Department of Revenue

Colorado Lottery

Request for Proposal # DOR17002/Scratch

Scratch Ticket Production

Issued: October 28, 2016

Revised: November 1, 2016 (See Amendment A) Revised: November 14, 2016 (See VSS for other updated docs) Revised: December 2, 2016 (See VSS for other updated docs)

TABLE OF CONTENTS

I. Introduction 3

A. Introduction B. Glossary of Terms

II. Background, Overview and Goals 8

A. Background B. Overview C. Goals

III. Statement of Work 14

A. Overview B. Product and Production Services C. Security and Game Integrity D. Shipment, Delivery, and Storage of Tickets E. Critical Support Services F. Value Added G. New Technologies H. Ticket Distribution/Cooperative Services I. Gift Cards J. Performance Incentives

H.

IV. Offeror Response Format 58

A. Purpose of Offeror Response Format B. Proposal Submission Requirements

V. Proposal Evaluation 63

Appendices

Appendix A - RFP Administrative Information

Appendix B – Pricing for Primary Contractor

Appendix C – Pricing for Secondary Contractor

Appendix D – Market Basket FY 18 - 23

Appendix E – Vendor Disclosure Form

Appendix F – Game Launch Schedule FY 11 – FY 16

I. INTRODUCTION AND GLOSSARY

A. Introduction

It is the intention of the Lottery to select two (2) or more contractors to supply ticket printing and related services as a result of RFP. It is the intent of this RFP that the Lottery will have a Primary Contractor and one or more Secondary Contractors.

The term of the resulting contracts will be from July 1, 2017 through June 30, 2023 with the option to renew, at the sole discretion of the Lottery, for two (2) additional two-year periods.

B. Glossary of Terms

The Lottery anticipates those responding to this RFP may be individuals, companies or corporations proposing the services individually or in conjunction with others and/or contractors and/or subcontractors. Therefore, the use of the terms “you,” “your,” “Contractor” and “offeror” in the following sections may be read in individual or collective terms, refer to a company and/or its principals, and in all cases refer to the entity responding to this RFP.

American National Standards Institute (ANSI) -- a private non-profit organization that oversees the development of voluntary consensus standards for products, services, processes, systems, and personnel in the United States

Apparent Successful Offeror(s) -- the offeror(s) that has been selected, based upon the evaluation of all responsible proposals, to be the contractor, but for whom financial and security investigations have not yet been completed.

Approved Prize Structure(s) -- the prize structure(s) presented in the final executed copy of the working paper(s).

Award – the public notice announcing the Successful Offeror after the time within which a protest or appeal may be lodged has lapsed or the administrative appeal process has been completed.

Bar Code – the symbol on a Scratch ticket, on-line ticket or other item (e.g. coupon or Lottery buck) that is used to uniquely identify each ticket or item.

Base Ticket Price -- price per one thousand (1,000) tickets including but not limited to those services in the Pricing Section “Base Price of Tickets.”

BIDS -- Bid Information and Distribution System on-line bulletin board where solicitations for Colorado are posted for vendors to review.

Commission -- the Colorado Lottery Commission.

Computer Imager -- the portion of the printing machinery that is used to place play and other lottery symbols on the front of the ticket during the printing process. This is commonly known in the industry as “Mead” or “Diconex” imaging.

Contractor(s) – means all awarded contractors to include the Primary Contractor and one or more Secondary Contractors.

Critical Support Services -- those services specifically defined in the Statement of Work under the Critical Support Services section.

Customer Service Specifications -- exact statement of the particular needs to be satisfied, or essential characteristics that the Lottery requires (in a good, material, method, process, service, system, or work) and which a contractor(s) must deliver. Specifications are written in a manner that enables both parties to measure the degree of conformance.

Director -- the director of the State Lottery Division who is the Colorado Lottery’s administrative head or his/her designees.

Dollar -- US dollar. All references to currency in this RFP refer to U.S. dollars.

DOR -- Colorado Department of Revenue.

Environmentally Friendly (see Recycled).

EPA Approved Black or Colored Ink -- water or soy based inks.

Evaluation Committee -- group of individuals who will review the responsive proposals received as a result of this RFP and select the Apparent Successful Offeror.

Executed Working Paper(s) -- a written document(s) signed by both the Contractor and the Lottery that constitutes a game(s) order. This document includes agreement by both the Contractor and the Lottery concerning the game order(s). Such agreement includes among other things, ticket design, prize structure, security features, ordered quantity, delivery schedule(s), price and other game specifics.

FOB -- Free On Board. For purposes of this RFP, ticket prices must include cost of shipping to final destination(s).

Four Color Process Printing -- printing process using subtractive primaries: yellow, magenta and cyan plus black in four color process printing.

Four Color Process Overprint -- printing process using subtractive primaries: yellow, magenta and cyan plus black in four color process printing that encompasses the display and rub-off portions of the Scratch Ticket in a continuous or series of images.

Full Packing -- full cartons. The inventory file must contain all packs on the original production file marked either as omitted or delivered.

Game Order -- the specifications for the production of a game as specified in the working papers.

GLEPS -- Guaranteed Low End Prize Structure whereby a set dollar value and number of low-tier prizes are allocated to every book of tickets.

Hash Data -- Hashing is the transformation of a string of characters into a usually shorter fixed-length value or key that represents the original string. Hashing is used to index and retrieve items in a database because it is faster to find the item using the shorter hashed key than to find it using the original value. It is also used in many encryption algorithms.

High Tier -- any prize fifty-one (51) dollars and higher.

