Michigan.gov/MiProcurement

Department of Technology, Management and Budget—Procurement Digital Cigarette Stamps and Related Services Request for Proposal No. 210000001627 Solicitation Manager Name: Steven Motz Direct Phone: 517-331-6086 Email: motzs1@michigan.gov Main Phone: 1-855-MI-PURCH 1-855-647-8724 This is a Request for Proposal (RFP) for Digital Cigarette Stamps and Related Services.

RFP Timeline

This RFP is subject to change. Check www.michigan.gov/SIGMAVSS for current information.

Attachment

Version 11(5/2020)

Version 12 (10/2020) 2 Proposal Instructions

1. PROPOSAL PREPARATION. The State recommends reading all RFP materials prior to preparing a proposal, particularly these Proposal Instructions and the Vendor Questions Worksheet. Bidders must follow these Proposal Instructions and provide a complete response to the items indicated in the table below. References and links to websites or external sources may not be used in lieu of providing the information requested in the RFP within the proposal. Include the bidder’s company name in the header of all documents submitted with your proposal.

Samples Required. In addition, by the proposal deadline, the bidder must submit samples of work that are identical to the proposed Contract Activities. Samples must be clearly labeled with the bidder's name and RFP number and sent to the address location in Section 6 below:

RFP Structure and Documentation

Schedule A Statement of Work

Schedule B Pricing

Attachment 1 Confidential Treatment Form (CT FORM)

BidderName_Att1-ConfTr_Sec2.pdf

Attachment 2 Vendor Questions Worksheet

Attachment 3 Mandatory Minimum Requirements

Attachment 4 Staffing Requirements and Resumes

Attachment 5 Preliminary Project Plan

Attachment 6 Standard Contract Terms

Attachment 7 Treasury Security Requirements

Attachment 8 Sample Training Materials

Attachment 9 Authorized SOM Distributors

Schedule E Contractor Hosted Software and Services

Exhibit 1 Support Services and Service Level Agreement for Hosted Services

Schedule F Data Security Requirements

Schedule H Safeguard Requirements of Confidential Tax Data

2. CONTACT INFORMATION FOR THE STATE. The sole point of contact for the State concerning this RFP is listed on the Cover Page. Contacting any other State personnel, agent, consultant, or representative about this RFP may result in bidder disqualification.

3. OPTIONAL PRE-PROPOSAL MEETING.

An optional pre-proposal meeting will be held through Microsoft Teams as follows:

(Must E-mail Solicitation Manager for meeting details 24 hours before meeting) The purpose of the pre-proposal meeting is to discuss content within the RFP and to provide a vision of the work that will be sought through the awarded contracts. Statements made by the Solicitation Manager or designee at a pre-proposal meeting are not considered modifications to the RFP. If, however, the Solicitation Manager determines modifications to the RFP are warranted after the meeting, modifications will be posted in writing on www.michigan.gov/SIGMAVSS as explained in the Modifications section of this document.

4. MODIFICATIONS. The State may modify this RFP at any time. Modifications will be posted on www.michigan.gov/SIGMAVSS. This is the only method by which the RFP may be modified.

5. QUESTIONS. Bidder questions about this RFP must be emailed to the Solicitation Manager no later than the time and date specified on the Cover Page. In the interest of transparency, only written questions are accepted. Answers to questions will be posted on www.michigan.gov/SIGMAVSS. Submit questions using the format below; a Microsoft Excel format or similar is suggested.

6. DELIVERY OF PROPOSAL.

Electronic – The bidder must submit its proposal, all attachments, and any modifications or withdrawals electronically through www.michigan.gov/SIGMAVSS. The price proposal should be saved separately from all other proposal documents. The bidder should submit all documents in a modifiable (native) format (examples include but are not limited to Microsoft Word or Excel and Google Docs or Sheets). In addition to submitting documents in a modifiable format, the bidder may also submit copies of documents in PDF. Attachment file size is limited to 6 MB per document. Bidder’s failure to submit a proposal as required may result in disqualification. The proposal and attachments must be fully uploaded and submitted prior to the proposal deadline. Do not wait until the last minute to submit a proposal, as the SIGMA VSS system requires the creation of an account and entry of certain information, in addition to uploading and submitting the materials. The SIGMA VSS system will not allow a proposal to be submitted after the proposal deadline identified in the solicitation Closing On/Closing Date fields (Summary view/Detail view), even if a portion of the proposal has been uploaded.

Questions on how to submit information or how to navigate in the SIGMA VSS system can be answered by calling (517) 284-0540 or (888) 734-9749. The Solicitation Manager will not provide assistance related to the submittal of the proposal and all attachments on the day of the proposal deadline. Responsibility for a complete submission lies with the bidder.

