B40120 SSJF CCS FY24 SPO signed.pdf

Sole Source Justification Form

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Bulletin Reference Number 22-565IGB-FISAD-B-40120

Requesting Agency/University ILLINOIS GAMING BOARD

Sole Source Justification Form - Part I Section I - General Information

Department/Bureau/Section: ILLINOIS GAMING BOARD

Need Identified Date: Sep 22, 2023 Supply/Service Need By Date: Jan 1, 2024

Project Title: Central Communications System Bridge Contract

Vendor: Light & Wonder

Provide a description of the supplies or services required:

Section 15(15) of the Video Gaming Act requires all video gaming terminals and licensed establishments to be linked through a central communications system that allows the Board to receive necessary auditing information, regulatory information, and to activate and deactivate VGTs, among other actions.

Value: Estimated Value of Initial Term, this Change Order or Amendment: 30,000,000

Will this Sole Source amend a Professional or Artistic Services contract? Yes No

*Sole Source may not be used for amendments for Professional or Artistic Services if the amendment would increase the value by more than 5% of the initial award or extend the term by more than 60 days.

Type: New Sole Source

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Bulletin Reference Number 22-565IGB-FISAD-B-40120

Requesting Agency/University ILLINOIS GAMING BOARD

Section II - Proposed Term

One-Time Purchase Term Contract

Estimated Contract Begin Date: Jan 1, 2024

Estimated Contract End Date: Dec 31, 2025

Number of Potential Renewals: 0

Length of Each Renewal in Months: 0

Total Value of All Renewals: 0

If a Term Contract, does the term, including renewals, exceed 12 months? Yes No

If yes, provide a detailed justification including any economic benefit received for agreeing to a multi-year term:

The State of Illinois seeks a multi-year contract with Light & Wonder which provides the Illinois Gaming Board ("IGB") with the Central Communication System (“CCS”). The CCS is the monitoring and control system that allows the Illinois Gaming Board to effectively regulate the constantly-growing distributed network of currently 45,000 video gaming terminal (“VGTs”) located in over 8,400 licensed establishments. The CCS is the telecommunications and technical manager of the system and acts as the primary and secondary repository for all information received by terminal operators (“TOs”), manufacturers, and licensed establishments (“LE”). Light & Wonder has only provided a two year and three year quote for services. Light & Wonder cannot provide a quote for term shorter than two years because the CCS is relying on equipment that needs upgrading, and term shorter than two years cannot justify the necessary upgrades.

Light & Wonder is the only vendor who can meet these services by January 1, 2024. This contract is necessary to bridge a gap in coverage between the expiration of the IGB's contract with a competitively selected vendor and the contract from an upcoming competitive solicitation to operate the CCS. Based on our experience and our research into other jurisdictions, a new vendor may require 18 to 24 months to develop and test for the IGB to certify. Additionally, if the IGB experiences any procurement related delays or issues this sole source will guarantee the CCS will continue to operate up to 24 months. This will allow the IGB to publish a solicitation, go to award, and execute a new contract without any VGT down time. The CCS is required under Section 15 of the Video Gaming Act and allows the IGB to audit and monitor video gaming terminals ("VGTs") across the State. Without a CCS, video gaming cannot function. Over the past 12 months, the video gaming industry generated more than $1.034 billion in revenue to the State of Illinois and units of local government. Accordingly, the State cannot afford a gap in the CCS.

Section III - Funding Source Select the type of funding to be used (Check all that apply): State Appropriate Funds Federal Funds Other (Explain):

This is a no-cost contract, borne by the licensees via a percentage of net terminal income being withheld to the vendor.

