ESBD_406491_1743626350910_304-26-0513 Cigarette Tax Stamps (v04.01.25Contracts Final2).pdf

RFP # 304-26-0513BJ Cigarette Tax Stamps Page 1 of 44

(Rev. 2/2024)

Texas Comptroller of Public Accounts

Glenn Hegar, Comptroller

Request for Proposals for

Heat Transfer Cigarette Tax Stamps and Related Services

RFP No. 304-26-0513BJ

Issued: April 2, 2025

Anticipated Schedule of Events

April 2, 2025 Issuance of RFP

April 11, 2025 Deadline for Submission of Questions (2:00 p.m., CT)

April 17, 2025 Release of Official Responses to Questions

(or as soon thereafter as practical)

May 2, 2025 Deadline for Submission of Proposals (2:00 p.m. CT)

Late Proposals will not be considered

May26 – 30, 2025 Presentations from Top-Ranked Respondents

(if presentations requested by CPA, dates and times to be scheduled)

September 1, 2025 Services Commencement Date

(or as soon thereafter as practical)

RFP # 304-26-0513BJ Cigarette Tax Stamps Page 2 of 44

Table of Contents

I. Summary

II. Specifications

A. Introduction

B. Background

C. Definitions and Acronyms

D. Scope of Services

E. Contract Resulting from this Solicitation; Order of Priority

F. Warranty of Performance

G. Security Incident Notification

H. Insurance and Bonds

I. Criminal Background Investigation

J. Contract Term; Survival of Terms

K. Acceptance Criteria

L. Payments

M. Discounts

N. PO Addition and Deletion

O. HUB Subcontracting Plan Information

P. Respondent Documents

Q. Respondent Exceptions

R. Respondent’s Past Performance; Vendor Performance Tracking System

III. Proposal Submission Requirements

A. Delivery of Proposal; Delivery of Stamp Samples

B. Proposal Content and Format

IV. Mandatory Price Sheet

V. Standard Terms and Conditions

VI. Execution of Proposal

VII. Conflict of Interest/Disclosure Statement

VIII. Nondisclosure Agreement

IX. Confidential Treatment of Information Acknowledgment

X. Certification Regarding Public Nature of the Proposal

XI. Respondent Exceptions

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I. Summary

1. Type of Solicitation: Request for Proposals (RFP)

2. Issuing Office: Texas Comptroller of Public Accounts (CPA)

Procurement Section

Room 300, Attn: RFP No. 304-26-0513BJ

111 E. 17th Street

Austin, Texas 78774

3. Additional Requirements/Qualifications: N/A

4. Responses to RFP: Sealed Competitive Proposals

5. Deadline for Proposals: In Issuing Office No Later Than:

May 2, 2025; 2:00 p.m., Central Time (CT)

6. Initial Contract Term: September 1, 2025 to August 31, 2026

7. CPA Optional Contract Terms: September 1, 2026 through August 31, 2027;

September 1, 2027 through August 31, 2028; and

September 1, 2028 through August 31, 2029

8. CPA Contact Person for this RFP: Bridget James, CTCM, CTCD

Bridget.James@cpa.texas.gov

Email with delivery receipt requested to: bidcpa@cpa.texas.gov

9. Proposals Submitted by Email: Required; See Section III, Part A

10. Proposals Submitted by Fax: Not Accepted

11. Pre-Proposal Conference: N/A

12. Pre-Proposal Inspection: N/A

13. Letters of Intent to Submit a Proposal: N/A

14. RFP Addenda: Notices of changes to items directly impacting the original RFP or solicitation process will be posted on the Electronic State Business

Daily (ESBD) located at: https://www.txsmartbuy.gov/esbd. CPA will post any amendment to this solicitation on the ESBD as an RFP

Addendum. It is the responsibility of an interested party to check the

ESBD for updates to this RFP before submitting a Proposal. Each

Respondent is solely responsible for verifying CPA’s receipt of its questions, if applicable, and its Proposal by the deadlines specified in this RFP.

15. Questions and Answers: Questions regarding this RFP must be in writing and must be submitted to the CPA Contact Person specified in Part 8, no later than April 11, 2025 @ 2:00 p.m. CT. Telephone inquiries will not be accepted. Questions may be submitted by email to the email address specified in Part 8. CPA intends to post answers to the questions received on the ESBD on April 17, 2025, or as soon thereafter as practical.

16. Respondent Presentations: CPA may request that Top-Scoring Respondents present an overview of the services and a demonstration of the software proposed in their Proposals. The presentations will be performed on or about May 26, through May 30, 2025. Presentation location

(e.g., videoconference, onsite, etc.), date(s) and time(s) to be arranged. In its sole discretion, CPA will determine the number of

Top-Scoring Respondents.

mailto:Bridget.James@cpa.texas.gov mailto:bidcpa@cpa.texas.gov https://www.txsmartbuy.gov/esbd

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17. Evaluation of Proposals under Best Value Standard (Section 2156.125 of the Texas Government Code):

Criteria Weight

Sample stamps: Compliance with specifications, adhesiveness, features, and quality 40%

Purchase price and costs 30%

Security and other features providing best protection to State 20%

References and past performance/qualifications 10%

Total: 100%

As applicable, the factors listed in Sections 2155.074, 2155.075, 2156.007, and 2157.003 of the Texas Government

Code shall also be considered in making an award. Best and Final Offers may be sought from Respondents whose

Proposals are ranked most highly by the evaluation committee. However, CPA encourages Respondents to offer their best pricing at all times. CPA reserves the right in its sole judgment and discretion, and at any time upon failure of negotiations, to reissue or withdraw this RFP rather than continue with negotiations.