DELIVERY OF SAMPLES.

The bidder must submit its samples utilizing one of the following methods:

Delivery or Courier Bruce Hanses, Administrator Office of Departmental Services Department of Treasury Operations Center 7285 Parsons Drive Dimondale, MI 48821

When submitting samples, the bidder should:

· Allow adequate time to clear State-building security checkpoints.

· Label the RFP number and bidder name on the outside of each package. If a delivery or courier service is used that prohibits markings on its package, this information should be placed on the outside of an interior package.

7. MANDATORY MINIMUM REQUIREMENTS. To avoid disqualification, the bidder must provide documentation to support they meet the mandatory minimum requirements provided in Attachment 3.

Only proposals meeting the mandatory minimum requirements will be considered for evaluation.

8. EVALUATION PROCESS. If all mandatory minimum requirements are met, the State will evaluate each proposal based on the following factors:

· Product Samples

· Schedule A (Statement of Work Responses)

· Attachment 5 (Preliminary Project Plan)

· Attachment 7 (Treasury Security Requirements)

· Attachment 8 (Sample Training Materials)

· Vendor Questions Worksheet (Attachment 2)

· Schedule A (Statement of Work Responses) related to staffing

· Attachment 4 (Staffing Requirements and Resumes)

Proposals receiving 80 or more technical evaluation points will have pricing evaluated and considered for award.

The State may utilize all bidder information, without regard to a proposal’s technical score, to determine fair market value for goods or services sought. The State is not obligated to accept the lowest price proposal. If applicable, the State’s evaluation will include consideration of a bidder’s qualified disabled veterans/service-disabled veteran owned business (QDV/SDVOB) status under MCL 18.1261(8). Additional information on the SDVOB preference is available at: Michigan.gov/SDVOB.

The State strongly encourages strict adherence to the Contract Terms. The State reserves the right to deem a bid non-responsive for failure to accept the Contract Terms. Nevertheless, the bidder may submit proposed changes to the Contract Terms in track changes (i.e., visible edits) with an explanation of the bidder’s need for each proposed change. Failure to include track changes with an explanation of the bidder’s need for the proposed change constitutes the bidder’s acceptance of the Contract Terms. General statements, such as that the bidder reserves the right to negotiate the terms and conditions, may be considered non-responsive.

The State may but is not required to conduct an on-site visit to tour and inspect the bidder’s facilities; require an oral presentation of the bidder's proposal; conduct interviews, research, reference checks, and background checks; and request additional price concessions at any point during the evaluation process.

9. NOTICE OF DEFICIENCY. The State reserves the right to issue a Notice of Deficiency to bidders if the State determines after the proposal deadline that a portion of the RFP was deficient, unclear, or ambiguous. Failure to respond to a Notice of Deficiency timely may be cause for disqualification.

10. CLARIFICATION REQUEST. The State reserves the right to issue a Clarification Request to a bidder to clarify its proposal if the State determines the proposal is not clear. Failure to respond to a Clarification Request timely may be cause for disqualification.

11. RESERVATIONS. The State reserves the right to:

a. Disqualify a bidder for failure to follow these instructions.

b. Discontinue the RFP process at any time for any or no reason. The issuance of an RFP, your preparation and submission of a proposal, and the State’s subsequent receipt and evaluation of your proposal does not commit the State to award a contract to you or anyone, even if all the requirements in the RFP are met.

c. Consider late proposals if: (i) no other proposals are received; (ii) no complete proposals are received; (iii) the State received complete proposals, but the proposals did not meet mandatory minimum requirements or technical criteria; or (iv) the award process fails to result in an award.

d. Consider an otherwise disqualified proposal if no other proposals are received.

e. Disqualify a proposal based on: (i) information provided by the bidder in response to this RFP; (ii) the bidder’s failure to complete registration on www.michigan.gov/SIGMAVSS ; or (iii) if it is determined that a bidder purposely or willfully submitted false or misleading information in response to the RFP.

f. Consider prior performance with the State in making its award decision.

g. Consider overall economic impact to the State when evaluating proposal pricing and in the final award recommendation. This includes but is not limited to: considering principal place of performance, number of Michigan citizens employed or potentially employed, dollars paid to Michigan residents, Michigan capital investments, job creation, tax revenue implications, and economically disadvantaged businesses.

h. Consider total-cost-of-ownership factors (e.g., transition and training costs) when evaluating proposal pricing and in the final award recommendation.

i. Refuse to award a contract to any bidder that has failed to pay State taxes or has outstanding debt with the State.

j. Enter into negotiations with one or more bidders on price, terms, technical requirements, or other deliverables.

k. Award multiple, optional-use contracts, or award by Contract Activity.

l. Evaluate the proposal outside the scope identified in the Evaluation Process section of this document if the State receives only one proposal.