Section IV - Sole Source Justification

This purchase is economically only available from a single source primarily because it is: (If "Other" explain in one sentence)

Compatibility of Equipment, Accessories, Replacement Parts or Service

Are there secondary justification(s) for this sole source? Yes No

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Bulletin Reference Number 22-565IGB-FISAD-B-40120

Requesting Agency/University ILLINOIS GAMING BOARD

Section V - Purchase History

Has the Agency or University Purchased these supplies or services in the past? Yes No

Term Term From Term To Value Description Contract Number Type

1 12/127/11 12/21/17 40,012,500

Create and operate a central communications system to transmit information and monitor the video gaming terminals

GAM12Z1000 RFP

2 12/22/17 12/20/19 13,337,500 Operate a central communications system to transmit information and monitor the video gaming terminals

GAM12Z1000 Renewal

3 12/21/19 12/17/21 13,337,500 Operate a central communications system to transmit information and monitor the video gaming terminals

P-2753 Renewal

4 Dec 18, 2021 Dec 31, 2023 30,000,000 Operate a central communications system to transmit information and monitor the video gaming terminals

P-32181 Sole Source

If more than 10, or if other comments, explain:

Section VI - Business Rationale

1. Provide a detailed explanation of the need for the supplies or services:

Section 15(15) of the Video Gaming Act requires the video gaming terminals throughout the State be linked through a CCS. The CCS provides for the complete operation of one of the world’s largest distributed networks of gaming terminals--over 45,000 VGTs in 8,400 locations and growing--which generates hundreds of millions of dollars in tax revenue to the State of Illinois and units of local government throughout the State. The CCS ensures that the operation of video gaming is efficient, ethical, transparent and accountable. The CCS provides compliance with the Video Gaming Act and the Board’s Video Gaming Rules. The CCS is a repository of all information regarding video gaming and assists the Board in its regulatory mission. In short, video gaming could not operate without the CCS. This contract is necessary to bridge a gap in coverage between the expiration of the IGB's contract with a competitively selected vendor and the contract from an upcoming competitive solicitation to operate the central communications system ("CCS") .

The CCS is required under Section 15 of the Video Gaming Act and allows the IGB to audit and monitor video gaming terminals ("VGTs") across the State. Without a CCS, video gaming cannot function. Over the past 12 months, the video gaming industry generated more than $1.034 billion in revenue to the State of Illinois and units of local government.

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Bulletin Reference Number 22-565IGB-FISAD-B-40120

Requesting Agency/University ILLINOIS GAMING BOARD

2. Provide a list and describe in detail the specifications required to satisfy the need:

This contract is necessary to keep video gaming operational throughout the State until a new contract can be entered into through a competitive solicitation. Notably, this vendor was selected through a competitive solicitation in 2011 and has been successfully operating the CCS since its inception in September 2012. Any delay would cause significant economic harm to State and local revenue and negatively impact the IGB's regulatory mission to ensure and uphold the integrity of video gaming. To illustrate this point, if the CCS were to be offline for 1 month the state would lose $74 million in revenue and local governments would lose $12.7 million. Because of the significant negative potential impact of any disruption, the IGB is seeking to execute a sole source contract with the current vendor for 24 months or until a new CCS can be approved and certified. The price for this extension, which is all borne by licensees, is an increase over the present contract. The current contract fee is .8513% of the net terminal income (“NTI”). The proposed contract is .92% of NTI.

3. Provide detail explaining the justification selected in Section IV to explain why the requested supplies or services are the only ones available that can satisfy the agency or university requirements?

This contract is currently being met by Light & Wonder (f/k/a Scientific Games), which won a competitive solicitation in 2011. The IGB has not yet finalized a competitive solicitation for a new award but plans to issue one in the fourth quarter of 2023 or 1st quarter of 2024. The IGB is seeking this contract to keep video gaming operational until a new award is made.

4. What are the unique features of the supplies or services that are not available in any other product or by any other vendor? Provide specific quantifiable factors/qualifications:

The entire CCS IT infrastructure was specifically built to monitor the Illinois video gaming market in compliance with the Video Gaming Act. The uniqueness of this IT infrastructure has spectacularly expanded over the preceding 12 years. The current CCS vendor was the original vendor selected to operate the CCS that began full operation in 2011. The video gaming industry did not exist before 2011. The current video gaming industry has over 45,000 video gaming terminals in over 8,400 locations with thousands of licensees. The CCS monitors and tracks all uploads, downloads and software modification for the 45,000 VGTs across the state. There is no similar system in the United States that provides this level of tracking under a distributed network of gaming terminals. The CCS is responsible for tracking all accounting information for over 1,000 units of local government and the associated revenue that is statutorily required to be sent to those governments from the operation of the 45,000 VGTs.

