CTR078859_-_Adult_Workforce_Diploma_Program_Executed.pdf

Direct Contract

Arizona Department of Administration

State Procurement Office Contract No.: CTR078859

Description: Adult Workforce Diploma Program

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CONTRACTOR IS STRONGLY ENCOURAGED TO READ THE ENTIRE CONTRACT.

Table of Contents

Scope of Work 2

Exhibit A - Program Performance Measures 9

Special Terms and Conditions 11

Addendum A - Contractor Insurance Requirements 19

Addendum B - Warranties and Requirements Related to Arizona Information Technology Statewide Policies, Standards, and Procedures 24

Uniform Terms and Conditions 10.5 28

Contract Signature Page 45

Attachment 1 - Participation in Boycott of Israel 46

Attachment 2 – Forced Labor of Ethnic Uyghurs Ban 47

Scope of Work

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1. Purpose and Background

1.1. Purpose: The Adult Workforce Diploma Program is designed to assist Arizona residents aged twenty-one and older in earning high school diplomas while developing critical employability, career, and technical skills necessary for employment. Administered by the Office of Economic Opportunity, the program supports flexible delivery through campus-based, online, or blended learning modalities.

1.2. Legal Authority: In accordance with Arizona Revised Statutes (A.R.S.) §41-2537, and A.A.C.

R2-7-E303, Competition Impracticable State establishes this contract with Smart Schools Inc., to provide the Materials or Services described herein.

1.3. Background:

The passage of SB 1744 during the Fifty-seventh Legislature First Regular Session provided for adult education and workforce development services to be delivered to adult learners in Arizona through the Adult Workforce Diploma Program as described in A.R.S. § 41-5421.

The program provides funding to approved eligible service providers to assist individuals who are at least 21 years of age in earning a high school diploma and developing critical employability skills and career and technical skills to prepare for employment.

The Adult Workforce Diploma program is established in the Office of the Economic Opportunity (OEO) to assist individuals who are at least twenty-one years of age in earning high school diplomas and developing critical employability and career and technical skills to prepare the individuals for employment. OEO is the administrator of the program, which may be delivered in a Campus-based, online, or blended modality.

An application process, as approved by the Arizona State Board of Education at their September 2022 meeting, was conducted to identify entities eligible to receive funds to provide adult education and workforce development services as described under A.R.S. 15-

217. At the October 2022 meeting, five entities were approved by the Arizona State Board of Education as Adult Workforce Diploma Program service providers. At the September 2023 meeting, an additional two entities were approved by the Arizona State Board of Education as Adult Workforce Diploma Program service providers.

SB 1744 section 14 requires OEO to include service providers approved by the Arizona State Board of Education in the list of approved program providers for the Adult Workforce Diploma Program, unless a provider has been removed from the list established by the Arizona State Board of Education because the service provider’s authorization was revoked.

SB 1744 provides that A.R.S. § 41-5421 applies retroactively to from and after June 30, 2025. (SB 1744, § 16).

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2. Definitions

2.1. "Academic skills intake assessment" means a criterion-referenced assessment of numeracy and literacy skills with high reliability and validity that is determined by third-party research and that may be administered in person or online.

2.2. "Accredited provider" means an entity that is currently accredited by one of the seven regional accreditation organizations or any successor entity.

2.3. "Average cost per graduate" means the total program funding disbursed to a participating program provider divided by the total number of graduates for a cohort calculated twelve months after the close of the cohort.

2.4. "Career pathways coursework" means one or more courses that align with the skill needs of industries in the economy of this state or region and that assist students to enter or advance within a specific occupation or occupational cluster.

2.5. "Career placement services" means services that are designed to assist students in obtaining employment, including career interest self-assessments, job search skills, résumé development, and mock interviews.

2.6. "Cohort" means the students who enter the program between July 1 and June 30 of each program year.

2.7. "Employability skills certification" means a certificate earned by demonstrating professional nontechnical skills through assessment and must include the program standards of the United States Department of Labor's "Skills to Pay the Bills: Mastering Soft Skills for Workplace Success."

2.8. "Graduate" means a student who has successfully completed all state and program provider requirements to earn a high school diploma.

2.9. "Graduation rate" means the total number of graduates from a cohort divided by the total number of students from the same cohort calculated twelve months after the close of the cohort.

2.10. "Graduation requirements" means course and credit requirements needed to earn a high school diploma from a program provider.

2.11. "High school diploma" means a diploma that is issued by an accredited provider and that is recognized as a secondary school diploma by this state.

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2.12. "Industry-recognized credential" means an education-related or work-related credential that verifies an individual's qualification or competence and that is issued by a third party with the relevant authority to issue the credential.

2.13. "Learning plan" means a documented plan that both:

(a) Is designed to prepare a student to succeed in the program and the student's future endeavors.

(b) Identifies the courses and credits that are needed for a student to complete the program and that are graduation requirements.