12. AWARD RECOMMENDATION. The contract will be awarded to the responsive and responsible bidder who offers the best value to the State, as determined by the State. Best value will be determined by the bidder meeting the minimum point threshold and offering the best combination of the factors stated in the Evaluation Process section of this document, and price, as demonstrated by the proposal. The State will post an Award Recommendation and Evaluation Synopsis on www.michigan.gov/SIGMAVSS.

13. DEBRIEF MEETING AND BID PROTEST. The State will post an Award Recommendation and Evaluation Synopsis which will provide instructions on how to request a debrief meeting.

If you wish to initiate a protest of the award, you must submit your written protest electronically at BidProtest-DTMB@michigan.gov no later than 3:00 p.m., five (5) calendar days after posting the Award Recommendation and Evaluation Synopsis on SIGMA VSS, or by 3:00 p.m. the next business day if that date falls on a state holiday or weekend. The State reserves the right to adjust this timing and will publish any change on the SIGMA VSS.

Additional information about the protest process is available at www.michigan.gov/micontractconnect under the “Programs and Policies” link.

14. STATE ADMINISTRATIVE BOARD. Contracts equal to $250,000 or greater than require approval by the State Administrative Board. The State Administrative Board’s decision is final; however, its approval does not constitute a contract. The award process is not complete until the awarded contractor receives a contract fully executed by all parties.

15. GENERAL CONDITIONS. The State will not be liable for any costs, expenses, or damages incurred by a bidder participating in this solicitation. The bidder agrees that its proposal will be considered an offer to do business with the State in accordance with its proposal, including the Contract Terms, and that its proposal will be irrevocable and binding for a period of 180 calendar days from date of submission. If a contract is awarded to the bidder, the State may, at its option, incorporate any part of the bidder’s proposal into a contract. This RFP is not an offer to enter into a contract. This RFP may not provide a complete statement of the State’s environment or contain all matters upon which agreement must be reached. Other than verified trade secrets, proposals submitted via www.michigan.gov/SIGMAVSS are the State’s property.

16. CONFIDENTIAL TREATMENT FORM AND THE FREEDOM OF INFORMATION ACT. All portions of the bidder’s proposal and resulting contract are subject to disclosure as required under Michigan’s Freedom of Information Act (FOIA), MCL 15.231, et seq. However, some information may be exempt from disclosure. Under MCL 18.1261(13)(b), records containing “a trade secret as defined under section 2 of the uniform trade secrets act, 1998 PA 448, MCL 445.1902,” are exempt from disclosure under FOIA. In addition, “financial or proprietary information” submitted with a bidder’s proposal is exempt from disclosure under FOIA. A bidder’s failure to comply with this Section is grounds for rejecting a bidder’s proposal as non-responsive. As a part of its proposal, each bidder must follow the procedure below.

SUBMIT A COMPLETED “CONFIDENTIAL TREATMENT FORM” (CT FORM) WITH YOUR BID. Completion and submission of the CT Form is required regardless of whether the bidder seeks confidential treatment of information. Failure to submit a completed CT Form may be cause for disqualification from the solicitation process.

Complete and sign Section 1 of the CT Form if the bidder does NOT request confidential treatment of information contained in its proposal; or

i. Complete and sign Section 2 of the CT Form if the bidder requests confidential treatment of certain information. Bidder must also submit a “Public Copy” of the proposal with the trade secret, financial, and proprietary information redacted and clearly labeled as the “Public Copy.”

b. FOIA REQUESTS. If a FOIA request is made for a bidder’s proposal, the Public Copy may be distributed to the public along with the bidder’s CT Form. The CT Form is a public document and serves as an explanation for the redactions to the Public Copy. Do not put any trade secret, financial, or proprietary information in the CT Form. Do not redact the CT Form itself.

c. NO ADVICE. The State will not advise a bidder as to the nature or content of documents entitled to protection from disclosure under FOIA or other laws, as to the interpretation of such laws, or as to the definition of trade secret or financial or proprietary information. Nothing contained in this provision will modify or amend requirements and obligations imposed on the State by FOIA or other applicable law.

d. FAILURE TO REQUEST CONFIDENTIAL TREATMENT. Failure to request material be treated as confidential as specified herein relieves the State, its agencies, and personnel from any responsibility for maintaining material in confidence.

e. Bids containing a request to maintain an entire proposal as confidential may be rejected as non-responsive. Bidders may not request confidential treatment with respect to resumes, pricing, and marketing materials. The State reserves the right to determine whether material designated as exempt by a bidder falls under MCL 18.1261 or other applicable FOIA exemptions. If a FOIA request is made for materials that the bidder has identified as trade secret, financial, or proprietary information, the State has the final authority to determine whether the materials are exempt from disclosure under FOIA.

