Web viewSTATE OF ILLINOIS. STATE SUPPLEMENTAL PROVISIONS. REQUEST FOR PROPOSAL FOR NEW MANAGER....

REQUEST FOR PROPOSAL FOR NEW MANAGER

The State of Illinois, acting through its Department of the Lottery (the “State”), requests qualifications and proposals from responsible entities (each a “Respondent”) to provide the State with all equipment, goods and services, and to perform for the State, as private manager, all functions necessary to operate the Illinois Lottery (the “Lottery”), other than those services and functions expressly retained by the State in the New PMA (as defined herein) (collectively, the “Services”). The State encourages and welcomes each Respondent that is interested and able to meet the requirements set forth herein to submit an offer to provide the Services (each, a “Proposal”).

This Request for Proposal (this “RFP”) is organized as follows:

Section 1 of this RFP (beginning on page 2) provides an introduction to this RFP and describes the State’s goals and relationship with its private manager.

Section 2 of this RFP (beginning on page 3) describes the Services to be provided and the rules and process related to a Respondent’s engagement of Significant Subcontractors (as defined below).

Section 3 of this RFP (beginning on page 6) provides background on the Lottery.

Section 4 of this RFP (beginning on page 8) provides the anticipated schedule for this RFP.

Section 5 of this RFP (beginning on page 9) provides detailed instructions for submitting a Proposal.

Section 6 of this RFP (beginning on page 26) provides additional information regarding selection of the New Manager (as defined below).

Section 7 of this RFP (beginning on page 27) provides a checklist for completing this RFP.

Section 8 of this RFP (beginning on page 29) provides additional information regarding specifications, qualifications and the statement of work.

Section 9 of this RFP (beginning on page 30) provides additional information regarding pricing.

Section 10 of this RFP (beginning on page 31) sets forth additional terms and conditions applicable to this RFP.

Section 11 of this RFP (beginning on page 35) sets forth certain supplemental disclosures by the State.

In compliance with the State and Federal Constitutions, the Illinois Human Rights Act, the U.S. Civil Rights Act, and Section 504 of the Federal Rehabilitation Act, the State of Illinois does not discriminate in employment, contracts, or any other activity. The State of Illinois encourages prospective Subcontractors to consider hiring qualified veterans and Illinois residents discharged from any Illinois adult correctional center, in appropriate circumstances.


Section 12 of this RFP (beginning on page 36) sets forth additional information required in connection with the New Manager’s use of Subcontractors (as defined below).

Respondents should carefully review this document, which constitutes the formal request for proposal for the private management of the Lottery, as well as the Lottery Law (as defined herein), Procurement Code (as defined herein) and the Administrative Code (as defined herein), to ensure a clear understanding of the State’s needs and objectives as well as the scope of work entailed.

1. INTRODUCTION

a. Encouraging Both Traditional and Nontraditional Respondents. To encourage innovation and ensure a competitive process, the State is interested in attracting Respondents both within and outside the U.S. and within and outside the lottery industry. Through the issuance of this RFP, the State is soliciting Proposals from each Respondent that is capable of providing the Services to the Lottery in a manner that:

maximizes contributions to the State’s Common School Fund and Capital Projects Fund;

serves the best interests of the State by, among other things, eliminating conflicts of interest in pricing and misaligned incentives from vertically integrated private management structures;

gathers new sources of Lottery customer data, protects such data, including protecting the privacy of Lottery customers, and maximizes the value of such data through predictive analytics;

increases the Lottery’s value to its stakeholders, while ensuring transparency as well as the security, honesty, fairness and integrity of the Lottery;

expands and diversifies the Lottery customer base; and

innovates by, among other things, recognizing market changes and leveraging lottery related data.

b. Selection of New Manager. Under the Lottery Law (20 ILCS 1605/1, et seq.) (the “Lottery Law”), the State is charged with conducting the functions of the Lottery with the assistance of a private manager. The State and its current private manager have entered into an agreement to terminate their relationship, and, accordingly, the State is in need of a successor private manager. Additional information regarding the State’s relationship with its current private manager is set forth in Section 1.c .

The State must select the best qualified Respondent that will provide management services in a manner that best achieves the State’s objectives as set forth in the Lottery Law. Together, the State and the private manager are obligated, in all instances, to promote and ensure integrity, security, honesty and fairness of the Lottery’s operations and administration. The State and the private manager must work collaboratively, transparently and creatively to attain their economic objectives while working within the ethical guidelines of the Lottery Law. The State seeks an open exchange of information and data among the State, its new private manager and its Subcontractors. A Respondent should submit a Proposal only if it is prepared for an open and transparent relationship with the State.

The private manager ultimately selected by the State under this solicitation (the “New Manager”) will enter into a private management agreement with the Lottery, a draft of which is attached to this RFP as Exhibit A and incorporated herein by reference (the “New PMA”).

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c. Current Agreements. In 2009, the Illinois General Assembly passed the Lottery Law, requiring the State to conduct the Lottery with the assistance of a private manager. On January 18, 2011, the Lottery entered into a private management agreement with its first private manager, Northstar Lottery Group, LLC (“Northstar”), a joint venture between GTECH Corporation (“GTECH”) and Scientific Games International, Inc. (“Scientific Games”). Northstar subsequently entered into a supply agreement with GTECH pursuant to which GTECH provides Draw Game Services (as defined below) (the “GTECH Subcontract”) and a supply agreement with Scientific Games pursuant to which Scientific Games provides Instant Ticket Game Services (as defined below) (the “SGI Subcontract” and, together with the GTECH Subcontract, the “Current Subcontracts” and GTECH, together with Scientific Games, the “Current Subcontractors”). As of the date of this RFP, Northstar, GTECH and Scientific Games are still providing lottery services to the State.

The State, Northstar, GTECH and Scientific Games have entered into a Letter Agreement of Termination (the “Letter Agreement”) pursuant to which the parties agreed to the terms on which Northstar will cease providing private management services to the State. The Letter Agreement provides for, among other things:

the termination of Northstar’s services as private manager to the Lottery effective as of January 1, 2017, subject to extension for additional periods of between three and six months at the State’s option;

the continuation of the Current Subcontracts at discounted rates through June 30, 2017; and

the assignment of the Current Subcontracts to the New Manager upon the effective date of the New PMA.

After review and consideration of the structure of various private management models in the industry, both within and outside of the United States, the State has determined that it is necessary to re-conceptualize its relationship with its private manager to put a greater focus on net income growth through innovation while ensuring transparency as well as the security, honesty, fairness and integrity of the Lottery. The fundamental expectation of the State’s new private manager model is a management approach that is inclusive of all operational functions and is focused on maximizing aggregate Lottery profitability across all channels.

2. USE OF SUBCONTRACTORS; SIGNIFICANT SUBCONTRACTORS

a. Significant Subcontractors. The New Manager will be responsible for providing the Services to the State. The State recognizes, however, that certain components of the Services will be delivered by the New Manager through subcontractors engaged by the New Manager (each, a “Subcontractor”). Further, in order to avoid conflicts of interest, the State is requiring the New Manager to engage one or more Subcontractors to perform both (i) draw game services (the “Draw Game Services”) and (ii) instant ticket game services (the “Instant Ticket Game Services”). For additional information on this requirement, please see Section 2.b.

Additionally, while not required, the State anticipates that the New Manager may also engage Subcontractors to provide iLottery/mobile services (the “iLottery/Mobile Services”) which consist of (1) the content component thereof (the “iLottery Content Component”) and (2) the customer relationship management services and platform component thereof (the “iLottery Platform Component”). Additional information regarding the treatment of the iLottery Content Component and iLottery Platform Component, including with respect to compensation, is set forth in Section 2.c .

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The Draw Game Services, Instant Ticket Game Services and iLottery/Mobile Services are collectively referred to herein as the “Major Service Components.” The underlying products that make up each Major Service Component are described in greater detail in Section 3.a . The technical requirements for each Major Service Component are set forth on Exhibit B attached hereto.