5. Has the Agency or University considered alternative supplies or services to satisfy their need? Yes No

5a. If no, why weren't alternatives evaluated?

Light & Wonder is the only vendor who can meet the IGB's needs by January 1, 2024 . No other vendor has the ability to handle the volume, timeline to implement, hardware purchase, security and infrastructure. No other vendor can offer the consistency and continuity of operational knowledge and familiarity with CCS.

6. Are there resellers or distributors?

Yes No N/A

7. What efforts were made to get the best possible price (i.e. did the agency/university negotiate) and how did you determine the price for this purchase is considered fair and reasonable?

Light and Wonder’s quote provides for a slight price increase over current rates to account for equipment upgrades. The current CCS relies on equipment that has reached its life expectancy, and with the ever-increasing demand on the CCS with Illinois’s still-growing VGT market, the equipment needs to be upgraded and replaced to maintain the CCS’s functionality. A system the size and scope of the current CCS is continuously in need of the most up to date hardware and software. The current vendor has informed the Board that much of the current equipment is becoming outdated and in order to adequately service the CCS and to maintain effective regulation over the next two years, equipment must be updated. After discussion with the vendor, the IGB agrees that the modest price increase to ensure the current CCS is capable of monitoring the increasing VGT market is reasonable and in the best interest of the State. Notably, this is a no-cost contract to the State. Licensees absorb the fees for the central communication system.

8. Will this purchase obligate the State to this vendor for future purchases such as maintenance, licensing or continuing need?

Yes No

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Bulletin Reference Number 22-565IGB-FISAD-B-40120

Requesting Agency/University ILLINOIS GAMING BOARD

9. What will be the financial or other impact to the State if this sole source is not approved and a competitive bid is required?

Video gaming on average generates approximately $74 million a month to the State of Illinois and nearly $12.8 million to local governments. On an annual basis, this amounts to over $889.3 million in revenue to the state and approximately $153.3 million to units of local government. These revenues pay for debt service on bonds issued to fund capital infrastructure projects, which create tens of thousands of jobs across Illinois. Additionally, the video gaming industry provides employment for tens of thousands of people all across the state who would potentially be laid off if the CCS was off-line for any period of time.

10. Is there any additional information you would like to add to justify this sole source?

Please see attached "Justification for a Multi-Year Contract" for more information and detail.

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Bulletin Reference Number 22-565IGB-FISAD-B-40120

Requesting Agency/University ILLINOIS GAMING BOARD

Section VII

Requesting Department Representative

Requesting Department Signature Required

I know and understand the contents of this Sole Source Justification and attest that all statements are true and correct and the fairness and reasonableness of the price was adequately confirmed.

Date Nov 13, 2023

Printed Name Daniel Gerber E-mail Address daniel.gerber@illinois.gov

Phone Number 312-636-3550

State Agency Bureau/Division Head or University Purchasing Director Approval and Signature Required

I know and understand the contents of this Sole Source Justification and attest that all statements are true and correct and the fairness and reasonableness of the price was adequately confirmed. (All prior form fields will lock once this e-signature is completed)

E-mail Address daniel.gerber@illinois.gov

Phone Number 312-636-3550 Date Nov 13, 2023

Printed Name Daniel Gerber

Agency Bureau/Division Head or University Purchasing Director and Not a Designee

SPO Approval and Signature Required

I have reviewed and understand the contents of this Sole Source Justification and agree with the State Agency or University determination.

I have reviewed and understand the contents of this Sole Source Justification and do not agree with the State Agency or University determination. As a result, the State Agency or University must explore other sourcing methods to satisfy their need.

State Purchasing Officer Signature Phone Number 217-299-5856 Date Nov 13, 2023

Printed Name Jenny Shourd E-mail Address jennifer.shourd@illinois.gov

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Bulletin Reference Number 22-565IGB-FISAD-B-40120

Requesting Agency/University ILLINOIS GAMING BOARD

Sole Source Justification Form - Part II Section I - General Information

Project Title

Vendor

Initial Date of Procurement Bulletin Posting

Was a Sole Source hearing held per 30 ILCS 500/20-25?

