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PA Lottery backtracks on lucrative advertising deal

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Wednesday, April 18, 2012

Pennsylvania Lottery officials today said they reversed a controversial decision to hire a new advertising agency to handle its $183 million marketing plan.

The lottery is extending its existing contract with South Side-based ad agency MARC USA for one year instead of starting a five-year deal with competing Downtown firm Brunner Inc., said lottery spokeswoman Allison Roberts.

CEO Michael Brunner called the decision "extremely disappointing" and said it caught him by surprise.

His firm announced in March that company officials signed a deal to take over the lucrative advertising contract. Brunner's compensation was slated to be $14,587,500. MARC filed a lawsuit that said lottery officials mishandled the competitive bidding and sought to overturn the decision to hire Brunner.

Lottery officials rejected MARC's complaint.

The Tribune-Review reported on April 5 that a lottery committee awarded the contract to Brunner even though the firm submitted the most expensive bid, out of three bids reviewed, and received the lowest score in a gauge of technical expertise.

Brunner received a higher overall score compared to MARC and another competitor, Philadelphia-based Tierney Communications, because its proposal set aside $5.22 million to hire minority- and women-owned businesses. State agencies refer to such firms as "disadvantaged businesses" and reward contractors for hiring them.

Roberts said lottery officials maintain that MARC's lawsuit is without merit, "but a subsequent review did uncover a few potential issues regarding procedures" followed in the bidding process. She declined to elaborate on the potential issues.

Brunner, the ad agency CEO, said in a statement that procedural errors by state officials, not his firm, caused the change. He said state officials notified the company April 12 that it would terminate the contract "due to errors committed by the commonwealth."

It's unclear if Brunner plans to challenge the decision. MARC will likely drop its lawsuit. "We are working closely with the commonwealth to assure that this matter is resolved to the satisfaction of both parties, and we have been assured that we will be appropriately compensated for the work that we have completed since being awarded the business," Brunner said.

Brunner had planned to hire 25 to 30 employees to work on the lottery account.

Roberts said the lottery decided to extend MARC's contract rather than start a new bidding process because of discussions underway in the General Assembly that could lead to privatizing the lottery's operations. The state Department of Revenue oversees lottery operations.


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