Inquiries and Responses Round 2.pdf

Department of Revenue

Questions/Answers for RFP # DOR17002/Scratch, Round 2

This document contains all inquiries submitted by offerors regarding the RFP.

Q1. General Questions:

Can the Lottery please confirm if a top prize is held for a second chance draw for all $20 games? Can the Lottery also please confirm what other price points incorporate second chance draws using a top prize from the game’s prize structure? How do you decide which games to do this for (i.e. all licensed games or other categories, or is it decided on a game by game basis)?

A1. The Colorado Lottery always offers a second-chance top prize drawing for all $10, $20 and if available, $50 games. The Lottery will also conduct promotional drawings not associated with top-prize drawings from time to time.

Q2. Page 32, h. Retailer Void Samples Q35.

Question: Could the Lottery please clarify what it means by “VOID tickets” in this instance? All of the tickets provided to the Lottery will be VOID tickets. How are these samples different from all other void tickets?

A2. As explained in the RFP, the samples requested must include the word VOID printed on the back of the tickets to show the vendors can provide such tickets for an actual print run. Other tickets requested throughout the RFP may be sample tickets – not associated with a game printed for another jurisdiction.

Q3. Page 43, 6. Ticket Testing Q66.

Question: Can the Lottery please provide the lab reports submitted to the Vendors from the last RFP process?

What is the name of the external laboratory used to test the Lottery’s tickets?

A3. As this section explains, the Lottery may elect to have tickets tested by an independent testing laboratory. In the past several years the Lottery has not conducted one of these independent tests and does not have reports to share. However, the Lottery wants the ability to conduct these random tests in the future.

Q4. Market Research and Analyses Q82.

Question: Can the Lottery please provide all weekly scratch ticket sales by game (including Game Name, Game Number, Price Point and Launch Date) from July 1, 2013 to the present?

A4. The Lottery does not have this information in a specific report and it would be time consuming to attempt to compile. The Lottery provides each vendor with weekly sales reports that contain all of the information requested. The report is titled Weekly Sales Update and is usually distributed on Monday morning.

Q5. Page 57, J. Performance Incentives Q93.

Will the Lottery please clarify what it means by performance metrics and incentives with respect to instant tickets?

A5. This is a newer concept in our state solicitations/contracts for performance incentives and an opportunity to use performance incentives in our contracts before seeking liquidated damages with contractors. If, as an offeror, you can think of some good opportunities, and/or pricing structure options, please make suggestions in your proposal, if not, this is not mandatory.

Q6. Page 3, State of Colorado Contract Term and Effective Date C. Extension Terms State’s

Options

Question: Our understanding is that the term is intended to be for seven (7) two (2) year extension options. However, this clause states that “the total duration of the contract” including the exercise of any options to extend, shall not exceed five years from the Effective Date.” “Clearly the proposed time frame here does exceed that timeframe.

Would the Lottery please clarify the Contract term dates?

A6. As this question was struck through by the potential offeror, The State will not be responding.

Q7. Page 4, State of Colorado Contract

Note: there is a typo in Clause 4 in referencing the Proposal – the RFP number is missing one 0. (DOR 1702/Scratch which should read DOR 17002/Scratch).

A7. This error has been corrected. A new attachment, Contract V2 has been posted.

Q8. Page 5, 5. Definitions X. “Work Product”

The Definition of “Work Product” has been expanded from the 2010 version to remove the wording that allows for the exclusion of anything “prepared generally for use by any or all of its customers (and not specifically for or at the request of the Lottery)” from what is included as “Work Product”. It only excludes “any material that was developed prior to the Effective Date that is used, without modification, in the performance of the Work.”

Would the Lottery consider excluding anything prepared generally for the use by any or all of the Contractor’s customers (and not specifically for or at the request of the Lottery) in the definition of Work Product?”

A8. This is the State’s current standard definition of work product. The contractor may request this modification in its proposal for consideration by the State. However, as stated in the RFP and Appendix, contract modifications may be deemed by the State as non-acceptance of the contract.

Q9. Follow-up question from Responses issued November 14, 2016

A65 re: Page 26, Q20. “Provide limited samples, if available.”

As per the responses provided in Round 1, Q20 has been revised to read “discuss your ability to provide options 1 through 25 above. Samples provided to your answer in Q66 will be used to evaluate options 1 through 25.” Then the line “Provide limited samples, if available”, is struck out. Can the Lottery please confirm that it no longer requires samples for 1 through 25 as part of the response to Q20.

A9. The Lottery will use the samples from Q66 to evaluate options 1 through 25 – additional samples for options 1 through 25 are not necessary.

