Michigan Lottery · gaming system. While the Lottery’s selection of the ICS vendor among those submitted in a Proposal may be influenced by any internet gaming experience, it is

M i c h i g a n L o t t e r y – i L o t t e r y R F P A d d e n d u m N o . 4

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Michigan Lottery

101 E Hillsdale

PO Box 30023

Lansing MI 48909

ADDENDUM NUMBER: 4 Issue Date and Time of Addendum: 2/14/2013 at 11:00am ET

To

Request for Proposals

RFP Number: MSL12-001

Title and Purpose of RFP:

Development, Implementation, Operational Support

and Maintenance of an

iLottery System and iLottery Games

NATURE OF ADDENDUM:

In accordance with Section 1.6 Time Schedule the Lottery is responding to all Bidder

inquiries received before the published deadline of February 5, 2013 by 4pm ET.

Included in this Addendum are all Bidder inquiries received along with the Lottery’s

response.

RESPONSES TO BIDDER INQUIRIES:

1. Inquiry: 3.0 Introduction, Please explain how it is envisioned that Instant style of play games will be generated, sold, and played over the internet and mobile devices? Is there any expectation of participation by the existing Instants provider(s) to be involved in the development process of iLottery Instant games? How does the lottery plan to handle licensing for iLottery instants when another company has the rights for the names or distribution, ie, Monopoly, Deal or No Deal, etc.?


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Response: Lottery is seeking Bidder solutions as to the technical delivery and play features of iLottery Games – including those that are played instantly. The RFP further outlines the constraint that Bidders must propose games that match existing play styles. In regard to today’s printed Instant Games, the Lottery has a printing contract with Pollard Banknote Limited but the selection of game themes comes from a variety of vendors. While it may be possible that a Bidder could propose iLottery Games that integrate with the printed versions of games, the Lottery provides no expectation, requirement, or preference to operate in this manner. As it relates to licensed properties, the Lottery plans to procure new games via the Contractor as necessary for iLottery Games – including iLottery Games that have third-party rights. Please reference Section 3.4.8 (iLottery Games Procurement and Integration) of the RFP for details. In summary, the Contractor will be required to integrate the iLottery Game but the direct third-party procurement costs (including any licensing fees) shall be the responsibility of Lottery. However, as an exception, in the scenario that a Bidder includes iLottery Games that leverage licensed properties in their Proposal then those costs must be included in the Baseline pricing and may not be negotiated separately.

2. Inquiry: 3.4.2 Random Winner Technology (RWT), the RPF states “the

Contractor must provide a centralized technology to employ RWT and show that it has been certified”…, yet section 3.4.6 states “iLottery games will integrate with CGS and shall not include any RWT within the iLottery Game software itself”. Can you please explain the Lottery’s preference and vision on how RWT services are to be provided?

Response: The statements are not contradictory and they reinforce the same constraint. The System must be the only method for logging official wagers and determining prize outcomes and thus iLottery Games may not contain their own methods for determining prize outcomes. The iLottery Games will interface with an integration layer of the System, as described largely in Section 3.4.4 (CGS Exposed Functionality), to then communicate with the other System components such as RWT. As an example, if an iLottery Game is deployed in a Mobile App then the iLottery Game software should utilize CGS to interface with PAM for certain functions such as geo-locating the player. To conduct a wager the iLottery Game software would again interface with CGS to send the wager to be logged and in turn obtain an outcome from the RWT that is configured to support the specific iLottery Game. Assume that the outcome retrieved was a two dollar ($2.00) winner in this scenario. The iLottery Game would then use a combination of graphics and user interactions to reveal the two dollar ($2.00) prize win to the player.


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3. Inquiry: 3.4.6 iLottery Games Implementation, please define how iLottery games will integrate with the TGCS (Traditional Central Gaming System (Gtech)), for

example, prize payout on pari‐mutuel games may mean that the total sales from both the TCGS and the iCGS (iLottery) must be combined by game by draw in order to calculate payouts, etc? For MUSL games, will iLottery game data be forwarded to MUSL independent of TCGS game/draw data? How is it envisioned

that Michigan in‐state only games data will be merged with TCGS data for these game?

Response: The RFP does not require an iLottery Game to integrate with the traditional gaming system which is currently provided by GTECH. While iLottery Games provided in Proposals need to match existing play styles offered by the Lottery, this should not be construed to mean that those iLottery Games must share wager pools, prize structures, and winner determination technologies with the traditional gaming system and/or paper Instant Games.

4. Inquiry: 3.4.6 iLottery Games Implementation, it is stated “iLottery games will integrate with CGS and shall not include any RWT within the iLottery Game software itself”. Please explain the Lottery’s preferred approach for supplying / incorporation of Random Number Generation services if it cannot be resident within the iLottery software and it has to be separately certified by the CGS provider who may not be doing the individual game development?

Response: Please reference Inquiry #2 within this Addendum. As a general statement, and for illustrative purposes only, the iLottery Game is largely a creative display / user interface that reveals the prize outcome that is centrally determined by the System.

5. Inquiry: 3.6.4 System Interfaces, please state whether the Lottery is the provider or in case the Lottery is not the provider, the name of the 3rd party currently providing the following third party systems and please provide high level specifications for each of the following system, for example which hardware platform is used, which database format is used, the version if applicable, method for integration, etc.?

A. Player Rewards Program B. Prize Fulfillment Vendors C. Marketing Database System D. Customer Relationship Management System E. Customer Service Operations Software F. Advertising Performance Tracking System G. Survey, Scoring and Analytics Programs Response: The RFP states that these third-party systems are subject to change. Further, the Lottery generally sets business requirements (e.g. Lottery requests that data for all user profiles is updated daily in Marketing Database System) and


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then allows the Contractor and third-party vendor to determine the best interface method to support the business requirement (e.g. daily file transfer, real-time API, etc.). Therefore, it is not ideal for the Lottery or Contractor to attempt to determine each of these integration methods via the Bidder inquiry process. Please refer to Appendix I (Interactive Marketing Program Background Information) of the RFP for additional information regarding current vendors.

6. Inquiry: 3.6.5.E – ICS, will the lottery please identify the current ICS provider in

Michigan? What are the requirements for the ICS provider’s experience, i.e. is the ICS provider required to have provided an ICS system for an iLottery gaming system of one other customer similar to the requirements of this RFP?

Response: The current ICS provider for Lottery’s traditional games is Elsym Consulting, Inc. The ICS provider must at least be an experienced provider for a gaming system. While the Lottery’s selection of the ICS vendor among those submitted in a Proposal may be influenced by any internet gaming experience, it is not a requirement. Also, please reference Inquiry #58 within this Addendum.

7. Inquiry: 3.6.6. Drawing Controls, Does the Lottery intend to hold drawing(s)

separately in the iLottery system or for the iLottery system to receive the numbers drawn from the traditional CGS for all games resident in the iLottery system which are also played in the traditional system using a real time transfer? What integration method is desired for this information interface between TCGS and iCGS?

Response: Please reference Inquiry #3 within this Addendum.

8. Inquiry: Appendix F ‐ Will the lottery please provide the assumptions used and the basis of the calculations for Appendix F – Sales & Profit Projections? This information is required to better understand the Lottery’s expectations so that the bidder is better able to propose solutions which will meet the expectations for iLottery products of the Michigan Lottery?

Response: Lottery has studied several international jurisdictions that have multiple years of iLottery operations experience. Available sales data from those jurisdictions was then used to reflect iLottery sales (excluding online sports betting) as a percentage of total sales from all distribution channels. For example, one hundred thousand dollars ($100,000) in iLottery sales divided by one million dollars ($1,000,000) in total distribution sales results in a 10% share of sales for iLottery. A blended rate among several jurisdictions was then calculated for each year of operation (e.g. if in the second year of operation jurisdiction A, B and C had a 2%, 3%, 4% share of iLottery sales respectively then the blended rate is 3% for the second year of operation).