Imaged Data -- data that includes, but is not limited to: symbols, legends, captions, retailer codes, ticket numbers, validation numbers, inventory control data, UPC, and bar codes.

Instant Game -- a game that is played on a ticket whose play action is activated to reveal instant game winners through the scratching and removal of a latex coating from said ticket.

http://www.businessdictionary.com/definition/need.html http://www.businessdictionary.com/definition/customer.html http://www.businessdictionary.com/definition/process.html http://www.businessdictionary.com/definition/final-good-service.html http://www.businessdictionary.com/definition/system.html http://www.businessdictionary.com/definition/work.html http://www.businessdictionary.com/definition/party.html http://www.businessdictionary.com/definition/measure.html http://www.businessdictionary.com/definition/degree.html http://www.businessdictionary.com/definition/conformance.html

Issuing Office -- the State of Colorado, Colorado Lottery Division.

Local Time -- prevailing Colorado local time (Mountain Standard or Daylight Savings).

Lottery Buck -- a promotional coupon of various denominations used by the Lottery.

Lottery -- the State Lottery Division of the Colorado Department of Revenue and/or the Colorado Lottery.

Low Tier -- any prize $50 and lower.

Manufacturing -- all aspects of production.

North American State and Provincial Lotteries (NASPL) – An active association representing fifty-two (52) lottery organizations.

North American State and Provincial Lotteries (NASPL) Standards Initiative (NSI) – The NASPL Standards Initiative (NSI) has been a collaborative effort between Lotteries, Vendors and Retailers to provide an interoperable Lottery based on: Open Technical Standards, Approved Best Practices, Certification (Vendors), and Verification (Lotteries).

No Omit Game -- the executed working paper prize structure exactly matches the number of winners at each level on the production file, inventory file and delivered game. In other words, there is a finished ticket produced and shipped to the Lottery for every record on the production tapes approved by the Lottery.

Offeror -- an entity submitting a proposal as a result of this RFP that is responsive to RFP requirements.

Optimum Prize Delivery -- the number of prizes $10,000 and higher must match the number of corresponding prizes as specified in the Executed Working Papers.

Over-redemption -- the payment of more prizes by the Lottery or its retailers than called for in the executed working papers.

Pack – A book of Scratch tickets.

Passive Game -- a lottery game with an associated drawing that may be periodic. It is distinguished from active games such as Lotto by the fact that players may not make their own selections but instead purchase tickets with preprinted numbers or other symbols. It is distinguished from the Instant game in that players do not know until after the drawing if they have won a prize.

PDF417 Barcode -- a stacked linear barcode symbol format used in a variety of applications, primarily transport, identification cards, and inventory management.

Pick Out -- the ability to determine winners without actually playing the game in the normal manner. With the Instant game and example would be pin pricking small amounts of latex from the play area of the ticket to discover whether such ticket was a winner or loser.

Play Symbol(s) -- the computer imaged symbol(s) on a Lottery ticket that determine whether a ticket is a winning or a non-winning ticket.

PMS (Pantone Matching System) -- a proprietary color space used in a variety of industries, primarily printing, though sometimes in the manufacture of colored paint, fabric, and plastics.

POS – point-of sale materials used to advertise Lottery games at retail locations.

https://en.wikipedia.org/wiki/Barcode https://en.wikipedia.org/wiki/Patent https://en.wikipedia.org/wiki/Color_space

Post-Consumer Waste -- waste paper, which has been discarded by the consumer.

Pouch Tickets – metalized one-sided surface pouch.

Primary Vendor – The vendor that may receive eighty (80) percent or more of the Colorado Lottery’s Scratch printing business over the life of the contract.

Product and Production Services -- those services specifically defined in the Statement of Work under the Product and Production Services Section to be performed by both the Contractors.

Pulse – a segment of tickets within a game that contain separate graphic display images or the same graphic display image with color variations.

Randomization – no discernible pattern under any type of testing. No characteristic or set of characteristics or prior elements or a set of values or sequence of values will allow prediction of the next value.

R.A.I.S.E – Colorado Lottery’s retailer incentive program, Retailer Award Incentive for Sales Excellence.

Recycled -- reprocessed from previous usage.

Recycled Paper -- substrate that can be collected, separated, or otherwise recovered from the solid waste stream for use in the form of raw materials in the manufacture or assembly of a new paper product. This substrate can contain two types of waste 1) post-consumer, not more than twenty percent or 2) mill waste.

Retailer -- a sales agent for Lottery products.

RFP -- this Request for Proposal.

Scene – a graphic display image that can change from ticket to ticket within a pack or a continuous image across multiple tickets within a pack.

Scratch Game – a game that is synonymous with Instant Game.

Secondary Vendor (s) – This/these vendors may print up to twenty (20) percent of the Colorado Lottery’s Scratch printing business over the life of the contract. No minimum amount of business is guaranteed to the secondary vendor(s).

Shipping Supplies -- all consumable items necessary for the addressing, packaging and posting of deliveries. This includes but is not limited to cartons, shrink-wrap, labels, adhesives, tape, strapping, pallets, padding.

SOW – Statement of Work.

Standard production game -- omitted packs are accounted for on the inventory file delivered with the game. The inventory file will show less packs produced than those possible on the production file due to omitted packs.

State -- State of Colorado

Subcontractor – Any person other than an employee of the Successful Offeror who performs any of the services specified in this RFP for compensation.

Successful Offeror -- the Apparent Successful Offeror who, having passed the financial and security investigation, and algorithm acceptance tests, is offered the contract expected to result from this RFP.