2.14. "Milestones" means objective measures of progress for which payment is made to a program provider under A.R.S. § 41-5421, including earned units of high school credit, earned industry-recognized credentials, and earned high school diplomas.

2.15. "Program" means the Adult Workforce Diploma Program.

2.16. "Program provider" means a public, nonprofit, or other entity that meets the requirements of this section and that does not receive federal or state funding or private tuition for a student who is funded through the program.

2.17. "Stackable credential" means a third-party credential that is part of a sequence of credentials that can be accumulated over time to build up an individual's qualifications to advance along a career pathway.

2.18. "Student" means a participant in the program who is at least twenty-one years of age, who is a resident of this state, and who has not earned a high school diploma.

2.19. "Transcript evaluation" means a documented summary of credits that students earned in previous public or private accredited high schools compared with program and program provider graduation requirements.

2.20. "Unit of high school credit" means a credit that is awarded based on a student's demonstration that the student has successfully met the content expectations for the credit area as defined by subject area standards, expectations, or guidelines.

3. Service Description

3.1. Service Provider Eligibility Requirements:

An eligible Adult Workforce Diploma Program service provider must have an application approved by the Office of Equal Opportunity showing that all the requirements listed below are met:

● Is operating a regionally accredited high school diploma-granting entity;

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● Has the ability to develop a learning plan for each student that integrates graduation requirements and career goals;

● Provides a course catalog that includes all courses that are necessary to meet graduation requirements and;

● Provide all the following:

o Remediation opportunities in literacy and numeracy;

o Career pathways coursework;

o Preparation for industry-recognized credentials/certificates and stackable credentials/certificates;

o Career placement services, and;

o Academic skills assessments and transcript evaluations.

4. Contractor Requirements

The Contractor Shall:

4.1. Meet all requirements stated in section 3 of the scope of work, including eligibility requirements to participate in the program as described in A.R.S. § 41-5421.

4.2. Deliver the instructional services through campus-based, online, or blended modalities.

4.3. Submit monthly invoices by or before the 10th calendar day of each month to OEO with the number of milestones met during the previous month. This includes reporting the number of currently enrolled students for whom invoices have and have not yet been submitted.

4.4. Provide an annual program report as stated in Section 6.1.3.

5. Minimum Program Performance Standards/Service Level Agreement

5.1. Contractor shall maintain:

5.1.1. A graduation rate of at least fifty percent (50%).

5.1.2. An average cost per graduate equal to less than $7,000.

5.2. Beginning Fiscal Year 2027-2028, OEO shall review data from each participating program provider to ensure that the program provider is achieving minimum program performance standards outlined in 5.1.1 and 5.1.2. A.R.S. § 41-5421(I).

5.3. The office may develop a process to bring a program provider into compliance. The office shall revoke a program provider’s authorization to participate in the program if the program provider does not comply with the requirements of this section within two years. A.R.S. § 41-5421(J).

6. Reporting Requirements/Notices:

6.1. The Contractor Shall Provide to OEO the following reporting:

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6.1.1. Annual Requirements Submission: On or before August 15th of each year, program providers seeking to participate must submit information to the OEO demonstrating they meet program requirements (e.g., regional accreditation, ability to develop learning plans, provide courses, offer remediation, career pathways, industry credentials, career placement, academic skills intake assessments, and transcript evaluations).

6.1.2. Monthly Invoices: Not later than the tenth (10th) calendar day of each month, participating program providers must submit invoices to the OEO, using OEO’s milestones invoicing template, for milestones met in the previous month. This includes reporting the number of currently enrolled students for whom invoices have and have not yet been submitted. Because the program for the 2025-2026 program year is retroactive from and after June 30, 2025, participating program providers may submit invoices for milestones completed in July 2025, August 2025, and September 2025. These invoices will be accepted no later than October 10, 2025.

6.1.2.1. OEO shall provide the template to the Contractor.

6.1.3. Annual Program Report: On or before October 30th of each year, each participating program provider must report to the OEO for the previous fiscal year (see Exhibit A):

▪ Total number of students who were funded through the program.

▪ Total number of earned credits.

▪ Total number of earned industry-recognized credentials or stackable credentials earned for each tier of funding.

▪ Total number of students who graduated through the program.

▪ Information required for performance measures adopted by the State

Board of Education pursuant to A.R.S. § 15-217.

7. Office of Economic Opportunity (OEO) Responsibilities:

7.1. Program Providers List: On or before October 15 of each year, the OEO must place all qualified program providers on a program providers list.

7.2. Monthly Program Updates: On or before the last calendar day of each month, the OEO must provide a written update to program providers, including:

● Aggregate total dollars paid to program providers for the year.

● Aggregate number of currently enrolled students for whom invoices have been submitted.

● Aggregate number of currently enrolled students for whom invoices have not yet been submitted.

● Estimated number of enrollments still available.

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7.3. Minimum Program Performance Standards Review: Beginning fiscal year 2027-2028, the OEO will review data from each participating program provider to ensure they achieve minimum program performance standards (e.g., graduation rate of at least 50%, average cost per graduate of $7,000 or less).