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The Lottery then applied each year’s blended rate against each of Lottery’s eight (8) year projection for retail sales. This provided iLottery Game Sales for each of the eight (8) years. Prize payout rates for each year of iLottery were then modeled after current Instant Game payout rates with planned increases each year. As a point of reference, Lottery produced more than $2.4 billion in revenues during last fiscal year with an average prize payout rate for all games of 57%. Assumptions made by Lottery were that growth rates would parallel other operator’s year-to-year rates (e.g. the second year rate may be a blend of rates observed in other jurisdictions from the actual years of 2002, 2005 and 2008) regardless of advances in technology in today’s age (e.g. increased mobile penetration, increased connectivity speeds, smartphone emergence, etc.). Additionally, where data was incomplete for some jurisdictions, some assumptions were made to estimate sales by creating trend lines derived from years that offered complete sales data. Also, please reference Inquiry #101 within this Addendum.

9. Inquiry: 1.0 Introduction and Background, Page 11: Activities contemplated under this RFP are currently permitted per this section. Please confirm what indemnities or protections there would be in place for the Contractor if there were a change in legislative framework, whether at the state or federal level, or in the event of termination for convenience pursuant to Section 2.45 Termination B. or non-appropriation in Section 2.31 Non-Appropriation.

Response: There are no provisions for indemnity or protection for Contractor in the event of legislative change, non-appropriations, or termination for convenience.

10. Inquiry: 2.18. Software and Documentation Escrow: There is no reference to what may trigger the use of the software source programs, program object code, operations manuals, service manuals, written procedures, and any such other materials necessary to operate the System which will be placed in an escrow account. Can the Lottery state these triggers? Response: Paragraph two (2) within Section 2.18 describes the Lottery’s intent and use of these materials.

11. Inquiry: 2.20. Title to, Use of, and Compensation for, Intellectual Property: This section states, “While the Lottery and the Contractor agree that Intellectual Property associated with any product or service provided by (or developed solely by) the Contractor during the Term of this Contract and used by the Lottery will remain the property of the Contractor, the Contractor will grant a license or authority to the Lottery to make use of any such Intellectual Property on an indefinite basis with respect to Lottery conduct of games and business”. Section


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2.20 further provides that ‘there shall be no additional charge for this right of the Lottery’. Please confirm that the term of any such license or authority to use the Intellectual Property shall be co-terminus with the term of the Contract or, in the event that the Lottery wishes to extend the license or authority to use the Intellectual Property beyond the term of the Contract, that the terms of any such extended license or authority to use the Intellectual Property shall be subject to the negotiation of appropriate terms and conditions, including without limitation, an appropriate license fee. Please also confirm that the license or authority to use the Intellectual Property shall be non-exclusive, non-transferable and subject to appropriate confidentiality obligations.

Response: The inquiry is citing language that was amended. Please reference Addendum No. 2 for modified language as it relates to this section.

12. Inquiry: 2.48. Invoicing and Payment: It is stated that the Lottery can retain a Holdback amount. Under what circumstances can the Lottery retain this Holdback amount? What is the quantum of this amount and under what circumstances will the Holdback amount be released? Response: The Lottery does not have a specific circumstance or amount in mind. From time to time a portion of a vendor invoice may not have the appropriate approval or back-up documentation, or there may be further clarification needed about a charge. If this information is not received in a timely manner, the Lottery may choose to holdback this portion of the payment rather than hold up payment of the entire invoice. The Lottery will release this amount when the proper supporting documentation/information is received and it will be included with the next payment to the vendor.

13. Inquiry: 2.50 Warranty, I.: This section states, “In the event that the Contractor breaches non-public personal information (eg. social security numbers of players) that is shall indemnify the Lottery and/or the State of Michigan and its agencies against all claims without limitation of liability.” We propose there should be a limitation on liability to be jointly developed and discussed between the Contractor and the Lottery.

Response: The inquiry is citing language that was amended. Please reference Addendum No. 3 for modified language as it relates to this section.

14. Inquiry: 3.0. Introduction, 3.4.2. Random Winner Technology, 3.4.6. iLottery Game Implementation: As a percentage of sales contract, we believe that game launch strategy decisions such as the number and timing of iLottery game launches, the market lifecycle of a game (game end guidelines), game themes, play formats, taking games from third party providers, etc. should be jointly agreed to by the Lottery and the Contractor. Please confirm that the Lottery is amendable to our interpretation.


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Response: Lottery firmly believes that Contractor should and will play a critical role in determining appropriate iLottery Games (and future Channel Mix) in order to meet or exceed the revenue and profit projections in the RFP. However, the Lottery will make final determinations with the Contractor acting as a critical advisor and therefore an approach that requires ‘joint agreement’ is not acceptable to Lottery.

15. Inquiry: 3.3.9. Notifications Integration with Lottery System (Specified Option): Does the lottery have an estimate of how many messages it will require annually under this specified option?

Response: Lottery is not requiring a certain number of messages to be sent by Contractor as it will vary depending upon the System that is defined in a Bidder’s unique Proposal. Also, please reference Inquiry #52 within this Addendum.

16. Inquiry: 3.4.8 iLottery Games Procurement and Integration: This section notes that the Contractor shall be required to provide support to the Lottery in conducting future iLottery game procurements from other sources and shall be reimbursed fully for the cost of these procurements. Please confirm whether reimbursable costs include any system customizations necessary to enable third party procurements. Please also confirm that license fees, if any, payable to third party sources, shall be the sole responsibility of the Lottery.

Response: Per Section 3.7.7 (System Engineering Support Services) of the RFP the Contractor will not be allowed to charge for System modifications related to iLottery Game development, integration and implementation services. As it relates to iLottery Game procurements, the costs originating from the third-party game providers (including any applicable license fees) are reimbursed by Lottery and are not the responsibility of Contractor.

17. Inquiry: 3.6.6. Drawing Controls: Approximately how many auditor supervised draws will be required annually?

Response: This will vary in any given year depending on the types of drawings being conducted which are related to certain iLottery activities. The Lottery is responsible for compensating the auditor in any scenario.

18. Inquiry: 3.7.17. Lottery Acceptance Testing: In an effort to estimate the cost of the RWT testing and certification would the Lottery supply the name of the test laboratory?

Response: Currently the Lottery utilizes Gaming Laboratories International, LLC. However, the Lottery cannot guarantee that this will be the laboratory utilized for any and/or all iLottery activities.


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19. Inquiry: Appendix D, Schedule of Service Levels and Liquidated Damages: We believe that some of the liquidated damages and service level obligations exceed industry standards. We trust that an opportunity will be afforded to the Contractor to negotiate these clauses in good faith.

Response: The Lottery will not provide this opportunity. Lottery has set forth Liquidated Damages that are consistent with many existing contracts and offer the Lottery with adequate protections from any Contractor errors.

20. Inquiry: Does the Lottery have any concerns regarding the voter-approval requirement (Proposal 1 of 2004) with regard to this RFP? Has the Lottery received any guidance on this issue from the Michigan Attorney General's Office?

Response: Lottery has obtained guidance regarding the voter-approval language with the Attorney General’s Office. In order to trigger the voter-approval requirement of art 4, § 41, either a new law must be enacted that authorizes a form of gambling or a proposed state lottery game must be "new" and must itself "utiliz[e] table games or player operated electronic or mechanical devices." Neither a new law nor lottery game is being proposed. Thus, the voter approval requirement does not trigger.

21. Inquiry: Can you share with us how you arrived at the $118 million in incremental profits for the first four years and $361 million for the next four years?


22. Inquiry: The RFP states the contractor must "comply with the security and operational standards as issued by any multi-jurisdictional association of which the Lottery is a member." Is the Lottery currently a member of such an association?

Response: Section 2.29 of the RFP states that “Contractor must be readily adaptable to comply” with these standards. These requirements are not mandated for implementation but rather the Lottery needs assurances that the System can easily meet the standards in the event that multi-jurisdiction games are offered via iLottery. As a point of reference, the Lottery currently participates in the sale of Mega Millions and Powerball games which have associations.

23. Inquiry: May we receive the inquiries and answers from other submitters?

Response: Yes, all Bidder inquiries and Lottery responses are disclosed in Addenda such as this document.


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24. Inquiry: As a third-party geolocation provider under section 3.3.5 of the RFP, is it

possible to offer our services in more than one bid proposal? For example, can a company be the proposed geolocation provider in 3 separate proposals from bidders X, Y, and Z? I believe we will be considered a subcontractor, however based on the definition provided in the RFP, I don't foresee us providing services that would classify us as a Substantial Subcontractor. Is this a probable assumption?

