SG as its provider of lottery gaming system services through 2031.
According to the records in the contract library of the Pennsylvania Treasury Department, the three contracts each have 10-year base periods, with two optional two-year renewals. They are together worth $766.4 million for the base period and $1 billion with the optional four years tacked on.
The state’s Department of General Services (DGS) issued a request for proposals for instant lottery game services and lottery gaming system services. DGS subsequently evaluated the proposals received and picked SG and Pollard “after a competitive procurement process,” according to the Lottery.
“During this procurement process, we sought a modern lottery solution that provides the best overall value for the Lottery and for the Commonwealth,” said Pennsylvania Lottery Executive Director Drew Svitko. “By realizing the benefits of new and emerging technologies, with the highest level of integrity and security, the Lottery can ensure funding for programs that benefit older Pennsylvanians for many years to come.”
Supplier contracts
Final negotiated cost documents attached to both supplier contracts show the companies will collectively be paid $323,973,000 over the base 10-year period of the contracts. If the contracts are renewed for an additional four years, they will make $107,892,000 during that time frame, for a final total of $431,865,000. Commissions are to be paid on a monthly basis.
Both documents project that gross instant ticket sales will total $2.7 billion annually, both during the 10-year base period and the four years for optional renewals.
According to SG’s primary supplier contract, the Lottery will pay 0.61% in commission per ticket sale during the base period, for a total of $164,673,000. The commission rate falls to 0.41% for the renewal years, equating to $44,172,000, for a final contract total of $208,845,000.
Meanwhile, under Pollard’s secondary supplier contract the Lottery will pay a commission of 0.59% through both the base period and the optional renewal. That equates to $159.3 million is commission for the base period, $63,720,000 for the renewal years and $223,020,000 in total.
Services contract
SG’s lottery gaming system services contract also includes a final negotiated cost document. It shows that the company will be paid 0.88% in commission for instant ticket sales and 0.24% for terminal-based games during the 10-year base period, for a total of $270,255,000. The Lottery will pay SG an additional $73,112,487 if the contract is renewed for four years, which totals $343,367,487.
But the Lottery will also pay for equipment — specifically, self-service vending equipment for both instant and terminal-based games. The contract estimates that equipment costs will total $172,177,100.71 during the base period and $52,725,751.42 for the renewal years, for a total of $224,902,852.13.
Combined, SG stand to make $442,432,100.71 in commissions and equipment costs during the 10-year base period and $125,838,239.42 for the renewal years, for a grand total of $568,270,340.13.
The lottery gaming system services contract also requires SG to produce 12 interactive second-chance promotional games per year and 16 second-chance drawing promotions per year.
