There are two serious challenges to the integrity of the decision recommending three casino licenses in New York.  While there is not yet litigation attacking the recommendations of the Facility Location Board, separate letters from attorneys, one representing the Oneida Indian Nation and the other on “behalf of several clients,” should cause New York’s regulators to pause.  The letters are typical of those seeking redress prior to litigation being filed.

New York’s Gaming Commission has the decision-making authority on awarding licenses for up to four casinos.  The Facility Location Board, appointed by the Commission to conduct a procurement and evaluate bids submitted by 16 applicants, published its recommendations on December 17.  After the Board reached its decisions, Governor Andrew Cuomo stepped in, implicitly criticizing the Board and “recommending” that a new procurement be done to select a fourth site.  The Board and the Commission apparently saw the wisdom of the Governor’s suggestion and promptly acceded to his request.

The essence of each letter is that the Facility Location Board’s recommendations are arbitrary and capricious because they did not follow their own rules and did not evaluate competing proposals in the same way.  It is a charge that goes to the heart of government procurement practices:  evaluation of bids should be open, accountable and capable of withstanding public scrutiny.  The Board’s recommendations meet none of these standards.

The law authorizing awards of casino licenses specified the evaluation criteria that had to be used in making decisions.  The law further specified the weight to be accorded each of the three broad categories.  Thus, “Economic Activity and Business Development” was a factor to be weighted as 70 per cent of all the factors.  Within each of the general categories, there were a number of specific criteria that had to be considered.  In “Economic Activity and Business Development,” for example, there were nine specific factors the Board had to consider and evaluate, such as maximizing revenues to the state and creating the highest number of quality state jobs.

The law clearly requires that a quantitative assessment be made of each proposal.  The Board further committed to making public its scoring of the proposals.  Then, they shifted gears.  Even though the evaluation criteria were set forth in the law, the Board decided to add an additional criterion.  It created this new factor in secret, neither announcing it during its evaluation nor informing bidders of the need to address it in their proposals.  It also decided to give their new criterion “substantial weight.”  While the law did allow the Board to create additional criteria, it should be obvious that the authority was for fine-tuning, not a secret process that would ignore the specific directives of the law on evaluating proposals.

Instead of factoring their new criterion into the weighted quantitative system mandated by the law, the Board further decided to abandon the quantitative aspect altogether in favor of a “qualitative” one.  If this were not enough of a divergence from what they were required to do, the challenge letters assert that even then the Board did not apply their new approach consistently in assessing the merits of each proposal.

In short, a Board that had its responsibilities specifically set forth in a law decided to ignore the dictates of that law and embark on their own determination of how things should be.  In doing so, they have called the integrity of this particular bidding process into question.  Their work product is now before the Gaming Commission that appointed them and must now make the actual decision on awarding casino licenses.  The Commission is meeting on Tuesday, but the meeting agenda has not yet been posted.  (The Commission’s staff is in assessing the financial viability of the bidders recommended by the Board.)  Update:  The Facility Location Board recommendations are not on the agenda.

To this point, the Commission has been fastidious in protecting the integrity of the procurement.  It would mark a substantial departure if it now accepted the incompetent and sloppy product of its appointees.  The flaws in the recommendations of the Facility Location Board are so significant that their decision is unlikely to survive independent scrutiny.  If the Gaming Commission does not remedy the problem, a court will.

The last time a gambling license was put out for bid, it resulted in the odiferous selection of an operator for Video Lottery Terminals at Aqueduct Racetrack that could not survive the light of day.  While I am not suggesting that this decision is akin to that one, I would be particularly cautious knowing there is a sitting grand jury with a zealous prosecutor seemingly eager to go after the Governor.