Response: Restrictions on submitting multiple proposals only applies to Bidders (and Joint Bidders if applicable). In regards to determination of Subcontractors versus Substantial Subcontractors, the Lottery would need to see the scope of actual work being delivered in order to determine this classification. Please reference the Appendix B (Glossary) to obtain further clarification to each of these terms.

25. Inquiry: Section 1.0 Introduction and Background. The RFP states that “the Lottery is planning to offer its existing array of lottery games (e.g. Instants, Keno, etc.) through modern digital channels of distribution….” One could interpret this provision as all types of lottery games currently authorized by the Lottery, including draw games. Would the Lottery please clarify with specificity all of the game types the Lottery intends to offer over the Internet? Without specificity, Bidders will be unable to develop a reliable financial model on which to base its price. In addition, would the Lottery please confirm that it has the authorization to offer each above game type, given Article IV, Section 41, of the Michigan Constitution, which provides that “… [n]o law enacted after January 1, 2004, that authorizes any form of gambling shall be effective, nor after January 1, 2004, shall any new state lottery games utilizing table games or player operated mechanical or electronic devices be established, without the approval of a majority of electors voting in a statewide general election and a majority of electors voting in the township or city where gambling will take place…” [emphasis added]? This issue becomes critical, given that Contractor’s compensation is directly correlated to sales and any limitation on the number of games offered could materially and adversely affect sales.

Response: Bidders should refer to Section 3.4.6 (iLottery Games Implementation) within the RFP to understand which games are required by Lottery. For many reasons, including the fact that Contractor is compensated with a share of iLottery Game Profits, the Lottery has provided a great deal of latitude for Bidders to propose a minimum of twenty (20) games that match existing play styles that are offered by the Lottery. In regards to the second part of the inquiry, please reference Inquiry #20 within this Addendum.


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26. Inquiry: Section 1.23 Disclosure and Ownership of Proposal Contents by Lottery. Section 1.23 of the RFP states that “any and all materials submitted [by the Bidder] become the exclusive property of the Lottery” [emphasis added]. As this statement could be misinterpreted to mean that the Lottery takes ownership of the confidential and/or proprietary material of the Bidder included within the Proposal, will the Lottery please revise Section 1.23 of the RFP to include the below underscored language: “Any and all materials submitted become the exclusive property of the Lottery, provided, however, for the avoidance of doubt, the Bidder shall retain exclusive ownership of any and all confidential and/or proprietary information of the Bidder that is contained in such submitted materials.”

Response: A reasonable interpretation would not be that Lottery takes ownership of the confidential and/or proprietary material of the Bidder. The section provides “unless prohibited by law” which is a protection for the Bidder.

27. Inquiry: Section 1.34 Litigation. The second (2nd) paragraph of Section 1.34 of the RFP requires the Bidder to disclose, among other items, whether the Bidder, or any of its owners, officers, trustees, board members, subcontractors, agents, and/or partners have been convicted of any civil or criminal offense, such disclosure that does not include either: (i) a time limitation that would make such offense relevant, (ii) a materiality threshold, and/or (iii) a requirement that any such conviction would result in a material adverse effect on the Lottery. As this disclosure requirement may result in immaterial disclosures, will the Lottery please revise the second paragraph of Section 1.34 of the RFP as follows: “As part of this disclosure requirement, Bidders must state whether they or any owners of at least five percent (5%) interest in the bidding company, officers, trustees, board members, subcontractors, agents, or partners have ever been convicted of (i) a felony, or (ii) a misdemeanor including but not limited to larceny, a gaming related offense, uttering and publishing, or any other civil or criminal offenses which either: (A) could materially affect the ability of the Bidder to perform under the Contract, or (B) is based upon fraudulent or dishonest acts. excluding driving offenses. Failure to disclose such matters may result in rejection of the Proposal or in termination of a Contract.” Additionally, will the Lottery please revise the disclosure requirement to be applicable to our “Substantial Subcontractors” instead of “subcontractors?”

Response: The language in the RFP is the Lottery’s current standard practice today and it will not be modified solely for the purposes of this RFP.


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28. Inquiry: Section 2.0 Introduction. Section 2.0 of the RFP provides that "by submission of a Proposal, the Bidder shall agree to the Terms and Conditions contained in this section." Would the Lottery please clarify how Bidders should interpret Section 5.8 of the RFP, which would seem to allow for a period of contract negotiation with the preferred Bidder following announcement of the Lottery's intent to award, as the former provision would seem to foreclose the ability to negotiate the terms and conditions of Section 2 (which would form an integral part of any Contract)?

Response: The second (2nd) paragraph within Section 5.8 (Notice of Award and Contract Signing) of the RFP provides the intent of the period for Contract negotiation.

29. Inquiry: Section 2.2 Amendments to the Contract. Section 2.2 of the RFP requires the mutual agreement of the parties to modify or amend the terms of any Contract provision resulting from the RFP. However, Section 2.2 of the RFP provides that the “Lottery shall have the right, in its sole discretion, to change the terms of this agreement where and/or when prescribed by Federal or State law.” As drafted, this provision gives the Lottery the ability to unilaterally amend sections of the Contract, and, make such amendments to the RFP without notice to the Bidder. As such, will the Lottery please revise the last sentence of Section 2.2 of the RFP as follows: “Lottery shall have the right, following written notice to the Contractor in its sole discretion, to change the terms of this agreement where and/or when expressly required prescribed by Federal or State law.”

Response: The Lottery does not agree to add a statement exactly as suggested by Bidder. However, the Lottery agrees that some degree of clarification would benefit the RFP. As such, language modifications have been published within Addendum No. 5 to reflect this.

30. Inquiry: Section 2.5 Emergency Extension. Section 2.5 of the RFP allows for “emergency extensions” of the Contract beyond the term (including options) permitted in Section 2.4 of the RFP. Additionally, the Lottery provides for only seven (7) days advance notice to the Contractor prior to such extension(s). As a proposed Contractor will be required to allocate (and re-allocate) significant assets (including those Michigan Lottery-dedicated employees) in connection with this Contract, (i) the Lottery should be required to provide at least thirty (30) days written notice for these extension periods, and (ii) each such extension period should not be for a period less than ninety (90) days. Additionally, Section 2.5 of the RFP allows for these emergency extensions to exist indefinitely until the “subsequent contractor’s” system is prepared to meet the requirements of the Lottery. While a proposed Contractor should be willing to provide some emergency services, (i) the compulsory duration should be limited to a total of


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ninety (90) days (provided, however, that the Contractor can elect to continue to provide the services for a longer period), and (ii) the Contractor should have the ability to negotiate the rates, terms and conditions for any such emergency extension after the compulsory duration has expired. As such, will the Lottery please revise the first paragraph of Section 2.5 of the RFP as follows: “The Lottery reserves the right to extend this Contract, or any renewal thereof, at the rates and upon the terms and conditions then in effect on seven thirty (730) days’ prior written notice for one (1) or more thirty ninety (3090) day periods if a different contractor is chosen for a subsequent contract and the subsequent contractor's system is not prepared to meet the requirements of the Lottery. During such ninety (90) day emergency extension period, the parties may mutually agree on a successive emergency extension period(s), which shall be under rates, terms and conditions as agreed to by the parties.


31. Inquiry: Section 2.9(D) Insurance. This section states that Notice must be sent to the Lottery if there is a “Material Change” in coverage under the policies. A material change can be subjective; in addition, the standard endorsement provided by the carriers does not afford this coverage. Will the Lottery please delete the works “materially changed” from paragraph D in Section 2.9, Insurance?

Response: In this case a material change would be a change in premium, deductible, or the addition of an exclusion. This language must remain to ensure Contractor does not greatly alter their insurance policies without Lottery having knowledge of the changes.