f. Bidder forever releases the State, its departments, subdivisions, officers, and employees from all claims, rights, actions, demands, damages, liabilities, expenses and fees, which arise out of or relate to the disclosure of all or a portion of bidder’s proposal submitted under this RFP. Bidder must defend, indemnify and hold the State, its departments, subdivisions, officers, and employees harmless, without limitation, from and against all actions, claims, losses, liabilities, damages, costs, attorney fees, and expenses (including those required to establish the right to indemnification), arising out of or relating to any FOIA request, including potential litigation and appeals, related to the portion of bidder’s proposal submitted under this RFP that bidder has identified as a trade secret, or financial or proprietary information. The State will notify bidder in writing if indemnification is sought. The State is entitled to: (i) regular updates on proceeding status; (ii) participate in the defense of the proceeding; (iii) employ its own counsel; and to (iv) retain control of the defense, or any portion thereof, if the State deems necessary. Bidder will not, without the State’s written consent (not to be unreasonably withheld), settle, compromise, or consent to the entry of any judgment in or otherwise seek to terminate any claim, action, or proceeding. If a State employee, official, or law is involved or challenged, the State may control the defense of that portion of the claim. Any litigation activity on behalf of the State, or any of its subdivisions under this Section, must be coordinated with the Department of Attorney General. An attorney designated to represent the State may not do so until approved by the Michigan Attorney General and appointed as a Special Assistant Attorney General.

Schedule A – Statement of Work Contractor must enter company name here.

Request for Proposal (RFP) No. 210000001627 Digital Cigarette Stamps and Related Services This schedule identifies the anticipated requirements of any Contract resulting from this RFP. The term “Contractor” in this document refers to a bidder responding to this RFP, as well as the Contractor who is awarded the contract. The term “Bidder” is used to identify where specific responses to the RFP are required.

The Bidder must respond to each requirement or question and explain how it will fulfill each requirement. Attach any supplemental information and appropriately reference within your response.

IMPORTANT NOTE TO CONTRACTORS/BIDDERS: There are specific requirements for which acceptance must be simply acknowledged through a checkbox(es), and others that require further explanation. Click one checkbox and complete the entries as identified.

BACKGROUND

The Tobacco Products Tax Act (Act 327 of 1993) provides for a tax upon the sale or importation of tobacco products. The Tobacco Products Act restricts the application of cigarette stamps to currently licensed cigarette wholesalers and unclassified acquirers (herein after referred to as Distributors). Treasury administers the collection and disposition of the tax. Prior to 2014, cigarette stamps were produced for application via a heat applied process and contain multiple layers. Act 188 of 2012 was passed authorizing the use of digital stamps and other requirements. Heat applied cigarette stamps were replaced with digital stamps, machines, scanners, processes and related services.

OBJECTIVES

The purpose of this RFP is to enter into a contractual agreement with a successful bidder to do the following work:

a. Contract will include Digital Cigarette Stamps, supporting systems (e.g., ordering system, desktop inventory track/trace system, mobile inventory track/trace application), and related services.

b. Supply the State of Michigan with approx. 450 million digital stamps annually.

c. Monitor maintenance including machine manufacturer agreements, applicable software licensing updates, MSA compliant software, machine optimization reporting, maintain updated UPC codes, including adds/deleted provided by MI.

d. Provide a system that allows Authorized MI Stampers to order stamps online.

e. Provide a track and trace stamp inventory system that will capture all authorized digital stamp purchases made by State of Michigan approved ‘stampers’.

f. Provide a mobile version of the track and trace system for our Enforcement teams.

g. Ensure MSA compliance by utilizing industry approved software such as Tax Rite, or other software as approved by Treasury.

The awarded Contractor will provide services from May 1, 2022 through April 30, 2027 and the resulting contract will include five one-year options. If transition services are required, start dates may need to be adjusted. The Contract to follow State fiscal year methodology (October 1st – September 30th). The Contractor must provide an acceptable timeline and project plan that will provide for 6 months of transition into the new contract prior to May 1, 2022.

DEFINITIONS

For the purposes of this RFP, the following terms have the following meanings:

“Authorized Stampers” includes wholesalers or unclassified acquirers licensed with the State of Michigan to affix digital stamps with SOM UPC codes to collect SET on.

“Authorized Users” means all persons authorized by the state to access and use the stamp ordering system, desktop inventory trace/track system and mobile inventory track/trace application under this contract.

“Business day” means a day other than a Saturday, Sunday or any other day on which the State is authorized or required by law to be closed for business.

“Distributor” due to Michigan’s unique Tobacco Product Tax Act (TPTA) this term includes both in-state wholesalers as well as Unclassified Acquirers. Distributor and Authorized Stampers are one and the same.