Q10. A 69 re: Page 33 Q40

The Lottery has completely replaced the original question (Identify the original question (Identify alternative methods by which Lottery personnel can approve production of Scratch games) with the Q40 “Provide affirmation of your understanding of this section and discuss any exceptions. Does the Lottery still want the original question answered?

Or because it is struck out should it not be answered at all?

A10. The original question does not need to be answered. See Round 1, Q69 of Inquiry and Response for more information.

Q11. Section III Statement of Work, B.1 Q5, B.1 Q14, B.1 Q18, B.3 Q18, B.4 Q35, C.6 Q66, E.1

Q80

Understanding that the Lottery would like seven sets of all the sample requirements listed throughout the RFP, will the Lottery please confirm that the quantity of tickets as outlined in the RFP for Q5, Q14, Q18, Q20, Q35, Q66, and Q80 should take precedence as opposed to 10 original samples as stated in A90 from Questions/Answers, Round 1?

A11. The Lottery would like seven original sets of samples for all of the sample requirements listed throughout the RFP (the quantity of tickets requested as outlined throughout the RFP – Q5, Q14, Q18, Q20, Q35, Q66, and Q80 should be included in the Offerors response). The RFP and the Round 1 Inquiries and Response Document (Q90) has been modified to reflect this change.

Q12. Section III Statement of Work, 2.a. Ticket/Game Features and Services

No. (9) Retailer Display Cards – requires that one card/insert be put into each pack of tickets for all games. Will the Lottery kindly confirm that this is a new requirement and that the retailer display card does not need to match the pack that it is inserted into, i.e., an unmatched insert card?

A12. This requirement is a new addition to this RFP. The retailer display card does not need to include a specific pack number, it just needs to be the retailer display card developed for that specific game.

Q13. III. Statement of Work, B Separately Priced Ticket/Game Features and Services, a.

Additional Ticket/Game Features and Services, (7) Multiple Color Ink Imaging:

Based on the Lottery’s response in A57 of the first round of questions and answers, will the Lottery please answer the following question:

Many lotteries use two colors of imaging (red and black for a card game for instance) under the latex play area, but more than two imaging colors on a ticket is quite rare. Is the Lottery specifying that it requires a ticket with six different imaging colors under the latex?

A13. Yes, the Lottery has used multiple colors (more than two) in symbol imaging over the years.

Games have included play symbols featuring multiple colors including red, green, blue, black white, etc.

Q14. III. Statement of Work, B. Product and Production Services Specifications, e. Test Games:

“The Contractor will provide test games immediately as requested by the Lottery…that are printed using the actual printed process…”

We have produced many test games for our customers, but they are laser proofs, and not actual tickets printed on the press. These tickets are typically produced when a lottery has a change to its validation system or equipment, or when it wants to test the validation of new or unique prize amounts.

1. Will the Lottery please explain the purpose of a printed test game?

2. Will the Lottery please clarify how often a printed test game will be required?

3. Will the Lottery please provide us with an estimate of the quantity of a printed test game?

A14. 1. When the Lottery refers to a printed test game, this can include printed laser proofs and/or actual printed test game tickets. Printed laser proofs are normally acceptable, however, if the laser proofs do not pass testing procedures, the Lottery may request actual test tickets.

2. The Lottery usually asks for test games when a system change or substantive change occurs to the development of a game (i.e. change to the barcode). It is unusual for the Lottery to ask for more than one test game at each price point each year.

3. The Lottery usually asks for 480,000 tickets/laser print tickets for $1 test games and 360,000 tickets/laser print tickets for all other price points.

Q15. RFP IV. B.5 and Appendix A. 12 and 19

The referenced provisions state that, if the Offeror submits any contractual modifications with its proposal, the State may deem that as non-acceptance of the contract and may disqualify Offeror from consideration. These provisions differ from the Lottery’s 2010 scratch ticket and 2013 gaming system procurements, both of which allowed bidders to propose modifications to contract terms.

Will the Lottery please confirm that the State may only deem any MATERIAL proposed contractual as potentially disqualifying an Offeror from consideration?

A15. The State’s processes evolve over time. The intent of the contract modification language is to streamline the contract process and to prohibit excessive contract negotiations or delays after award. The language has been modified in the RFP to match this intent, see the next paragraph below. The Offeror may submit contract modifications. However, as stated in the referenced RFP and Appendix A sections (see below), contract modifications may be deemed by the State as non-acceptance of the contract. Potential modifications cannot be defined as “material” or “immaterial” by the State.

RFP Section IV., B., 5, “Compliance with Contract. By submitting a proposal, Offeror agrees to all terms and conditions of the contract and, if awarded, agrees to sign the contract as is, with no modifications. If Offeror submits any contractual modifications with its proposals, the State may deem that as non-acceptance of the contract and may disqualify Offeror from consideration. The State, at its sole discretion, may propose contract modifications.”