18. Delivery and Building Access. Respondents are required to submit Proposals electronically via email with delivery receipt requested and are required to submit stamp samples via hand delivery or shipment in accordance with Section

III, Part A.

Due to building access procedures, a Respondent submitting stamp samples using hand-delivery to the Issuing Office is encouraged to allow additional time to hand deliver items to the Issuing Office. CPA Security Desk personnel will not deliver items to, or accept items for, the Issuing Office. Delivery persons must adhere to all requirements, including safety, posted at the Issuing Office and must present a valid, current photo identification card to the CPA Security

Desk personnel to obtain a visitor’s pass and CPA staff escort to the Issuing Office.

Respondent is solely responsible for ensuring timely delivery of its Proposal and stamp samples to the Issuing Office by the Deadline for Submission of Proposals. Proposals and stamp samples that are not submitted in accordance with instructions and requirements of this RFP and received by the Deadline for Submission of Proposals will not be considered for evaluation and award of a Contract.

19. Contact with CPA Staff: Upon issuance of this RFP, employees and representatives of CPA, other than the CPA

Contact Person identified in Part 8, will not discuss the contents of this RFP with any Respondent or its representatives.

Failure of a Respondent or any of its representatives to observe this restriction may result in disqualification of any related Proposal. This restriction does not preclude discussions between the parties to conduct business unrelated to this procurement or to obtain assistance completing Historically Underutilized Business (HUB) forms required by this RFP.

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II. Specifications

A. Introduction

The Texas Comptroller of Public Accounts (CPA), an agency of the State of Texas, issues this Request for Proposals (RFP) to solicit Proposals from qualified vendors for Heat Transfer Cigarette Tax Stamps production, delivery and related services, as described in this RFP (Services). CPA’s objective is to obtain the Services that represent the best value for

CPA and the State of Texas according to the terms and conditions of this RFP.

CPA anticipates making a Contract award to one (1) Successful Respondent for the Services. CPA reserves the right not to award a Contract for the performance of all or part of the Services. This RFP is not exclusive and CPA reserves the right to issue additional solicitations regarding the Services or similar services at any time. All

Respondents are encouraged to offer their best pricing at all times.

All costs associated with the Services must be included in the Respondent’s Proposal. Proposals that do not meet all of the requirements or contain all of the required documentation specified in this RFP will be rejected as non-responsive.

B. Background

Under Section 154.053 of the Texas Tax Code, the CPA shall design and have printed or manufactured cigarette tax stamps that signify payment of the cigarette tax imposed under the statute. The CPA determines the date of issue, design, size, color, denomination and quantity of stamps manufactured. In fulfilling its duties under Section 154.053 of the Texas Tax

Code, CPA seeks to obtain services from a qualified vendor to provide the printing, manufacturing and related services necessary to produce and deliver to CPA heat transfer, counterfeit-resistant cigarette tax stamps as further described in this section and in accordance with all terms, conditions and specifications of this RFP. A strong consideration in selection of the Successful Respondent, if any, shall be the best protection provided to the state in CPA’s enforcement of Chapter 154 of the Texas Tax Code and against illegal reproduction or counterfeiting of the cigarette tax stamps.

Historically, CPA required four (4) deliveries per year (quarterly delivery) consisting of 280 cases of Stamp Type 1 and 1 case of Stamp Type 2 per quarterly delivery (1,120 cases per year Stamp Type 1 and 4 cases per year Stamp Type 2). CPA projects that under the Contract CPA will reduce the number of deliveries per year and increase for each delivery the case quantities for each stamp type, resulting in two (2) biannual deliveries consisting of 550 cases per delivery for Stamp Type

1 (1,100 cases total per year) and 1 case per delivery for Stamp Type 2 (2 cases total per year).

C. Definitions and Acronyms

• Award Date. The Award Date is the earlier of the date an authorized representative of CPA (1) issues a Purchase

Order (PO) or (2) signs a formal, written agreement.

• Contract. The agreement described in Section II, Part E (Contract Resulting from this Solicitation; Order of Priority), if any.

• CPA’s Designated Representative. The CPA staff member designated to serve as the CPA point of contact for certain communications and activities during Successful Respondent’s performance under the Contract.

• Days. The word “days” shall mean calendar days unless otherwise specified.

• Proposal. A response to this RFP.

• Respondent. Any person or entity that submits a Proposal.

• Stamp Type 1. Machine-applied cigarette tax stamps that conform to the applicable specifications detailed in Section

II Part D of this RFP.

• Stamp Type 2. Manually-applied cigarette tax stamps that conform to the applicable specifications detailed in Section

II Part D of this RFP.

• Successful Respondent. The Respondent awarded a Contract, if any.

D. Scope of Services

D.1. Requirements. Successful Respondent must provide Heat Transfer Cigarette Tax Stamps (“stamps”) production, delivery and related services that comply with all requirements set forth this RFP and that meet the following specifications and quantities for all items:

a. Security Features; Scanners; Adhesion; Paper.

1) Stamps must be manufactured so that they are easily and securely attached to an individual package of cigarettes and permit identification of the person that affixed the stamp to the particular package of cigarettes by means of a number or other mark on the stamp.

