ANTI-DRUG AD CONTRACT AWARD SURPRISES SOME

A commercial that aired during the Super Bowl equates drug use with
supporting terrorists.

The White House is hedging its bets on the Madison Avenue contractor
recently rehired to handle the drug czar's latest $152 million anti- drug
ad effort.

The decision by the Office of National Drug Control Policy (ONDCP) to award
the work to Ogilvy & Mather last week surprised Madison Avenue and rival
bidders.

Ogilvy agreed to a $1.8 million deal this year to settle claims that it
overcharged the drug office for ad work under the last contract.

The ad agency is still facing an investigation by the U.S. Attorney for the
Southern District of New York for possible criminal wrongdoing in the
overbilling. Spokesman Marvin Smilon, as a matter of policy, had no
comment, but the agency said no charges have been filed.

The White House, however, says it can yank the account from Ogilvy if any
charges are filed. "That would be a basis for reconsidering the contract,"
warns Tom Riley, public affairs director for the ONDCP.

Ogilvy's new contract is a one-year deal, with four years of renewable
options, Riley says. The "cost-plus-fixed fee" contract pays $151.9 million
through July 2003 and would be worth $762.1 million over five years. About
$130 million annually would go to media planning and buying. The rest pays
for creating ads.

Ogilvy, known for its popular ads for IBM, American Express and Miller
Brewing, beat four rivals in the closely watched competition, but none
returned calls about the issue.

Others, however were quick to criticize: "When it comes to cheating, once
should be enough: The U.S. government should not wear a 'cheat me' sticker
on its forehead," says Gary Ruskin, director of Ralph Nader's watchdog
group Commercial Alert. "This is something taxpayers ought to be mad about."

Ogilvy executives counter they were never out to cheat anybody. The
overcharges were clerical errors by a first-time contractor not familiar
with federal rules, they say. Ogilvy says it cooperated fully with the
Department of Justice probe that resulted in the agency paying $690,744 and
slashing its bill by $1,150,256 in February.

Riley notes that Ogilvy has revamped its accounting practices to comply
with federal rules, that "no government money was lost." Excluding the shop
from the new contracts would have been illegal, he says. He adds: "We will
be extremely vigilant and demand the highest level of value for the
taxpayers' money."

Among the factors in Ogilvy's surprise victory:

The decision was made by an impartial third party: the U.S. Navy, which has
managed the contract (the ONDCP is now in talks to have the Department of
the Interior take over).

The latest contract had to be in compliance "with strict government
cost-accounting standards," says William Barker, assistant officer in
charge for the Navy's Fleet and Industrial Supply Center in Norfolk, Va.
"They came to us, and we helped turn it around." Even drug czar John
Walters didn't know who the winner was before the announcement.

Ogilvy's anti-drug ads during Super Bowl XXXVI, linking teen drug use with
supporting terror lords such as Osama bin Laden, are testing "off the
charts" with teens and giving parents a new way to discuss the problem,
says Riley.

The White House has asked for new ads with a similar strategy, giving
Ogilvy an edge.

The results were a sharp contrast with a recent study showing more
traditional ads from The Partnership for a Drug Free America, the group
that has the biggest anti-drug ad effort, having no impact on teen drug use.

The huge WPP Group that owns Ogilvy used its deep pockets to offer what the
feds describe as a "best value acquisition."