CTR079478_CI_-_Executed.pdf

Direct Contract

Arizona Department of Administration

State Procurement Office Contract No.: CTR079478

Description: Economic Feasibility of the Willcox AMA Management Goal

Direct Contract | Revision No. 2 | Revised 08-25 | Page 1 of 36

CONTRACTOR IS STRONGLY ENCOURAGED TO READ THE ENTIRE CONTRACT.

Table of Contents

Scope of Work 2

Special Terms and Conditions 8

Addendum A - Contractor Insurance Requirements 11

Addendum B - Warranties and Requirements Related to Arizona Information Technology Statewide Policies, Standards, and Procedures 15

Uniform Terms and Conditions 10.5 19

Contract Signature Page 36

Docusign Envelope ID: 0AD997C8-C5A7-4EE2-BAA6-9239324A0DE8

Scope of Work

Administration

State Procurement Office Contract No.: CTR079478

Direct Contract | Revision No. 2 | Revised 08-25 | Page 2 of 36

1. Purpose and Background

1.1. Purpose: The purpose of this contract is to enable the Arizona Department of Water

Resources to understand the economic feasibility of a mandatory reduction of groundwater use in the Willcox AMA as part of the required conservation programs in the Willcox Active Management Area Management Plan.

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

Arizona Administrative Code (A.A.C.) R2-7-E303, Competition Impracticable, State establishes this contract with WestWater Research LLC, to provide the Materials or Services described herein.

1.3. Background:

1.3.1. In accordance with statutory requirements, a management plan for the Willcox AMA must be promulgated within two years of the designation—no later than 2027. Following promulgation, conservation programs and regulatory requirements are to be implemented within an additional two-year period, by 2029.

1.3.2. ADWR has developed a draft goal: “To support the long-term viability of the regional economy, mitigate land subsidence, and extend the life of the aquifer by reducing groundwater overdraft by at least 50% by 2075.” To assist in meeting the Willcox AMA management goal, mandatory conservation requirements will be included in the management plan to help facilitate a reduction of groundwater use. However, any implemented conservation program or requirement must prove economically and technically feasible.

1.3.3. ADWR understands the economic and technical feasibility of conservation requirements in two time periods. First, as there will be five management plans spanning a length of 10 years each to meet the management goal, ADWR is understanding economic feasibility for the first 10 years. The second time period will consider the term of the draft management goal, through 2075.

2. Requirements

2.1. On-Water Resource Economics Support:

2.1.1. WestWater will provide water resource economic support services related to ADWR regulatory, program, policy, and strategic water management matters, such as, but not limited to:

2.1.2. Economic and data analysis for Active Management Areas (“AMAs”) and Irrigation Non- Expansion Areas (“INAs”), Assured and Adequate Water Supplies (“AAWS”) issues, and/or related to rural water supply and demand.

Administration

State Procurement Office Contract No.: CTR079478

Direct Contract | Revision No. 2 | Revised 08-25 | Page 3 of 36

2.1.3. Economic impact analysis of potential regulatory or policy changes, including the impact of potential legislation related to the retirement of agricultural lands and conversion of related water rights to AAWS uses.

2.1.4. Development and evaluation of water supply projections and/or economic impacts related to AAWS program efforts.

2.1.5. Development of our updates to templates or forms utilized to support AMA or Statewide planning, reporting, or program management.

2.1.6. Participation in calls and planning meetings with ADWR Staff and other stakeholders related to water resource issues.

2.1.7. Completing white papers on assigned trends, policy issues, water pricing and economics, or other water resource-related developments.

2.1.8. Due to the on-call nature of this engagement, assignments, projects, and work products will be managed through written Task Orders that will include the purpose, specific tasks, timeframe, and deliverables. WestWater will complete assigned Task Orders on an as-available basis. ADWR understands that WestWater has not reserved a specific time to complete all support services that may be requested by ADWR.

2.2. Task 1: Project Kickoff and Check-in Meetings. The WestWater project team will initiate the effort by meeting with ADWR to refine the project scope, including determining the number of baseline conditions and modeled alternatives to be developed. Westwater and ADWR will also hold regular check-in meetings to monitor progress, review deliverables, and ensure alignment throughout the project.