“Encrypt” the process of transforming information using an algorithm to make it unreadable to anyone except those possessing unique scanners, typically referred to as a key. The State prefers data to be encrypted on the stamp and readily available for security feature verification.

“ENDS” Electronic Nicotine Delivery Systems; A term used to describe various electronic smoking devices. Commonly called e-cigarettes or vape pens. An ENDS device typically consists of a battery, microprocessor, heater, and cartridge tank.

“Machine Subcontractor” Contractor delegates performance of a portion of the Deliverable(s) to Industry approved High Speed and Hand stamping manufacturers (e.g., R.E.D. Stamp, Inc. and United Silicone, an ITW Company). In the event of IQOS or other new tobacco products requiring stamps, the scope of these high speed stamping sub-contractors may be expanded to support new products as needed.

“Program Manager” has the meaning set forth in Contract Terms, Section 4. The State of Michigan Division Administrator over the Tobacco Unit is the State Program Manager. The Vendor’s Program Manager is also called the Contractor Representative.

SCOPE OF WORK

The Contractor must provide the following:

1. Stamps or equivalent indicia as approved at the sole discretion of Treasury.

2. Contractor must share digital stamp technology with the State and other parties as permitted by Treasury (i.e., for use with handheld devices/smartphones, machines, stamp application, etc.).

3. Related Services:

a. Provide sufficient licenses for any proprietary software or hardware needed by the State and any licensed wholesalers and unclassified acquirers licensed to apply cigarette stamps, ensure MSA compliance, or any other proposed indicia.

b. Provide access to any Information Technology system proposed in any solution to employees or designated representatives of the State Treasurer, licensed wholesalers and unclassified acquirers, any State authorized entity and, to the extent permitted or required by Treasury, the general public.

c. Treasury shall have sole authority to determine the security requirements and security framework for users of said system and related test environments, and the granting of access rights to any systems and services provided by the Contractor.

4. Optional Services:

At the State’s discretion, optional services that are within the scope of the Contract may be added at a future date by a mutually agreed upon separate statement of work through a Contract Change Notice.

Bidder Response:

Bidder must check 1 box below and provide the requested information:

List all exceptions(s):

1. Requirements and Deliverables

The following is a preliminary listing of the major tasks involved for developing the end deliverables of this project. However, the Contractor is not constrained from supplementing this listing through additional steps, sub tasks, or elements deemed necessary to permit the development of alternative approaches, or the application of proprietary techniques.

1.1. Digital Stamps:

1.1.1. General Stamp Specifications

a. Per TPTA, stamps must be stamped on the bottom of the cigarette packs. Stamps must be compatible with current high speed and hand stamping machines (see below).

b. Contractor will be required to maintain a minimum of 10 weeks inventory on all stamp denominations outlined in section e below.

c. Contractor must provide both Overt and Covert security features.

d. Contractor does not charge by number of security features. The only limitation to the number of security features is the physical space of the stamp itself.

e. Stamps must be provided in various denominations and layout as follows:

1) R1 – MI-State /20 (30,000 R/L)

2) R2 – MI-State /20 (1,500 R/L) 60MC

3) R4 – MI-Tribal /20 (30,000 R/L)

4) R5 – MI-Tribal /20 (1,500 R/L) 60MC

5) Due to the constantly evolving industry that includes adding new products to the market, Treasury reserves the right to request additional denominations and/or layouts or types of stamps if needed. Examples of future layouts would be IQOS, or vape products if legislatively required..

f. The stamp rolls have ascending, or descending numbers printed on the base paper at a standard interval to provide an exact count of stamps remaining and stamps used on the roll.

g. The stamps must readily and permanently adhere to all cigarette package wrapper materials or the cigarette package itself in such a manner that they cannot be removed without either being destroyed or rendered unusable as an indicator of tax payment or destroying the wrapper. Contractor guarantees the stamps will be designed and manufactured to ensure stamps are affixed at least 90% to individual cigarette packs, so the stamps cannot be removed without being mutilated or destroyed.

Bidder Response:

Bidder must check 1 box below and provide the requested information:

List all exceptions(s):

Bidder Response:

The Bidder must describe how they would meet a future request to deliver an additional stamp type/format in the event described in 1.1.1. e.5.

Bidder Response:

The Bidder must submit samples in accordance with Proposal Instructions, Section 6, Delivery of Proposal.

a. Samples will be required (Production Grade Samples similar in size and scope)

b. Proposed artwork will be required as a .pdf or .jpg file.

Please describe the samples that you have delivered to the State.