7.4. Milestone Invoice Template: OEO to provide an invoicing template to be used by all participating program providers.

8. Notices

8.1. The Contractor shall submit all notices/correspondence relevant to this contract as directed by the Department, electronically or by mail to:

Arizona Office of Economic Opportunity ATTN: Stephen Sifuentes, Finance Administrator Senior 1400 W Washington St, 3rd Floor Phoenix, AZ 85007 stephen.sifuentes@oeo.az.gov

8.2. The Certificate of Insurance is to be submitted to:

The Procurement Officer on file Paul Evans Paul.Evans@azdoa.gov

9. Payment

9.1. The Adult Workforce Diploma Program fund is established consisting of legislative appropriations, gifts, grants, and other donations. A.R.S. § 41-5421(A).

9.2. The Office of Economic Opportunity shall administer the funds. OEO shall pay approved Adult Workforce Diploma Program service providers the following amounts for each student who completes the following milestones:

9.2.1. $250 for each completed half unit of high school credit.

9.2.2. $250 for each completed employability skills certification.

9.2.3. $250 for each earned industry-recognized credential/certificate or stackable credential/certificate that requires not more than fifty hours of training.

9.2.4. $500 for each earned industry-recognized credential/certificate or stackable credential/certificate that requires more than fifty hours but not more than one hundred hours of training.

9.2.5. $750 for each earned industry-recognized credential/certificate or stackable credential/certificate that requires more than one hundred hours of training.

9.2.6. $1,000 for each, earned high school diploma.

mailto:Paul.Evans@azdoa.gov

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9.3. OEO shall pay the approved service providers in the order in which invoices are submitted until all available monies are exhausted.

9.4. All funds received by approved service providers for the Adult Workforce Diploma Program must be utilized according to the statutory requirements described under A.R.S. § 41-5421.

Exhibit A - Program Performance Measures

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Description: The information required by the performance measures adopted by the state board of education pursuant to A.R.S. § 15-217: The information required by the performance measures adopted by the state board of education pursuant to A.R.S. § 15-217, as referenced in Section 6.1.3 of the Scope of Work which describes the Annual Program Report requirements.

02-1. Provide adult learner progress towards earning a high school diploma. (A.1.) (The total number of earned credits [§ G, 2].)

a. Number of credits each student has earned when entering the program (if any).

b. The remaining number of credits a student must earn at the start of the program to earn a high school diploma.

c. Number of credits each student has earned in the required reporting month.

02-2. The total number of unduplicated adult learners who have earned a high school diploma. (A.2.)

(The total number of students who graduated through the program [§ G, 4].)

a. The graduation rate of adult learners enrolled in the program school. (Number of adult learners who earned a high school diploma divided by number of enrolled students.)

02-3. The total number of earned industry-recognized credentials or stackable credentials for each tier of funding [§ G, 3]. (A.3.)

a. Tier 1

i. The number of industry-recognized credentials earned by adult learners enrolled.

ii. The type of industry-recognized credentials earned by adult learners enrolled.

iii. The number of unduplicated adult learners who have earned at least one industry-recognized credential.

b. Tier 2

i. The number of industry-recognized credentials earned by adult learners enrolled.

ii. The type of industry-recognized credentials earned by adult learners enrolled.

iii. The number of unduplicated adult learners who have earned at least one industry-recognized credential.

c. Tier 3

i. The number of industry-recognized credentials earned by adult learners enrolled.

ii. The type of industry-recognized credentials earned by adult learners enrolled.

iii. The number of unduplicated adult learners who have earned at least one industry-recognized credential.

02-4. The number of adult learners or graduates who have matriculated at an institution of higher learning or postsecondary education institution. (A.4.)

a. Number of adult learners who are concurrently enrolled in a postsecondary institution.

b. Identify the postsecondary institutions that graduates are attending.

i. In-State

1. Community colleges

2. Universities

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3. Vocational training

ii. Out of state

c. Number of graduates who have enrolled in a postsecondary institution.

d. Identify the postsecondary institutions that graduates are attending.

i. In-State

1. Community colleges

2. Universities

3. Vocational training

ii. Out of state 02-5. The number of adult learners or graduates who have newly acquired employment. (A.5.)

a. Number of adult learners who have newly acquired employment.

b. Number of graduates who have newly acquired employment.

02-6. The number of adult learners or graduates who are now earning higher wages. (A.5.)

a. Number of adult learners who are now earning higher wages.

b. Number of graduates who are now earning higher wages.

02-7. The number of adult learners or graduates who have obtained a better job/promotion. (A.5.)

a. Number of adult learners who have obtained a better job/promotion.

b. Number of graduates who have obtained a better job/promotion.