Yes - Complete Section II and III below (Section II will only be visible when this option is selected)

No - Section II not required, go to Section III below Section III - CPO Approval and Signature Required

Based on my review, I authorize the Agency/University to proceed in accordance with the published Notice referenced above.

Based upon my review, I authorize the Agency/University to proceed with the following Changes.

Based on my review, the Agency/University is not authorized to proceed with this sole source as presented and my recommendation is that it be cancelled.

Other

CPO Signature CPO Phone

Printed Name Date

CPO E-mail

Version 7.01 Page of Sole Source Justification Form - Part I Section I - General Information Will this Sole Source amend a Professional or Artistic Services contract?

If yes, what was the original contract value?

*Sole Source may not be used for amendments for Professional or Artistic Services if the amendment would increase the value by more than 5% of the initial award or extend the term by more than 60 days.

Section II - Proposed Term If a Term Contract, does the term, including renewals, exceed 12 months?

If yes, provide a detailed justification including any economic benefit received for agreeing to a multi-year term:

Section III - Funding Source Select the type of funding to be used (Check all that apply):

Section IV - Sole Source Justification Are there secondary justification(s) for this sole source?

Section V - Purchase History Has the Agency or University Purchased these supplies or services in the past?

Term Term From Term To Value Description Contract Number Type Section VI - Business Rationale

1. Provide a detailed explanation of the need for the supplies or services:

2. Provide a list and describe in detail the specifications required to satisfy the need:

3. Provide detail explaining the justification selected in Section IV to explain why the requested supplies or services are the only ones available that can satisfy the agency or university requirements?

4. What are the unique features of the supplies or services that are not available in any other product or by any other vendor? Provide specific quantifiable factors/qualifications:

5. Has the Agency or University considered alternative supplies or services to satisfy their need?

5a. If yes, name the alternative vendors whose supplies or services were evaluated:

5b. If yes, what were the alternatives for each vendor and why were they unacceptable? Be specific with regard to features, characteristics, requirements, capabilities and compatibility:

5c. Explain how the market evaluation was conducted?

*This evaluation is to determine available options within a market. If the evaluation is to determine quality or best suited option, this is not the appropriate source selection. Under no circumstances shall the evaluation consist of testing alternative options. These activities must be conducted in a competitive transparent environment (i.e. IFB or RFP).

5a. If no, why weren't alternatives evaluated?

6. Are there resellers or distributors?

7. What efforts were made to get the best possible price (i.e. did the agency/university negotiate) and how did you determine the price for this purchase is considered fair and reasonable?

8. Will this purchase obligate the State to this vendor for future purchases such as maintenance, licensing or continuing need?

8a. If yes, please provide details regarding future obligations and/or needs:

9. What will be the financial or other impact to the State if this sole source is not approved and a competitive bid is required?

10. Is there any additional information you would like to add to justify this sole source?

Section VII Requesting Department Signature Required I know and understand the contents of this Sole Source Justification and attest that all statements are true and correct and the fairness and reasonableness of the price was adequately confirmed.

State Agency Bureau/Division Head or University Purchasing Director Approval and Signature Required I know and understand the contents of this Sole Source Justification and attest that all statements are true and correct and the fairness and reasonableness of the price was adequately confirmed. (All prior form fields will lock once this e-signature is completed) SPO Approval and Signature Required Sole Source Justification Form - Part II Section I - General Information Was a Sole Source hearing held per 30 ILCS 500/20-25?

Section II - Sole Source Hearing Details The State posted to the Illinois Procurement Bulletin a description of the State's need, the justification for the sole source decision, and information regarding the opportunity to submit comments and testify at a public hearing. Notice of the hearing was also posted outside of the hearing room 48 hours prior to the hearing.

The public hearing was conducted for the purpose of receiving testimony regarding the sole source determination. The Hearing Officer recommends the following:

The following relevant documents are attached:

Section III - CPO Approval and Signature Required 9.0.0.2.20101008.1.734229