2) Stamps must be heat applied and must be suitable for high speed, stamping machine or heat iron and capable of application with heat to the receiving surface such as cellophane, paper, etc. Stamps must be compatible

RFP # 304-26-0513BJ Cigarette Tax Stamps Page 6 of 44 with stamping equipment currently supported by stamp machine manufacturers and in operation by Texas permitted cigarette distributors.

3) Stamps must be printed on mill-controlled paper furnished by the Successful Respondent.

4) The stamps must contain identifiable protective features that immediately permit analysis to establish stamp authenticity.

5) The stamps must contain a covert security feature where wording, specified by CPA, on the stamp becomes brightly fluorescent when exposed to ultraviolet light. This fluorescence feature must be a stable and permanent effect whenever tests are made and shall not be fugitive.

6) All stamps must be processed with a special safety tint lettering, specified by CPA, and must be arranged and printed to minimize, as much as reasonably possible as determined solely in CPA’s discretion, the ability to photograph the safety tint lettering.

7) The safety tint lettering for all stamps shall exist on the face of each stamp and extend beyond each stamp’s border and onto the base paper on which the stamp is affixed. All safety tint lettering (i.e., that which is on the stamp face and that which is on the base paper) shall transfer with the stamp, whether the stamp is manually applied or machine applied.

8) Stamps must contain not less than two (2) different distinctive colors. Halftones, shades, tints, or tones of a color or colors will not be acceptable or considered as separate and distinctive colors. The safety tint lettering shall not be considered as one of the stamp colors.

9) Each stamp must contain taggant or a similar substance or substances that must allow for effective enforcement and efficient verification and authentication using portable, hand-held scanners (Taggant

Scanners) with such Taggant Scanners to be provided by Successful Respondent to CPA.

a) Pricing for Respondent’s proposed Taggant Scanners shall be included in Line Item 3 (Alternate Item –

Taggant Scanners) of Price Schedule 1 of the Mandatory Price Sheet, with such pricing, if any, reflected as a one-time cost during the Initial Contract Term only for one lot of 312 Taggant Scanners.

b) To accommodate potential growth during the Contract Term, CPA requests Respondent also include pricing for additional Taggant Scanners within Section III, Price Schedule 2 (Optional Features, Products or Services).

10) Stamps must securely adhere and must remain legible. Adhesion must be sufficient to prevent the lifting up or peeling of the stamp using a sharp edge, a tacky product such as tape, or other method of removal once the stamp has been adhered to the intended surface.

11) Each roll of base paper must have a blank continuing leader of at least 18 inches in length on the leading edge of the roll, and a blank continuing tail of at least 12 inches in length on the trailing end of the roll.

Leading and trailing base paper must not have any stamps affixed to it. The machine perforations along the side edges of the base paper and running the complete length of each roll shall be punched completely through the paper and be free of excess paper fragments. The first and last line of stamps must not be affected by the tape or adhesive used to connect the leader and the trailing paper.

b. Stamp Numbering. Stamps must be sequentially numbered and conform to the following:

1) Stamp Serial Numbers:

a) All stamps must include a five (5) digit serial number (“Serial Number”).

b) Serial Numbers must have a 5-space, alpha-numeric character field, with each space in the character field adaptable to substitution of an alphabetic character for a numeric character.

c) Serial Numbers shall run consecutively and shall include a numeric character in all five (5) spaces of the character field.

d) CPA shall determine, solely in its discretion, if substitution of an alphabetic character for a numeric character shall occur and, as applicable, shall determine the quantity and location of such substituted characters within the Serial Number character field.

e) All stamps must also carry a five (5) digit, individual stamp number (“Individual Stamp Number”).

f) All Serial Numbers and all Individual Stamp Numbers must be centered on all stamps.

g) All Serial Numbers and all Individual Stamp Numbers on all stamps must be clearly and sharply printed and easy to read.

2) Stamp Type 1:

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a) Must be able to be applied by machine;

b) Must measure approximately ½ inch x ½ inch;

c) Must be provided on rolls of 30,000 uniquely and consecutively numbered stamps per roll, and:

i. Stamp distribution on each roll shall be in rows of 15 stamps across and columns of 2,000 stamps down;

ii. All stamps on a roll must carry an identical Serial Number that is unique to that roll;

iii. All stamps on each roll must carry an Individual Stamp Number with the Individual Stamp Numbers on each roll being consecutively numbered from 00001 through 30000, with 00001 applied to the top left stamp (first row) of the roll, consecutive numbers increasing left to right on the first row and each subsequent row of the roll, and concluding with 30000 applied to the bottom right stamp (last row) of the roll; And

iv. Each stamp roll shall indicate the stamp count every 1,500 stamps by identifying the cumulative stamp count on the right side of the base paper.

d) Repeats of stamp numbers are not allowed on stamps of the same color scheme.

e) Rolls of stamps shall be packaged in cases which must contain exactly 25 rolls per case.

i. Partial cases will not be accepted; and

ii. Rolls shall be arranged in ascending stamp number order from left to right inside each case.