02-8. The total number of unduplicated enrolled students who were funded through the program [§ G, 1].

a. Full-time

b. Part-time

Special Terms and Conditions

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1.0 Definitions

1.1 [Reserved]

2.0 Contract Interpretations

[Reserved]

3.0 Contract Administration and Operation

3.1 Term of Contract. Pursuant to the retroactivity provisions in SB 1744, the term of the Contract will commence on July 1, 2025, and will continue for twelve (12) months unless canceled, terminated, or permissibly extended.

3.2 Contract Extensions. The OEO may, at its discretion, request for a mutual agreement to extend the initial Contract term in increments of one (1) or more months and do so one or more times, provided that the maximum aggregate term of the Contract including extensions cannot exceed the maximum aggregate term of five (5) years.

3.3 Eligible Agency: This contract is a single-agency contract for the sole use of the Office of

Economic Opportunity.

4.0 Costs and Payments

4.1 Pricing: As payment for full and satisfactory performance of the services, the OEO agrees to pay the CONTRACTOR as outlined in the Scope of Work.

5.0 Contract Changes: This Agreement may only be changed in writing and must be signed by both parties and their duly authorized agents (an Amendment). In the event that state or federal law enacted after the effective date of this Agreement conflicts with any term of this Agreement, controlling law will apply and supersede that/those term(s). The parties agree to promptly consider an appropriate Amendment to the Agreement to remove each conflict.

6.0 Risk and Liability

6.1 Risk of Loss. Contractor shall bear all risk of loss to Materials while in pre-production, production, storage, transit, staging, assembly, installation, testing, and commissioning, if and

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Direct Contract | Revision No. 1 | Revised 03-24 | Page 12 of 47 as those duties are within the scope of the Work, until they have been accepted as conforming by State in the particular location and situation specified in the Order, or as specified generally elsewhere in the Contract if the Order does not provide particulars, provided that, risk of loss for nonconforming Materials will remain with Contractor notwithstanding acceptance to the extent the loss stems from the nonconformance.

6.2 General Contractor Indemnification and Insurance Requirements

6.2.1 Contractor Indemnification (Not Public Agency). To the fullest extent permitted by law, Contractor shall defend, indemnify, and hold harmless the State of Arizona, and its departments, agencies, boards, commissions, universities, officers, officials, agents, and employees (hereinafter referred to as “Indemnitee”) from and against any and all claims, actions, liabilities, damages, losses, or expenses (including court costs, attorneys’ fees, and costs of claim processing, investigation and litigation) (hereinafter referred to as “Claims”) for bodily injury or personal injury (including death), or loss or damage to tangible or intangible property caused, or alleged to be caused, in whole or in part, by the negligent or willful acts or omissions of Contractor or any of its owners, officers, directors, agents, employees or Subcontractors. This indemnity includes any claim or amount arising out of, or recovered under, the Workers’ Compensation Law or arising out of the failure of such Contractor to conform to any federal, state, or local law, statute, ordinance, rule, regulation, or court decree. It is the specific intention of the parties that the Indemnitee shall, in all instances, except for Claims arising solely from the negligent or willful acts or omissions of the Indemnitee, be indemnified by Contractor from and against any and all claims. It is agreed that Contractor will be responsible for primary loss investigation, defense, and judgment costs where this indemnification is applicable. In consideration of the award of this contract, the Contractor agrees to waive all rights of subrogation against the State of Arizona, its officers, officials, agents, and employees for losses arising from the work performed by the Contractor for the State of Arizona. This indemnity shall not apply if the Contractor or Subcontractor(s) is/are an agency, board, commission or university of the State of Arizona.

6.2.2 Public Agency Language Only. Each party (as 'indemnitor') agrees to indemnify, defend, and hold harmless the other party (as 'indemnitee') from and against any and all claims, losses, liability, costs, or expenses (including reasonable attorney's fees) (hereinafter collectively referred to as 'claims') arising out of bodily injury of any person (including death) or property damage but only to the extent that such claims which

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Direct Contract | Revision No. 1 | Revised 03-24 | Page 13 of 47 result in vicarious/derivative liability to the indemnitee, are caused by the act, omission, negligence, misconduct, or other fault of the indemnitor, its officers, officials, agents, employees, or volunteers."

6.2.3 Insurance Requirements: Addendum A to the Special Terms and Conditions:

Contractor Insurance Requirements is incorporated herein as part of the Special Terms and Conditions.

7.0 Warranties

7.1 Warranties and Requirements Related to Information Technology. Addendum B:

Warranties and Requirements Related to Arizona Information Technology Statewide Policies, Standards, and Procedures is incorporated herein as part of the Special Terms and Conditions.

8.0 Termination

8.1 OEO may terminate this Agreement if OEO revokes the program provider’s authorization to participate in the program pursuant to A.R.S. § 41-5421(J).

8.2 Contractor may terminate the Agreement with ninety (90) days written notice if 1) Contractor submits to OEO a plan describing how it will meet its programmatic, reporting, and financial obligations upon termination; and 2) OEO approves the termination plan.