The State believes there is a large and diverse pool of potential Subcontractors who can provide the Major Service Components (each such Subcontractor, a “Significant Subcontractor”). Therefore, in order to facilitate the New Manager’s engagement of the Significant Subcontractors, the State is requesting information and bids (each a “Subcontractor Bid” and the request for such Subcontractor Bids, the “Sub RFP”) on behalf of the New Manager from potential Significant Subcontractors separately from, but simultaneously with, this RFP. The State will not evaluate the substance of any Subcontractor Bid or enter into any agreement with any Significant Subcontractor. Instead, each Respondent is required to incorporate the Significant Subcontractors that such Respondent intends to engage within its Proposal in accordance with Section 2.d .

b. Prohibition on Conflicts of Interest. The State has a vital interest both in ensuring the transparency and integrity of the Lottery and in ensuring that incentives are aligned between the New Manager and the State in a way that encourages maximum growth and profitability of the Lottery for the citizens of Illinois. To further these interests, the State is prohibiting the New Manager and any Affiliate1 thereof from, directly or indirectly, (i) providing Draw Game Services or Instant Ticket Game Services to the Lottery or (ii) receiving any compensation or other benefit in the capacity of a provider or supplier to the Lottery, other than the compensation received for private management services as described herein and set forth in the New PMA. The foregoing restrictions do not preclude any Respondent or any Affiliate thereof from submitting one or more Subcontractor Bids.

c. Treatment of iLottery. While the State is requesting Subcontractor Bids for iLottery/Mobile Services, the State considers the iLottery Platform Component to be a core component of the Services that the New Manager will provide. The State is soliciting Subcontractor Bids for the iLottery Platform Component as a courtesy to Respondents who do not have the technical expertise to provide such services themselves, but is not requiring the New Manager to engage any Significant Subcontractor for that purpose.

iLottery Platform Component services may be provided either by the New Manager directly, or through one or more Significant Subcontractor(s), but the compensation for those services will be part of the Management Fee (as defined in the New PMA) payable to the New Manager, rather than an allocation of the Operating Allowance (as defined in the New PMA). Accordingly, Respondents who intend to engage one or more Significant Subcontractor(s) to provide services related to the iLottery Platform Component should consider the fees and expenses of such engagement(s) when submitting their pricing proposals.

Similarly, if the New Manager or any of its Affiliates chooses to provide any service related to the iLottery Content Component, neither the New Manager nor such Affiliate will be entitled to any additional compensation, including any portion of the Operating Allowance, for providing such services, other than potential increases in the Management Fee and Incentive Compensation (as defined in the New PMA) owed to the New Manager as a result of increases in operating revenue and net

1 “Affiliate” as used herein and throughout the RFP process shall mean, with respect to any particular person, any other person directly, or indirectly through one or more intermediaries, controlling, controlled by or under common control with such person. For purposes of such definition, the terms “controlling,” “controlled by” or “under common control with” mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise.

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income, respectively. Compensation for iLottery Content Component services provided through Significant Subcontractors unaffiliated with the New Manager may be allocated against the Operating Allowance by the New Manager.

d. Incorporation of Significant Subcontractor Bids in Proposal. In addition to the other requirements set forth herein with respect to all Subcontractors (see Section 12 ), each Respondent’s Proposal must list the Significant Subcontractors that such Respondent intends to engage, describe the Services each such Significant Subcontractor will provide and include the proposed compensation for such Services. To the extent possible, each Respondent should include binding term sheets with the Significant Subcontractors that such Respondent incorporates into its Proposal.

The Significant Subcontractors that are incorporated into each Respondent’s Proposal must either be (i) Significant Subcontractors that have submitted a Subcontractor Bid in response to the Sub RFP and with whom Respondent has negotiated with and come to terms with in accordance with the process described in Section 2.d.i or (ii) a Current Subcontractor with whom such Respondent has negotiated with and come to terms with in accordance with the process described in Section 2.d.ii . Respondents may not propose their own Significant Subcontractors who have not submitted a Subcontractor Bid or are not Current Subcontractors, but may encourage any such person to submit a Subcontractor Bid in response to the Sub RFP and then incorporate such person’s Subcontractor Bid in accordance with Section 2.d.i . No Respondent may enter into any agreement with any Significant Subcontractor that requires exclusivity or otherwise prevents such Significant Subcontractor from freely negotiating or contracting with any other Respondent.

i. Review of Subcontractor Bids. All Subcontractor Bids are due thirty (30) days prior to the due date for Proposals in response to this RFP (the “Subcontractor Bid Review Period”). Subject to the execution of applicable confidentiality agreements, each Respondent will have access to the Subcontractor Bids during the Subcontractor Bid Review Period. Each Respondent is encouraged to negotiate with the Significant Subcontractors that submitted Subcontractor Bids during the Subcontractor Bid Review Period to improve upon such Subcontractor Bids and incorporate such improvements in such Respondent’s Proposal. A Respondent may negotiate with more than one Significant Subcontractor with respect to any Major Service Component during the Subcontractor Bid Review Period and conversely, each Significant Subcontractor may negotiate with more than one Respondent.

ii. Current Subcontractors. During this RFP solicitation, each Respondent will be given an opportunity to review the Current Subcontracts and the Letter Agreement and negotiate with each Current Subcontractor to determine if such Respondent’s Proposal will include either Current Subcontractor providing services to the Lottery after June 30, 2017.

In the event that the New Manager does not engage GTECH to continue to provide the services currently provided under the GTECH Subcontract, GTECH is entitled to receive payment of an amount equal to the “Residual Value” (as defined in the Letter Agreement).2 Such a payment would initially be made by the State and then would be allocated against the New Manager’s Operating Allowance proportionally across the years impacted by the payment.

3. BACKGROUND OF THE LOTTERY.

a. Products.

2 Additional information regarding the treatment of the Residual Value may be found in Section 10.2.5 of the New PMA.

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The Lottery provides a rich portfolio of draw and instant games at price points that range between $1 and $30, including specialized, statewide and national lottery games.

Draw Games. The Lottery has a strong draw game presence, with both Illinois-centric games (i.e. Pick 3, Pick 4, Lucky Day Lotto, Lotto, special raffles) and as a participant in national multi-jurisdiction draw games (i.e. Mega Millions and Powerball).

Instant Ticket Games. The Lottery has a robust mix of instant games leveraging seasonal, trending and otherwise specialized topics that resonate with regular and occasional players alike. Instant games that allow the Lottery to capitalize on specific opportunities serve as a marketing tool while also injecting unique offerings into the base mix of instant games. Currently, the Lottery has instant games that leverage holidays such as St. Patrick’s Day and Fourth of July, pop cultural phenomena such as The Walking Dead, and charitable causes such as HIV/AIDS prevention and treatment, the Special Olympics and multiple sclerosis research.

iLottery/Mobile. Lottery players may purchase single tickets and subscriptions via the Lottery’s website or mobile application. The State believes iLottery is underutilized, which presents a significant opportunity for the New Manager to expand and diversify the Lottery customer base. Recently, the enabling legislation for the Lottery’s internet program was extended through July 1, 2017. The State is hopeful that during the term of the New PMA, the Illinois General Assembly will pass legislation expanding the scope of the iLottery services that may be provided. Therefore, the State is asking Respondents to provide their plans and qualifications with respect to providing expanded iLottery/mobile offerings in addition to those that may be offered currently.

b. Channel and Retailer Overview. Lottery products are sold almost exclusively by approximately 7,700 retailers, most of which are veteran retailers with loyal player bases. Approximately 87% of these retailers sell products with instant ticket devices. Currently, Lottery revenue is concentrated in traditional convenience store and gas station accounts. While the State expects this traditional channel to continue as the bedrock of Lottery revenue, there are significant opportunities for growth by capturing new customers in different channels.

Supply chain and inventory control/distribution are fundamental elements of lottery management. This critical activity is most pertinent to instant games, which require materials to be designed and produced in advance and on a schedule that allows for timely rollout to take advantage of current market dynamics. This sector of the market also requires the secure storage and inventory control of hundreds of millions of dollars of instant game tickets. Additionally, distribution to thousands of retail locations across the state must occur efficiently, without interruption, delay or other difficulty. The New Manager will be responsible for ensuring that retailers have an appropriate supply of instant tickets available for customers and monitoring sales to determine when a game is underperforming and should be replaced.

c. Personnel. The Lottery has an experienced sales staff. These current State employees will provide the New Manager with, among other things, (i) a high level of operational continuity, (ii) quicker access to key organizational competencies, and (iii) institutional knowledge and relationships. The Lottery Law requires any private manager to utilize the services of these State employees to assist in the administration and operation of the Lottery (see 20 ILCS 1605/9.1(c-5)). The arrangement for the use of the employees will be documented in an “Employee Use Agreement” between the State and the New Manager which will be provided in the Data Room and attached as an exhibit to the New PMA.

d. Marketing. Through marketing, the Lottery intentionally seeks to expand and diversify its customer base as well as market the Lottery to those residents who are new, infrequent or lapsed players, especially those who are most likely to make regular purchases on the internet. Paid advertising supports communications around jackpot sizes, promotes the launch of specialty games throughout the

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year, and preserves and supports the Lottery brand. The Lottery also engages in retail-level marketing as a way to boost sales. In recent years, the Lottery’s budget for marketing and advertising has been $44 million per year, half of which has been devoted to advertising, and the balance of which has been allocated to agency fees, retail, events and promotions, research, sales and other related items.

e. Opportunity. The State believes the New Manager will have a tremendous opportunity to grow and improve the Lottery due to, in part:

Large state population with a high household income percentage. Illinois is the fifth most populous state and ranks 18th among the 50 states in terms of household income. In addition, approximately 77% of the State’s population is able to participate in the Lottery.

Solid sales base. The Lottery already has a solid sales base with almost $3.0 billion of revenue generated during each of the last two fiscal years.

Sales have increased, but profits have decreased. Over the last decade, Lottery sales have substantially increased, but profits have substantially decreased. The table below shows these trends.