Ticket Production Prices – Includes base ticket prices plus any printing options.

TVM –Ticket Vending Machines

Traditional Game -- see Passive game.

Turnover Services – any and all services required by the Lottery to prepare for, implement and successfully complete the conversion from Contractor’s systems and operations to a subsequent contractor’s systems and operations.

UPC – Universal Product Code.

Validation Number -- the unique serial number on the face of the ticket whereby the validity and pay status of the ticket is determined.

Value Added Prizes – strategic partnerships or alliances with other companies or individuals that offer value-added prizes or marketing enhancements to Scratch games.

VIRN -- Void If Removed Number (ticket validation number).

VOID tickets – actual size tickets printed with latex covering from pool zero that are marked void on the back.

Working Papers – an unofficial written document(s) concerning a game(s) order prior to being signed by the Contractor and the Lottery.

II. BACKGROUND, OVERVIEW AND GOALS

A. Background

1. Mission Statement

It is the Lottery's mission to create and sell Lottery games of chance that are held to the highest standards of integrity, entertainment and efficiency, in order to maximize proceeds for the people of Colorado. Over the past thirty-three (33) years, we are proud that more than $2.8 billion has been returned to Colorado for parks, recreation, open space, wildlife projects and public school construction. It is the support of our valued players and committed retailer partners that enables us to further enhance our most valuable natural resource — the great outdoors.

2. Scratch Sales Background

The Lottery has sold Instant/Scratch games since 1983. Instant games were the only Lottery product until 1989, when Lotto was introduced.

At the present time, $1, $2, $3, $5, $10, $20 and $50 games are marketed. Sales of Scratch games continue to grow, and account for the highest share of Lottery sales.

Sales comparisons by price point for the past five complete fiscal years are as follows:

Total Sales (in millions)

FY12 FY13 FY14 FY15 FY16

$1 Games $36.9 $33.6 $30.7 $28.3 $26.7

$2 Games $32.8 $26.0 $26.9 $23.2 $24.0

$3 Games $48.9 $44.7 $43.2 $41.6 $37.5

$5 Games $100.2 $104.5 $99.9 $118.6 $121.6

$10 Games $64.9 $76.5 $68.9 $79.7 $76.4

$20 Games $80.8 $83.5 $92.6 $85.9 $73.4

$50 Games N/A N/A N/A N/A $35.7

Total $364.5 $368.8 $362.2 $377.3 $395.3

Average Weekly Sales (in millions)

$1 Games $.71 $.65 $.59 $.54 $.51

$2 Games $.63 $.50 $.57 $.45 $.46

$3 Games $.94 $.86 $.83 $.80 $.72

$5 Games $1.93 $2.01 $1.92 $2.28 $2.34

$10 Games $1.25 $1.50 $1.32 $1.53 $1.47

$20 Games $1.60 $1.61 $1.78 $1.65 $1.41

$50 Games N/A N/A N/A N/A $.68

Total $7.06 $7.13 $7.01 $7.25 $7.59

Average Weekly Per Capita Sales https://dev-new-coloradolottery-public.s3.amazonaws.com/media/filer_public/e0/2d/e02d7ef9-2690-4e4f-b23f-336c1349d5fb/1200x675.jpeg

$1 Games $.13 $.12 $.11 $.10 $.09

$2 Games $.12 $.09 $.09 $.08 $.08

$3 Games $.17 $.16 $.15 $.15 $.13

$5 Games $.35 $.37 $.35 $.42 $.43

$10 Games $.23 $.27 $.24 $.28 $.27

$20 Games $.28 $.29 $.33 $.30 $.26

$50 Games N/A N/A N/A N/A $.13

Total $1.28 $1.30 $1.27 $1.33 $1.39

Fifty-two (52) week sales encompassing the approximate fiscal year

Fiscal Years are measured from July 01 to June 30

Population figures based on US Census projections

B. Overview

1. Playership

A recent tracking study indicates the percentage of Colorado residents playing Lottery games over a twelve-month period to be sixty-four percent.

2. Scratch Game Development

In fiscal year 2016, the Colorado Lottery posted Scratch sales of $395 million. In order to continue to invigorate the Scratch product line, the Lottery will look to position each price point to realize its potential.

In fiscal year 2017 and beyond, the Colorado Lottery will focus on several key areas in order to increase Scratch game sales and profitability.

Manage prize payouts in a manner that increases profitability and sustains sales growth in all price points

Sustain a 24 game retail mix at all times

Optimize inventory levels to ensure the best sell-out parameters

Maintain “shelf games” for the $1, $2, $5 and $10 price points

Maintain an adaptable Scratch schedule in an effort to optimize the Lottery’s courier system

The Colorado Lottery looks to continue to grow the Scratch product line utilizing the following methods:

All game queues projected on a twenty to twenty-five (20 to 25) week sellout

Forty to forty-five (40 to 45) games in FY17for all price points

Target-base design strategy for marketing to various segments

Provide variety within each price point (play style, themes)

Research opportunities to market/promote most scratch games

Continue to research new trends in Scratch games

3. Scratch Game Attributes

One (1) Dollar Price Point – Four (4) to five (5) games available at one time

Themes (specialty, money, gaming, numbers) & play styles

Inventory Levels o 3.36(m) Base games – 4.56(m) 7-11-21

Prize Payout – Sixty (60) percent

Market Share – Eight (8) percent

Two (2) Dollar Price Point – Four (4) to five (5) games available at one time

Continue to offer successful base games (7s Series, Super 7-11-21)