2.3. Task 2: Baseline Condition. To assess the potential economic impacts of water use reductions to the agricultural sector needed to meet the management goal, baseline conditions must first be established. Given the vital role that irrigated agriculture plays in the Willcox AMA, WestWater focuses first on developing baseline conditions for a typical representative agricultural production operation(s). The baseline condition(s) will draw from multiple data sources, including:

2.3.1. Enterprise budgets from the University of Arizona Cooperative Extension.

2.3.2. Crop yields, prices, and farm sizes from the USDA Agricultural Census.

2.3.3. Crop acres and irrigation practices from the U.S Geological Survey (USGS’s) Observation of Irrigated Lands for the Willcox groundwater basin.

2.3.4. Well-depth, data provided by ADWR’s hydrology team.

2.3.5. Electricity costs from local utilities.

2.3.6. Based on the USGS’s Observation of Irrigated Lands for the Willcox groundwater basin and discussion with ADWR, WestWater may model the baseline conditions for representative farms associated with the crops with the highest acres in the basin:

2.3.6.1. Alfalfa.

2.3.6.2. Small Grains (Wheat, Oats, Barely).

2.3.6.3. Corn.

2.3.6.4. Orchard Crops (Pecans, Peaches, Apples).

2.3.6.5. Vineyards.

Administration

State Procurement Office Contract No.: CTR079478

Direct Contract | Revision No. 2 | Revised 08-25 | Page 4 of 36

2.3.7. Depending on the number of representative farms needed to model Willcox groundwater basin agricultural production, the budget may be modified. The estimated budget included below assumes that five (5) representative farms will be developed.

2.3.8. WestWater will initially rely upon crop enterprise budgets from the University of Arizona Cooperative Extension as a foundation for estimating the costs of production for each crop considered in the analysis. However, the available budgets will require modifications to reflect conditions in the Willcox AMA better. Westwater will collaborate with ADWR staff to refine the baseline conditions using input from local agricultural experts and stakeholder discussions. As needed, WestWater will support ADWR staff by helping to develop questions or participating in meetings to help facilitate stakeholder engagement to make adjustments to the crop budgets to more accurately represent costs and returns to agriculture.

2.4. Task 3: Modeled Alternatives. WestWater will work with ADWR staff to identify and develop a set of alternatives reflecting potential farm-level mitigation strategies to various groundwater reduction scenarios. These alternatives may include, but are not limited to one more of the following:

2.4.1. Modifications to irrigation methods.

2.4.2. Crop rotation and rotational fallowing strategies.

2.4.3. Use of deficit irrigation practices.

2.4.4. Other mitigation strategies.

2.4.5. As with the baseline conditions, Westwater will work with ADWR staff to refine alternatives based on stakeholder input. The set of alternatives will be initially assessed based upon factors such as implementation costs, crop suitability, labor and equipment requirement, and level of water savings, among others. This initial assessment may eliminate some alternatives from further consideration due to technical, market, or other factors. The budget estimate provided below assumes that up to four alternatives will be quantitatively assessed.

2.5. Task 4: Potential for a System to Trading Water Supply Allocation Reductions. Given that producers’ capacity to remain within their future water supply allocations will vary by operation, stakeholders have expressed an interest in the Willcox AMA Management Plans to include a provision that will allow trading of unused allocations. Building on the results from Tasks 2 and 3, Task 4 will evaluate the economic feasibility of establishing a mechanism for trading water supply allocations. The analysis will assess whether the representative farm can remain within its potential allocation at a cost-effective level, while retaining some allocation to trade with other operations. Any unused allocation may result from on-farm practices or a voluntary reduction in water use below the allocated amount. Concurrently, the analysis will examine the feasibility of other operations purchasing such unused supply and the potential gains in agricultural production attributable to a managed groundwater allocation trading program. This task will be conducted in close coordination with ADWR staff to define the parameters of a potential trading framework.