Appendix A., 12. “A proposal submitted in response to this RFP shall constitute a binding offer.

The autographic signature of the offeror shall indicate acknowledgment of this condition.

Signature shall be that of a person legally authorized to execute contractual obligations. A submission in response to this RFP acknowledges acceptance by the offeror of all terms and conditions including compensation, as set forth herein. An offeror shall identify clearly and thoroughly any variation between its proposal and the State’s RFP requirements. Failure to do so shall be deemed a waiver of any rights to subsequently modify the terms of performance, except as outlined or specified in the RFP.”, and as stated in

Appendix A,, 19, “The offeror’s signature on the Request for Proposal - Confirmation of Offer (see attachment labeled Confirm) is confirmation that the offeror understands and acknowledges that any award will require a contract between the State and the offeror containing the terms and conditions in the attached contract. Offeror agrees to all terms and conditions of the contract and, if awarded, agrees to sign the contract as is, with no modifications. If the Offeror submits any contractual modifications with its proposal, DOR, DOR may deem that as non-acceptance of the contract and may disqualify the Offeror from consideration. DOR, at its sole discretion, may propose contract modifications.”

Q16. Appendix B and Appendix C

Separately priced Ticket/Game Features in Appendix B and Appendix C require the game features to be listed as a Cost per 1,000. Will the lottery kindly confirm that special feature pricing can be listed as a flat fee, a price per square inch, per additional scene, etc., as is applicable to the feature?

A16. Yes, the Lottery will accept other pricing options for separately priced ticket/game features.

Q17. Contract 20 L – Q & A 21

Q 21 in Round 1 sought clarification of the Lottery’s intent to include the RFP as a

Contract document and, if so, an indication of the priority of that document in resolving conflicts. The Lottery’s answer did not address this question, referring instead to an awarded contractor’s proposal.

Will the Lottery please inform bidders as to whether the RFP will be a part of the Contract and, if so, advise regarding the priority of that document in resolving conflicts?

A17. The RFP (or Contractor’s proposal) in whole will not become part of the Contract. Portions of the RFP and contractor’s proposal may be incorporated as needed into the SOW (Exhibit A). If the State chooses to incorporate additional items from the RFP or contractors proposal outside the SOW, a new exhibit will be created. Such Exhibit will be lowest on the priority of interpretation.

Q18. Appendix A, Section 34 – Litigation, Page 10

Question: The Lottery requests offerors to submit a complete disclosure of any prior and/or pending civil or criminal litigation. This as drafted would seem to require disclosure of litigation going back to the formation of the company, which for some offerors covers decades and may not be particularly relevant for the lottery’s analysis. Is it acceptable to provide disclosure for some shorter period of time, not less than five years, and additional disclosure in this regard as requested by the Lottery?

A18. This time period is acceptable and Appendix A has been modified to reflect this change.

Q19. Contract, Section 5(X) – Definitions, Page 5

Question: Please confirm that Work Product does not include any of the identified materials that are produced independently from the Contract or that are not developed for or on behalf of the Lottery.

A19. This is correct. Work Product does not include any of the identified materials that are produced independently from the Contract or that are not developed for or on behalf of the Lottery.

Q20. Contract, Section 10(D) – Incident Notice and Remediation, Page 10

Question: Under this section, the Lottery appears to seek authority to unilaterally order certain corrective or risk-reducing action to be implemented to Contractor solely at Contractor’s cost, regardless whether the Incident was caused by Contractor and whether the ordered action is compatible with the goods and services or the operations of Contractor. This would seem to impose an open/ended obligation on Contractor to provide what amounts to information security goods and services which are not necessarily called for under the RFP and a potentially unfair and direct interference with Contractor’s operations, processes and performance. Please provide clarification regarding what exactly the Lottery believes is the obligation of the Contractor under this section in the event the Incident is caused by someone other than Contractor or someone acting on its behalf.

A20. Section 10 (D) states, “If Contractor becomes aware of any Incident, it shall notify the State immediately and cooperate with the State regarding recovery, remediation, and the necessity to involve law enforcement, as determined by the State. Unless Contractor can establish that none of Contractor or any of its agents, employees, assigns or Subcontractors are the cause or source of the Incident, Contractor shall be responsible for the cost of notifying each person who may have been impacted by the Incident. After an Incident, Contractor shall take steps to reduce the risk of incurring a similar type of Incident in the future as directed by the State, which may include, but is not limited to, developing and implementing a remediation plan that is approved by the State, at no additional cost to the State“. Therefore the responsibility of the Contractor is to notify the State of any Incident. If the Incident is the responsibility of the Contractor, then Contractor shall follow the steps outlined in Section 10 (D).