3) Stamp Type 2:

a) Must be able to be manually applied;

b) Must measure approximately ½ inch x ½ inch;

c) Must be provided in pads of 1,500 uniquely and consecutively numbered stamps per pad, and:

i. Stamp distribution in each pad shall be in ten (10) sheets of stamps, with each sheet consecutively numbered 1 through 10;

ii. Stamp distribution on each sheet shall be in rows of 15 stamps across and columns of 10 stamps down for a total stamp count of 150 stamps per sheet;

iii. All stamps in each pad must carry an identical Serial Number that is unique to that pad; and

iv. All stamps in each pad must carry an Individual Stamp Number, with the Individual Stamp Numbers in each pad being consecutively numbered from 00001 through 01500, with 00001 applied to the top left stamp (first row) on the first page of the pad, consecutive numbers increasing left to right on the first row and each subsequent row of the page, and concluding with 00150 applied to the bottom right stamp (last row) of the first page of the pad. Stamp numbering shall continue consecutively increasing in the same manner on subsequent pages of the same pad, beginning with

00151 applied to the top left stamp on the second page of the pad and concluding with stamp number

01500 applied to the bottom right stamp of the last page of the pad.

d) Repeats of stamp numbers are not allowed on stamps of the same color scheme.

e) Pads of stamps shall be packaged in flats of ten (10) pads per flat.

i. Each flat shall be individually packaged in a small cardboard container; and

ii. Each cardboard container shall display on the outside of the container the range of stamp numbers of the flat within the cardboard container.

f) Flats of stamps shall be packaged in cases which must contain exactly 25 flats per case.

i. Partial cases will not be accepted; and

ii. Flats shall be arranged in ascending stamp number order with the lowest numbered flat at the top of the case and highest numbered flat at the bottom of the case.

c. Shipment and Delivery of Stamps.

1) Upon Contract award, if any, CPA shall provide Successful Respondent an estimated delivery schedule and stamp type and quantities applicable to delivery dates. Prior to a delivery date, CPA shall provide to

Successful Respondent written confirmation of the stamp types, quantities and CPA Delivery Location(s) applicable to the delivery date. CPA intends the Distribution Warehouse to serve as the primary Delivery

Location for receiving stamp shipments; however, CPA reserves the right, in its sole discretion, to designate any stamp shipment be delivered to any Delivery Location(s). Successful Respondent shall provide to CPA documentation of all shipping costs associated with each delivery. All deliveries, and the pricing and quantities applicable thereto, must be made in accordance with the terms and conditions of the Contract. All bills of lading must contain all information required within the template provided by CPA.

2) As an essential element of the Services, Successful Respondent shall provide and maintain the protection and

RFP # 304-26-0513BJ Cigarette Tax Stamps Page 8 of 44 security of CPA stamps until received and accepted by CPA at the Delivery Location specified by CPA’s

Designated Representative. During, and through all points of, transport from Successful Respondent’s manufacturing point through delivery to and acceptance by CPA, Successful Respondent shall, at a minimum, ensure CPA stamps are safely and efficiently transported in vehicles that are suitable for secured storage and transport of theft-sensitive goods and that are operated by Successful Respondent’s personnel or subcontractors possessing appropriate training, qualifications, competence and experience and who are capable of protecting and securing the stamps at all times.

3) For each CPA stamp order, at least 72 hours prior to Successful Respondent’s scheduled departure from its manufacturing facility, Successful Respondent shall submit in writing to CPA’s Designated Representative a delivery plan for the CPA stamp order (“Delivery Plan”). The Delivery Plan shall include Successful

Respondent’s dates and estimated times of departure and arrival, anticipated travel route, location of overnight stays, if applicable, identification of Successful Respondent’s driver and passengers (if any), and vehicle description (i.e., make, model, size, license plate). In event of any changes occurring to any element of the Delivery Plan at any time prior to delivery to CPA, Successful Respondent shall submit a revised

Delivery Plan, including such changes, to the CPA Designated Representative immediately upon Successful

Respondent’s knowledge of the changes.

4) Stamps must be packaged to prevent damage in transit. Each case of stamps shall be sealed using a numbered security seal applied by the Successful Respondent and broken only in the presence of Texas law enforcement. Each case of stamps shall include outside labeling that clearly states the stamp type, color, and

Serial Number range of rolls or pads, as applicable, that are contained inside the case. Each label shall be printed using a format and font size specified by CPA and shall be securely fixed on the outside of the applicable case of stamps. Stamps shall be delivered F.O.B. destination to the Delivery Location specified by CPA’s Designated Representative. Successful Respondent shall comply with the delivery specifications applicable to each of the following CPA delivery locations (Delivery Locations):

a) Distribution Warehouse. A loading dock area that can receive semi-trailer trucks is available at the

Distribution Warehouse located at Omni Business Park, Building 5, 4437 Supply Court; Austin, Texas

78744. The shipment must be delivered bound and on pallets. Carrier is required to make delivery inside the building and deliver each order to the assigned drop-off point. Stamp cases must be delivered on skids for ease of off-loading and cargo stability during transport; skids are necessary for off-loading at the Distribution Warehouse. Cases should be loaded in the truck in reverse order with the highest numbered case at the rear of the truck and first to be removed. Cases should be loaded on each skid in reverse order with the highest numbered case on top and first to be removed. The highest numbered case on each skid should face the front of the truck so that skid jack maneuvering will make the highest numbered case accessible for first removal at the vault side.

b) LBJ Building. Due to limited size of delivery parking surface, Respondents should plan for a delivery vehicle maximum length of 28 feet. A loading dock is available at the LBJ Building located at 111 East