2.6. Task 5: Baseline and Alternative Comparisons -10 year and Management Goal Period. Building on Tasks 2, 3 and 4, Westwater will conduct an economic analysis comparing the baseline

Administration

State Procurement Office Contract No.: CTR079478

Direct Contract | Revision No. 2 | Revised 08-25 | Page 5 of 36 condition with each alternative over a ten (10) year period as well as the full management goal planning period. This analysis will assess the economic feasibility of each alternative at the farm level and the implications on groundwater use under different adoption levels. This will quantify the feasibility at the farm-level as well as identify the scale of alternatives that need to be adopted to achieve the management goal for each period. In addition, the analysis will identify the level of financial support from state and federal programs that could help to incentivize adoption of the alternatives.

2.7. Task 6: Reporting. See Reporting Requirements, Section 5.1.

2.8. Task 7: Regional Economic Impact (Optional). To understand the regional economic impact, only upon affirmative, written notice by ADWR, WestWater will conduct an analysis using IMPLAN (Impact Analysis for Planning) data for Cochise County, Graham County, and/or the State of Arizona. IMPLAN is an input-output (I-O) modeling tool that tracks the flow of money through industries, households, and governments in a specific geography (like a county or region). The model will estimate direct, indirect, and induced impacts of each alternative.

2.9. Timeline and Schedule:

2.9.1. Consistent with the reporting requirements in Section 5.1, WestWater shall provide draft deliverables for the tasks set forth in section 2.1.1 through 2.1.6 to ADWR within four (4) months after notice to proceed.

2.9.2. Consistent with the reporting requirements in Section 5.1, a final set of deliverables for the tasks set forth in section 2.1.1 through 2.1.6 will be submitted to ADWR within two (2) weeks of receiving comments and requested changes.

2.9.3. Upon notice from ADWR at least six (6) weeks before the deadline established by Section 2.2.1, Contractor shall modify the report required in Section 5.1 to include the task in Section

2.1.7 within the timeline included in sections 2.2.1 and 2.2.2.

3. Contractor Requirements

The Contractor Shall:

3.1. Service Requirements:

3.1.1. Ensure that services are rendered in accordance with industry standards.

3.2. Qualification Requirements:

3.2.1. Ensure that the work performed under this Contract shall be overseen by an expert in agricultural and water resources economic analysis with at least twenty years of experience.

Administration

State Procurement Office Contract No.: CTR079478

Direct Contract | Revision No. 2 | Revised 08-25 | Page 6 of 36

4. Performance Measures/Service Level Agreement

4.1. WestWater shall keep ADWR apprised of weekly progress on all tasks via telephone and/or email.

5. Reporting Requirements:

The Contractor shall submit the following items and all notices/correspondence relevant to this contract as directed by the Department, electronically to:

Arizona Department of Water Resources Care of Olga Hart 1802 W Jackson St. Box #79 Phoenix, Arizona 85007 ohart@azwater.gov

5.1. Task 6: Reporting. Consistent with the timeline specified in Section 2.2, Contractor shall prepare a report in PDF format that summarizes all tasks of the project and provides a set of key findings and recommendations for further investigation.

5.2. Contractor shall prepare a draft report for review and comment by ADWR. WestWater will address the changes requested and provide a final report to ADWR.

5.3. Contractor shall provide an accompanying spreadsheet model detailing the baseline and modeled alternatives, allowing staff to explore and adjust the scenarios after project completion.

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

Arizona Department of Administration State Procurement Office

1400 W Washington St., Suite 3100 Phoenix, Az 85007 Email: paul.evans@azdoa.gov

6. Payment

6.1. Payment Units of Measure already agreed upon before execution.

7. Pricing

Staff Role Previous Contract Rate

($/hour) 2025 Rates

($/hour) 2026 Rates

($/hour)

Principal/Regional Director $400 $420 $420

Senior Associate $225 $235 $245 mailto:ohart@azwater.gov

Administration

State Procurement Office Contract No.: CTR079478

Description: Economic Feasibility of the Willcox AMA Management Goal

Direct Contract | Revision No. 2 | Revised 08-25 | Page 7 of 36

Associate $185 $195 $205

Analyst $125 $130 $135

Administrative Staff $130 $130 $135

IMPLAN Data (optional) $10,000

Expert Witness $500 per hour for deposition and trial days.

Travel Reimbursement

Rates shall not exceed the current State of Arizona Accounting Manual

(SAAM) Section 5095. https://gao.az.gov/state-arizona-accounting-manual-saam

Project Task Staff Hours.

