Financial evaluation of third National Lottery applicants

Every eight years the licence to operate the National Lottery is awarded to a successful bidder through a rigorous and lengthy tender process. After receiving conflicting recommendations from the Evaluation Committee and the National Lotteries Board, the Ministry of Trade and Industry brought in Genesis to conduct an independent and substantive evidence-based assessment of the financial and business models of the competing applicants.

The purpose was to assist the minister in selecting a successful (and reserve) bidder in order to negotiate and conclude a licence, and where the rationality and reasonableness of the decision would likely be under intense scrutiny.

Genesis used its experience to distil the key features of each business and financial models, and identify quantitative measures that would enable an independent evidence-based comparison across the bids on the five different variables that formed part of the assessment criteria. This included assessing a ranking on likely sales based on capex, distribution networks, prize payouts and new game development. It also included assessing financial solvency by subjecting the financial models to different revenue scenarios. In the process Genesis developed a robust new scoring method that built on the quantitative measures of the business and financial plans, but also built on the techniques applied in other government procurement programmes (such as relative points based on relative pricing).

The Genesis assessment provided the basis for the decision by the minister to select the successful bidder. Furthermore, the Genesis report and scoring have stood up to intense scrutiny as the minister’s decision has been subject to a number of reviews by one of the unsuccessful bidders. As such, the Genesis work has also proved invaluable to the High Court judges in adjudicating the litigation.