17th Street, Austin, Texas, 78701. The dock is located on the east side of the building. The shipment must be delivered bound and on pallets. Carrier is required to make delivery inside the building and deliver each order to the assigned drop-off point. Stamp cases must be delivered on skids for ease of off-loading and cargo stability during transport; skids are necessary for off-loading at the LBJ Building. Cases should be loaded in the truck in reverse order with the highest numbered case at the rear of the truck and first to be removed. Cases should be loaded on each skid in reverse order with the highest numbered case on top and first to be removed. The highest numbered case on each skid should face the front of the truck so that skid jack maneuvering will make the highest numbered case accessible for first removal at the vault side.

c) Rusk Building. Due to limited size of delivery parking surface, Respondents should plan for a delivery vehicle maximum length of 28 feet. There is no loading dock available at the Rusk Building located at

208 10th Street, Austin, Texas, 78701. Carrier must provide delivery at street level. Delivery will be made from the entry of the Rusk Building’s parking garage, which is located on the west side of the building, on Brazos Street. The shipment must be delivered bound and on pallets. Stamp cases must be delivered on skids for ease of off-loading and cargo stability during transport. The boxes of stamps must be packed, shipped, delivered, and arranged in the truck from back to front with serial numbers of stamps running consecutively from highest to lowest. Cases should be loaded in the truck in reverse order with the highest numbered case at the rear of the truck and first to be removed. Cases should be loaded on each skid in reverse order with the highest numbered case on top and first to be removed. The highest numbered case on each skid should face the rear of the truck so that the highest numbered case is accessible for first removal at the vault site.

5) Receipt of Stamps. All stamps received by CPA are subject to inspection and verification when the original package is opened. Any stamps furnished that do not comply in every manner with the Contract requirements

RFP # 304-26-0513BJ Cigarette Tax Stamps Page 9 of 44 will be rejected and, within thirty (30) calendar days of receipt of written notice, Successful Respondent shall replace the rejected stamps at no cost to CPA. All stamps rejected by CPA shall be destroyed under the direction of CPA or CPA’s authorized agent or agents.

At least two (2) days before shipment arrives to the delivery location, the Successful Respondent shall submit to CPA’s Designated Representative an Excel® spreadsheet in CPA’s required format containing the following information regarding the invoiced shipment:

a) invoice (PO #) number,

b) ship date,

c) stamp colors,

d) security features/characteristics,

e) total number of individual stamps in shipment by type,

f) total number of rolls by type,

g) total number of cases by type with each case numbered consecutively, and

h) beginning and ending roll/pad stamp numbers including missing stamp numbers within each numbered case with a list of missing roll/pad stamp numbers from within each case.

6) Default in Delivery. CPA has determined that Successful Respondent’s timely secured delivery of the

Services is critical to CPA’s compliance with statutory requirements and fulfillment of obligations to third parties. In event Successful Respondent refuses or fails to timely and securely deliver the Services as required under the Contract or PO issued thereunder, CPA may immediately terminate the right of Successful

Respondent to proceed, in whole or in part, with the delayed delivery, and CPA may procure the Services

(“Replacement Delivery”) through any method permitted by law. In such an event, Successful Respondent shall be liable to CPA for any excess costs incurred by CPA in procuring and completing the transaction for the Replacement Delivery.

In addition to recovering from Successful Respondent such excess costs, in submitting a response to this

RFP, Respondent and CPA agree that in any default in delivery of Services by Successful Respondent, the measure of CPA’s damages are difficult or impossible to determine or forecast and, to the extent that

Successful Respondent’s default in delivery results in CPA being unable to fulfill any delivery obligation to any third party, the not-to-exceed amount of Five Hundred Dollars ($500.00) per calendar day of default in delivery is established by the parties not as a penalty, but as liquidated damages representing the reasonable estimate of just compensation to CPA for Successful Respondent’s default in delivery. CPA may, but not must, impose the liquidated damages. In event CPA does impose liquidated damages, charges shall begin accumulating the first day after the scheduled date of delivery and continue through the actual date of

Successful Respondent’s delivery or of receipt of the Replacement Delivery, whichever may be applicable.

In event CPA deems liquidated damages are necessary and appropriate, the total sum of liquidated damages shall be deducted from the money due or to become due to Successful Respondent or shall be issued by

Successful Respondent to CPA as a credit towards pending orders, if any. Failure of CPA to exercise any or all of the foregoing remedies in any instance of Successful Respondent’s default in delivery shall not waive

CPA’s right to exercise such remedy or remedies in any subsequent default in delivery. The foregoing remedies for default in delivery are non-exclusive, shall not preclude other remedies available to CPA in contract or by law, and shall not be applicable in event of Successful Respondent’s perfected force majeure claim qualified under Section V, Part 53 of this RFP.

d. Supervision of Manufacturing Plant. CPA or CPA’s authorized agent or agents shall have access to all parts of the plant where the cigarette tax stamps are being manufactured at any and all times, and Successful Respondent shall conform to such regulations as may be made by CPA to prevent the removal from the Successful

Respondent’s plant any stamps so manufactured, or any property or equipment that might provide a means of reproducing the design of the stamps being manufactured under any PO issued under the Contract. The removal without order of any of the foregoing property or equipment shall constitute breach of contract by the Successful

Respondent and CPA may stop the manufacturing process and the Successful Respondent shall be liable for any loss incurred in stamps printed prior to such improper removal. In the event such action becomes necessary, CPA shall not be liable for any cost of materials or expenses of printing or manufacturing the stamps so manufactured prior to the time the manufacturing process is ordered stopped, and CPA may refuse to accept stamps manufactured prior to such act.