Q21. Contract, Subsection 12(F)(iv) – Insurance, Page 12

Question: Please confirm that Contractor would not be liable for over-redemption arising from payment of tickets that do not validate as winning tickets.

A21. Section 12 (F) (iv) does not relate to over-redemption, it refers to altered or counterfeit tickets.

Please refer to Section 12 (F) (i) regarding over-redemption insurance requirements and contractor liability.

Q22. Contract, Section 17 – Rights in Work Product and Other Information, Pages 17-18:

Question(s):

a. Please clarify how this section interacts with Section 5(X) and Subsection 20(GG).

Note that in our experience the proposed contractual provision has not been seen before in any other instant ticket procurement, and we have significant concerns with this section to the extent this section applies to intellectual property rights of

Contractor developed independently from this Contract or otherwise than on behalf of or at the direction of the Lottery.

b. To the extent this section applies to intellectual property rights created outside the scope of the Contract or otherwise than at the request or on behalf of the Lottery, the

Lottery appears to seek very broad assignment of future rights and interests in and to any future infringement claims regarding intellectual property embodied by the goods and services provided by Contractor. Because intellectual property rights are the very basis of the value of our business, and by assigning such rights the Lottery would prevent the Contractor from taking steps to protect, preserve and sustain its business, and since we otherwise indemnify the Lottery for such infringement claims under Section 20(GG), we strongly urge that such obligation to assign future infringement claims be removed as Contractor has no ability to value such an assignment.

c. Subject to a confirmation of Question 2 above, please confirm that the assignment of copyright and patent rights under this Section only applies to Work Product produced specifically under the Contract or at the request or on behalf of the Lottery.

d. To the extent this section applies to intellectual property rights created outside the scope of the Contract or otherwise than at the request or on behalf of the Lottery, please explain why a worldwide, perpetual license to such independently developed gods and/or services is appropriate and needed.

A22. a.-d: The language in Section 17 is tied to the definition of “Work Product”. Work Product in this contract is specific to Work created under this agreement for the State and does not apply to intellectual property, trademarks, trade names, patents, and copyrights maintained by the Contractor prior to the execution of the Contract or not created under the Contract for the State.

The contractor may request modifications in its proposal for consideration by the State.

Q23. Contract, Section 20(II) – Liquidated Damages, Pages 26-29

Question: Please clarify whether and how our understanding of the application of liquidated damages under this section is incorrect:

a. Amounts assessed shall not be imposed as a penalty by the Lottery.

b. Liquidated damages shall not be assess in the event the Lottery does not actually incur damages.

c. In the event such liquidated damages are assessed by the Lottery, it shall be the lottery’s sole remedy for the corresponding incident.

d. The parties agree that liquidated damages will not be assessed by the Lottery under multiple provisions relating to a single incident.

e. Contractor shall not be liable for liquidated damages to the extent the incident was caused by the Lottery, its retailers, third parties, communications failures or events or Force Majeure.

Further, does the Lottery object to discussing the following procedural concepts for inclusion in the Contract regarding the application of liquidated damages:

i. The Lottery shall notify Contractor in writing of a proposed assessment of liquidated damages prior to such assessment becoming due and payable.

ii. Such assessment must be made within six (6) months of the incident, or such liquidated damages are deemed waived by the Lottery.

iii. Contractor shall have the right to object to any such assessment within ten

(10) business days following its receipt of the notice.

iv. In the event Contractor does object to any such assessment, the parties shall schedule a time to discuss such assessment.

v. Any portion of liquidated damages assessed to which Contractor does not object shall be due and payable. The assessment of liquidated damages shall be in lieu of the right of ______ Lottery to institute a cause of action for consequential damages.

Finally, will the Lottery please clarify the basis for each amount proposed for such liquidated damages?

A23. a – Liquidated Damages are not imposed as penalties.

b – Liquidated damages are assessed per the stipulations and conditions outlined in Section 20

(II).

c – The Lottery may seek additional remedies if applicable (and available) under the terms of the contract.

d – The intent is to assess liquidated damages under a single provision, unless it applies to multiple provisions under Section 20 (II).

e – This is correct.

i-iv. - The State will consider adjustments to procedural concepts, but will not finalize as part of this document. As stated in the draft Contract, final Liquidated Damages terms will be finalized upon award.

Q24. Contract, Section 20(KK) – Task Orders, Page 30

Question: Please clarify how this section will apply to the goods and services provided under this Contract.

A24. Task Orders are typically used by the State under the Scratch Contracts to license proprietary game property that is not currently available to the Contractor. Section 20 (KK) provides the structure and mechanism to utilize Task Orders instead of an amendment to accomplish this.

The State has a new Master Task Order template. Please see updated Attachment, Contract V2, Exhibit B.