Task Principal Senior Associate

Associate Analyst

1: Project Meetings 10 4 10 0

2:Baseline Conditions

16 24 50 50

3:Modeled Alternatives

16 24 50 50

4:Trading Program Analysis

8 12 20 20

5: Comparison 10 20 24 20

6: Deliverables 8 8 20 16

Task7:Regional Economic Impact (optional)

4 8 20 16

Docusign Envelope ID: 0AD997C8-C5A7-4EE2-BAA6-9239324A0DE8 https://gao.az.gov/state-arizona-accounting-manual-saam https://gao.az.gov/state-arizona-accounting-manual-saam

Special Terms and Conditions

Administration

State Procurement Office Contract No.: CTR079478

Description: Economic Feasibility of the Willcox AMA Management Goal

Direct Contract | Revision No. 2 | Revised 08-25 | Page 8 of 36

1.0

1.1

2.0

3.0

3.1

3.2

4.0

4.1

5.0

6.0

6.1

6.2

Special Terms and Conditions

Definitions

Add as needed

Contract Interpretations

[Reserved]

Contract Administration and Operation

Term of Contract. The term of the Contract will commence on the date indicated on the Offer and Acceptance and continue for twelve (12) months unless canceled, terminated, or permissibly extended.

Eligible Agency: This contract is a single-agency contract for the sole use of ADWR.

Costs and Payments

Pricing: Fixed Price hourly rate and materials per Scope of Work, Section 7, Pricing.

Contract Changes

[Reserved]

Risk and Liability

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 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.

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

Administration

State Procurement Office Contract No.: CTR079478

Direct Contract | Revision No. 2 | Revised 08-25 | Page 9 of 36 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 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.

Administration

State Procurement Office Contract No.: CTR079478

Direct Contract | Revision No. 2 | Revised 08-25 | Page 10 of 36

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.

7.2 [FOR ADDITIONAL, CONTRACT-SPECIFIC WARRANTIES, if any]

8.0 [RESERVED]

9.0 [RESERVED]

10.0 [RESERVED]

11.0 General Provisions for Materials: (Add as needed or required.)

[RESERVED]

12.0 General Provisions for Services: (Add as needed or required.)

13.0 Data and Information Handling: (Add as needed or required.)

14.0 Information Technology Work: (Add as needed or required.)

15.0 Agency Specific Terms and Conditions: (Add as needed or required.)

16.0 Provisions for Statewide Contracts: (Add as needed or required.)

Addendum A to the Special Terms and Conditions

Administration

State Procurement Office Contract No.: CTR079478

Direct Contract | Revision No. 2 | Revised 08-25 | Page 11 of 36

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.

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

Administration

State Procurement Office Contract No.: CTR079478

Direct Contract | Revision No. 2 | Revised 08-25 | Page 12 of 36

• 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

• 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.

Administration

State Procurement Office Contract No.: CTR079478

Direct Contract | Revision No. 2 | Revised 08-25 | Page 13 of 36

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 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

Administration

State Procurement Office Contract No.: CTR079478

Direct Contract | Revision No. 2 | Revised 08-25 | Page 14 of 36 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.

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

Administration

State Procurement Office Contract No.: CTR079478

Direct Contract | Revision No. 2 | Revised 08-25 | Page 15 of 36

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

1. Security Standards

1.1. Security of the State’s systems and Data are of utmost importance to the State. In order to assure security from a personnel and operations perspective, Contractor shall comply with all requirements, in their entirety, as described in the statewide enterprise architecture; statewide

Information Technology security policies, standards, and procedures; and any applicable agency-specific Information Technology security policies, standards, and procedures.

1.2. Contractor shall follow the correct, current version of these policies, standards, and procedures established by the Arizona Department of Homeland Security (AZDOHS) pursuant to their authority under A.R.S. Title 41, Chapter 41. The current website for these policies, standards, and procedures is: Information Technology Policies, Standards and Procedures. Note that this link is provided for convenience only.

1.3. For security reasons, some state facilities require non-state personnel to have escorts. If required by the state facility, Contractor personnel shall only be allowed inside of a State facility if accompanied by an escort designated by the State. This is applicable in Correctional facilities, Public Safety facilities, State Lottery, and other facilities as designated by the State.