9.0 Confidentiality: OEO and CONTRACTOR may choose, from time to time, in connection with work contemplated under this Agreement, to disclose confidential information to each other (Confidential Information). All such disclosures must be in writing and marked as Confidential Information. The Parties shall not disclose to unauthorized third parties any Confidential Information of the other Party and will use such information only for the purposes of this Agreement, and for three (3) years after the termination of this Agreement; provided that the receiving Party's obligations hereunder shall not apply to information that: (A) is already in the receiving Party's possession at the time of disclosure; or, (B) is or later becomes part of the public domain through no fault of the receiving Party; or, (C) is received from a third party with no duty of confidentiality to the disclosing party; or, (D) was developed independently by the receiving party prior to disclosure; or, E. is required to be disclosed by law or regulation. Any information that is transmitted orally or visually, in order to be protected hereunder, shall be identified as such by the disclosing party at the time of disclosure, and identified in writing to the receiving party, as Confidential Information, within thirty (30) days after such oral or visual disclosure. The

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CONTRACTOR shall retain the right to refuse acceptance of such Confidential Information that is not required for the purposes of this Agreement. Both parties agree to comply with the federal Family Educational Rights and Privacy Act of 1974. This applies to all provisions of this Agreement which involves identifiable individual student data.

10.0 Public Record: Both parties recognize that any work product developed under this Agreement becomes public information, except as limited by Confidentiality, Section 10.

11.0 General Provisions for Services

11.1 Applicability. Article 13 applies to the extent the Work is or includes Services.

11.2 Comprehensive Services. Contractor shall provide the comprehensive range of Services for which a price is established in the Contract for ordering by Eligible Agencies .

11.3 Additional Services. State at its discretion may modify the scope of the Contract by Contract Amendment to include additional Services or service categories that are within the general scope of the ones originally covered by the Contract. Once the Contract Amendment is fully executed, Contractor shall then update all applicable pricing and make them available to all affected entities at no additional cost. Either party may make the request to add Services to the Contract; regardless of who makes the request, the parties shall negotiate in good faith a fair price for any additional Services, but State may elect not to add some or all of the Services in question if no agreement is reached on pricing in a timely manner.

Contractor’s request or proposal in response to State’s request shall include documentation demonstrating that the proposed price for the additional Services is both fair and reasonable and comparable to the original prices.

11.4 Off-Contract Services. Contractor shall ensure that the ordering process for the Services prevents Orders for Services not included in the scope of the Contract (and for which no price or compensation has been established in the Contract) or Services explicitly excluded from the Contract. Notwithstanding that State might have its own internal administrative rules regarding off-contract or excluded ordering of Services, and endeavors to prevent such Orders from occurring, Contractor is responsible for not accepting any such Orders.

State may, at its discretion, cancel any such Order without obligation.

11.5 Removal of Personnel. Notwithstanding that Contractor is in every circumstance responsible for hiring, assigning, directing, managing, training, disciplining, and rewarding its personnel, State may at its discretion, and without the obligation to demonstrate cause, instruct Contractor to remove any of its personnel from State’s facilities or from further

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Direct Contract | Revision No. 1 | Revised 03-24 | Page 15 of 47 assignment under the Contract. In such cases, Contractor shall promptly replace removed personnel with other personnel that have equivalent qualifications, experience, and capabilities.

11.6 Accuracy of Work. Contractor is responsible for the accuracy of the Services, and shall promptly make all necessary revisions or corrections resulting from errors and omissions on its part without additional compensation. Acceptance by State shall not relieve Contractor of responsibility for correction of any errors discovered subsequently or necessary clarification of any ambiguities.

11.7 Requirements at Location of Services:

11.7.1 Contractor personnel shall perform their assigned portions of the Services at the specific location indicated in the Order. Contractor acknowledges that the location might be inside an industrial building, institutional building, or one of various office types and classes.

11.7.2 If performing the Services requires Contractor personnel to work inside a secured perimeter at certain institutional facilities (including but not limited to prisons) where prior clearances are required, Contractor shall contact the facility directly in advance of performing the Services to confirm its current security clearance procedures, allowable hours for work, visitor dress code, and other applicable rules. State shall not pay any additional fees (including but not limited to service charges) or excuse late performance, if Contractor has failed to comply with these requirements.

11.8 Acceptance of Services. State has the right to accept Services subject to acceptance criteria. State may apply acceptance criteria to the Contract or a specific Order, which may include, but are not limited to, accuracy, completeness, conformance to requirements, or quality. State shall not pay Contractor for unaccepted Services, and State may, at its discretion, withhold or make partial payment for any rejected Services, while Contractor is in the process of re-performing or otherwise curing the grounds for State’s rejection.

11.9 Corrective Action Required. Notwithstanding any other guarantees, general warranties, or particular warranties Contractor has given under the Contract, and in addition to any other rights and remedies available under the Contract, if Contractor fails to perform any material portion of the Services including, but not limited to, failure to complete any contractual deliverable or failure to meet agreed-upon service levels or service standards set out in or referred to in the Contract, then Contractor shall perform a root-cause analysis to identify the source of the failure and use all commercially reasonable efforts to correct the failure and meet the Contract requirements as promptly as is practicable.