Sales and Profits History

2005 2006 2007 2008 2009 2010 2011 2012 2013 20140

500

1,000

1,500

2,000

2,500

3,000

0%

5%

10%

15%

20%

25%

30%

35%

40%

Total Sales ($MM) Profit (% of Sales)

Underperformance relative to peer group. The State believes the Lottery is underperforming relative to its peer group3 in terms of per capita sales and per capita profits. If the Lottery performed as well as its peer group average, then per capita sales would be equal to $290.31 (actual $216.75) and per capita profits would be $85 (actual $59.93) for the State’s fiscal year that ended June 30, 2014. The tables below show the Lottery’s historic performance relative to its peer group in these metrics.

3 The Lottery’s peer group includes the lotteries for Georgia, Ohio, Pennsylvania, Michigan and Ontario (Canada).

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2010 2011 2012 2013 2014$160

$180

$200

$220

$240

$260

$280

$300Per Capita Sales

Large State Lotteries Peer GroupUnited States Illinois

Mill

ions

2010 2011 2012 2013 2014$50

$55

$60

$65

$70

$75

$80

$85

$90Per Capita Profits

Large State Lotteries Peer Group

United States Illinois

Mill

ions

Improved Technology. Technological advances are expected to enable the New Manager to improve per capita sales. iLottery sales have increased from just $4.02 million in fiscal year 2012 to nearly $34.0 million in fiscal year 2016. The State expects the New Manager to be able to take advantage of technological advances and continue this positive trend of iLottery sales.

4. ANTICIPATED SCHEDULE

The anticipated schedule for this RFP process is set forth below. This schedule is subject to change at any time at the discretion of the State. Any such change will be published in the Illinois Procurement Bulletin (www.purchase.state.il.us) (the “Bulletin”).

Date Event

July 28, 2016 Release of RFP for New Manager Services and Publication of Solicitation for Subcontractors

August 18, 2016 Mandatory Respondent Conference

September 26, 2016 Subcontractor Bids due and Subcontractor Bid Review Period begins

September 30, 2016 Respondent deadline to submit questions for Q&A

October 5, 2016 State publishes answers to Q&A

October 26, 2016 Deadline for submission of Proposals and public opening of Proposals

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http://www.purchase.state.il.us/


Each Respondent must read and review the entire solicitation package, including but not limited to, the exhibits attached to this RFP, the Lottery Law, the Procurement and Administrative Codes, and the materials set forth in the data room (the “Data Room”), which may be accessed by a Respondent after the conditions precedent to access are satisfied (including the execution of a confidentiality agreement with the State in a form and substance satisfactory to the State). Requests for Data Room access should be directed to the Lottery Procurement Officer, Helen Kim, at [email protected] . Please note that the State may post additional documents to the Data Room at any time prior to the submission deadline for final Proposals. It is each Respondent’s responsibility to check the Data Room frequently for any such updates.

All forms and signature areas contained in the solicitation package must be completed in full and submitted along with the Technical Responses (See Section 5.b.i.2) and price proposal which, when combined, will constitute the Proposal. Do not submit the instruction pages with Proposals. Proposals that do not adhere to form and content requirements may not be considered.

5. REGISTRATION FORMS; INSTRUCTIONS FOR SUBMITTING PROPOSALS

a. Format And Content Of Proposals: Proposal must be in the format set forth in this Section 5.a. Proposals must include the information described in Section 5.b.

Each Proposal shall be bound and typed, single or double sided, on 8½” x 11” paper in English using no less than 11 point font with 1” margins. A Proposal may be bound in 3-ring binder; 19-hole, comb-type binding; or other binding format that can be readily reviewed and taken apart, if necessary. Drawings or other graphic representations may be provided on 11” x 17” paper. Each Proposal shall include a table of contents, which identifies the major Proposal sections as outlined herein, and any illustrations, tables, charts or graphics included in such Proposal.

Each Respondent also is required to submit its Proposal on an electronic storage device with all text files in Microsoft Word© format or Microsoft Excel© (non-PDF) format, as appropriate. The electronic storage device shall be submitted in an appropriate sealed envelope. The hardbound Proposal shall take precedence over information submitted electronically.

Respondents are required to organize the information requested in this RFP in accordance with the format outlined herein. Failure of a Respondent to organize the information required by this RFP as outlined may result in the State, at its sole discretion, deeming such Respondent’s Proposal non-responsive to the requirements of this RFP.

A Respondent, however, may reduce the repetition of identical information within several sections of its Proposal by making the appropriate cross-references to other sections of its Proposal. Appendices for certain technical or financial information (e.g., annual reports) may be used to facilitate Proposal preparation.

b. Organization and Content Required. Proposals must be submitted separately in as few as four and as many as five packets in accordance with this Section 5.b as well as Section 5.h. Each packet must be separately sealed and labeled. Please follow these instructions carefully.

i. Packet 1 – Technical Packet. Packet 1 must include a fully-executed transmittal letter (the “Proposal Transmittal Letter”) from Respondent acknowledging (1) Respondent has completely reviewed and understands the terms and requirements of this RFP, including all addenda issued prior to the due date for Proposals in response to this RFP, (2) Respondent is in compliance with, and agrees to be bound by, such terms and requirements and (3) by executing the Proposal Transmittal Letter and submitting a Proposal, Respondent makes a Proposal to the State that the State may accept.

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mailto:[email protected]


The Proposal Transmittal Letter and all attachments thereto (referred to collectively as the “Technical Packet”) must be executed by an authorized signatory of Respondent who is empowered to bind Respondent to the obligations contained in the Proposal.

Proposals submitted by corporations, limited liability companies, partnerships and other entities must be executed in the company name by an authorized signatory of the entity, must include the official business address of the entity, and must state the entity’s state/country of organization. Proposals submitted by a joint venture must be similarly executed by all joint venture partners. Unsigned Proposals will be considered non-responsive. Anyone signing the Proposal Transmittal Letter as an agent must file with it legal evidence of his or her authority to execute such Proposal Transmittal Letter.

The Proposal Transmittal Letter must include the following attachments:

1. Executive Summary. Each Respondent shall submit a summary detailing the key aspects of its Proposal. This section should include a clear statement of Respondent’s understanding of this RFP and the contract requirements, and how Respondent intends to meet the RFP requirements. The executive summary shall not exceed six (6) typed pages.

2. Technical Response. Each Respondent shall submit a detailed statement of its qualifications and plans for performing the Services (the “Technical Response”), in the form of a report that addresses, at a minimum, each criterion set forth in the table provided in Section 5.q in a separate section that includes all information that is responsive to such criterion (including information provided by Subcontractors, if applicable) and has a title that corresponds to such criterion (e.g., “Plan for Performing the Services”).

3. Markup of New PMA. Each Respondent shall review and, if necessary, edit or mark up the New PMA to incorporate those changes such Respondent feels are necessary for its eventual execution thereof. Please note that the New PMA markup, as part of the Technical Packet submission, must not include any pricing edits, including, but not limited to, edits related to the Management Fee, Incentive Compensation, Shortfall Compensation or IP Licensing Fee (see Section 5.r and Section 9). Such edits must be submitted separately as part of the Pricing Packet.

4. Subcontractor Disclosure. Each Respondent shall (i) identify each Subcontractor expected to receive $50,000 or more annually in connection with the New PMA, (ii) disclose the expected amount of money each such Subcontractor will receive and (iii) provide the other information and disclosures required by Section 12. Each Respondent should also attach any definitive term sheets it has entered into with potential Significant Subcontractors.

ii. Packet 2 - Pricing Packet (separately sealed). Packet 2 must contain Respondent’s Pricing Packet. See Section 9. See also Section 5.r .

iii. Packet 3 - Required Forms. Packet 3 must contain either Form A or Form B.

1. Form A. Form A consists of eight forms and shall be returned by those Respondents that are not registered in the Illinois Procurement Gateway. Complete this form if you are not using an Illinois Procurement Gateway Registration Number. Form A.

2. Form B. Form B consists of three forms and only shall be returned by those Respondents that have a valid Illinois Procurement Gateway registration number with expiration date and elect to not use the forms found in Form A. Complete this form only if you are using a valid Illinois Procurement Gateway Registration Number. To ensure that you are registered in the Illinois Procurement

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http://www.illinois.gov/cpo/general/Documents/Forms%20A%20Section%20V.15.2.docx


Gateway, search for your business name in the Illinois Procurement Gateway Registered Replacement PM Directory. If your company does not appear in the search results, then you are not registered in the Illinois Procurement Gateway. Form B.

iv. Packet 4 - BEP Utilization Plan. Packet 4 must contain a response to the Minorities, Females, and Persons with Disabilities participation requirements (see Section 5.p). Such a response should include completed versions of the Letter of Intent (Letter of Intent) and Utilization Plan (Utilization Plan).

v. Packet 5 - Redacted Offer - Confidential Information. Packet 5, if desired, shall be the same as the Technical Packet submitted in Packet 1 and the Pricing Packet contained in Packet 2 with all confidential information and proprietary information that Respondent claims is exempt from public disclosure redacted.