32. Inquiry: Section 2.10 Contractor Error Liability. As drafted, Section 2.10 of the RFP requires that the Contractor agree to accept unlimited liability to pay damages for “any specific and definite financial obligations incurred by the Lottery arising as a result of errors or faults by Contractor’s staff, subcontractors, and the System.” The Lottery provides as an illustrative example “errors in entry or posting of winning numbers or winning outcomes by System operators, software or hardware errors that create unwarranted payout liabilities, and apparent winning wagers or outcomes issued by the System and presented for redemption which are not identified as valid winning outcomes in the transactions maintained by the iLottery ICS…” Given that such language provides for significantly more financial liability than what is required under Michigan regulation, will the Lottery please amend this provision (i) to require that the Lottery give Contractor reasonable notice of any


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claim for damages for which Contractor is potentially liable under this term, (ii) to assure that the Lottery not settle any such claim without first obtaining Contractor’s written approval; and (iii) to provide Contractor the right to assume control of the legal defense to any such claim?

Response: The Lottery does not agree to make modifications exactly as suggested by Bidder. However, the Lottery agrees that some degree of clarification would benefit the RFP. As such, language modifications have been published within Addendum No. 5 to reflect this.

33. Inquiry: Section 2.11 Ownership of Materials. With respect to Section 2.11, would the Lottery please clarify that its right to use whatever data, documentary material or operating reports it will own pursuant to this provision shall be subject to whatever intellectual property rights are held by any third party(ies) that may be applicable thereto?

Response: Please reference the updated language for Section 2.20 (Title to, Use of, and Compensation for, Intellectual Property) within Addendum No. 2 for language related to this inquiry.

34. Inquiry: End of Contract Conversion, through 2.46(I), Contractor’s Responsibilities Upon Termination. As currently drafted, Sections 2.15 – 2.46(I) of the RFP require that the Contractor supply the Lottery and/or its agent with access to certain system data in connection with any system conversion. Will the Lottery please revise Section 2.15 of the RFP to ensure that the Contractor’s proprietary and confidential information would be protected in connection with any disclosure to a successor contractor by including the below underscored language in the second (2nd) paragraph of Section 2.15 of the RFP: “The Contractor shall cooperate fully and in good faith in the Conversion. Cooperation may include, but not be limited to, sharing of data Files, procedures, protocols, parameter settings, and authority reference Files; provided, however, to the extent any proprietary or confidential information of the Contractor is required to be disclosed to the successor contractor, the Contractor may require that adequate protection of such confidential and proprietary information will be given, including, but not limited to, requiring the successor contractor to execute a non-disclosure agreement.”


35. Inquiry: Section 2.18 Software and Documentation Escrow. The Lottery requests that the Vendor deliver to the Lottery or place in an escrow account


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“Contractor’s software source programs, program object code, operations manuals, service manuals, written procedures, and any such other materials necessary to operate the System” and “installation packages for third-party software products.” Vendor’s practice is to deposit only its proprietary source code and related materials into escrow for the benefit of customers. Bearing in mind that in most cases Vendor does not have the right to transfer or place third-party software in escrow without the third-party owner’s explicit approval, will the Lottery please confirm that Contractor is not required to deposit third-party materials for which it does not have the right to transfer or place in escrow? Will the Lottery please confirm that the Vendor’s obligation under this section to provide changes and change documentation within a week of installation in production is limited to material changes to the proprietary source code and that non-material changes to Contractor’s proprietary source code shall be deposited annually?

Response: If third-party software is licensed in the system, the Contractor is required to place the installation packages used in an escrow account. The language in the RFP is the Lottery’s current standard practice today and it will not be modified solely for the purposes of this RFP.

36. Inquiry: Section 2.20 Title to, Use of, and Compensation for, Intellectual Property; 2.35, Indemnification. Section 2.35 of the RFP provides that the Contractor shall indemnify the Lottery from and against all losses…incurred in connection with any action… to the extent that such action….is based on a claim that any piece of equipment, software, commodity or services supplied by the Contractor or its subcontractors, or the operation of such equipment, software, commodity or services, or the use or reproduction of any documentation provided with such equipment, software, commodity or service infringes any United States patent, copyright, trademark or trade secret of any person or entity which is enforceable under the laws of the United States. Given that indemnification obligations relating to intellectual property are more fully provided in the second paragraph of Section 2.20 of the RFP, would the Lottery please consider deleting Section 2.35(D) of the RFP so as to avoid any potential inconsistencies between two RFP provisions that address the same substantive issue? If the Lottery elects to keep Section 2.35(D), will the Lottery please confirm that the Contractor should only be required to indemnify and hold harmless the Lottery to the extent that the goods or services provided by the successful vendor infringed the rights of a third party, and not to the extent any infringement resulted from acts of the Lottery? Additionally, will the Lottery please confirm that Vendor’s legal counsel shall control any such defense?


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Further, will the Lottery confirm that obligations of the Vendor with respect to procuring the right to use third-party intellectual property, replacing products or services with non-infringing alternatives or accepting returns from the Lottery, is limited to circumstances in which the Lottery has a reasonable belief based on the advice of competent intellectual property legal counsel, that such products or services at issue infringe the enforceable intellectual property right of a third party?

Response: Lottery will not delete Section 2.35(D) of the RFP. Section 2.35(D) does not limit a Bidder’s indemnity to goods or services provided by the Bidder. Further, nothing in Section 2.35(D) provides that Contractor’s legal counsel will control any such defense. Bidder’s obligation under the second (2nd) paragraph of Section 2.35(D) is not limited to circumstances in which the Lottery has a reasonable belief based on the advice of competent intellectual property legal counsel, that such products or services at issue infringe the enforceable intellectual property right of a third party.

37. Inquiry: Section 2.26(A), Liquidated Damages Provisions. Section 2.26(A) of the RFP states that Liquidated Damages will not be calculated as potential lost revenue or potential lost net profit to the Lottery. Would the Lottery please revise this provision to state that: “Subject to the Liquidated Damages provisions set forth in Appendix D to this RFP, Liquidated Damages will not be calculated as potential lost revenue or potential lost net profit to the Lottery.” This would reflect the fact that some of the Liquidated Damages calculations set forth in Appendix D are in fact calculated based on potential lost net profit to the Lottery.


38. Inquiry: Section 2.26(H), Liquidated Damages Provisions. Will the Lottery please revise Section 2.26(H) of the RFP to remove the limitation that delays giving rise to the exclusion of liquidated damages must be “solely” and “specifically” related to the force majeure event and/or the Lottery, and instead include that the limitation be “to the extent” due to such cause, as follows:


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“Liquidated Damages and Delays. The Contractor shall not be required to pay Liquidated Damages for delays solely to the extent due to matters affected by force majeure, or for time delays specifically to the extent due to, or approved by, the Lottery. Liquidated Damages and service levels for this implementation are documented in Appendix D (Schedule of Service Levels and Liquidated Damages).” In addition, would the Lottery further revise Section 2.26(H) of the RFP to provide that: “Contractor should not be required to pay Liquidated Damages for delays caused by the actions or omission of third parties not under the control of the Contractor, its subcontractors, and their respective employees, consultants or agents.” Because there are a number of events in the delivery of an Internet-based solution over which the Contractor shall have no control, but which may render the System inaccessible from a user perspective (i.e., inaccessibility resulting from the user’s Internet-enabled device, user error, ISP failure), these exclusions from the imposition of Liquidated Damages are necessary.

Response: In regards to both inquiries, the language in the RFP is the Lottery’s current standard practice today and it will not be modified solely for the purposes of this RFP. As further clarification, Liquidated Damages resulting from third-parties are the responsibility of the Contractor. Further, there are exemptions within the Appendix D that offer clarity regarding events that are out of the control of the Contractor.

39. Inquiry: Section 2.35 Indemnification. Would the Lottery please amend Section 2.35 of the RFP by adding the following paragraph at the end to ensure that such standard exceptions to indemnification obligations are included within this subsection: “Notwithstanding the foregoing, the Contractor shall have no obligation to indemnify or defend the State for, or to pay any costs, damages or attorneys’ fees related to, any claim based upon the combination, operation, or use of the equipment with equipment or software not supplied by the Contractor, where the claims would not have occurred but for the combination, operation or use of such third-party equipment."

Response: Lottery does not agree to amend the RFP as Section 2.35(A) provides limitation: “that are attributable to the negligence or tortious acts of the Contractor or any of its Subcontractors, or by anyone else for whose acts any of them may be liable.” 2.35(B) holds this exception “from the Contractor’s breach of the No Surreptitious Code Warranty.”