Themes (specialty, money, gaming, numbers, license) & play styles

Inventory Levels o 1.2 to 1.8(m) License Property/Specialty Games – 1.8(m) Regular Games –

2.0 to 2.7(m) Base Games (Super 7-11-21 & 7s Series)

Prize Payout – 62 percent

Market Share – Six (6) percent

Three (3) Dollar Price Point – Three (3) to four (4) games available at one time

Play Style – Crossword, Bingo, “Go To,” Standard

Inventory Levels o “Got To”/Standard – 960,000 to 1.4(m), Bingo – 2.5(m), Crossword – 6.0(m)

Prize Payout - 63%

Market Share – Thirteen (13) percent

Five (5) Dollar Price Point – Six (6) to Seven (7) games available at one time

Themes – Money, Gaming, Numbers, Crossword, Bingo, License

Inventory Levels o 1.08 to 1.8(m) Standard – 960,000(m) Holiday theme – 2.28(m) Bingo – 3.24(m) Crossword

Prize Payout – 68.5 percent

Market Share – 23 percent

Ten (10) Dollar Price Point – Three (3) games available at one time

Themes – Standard/Crossword and Spotlight Game

Inventory Levels o 960,000 Standard – 1.8 (m) crossword -- 2.5(m) Spotlight

Prize Payout – 71 percent

Market Share – Fifteen (15) percent

Twenty (20) Dollar Price Point – Three (3) games available at all times

Top Prize – $50,000 to $1 million

Inventory Levels o 1.2 to 2.16(m)

Prize Payout – 74.5 percent

Market Share – Twenty (20) percent

Fifty (50) Dollar Price Point – One (1) game available at various times

Top Prize –$3 million

Inventory Levels o 1.2(m)

Prize Payout – Eighty (80) percent

Market Share – Fifteen (15) percent

4. Product Distribution

The Colorado Lottery currently has 28 sales routes state wide. At this time, the Lottery distributes the majority of tickets through a full courier delivery system that handles the initial and replenishment of all ticket stock. Lottery sales representative’s responsibilities include delivering tickets to merchandising game POS, retail promotions, and working with retailers to better merchandise tickets in the dispensers and vending machines

The majority of retailers with a single selling location utilize in-counter/on-counter ticket dispensers to display and store tickets. Multi-lane retailers and locations such as restaurants and truck stops sell tickets from Ticket Vending Machines (TVMs). The Lottery has more than 600, 20 to 24 bin TVMs in its network.

5. Retail Network

The Colorado Lottery has a retail network of approximately 3,000 retailers. The majority of these retailers are in the metro areas of Denver, Pueblo, Colorado Springs, Ft Collins, Loveland, Greeley, Longmont, and Grand Junction. The remaining retail locations are in small towns and rural areas.

Convenience stores sell about 65 percent of all Scratch tickets while grocery stores sell about 35 percent.

6. POS, Promotion and Advertising

Proper use of point-of-sale (POS) material is a key factor in reminding players about Scratch games. The Lottery provides a variety of Scratch POS materials for retailers that communicate both brand and individual game messages. In addition to the seven (7) percent Scratch commission for each ticket sold, and a one (1) percent cashing bonus, the Lottery has a retailer incentive program – R.A.I.S.E (Retailer Award Incentive for Sales Excellence) that rewards retailers – who qualify by featuring specific POS items – with a seven (7) percent additional bonus on all sales that exceed prior year sales.

Retailer incentive programs have been very successful in retaining existing space and in gaining additional space for Lottery sales messages at retail locations.

The Lottery has successfully supported Scratch games with advertising for a number of years. Games with media support consistently sell faster than other games.

Media/advertising support can include but is not limited to – television, radio, newspaper, Internet, mobile, outdoor, in-store POS, etc. In addition to “traditional” marketing/advertising efforts, the Lottery has developed a number of second-chance Internet drawing opportunities that allows players to enter non-winning/entry Scratch tickets into promotional/top-prize drawings. In FY16, the Lottery conducted second-chance drawings associated with a variety of Scratch games introduced. Prizes for these drawings consist of low-cost merchandise/Scratch tickets to $1 million cash.

In addition to the traditional marketing efforts, in FY15 the Colorado Lottery introduced its first mobile app. This app provides players a number of conveniences including:

Checking tickets by scanning the PDF417 barcode to see if they are winners

Automatically enter second-chance

Get in-depth information on all active Scratch games

Stay up-to-date with mobile alerts to find out when new games are released into the market and when second-chance drawing deadlines are approaching

Manage your MyLottery player’s club profile and email/text subscriptions.

Find the nearest Lottery retailer anytime, anywhere.

Conveniently have access to winning numbers and estimated upcoming jackpot amounts

A Check Your Numbers feature that allows you to store up to five sets of numbers for each of the Lottery’s five Jackpot games

Sign up for mobile alerts that notify you when your favorite numbers have been drawn for your favorite games

See past winning numbers for Jackpot games

C. Goals for FY17

Sales

Scratch $396 million

Powerball $ 93.3 million

Mega Millions $ 25 million

Lotto $ 26 million

Lucky for Life $ 17 million

Cash5 $ 21.7 million

Pick 3 $10.9 million

TOTAL $589.9 million

Minimum of $132 million in proceeds

Excellent security, integrity, and customer service

III. STATEMENT OF WORK

The purpose of this Statement of Work (SOW) is to provide sufficient information to potential offerors to prepare proposals that meet or exceed the needs set forth in this solicitation.