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11.9.1 Contractor shall provide State a report detailing the identified cause and setting out its detailed corrective action plan promptly after the date the failure occurred (or the date when the failure first became apparent, if it was not apparent immediately after occurrence).

11.9.2 State may demand to review and approve Contractor’s analysis and plans, and Contractor shall make any and all reasonable corrections State instructs and adopt State’s recommendations, including any measures State determines to be necessary for employee or public safety, or the protection of property or the environment.

11.9.3 Contractor shall take the necessary action(s) to avoid any like failures in the future.

12.0 Data and Information Handling

12.1 Applicability. Article 14 applies to the extent the Work includes handling of any (1) State’s proprietary and sensitive Data or (2) confidential or access-restricted information obtained from State or from others at State’s behest.

12.2 Data Protection and Confidentiality of Information. Contractor warrants that it will establish and maintain procedures and controls acceptable to State for ensuring that State’s proprietary and sensitive Data is protected from unauthorized access and information obtained from State or others in performance of its contractual duties is not mishandled, misused, or inappropriately released or disclosed. For purposes of this paragraph, all Data created by Contractor in any way related to the Contract, provided to Contractor by State, or prepared by others for State are proprietary to State, and all information by those same avenues is State’s confidential information. To comply with the foregoing warrant:

12.2.1 Contractor shall provide the State and Eligible Agencies with a copy of its Disaster Recovery plan upon request. The Disaster Recovery plan shall outline the Contractor's actions, with timelines, in the event of a natural disaster, cyber-attack or loss of ability to operate and perform services under this contract.

12.2.2 Contractor shall: (a) notify State immediately of any unauthorized access or inappropriate disclosures, whether stemming from an external Data Breach, internal Data Breach, system failure, or procedural lapse within twenty-four (24) hours of a Data Breach, by sending an email to the Arizona Department of Homeland Security at AZSOC@azdohs.gov and GRC@azdohs.gov, reporting the incident that occurred; (b) cooperate with State to identify the source or cause and respond to each unauthorized access or inappropriate disclosure; and (c) notify mailto:AZSOC@azdohs.gov mailto:GRC@azdohs.gov

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State promptly of any security threat that could result in unauthorized access or inappropriate disclosures; and

12.2.3 Contractor shall not: (a) release any such Data or allow it to be released or divulge any such information to anyone other than its employees or officers as needed for each person’s individual performance of his or her duties under the Contract, unless State has agreed otherwise in advance and in writing; or (b) respond to any requests it receives from a third party for such Data or information, and instead route all such requests to State’s designated representative.

12.3 Personally Identifiable Information. Without limiting the generality of paragraph 14.2, Contractor warrants that it will employ protections for any personally identifiable information (“PII”) belonging to State’s employees or other contractors or members of the general public that it receives from State or otherwise acquires in its performance under the Contract. For purposes of this paragraph:

12.3.1 PII has the meaning given in Arizona Revised Statute (A.R.S.) § 18-551; and

12.3.2 “protections” has the meaning given in the National Institute of Standards and Technology (NIST) Special Publication 800-160, Revision 2, Volume 1.

NOTE (1): For convenience of reference only, Arizona Revised Statute (A.R.S.) § 18-551 is available at:

https://www.azleg.gov/ars/18/00551.htm

NOTE (2): For convenience of reference only, NIST SP 800-160, Revision 2, Volume 1 is available at:

https://nvlpubs.nist.gov/nistpubs/SpecialPublications/NIST.SP.800-160v2r1.pdf

12.4 Protected Health Information. Contractor warrants that, to the extent performance under

Contract involves individually identifiable health information (referred to hereinafter as protected health information (“PHI”) and electronic PHI (“ePHI”) as defined in the Privacy Rule referred to below), it:

12.4.1 is familiar with and will comply with the applicable aspects of the following collective regulatory requirements regarding patient information privacy protection: (a) the “Privacy Rule” in CFR 45 Part 160 and Part 164 pursuant to the Health Insurance Portability and Accountability Act (“HIPAA”) of 1996; (b) Arizona laws, rules, and https://www.azleg.gov/ars/18/00551.htm https://nvlpubs.nist.gov/nistpubs/SpecialPublications/NIST.SP.800-160v2r1.pdf

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Direct Contract | Revision No. 1 | Revised 03-24 | Page 18 of 47 regulations applicable to PHI/ePHI that are not preempted by CFR45-160(B) or the Employee Retirement Income Security Act of 1974 (“ERISA”) as amended; and (c) State’s current and published PHI/ePHI privacy and security policies and procedures;

12.4.2 will cooperate with State in the course of performing under the Contract so that both State and Contractor stay in compliance with the requirements in (1) above; and

12.4.3 will sign any documents that are reasonably necessary to keep both State and Contractor in compliance with the requirements in (1) above, in particular “Business Associate Agreements” in accordance with the Privacy Rule.