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40. Inquiry: Section 2.35(E) Indemnification. Section 2.35(E) of the RFP provides for uncapped liability with respect to any data security breaches resulting in disclosure of Personally Identifiable Information, which is inconsistent with regulation. Would the Lottery please revise this Section 2.35(E) to ensure that the liability associated with such breach is consistent with Section D.20, iLottery Security Breach, which is consistent with applicable regulation.

Response: The language in the RFP is the Lottery’s current standard practice today and it will not be modified solely for the purposes of this RFP. In the event of data security breaches, the Contractor will be subject to each and every applicable provision in the RFP.

41. Inquiry: Section 2.45(B) Termination. Section 2.45(B) of the RFP provides that where the Lottery terminates the Contract “for convenience,” the Contractor shall be entitled to compensation upon submission of invoices and proper proof of claim, in that proportion which its services and products were satisfactorily rendered or provided, as well as expenses necessarily incurred in the performance of work up to time of termination. Would the Lottery please clarify what the Contractor is entitled to should the Contract be terminated by the Contractor based upon the Lottery's default? Since Contractor’s compensation will be based on agreed fixed percentage rates of ticket sales established through the bidding process and any subsequent negotiations, rather than on separately established payments for specific deliverables, will the Lottery please revise Section 2.45(B) by re-defining the monetary compensation Contractor may recover in the event of the Lottery's termination for convenience and termination based upon Lottery's default to include Contractor’s previously uncompensated labor, material and equipment costs of deliverables for which no agreed prices were otherwise established in the Contract? Absent such a provision, the Contractor would place at risk significant capital assets which are highly customizable and deployed and which may not be repurposed, should the Lottery elect to terminate the Contract for convenience.

Response: In regards to the first part of this inquiry, the Contract does not include a provision relating to Contractor rights under a Lottery default. Contractor rights at Termination are set forth in Section 2.45 and Contractor Responsibilities Upon Termination in Section 2.46. In regards to the second part of this inquiry, the Contractor is entitled to compensation for services and products satisfactorily rendered or provided up to the time of termination. As stated in similar inquiries, the Lottery is not in a position to absorb the financial risk of a Contractor’s business operations.


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42. Inquiry: Section 2.47 Settlement of Funds. Will the Lottery accept weekly net settlement to align with the standard retailer settlement process?

Response: Perhaps this may be acceptable. The language in the RFP states ‘or to be mutually defined if necessary’ which leaves room for Contractor and Lottery to negotiate this term.

43. Inquiry: Section 3.0 Introduction; Section 3.4.6 iLottery Games Implementation; Appendix A. Section 3.0 of the RFP states that the System shall support the purchase of “existing Lottery Games (e.g., Instants, Keno, etc.).” Will the Lottery please confirm that “existing” games beyond “Instants and Keno” include the following games that are currently offered at retail with existing prize structures, account pools and liabilities: Powerball, MegaMillions, Fantasy 5, Classic Lotto 47, Daily 3, Daily 4, Daily Keno, Raffle and Club Keno. Further, Section 3.4.6. of the RFP states that the iLottery Games should “match” existing play styles and “leverage” play styles from the “existing” games, and the definition of “iLottery Game” is a digital “version” of an existing lottery game. As such, will the Lottery please confirm the following: (A) Is it the Lottery’s intention to offer these “existing” games over the iLottery

channels in addition to the existing retail access? (B) By using the terms “match,” “versions” and “leverage” when referencing the

“existing” games, does the Lottery intend for the creation of games that mimic the current existing games, but such digital games have their own separate and unrelated draws, prize structures, account pools and liabilities?

(C) If existing retail channel games are to be accessed over the iLottery channels,

will the draws, prize structures, account pools and liabilities be shared (i.e., will a game sold at retail and the corresponding iLottery Game that “matches” the retail game have the same draw, prize structure and a shared account pool to pay out prizes)?

(D) Will the current retail sales hours be maintained for the sale of iLottery

Games?

Response: Please reference Inquiry #3 and Inquiry #25 within this Addendum. In regards to Item D in the inquiry above, iLottery sales are not reliant on the retail gaming system. Lottery states in the RFP that the sale of iLottery Games and the System will be available 24/7/365.

44. Inquiry: Section 3.1.4(B), Quantitative Performance Criteria. In Italy, (Total Population 60.5M), the provider supports a very extensive iGaming offering including Sports Betting, Poker, Casino and iLottery games. They have over 1M player accounts. These systems are sized for a maximum of approximately 60K


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concurrent users. The bingo and lottery system loads are approximately 5K concurrent users. A well-established provider’s (Total Population 62.6M) iGaming consists of existing Lottery Draw Based Games and eInstants. They have over 8M registered players. In the Summer of 2011, before a record EuroMillions jackpot, the peak Transactions per Minute (TPM) for all account activity and wagers was approximately 8K TPM. Even if every transaction was completely independent, this would be less than 10K concurrent users. Based on this data, will the Lottery please consider reducing the requirement for 50,000 concurrent players and the ability to expand to 200K concurrent players? Response: The Lottery appreciates the research provided from the Bidder. As such, language modifications have been published within Addendum No. 5 to reflect this.

45. Inquiry: Section 3.1.14(E), Network Design and Implementation. Will the Lottery confirm that third-party game content will be required to communicate via the Contractor’s published APIs?

Response: That is correct. Section 3.4.4 (CGS Exposed Functionality) provides greater detail as to the types of API interactions that the Contractor will support for third-party iLottery Game providers.

46. Inquiry: Section 3.2.2 Portal Implementation Services. Will the Lottery please provide details (e.g., potential size and frequency of uploads/downloads) on what type of documents are envisioned with respect to the following language: “Portals must include a secure upload and download site for exchange of documents between the player and Lottery within the System.”

Response: Lottery envisions that the player and Lottery may communicate using document exchange to complete processes that require sensitive information. An example of this is Lottery’s prize claim process for prizes above six hundred dollars ($600). In that example, the player would upload a one (1) page PDF document and one (1) or two (2) photos or scanned images which allow the Lottery to process the prize payment. In terms of frequency, this figure will grow as iLottery revenues increase but will likely represent a fraction of total players per year.

47. Inquiry: Section 3.3.4 Player Banking Services. Regarding Transaction Limits, the RFP states that the “Lottery will have sole discretion to designate funding limits. Contractor may advise Lottery regarding any limits that may be necessary to minimize exposure to possible fraud activities.” Will the Lottery please amend this requirement as follows to allow Contractor to set maximums for the Lottery-designated funding limits?


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“Contractor may define a maximum setting for any limits that may be necessary to minimize exposure to possible fraud activities.”

Response: Lottery does not agree to amend this requirement. Lottery may have to evaluate more consequences beyond the possible exposure to fraud activities in the decision making process to establish limits. Lottery believes that the Contractor has a critical role in determining the designation of these limits but the flexibility for Lottery to make decisions that are comprehensive of all factors must be retained to ensure the compliance and success of the program. Also, please reference Inquiry #48, Inquiry #65 and Inquiry #89 within this Addendum.

48. Inquiry: Section 3.3.4 Player Banking Services. The Lottery has indicated that it reserves the right to solely designate and retain any fees assessed to players, but the amount of fees that are set can adversely impact player participation and therefore Contractors pricing models. How will the Lottery reconcile this?

Response: Lottery understands the affect that fees may have on the program. Further, Lottery’s purpose is to meet or exceed the revenue and profit goals outlined in the RFP. Therefore, it would defeat Lottery’s entire purpose to establish fees that defeat revenue goals. It is essential for Lottery to maintain the control to modify fees as necessary. Also, please reference Inquiry #47, Inquiry #65, and Inquiry #89 within this Addendum.

49. Inquiry: Section 3.3.4 Player Banking Services. In addition to being a prepaid iLottery card, would the Game Card be personalized to the player and linked to his or her gaming account to enable, from the lottery terminal at retail, deposits directly into the e-wallet of the game account?

Response: Lottery is providing a response to this inquiry assuming that the Bidder intended to reference Section 3.5.4 (Game Card Program). The response to the inquiry, using this assumption, is no. Lottery is seeking a Game Card that is distributed at retail outlets that can then be used to add funds into a player’s iLottery VWA for the exclusive use of wagering on iLottery Games. Lottery is not requesting a card that is personalized and/or linked to a player in the RFP. Finally, perhaps it is possible that a Bidder may propose interaction with a Lottery retail terminal for activities associated with the Game Card, but it is not a specific requirement in the RFP. Also, please reference Inquiry #93 within this Addendum.