1.1.2. Overt Security Features (Level 1; visible to the naked eye or can be felt via touch. Includes Holograms, colored inks and security thread)

Stamps will carry several overt security features providing for an easy initial verification by enforcement, licensees, and public with little to no training and unaided visual inspection. At a minimum, the following must be included:

1. State Seal constructed of color-controlled gratings creating a true color replication of the Michigan State Seal at certain defined angles of viewing.

2. Unique images for Retail stamps and Tribal stamps. Each has similar components but very different visual characteristics for easy visual differentiation. Tribal Stamps must be visibly identifiable by the naked eye.

Bidder Response:

Bidder must check 1 box below and provide the requested information:

List all exceptions(s):

1.1.3. Covert Security Features (Level 2; only visible to trained examiners using readily available tools. Examples include ultraviolet images, hidden text or images embedded into the stamp)

The “semi-covert” level will require the use of a simple hand-held magnifying device, which will allow trained officers to visually examine semi-covert features.

The “covert” level would require a verification device such as a Digital Microscope and Laptop to distinguish the features embedded into the stamp.

Stamps will carry several Covert security features.

Bidder Response:

The Bidder must explain their Covert Security Features, and how they will be used.

1.1.4. Stamp Compatibility

Stamps and roll configurations must be compatible with the State of Michigan’s existing high speed stamping machines. The high-speed stamping machines in all SOM Authorized Stampers sites are owned by the stampers and manufactured by either Red Stamp or United Silicone Inc (USI). This includes rolls to be delivered are 2 stamps wide on a paper liner of 30,000 stamps, or 1 stamp wide on a paper liner of 1,500 stamps.

Bidder Response:

Bidder must check 1 box below and provide the requested information:

List all exceptions(s):

Other Stamp Features required:

1. An open architecture 2-D QR bar code with secured access easily read by enforcement officers and auditors using laptop, tablet, or smart phone devices.

2. The open architecture 2-D bar code enables other reporting sectors, such as retailers, secondary acquirers, etc. to authenticate and report non-readable stamps.

Bidder Response:

Bidder must check 1 box below and provide the requested information:

List all exceptions(s):

Bidder Response:

The Bidder must describe how they meet the requirements in this section.

1.1.5. Encrypted Data included on Stamps:

The following information must be encrypted on each stamp:

a. Authorized Stamper name.

b. Option to include a designated stamping agents name.

c. Unique stamp number.

d. Date the stamp was affixed to the cigarette pack.

e. Denomination of the cigarette pack.

f. UPC code.

g. Cigarette pack brand name.

h. Cigarette pack manufacturer name.

i. Distributors Invoice number(s) * *Note: The majority of Michigan Distributors utilize pre-stamping fulfillment methodology. Therefore, the distributors invoice numbers are not currently captured in the encrypted stamp barcode. However, for the few distributors who utilize ‘just-in-time’ fulfillment, we would reserve the right to request this.

Bidder Response:

Bidder must check 1 box below and provide the requested information:

List all exceptions(s):

Bidder Response:

The Bidder must describe the method the contractor would use to capture distributor invoice numbers into the encrypted stamp barcode if MI were to implement this requirement in the future.

Bidder Response:

The Bidder must describe how they meet the requirements in this section, including the number of features/data fields that can be incorporated into each stamp.

Bidder Response:

The Bidder must describe the stamp security features that disallow replication via photocopy, scan or any other fraudulent methods

1.2. Digital Stamping Machines and Maintenance:

1.2.1. General Stamping Machines and Maintenance Requirements

a. High Speed Stamping machines must be MSA compliant, utilizing approved MSA software (e.g., Tax Rite).

b. The annual license fees for the required MSA compliance Tax Rite Software must be an itemized line-item cost within bid.

c. Contractor must have the ability to extract MSA UPC compliance data & report out metadata to substantiate MSA compliance.

d. In the event any additional machine subcontractors join the market, Contractor will pursue & obtain an agreement in a timely fashion.

e. Lake Image Systems, or a Treasury approved optical verification system, will be used for optical verification and digital stamp signature data collection.

f. During the contract period, stamping machines will only be brought online at an authorized State of Michigan Distributor site for the use of stamping State of Michigan digital stamps.

g. Distributors will be responsible for machine purchases, leases, maintenance agreements and service call costs.

h. Contractor will partner with both the SOM and machine manufacturer’s to provide reporting and review machine error rates or overrides and react appropriately to rectify any negative trends based on established expectations.

i. Contractor will complete Factory Acceptance Testing (FAT) on any High-Speed machines installed or moved during the term of the contract. The FAT will ensure all physical and environmental security factors are in place, all data transmissions are fully uploaded to the contractor's inventory database, and MSA compliance software is active and accurate. The FAT must be completed within 30 days of installation/move date unless an alternative timeframe is agreed upon by the State Program Manager. FAT reports will be provided to Treasury upon completion of FAT.

j. Contractor must immediately inform Program Manager or designee of the sale or lease of any machine and the name and address of the seller and/or purchaser.

k. Should Treasury decide to disable a machine, only the SOM Program Manager or appointee has the authority/ability to set a flag in the Track and Trace system that would stop the daily transmission of the UPC control file which will then put the machine in 96 hour shut-down cycle to disable the machine.

l. Contractor will provide a Technical Support number to authorized Stamping licensees in the event of machine malfunctions or degradation of stamping production.

