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Wisconsin Lottery does not make vendor pay for mistakes

Nov 28, 2008, 9:28 am

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Wisconsin Lottery

The Wisconsin Lottery has repeatedly declined to seek the maximum amount of damages allowed against a contractor whose technical failures have disrupted ticket sales and operations, records show.

The Lottery has contracted with GTECH Corp. since 1989 to operate its ticket system, including 3,200 terminals at retailers statewide and a related telecommunications network. Under the contract, the Lottery can assess damages when its telecommunications systems fail or tickets cannot be validated.

A Legislative Audit Bureau report released last week found the Lottery declined to assess damages for 12 out of 30 such incidents in the budget year that ended June 30. In some of those cases, the system failures were caused by bad weather, telephone companies or other factors beyond GTECH's control.

But in the 18 instances the Lottery imposed damages against GTECH, they were typically far less than the maximum allowed, records show.

Lottery spokesman Andrew Bohage said the Lottery seeks damages for the amount of revenue it believes it actually lost as a result of GTECH's failures. State law requires the damages be based on losses and not used to punish for bad performance, he said. It would make no sense to seek the maximums for smaller problems, he said.

Revenue Secretary Roger Ervin, whose agency includes the Lottery, said it would nonetheless review procedures for assessing damages against GTECH in response to the audit.

Robert Vincent, GTECH's senior vact, the Lottery could have sought damages up to $77,000.

But the Lottery said it could only demonstrate a loss of ticket sales of between $3,875 and $6,382 based on sales averages during that time in previous weeks. It assessed damages of $4,000.

In the wee hours of Oct. 2, 2007, the failure of GTECH's satellite network caused up to 3,000 terminals to go down, some for as long as 55 minutes. The Lottery could have sought damages of $50,000; it assessed only $300 for estimated lost sales.

Several hundred terminals were down for more than 30 minutes on the evening of Dec. 26, 2007, as a result of interference with GTECH's satellites. GTECH blamed that problem on its satellite vendor. The state could have sought damages of up to $29,000 under the contract but only assessed $3,900.

During several service outages, the Lottery sought no damages because actual ticket sales exceeded the previous weeks' averages. That doesn't mean the Lottery didn't lose sales, however.

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