Questions in this section are in italics, preceded by a “Q” and sequential number. All questions should have a response (see Section IV). Proposals that are not in compliance with what is set forth in this RFP may be considered non-responsive. Non-responsiveness is determined solely by the State. Refer to RFP Section IV, Offeror Response, for the requested format for responses to this RFP.

A. Overview

It is the intention of the Lottery to select one or more contractors to supply Scratch tickets and related services as a result of this RFP.

Unless otherwise specified, all services identified in this Statement of Work are to be included in the base ticket price. Pricing for both Primary and Secondary Contractors will remain firm throughout the term of the contract, including any extensions.

The Product and Production Services identified in RFP Section III.B are needed of both the Primary and Secondary Contractor(s). The table below provides an overview of the services to be provided by the Primary Contractor and the Secondary Contractor(s).

Section III Primary Contractor Secondary Contractor

B

B.5.b

C

D.1 – 4

D.5

E.1.a

E.1.b.1-2

E.1.b.3

E.1.b.4-8

E.1.c

E.2.a-d

F

G

H

1. Primary Contractor

a. This scenario is based on a shared risk/reward model. Under this scenario, the Lottery will select one (1) Primary Contractor and one (1) or more Secondary Contractor(s) to provide Scratch tickets. The Primary Contractor will produce a minimum of eighty percent (80%) of the total number of Scratch ticket games ordered by the Lottery and will receive a payment based on price per thousand. The Primary Contractor will use its resources to generate increased Scratch ticket sales and profits and will collaborate with the Lottery regarding all aspects of Scratch ticket games including, but not limited to, game selection, game duration, prize structure, marketing and analyses. Decisions regarding all aspects of Scratch ticket games will remain within the sole discretion of the Lottery.

b. In addition to ticket printing services, the Primary Contractor must provide

Product and Production Services and Critical Support Services and will include the costs for these services in their base ticket price.

2. Secondary Contractor

a. The Secondary Contractor(s) may produce up to a maximum of twenty (20) percent of the number of Scratch games ordered by the Lottery. The twenty (20) percent maximum will be divided among the Secondary Contractor(s). All Scratch ticket costs will be assessed on a price per thousand basis to the Lottery. There are no minimum or maximum order guarantees for the Secondary Contractor(s) for the term of this contract, including any extensions.

b. The Secondary Contractor(s) will provide Product and Production Services.

B. Product and Production Services

1. Product Specifications

a. Ticket Stock

(1) Tickets will be printed on white ten (10) point or heavier stock not to exceed twelve (12) point, that will not curl, separate, or be easily split. The ticket stock must be coated on one (1) side minimum (two (2) sides preferable) and meet Lottery security requirements. The Lottery will provide the security requirements to the Contractor. The Lottery prefers virgin paper stock but will accept recyclable stock that does not contain more than twenty (20) percent post-consumer waste.

(2) The ticket stock will consist of paper cardstock or foil-less environmentally friendly substrate. The Contractor must ensure that its products continue to conform to the specifications and requirements contained in this RFP and the resulting contract for the term of the contract, including any extensions.

(3) The Contractor will keep the Lottery continuously informed of available ticket stocks. The Lottery may utilize any or all of the Contractor’s available ticket stocks during the term of the contract, including any extensions. Requirements for ticket stock may vary per game at the Lottery’s discretion and will be specified by the Lottery in the Executed Working Papers.

(4) All tickets must remain compatible with the Lottery’s ticket dispensing systems, (e.g., in-counter, on-counter and automated Ticket Vending Machine (TVM) (currently IGT’s Gemini) as utilized now or in the future by the Lottery.

Q1. Provide documentation your tickets will meet the guidelines as described in 1.a (1- 4).

b. Ticket Size Contractor will produce tickets in various sizes. All tickets must meet the Lottery’s needs regarding printing, imaging and perforation. All tickets must be designed so that they can effectively be dispensed by the Lottery’s TVM.

The Lottery currently uses the ticket sizes listed below. At a minimum, the Contractor will produce tickets that fall within the following ranges:

WIDTH HEIGHT

TICKET SIZE A 4.00” 2.50”

TICKET SIZE B 4.00” 3.00”

TICKET SIZE C 4.00” 4.00”

TICKET SIZE D 4.00” 5.00”

TICKET SIZE E 4.00” 6.00”

TICKET SIZE F 4.00” 8.00”

TICKET SIZE G 4.00” 10.00”

TICKET SIZE H 4.00” 12.00”

The ticket size for each game will be specified by the Lottery in the Executed Working Papers for each game. During the term of the contract, the Lottery reserves the right to request ticket sizes other than those specified above.

Variation in the size of one thirty-second (1/32) of an inch from the individual dimensions stated in the Executed Working Papers will be allowed for manufacturing tolerance only.

Q2. Specify the exact size(s) of the ticket you propose to supply for each Ticket Size A, B, C, D, E, F, G and H –include any additional ticket sizes available. Use a format similar to the table provided below.

Pack Size

Size A

Size A

Size B

Size B

Size C

Size D

Size E

Height Range

4.00” x 2.50”

4.00” x 2.50”

4.00” x 3.00”

4.00” x 3.00”

4.00” x 4.00”

4.00” x 5.00”

4.00” x 6.00”

Pack Size

Size F

Size F

Size G

Size G

Size H

Size H

Height Range

4.00” x 8.00”

4.00” x 8.00”

4.00” x 10.00”

4.00” x 10.00”

4.00” x 12.00”

4.00” x 12.00”

c. Pack Sizes The Lottery reserves the right to use varying pack sizes. In the event the Lottery decides to use a pack size not listed below, the pack size will be determined by interpolation from the prices proposed. Pack size for each game will be specified by the Lottery in the Executed Working Papers and will not include “void” tickets.