2. Security Framework

2.1. The State of Arizona information security policies and standards follow the National Institute of

Standards and Technology (NIST) SP 800-53 Rev. 5 Security and Privacy Guidelines may currently be located at: https://nvlpubs.nist.gov/nistpubs/SpecialPublications/NIST.SP.800-

53r5.pdf.

2.2. The State has established a process to assess risk associated with storing, processing and/or transmitting State of Arizona Data with external, non-State of Arizona entities. The Arizona Risk and Authorization Management Program (AZRamp) was developed to ensure State and contractors meet these requirements. All contractors responding to State solicitations must successfully complete the AZRamp risk assessment based upon the Data classification involved as determined by the Data owner and AZDOHS Cyber Command. Failure to successfully complete AZRamp assessment will be deemed as breach of contract.

2.3. In the State’s sole discretion, the State may also accept current FedRamp and StateRamp certifications as evidence that the Contractor has met the State's risk assessment requirements.

2.4. Other forms of Cybersecurity Frameworks (CSF), Trust Documents, Self-Attestations, including, but not limited to, ISO/IEC, SOC 2 & 3, PCI, or HIPAA reports of compliance, may be reviewed

Docusign Envelope ID: 0AD997C8-C5A7-4EE2-BAA6-9239324A0DE8 https://azdohs.gov/information-technology-it-policies-standards-and-procedures https://nvlpubs.nist.gov/nistpubs/SpecialPublications/NIST.SP.800-53r5.pdf https://nvlpubs.nist.gov/nistpubs/SpecialPublications/NIST.SP.800-53r5.pdf

Administration

State Procurement Office Contract No.: CTR079478

Direct Contract | Revision No. 2 | Revised 08-25 | Page 16 of 36 as part of the State’s risk assessment, but are not exclusive or conclusive evidence that the

Contractor has met the State’s risk assessment requirements.

3. Additional Security Requirements

3.1. Contractor shall comply with all security requirements requested by the State.

3.2. If an Arizona Risk and Authorization Management Program (AZRamp) is required, it will generally follow these steps, each of which shall be completed by the Contractor upon request by the State:

3.2.1. Contractor shall submit a completed Arizona Baseline Infrastructure Security

Controls Prerequisite assessment spreadsheet with its Offer. The Arizona Baseline

Infrastructure Security Controls Prerequisite assessment spreadsheet as found at:

https://azdohs.gov/sites/default/files/arizona_baseline_security_controls_pre-requisite__0_0.xls, and mitigate gaps or install compensating controls for any issues of concern identified by State.

3.2.2. Contractor shall provide Information Security documentation for the AZRamp assessment to include System Security Plan (SSP), Written Information Security

Programs (WISP), or supporting written IT policies for review of the assessment.

3.2.3. Note regarding the confidential treatment of Contractor information:

3.2.3.1. The State of Arizona seeks a partnership with our supporting vendors, therefore, Non-Disclosure Agreements (NDA) for release to review submitted SSPs, WISPs, or written IT policies will not be considered.

3.2.3.2. Submitted SSPs, WISPs, or written IT policies are deleted and not retained after AZRamp Authorization is granted.

3.2.3.3. Procedures for submission of documents considered confidential or proprietary are identified within this RFP.

3.2.3.4. Special secure transfer of documents related to this AZRamp review process may be made by contacting: GRC@AZDOHS.gov to make special arrangements for the transfer of these documents.

3.2.4. If applicable to this Solicitation, Contractor shall complete and submit with the Offer an unedited and signed State of Arizona Health Insurance Portability and

Accountability Act (HIPAA) Business Associate Addendum (BAA).

3.2.5. All contract awards are contingent on the successful completion of the AZRamp 125

Low Impact (public information) or the AZRamp 325 Moderate (Confidential, PII, or

PHI) Impact Control spreadsheet titled “Arizona Infrastructure Security Controls

2017 (Excel),” to be determined by the Enterprise Security, Privacy & Risk

Compliance team. Low (Column E) and Moderate (Column F) Impact controls

Docusign Envelope ID: 0AD997C8-C5A7-4EE2-BAA6-9239324A0DE8 https://azdohs.gov/sites/default/files/arizona_baseline_security_controls_pre-requisite__0_0.xls https://azdohs.gov/sites/default/files/arizona_baseline_security_controls_pre-requisite__0_0.xls mailto:GRC@AZDOHS.gov

Administration

State Procurement Office Contract No.: CTR079478

Direct Contract | Revision No. 2 | Revised 08-25 | Page 17 of 36 spreadsheet can be located here:

https://azdohs.gov/sites/default/files/arizona_baseline_security_controls_2017_v2_

0_0.xls.