50. Inquiry: Section 3.3.6 Responsible Gaming Controls. Since a single log-in player identification is the most user-friendly and intuitive solution from a player’s


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perspective, is the Contractor required to integrate with the current subscription/loyalty/player card solutions to ensure a single player view?

Response: Lottery is responding to this inquiry in a general manner outside of the context of the Bidders reference to Section 3.3.6 as cited within its inquiry because an applicable point of reference was not found. As stated in Item G of Section 3.3.3 (Player Database) of the RFP, the Contractor will be required to perform a data conversion of existing player data upon the request of Lottery. Further, the Contractor will be required to expose PAM services via CGS which could accomplish a single-sign on approach if directed by the Lottery. In short, Lottery may direct this approach at its discretion using any combination of CGS and/or data conversion.

51. Inquiry: Section 3.3.6 Responsible Gaming Controls. If the Lottery will be offering other iGames (i.e. the existing Draw Based Games (DBGs) via immediate purchase or subscriptions), how does the Lottery envision supporting Responsible Gaming from a single player view, since the player spend from the DBGs and the player spend from the iLottery games requested in this RFP will not be combined to provide a full picture of the player which is a fundamental aspect of Responsible Gaming?

Response: Please reference Inquiry #50 within this Addendum. To further expand, as contemplated in the RFP within PAM and CGS, the Lottery will have the ability to use the System provided under the Contract to manage responsible gaming from a single player view, for programs that require registration, if desired. Alternatively, as it exists today, the Lottery may choose to manage responsible gaming on a program-by-program basis. Lottery views these decisions as better determined once a Contractor is in place to offer technical and strategic guidance regarding any integrated approaches to responsible gaming and the RFP provides for a variety of possible solutions.

52. Inquiry: Section 3.3.9 Notifications Integration with Lottery System (Specified Option). Section 3.3.9 states “Subsequently, Contractor will be required to assume all third-party costs associated with messaging rates for email, SMS, Push Notifications, or other messaging services which Lottery requires to be executed through the existing program provider’s technology framework.” Will the Lottery please clarify what messaging services are required?

Response: The messaging services that are required will vary based on the Channel Mix that is provided by a Bidder in its Proposal. Therefore, a Bidder would have better insight as to the types of messages that would need to be replicated in a third-party environment should the Lottery execute this Option. For example, if a Mobile App is not included in the Proposal then Push Notifications are not viable because they only function within a Mobile App.


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As a general idea regarding the types of messaging that may be sent include but are not limited to registration confirmation, funds transfer confirmations, promotional activities, Promo Dollar bonuses, prize wins requiring a claim form to be completed, and new game introductions. Also, please reference Inquiry #15 within this Addendum.

53. Inquiry: Section 3.4.3 Engagement Features (Chat). Based on industry experience, most chat environments feature monitored chat to ensure players don’t say anything offensive to other players (or the Brand). Will the Lottery assume the cost and responsibility of monitoring chat?

Response: Lottery is not requiring a moderation tool and/or operational services to moderate chat content in the RFP, therefore there are no costs and/or responsibilities for the Lottery (or Contractor) to assume. However, this does not prohibit a Bidder from including such a solution as an Offered Option in its Proposal for Lottery’s consideration.

54. Inquiry: Section 3.4.5, CGS Environments. There is a potential security risk in allowing third parties access to tightly controlled environments other than development and testing, especially a production environment. It could potentially compromise the integrity of the system. Will the Lottery please confirm that it wants the Contractor to allow external third parties access to only development environments?

Response: In the context of Section 3.4.5 that is correct.

55. Inquiry: Section 3.5.2 Promotion Capabilities. Section 3.5.2 contains several alphabetical lists, each starting at “A.” Would the Lottery please add numbered sub-headings to permit unique alpha-numeric references to these items?

Response: Bidders may reference the underlined text (e.g. promotion types, configurable rules, entry pools) that precedes each of the alphabetical lists in order to make a correct reference for the Lottery to understand.

56. Inquiry: Section 3.6.5(J) Gaming Operating System Security and Control Features and Functions. Will the Lottery please clarify that this section is referring to the physical address and not the logical address, such as an IP address?

Response: The Lottery is referring to an IP Address in this section of the RFP.

57. Inquiry: Section 3.5.2 Promotion Capabilities. This section states that “Third-party auditor presence and drawing observation may be required of certain drawings as directed by Lottery.” Will the Lottery be responsible for compensating the third-party auditors?


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58. Inquiry: Section 3.6.11(E) ICS Requirements. In this section, the Lottery requires that “The Proposal must identify three (3) such alternative Subcontractors from which the Lottery can select.” Recent changes in the industry have made it so that there are only two potential ICS vendors to choose from. Based on that information, will the Lottery please allow vendors to propose two choices for ICS Subcontractors rather than three?

Response: Lottery agrees and has modified the RFP language within Addendum No. 5.

59. Inquiry: Section 3.7.6 Customer Support Center (“CSC”). Can the Contractor assume that player support services apply only to technical support on Interactive wagering?

Response: That is not a correct assumption. Subsection (C) within Section 3.7.6 provides a definition that is broader than ‘technical support on Interactive wagering’.

60. Inquiry: Section 3.7.7 System Engineering Support Services. The RFP, in Section 3.7.7, addresses the proposed Contractor’s obligations with respect to providing System support and changes, with the stated requirement that the Contractor be obligated to provide at least twenty five hundred (2,500) support hours per year of the Contract, with those annual support hours included in the base price of the Proposal. Pursuant to the terms of the RFP, after those 2,500 annual support hours are exhausted in a given Contract year, then the Lottery may request and approve additional support hours at a price negotiated with the Contractor (i.e., the Contractor is entitled to additional remuneration for any hours in excess of 2,500). Section 3.7.7 of the RFP limits the services that can be allocated to these support hours to “graphical design, programming and application development” and provides that they shall not include “hours for specification development, business analysis, testing, or other hours required for defining and testing the change request.” Further, Section 3.7.7. provides that any hours associated with either: (a) “System implementation, based upon the specifications in [the] RFP and the Proposal” or (b) “iLottery Game development, integration and implementation services” shall not be included in the annual allocation of, and are not applicable to, these 2,500 support hours per year of the Contract for “change requests.”


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However, in the “Lottery Response” contained in Addendum Number 1 to the RFP with respect to both: (i) Protest #20 – Section 3.4.4 CGS Exposed Functionality and (ii) Protest #21 – Section 3.5.5. CGS Marketing Technology Solutions Option, which were issued in response to a potential Contractor(s )’s protest and inquiry into which party shall bear the unknown and un-estimable costs and expenses with respect to the interface and integration services necessary with respect to Section 3.4.4 and Section 3.5.5 of the RFP, the Lottery stated that “per Section 3.7.7 System Engineering Support Services the Contractor will already be providing the Lottery with annual support hours to handle such change requests,” which implies that the Contractor is permitted to allocate the integration service hours to the required 2,500 support hours, and thus would be compensated for service hours in excess of the 2,500 yearly support hours. The Lottery’s response, if understood correctly, appears to be in direct conflict with the language of Section 3.7.7 of the RFP that states that those integration and interface costs associated with iLottery Game “integration and implementation services” are to be “handled independently” and not allocated to the 2,500 support hours. It should be noted that based upon the vague terms of the RFP, as well as the conflicting assertion provided under the “Lottery Response” to the above noted “protests,” in addition to Section 3.4.4 and Section 3.5.5, there are numerous other “integration” and “interface” obligations of the Contractor with third-party providers within the RFP that are unclear as whether the Contractor can allot its service time against these 2,500 yearly support hours included within the base price (and thus allow the Contractor to be compensated for those additional integration and interface hours in excess of the 2,500, as negotiated with the Lottery), which include, but are not limited to, the following Sections of the RFP: (1) Section 3.2.2, Portal Implementation Services; (2) Section 3.3.9, Notifications Integration with Lottery System; (3) Section 3.4, iLottery Games and Game Integration Services; (4) Section 3.4.1, Centralized Gaming Services (CGS); (5) Section 3.4.4, CGS Exposed Functionality; (6) Section 3.4.6, iLottery Games Implementation; (7) Section 3.4.8, iLottery Game Procurement and Integration; and (8) Section 3.6.4, System Interfaces. As there remains significant ambiguity with respect to allocation of support hours (and ultimately, the related cost burden for such service time) with respect to integration and interface efforts with potential third-party providers, and as Section 3.7.7 of the RFP appears to be in conflict with the “Lottery Response” given in the Addendum Number 1, will the Lottery please confirm that all integration and interface services with third-party providers that are


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delivered by the Contractor at the direction of the Lottery shall apply against, and be allocated to, the annual 2,500 support hours included in the Contractor’s base price? And that the Contractor shall be entitled to remuneration from the Lottery for any integration/interface services required with respect to third-party providers in excess of the annual 2,500 support hours? This clarification by the Lottery is of tremendous importance, as without such necessary clarif ication, it will result in a situation whereby the responsible Bidders will have insufficient information on which to provide an accurate and reasonable Proposal to the Lottery and the State of Michigan.