In addition, Respondent must (a) clearly specify in a separate attachment within Packet 5 the specific statutory basis or bases under the Illinois Freedom of Information Act (“FOIA”) (5 ILCS 140/1 et seq.) or other applicable law or rule for each redaction, along with a detailed justification for exempting the information underlying each such redaction from public disclosure and (b) request confidential treatment of such information at the time of submitting its Proposal. The redacted copy of the Proposal must retain as much of the Proposal as possible. The State will not honor requests to keep entire Proposals confidential. See Section 5.k for additional information.

c. Published Procurement Information. Each Respondent should note that the State publishes procurement information, including updates, on the Bulletin. Procurement information may not be available in any other form or location. Respondent is responsible for monitoring the Bulletin. The State will not be held responsible if Respondent fails to receive the optional e-mail notices.

d. Solicitation Contact. The individual listed below shall be the single point of contact for this RFP solicitation (the “Solicitation Contact”). Unless otherwise directed, Respondents should only communicate with the Solicitation Contact. The State shall not be held responsible for information provided by or to any other person.

Solicitation Contact: Helen KimDepartment: Illinois Department of the LotteryStreet Address: 122 S. Michigan, 19th FloorCity, State Zip: Chicago, Illinois 60603Email: [email protected]: (312) 814-3495

Suspected errors in this RFP should be immediately reported to the Solicitation Contact identified above. Do not discuss, directly or indirectly, the solicitation or any Proposal with any State officer or employee other than the Solicitation Contact.

e. Respondent Questions And State Answers. All questions pertaining to this RFP, other than questions raised at Respondent Conference, must be submitted in writing to the Solicitation Contact no later than September 30, 2016. Questions received and State responses may be posted as an addendum to the original solicitation on the Bulletin; only these posted answers to questions shall be binding on the State. Respondents are responsible for monitoring the Bulletin.

f. Required Meetings.

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http://www.illinois.gov/cpo/general/Documents/BEP%20Utilization%20Plan%20v.14.1.pdf

http://www.illinois.gov/cpo/general/Documents/Letter%20of%20Intent%20Template%20v.14.1.pdf

http://www.illinois.gov/cpo/general/Documents/Forms%20B%20Section%20V.15.2.docx


Respondent Conference: Yes No

Mandatory Attendance: Yes No

Respondent’s attendance at its scheduled conference (each, a “Respondent Conference”) is mandatory. Respondent will be disqualified if it does not attend its Respondent Conference, is not on time, leaves early or fails to sign the attendance sheet. Respondent must allow adequate time to accommodate security screenings at the site.

Date: Thursday, August 18, 2016

Time: 11:00 a.m. to 1:00 p.m.

Location: 122 S. Michigan St., 19th Floor, Chicago, Illinois 60603

g. Proposal Due Date, Time, And Address For Submission Of Proposals: Proposals are due by 1:00 p.m. Central Daylight Savings Time on October 26, 2016. The State will conduct a public opening of submitted Proposals on October 26, 2016 following the submission deadline. Proposals must be sent to the “Submit/Deliver Proposals To” address provided below.

i. Proposal Firm Time: The Proposal must remain firm for 180 days from opening.

ii. Submit/Deliver Proposals To: Label (outside of envelopes/containers):

Department: Illinois Department of the Lottery “Sealed Proposal – Do Not Open”

Attn: Helen Kim Project Title & Reference #: Illinois Department of the Lottery Private Manager RFP

IPB No.: 22039124

Address: 122 S. Michigan, 19th Floor Due Date & Time: 1:00 p.m. Central Daylight Savings Time on October 26, 2016

City, State Zip: Chicago, Illinois 60603 Respondent Name

Respondent City, State Zip

h. Submission Of Proposals: The Proposal must be submitted in separately sealed packets as indicated below and clearly labeled with the Request for Proposal title, the IPB reference number, the packet number, Respondent’s name and the wording: “Sealed Proposal – Do Not Open.” The separately sealed packets may be submitted together in one mailing/shipping box or may be submitted separately in individual/shipping boxes. Do not save the entire Proposal on a single electronic storage device. Pricing must always be on a separate electronic storage device unless otherwise instructed.

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Subject Matter # of Originals # of Hard Copies # of Electronic Storage Devices

PACKET 1 – Technical Packet 2 9 2

PACKET 2 – Pricing Packet2 2 2

PACKET 3 – FORM A or FORM B 2 2 2

PACKET 4 – Minorities, Females and Persons with Disabilities Participation and Utilization Plan 2 2 2

PACKET 5 – Redacted Technical Packet 2 2 2

i. Employee Tax Credit: Respondents who hire qualified veterans and certain ex-offenders may be eligible for tax credits (30 ILCS 500/45-67 and 45-70). Please contact the Illinois Department of Revenue (217-524-4772) for information about tax credits.

j. Governing Law; Venue And Forum. Illinois law and rules govern this RFP and any resulting contract. By submitting a Proposal in response to this RFP, Respondent agrees and accepts that any action initiated in court shall be filed and litigated (including all discovery proceedings) exclusively in the courts located in Chicago, Illinois, or a federal court of the Northern District of Illinois, as applicable, and all objections as to personal jurisdiction and venue are waived, except an action to subpoena a witness or to obtain documents in a foreign jurisdiction may be filed in the county where the person or documents are located.

This document contains statutory references designated with “ILCS”. Respondent may view the full text at (www.ilga.gov/legislation/ilcs/ilcs.asp). Selection of the successor private manager is governed by certain sections of the Lottery Law, limited sections of the Illinois Procurement Code (30 ILCS 500/20-35; 30 ILCS 500/50) (collectively, the “Procurement Code”) and the rules drafted by the Chief Procurement Office for hiring the successor manager (44 Ill. Adm. Code 1.8000 et seq.) (the “Administrative Code”). In the event of a conflict between this RFP and applicable law, including the Lottery Law, the Procurement Code or the Administrative Code, applicable law controls.

k. Use Of Materials; Public Records And Requests For Confidential Treatment. Proposals become the property of the State and submissions will not be returned. The State may use any ideas or adaptations of the ideas contained in any Proposal, subject to the intellectual property rights of the applicable Respondent. The State reserves the right to use any and all information contained in a Proposal to the extent permitted by law.

All Proposals will be open to the public under FOIA and other applicable laws and rules, unless a Respondent requests in its Proposal that the State treat certain information as confidential. A request for confidential treatment will not supersede the State’s legal obligations under FOIA. The State will not honor requests to keep entire Proposals confidential.

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If Respondent requests confidential treatment, Respondent must submit additional copy/copies (see Section 5.b and Section 5.h) of the Technical Packet and Pricing Packet with proposed confidential information redacted. Regardless, the State will disclose the successful Respondent’s name, the substance of the Proposal, and the price.

By submitting a Proposal, each Respondent agrees that it will hold harmless and indemnify the State for all costs or damages associated with the State defending such Respondent’s Proposal (including, without limitation, defending Respondent’s request for confidential treatment). Respondent agrees that the State may copy the Proposal to facilitate evaluation, or to respond to requests for public records. Respondent warrants that such copying will not violate the rights of any third party.

l. Reservations. Respondent must read and understand the solicitation and tailor its Proposal and all activities to ensure compliance with the instructions of this RFP as well as applicable law. The State reserves the right to amend the solicitation, reject any or all Proposals for any reason, award by item/services, group of items/services, or grand total, and waive minor defects. The State may request a clarification, inspect Respondent’s premises, conduct a background check, interview staff, request a presentation, or otherwise verify the contents of a Respondent’s Proposal, including information about Subcontractors and suppliers. The State may request best and final Proposals when appropriate. The State will make all decisions on compliance, evaluation, and terms and conditions, and shall make decisions in the best interests of the State and in accordance with the Lottery Law, Procurement Code, Administrative Code, and other applicable State and Federal statutes and regulations. This competitive process may require that Respondent provide additional information and otherwise cooperate with the State. If a Respondent does not comply with requests for information and cooperate, the State may reject the Proposal. Submitting a Proposal does not entitle Respondent to an award or a contract. Posting Respondent’s name in a Bulletin notice does not entitle Respondent to a contract. The State is not responsible for and will not pay any costs associated with the preparation and submission of any Proposal or any related background check. Awarded Respondent(s) shall not commence, and will not be paid for any billable work undertaken prior to the date all parties execute the New PMA, unless approved in writing in advance by the State Purchasing Officer or the Chief Procurement Officer (or designee).

m. Award. The State is not obligated to award a contract pursuant to this RFP. If the State issues an award, the award will be made to the best qualified New Manager based on the evaluation factors set forth in this RFP and negotiation of compensation determined to be fair and reasonable pursuant to the Procurement Code and the Administrative Code. However, if the State does not consider the price to be fair and reasonable and negotiations fail to meet an acceptable price, then the State reserves the right to cancel the award and take appropriate action to meet the needs of the State. The State will determine whether the price is fair and reasonable by considering the Proposal, including Respondent's qualifications, Respondent's reputation, all prices submitted, other known prices and other relevant factors. The State will post a notice to the Bulletin identifying the New Manager in accordance with 44 Ill. Adm. Code 18025.

n. PROTEST REVIEW: Each Respondent who submits a Proposal hereby agrees that it has read and reviewed, and understands, the entire RFP solicitation package, including but not limited to, the exhibits attached to this RFP, the documents contained in the Data Room, as well as the Lottery Law, Procurement Code and the Administrative Code and other regulations, if any, that apply hereto.