3.3. The State reserves the right to conduct risk assessments, vulnerability assessments, black-box penetration tests or hire a third party to conduct risk assessments, vulnerability assessments, and black-box penetration tests of the Contractor’s environment. Contractor will be alerted in advance and arrangements made for an agreeable time. Contractor shall respond to all flaws deemed serious by the State when discovered by providing an acceptable timeframe to resolve the issue and/or implement a compensating control(s).

3.4. Upon request, Contractor shall submit copies of system logs from Contractor’s environment to the State of AZ security team in the format requested to be added to the State SIEM (Security

Information Event Monitor) or IDS (Intrusion Detection System).

3.5. Contractor shall comply with all applicable State and Federal laws and regulations, including, but not limited to, the following (please note that the links are provided for convenience only and may change):

3.5.1. State of Arizona statewide policies, standards and procedures:

https://azdohs.gov/information-technology-it-policies-standards-and-procedures;

3.5.2. Federal Information Security Modernization Act of 2014 (FISMA):

https://csrc.nist.gov/topics/laws-and-regulations/laws/fisma;

3.5.3. OMB Circular A-130: https://www.federalregister.gov/documents/2016/07/28/2016-

17872/revision-of-omb-circular-no-a-130-managing-information-as-a-strategic-resource;

3.5.4. National Cyber Strategy of the United States of America:

https://www.cisa.gov/executive-order-strengthening-cybersecurity-federal-networks-and-critical-infrastructure;

3.5.5. Health Insurance Portability and Accountability Act (HIPAA) including Business

Associate Agreement/ Health Information Technology for Economic and Clinical

Health Act (HITECH): https://www.hhs.gov/hipaa/index.html;

3.5.6. Tax Information Security Guidelines For Federal, State and Local Agencies:

Safeguards for Protecting Federal Tax Returns and Return Information (I.R.S.

Publication 1075): https://www.irs.gov/pub/irs-pdf/p1075.pdf;

3.5.7. Criminal Justice Information Services Security Policy (CJIS):

https://www.fbi.gov/services/cjis/cjis-security-policy-resource-center;

3.5.8. Centers for Medicare & Medicaid Services (CMS), Minimum Acceptable Risk

Standards for Exchanges (MARS-E):

Docusign Envelope ID: 0AD997C8-C5A7-4EE2-BAA6-9239324A0DE8 https://aset.az.gov/sites/default/files/Arizona%20Baseline%20Security%20Controls%202017_v2.xls https://aset.az.gov/sites/default/files/Arizona%20Baseline%20Security%20Controls%202017_v2.xls https://azdohs.gov/sites/default/files/arizona_baseline_security_controls_2017_v2_0_0.xls https://azdohs.gov/sites/default/files/arizona_baseline_security_controls_2017_v2_0_0.xls https://azdohs.gov/information-technology-it-policies-standards-and-procedures https://csrc.nist.gov/topics/laws-and-regulations/laws/fisma https://www.federalregister.gov/documents/2016/07/28/2016-17872/revision-of-omb-circular-no-a-130-managing-information-as-a-strategic-resource https://www.federalregister.gov/documents/2016/07/28/2016-17872/revision-of-omb-circular-no-a-130-managing-information-as-a-strategic-resource https://www.federalregister.gov/documents/2016/07/28/2016-17872/revision-of-omb-circular-no-a-130-managing-information-as-a-strategic-resource https://www.cisa.gov/executive-order-strengthening-cybersecurity-federal-networks-and-critical-infrastructure https://www.cisa.gov/executive-order-strengthening-cybersecurity-federal-networks-and-critical-infrastructure https://www.hhs.gov/hipaa/index.html https://www.irs.gov/pub/irs-pdf/p1075.pdf http://https/ https://www.fbi.gov/services/cjis/cjis-security-policy-resource-center