NOTE: For convenience of reference only, the Privacy Rule is available at:

http://www.hhs.gov/hipaa/for-professionals/privacy/index.html

12.5 Artificial Intelligence (AI) Prohibitions. Consistent with State policy, if Contractor supplies

AI Services or Materials (either directly or through Subcontractors or the sale of licenses), such as research, development, training, implementation, deployment, maintenance, provision, or sale of AI systems, then Contractor is prohibited from using State of Arizona Materials or Data in generative AI queries or for building or training proprietary generative AI programs unless explicitly approved in advance by the State in writing.

12.5.1 Contractor shall also disclose the utilization of generative AI before producing works owned by the State and/or integrating generative AI into Materials or Services used by the State.

12.5.2 Contractor shall perform due diligence to ensure proper licensure of model training data for all generative AI services.

http://www.hhs.gov/hipaa/for-professionals/privacy/index.html

Addendum A to the Special Terms and Conditions

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Addendum A - Contractor Insurance Requirements

1.1 Indemnification Clause

To the fullest extent permitted by law, Contractor shall defend, indemnify, and hold harmless the State of Arizona, and its departments, agencies, boards, commissions, universities, officers, officials, agents, and employees (hereinafter referred to as “Indemnitee”) from and against any and all claims, actions, liabilities, damages, losses, or expenses (including court costs, attorneys’ fees, and costs of claim processing, investigation and litigation) (hereinafter referred to as “Claims”) for bodily injury or personal injury (including death), or loss or damage to tangible or intangible property caused, or alleged to be caused, in whole or in part, by the negligent or willful acts or omissions of Contractor or any of its owners, officers, directors, agents, employees or subcontractors. This indemnity includes any claim or amount arising out of, or recovered under, the Workers’ Compensation Law or arising out of the failure of such Contractor to conform to any federal, state, or local law, statute, ordinance, rule, regulation, or court decree. It is the specific intention of the parties that the Indemnitee shall, in all instances, except for Claims arising solely from the negligent or willful acts or omissions of the Indemnitee, be indemnified by Contractor from and against any and all claims. It is agreed that Contractor will be responsible for primary loss investigation, defense, and judgment costs where this indemnification is applicable. In consideration of the award of this contract, the Contractor agrees to waive all rights of subrogation against the State of Arizona, its officers, officials, agents, and employees for losses arising from the work performed by the Contractor for the State of Arizona.

This indemnity shall not apply if the contractor or sub-contractor(s) is/are an agency, board, commission or university of the State of Arizona.

1.2 Insurance Requirements

1.2.1 Contractor and subcontractors shall procure and maintain, until all of their obligations have been discharged, including any warranty periods under this Contract, insurance against claims for injury to persons or damage to property arising from, or in connection with, the performance of the work hereunder by the Contractor, its agents, representatives, employees or subcontractors.

1.2.2 The Insurance Requirements herein are minimum requirements for this Contract and in no way limit the indemnity covenants contained in this Contract. The State of Arizona in no way warrants that the minimum limits contained herein are sufficient to protect the Contractor from liabilities that arise out of the performance of the work under this Contract by the Contractor, its agents, representatives, employees or subcontractors, and the Contractor is free to purchase additional insurance.

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1.3 Minimum Scope and Limits of Insurance

Contractor shall provide coverage with limits of liability not less than those stated below.

1.3.1. Commercial General Liability (CGL) – Occurrence Form

Policy shall include bodily injury, property damage, and broad form contractual liability coverage.

• General Aggregate $2,000,000

• Products – Completed Operations Aggregate $1,000,000

• Personal and Advertising Injury $1,000,000

• Damage to Rented Premises $50,000

• Each Occurrence $1,000,000

a. The policy shall be endorsed, as required by this written agreement, to include the State of

Arizona, and its departments, agencies, boards, commissions, universities, officers, officials, agents, and employees as additional insureds with respect to liability arising out of the activities performed by or on behalf of the Contractor.

b. Policy shall contain a waiver of subrogation endorsement, as required by this written agreement, in favor of the State of Arizona, and its departments, agencies, boards, commissions, universities, officers, officials, agents, and employees for losses arising from work performed by or on behalf of the Contractor.

1.3.2. Business Automobile Liability

Bodily Injury and Property Damage for any owned, hired, and/or non- owned automobiles used in the performance of this Contract.

• Combined Single Limit (CSL) $1,000,000

a. Policy shall be endorsed, as required by this written agreement, to include the State of Arizona, and its departments, agencies, boards, commissions, universities, officers, officials, agents, and employees as additional insureds with respect to liability arising out of the activities performed by, or on behalf of, the Contractor involving automobiles owned, hired and/or non-owned by the Contractor.

b. Policy shall contain a waiver of subrogation endorsement as required by this written agreement in favor of the State of Arizona, and its departments, agencies, boards, commissions, universities, officers, officials, agents, and employees for losses arising from work performed by or on behalf of the Contractor.