Any action to contest the selection of the New Manager by the State must adhere to the requirements set forth in 44 Ill. Adm. Code 1.8030. Contact information for the protest review office is as follows:

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Chief Procurement Office Attn: Protest Review Office 401 S. Spring StreetSuite 515 Stratton Office Building Springfield, IL 62706Phone: (217) 720-7267Facsimile: (217) 558-1399Illinois Relay: (800) 526-0844

o. Evaluation Process. The State evaluates categories and factors of “Responsiveness” and “Responsibility,” as well as pricing. If the State finds a failure or deficiency in a Proposal, the State may reject such Proposal or reflect the failure or deficiency in the evaluation.

i. Responsiveness. A “Responsive” Respondent is one who submits a Proposal that conforms in all material respects to this RFP, and includes all required forms.

1. Subcontractor Disclosure: Respondent shall complete the Subcontractor Disclosure form found in Section 12.

2. BEP Utilization Plan. Respondent shall submit the BEP Utilization Plan. See Section 5.p.

3. If completing Form A, required forms may include, but is not limited to:

Authorized to Transact Business or Conduct Affairs in Illinois: A Respondent (other than an individual acting as a sole proprietor) must be a duly constituted legal entity and authorized to transact business or conduct affairs in Illinois prior to submitting a Proposal. For more information, see Authorized to Transact Business or Conduct Affairs in Illinois in Form A, Part 3.

State Board of Elections Registration: Throughout this RFP solicitation, each Respondent, and upon declaration of a winner, the New Manager, may be prohibited from making political contributions and be required to register with the State Board of Elections. For more information, see State Board of Elections in Form A, Part 5.

Illinois Department of Human Rights Public Contracts Number: Respondent shall complete and return the IDHR Public Contract Number form in Form A, Part 2, or in the Illinois Procurement Gateway.

Standard Certifications: Respondent shall complete and return the Standard Certifications form in Form A, Part 4, or in the Illinois Procurement Gateway.

Financial Disclosures and Conflicts of Interest: Respondent shall complete and return the Financial Disclosures and Conflicts of Interest form in Form A, Part 7, or in the Illinois Procurement Gateway.

Disclosure of Business Operations with Iran: Respondent shall complete and return the Disclosure of Business Operations with Iran form in Form A, Part 6, or in the Illinois Procurement Gateway.

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Business and Directory Information: Respondent shall complete and return the Business and Directory Information form in Form A, Part 1, or in the Illinois Procurement Gateway.

Taxpayer Identification Number: Respondent shall complete and return the Taxpayer Identification form in Form A, Part 8, or in the Illinois Procurement Gateway.

4. If completing Form B, then responsiveness may include, but is not limited to:

Valid Illinois Procurement Gateway registration number with expiration date;

Replacement certification to Illinois Procurement Gateway Certification #6 (supersedes response in Illinois Procurement Gateway);

Disclosure of pending and current contracts; and

Certifications timely to this solicitation.

5. The State will determine whether the Proposal meets the stated requirements. Minor differences or deviations that have negligible impact on the price or suitability of the service to meet the State’s needs may be accepted or corrections allowed. If no Respondent meets a particular requirement, the State may waive that requirement.

6. The State will determine whether the Proposal complied with the instructions for submitting Proposals. Except for late submissions, and other requirements that by law must be part of the submission, the State may require that a Respondent correct deficiencies as a condition of further evaluation.

ii. Responsibility. A “Responsible” Respondent is one who has the capability in all respects to perform fully the contract requirements and who has the integrity and reliability that will assure its good faith performance. The State determines whether Respondent is a “Responsible” Respondent; that is, a Respondent with whom the State can or should do business. For example, the State may consider the following:

1. A “prohibited bidder” includes any person assisting an employee of the State of Illinois by reviewing, drafting, directing, or preparing any invitation for bids, a request for proposal, or request of information, or providing similar assistance unless such assistance was part of a publicly issued opportunity to review drafts of all or part of these documents. For purposes of this section, an employee of the State of Illinois means one who, by the nature of his or her duties, has the authority to participate personally and substantially in the decision to award a State contract. No person or business shall submit specifications to a State agency unless requested to do so by an employee of the State. No person or business that contracts with a State agency to write specifications for a particular procurement need shall submit a bid or proposal or receive a contract for that procurement need.

Nothing herein is intended to prohibit a Respondent from bidding or offering to supply developing technology, goods or services after providing the State with a demonstration of the developing technology, goods, or services; provided the subject of the demonstration to the State represents industry trends and innovation and is not specifically designed to meet the State's needs. Nothing herein is intended to prohibit a person or business from submitting a bid or offer or entering into a contract if the person or business: (i) initiates a communication with an employee to provide general information about products, services, or industry best practices and, if applicable, that communication is documented in

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accordance with Section 50-39 of the Illinois Procurement Code or (ii) responds to a communication initiated by an employee of the State for the purposes of providing information to evaluate new products, trends, services, or technologies.

2. Other factors that the State may evaluate to determine Responsibility include, but are not limited to: certifications, conflict of interest, financial disclosures, political contributions, taxpayer identification number, past performance in business or industry, compliance with applicable laws, financial responsibility, insurability, effective equal opportunity compliance, payment of prevailing wages if required by law, capacity to produce or sources of supply, and the ability to provide required maintenance service or other matters relating to Respondent’s ability to deliver in the quality and quantity within the time and price as specified in this solicitation.

3. Awarded Respondents must at all times have financial resources sufficient, in the opinion of the State, to ensure performance of the contract and must provide proof upon request. The State may require a performance bond if, in the opinion of the State, it ensures performance of the contract. The State may terminate the contract, consistent with the termination for cause provision of the contract, if Respondent lacks the financial resources to perform under the contract.

4. The State may require a Respondent to correct any deficiencies as a condition of further evaluation.

p. Minorities, Females, and Persons with Disabilities Participation and Utilization Plan. This RFP contains a goal to include businesses owned and controlled by minorities, females, and persons with disabilities in the State’s procurement and contracting processes in connection with three types of services: marketing, advertising and shipping/freight. Failure to submit a Utilization Plan as instructed later in this RFP may render the Proposal non-responsive. All questions regarding the subcontracting goal must be directed to the BEP Liaison prior to submission of proposals.

BEP Goal: The BEP goal for this RFP applies solely to three types of services: marketing, advertising and shipping/freight. The BEP goal is 20% of each individual service category. BEP Liaison: Jeanetta Cardine, CMS/Business Enterprise ProgramPhone Number: (312) 814-3172Email Address: [email protected]

Businesses included in Utilization Plans as meeting BEP requirements as prime vendors or Subcontractors must be certified by the State as BEP vendors prior to the Proposal closing date. Go to (http://www.illinois.gov/cms/business/sell2/bep/Pages/default.aspx) for complete requirements for BEP certification.

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http://www.illinois.gov/cms/business/sell2/bep/Pages/default.aspx



q. Qualifications. The State will first evaluate each Respondent’s Technical Response. Each Respondent’s Technical Response will be evaluated based on its overall qualifications to provide the Services. The total number of possible points to be earned by a Respondent for its Technical Response is 2000. After evaluating each Respondent’s Technical Response (and before considering price), the State will rank the Respondents by aggregate Technical Response point total. The following table represents the criteria, evaluation factors and point values that will be considered in evaluating Technical Responses:

Criteria Evaluation Factors Possible

Points

1. Marketing the Lottery.

See also, 44 Ill. Adm. Code 1.8010(e)(1).

Respondent’s ability to market the Lottery to those residents who are new, infrequent or lapsed players of the Lottery, especially those who are most likely to make regular purchases on the internet.

100

2. Social Responsibility.

See also, 44 Ill. Adm. Code 1.8010(e)(2) and 20 ILCS 1605/9.1(e).

Respondent’s ability to address the State’s concern with social effects of gambling by those who can least afford to do so. In connection with the State’s evaluation of this criterion, please include at a minimum the following information for Respondent:

prior programs designed, implemented, or administered to address the social effects of gambling by those who can least afford it;

proposed strategy to address the social effects of gambling by those who can least afford it (including strategy for gathering and analyzing customer data to address such social effects); and

strategy for ensuring that retailers are in compliance with the Americans with Disabilities Act.

100

3. Management.

See also, 44 Ill. Adm. Code 1.8010(e)(3) and 20 ILCS 1605/9.1(e).