Bidder Response:

Bidder must check 1 box below and provide the requested information:

List all exceptions(s):

Bidder Response:

1.3. Stamp Ordering System

1.3.1 General Stamp Ordering System Requirements

a. Allow ordering by the distributor without payment.

b. Allow Treasury to see any outstanding balances due by a licensee (in the event there is a change in policy and Treasury no longer pays for digital stamps).

c. Allow expedited deliveries only if licensee provides billing data and pays for any expedited delivery charge.

d. Additional authorized users for each distributor must be approved by SOM.

e. Electronically generated emails to SOM for each distributor stamp order.

f. The Stamp ordering system will require a unique Login ID & meet industry standard for password security.

g. Stamp Ordering System will ensure shipment delivery addresses are only modifiable by authorized contractor staff, and with the approval of SOM.

h. Contractor to provide training to any added authorized users. See Section 1.7.3 for additional details on training requirements.

i. Contractor to periodically provide SOM with list of inactive authorized users to ensure system security protocols.

Bidder Response:

Bidder must check 1 box below and provide the requested information:

List all exceptions(s):

Bidder Response:

The Bidder must provide a brief overview of their General Stamp Ordering System.

1.4. Stamp Tracking/Tracing & Inventory System Requirements

1.4.1 General Stamp Tracking/Tracing & Inventory System Requirements

a. The Stamp track and trace system will have the ability to trace stamps by roll, distributor, date, and individual stamp serial number level.

b. Must require unique user IDs and meet industry standards for password security.

c. Must support unique stamping events for tracking the status of the stamp(s) from start to finish through the supply chain (e.g., ordered, shipped, received, applied, scrapped etc.).

d. Must include accounting fields and ability for licensee to pay. Treasury currently pays for all stamps vs. the industry norm of the Licensee paying for them. In the event this were to change, accounting fields to support this would be required.

e. System must have the capability to include the distributors invoice number encrypted or traced when the product is sold using “just in time” order fulfillment processes vs. pre-stamped.

f. The system will capture and house the following stamping data elements:

· Authorized Stamper name

· Date & time

· Status (e.g., ordered, shipped, received, applied, scrapped)

· Brand code

· Serial Number

· Roll Range

· Stamp Machine ID

· Stamp Item No. (RI, R2, R4, R5)

· Stamp Item Name (MI/20 (30,000 roll), Tribal/20 (1,500 roll), etc.

· Shipment Data - including Ship Date, Ship to, etc.

· Stamper receipt date

· Stamper acceptance data

· Contractor Invoice No.

· Distributor Invoice No. (we reserve the right to request)

· Quantity Shipped

· Ship to City, State, County & Zip

· Manufacturer UPC Data including UPC Number, Brand and Manufacturer Name

Bidder Response:

Bidder must check 1 box below and provide the requested information:

List all exceptions(s):

Bidder Response:

The Bidder must provide a brief overview of their General Stamp Tracking/Tracing & Inventory System.

1.5. Physical Security of Stamps

1.5.1. Manufacturing Facility Security - Manufacturing Facility must contain, but not be limited to the following:

a. Fire exit doors with break alarm bell for local alert in the event of an exit.

b. Locks on all outside doors.

c. Intrusion alarm system.

d. Maintain Visitor logs of all non-employees entering office, manufacturing and storage areas.

e. Limited access to all production and storage areas by the contractor’s employees or agents and visitors.

f. Cameras with archived footage meeting industry standards, that will be available for review by authorized State personnel if requested.

Bidder Response:

Bidder must check 1 box below and provide the requested information:

List all exceptions(s):

1.5.2. Stamp Storage Security - Stamp Storage within the Manufacturing Facility must contain, but not be limited to the following:

a. Stamps must be stored in contractor’s climate-controlled warehouse.

b. SOM stamps must be stored in separate room, i.e., not co-mingled with any other states stamps.

c. Contractor storage area must be restricted within the warehouse compound.

d. The storage area must be protected against damage or loss (fire, water).

e. Key card must be required for entry into the storage location.

f. The storage area must have security appropriate for storage of negotiable instruments.

g. Treasury must have access to the storage area for purposes of inspection or examination without advance notice to the Contractor.

h. Cameras with archived footage meeting industry standards, that will be available for review by authorized State personnel if requested.