Response: Lottery will not confirm the Bidder request that all third-party integrations may incur against the 2,500 annual support hours. Lottery’s response to Protest #20 and Protest #21 within Addendum No. 1 was provided to clarify very isolated areas of the RFP and a Bidder should not misconstrue this to mean that all third-party integrations are and/or should be subject to the same terms. As specified in Section 3.7.7 “All hours associated with the System implementation, based on the specifications in this RFP and the Proposal, shall not be included in the annual allocation of these support hours.” Further, Lottery has expressly stated in the RFP that iLottery Game activities may not be allotted against the 2,500 annual support hours per Section 3.7.7 of the RFP; “iLottery Game development, integration and implementation services are handled independently, as described primarily in Section 3.4, and are not applicable to hours allocated per year of the Contract for change requests.” Lottery agrees that the language in Section 3.5.5 and Section 3.4.4 would benefit from amended language in conjunction with the response to Protest #21 within Addendum No. 1. Additionally, the Lottery agrees that Section 3.6.4 can be selectively clarified to allow for certain System interfaces to be allotted against the 2,500 annual support hours. As such, language modifications have been published within Addendum No. 5 to reflect these changes.

61. Inquiry: Part 4 iLottery System Pricing. The method in this pricing scenario requires vendors to bear all the risk regarding Gross Profit levels. Would the Lottery amend the pricing structure to allow a sliding scale such that as sales increase the price would be lower?

Response: Lottery does not agree to amend the pricing structure to allow for a sliding scale. The pricing method used in the RFP resembles common practice currently used by Lottery in similar contracts.

62. Inquiry: Appendix D.15 Failure to Comply with Required Standards or to Remedy Audit Recommendations. The Contractor is required to comply with all required Lottery and multi-jurisdictional standards, and Liquidated Damages will apply for each instance of non-compliance. However, because many multi-


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jurisdictional rules are not published, the Contractor may not be aware of changes to multi-jurisdictional standards until an audit reveals certain deficiencies. To ensure that Contractor has knowledge of modifications to multi-jurisdictional standards before Liquidated Damages may be assessed, would the Lottery revise the second paragraph of D.15 as follows? The Contractor shall comply with all required Lottery and/or multi-jurisdictional standards. If the Contractor fails to comply with any required Lottery or multi-jurisdictional association standard within sixty (60) calendar days following notification by Lottery to Contractor of any changes to such standards, the Lottery may impose Liquidated Damages of five thousand dollars ($5,000) for each instance of non-compliance. In addition, the Lottery may impose an additional five thousand dollars ($5,000) for each subsequent (7) day period, or portion thereof, for each instance for which compliance has not been achieved. Response: Lottery agrees and has modified the RFP language within Addendum No. 5.

63. Inquiry: Appendix E Lottery IT Security Policies. Regarding Appendix E, subsections 3 and 7, will the Lottery please confirm that these requirements are referring to interactive logins only?

Response: Lottery cannot respond to this inquiry due to the need for a high degree of interpretation. Specifically, the term ‘interactive logins’ is not a valid point of reference within the RFP.

64. Inquiry: Appendix F Sales & Profit Projections. For pricing purposes, can the Contractor assume that the Lottery will not exceed 1% of iGaming Sales for iGaming promo dollars on an annual basis?

Response: The Lottery has estimated a 1% allocation of Promo Dollars based on iLottery Game Sales. However, this may increase or decrease based on the return on investment performance for ongoing Promo Dollar campaigns. Lottery’s objective is to maximize profits to the School Aid Fund and the utilization of Promo Dollars will remain consistent with this objective.

65. Inquiry: Section 3.3.4 Player Banking Services. The Lottery has indicated that it reserves the right to solely designate and retain any fees assessed to players. Since fees can negatively impact player participation these fees also affect bidder’s pricing models. We respectfully request that the Lottery identify known potential fees as part of this bidding process to allow responsible bidders to factor these fees into potential pricing models. Furthermore we respectfully request that the Lottery define a process in which the successful Contractor will be notified of new fees and allowed to adjust its compensation should new fees adversely affect player participation.


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Response: Lottery does not have specific fees determined at this point in time. Additionally, Lottery does not agree to allow the Contractor to adjust its compensation based on fees. However, the Contractor will be given notice of planned changes to fees from the Lottery. Please reference Inquiry #47, Inquiry #48, and Inquiry #89 within this Addendum.

66. Inquiry: Section 2.9 Insurance, H: Would the lottery clarify what coverage is expected under "Computer Crimes"?

Response: This should be included as part of the Fidelity/Employee Dishonesty policy. It should cover direct loss to the State and any legal liability of the State arising out of or related to fraudulent or dishonest acts committed by the employees of the Contractor or its Subcontractors resulting from some kind of Computer Fraud.

67. Inquiry: Section 2.9 Insurance, H: Coverage provided by a fidelity insurance policy covers loss of money, securities, or inventory as a result of the dishonesty of employees. Please clarify extent of legal liability coverage sought by the State.

Response: Section 2.9 Insurance, H sets forth a minimum amount of one million dollars ($1,000,000) with a maximum deductible of fifty thousand dollars ($50,000).

68. Inquiry: Section 2.9 Insurance, B: Would the lottery clarify who they are referring to by including “agents” in the request for “Additional Insureds”.

Response: Any person or entity who is authorized to act for the State through employment, by contract or apparent authority.

69. Inquiry: Page 20, Section 1.24: Public Records and Requests for Confidentiality. The second paragraph of this section states: “…the Lottery may make a reasonable attempt to notify the Bidder of the request so the Bidder may take any actions it deems necessary to prevent Lottery’s disclosure of the material.” In conformance with the statement on p.3 in Addendum Number 1, will the Lottery please change the wording to “will make a reasonable attempt” and commit to trying to contact the Bidder?

Response: Lottery does agree to modify the language because the semantics used in the RFP will not supersede any federal or state laws that govern public requests for information. Lottery’s response to Protest #8 within Addendum No. 1 is intended only to clarify the Lottery’s responsibilities as dictated by the Freedom of Information Act.

70. Inquiry: Page 23, Section 1.33: Investigations During Proposal Evaluation. What is the typical cost of background investigations in Michigan?


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Response: As a general estimate it would cost one hundred dollars ($100) to one hundred and fifty dollars ($150) per employee. Certain activities of the background check process may involve the Bidder’s state resources, such as fingerprinting services, which may vary in cost. The figure stated in this response is a reasonable estimate based on the Lottery’s experience.

71. Inquiry: Page 30, Section 2.8. Bonds and Insurance Qualifications. This section requires that “The Contractor must provide copies of each insurance contract.” It is not standard practice to provide copies of each insurance contract because many of our insurance policy contracts may contain proprietary information. Will the Lottery please modify this requirement to eliminate the need to provide copies of each contract, and accept a standard certificate of insurance evidencing the required coverage?

Response: Lottery does not agree to modify the RFP per this request. While this may not be standard practice in other jurisdictions, obtaining a copy of each insurance contract is standard practice within Michigan.

