sole source justification form.pdf

Sole Source Justification Form

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Bulletin Reference Number 22-565IGB-FISAD-B-25417

Requesting Agency/University ILLINOIS GAMING BOARD

Sole Source Justification Form - Part I Section I - General Information

Department/Bureau/Section: ILLINOIS GAMING BOARD

Need Identified Date: June 1, 2021 Supply/Service Need By Date: December 18, 2021

Project Title: Central Communications System Bridge Contract

Vendor: Scientific Games International, Inc.

Provide a description of the supplies or services required:

Section 15(15) of the Video Gaming Act requires the all video gaming terminals to be linked through a central communications system that allows the Board to receive necessary auditing information and to activate and deactivate VGTs.

Value: Estimated Value of Initial Term, this Change Order or Amendment: 30,000,000

Will this Sole Source amend a Professional or Artistic Services contract? Yes No

*Sole Source may not be used for amendments for Professional or Artistic Services if the amendment would increase the value by more than 5% of the initial award or extend the term by more than 60 days.

Type: New Sole Source

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Bulletin Reference Number 22-565IGB-FISAD-B-25417

Requesting Agency/University ILLINOIS GAMING BOARD

Section II - Proposed Term

One-Time Purchase Term Contract

Estimated Contract Begin Date: 12/18/21

Estimated Contract End Date: 12/31/23

Number of Potential Renewals: 0

Length of Each Renewal in Months: 0

Total Value of All Renewals: 0

If a Term Contract, does the term, including renewals, exceed 12 months? Yes No

If yes, provide a detailed justification including any economic benefit received for agreeing to a multi-year term:

The State of Illinois seeks a two-year contract with Scientific Games, which provides the Illinois Gaming Board with the Central Communication System (“CCS”). The CCS is the monitoring and control system that allows the Illinois Gaming Board (“IGB”) to effectively regulate the distributed network of 40,000 video gaming terminal (“VGTs”) located in over 8,000 licensed establishments. The CCS is the telecommunications and technical manager of the system and acts as the primary and secondary repository for all information received by terminal operators (“TOs”), manufacturers, and licensed establishments (“LE”).

The State of Illinois does not have the infrastructure capability nor does it possess the intricate operational knowledge of the CCS to replicate and construct a similar system internally. Undertaking a project of the size and scope of the CCS would take the State of Illinois years to attempt to implement. There are no other governmental entities globally that have created a CCS for a distributed video gaming system of the size and scope of the Illinois market. It is certain that other vendors could create and maintain a CCS but they would need a minimum of 18 months to adequately develop and implement a similar CCS system to replace the current CCS system.

Any delay would cause injurious economic harm to state and local revenue and negatively impact the State of Illinois regulatory mission to ensure and uphold the integrity of video gaming. To further illustrate this point, if the CCS were to be offline for 1 month the state would lose $57 million in revenue to the State of Illinois and local governments would lose $9.8 million. Because of the significant negative potential impact of any disruption the IGB is requesting a sole source contract with the current vendor for 24 months.

In addition, when this contract began no one could have imagined the size and scope of the industry today.

A sole source contract will provide the only option for preserving video gaming while preparing a complex RFP for a new central communications system. There is no economically or technically feasible alternative for an interim solution.

A RFP will be prepared and published in 2022 and a new contract is expected to be in place by January 1, 2023. Even with the anticipated new contract dates, transition and training for technical and complex services of nature require the predecessor and successor contracts run in parallel for at least six months.

A sole source contract to continue supporting ongoing operations is essential for the IGB, the State of Illinois and its citizens. The IGB is seeking a term that ends the earlier of either the Board certifying the an operational CCS by a vendor chosen through a competitive solicitation or two years.

Section III - Funding Source Select the type of funding to be used (Check all that apply): State Appropriate Funds Federal Funds Other (Explain):

The cost of this contract is borne by the licensees via a percentage of income being withheld to the vendor.