Standard Ticket Size

Pack Size

A 200 & 300

B 200 & 300

C 100

D 100

E 100

F 60 & 100

G 30 & 60

H 30 & 60

Q3. Provide affirmation of your ability and willingness to provide tickets at the standard pack sizes listed above and the price differential for each pack size. Discuss any exceptions.

d. Ticket Orientation Tickets should be printed in both horizontal (i.e. ticket reads left to right along the longer dimension and down the shorter dimension) and vertical (i.e. ticket reads left to right across the shorter dimension and down the longer dimension) formats.

Offeror may be disqualified if it cannot or will not produce tickets in both formats at the same price. Because of packaging and the physical design of ticket dispensers, the Lottery would like all tickets be perforated on the four (4) inch side regardless of the vertical or horizontal format. Ticket orientation will be specified by the Lottery in the Executed Working Papers.

Q4. Provide affirmation of your ability and willingness to print tickets in both horizontal and vertical formats at the same price. Discuss any exceptions.

e. Ticket Perforations The perforations between tickets will be deep enough, and will contain adequate space between the perforations, to allow retailers and/or the TVM to separate the tickets without damage. In addition, the perforations must not be so deep as to allow detachment of the tickets during normal handling or dispensing.

f. Ticket Ink The Contractor will be able to produce a minimum of fourteen (14) colors, including display, overprint, and ticket back colors. Colors must be consistent from one surface to the other (i.e., display and overprint colors). The printing method (or process) will be submitted for pre-approval by the Lottery.

g. Font Generation All font (display printing) generation used in Scratch games, whether standard, customized or licensed, will be submitted for pre-approval by the Lottery.

h. Imaged Data The imaged data will include, but not be limited to, the following items: special symbols (e.g., cactus, cars, letters, numbers, etc.), special fonts, multiple color fonts, legends, captions, retailer codes, ticket numbers, validation numbers, inventory control data, Universal Product Code (UPC), and bar codes. The imaged data will conform to game programming parameters as specified by the Lottery in the Executed Working Papers. Imaged data will be printed using a computer controlled imaging printer and:

(1) Imaged data must be uniformly positioned and aligned on the tickets, unless otherwise specified by the Lottery in the Executed Working Papers, to prevent potential pick-out problems associated with the positioning and/or alignment.

(2) Imaged data must be sufficiently legible so as to be clearly readable by a person with normal vision under normal lighting conditions as determined by a designated Lottery representative.

(3) Imaged data must be accompanied by appropriate captions and legends for play and prize symbols to provide redundancy for security reasons, to prevent consumer disputes, and/or to preserve alignment between play and prize positions on the ticket. Captions and legends must spell out or abbreviate the play and prize symbols in type smaller than the play and prize symbols themselves in a different but recognizable form. The captions and legends used in each game will be specified by the Lottery in the Executed Working Papers.

(4) No Scratch ticket will contain more imaged data than authorized by the Lottery in the Executed Working Papers.

(5) Imaged data will be printed with inks that frustrate the compromise of tickets and will not smear from sweat, water or other normal environmental conditions. Imaged data ink will not be obliterated in the course of removing the scratch-off material using normal pressure. The play symbols will not be obliterated after removal of the scratch-off material by application of any commonly occurring solvent (e.g., perspiration, saliva, water, soft-drinks, coffee, etc.) and moderate rubbing (twelve or fewer times) with a tissue or other soft object.

(6) There will be no “offsetting” of inks from the front to the back of the tickets or an adjacent page and vice versa as a result of being placed on a roll or stacked in sheets during printing or finishing.

(7) The areas on which the imaged data are printed will contain one or more opaque background coating(s) (mask or lily pad) or similar proven technology on all tickets. The coating(s) will be free of voids and scratches that are visible without magnification, and will be devoid of holes or marks that would complicate the detection of ticket tampering. The background coating(s) must adhere to the underlying substrate and must exhibit obvious damage when alteration or delaminating techniques are employed.

(8) Imaged data must be printed clearly, must be easily read, and images must not bleed or be distorted.

(9) Imaged data must be completely covered by the scratch-off material.

Any exceptions to this requirement will be addressed in the Executed Working Papers.

Q5. Demonstrate your ability to meet or exceed the above by providing no more than seventen (710) samples of various imaged data from actual tickets (not color copies).

Samples from another state lottery are acceptable. Describe your limitations, if any, with regard to printing various words, letters, numbers, multiple color image data, characters or unique symbols in various combinations or colors. Discuss any exceptions.

i. Game and Pack Numbers Each pack of tickets within a game must be identified with a unique, consecutive (except for omissions that occur in production) identification number for use in controlling ticket distribution, retail inventory and accounting. Game and pack numbers must be printed on the back of the ticket below the barcode image in the following order: game number, pack number, and check digit number.

Q6. Discuss your procedures to ensure that the same pack number is printed on all tickets in a specific pack and that no pack number is duplicated within a game.

j. Ticket Numbers Each ticket within a pack will display a unique sequential number beginning with “000”. The ticket numbers must be consecutive in the pack, and no omissions will be allowed within the pack. Ticket numbers will be printed on the back of the ticket and will follow the game and pack number printed below the barcode.

In addition, a quality control inspection window will be placed on the front of all tickets. This window will contain the same three-digit ticket number that is printed on the back of the ticket.