Respondent’s ability to provide the most successful management of the Lottery for the benefit of the people of the State of Illinois based on current and past business practices or plans of Respondent. In connection with the State’s evaluation of this criterion, please include at a minimum the following information for Respondent:

evidence demonstrating the soundness of the proposed Lottery team and management structure;

history of employee relations, including transition and collective bargaining experience;

corporate support and resources;

evidence demonstrating the adequacy of proposed staffing and an organizational chart;

evidence demonstrating the adequacy of training and education programs for staff; and

a report regarding experience in managing or working with any other related businesses with turnover in excess of $1 billion per year.

100

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Points

4. Past Performance.

See also, 44 Ill. Adm. Code 1.8010(e)(4) and (8) and 20 ILCS 1605/9.1(e).

Respondent’s past performance in servicing, equipping, operating or managing a lottery on behalf of the State or other state or foreign governments and attracting persons who are not regular players of a lottery.

10

Respondent’s record of past performance of similar work. In connection with the State’s evaluation of this criterion, please include at a minimum the following information for Respondent:

ownership, operation and maintenance experience and past performance on other large projects (including size and complexity of projects);

results achieved in growing net income;

state and federal regulatory compliance, permitting experience and past performance on similar projects;

history in renewals of service contracts;

approach to resolving contract disputes;

strategies used to select best-in-class partners and/or Subcontractors, align performance objectives and resolve conflicts with or among partners and/or Subcontractors;

a report of each instance in which it was alleged that Respondent performed inadequately - for each such instance, please provide an explanation of the circumstances, and the actions taken to address the situation;

Respondent’s five year litigation history; and

Respondent’s experience in omni-channel retail and lottery and integration of complex multi-channel partnerships.

Note that the State may conduct an independent examination to identify alleged poor or inadequate performance, and reserves the right to request additional information. Self-reporting will be viewed positively.

60

Respondent’s past performance in maximizing revenue of an enterprise in an ethical and socially responsible manner.

30

7. Plan for Performing the Services.


General. Respondent’s plan for performing the Services (the “General Plan”). In connection with the State’s evaluation of this criterion, please include at a minimum the following information for Respondent along with the additional information requested in Table A of Exhibit B:

Marketing

plan to grow the Lottery in terms of users and net income;

plan to maintain the current Lottery customer base and build the brand;

plan to maintain and protect the Lottery’s intellectual property;

500

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Points

plan with respect to communication and standard operating procedures;

Financial

asset management approach to maintain managed assets in good working order and condition;

capital expenditure plan, including a description of any capital improvements Respondents may have identified during the Proposal preparation that would immediately benefit the Lottery;

Operations

plan to meet the service levels and comply with all State policies, rules and applicable regulatory requirements;

emergency response, fraud detection and security plans;

procedure for setting up new operation and maintenance reporting;

plan for the oversight and management of the Lottery facilities, customer support centers and retail outlets;

Systems and Data Management

a data gathering, integration, protection and analytics plan (including obtaining new sources of customer data and using predictive analytics to improve marketing);

preventative, predictive, corrective and routine maintenance plans utilizing data management systems;

plan for a centralized interface for Lottery access to core business sub-systems;

plan for Lottery system interoperability and integration;

Transition

the Transition Plan, Initial Annual Business Plan, and Disentanglement Services Plan, each as defined in the New PMA. The Transition Plan should include:

- a list of the transition team members and, for each such member, the expertise and qualifications for accomplishing the objectives allocated to him or her; and

- procedures for transitioning operation and maintenance information and other information and data from the current private manager to the State and Respondent.

Subcontractors. Respondent’s selection of Significant Subcontractors, plan to manage such Significant Subcontractors and integrate the Services provided thereby (the “Subcontractor Plan”). In connection with the State’s evaluation of this criterion, please include at a minimum the following information:

200

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Points

list of proposed Significant Subcontractors and any past affiliation therewith;

list of key personnel for each Significant Subcontractor Respondent intends to engage and the qualifications of such key personnel to perform the Services;

key personnel responsible for managing the Significant Subcontractors and their qualifications for doing so;

plan to integrate the various technologies used by the proposed Significant Subcontractors;

methodology used to gather data from Significant Subcontractors, protect the same and deposit the same in a central database for analytics; and

the information requested in Table B of Exhibit B hereto.

Transparency and Integrity. Respondent’s plan to ensure the transparency, as well as the security, honesty, fairness and integrity of the Lottery (the “Transparency and Integrity Plan”).

100

6. Ability to Perform the Services.


Respondent’s ability to perform the Services as reflected by general experience, specific experience, and the qualifications, technical training, education and abilities of personnel proposed to be assigned to perform the Services. In connection with the State’s evaluation of this criterion, please include at a minimum the following information:

evidence of ability to satisfy the General Plan;

evidence of ability to satisfy the Subcontractor Plan;

evidence of ability to satisfy the Transparency and Integrity Plan; and

evidence of ability to satisfy the technical specifications set forth in Exhibit B hereto.

300

7. Personnel, Equipment and Facilities.


List of Respondent’s personnel, equipment and facilities to perform the Services currently available or demonstrated to be made available at the time of contracting.

100

8. History of Compliance with Contractual Obligations, Policies and Regulatory

Respondent’s ten year record of complying with (i) contractual obligations and (ii) applicable law. In connection with the State’s evaluation of this criterion, please include at a minimum the following information for Respondent:

number, nature and resolution of any actual or alleged contract breaches, defaults or other disputes (including the imposition of liquidated damages, fines or indemnification responsibilities) arising under any contract in the

100

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Points

Requirements. last ten (10) years;

the name and parties to any such contract;

an indication on whether any such contract was terminated and the circumstances pertaining to such termination; and

the number, nature and resolution of any actual or alleged violations of applicable law in the last ten (10) years.

9. Financial Strength and Investment Capability.

Ability of Respondent to satisfy its financial obligations under the New PMA, including payment of any Shortfall Compensation (as defined in the New PMA) that may become due. In connection with the State’s evaluation of this criterion, please include at a minimum the following information for Respondent:

copies of annual audited financial statements, including all notes, for each of the last three fiscal years, prepared in accordance with general accepted accounting principles and unaudited financial statements for the period ending June 30, 2016;

if available, the most recent Form 10-K and Form 10-Q filed with the U.S. Securities and Exchange Commission;

any outstanding liabilities or litigation against Respondent or its Affiliates that could adversely affect the ability of Respondent to satisfy its financial obligations under the New PMA, or otherwise have an adverse impact on the ability of Respondent to provide the Services at the applicable required service levels;

an indication on whether any other entity will guaranty Respondent’s financial obligations under the New PMA;

the willingness and ability of Respondent to provide a letter of credit or performance bond to satisfy any financial obligations Respondent may have under the New PMA, including with respect to Shortfall Compensation;

credit rating;

net worth;

leverage (long-term debt to total capital ratio);

historic profitability in relation to size;

liquidity (current debt to current assets ratio);

overall financial stability; and

renewals of material contracts in the last five (5) years.

If a guaranty is contemplated by Respondent’s Proposal, please provide supplemental information for the proposed guarantor substantially similar to

40

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Points

that requested above for Respondent.

Respondent’s ability to invest in the Lottery (e.g., via marketing expenditures above those budgeted in the applicable operating allowance).

10

11. Innovation. Respondent’s innovative ideas for the Lottery. Evidence of innovation may include, but is not limited to, the following:

New games, including:

- proposed new games or concepts for the Lottery; and- approach for creating new games during the term of the New PMA

(such as market research, determination of success factors and analysis thereof).

Marketing and advertising, including:

- use of social media; and- approach to gathering new sources of customer data and using

predictive analytics to improve marketing.

Delivery methods, including:

- use of internet, mobile, tablets, apps and emerging technologies;- new ways to use traditional delivery methods; and- interactive lottery play.

Use of technology, including:

- platform;- scalability; and- flexibility.

Retailer relations, including:

- aligning incentives via commissions, bonuses or other incentives;- appreciation programs;- tactics to improve or remove underperforming retailers; and- approach to add retailers in new and existing geographic areas

(including via the use of predictive analytics).

Compensation, including:

- aligning incentives (e.g., rewarding Significant Subcontractors for increasing net income rather than increased sales); and

- encouraging Significant Subcontractors to quickly cycle unsuccessful games.

History of innovation within and/or outside the gaming industry.

200

12. Other Qualifications and

Other qualifications and experience Respondent believes are relevant in the Evaluation Committee’s determination of the New Manager. These

50

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Points

Experience. qualifications and experience may include, but are not limited to, the following:

Experience implementing capital improvements (including analysis and evaluation).

Approach to responding to customer service requests.

Other experience relevant to this opportunity, specifically referring to the following matters:

- consumer-facing technology;- wide-area network delivery;- high-availability/uptime;- high level of information security;- large data warehousing and data mining;- real-time operating environment; and- high transaction volume.

Other experience relevant to this opportunity, specifically referring to the following matters:

- significant revenue size and volume of transactions;- consumer-facing business with a strong focus on customer analytics and

segmentation;- multi-channel sales distribution, including both physical and digital

channels;- portfolio management of multiple low-cost, high-impulse products; and- logistics and sales support.