Section IV - Sole Source Justification

This purchase is economically only available from a single source primarily because it is: (If "Other" explain in one sentence)

Compatibility of Equipment, Accessories, Replacement Parts or Service

Are there secondary justification(s) for this sole source? Yes No

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Bulletin Reference Number 22-565IGB-FISAD-B-25417

Requesting Agency/University ILLINOIS GAMING BOARD

Section V - Purchase History

Has the Agency or University Purchased these supplies or services in the past? Yes No

Term Term From Term To Value Description Contract Number Type

1 12/127/11 12/21/17 40,012,500

Create and operate a central communications system to transmit information and monitor the video gaming terminals

GAM12Z1000 RFP

2 12/22/17 12/20/19 13,337,500 Operate a central communications system to transmit information and monitor the video gaming terminals

GAM12Z1000 Renewal

3 12/21/19 12/17/21 Operate a central communications system to transmit information and monitor the video gaming terminals

P-2753 Renewal

If more than 10, or if other comments, explain:

Section VI - Business Rationale

1. Provide a detailed explanation of the need for the supplies or services:

Section 15(15) of the Video Gaming Act requires the video gaming terminals throughout the State be linked through a CCS. The CCS provides for the complete operation of one of the world’s largest distributed networks of gaming terminals, over 40,000 VGTs in 8,000 locations that generates hundreds of millions of dollars in tax revenue to the State of Illinois and units of local government around the state. The CCS ensures that the operation of video gaming is efficient, ethical, transparent and accountable. The CCS provides compliance with the Video Gaming Act and the Board’s Video Gaming Rules. The CCS is a repository of all information regarding video gaming and assists the Board in its regulatory mission. In short, video gaming could not be operational without the CCS.

2. Provide a list and describe in detail the specifications required to satisfy the need:

Provide a server that allows the IGB to communicate with, including enable and disable, any VGT in service; Monitor all VGT activity, including money in/out; provide auditing records, including customizable records based on specified criteria, of all VGT transactions.

3. Provide detail explaining the justification selected in Section IV to explain why the requested supplies or services are the only ones available that can satisfy the agency or university requirements?

The last time this contract was bid out, the vendor took nine months to create, test, and certify a functioning system to monitor all VGTs. The IGB has no reason to believe that any vendor can do so more quickly. Thus, any vendor other than the current CCS provider would force VGTs to be down for an unspecified period.

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Bulletin Reference Number 22-565IGB-FISAD-B-25417

Requesting Agency/University ILLINOIS GAMING BOARD

4. What are the unique features of the supplies or services that are not available in any other product or by any other vendor? Provide specific quantifiable factors/qualifications:

The entire IT infrastructure was specifically built to monitor the Illinois Video Gaming Act. The uniqueness of this IT infrastructure has spectacularly expanded over the preceding 10 years. The current CCS vendor was the original vendor selected to operate the CCS that began full operation in 2011. The video gaming industry in 2011 did not exist. The current video gaming industry has over 40,000 video gaming terminals in over 8,000 locations with thousands of licensees. There is no comparable video gaming market in the United States. The CCS monitors and tracks all uploads, downloads and software modification for the 40,000 VGTs across the state. There is no similar system in the United States that provides this level of tracking under a distributed network of gaming terminals. The CCS is responsible for tracking all accounting information for over 1,000 units of local government and the associated revenue that is statutorily required to be sent to those governments from the operation of the 40,000 VGTs.

5. Has the Agency or University considered alternative supplies or services to satisfy their need? Yes No

5a. If no, why weren't alternatives evaluated?

Scientific Games is currently meeting the Board's need after taking nearly a year to create an operational CCS. No other vendor would be able to have a system in place by December 2021 to meet the Board's needs as a CCS.

6. Are there resellers or distributors?

Yes No N/A

7. What efforts were made to get the best possible price (i.e. did the agency/university negotiate) and how did you determine the price for this purchase is considered fair and reasonable?

This price is the same price from the current contract, which was selected through a competitive solicitation. Previous spending was analyzed, and the pricing will stay the same. Notably, this is a no-cost contract to the State. Licensees absorb the fees for the central communication system.