Q7. Discuss your procedures to ensure that ticket numbers are consecutive and will not appear more than one time per pack. Discuss any exceptions.

k. Validation Number Each ticket will have a unique validation number. The validation number will be printed horizontally in the play area on the front of the ticket, be completely covered by the scratch-off material, and will allow for winning ticket validation and reconstruction of all covered play symbols. The font style for the validation number will be clear and easily readable by retailer personnel. The validation number will consist of a sequence of digits assigned as game identifier, validation number, ticket number and check code. With the exception of the first three (3) digits, three (3) consecutive digits will be contained inside a singular box within the validation number. The selection of the three (3) digits will be based on a re-constructible algorithm such that the three (3) digits appear random. The algorithm for the check digits includes the game identifier and a unique Colorado game identification code. It may be required that the validation number float from top to bottom randomly in various games as determined by the Lottery.

Q8. Discuss your procedures for ensuring unique validation numbers for each ticket, and your ability to randomly place the number from ticket to ticket within a game.

l. Retailer Validation Codes

Each ticket will have an imaged three (3) letter validation code for use by retailers for sight validation and paying prizes. The codes will spell out all or a portion of the prize amount. The retailer validation code must “float” horizontally and/or vertically throughout the imaged area and will appear randomly as specified by the Lottery in the Executed Working Papers.

m. Bar Codes

Each Scratch ticket, detachable stub, coupon, and/or Lottery buck will have a unique imaged bar code representation of the game number, validation numbers, to be represented as zeros in this field, pack number and ticket number printed on the back of the ticket. The bar code will be an intelligent bar code and must be printed in maximum density ink for best read rates. The Contractor will be able to produce standard bar codes such as Interleaved 2 of 5, UPC, PDF417 stacked linear, and other standard bar codes including 2-dimensional matrix bar codes, or any other formats as determined by the Lottery through the life of the contract.

The bar code will be determined using an algorithm to be provided by the Lottery to the Contractor after contract execution. The bar code characters will be printed in a standard or compressed interleaved two-of-five bar code symbology using standard start and stop characters.

The bar code will meet the most current versions of the American National Standards Institute (ANSI) and the North American State and Provincial Lotteries (NASPL ) Standards Initiative (NSI) specifications and achieve a first-time read rate of no less than 95 percent and a third time read rate of 99 percent. Scratch tickets, detachable stubs, coupons, and/or Lottery bucks must be scanable and readable from either direction by scanning equipment used at retail locations.

Q9. Discuss your procedures for ensuring unique bar codes for each ticket.

n. Universal Product Codes (UPC) A unique UPC bar code will be printed on the back of all Scratch tickets, detachable stub, coupons and lottery bucks as specified by the Lottery in the Executed Working Papers. The UPC symbol must conform to specifications in the technical manuals published by the Uniform Code Council, Inc. (UCC) and ANSI specifications. The UPC bar code will be in the form of “7 04104 YY### X” where:

### represents the 3 digit game number YY represents the placeholder digits X is the check digit

The UPC bar code will achieve a first-time read rate of no less than 95 percent and a third time read rate of no less than 99 percent.

The UPC bar code will be determined using an algorithm to be provided by the Lottery to the Contractor after award of contract. The bar code characters will be printed in a standard or compressed interleaved two-of-five bar code symbology using standard start and stop characters.

Q10. Provide documentation that demonstrates your ability to print a UPC bar code in either horizontal or vertical positioning. Discuss any exceptions.

o. Scratch-Off or Exposing Material

(1) The scratch-off or other exposing material will be opaque elastomeric material and of such quality as to maintain the security of the ticket symbols and validation number. The scratch-off material will appear and feel smooth to the touch, will be readily removable with a reasonable degree of resistance when scratched with commonly used items (e.g., scrapers, keys, coins, fingernails, etc.)

and subjected to normal environmental factors, and will fragment when removed without causing dusting. The scratch-off material will not be chemically or dermatologically irritating.

(2) The scratch-off material must, at a minimum, cover the entire play area and overlay into the display area, but not beyond the overprint border.

(3) The Contractor will have the ability to apply scratch-off material to several locations on each ticket.

(4) The border between the scratch-off area and uncovered portion of the ticket must be sharp and even.

(5) If specified by the Lottery in the Executed Working Papers, the scratch-off material must reveal an imaged symbol prior to scratching the area and to display the same or identical symbol on a different background or border color after the area is scratched.

Q11. Describe the imaging process that would be used to comply with this section.

Discuss any exceptions.

p. Protective Coating Each ticket will contain security features to minimize and detect alteration and counterfeiting. The play symbols under the scratch-off material will be covered with a transparent, colored security tint coating or security colored (primer) coating so that the play symbols are protected when the player removes the scratch-off material. The protective coating will be free of voids that expose the printed play symbols and cause damage during incidental exposure to water or moisture. The adhesion barrier characteristics of the coating will be such that the play symbols remain readable following various water exposures and handling of wet tickets.

This coating will resist damage during normal removal of the scratch-off material and normal ticket handling. The protective coating will not be penetrated by solvents in a manner that will allow the game data inks to “bleed through” the protective coating and, subsequently, through the cover material of “unsold” tickets. The coating will not remove play symbols when scratched without causing obvious and/or irreparable damage to the ticket.

The protective coating will be uniform so that irregularities caused by tampering may be easily detected and will exhibit obvious damage when imaged data alteration methods are employed. In addition, the color of the security tint or colored primer coating will not be easily reproduced using photocopier, scanner or computer technology. The coating will be subject to industry standard testing at the request of the Lottery.

