I thought the New York Racing Association’s Reorganization Board on Monday finally began to exhibit indications that it will be taking a meaningful oversight role over NYRA and New York’s racing. I have described previous meetings of the body as desultory, but we witnessed a spirited discussion on a contract award to the Global Betting Exchange that even resulted in the first vote by the new Board that had dissenters.
The GBE contract is intended to enhance NYRA’s advance deposit wagering system. It resulted from a procurement begun in 2011 that ended up with the “old” NYRA Board approving a contract award in August, 2012. The contentious debate began with reservations expressed by Robert Megna, a Board member but also Governor Cuomo’s Budget Director. He conveyed the concerns of the Franchise Oversight Board – an entity with responsibility for overseeing NYRA’s finances as well as its adherence to procedures for awarding contracts – that NYRA did not follow its own procedures in making the award to GBE. According to Megna, the FOB has “serious reservations about the bidding process.”
While the ensuing discussion may have been spirited, it shed more heat than light on the matter. Several members, including those on the Board’s Audit Committee, stated that it was the first time they had heard concerns from the FOB about the process for awarding the contract. If a consensus emerged, it was that while the FOB may have communicated their concerns to prior NYRA management, their issues never made it to the Board, particularly the Audit Committee charged with ensuring that such screw-ups do not happen. We even had one Board member commenting that it was important to uncover who said what to whom, and when.
Perhaps such an inquiry can be expedited if Board members go back and review their notes from prior meetings. At the initial meeting of the Board on December 12, one member raised the “account wagering” matter as something that had to be addressed immediately. This prompted Board Chairman David Skorton to direct Acting CEO Ellen McClain to make a report by Christmas of all issues “hanging fire,” specifically including the account wagering issue. (This report was apparently never done.) At the next meeting on January 25, the meeting minutes indicate that the matter of the contract was “discussed and deferred.” During the third Board meeting on February 27, McClain informed the Board that the FOB had questions regarding the “decision-making process” leading to the selection of GBE and had asked the Board to examine the contract award. She further informed the Board that she had looked at the process again, was comfortable with it, and referred to GBE as offering “killer technology.”
At the Board’s fourth meeting on April 11, there was a more extended discussion of the GBE contract award. McClain distributed a written report at the meeting which at least two Board members said answered the questions that needed to be answered and that the selection process was a good one. Chairman Skorton emphasized that the Board should proceed at its own pace, in part because the McClain report had been delivered recently and partly because of the FOB concerns. When Board member Megna was asked what his concerns were, he said the question was whether NYRA had followed its own procedures in awarding what he described as a sole source contract, and that the FOB had other questions that needed to be answered. While Megna did not specify those questions, he thought the contract could move forward once they were addressed. Chairman Skorton then announced he would convene an ad hoc committee that would review the FOB concerns, address them, and then move forward. He assured the Board at the April meeting that there would be no need to wait for the next Board meeting before taking action on the contract.
It was, therefore, surprising to listen to the discussion at the June 10 meeting by Board members purportedly being blindsided at learning that the FOB had questions about the process used to select GBE. While Bob Megna stated that it was not a new issue and that FOB had been raising it, his statements carried little weight with the Board, although one member did state that these were issues that had been discussed at prior meetings. While most members had no recollection of the prior discussions – including Skorton’s commitment to an ad hoc group that would resolve the matter – there was no hesitancy in affixing the blame on prior NYRA management, which can only mean Ellen McClain. When one Board member lamented the fact that this Board was now a governmental body and it is not how government acts, I had to laugh – as a former long-time government employee. It is precisely how government all too often acts. When you mess up, blame those who are no longer there to explain themselves.
So here is what was decided at the meeting: the FOB will be asked to provide a written explanation of their issues with the GBE selection “within 48 hours;” and, the Board will execute the GBE contract unless the FOB memo points out “substantial variance” from NYRA’s procedures on procurements. You do not need to have attended law school to realize that a standard of “substantial variance” means this dispute is going to continue, since the state’s oversight agencies – not only the FOB but the State Gaming Commission, whose Acting Director chairs the FOB – will not be satisfied unless the award is cancelled.
It may be difficult to come up with a more glaring example of the effect on New York’s racing from a lack of leadership than this one. The GBE contract may seem to be an esoteric matter, but NYRA estimates that it will lose between $3 and $5 million in the last three months of this year if the contract does not go forward. And, no one, including the FOB and Bob Megna, has any questions about the value of GBE’s product. But what is most frustrating is that this is a matter that could have been resolved with minimal effort over the past ten months since the contract award.
Unfortunately, there is no one, with the exception of the terminated Ellen McClain, who took the initiative to resolve this issue – and she is now being blamed for it. (Significantly, no one at the June 10 meeting mentioned the McClain report that had been distributed prior to the April 11 meeting and was cited as answering the necessary questions.) All one had to do is sit down with the Chair of the FOB, ascertain the problems and respond to them in writing. If there really is a problem, then start over. One person could have done this. While members of the Board warrant criticism for not having done this – acknowledging that they are not paid for their service – the paid state employees deserve more than their share of criticism. NYRA is, after all, an enterprise that is important to the state. Depriving it of the $3 to $5 million this dispute could end up costing over just three months does not help with their financial viability. Both Bob Megna and the Gaming Commission’s Acting Director have questioned previously whether NYRA should continue to receive revenues from Video Lottery Terminals. Could they not have at least taken the initiative to resolve this?