8. Will this purchase obligate the State to this vendor for future purchases such as maintenance, licensing or continuing need?

Yes No

9. What will be the financial or other impact to the State if this sole source is not approved and a competitive bid is required?

Video gaming on average generates $57 million a month to the State of Illinois and nearly $10 million to local governments. On an annual basis, this amounts to over $680 million in revenue to the state and approximately $120 million to units of local government.

These revenues pay for debt service on bonds issued to fund capital infrastructure projects, which create thousands of jobs across Illinois.

10. Is there any additional information you would like to add to justify this sole source?

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Bulletin Reference Number 22-565IGB-FISAD-B-25417

Requesting Agency/University ILLINOIS GAMING BOARD

Section VII

Requesting Department Representative

Requesting Department Signature Required

I know and understand the contents of this Sole Source Justification and attest that all statements are true and correct and the fairness and reasonableness of the price was adequately confirmed.

Date Nov 1, 2021

Printed Name Daniel Gerber E-mail Address Daniel.Gerber@Illinois.gov

Phone Number 312-814-4713

State Agency Bureau/Division Head or University Purchasing Director Approval and Signature Required

I know and understand the contents of this Sole Source Justification and attest that all statements are true and correct and the fairness and reasonableness of the price was adequately confirmed. (All prior form fields will lock once this e-signature is completed)

E-mail Address Marcus.Fruchter@Illinois.gov

Phone Number 312-814-4645 Date 11/1/2021

Printed Name Marcus Fruchter

Agency Bureau/Division Head or University Purchasing Director and Not a Designee

SPO Approval and Signature Required

I have reviewed and understand the contents of this Sole Source Justification and agree with the State Agency or University determination.

I have reviewed and understand the contents of this Sole Source Justification and do not agree with the State Agency or University determination. As a result, the State Agency or University must explore other sourcing methods to satisfy their need.

State Purchasing Officer Signature Phone Number 217-299-5856 Date Nov 1, 2021

Printed Name Jenny Shourd E-mail Address jennifer.shourd@illinois.gov

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Bulletin Reference Number 22-565IGB-FISAD-B-25417

Requesting Agency/University ILLINOIS GAMING BOARD

Sole Source Justification Form - Part II Section I - General Information

Project Title

Vendor

Initial Date of Procurement Bulletin Posting

Was a Sole Source hearing held per 30 ILCS 500/20-25?

Yes - Complete Section II and III below (Section II will only be visible when this option is selected)

No - Section II not required, go to Section III below Section III - CPO Approval and Signature Required

Based on my review, I authorize the Agency/University to proceed in accordance with the published Notice referenced above.

Based upon my review, I authorize the Agency/University to proceed with the following Changes.

Based on my review, the Agency/University is not authorized to proceed with this sole source as presented and my recommendation is that it be cancelled.

Other

CPO Signature CPO Phone

Printed Name Date

CPO E-mail

Version 7.01 Page of Sole Source Justification Form - Part I Section I - General Information Will this Sole Source amend a Professional or Artistic Services contract?

If yes, what was the original contract value?

*Sole Source may not be used for amendments for Professional or Artistic Services if the amendment would increase the value by more than 5% of the initial award or extend the term by more than 60 days.

Section II - Proposed Term If a Term Contract, does the term, including renewals, exceed 12 months?

If yes, provide a detailed justification including any economic benefit received for agreeing to a multi-year term:

Section III - Funding Source Select the type of funding to be used (Check all that apply):

Section IV - Sole Source Justification Are there secondary justification(s) for this sole source?

Section V - Purchase History Has the Agency or University Purchased these supplies or services in the past?

Term Term From Term To Value Description Contract Number Type Section VI - Business Rationale

1. Provide a detailed explanation of the need for the supplies or services:

2. Provide a list and describe in detail the specifications required to satisfy the need:

3. Provide detail explaining the justification selected in Section IV to explain why the requested supplies or services are the only ones available that can satisfy the agency or university requirements?