Maximum Technical Response Points 2000

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r. Price. After the evaluation and ranking contemplated by Section 5.q is completed, Respondents will be evaluated based upon their price proposals. The maximum points a Respondent may earn for price is 440. After evaluating each Respondent’s price proposal, the State will rank the Respondents by aggregate price point total The chart below shows how the State will determine price points. The Respondent’s price proposal must be submitted in the format described in Section 9.

Category Points

Total Cost: Respondents will be ranked according to each Respondent’s estimated Total Cost over the life of the New PMA. “Total Cost” is an amount equal to the result of (i) the Aggregate Management Fee plus (ii) the Aggregate Incentive Compensation minus (iii) the Adjusted IP License Fee.

Management Fee

The Management Fee should include compensation for services related to the iLottery Platform Component, whether provided by one or more Significant Subcontractor(s) or the New Manager directly.

The “Aggregate Management Fee” for purposes of calculating the Total Cost is the estimated aggregate amount of the Management Fee over the life of the New PMA based on the State’s estimates of projected revenues during such period.

Incentive Compensation

The “Aggregate Incentive Compensation” for purposes of calculating the Total Cost is the estimated aggregate amount of the Incentive Compensation over the life of the New PMA based on the State’s estimates of projected Net Income during such period.

IP License Fee

The “Adjusted IP License Fee” for purposes of calculating the Total Cost is the IP License Fee as adjusted by a discount rate to account for the fact that such payment shall be made upfront at the outset of the New PMA.

Points for each Respondent’s Total Cost shall be allocated using the following formula:

(lowest Total Cost among all Respondents/Total Cost of the Respondent being evaluated) * 360 points

The Respondent with the lowest Total Cost will therefore be awarded 360 points.

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Category Points

Shortfall Compensation.

Respondents will be ranked based upon the percentage of Shortfall Compensation that each Respondent indicates it is willing to pay the State on an annual basis. The initial draft of the New PMA contemplates the New Manager paying 100% of any Shortfall Compensation to the State on an annual basis.

Shortfall Compensation in any contract year is the amount, if any, by which Guaranteed Net Income (as defined in the New PMA) exceeds Net Income (as defined in the New PMA), up to a maximum of 5% of Net Income.

80 points will be awarded for any Respondents willing to compensate the State for 100% of the Shortfall Compensation up to a maximum of 5% of Net Income. Respondents that bid a lower percentage will have their points reduced by three points for each incremental percentage below 100%. For example, a bidder that is only willing to compensate the State for 80% of the Shortfall Compensation would receive 20 points.

Maximum Price Points 440

s. Weighting Of Evaluation Criteria. The table below shows the separate rankings that the State evaluates and their relative weights in point format.

Relative Weighting of Evaluation Criteria

Relative Evaluation Criteria Weighting Percentage

Technical Response Score 2000

Price Score 440

Total 2440

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6. SELECTION OF REPLACEMENT PRIVATE MANAGER.

a. Section 9.1(o) of the Lottery Law states that the “Chief Procurement Officer shall adopt administrative rules, including emergency rules, to establish a procurement process to select a successor private manager if a private management agreement has been terminated.” The adopted administrative rules are contained in the Administrative Code.

b. The Evaluation Committee, as described in 44 Ill. Adm. Code 1.8010(g), may conduct discussions with any Respondent as contemplated in 44 Ill. Adm. Code 1.8010(h).

c. The State shall evaluate each Proposal and determine how well each Proposal meets the Responsiveness and Responsibility requirements. The State ranks Proposals, without consideration of Price, from best to least qualified using a point ranking system (unless otherwise specified) as an aid in conducting the evaluation.

d. After evaluation of all Proposals, the Lottery will select three finalists for purpose of conducting the public hearing required by 44 Ill. Adm. Code 1.8010(k).

e. Once the hearing is complete, the Lottery’s negotiation committee will commence negotiations with the best and next highest ranked Respondents as contemplated under 44 Ill. Adm. Code 1.8010(l). Additional negotiation with prospective Significant Subcontractors may occur as part of these negotiations. Any subcontracts entered into prior to award are void as to the State and at the sole risk of Respondents and their respective Subcontractors.

f. If the State does not consider the price to be fair and reasonable and negotiations fail to meet an acceptable price, the State reserves the right to cancel the award and take appropriate action to meet the needs of the State. The State determines whether the price is fair and reasonable by considering the Proposal, including Respondent's qualifications, Respondent's reputation, all prices submitted, other known prices and other relevant factors.

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7. CHECKLIST.

Respondent should use this Section 7 as a final checklist to ensure that all required documents are completed and included with the Proposal. Respondent must mark each blank below as appropriate (mark N/A when a section is not applicable to this RFP) and include such completed checklist within its Technical Packet. Respondent understands that failure to meet all requirements is cause for disqualification.

a. SOLICITATION AND NEW PMA REVIEW: Respondent reviewed this RFP, including all referenced Exhibits, Data Room documents, applicable laws and regulations and instructions, completed all blanks, provided all required information, and demonstrated how it will meet the requirements of the State of Illinois.

Yes No

b. ADDENDA: Respondent acknowledges receipt of any and all addenda to the solicitation and has taken those into account in making this Proposal.

Yes No N/A

c. RESPONDENT CONFERENCE: If attendance was mandatory, Respondent attended Respondent’s Conference.

Yes No N/A

d. PROPOSAL SUBMISSION: Respondent is submitting the correct number of copies, in a properly labeled container(s), to the correct location, and by the due date and time.

Yes No

e. FORM A or FORM B: Respondent is properly submitting either Form A or Form B, but not both.

Yes No

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f. PACKET 1 – Proposal Transmittal Letter with the listed enclosures

Yes No

i. Executive Summary Yes No

ii. Technical Response Yes No

iii. Markup of New PMA Yes No

iv. Subcontractor Disclosures Yes No

g. PACKET 2 – PRICING

Yes No

h. PACKET 3 – FORM A

Yes No

i. Business and Directory Information Yes No

ii. Illinois Department of Human Rights Public Contracts Number Yes No

iii. Standard Certifications Yes No

iv. Disclosure of Business Operations in Iran Yes No

v. Financial Disclosures and Conflicts of Interest Yes No

vi. Taxpayer Identification Number Yes No

vii. Standard Certifications Yes No

viii. Authorization to Transact Business in Illinois Yes No

ix. State Board of Elections Registration Yes No

i. PACKET 3 – FORM B

Yes No

i. Illinois Procurement Gateway Registration No. with expiration date Yes No

ii. Certifications Timely to this Solicitation Yes No

iii. Disclosures of Lobbyists and Pending and Current Contracts Yes No

j. PACKET 4 – BEP UTILIZATION PLAN

i. Minorities, Females, Persons with Disabilities Participation and Utilization Plan

Yes No

k. PACKET 5 – REDACTED PROPOSAL

Yes No

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STATE OF ILLINOISSPECIFICATIONS/QUALIFICATIONS/STATEMENT OF WORK

8. SPECIFICATIONS/QUALIFICATIONS/STATEMENT OF WORK

a. Goal. The State’s goals with respect to this RFP are set forth in Section 1 and in the New PMA.

b. Supplies And/Or Services Required. The New Manager will be expected to provide the Services in accordance with the terms and conditions of the New PMA.

c. Deliverables: See Section 8.b.

d. Respondent / Staff Specifications: See the New PMA.

e. Subcontractors: See Section 12.

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STATE OF ILLINOISSTATE SUPPLEMENTAL PROVISIONS

9. PRICING

a. FORMAT OF PRICING:

i. A Respondent’s price proposal shall serve as the basis for the compensation terms of the resulting contract. Failure to submit pricing as shown in this section may render a Respondent’s entire Proposal non-responsive and ineligible for award.

ii. Pricing for evaluation purposes shall be submitted in the following format (collectively, the “Pricing Packet”) in a separately sealed packet in accordance with Section 5.b:

1. Management Fee: Each Respondent must state its proposed Management Fee by completing and submitting Section 3 of Schedule 10.1 to the New PMA.

2. Incentive Compensation: Each Respondent must state its proposed Incentive Compensation structure by completing and submitting Section 5 of Schedule 10.1 to the New PMA. Each Respondent must additionally (i) explain how such compensation will ensure maximum growth of the Lottery and (ii) explain how such compensation will align the interests of such Respondent and the State.

3. Shortfall Compensation: Each Respondent must state the percentage of any Shortfall Compensation that such Respondent is willing to pay the State on an annual basis. Each Respondent must additionally explain how such Shortfall Compensation structure will align the interests of such Respondent and the State.

4. IP Licensing Fee: Each Respondent must state the lump sum amount it proposes to pay to the Lottery upon execution of the New PMA for use of the Lottery’s trademarks.

b. TYPE OF PRICING: The Illinois Office of the Comptroller requires the State to indicate whether the contract pricing is estimated at the time it is submitted for obligation.

c. EXPENSES ALLOWED: Expenses are allowed as stated in the New PMA.

d. TAXES: Taxes will be paid as stated in the New PMA.