Successful Respondent shall immediately notify CPA should Successful Respondent become aware of any stamp integrity issues which may impact CPA or the State of Texas. Such stamp integrity issues include, but are not

RFP # 304-26-0513BJ Cigarette Tax Stamps Page 10 of 44 limited to, the following: security breach at manufacturing plant or storage facilities, counterfeiting activities, stamp alterations/modifications, or any misapplication of stamps at a wholesaler or distributor level.

e. Custody of Design, Drawing, Printing Plates, Inspection of Printing and Processing Stamp, Destruction of Stamps.

1) During the manufacturing process and printing of the stamps, the Successful Respondent shall have custody of specifications, photographs, negatives, positive impressions, drawings, dies, electroplates, printing stones, and all other property or equipment that may provide a means of reproducing, manufacturing or printing of the cigarette tax stamps selected by CPA. Also, CPA or CPA’s authorized agent or agents shall be permitted to observe the printing, manufacturing and processing of the stamps for delivery, and to inspect all finished stamps prior to sealing of boxes prepared for stamp deliveries. CPA shall have access to all defective stocks of stamps and the same shall be destroyed using a destruction method approved by CPA and performed under

CPA’s supervision.

2) All printing and manufacturing services under the Contract must be performed strictly within the premises of the Successful Respondent. No part of the Contract may be subcontracted, outsourced, sublet out or performed in any other premises without prior written consent of CPA. No assignment of the Contract, in whole or in part, may be made without prior written consent of CPA. CPA authorized agent or agents with proper credentials may act as inspectors during the process of manufacture and shall be accorded all privileges and assistance in carrying out this function.

3) All stamps not intended for delivery to CPA as part of an order shall be subject to a destruction method and procedure approved by CPA which shall include Successful Respondent’s advance notice to CPA of at least

30 days to allow CPA’s authorized agent to attend and observe the destruction process. In the event that

CPA’s authorized agent or designated delegate is unable to attend a scheduled destruction, only with CPA’s prior written approval shall Successful Respondent proceed with the stamp destruction. In such instance, Successful Respondent shall videotape the stamp destruction event in accordance with procedures approved by CPA, and Successful Respondent shall securely deliver the recording to CPA within 72 hours of completing the stamp destruction.

f. Stones, Zincs, Plates, Etc. If applicable, stones, zincs, plates, etc., by whatever name used in connection with the production of stamps shall become the property of CPA, and upon CPA’s written request all such items shall be turned over to CPA or destroyed at CPA’s option. When stones, zincs, plates, etc. are not in use, they shall be deposited by Successful Respondent in a place of security acceptable to CPA. When production on a specific order has been completed, Successful Respondent will return stones, zincs, plates, etc. to the designated place of deposit acceptable to CPA. Details regarding the preservation and security of stones, zincs, plates, etc., will be arranged between the Successful Respondent, if a contract award is made under the terms of this RFP.

g. Paper Cost Price Increases. Respondent’s Proposal must include a statement from its current paper stock supplier, submitted on the supplier’s letterhead, that states the current cost price (“Current Cost Price”) for paper stock to be used for production of CPA’s tax stamps and that clearly indicates which listed paper stock is applicable to

CPA’s Stamp Type 1 and Stamp Type 2. Failure to include the required statement with the Proposal may result in disqualification of Respondent’s Proposal.

During the Contract Term CPA may, in its sole discretion, grant a price increase up to an actual paper cost increase incurred by Successful Respondent. Initial Term pricing may not be increased. Pricing for any optional additional periods may be increased, but only at the beginning of the applicable optional renewal period and only for an amount equal to Successful Respondent’s actual paper cost increase applicable to paper stock used in producing

CPA’s Stamp Type 1 and/or Stamp Type 2 (“Actual Cost Increase”).

Any request for a price increase submitted by Successful Respondent must include a statement from Successful

Respondent’s then current paper stock supplier, submitted on the supplier’s letterhead, that states the new cost price (“New Cost Price”) applicable to paper stock to be used for production of CPA’s tax stamps and clearly indicates which listed paper stock is applicable to CPA’s Stamp Type 1 and Stamp Type 2. Successful Respondent must also submit a proposed, amended Mandatory Price Sheet reflecting revised line item pricing for Stamp Type

1 and Stamp Type 2, as applicable, in accordance with the terms in this section.

The following factors shall be considered when determining a price increase, if any:

1) Successful Respondent’s request for price increase must be the result of an actual, industry-wide price increase for paper stock used for producing CPA’s Stamp Type 1 and/or Stamp Type 2;

2) Any allowed paper cost price increase shall be applicable to only the same basis weight of the same paper product, using the same pricing method reflected in Successful Respondent’s original Proposal (i.e., $/cwt or

$/M);

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3) Any allowable paper cost price increase shall not exceed the Actual Cost Increase incurred by Successful

Respondent. The formula to be used in determining the maximum allowable paper cost price increase shall be:

Percent Maximum Cost Increase (“PMCI”) = 100 x (New Cost Price – Current Cost Price)

Current Cost Price

Unless Respondent’s Proposal includes a statement indicating otherwise, for the purposes of this RFP and the Contract, paper cost will be presumed to be 60% of the line item price, expressed in dollars, indicated for

Stamp Type 1 and for Stamp Type 2 (“Paper Cost Percentage”). Any approved paper cost price increase shall be applied to only the Paper Cost Percentage (i.e., 60% unless otherwise stated) of the total line item price listed on Successful Respondent’s Mandatory Price Sheet accepted by CPA.