4. What are the unique features of the supplies or services that are not available in any other product or by any other vendor? Provide specific quantifiable factors/qualifications:

5. Has the Agency or University considered alternative supplies or services to satisfy their need?

5a. If yes, name the alternative vendors whose supplies or services were evaluated:

5b. If yes, what were the alternatives for each vendor and why were they unacceptable? Be specific with regard to features, characteristics, requirements, capabilities and compatibility:

5c. Explain how the market evaluation was conducted?

*This evaluation is to determine available options within a market. If the evaluation is to determine quality or best suited option, this is not the appropriate source selection. Under no circumstances shall the evaluation consist of testing alternative options. These activities must be conducted in a competitive transparent environment (i.e. IFB or RFP).

5a. If no, why weren't alternatives evaluated?

6. Are there resellers or distributors?

7. What efforts were made to get the best possible price (i.e. did the agency/university negotiate) and how did you determine the price for this purchase is considered fair and reasonable?

8. Will this purchase obligate the State to this vendor for future purchases such as maintenance, licensing or continuing need?

8a. If yes, please provide details regarding future obligations and/or needs:

9. What will be the financial or other impact to the State if this sole source is not approved and a competitive bid is required?

10. Is there any additional information you would like to add to justify this sole source?

Section VII Requesting Department Signature Required I know and understand the contents of this Sole Source Justification and attest that all statements are true and correct and the fairness and reasonableness of the price was adequately confirmed.

State Agency Bureau/Division Head or University Purchasing Director Approval and Signature Required I know and understand the contents of this Sole Source Justification and attest that all statements are true and correct and the fairness and reasonableness of the price was adequately confirmed. (All prior form fields will lock once this e-signature is completed) SPO Approval and Signature Required Sole Source Justification Form - Part II Section I - General Information Was a Sole Source hearing held per 30 ILCS 500/20-25?

Section II - Sole Source Hearing Details The State posted to the Illinois Procurement Bulletin a description of the State's need, the justification for the sole source decision, and information regarding the opportunity to submit comments and testify at a public hearing. Notice of the hearing was also posted outside of the hearing room 48 hours prior to the hearing.

The public hearing was conducted for the purpose of receiving testimony regarding the sole source determination. The Hearing Officer recommends the following:

The following relevant documents are attached:

Section III - CPO Approval and Signature Required 9.0.0.2.20101008.1.734229

The State of Illinois does not have the infrastructure capability nor does it possess the intricate operational knowledge of the CCS to replicate and construct a similar system internally. Undertaking a project of the size and scope of the CCS would take the State of Illinois years to attempt to implement. There are no other governmental entities globally that have created a CCS for a distributed video gaming system of the size and scope of the Illinois market. It is certain that other vendors could create and maintain a CCS but they would need a minimum of 18 months to adequately develop and implement a similar CCS system to replace the current CCS system. Any delay would cause injurious economic harm to state and local revenue and negatively impact the State of Illinois regulatory mission to ensure and uphold the integrity of video gaming. To further illustrate this point, if the CCS were to be offline for 1 month the state would lose $57 million in revenue to the State of Illinois and local governments would lose $9.8 million. Because of the significant negative potential impact of any disruption the IGB is requesting a sole source contract with the current vendor for 24 months.

In addition, when this contract began no one could have imagined the size and scope of the industry today.

A sole source contract will provide the only option for preserving video gaming while preparing a complex RFP for a new central communications system. There is no economically or technically feasible alternative for an interim solution.

A RFP will be prepared and published in 2022 and a new contract is expected to be in place by January 1, 2023. Even with the anticipated new contract dates, transition and training for technical and complex services of nature require the predecessor and successor contracts run in parallel for at least six months.

A sole source contract to continue supporting ongoing operations is essential for the IGB, the State of Illinois and its citizens. The IGB is seeking a term that ends the earlier of either the Board certifying the an operational CCS by a vendor chosen through a competitive solicitation or two years.