Q12. Describe other protective coatings that are available for scratch tickets. Discuss any exceptions and/or concerns (e.g., shelf life, tamper-resistance, etc.).

q. Display and Overprint Printing

(1) Contractor will be capable of full-bleed graphic designs by applying up to fourteen (14) colors (i.e., spot, display, and overprint) on top of the scratch-off material on each ticket front. Spot colors may be specified by the Lottery as PMS (Pantone Matching System) colors or equivalent.

(2) Contractor will be capable of applying up to six (6) color overprint designs on each Scratch ticket, such that: (a) all scratch-off material is covered by an overprint color; (b) the overprint inks extend beyond the edges of the scratch-off material and in the display area; and (c) the overprinting is even and uniform.

The overprint will be well defined, unblurred, and sharp in order to highlight any tampering of the ticket. Display printing will be done with inks that will not smear from sweat, water or other normal environmental conditions.

(3) Subject to industry trade tolerances and practices, the display printing and overprint must be in proper registration.

Q13. Discuss your ability to meet or exceed the needs addressed in this section.

Discuss any exceptions.

r. Security Tint Tickets must be printed with a security tint if specified by the Lottery in the Executed Working Papers.

Q14. Discuss the different security tints available from your company. Provide no more than five (5) samples of available security tints.

2. Ticket/Game Features and Services

a. Ticket/Game Features and Services Contractor(s) are to provide the following ticket features and/or services.

(1) A maximum of fourteen (14) colors including display, back and overprint

(2) Screened display (Black) – Currently the Lottery screen prints the price point on the back of tickets higher than one dollar ($1.00)

(3) Optimum prize delivery

(4) Unusual prize insurance for prizes exceeding $25,000

(5) Imaging that conforms to game programming specifications

(6) Printing multiple games side by side

(7) Full gloss UV display coating

(8) Continuous Image Four Color Process – unbroken graphic image covers entire ticket including rub-off area

(9) Retailer Display Cards – one card/insert placed in each pack of tickets for all games. This includes inserts for unique color/name pulse as required by individual game ( currently 4” wide by 3.5” high)

(10) Prize guarantee ($1,000 and higher)

(11) Hash Data/Second-Chance Drawing Validation File

Q15. Discuss your ability to meet and/or exceed these ticket/game features and services. Discuss any exceptions.

3. Separately Priced Ticket/Game Features and Services

a. Additional Ticket/Game Features and Services

If applicable, Contractor(s) will provide the following additional ticket/game features that will be separately priced in addition to the base ticket price.

Separately priced items or costs not identified in the offeror’s response will be the sole responsibility of the Contractor.

(1) Neon/Fluorescent Display Color

(2) Metallic Display Colors

(3) Stub Tickets with Horizontal or Vertical Perforations with Covering

(4) Stub Tickets with Horizontal or Vertical Perforations without Covering

(5) Color/Graphic Pulse (pricing for this feature will include all expenses associated with printing process – i.e., plate changes, press stops, etc.)

(6) Thermal Ink

(7) Multiple Color Ink Imaging (pricing for this feature will include all expenses associated with printing process – i.e., plate changes, press stops, etc.)

(8) No Omit Games

(9) Patented Processes (pricing for this feature will include all expenses associated with printing process – i.e., plate changes, press stops, etc.)

(10) Scented Ink

(11) Printing on Shrink Wrap (pricing for this feature will include all expenses associated with printing process – i.e., plate changes, press stops, etc.)

(12) Simulated Foil (pricing for this feature will include all expenses associated with printing process – i.e., plate changes, press stops, etc.)

(13) Pearlescent Ink

(14) Holographic Ticket Stock

(15) Two-Sided Display Printing (pricing for this feature will include all expenses associated with printing process – i.e., plate changes, press stops, etc.)

(16) Die Cut Tickets (pricing for this feature will include all expenses associated with printing process – i.e., plate changes, press stops, etc.)

(17) Retailer Games

(18) Pouch Tickets (defined as metalized one-sided surface pouch)--each pouch must denote a unique bar code and UPC bar code that correlates to the tickets inside the pouch. The tickets must be packaged in such a way that the bar code and UPC bar code are visible through the pouch. The bar code and UPC bar code are not printed on the pouch (pricing for this feature will include all expenses for merchandising (dispensers) of pouch tickets)

(19) Multiple Scenes in a single pack (pricing for this feature will include all expenses associated with printing process – i.e., plate changes, press stops, etc.)

(20) Passive (Traditional) Games

(21) Probability Games

(22) Two-Sided Play Area (pricing for this feature will include all expenses associated with printing process – i.e., plate changes, press stops, etc.)

(23) Extended-Play Marking System - a marking system(s) on extended-play tickets to determine if the play spots match the winning play symbols under the scratch-off covering (e.g., Bingo or Crossword tickets) (pricing for this feature will include all expenses associated with printing process – i.e., plate changes, press stops, etc.)

(24) Oversized Tickets(pricing for this feature will include all expenses for merchandising (dispensers) of oversized tickets)

(25) Recommending and producing programs to link Instant Tickets with interactive play via digital channels such as the Lottery’s MyLottery program, social networks, microsites, and mobile applications. Such programs may include, among other things:

1. 2nd Chance games/drawings

2. Games offering opportunities for virtual Instant Ticket trials

3. Interactive games for extended brand interaction (non-trial) for fun and/or prizes

4. Retailer/consumer coupons and special purchase discounts/offers.

(26) Recommending and providing barcode technology for Instant Ticket and/or POS to facilitate player engagement via alternate channels.