Any allowable line item price increase shall not exceed the amount determined using the following formula:

Maximum line Item Price Increase = Paper Cost Percentage expressed in dollars x PMCI

CPA expects to receive all paper cost price decreases also. The amount of decrease will be determined applying the same formula and terms as above. Decreases may exceed the amount calculated by the formula.

Successful Respondent must reflect on its invoices to CPA details of any decreases in the cost of paper and must reflect such decrease, if any, as a discount.

D.2. Proposal Requirements. Proposal requirements listed within this Section II, Part D.2., are in addition to, and not in lieu of, requirements set forth within Section III, Part B (Proposal Content and Format).

1) Respondent’s Proposal must demonstrate that Respondent’s stamps meet or exceed all required specifications of this RFP. Respondent must submit samples of both Stamp Type 1 and Stamp Type 2 in sufficient quantity for testing at more than one location, and samples of the paper which Respondent proposes to use for Stamp

Type 1. At a minimum, Respondent’s submission of stamp samples shall include two (2) rolls of Stamp Type

1 and two (2) pads of Stamp Type 2.

2) Respondent’s Proposal must include a statement of the estimated time necessary for Respondent to manufacture and deliver CPA orders of Stamp Type 1 and Stamp Type 2. (See Section II, Part B

(Background) for CPA’s historical and anticipated delivery frequencies and quantities for Stamp Type 1 and

Stamp Type 2.) Respondent’s statement should include details applicable to any minimum required notice times, lead times, design times, differences (if any) in estimated times applicable to first order placed versus subsequent orders placed, or other factors, including supply-chain delays, relevant to or influencing the timeline from date of CPA’s placement of order to Respondent’s manufacture and delivery of the stamps ordered by CPA.

3) Respondent’s Proposal must include the name of the manufacturer of the paper stock to be used to print

Stamp Type 1 and to print Stamp Type 2.

4) Respondent’s Proposal must include all costs, including all shipping charges and other costs associated with

Respondent’s performance under the Contract, for all Services for the Initial Term and each of the optional additional periods listed on Section IV Mandatory Price Sheet. CPA will not prepay any amounts.

5) Manufacturing Protection System. Respondent’s Proposal must include a separate, confidential, detailed statement fully explaining the Respondent’s manufacturing protection system; the protection provided to

CPA and the State of Texas against unlawful stamp reproduction, and the method by which such reproduction can be detected by CPA and/or State of Texas inspectors. In its confidential statement, Respondent must describe the manufacturing protection systems utilized by the Respondent to ensure that all stamps manufactured are carefully guarded during the manufacturing process and during storage prior to shipment or delivery. Such systems may include, but are not limited to, the use of an alarm system, video surveillance system with a specified video retention period, key card access to restricted areas, etc. CPA reserves the right to verify manufacturing protection system and security of facility prior to Contract award. Please refer to Section V, Part 35 of this RFP for information regarding procedures for submission of Confidential

Information.

6) Protection and Security during Transportation. Respondent’s Proposal must include a statement detailing

Respondent’s procedure(s) for ensuring the protection and security of theft-sensitive tax stamps during transportation from Respondent’s manufacturing facilities to the CPA delivery locations listed in Section II

Part D.9 of this RFP. Respondent’s statement should clearly and succinctly state, at a minimum, Respondent’s approach toward planning and coordination of shipment security and transport, selection of vehicles and operators, security management and shipment tracking during transit, response to problems (e.g., vehicle breakdowns) during shipment, and confirmation of safe and secure delivery of shipments. Please refer to

RFP # 304-26-0513BJ Cigarette Tax Stamps Page 12 of 44

Section V, Part 35 of this RFP for information regarding procedures for submission of Confidential

Information.

7) Respondent’s Disaster Recovery Program. Respondent’s Proposal must include a complete description of its disaster recovery program. The disaster recovery program should address the Respondent’s plans and turn-around times for the manufacturing of stamps in the event Respondent experiences a disaster that renders its equipment inoperable, etc.

D.3. CPA Data Safeguard Standards.

a. Reserved.

b. Reserved.

c. Reserved.

d. Reserved.

e. Reserved.

f. Reserved.

g. Reserved.

h. Reserved.

i. Auditable Information Security Framework. Successful Respondent shall secure its own and its third-party service providers’ systems (e.g., IT service provider, Cloud Service Provider) in a manner consistent with an auditable information security framework e.g., National Institute of Standards and Technology (NIST), International

Organization for Standardization (ISO) 27001.

j. Reserved.

k. Supply Chain Risk Management. Successful Respondent shall provide CPA’s Contract Manager a description of how it manages supply chain risks. Specifically, Successful Respondent shall describe its established agreements and procedures with entities involved in the supply chain for the notification of supply chain risks, compromises, and the result of assessments or audits. During the term of the contract, Successful Respondent shall provide

CPA’s Contract Manager prompt, written notice of supply chain risks that impact the delivery of the products and services of the Contract. Examples of supply chain risks include supplier financial failure, production control/product quality, market supply and demand, labor disputes/shortages, cybersecurity threats, natural disasters. Successful Respondent shall notify CPA of a supply chain compromise and potential compromise in accordance with Section G Security Incident Notification.

l. Reserved.

m. Reserved.

n. Reserved.

o. Reserved.

p. Reserved.

q. Reserved.

r. Reserved.

s. Reserved.

t. Reserved.