Bidder Response:

Bidder must check 1 box below and provide the requested information:

List all exceptions(s):

Bidder Response:

The Bidder must briefly describe their stamp storage facility and security measures including the number of days footage be archived for both manufacturing facility and storage facility.

1.6. Mobile Application/Scanning Requirements

1.6.1. General Mobile Application System Requirements

a. Contractor must provide mobile ability to Treasury designees (Enforcement/MSP) to remotely scan stamps during offsite inspections to verify stamp authenticity.

b. Mobile Stamp application must be compatible with IOS platform.

c. Mobile app must be an open architecture solution that does not require the state to purchase proprietary devices.

d. Mobile app must be integrated, i.e., not require multiple separate devices to scan remotely.

e. Mobile application fulfillment, both initial and ongoing for the duration of the contract should be downloadable from the Apple App Store, and at no additional charge.

f. Contractor will issue Mobile application unique ID’s only on approval of Authorized Treasury personnel.

g. Contractor will provide application support during standard business hours via a 800# for all users.

h. Mobile application must provide approve security protocols separate from the physical device.

i. Ability to issue unique user IDs for all mobile application users.

j. Mobile App must capture, display, and upload the following data elements into the remote track and trace system:

· Unique Stamp ID

· Date Shipped

· Authorized Stamper Name

· Status (e.g., ordered, shipped, received, applied, scrapped)

k. Upgrades to mobile application to meet industry standards are provided at no additional charge.

l. Mobile app must be QR compatible.

Bidder Response:

Bidder must check 1 box below and provide the requested information:

List all exceptions(s):

Bidder Response:

The Bidder must provide a brief overview of their Mobile Application/Scanning application.

1.7. Related Services

1.7.1. General Related Services Requirements

a. Fraud Prevention: Contractor will actively monitor the market looking for counterfeit stamps using data mining tools and methodologies.

b. Contractor will report to the SOM any such appearances of possible counterfeit product.

c. Annual SOC testing If Applicable, the Contractor must perform annual testing of all security control requirements to determine they are working as intended. Annual certification must be provided in writing to the Program Manager or designee in the form of a SOC II Type II or similar audit report within 30 days of audit report completion.

d. Disaster Contingency Plan: Contractor will provide a disaster recovery plan to illustrate operational impact in case of an emergency.

e. Help Desk Support (direct) for SOM authorized Distributors: Contractor will provide a Help Desk/Technical Support process and system to receive, issue & log a unique tracking number, prioritize, escalate (if needed), and resolve problems/issues reported by authorized Treasury Licensees. This includes order/delivery questions, Stamp ordering & inventory system setup & support questions, adding authorized distributor ID’s when needed, adding authorized mobile application users as needed, and password resets.

f. Internal Support – SOM requires a dedicated Relationship Manager within Contractors organization. This RM would be the SOM point person for any all reporting, support, problem resolution, or any other contract related issues.

Bidder Response:

Bidder must check 1 box below and provide the requested information:

List all exceptions(s):

Bidder Response:

The Bidder must respond to 1.7.1 d by providing an outline to illustrate how business continuity will be maintained in the event of a disaster.

Bidder Response:

1.7.2 Contract Transition

In the event of a new contractor assuming MI’s Digital Stamp contract; the new Contractor will provide a transition plan that includes the following:

a. Existing HS and Hand stamping systems must be compatible with a new vendors systems. The SOM stampers use Red Stamp and USI High Speed machines.

b. New Contractor will coordinate transition of UPC lists, Stamper Contact data, Machine S/N’s from old contractor. A dedicated transition team would need to be assigned to ensure a seamless transition (see sec 4.5 Key Personnel).

c. All historical stamp meta-data will be provided to the new contractor prior to new contact start date.

d. Vendor Interface testing would be required to test and implement interfaces to the SOM authorized stampers’ stamping machines, as well as internal interfaces to the ordering, tracking and mobile application platforms.

e. Training on the mobile application for Treasury Enforcement & MSP personnel.

f. Training on the Inventory system for all Treasury personnel.

g. Training on the Stamp Ordering system for all Distributors’ authorized personnel.

In addition to providing a Transition Plan, the Contractor must also provide a Project Plan as describe in Statement of Work, Section 5.1.

Bidder Response:

Bidder must check 1 box below and provide the requested information:

List all exceptions(s):

Bidder Response:

The Bidder must describe how they would meet the requirements of this section including the transition plan for all systems as well as the transference of historical metadata.

1.7.3. Training

In addition to the Training provided during any Contract Transition (See 1.7.2), the Contractor must also provide the following ongoing training as part of the standard contract pricing:

a. Provide timely training to…