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10. TERMS AND CONDITIONS:

a. New PMA. The New PMA contains the terms and conditions that will govern the Lottery’s relationship with the New Manager. In the event of a conflict between the New PMA and the remaining terms in this Section 10, the terms in the New PMA control.

b. Accuracy of RFP and Related Documents

i. The State assumes no responsibility for the completeness or the accuracy of specific technical and background information presented in this RFP or otherwise distributed or made available during this RFP process, including those documents found in the Data Room. In addition, the State will not be bound by or be responsible for any explanation or interpretation of the proposed documents or Data Room documents other than those given in writing by the State through the posting of addenda to this RFP to the Bulletin. In no event may a Respondent rely on any oral statement by the State, or its agents, advisors or consultants.

ii. Should a Respondent find discrepancies or omissions in this RFP, the Data Room documents or any other related documents, Respondent should immediately notify the State in writing of such potential discrepancy or omission. A written addendum to this RFP will be published to the Bulletin if clarification is determined by the State to be necessary. Each Respondent requesting an interpretation will be responsible for delivering such requests in writing to the Solicitation Contact.

iii. In the event that there are conflicting requirements among the RFP and the Exhibits thereto, the most stringent provision for the State’s benefit shall apply, unless clarified in writing by the State through the posting of an addendum to this RFP to the Bulletin. In certain cases, available information may not be organized in an optimum format for Proposal preparation efforts. Respondents are responsible for reviewing and becoming familiar with all available documents pertaining to the Lottery and relating to the performance of the Services requested under the terms and provisions of this RFP, including but not limited to those documents found in the Data Room.

c. Addenda to RFP. During the period provided for preparation of Proposals, the State may issue written addenda to this RFP. These addenda will be numbered consecutively and will be published to the Bulletin. These addenda will be issued by, or on behalf of, the State and will constitute a part of this RFP. Each Respondent is required to acknowledge receipt of all addenda at the time of submission of its Proposal by listing the addenda in the executed Proposal Transmittal Letter. All Proposals shall be prepared with full consideration of the addenda issued prior to the due date for Proposals in response to this RFP.

d. Background Investigation

i. The State will not enter into the New PMA with a New Manager until a full investigation has been completed by the Lottery’s background check advisor (the “Background Check Advisor”). Respondents will be required to pay the

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State or its designee all fees, costs and expenses incurred in connection with the background investigations described in Section 10.d.ii below.

ii. The State expects to begin the background check process upon the identification of the best qualified Respondent(s). The State, through its Background Check Advisor, will conduct a full background investigation of finalist Respondents and may conduct a background investigation on any Significant Subcontractor included in a finalist Respondent’s Proposal. The State must complete its background investigations on the finalist Respondents before entering into the New PMA. Each finalist Respondents shall, and shall cause the Significant Subcontractors included in its Proposal to, fully cooperate with the Background Check Advisor in a timely manner during the investigation(s). Such cooperation may include, but not be limited to, completing additional Multi-Jurisdictional Disclosure Forms or other forms for individuals or entities involved in the transaction; participating in interviews with the Background Check Advisor; and providing documents to the Background Check Advisor. The State may take a lack of cooperation into consideration in making its determination.

e. Cost of Proposal Preparation, Selection and Process

i. The State accepts no liability for the costs and expenses incurred by any Respondent in connection with this entire RFP process, including preparing the Proposals, preparing responses for clarification, attending interviews, participating in contract development and technical/financial work sessions, conducting due diligence investigations, attending meetings and presentations required for the contract approval process, negotiating the New PMA or consummating any transaction. Each Respondent that enters into the request for proposal process shall prepare the required materials and submittals at its own expense and with the express understanding that it cannot make any claims whatsoever for reimbursement from the State for the costs and expenses associated with the RFP process.

ii. The New Manager shall pay all (i) reasonable out-of-pocket expenses incurred by the State and its affiliates, including the reasonable fees, charges and disbursements of counsel for the State (whether outside counsel or the allocated costs of its internal legal department), in connection with the preparation and administration of the RFP, New PMA and other Lottery Documents (as defined in the New PMA), modifications or waivers of the provisions of the New PMA or any other Lottery Document and (ii) out-of-pocket expenses incurred by the State and its affiliates, including the fees, charges and disbursements of any counsel for the State (whether outside counsel or the allocated costs of its internal legal department), in connection with the enforcement, collection or protection of its rights in connection with the Lottery Documents.

f. State’s Rights. This RFP constitutes an invitation to Respondents to submit Proposals to the State. Without limitation, the State reserves and holds, at its sole discretion, the following rights and options to:

i. Waive any technicalities or immaterial irregularities in any Proposal received;

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ii. Prepare and issue such amendments and/or addenda to this RFP prior to the selection of a Respondent that may expand or cancel any portion of or all work described in this RFP without the substitution of another RFP and posting such revisions to the Bulletin;

iii. Require additional information from one or more Respondents to supplement or clarify the Proposals submitted;

iv. Visit and examine any of the facilities referenced in the Proposals and others owned, operated and/or designed by Respondents to observe and investigate the operations at such facilities;

v. Reject any or all Proposals in whole or in part;

vi. Reject any Proposal from any firm that is in arrears to the State upon any debt or contract or that is a defaulter as surety or otherwise upon any obligation to the State or that has failed to perform faithfully in any previous contract with the State;

vii. Postpone or change the date for receipt of Proposals or any other deadlines and dates specified in this RFP;

viii. Issue subsequent requests for proposals, conduct investigations with respect to the information provided by each Respondent, and hold public meetings for consideration of the merits of any or all Respondents;

ix. Request recipients of this RFP registered to participate in the request for proposal process to send representatives to the State’s office for interviews and presentations;

x. Request best and final offers from one or more Respondents;

xi. Discontinue negotiations with any Respondent and commence negotiations with any other Respondent;

xii. Conduct simultaneous negotiations with two or more Respondents;

xiii. Select and enter into one or more agreement with a Respondent whose Proposal best satisfies the interests of the State, in the judgment of the State, to the requirements of this RFP;

xiv. Terminate the request for proposal process prior to an award of a New PMA;

xv. Refuse to award an agreement to any and all Respondents; or

xvi. Take any action affecting the request for proposal process, or the projects subject to this RFP, that is in the best interest of the State.

g. Respondent Certification. By submission of its Proposal, each Respondent hereby certifies that the prices in the Proposal have been arrived at independently, without consultation, communication, or contract for the purpose of restricting competition as to

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any matter relating to such prices with any other Respondent, Subcontractor or with any other competitor. Respondent further certifies that unless otherwise required by law, the prices, which have been quoted in the Proposal have not been knowingly disclosed by Respondent and will not knowingly be disclosed by Respondent prior to the award of the New PMA contract, directly or indirectly, to any other Respondent or to any other competitor. Respondent further represents and warrants that no attempt has been made or will be made by Respondent to induce any other person or entity to submit or not submit a Proposal or a Subcontractor Bid for the purpose of restricting competition.

h. Post-Performance Review. The State and the New Manager shall conduct a post-performance review after the completion of the term of the New PMA in accordance with the New PMA.

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11. STATE SUPPLEMENTAL PROVISIONS.

Department Definitions

Click here to enter text.

Required Federal Clauses, Certifications and Assurances


American Recovery and Reinvestment Act of 2009 (ARRA) Requirements


Public Works Requirements (construction and maintenance of a public work) 820 ILCS 130/4.


Prevailing Wage (janitorial cleaning, window cleaning, building and grounds, site technician, natural resources, food services, security services, and printing, if valued at more than $200 per month or $2,000 per year) 30 ILCS 500/25-60.


Department Specific Terms and Conditions

See Technical Provisions and Specifications, attached to this RFP as Exhibit B.

Other (describe)

See New PMA, attached to this RFP as Exhibit A.

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12. SUBCONTRACTOR DISCLOSURE.

Will Subcontractors be utilized? Yes No

All contracts with Subcontractors (including Significant Subcontractors) must include Standard Certifications completed and signed by the Subcontractor. Further, any contract between a Subcontractor and the New Manager must include certain provisions set forth in Section 7 of the New PMA.

a. Please identify below subcontracts with an annual value of $50,000 or more that will be utilized in the performance of the contract, the names and addresses of the Subcontractors, and a description of the work to be performed by each.

Subcontractor Name: Click here to enter text.

Anticipated/Estimated Amount to Be Paid: Click here to enter text.

Address: Click here to enter text.

Description of Work: Click here to enter text.

Subcontractor Name: Click here to enter text.

Anticipated/Estimated Amount to Be Paid: Click here to enter text.

Address: Click here to enter text.

Description of Work: Click here to enter text.

If additional space is necessary to provide Subcontractor information, please attach an additional page.

b. For the Subcontractors identified above, Respondent must provide each Subcontractor’s Financial Disclosures and Conflicts of Interest to the State.

c. If the Subcontractor is registered in the Illinois Procurement Gateway and Respondent is using the Subcontractor’s Standard Certifications or Financial Disclosures and Conflicts of Interest from the Illinois Procurement Gateway, then Respondent must also provide a completed Form B for the Subcontractor.

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