Administration

State Procurement Office Contract No.: CTR079478

Direct Contract | Revision No. 2 | Revised 08-25 | Page 18 of 36 https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2-

MARS-E-v2-0-Minimum-Acceptable-Risk-Standards-for-Exchanges-11102015.pdf;

3.5.9. A.R.S. §18-104 - Arizona Department of Administration, Arizona Strategic Enterprise

Technology (ADOA-ASET), Powers and duties of the agency:

https://www.azleg.gov/arsDetail/?title=18;

3.5.10. A.R.S. §41-4282 - Statewide Information Security and Privacy Office (SISPO):

https://www.azleg.gov/viewdocument/?docName=https://www.azleg.gov/ars/41/04

282.htm

3.5.11. A.R.S. §18-551 - Definitions Information Security Including PII:

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

3.5.12. A.R.S. §18-552 - Notification of security system breaches; requirements;

enforcement; civil penalty; preemption; exceptions:

https://www.azleg.gov/ars/18/00552.htm;

3.5.13. Arizona Executive Order 2008-10 – Mitigating Cyber Security Threats:

https://aset.az.gov/node/428;

3.5.14. SIPC Memorandum of Understanding (MOU): https://www.sipc.org/about-sipc/;

3.5.15. State Environmental policies: https://azdeq.gov/LawsAndRules;

3.5.16. Family Education Rights Privacy Act (FERPA):

https://www2.ed.gov/policy/gen/guid/fpco/ferpa/index.html?src=rn;

3.5.17. Driver’s Privacy Protection Act (DPPA): https://azdot.gov/motor-vehicles/driver-services/driver-license-information/motor-vehicle-records;

3.5.18. Incident Response Reporting program and system:

https://azdohs.gov/sites/default/files/p8240-incident-response-planning_0.pdf;

3.5.19. State of Arizona Library, Archives and Public Records, Records Management

Division, General Retention Schedules https://azlibrary.gov/branches/archives-records-management; and

3.5.20. Payment Card Industry (PCI) Security Standards including but not limited to

Supplemental Documents, Information Supplements and Validation Requirements:

https://www.pcisecuritystandards.org.

Docusign Envelope ID: 0AD997C8-C5A7-4EE2-BAA6-9239324A0DE8 https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2-MARS-E-v2-0-Minimum-Acceptable-Risk-Standards-for-Exchanges-11102015.pdf https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2-MARS-E-v2-0-Minimum-Acceptable-Risk-Standards-for-Exchanges-11102015.pdf https://www.azleg.gov/arsDetail/?title=18 https://www.azleg.gov/viewdocument/?docName=https://www.azleg.gov/ars/41/04282.htm https://www.azleg.gov/viewdocument/?docName=https://www.azleg.gov/ars/41/04282.htm https://www.azleg.gov/ars/18/00551.htm https://www.azleg.gov/ars/18/00552.htm https://www.sipc.org/about-sipc/ https://azdeq.gov/LawsAndRules https://www2.ed.gov/policy/gen/guid/fpco/ferpa/index.html?src=rn https://azdot.gov/motor-vehicles/driver-services/driver-license-information/motor-vehicle-records https://azdot.gov/motor-vehicles/driver-services/driver-license-information/motor-vehicle-records https://azdohs.gov/sites/default/files/p8240-incident-response-planning_0.pdf https://azlibrary.gov/branches/archives-records-management https://azlibrary.gov/branches/archives-records-management https://www.pcisecuritystandards.org/

Uniform Terms and Conditions

Administration

State Procurement Office Contract No.: CTR079478

Direct Contract | Revision No. 2 | Revised 08-25 | Page 19 of 36

Uniform Terms and Conditions 10.5

1. Definition of Terms. As used in this Solicitation and any resulting Contract, the terms listed below are defined as follows:

1.1. “AI” means the science and engineering of making machines capable of performing tasks that are typically associated with human intelligence, such as learning and problem-solving, and includes without limitation: AI systems, classic AI, external AI, generative AI, and large language model (LLM)

AI.

1.2. “Attachment” means any item the Solicitation which requires the Offeror to submit as part of the

Offer.