1.3.3. Workers’ Compensation and Employers' Liability

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• Workers' Compensation Statutory

• Employers' Liability o Each Accident $1,000,000 o Disease – Each Employee $1,000,000 o Disease – Policy Limit $1,000,000

a. Policy shall contain a waiver of subrogation endorsement, as required by this written agreement, in favor of the State of Arizona, and its departments, agencies, boards, commissions, universities, officers, officials, agents, and employees for losses arising from work performed by or on behalf of the Contractor.

b. This requirement shall not apply to each Contractor or subcontractor that is exempt under A.R.S.

§ 23-901, and when such Contractor or subcontractor executes the appropriate waiver form (Sole Proprietor or Independent Contractor).

1.3.4. Professional Liability (Errors and Omissions Liability)

• Each Claim $2,000,000

• Annual Aggregate $2,000,000

a. In the event that the Professional Liability insurance required by this Contract is written on a claims-made basis, Contractor warrants that any retroactive date under the policy shall precede the effective date of this Contract and, either continuous coverage will be maintained, or an extended discovery period will be exercised, for a period of two (2) years beginning at the time work under this Contract is completed.

b. The policy shall cover professional misconduct or negligent acts for those positions defined in the Scope of Work of this contract.

1.4. Additional Insurance Requirements

The policies shall include, or be endorsed to include, as required by this written agreement, the following provisions:

1.4.1. The Contractor's policies, as applicable, shall stipulate that the insurance afforded the Contractor shall be primary and that any insurance carried by the Department, its agents, officials, employees or the State of Arizona shall be excess and not contributory insurance, as provided by A.R.S. § 41-621 (E).

1.4.2. Insurance provided by the Contractor shall not limit the Contractor’s liability assumed under the indemnification provisions of this Contract.

1.5. Notice of Cancellation

Applicable to all insurance policies required within the Insurance Requirements of this Contract, Contractor’s insurance shall not be permitted to expire, be suspended, be canceled, or be materially changed for any reason

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Direct Contract | Revision No. 1 | Revised 03-24 | Page 22 of 47 without thirty (30) days prior written notice to the State of Arizona. Within two (2) business days of receipt, Contractor must provide notice to the State of Arizona if they receive notice of a policy that has been or will be suspended, canceled, materially changed for any reason, has expired, or will be expiring. Such notice shall be sent directly to the Department and shall be mailed, emailed, hand delivered or sent by facsimile transmission to (State Representative’s Name, Address & Fax Number).

1.6. Acceptability of Insurers

Contractor’s insurance shall be placed with companies licensed in the State of Arizona or hold approved non-admitted status on the Arizona Department of Insurance List of Qualified Unauthorized Insurers. Insurers shall have an “A.M. Best” rating of not less than A- VII. The State of Arizona in no way warrants that the above-required minimum insurer rating is sufficient to protect the Contractor from potential insurer insolvency.

1.7. Verification of Coverage

Contractor shall furnish the State of Arizona with certificates of insurance (valid ACORD form or equivalent approved by the State of Arizona) evidencing that Contractor has the insurance as required by this Contract. An authorized representative of the insurer shall sign the certificates.

1.7.1. All such certificates of insurance and policy endorsements must be received by the State before work commences. The State’s receipt of any certificates of insurance or policy endorsements that do not comply with this written agreement shall not waive or otherwise affect the requirements of this agreement.

1.7.2. Each insurance policy required by this Contract must be in effect at, or prior to, commencement of work under this Contract. Failure to maintain the insurance policies as required by this Contract, or to provide evidence of renewal, is a material breach of contract.

1.7.3. All certificates required by this Contract shall be sent directly to the Department. The State of Arizona project/contract number and project description shall be noted on the certificate of insurance. The State of Arizona reserves the right to require complete copies of all insurance policies required by this Contract at any time.

1.8. Subcontractors

Contractor’s certificate(s) shall include all subcontractors as insureds under its policies or Contractor shall be responsible for ensuring and/or verifying that all subcontractors have valid and collectable insurance as evidenced by the certificates of insurance and endorsements for each subcontractor. All coverages for subcontractors shall be subject to the minimum Insurance Requirements identified above. The Department reserves the right to require, at any time throughout the life of this contract, proof from the Contractor that its subcontractors have the required coverage.

1.9. Approval and Modifications

The Contracting Agency, in consultation with State Risk, reserves the right to review or make modifications to the insurance limits, required coverages, or endorsements throughout the life of this contract, as deemed necessary.

Such action will not require a formal Contract amendment but may be made by administrative action.

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1.10. Exceptions

In the event the Contractor or subcontractor(s) is/are a public entity, then the Insurance Requirements shall not apply. Such public entity shall provide a certificate of self-insurance. If the Contractor or subcontractor(s) is/are a State of Arizona agency, board, commission, or university, none of the above shall apply.

Addendum B to the Special Terms and Conditions

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Addendum B - Warranties and Requirements Related to Arizona Information Technology…