D.4. Liquidated Damages. In submitting a Proposal, Respondent agrees that the measure of damages in the event of a default or breach by Successful Respondent may be difficult or impossible to calculate. In the event Successful

Respondent fails to perform Services or complete the obligations under the Contract in a timely manner, CPA may require Successful Respondent to pay, as liquidated damages and not as a penalty, an amount equivalent to two percent

(2%) of the total cost for Services or obligations not completed as required by the Contract per calendar day of delay.

CPA may impose, but is not obligated to impose, these liquidated damages in lieu of any monetary damages available to CPA under the Contract or applicable law.

D.5. Optional Features, Products or Services. If Respondent believes there are additional features, products or services that would benefit CPA under this RFP, Respondent may describe such features, products or services and include pricing for such features, products or services in the Mandatory Price Sheet. Optional features, products or services

RFP # 304-26-0513BJ Cigarette Tax Stamps Page 13 of 44 are not scored as part of the evaluation process. Respondent is required to include information requested in Section II, Part D.1.a.9)e) within the Mandatory Price Sheet, Price Schedule 2 (Optional Features, Products or Services).

E. Contract Resulting from this Solicitation; Order of Priority

Respondent’s Proposal is a legal offer to contract based upon the terms, conditions, and specifications set forth in this RFP.

“Contract” means (1) a valid PO issued by CPA or (2) a formal, written agreement between CPA and Successful

Respondent, if any. The Contract is effective as of the Award Date and will be between CPA and the Successful

Respondent. Successful Respondent shall be solely responsible to CPA for all performance by Successful Respondent’s employees, representatives, agents, subcontractors, suppliers, third-party service providers, and similar entities (“Persons” for purposes of this sentence) and for ensuring that all such Persons comply with applicable provisions of this RFP and the

Contract. The entire Contract between CPA and Successful Respondent shall consist of the following documents, which shall control in the following order of priority, except as otherwise provided in the formal, signed agreement between the parties or CPA’s PO: (1) the PO and PO Change Notices (POCN), if any; (2) the formal, signed agreement, if any; (3) this

RFP; and (4) Successful Respondent’s Proposal (collectively, these documents constitute the “Contract”).

F. Warranty of Performance

Successful Respondent represents and warrants that its performance under the Contract shall be conducted conscientiously in a professional and workmanlike manner to the full extent of Successful Respondent’s talents and capabilities with due diligence and in full compliance with the highest professional standards of practice in the industry applicable to the

Services.

G. Security Incident Notification

Successful Respondent shall have policies and procedures for the effective management of Security Incidents, which shall be made available to CPA upon written request. Within twenty-four (24) hours of Successful Respondent’s discovery or reasonable belief that there has been an event which results in the accidental or deliberate unauthorized access, loss, disclosure, modification, disruption, or destruction of confidential CPA information (“Security Incident”), Successful

Respondent shall provide notice to CPA by calling (800) 531-5441 EXT 34357. Until the investigation is complete, Successful Respondent shall submit, on a daily basis or as otherwise agreed by CPA, a written report via encrypted email to security.alerts@cpa.texas.gov that includes, at a minimum, the following:

• Date and time incident occurred,

• Date and time incident detected,

• Date and time incident contained,

• Address where incident occurred,

• Name of person(s) that discovered incident,

• Description of how Successful Respondent discovered incident,

• Type of CPA information involved,

• Description of the nature of the incident,

• Description of the steps Successful Respondent has taken or will take to investigate incident,

• Description of the steps Successful Respondent has taken or will take to mitigate any negative impacts of incident,

• Information technology involved (e.g., laptop, server, mainframe),

• Description of steps taken to preserve computer evidence and maintain chain of custody, and

• Description of corrective action Successful Respondent has taken or will take to prevent future incidents.

Successful Respondent shall coordinate all media or other breach notifications with CPA in advance of such notification(s), unless expressly prohibited by law. Subject to review and approval of CPA, Successful Respondent shall provide notice at its own cost that satisfies the requirements of applicable law to individuals whose information was compromised or likely compromised as a result of the Security Incident. If CPA, in its sole discretion, elects to send its own separate notice, then all costs associated with preparing and providing the notice shall be reimbursed to CPA by Successful Respondent. If

Successful Respondent does not reimburse such costs within thirty (30) days of CPA’s written request, then CPA shall have the right to collect such costs. CPA reserves the right to conduct an independent investigation of any Security Incident, and should CPA choose to do so, Successful Respondent shall cooperate fully with CPA and assume responsibility at its own expense for making personnel, resources, and systems access available to CPA and CPA’s authorized representative(s).

H. Insurance and Bonds

Successful Respondent represents and warrants that it shall obtain and maintain the following coverages throughout the term of the Contract and that all coverages shall be with companies licensed in Texas with an “A” rating from A.M. Best

Co. authorized to provide the required coverages:

mailto:security.alerts@cpa.texas.gov

RFP # 304-26-0513BJ Cigarette Tax Stamps Page 14 of 44

• Blanket Employee Dishonesty Bond or Employee Dishonesty Coverage under…