1.3. “Contract” means the combination of the Solicitation, including the Instructions to Offerors, the

Uniform and Special Terms and Conditions, and the Specifications and Statement or Scope of Work;

the Offer and any Best and Final Offers; and any Solicitation Amendments or Contract Amendments.

1.4. "Contract Amendment" means a written document signed by the Procurement Officer that is issued for the purpose of making changes in the Contract.

1.5. “Contractor” means any person who has a Contract with the State.

1.6. “Data” means recorded information, regardless of form or the media on which it may be recorded.

The term may include technical data and computer software. The term does not include information incidental to contract administration, such as financial, administrative, cost or pricing, or management information.

1.7. “Days” means calendar days unless otherwise specified.

1.8. “Exhibit” means any item labeled as an Exhibit in the Solicitation or placed in the Exhibits section of the Solicitation generally containing maps, schematics, examples of reports, or other documents that will be used to perform the requirements of the Scope of Work after contract award.

1.9. “Gratuity” means a payment, loan, subscription, advance, deposit of money, services, or anything of more than nominal value, present or promised, unless consideration of substantially equal or greater value is received.

1.10. “Materials” means all property, including equipment, supplies, printing, insurance and leases of property but does not include land, a permanent interest in land or real property or leasing space.

1.11. “Procurement Officer” means the person, or his or her designee, duly authorized by the State to enter into and administer Contracts and make written determinations with respect to the Contract.

Administration

State Procurement Office Contract No.: CTR079478

Direct Contract | Revision No. 2 | Revised 08-25 | Page 20 of 36

1.12. “Services” means the furnishing of labor, time or effort by a Contractor or Subcontractor which does not involve the delivery of a specific end product other than required reports and performance, but does not include employment agreements or collective bargaining agreements.

1.13. “State” means any department, commission, council, board, bureau, committee, institution, agency, government corporation or other establishment or official of the executive branch or corporation commission of the State of Arizona that executes the Contract.

1.14. “State Fiscal Year” means the period beginning with July 1 and ending June 30.

1.15. “Subcontract” means any Contract, express or implied, between the Contractor and another party or between a Subcontractor and another party delegating or assigning, in whole or in part, the making or furnishing of any Materials or any Services required for the performance of the Contract.

1.16. “Subcontractor” means a person who contracts to perform work or render Services to a Contractor or to another Subcontractor as a part of a Contract with the State.

2. Contract Interpretation

2.1. Arizona Law. The Arizona law applies to this Contract including, where applicable, the Uniform

Commercial Code as adopted by the State of Arizona and the Arizona Procurement Code, Arizona

Revised Statutes (A.R.S.) Title 41, Chapter 23, and its implementing rules, Arizona Administrative

Code (A.A.C.) Title 2, Chapter 7.

2.2. Implied Contract Terms. Each provision of law and any terms required by law to be in this Contract are a part of this Contract as if fully stated in it.

2.3. Contract Order of Precedence. In the event of a conflict in the provisions of the Contract, as accepted by the State and as they may be amended, the following shall prevail in the order set forth below:

2.3.1. Special Terms and Conditions;

2.3.2. Uniform Terms and Conditions;

2.3.3. Statement or Scope of Work;

2.3.4. Specifications;

2.3.5. Attachments;

2.3.6. Exhibits; then

Administration

State Procurement Office Contract No.: CTR079478

Direct Contract | Revision No. 2 | Revised 08-25 | Page 21 of 36

2.3.7. Any other documents referenced or included in the Solicitation including, but not limited to, any Bid or Offer documents provided by the Contractor that do not fall into one of the above categories.

2.4. Relationship of Parties. The Contractor under this Contract is an independent Contractor. Neither party to this Contract shall be deemed to be the employee or agent of the other party to the Contract.

2.5. Severability. The provisions of this Contract are severable. Any term or condition deemed illegal or invalid shall not affect any other term or condition of the Contract.

2.6. No Parol Evidence. This Contract is intended by the parties as a final and complete expression of their agreement. No course of prior dealings between the parties and no usage of the trade shall supplement or explain any terms used in this document and no other understanding either oral or in writing shall be binding.

2.7. No Waiver. Either party’s failure to insist on strict performance of any term or condition of…