72. Inquiry: Pages 31-34, Section 2.9. Insurance. Paragraph 5 of this section requires that “Where specific limits are shown, they are the minimum acceptable limits. If the Contractor’s policy contains higher limits, the State shall be entitled to coverage to the extent of such higher limits.” This requirement is very atypical in the industry and not fair to vendors, especially large vendors who likely have higher limits on their policies. Will the Lottery remove this requirement so that the language is consistent with similar lottery industry insurance requirements? Additionally, subsection D. requires that policies include 30 days notice of cancellation to the Lottery. Insurance brokers are no longer legally allowed to put a blanket 30 day clause on the new standard certificate of insurance form. Certificates now state that notice of cancellation will be provided based on terms of individual policies. Will the Lottery please amend this section accordingly?

Response: To the first part of this inquiry, no, this is standard language in all State contracts. To the second part of this inquiry, this language does not ask for certificates to state the thirty (30) day notification clause, but requires that the insurance policies be endorsed to provide the notice.

73. Inquiry: Page 34, Section 2.10. Contractor Error Liability. The RFP states the contractor will be liable for “… apparent winning wagers or outcomes issued by the Contractor's System and presented for redemption which are not identified as valid winning outcomes in the transactions maintained by the iLottery ICS as outlined in Section 3.6.11.” Will the Lottery specify that this liability is limited to


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errors or faults arising as a result of actions by the Contractor, its staff, Subcontractors, or the systems and permit the Contractor to reserve the right to negotiate other standard exclusions into this section, including, but not limited to, any fraud or player wrongdoing?

Response: Please reference Protest #5 within Addendum No. 1.

74. Inquiry: Page 38, Section 2.20. Title to, Use of, and Compensation for, Intellectual Property. Will the Lottery please revise the second paragraph to include standard intellectual property indemnification exclusions, including clarifying that the Contractor’s indemnification obligations only extend to its own actions, and that actions of the Lottery or its other vendors in connection with their use of the Contractor’s intellectual property in a manner other than what is authorized by the Contractor are not covered?

Response: Lottery does not agree to revise the second (2nd) paragraph of Section 2.20. Contractor’s indemnification under this paragraph relates to claims that Contractor is violating a third-parties intellectual property rights.

75. Inquiry: Page 39, 2.21. Exclusive Use of the Transaction Processing Systems. The RFP requires: “Use of the Contractor’s hardware and software configuration that processes game transactions for the Lottery must be exclusive to the Lottery. Transactions from other sources shall not be commingled with the gaming transactions of the Lottery.” This setup restricts the Lottery’s options, and possibly increases its cost unnecessarily. It is far more common today for Vendors to provide a shared environment. Will the Lottery change the requirement to the following? “Contractors shall provide a system that securely processes transactions in such a way that prevents commingling of jurisdictional transactions as well as commingling of transactions by required processing type.”

Response: Lottery does not agree to add a statement exactly as suggested by Bidder. However, the Lottery agrees that some degree of clarification would benefit the RFP. As such, language modifications have been published within Addendum No. 5 to reflect this.

76. Inquiry: Page 39, 2.23: Lottery Purchase and Prize Payment Restrictions. We would prefer not to provide employees’ social security numbers and dates of birth due to privacy concerns, and instead provide this information in response to a specific inquiry on an as needed basis. We request that the Lottery revise this to reflect only name and address is required, or in the alternative, restrict the request for social security number and dates of birth to Michigan residents only. Furthermore, from a privacy standpoint, we object to the requirement that employees provide information on relatives living in their household. Will the Lottery please remove this requirement?


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77. Inquiry: Page 43, Section 2.27: Security Program under the Contract. With respect to the last paragraph on p. 43, will the Lottery please limit this requirement to employees in the State of Michigan and key out of state personnel? With respect to Section I. on p. 44 will the Lottery please clarify that this reporting requirement is only for employees of the Contractor working on the Contract?

Response: In response to both questions, the language in the RFP is the Lottery’s current standard practice today and it will not be modified solely for the purposes of this RFP.

78. Inquiry: 10) Page 46, Sections 2.33 & 2.34: Freedom of Information and Confidentiality. MCL15.231(1)(f) states: (1) A public body may exempt from disclosure as a public record under this act any of the following: (f) Trade secrets or commercial or financial information voluntarily provided to an agency for use in developing governmental policy if: (i) The information is submitted upon a promise of confidentiality by the public body. (ii) The promise of confidentiality is authorized by the chief administrative officer of the public body or by an elected official at the time the promise is made. (iii) A description of the information is recorded by the public body within a reasonable time after it has been submitted, maintained in a central place within the public body, and made available to a person upon request. This subdivision does not apply to information submitted as required by law or as a condition of receiving a governmental contract, license, or other benefit. In order for Bidders to ensure that their trade secrets and financial information will be protected to the maximum possible extent under Michigan law, will the Lottery please confirm that this subdivision of the Michigan FOIA law is applicable to trade secrets and financial information supplied in connection with this RFP process and any resulting Contract? Furthermore, will the Lottery please confirm that the Lottery will meet all of the public body requirements listed in this subdivision?



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79. Inquiry: Page 49, Section 2.41: Compliance with Laws. The Lottery has included a sentence requiring the Contractor to comply with Applicable Laws, but the Lottery does not make a similar representation. We understand that the Lottery is taking the position that its compliance with the law is inherent, but will the Lottery confirm that this is one of the items that the parties can further clarify during contract negotiations?

Response: Lottery does not agree to negotiate any such term with Contractor. Please reference Protest #9 within Addendum No.1.

80. Inquiry: Page 51, Section 2.46. Contractor’s Responsibilities Upon Termination. Subsection F states that the Contractor “shall be deemed to have released and relinquished to the Lottery any and all claims or rights …to common law or statutory copyright…” This provision is overreaching as the rights of the Lottery are sufficiently protected by other provisions of the RFP in this regard and there is no reason for a blanket provision transferring the Contractor’s intellectual property to the Lottery. Will the Lottery delete this provision or modify the provision to acknowledge that the Contractor will be required to release or relinquish copyrights to the Lottery only in materials that are otherwise transferred to the Lottery under other provisions of the Contract?

Response: Lottery does not read Section 2.46(F) as “a blanket provision for transferring the Contractor’s intellectual property to Lottery.” It provides that upon termination the Contractor releases and relinquishes to Lottery any and all claims with respect to all or any part of unpublished material prepared or created by the Contractor in the course of its performance hereunder. Read in conjunction with Section 2.46(H) whereby Contractor must protect and preserve any property related to the Contract.

81. Inquiry: Page 54, Section 2.49. Non-Exclusive Rights. Will the Lottery confirm that there will only be one (1) iLottery System during the Term, with the understanding that the Lottery may separately contract with providers of iLottery games per RFP section 2.22?

Response: Lottery does not agree to this change as it may be interpretive. While the iLottery System will be the focus of the digital distribution of games, it may not be an exclusive system for that purpose.

82. Inquiry: Page 57, Section 3.1.1.A. Configuration at the Primary Data Center. The RFP states: “Servers providing mission-critical gaming support…” What is the Lottery’s specific definition of “mission-critical”?

Response: Any support that is required for the operation of iLottery.


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83. Inquiry: Page 61, Section 3.1.9. Primary Data Center Specification. The Lottery has indicated in subsection A. Location that the primary data center is preferred to be located within Michigan. With respect to an iLottery system the location of the primary data center will have no impact on a vendor’s ability to meet the technical requirements of the Lottery. Yet, this requirement creates a substantial disadvantage to bidders that do not currently have a data center presence in Michigan while providing no technical benefit to the Lottery. Assuming the vendor demonstrates the legality of an out of state data center under federal law, will the Lottery please remove the preference for the in-state data center from the RFP? With respect to the back-up data center, the Lottery has confirmed that from a security perspective the Lottery requires logical separation (e.g. stateful firewall, Intrusion Detection, logging, etc) from other jurisdictions and/or systems to ensure the prevention of unauthorized access and to ensure the integrity of Lottery’s System. But, physical separation is not required. Please confirm that the same is true for the primary system.

Response: In regards to the first part of the inquiry, Lottery does not agree to remove the preference given to an in-state data center. In regards to the second part of the inquiry, please reference Inquiry #75 within this Addendum.

84. Inquiry: Page 62, 3.1.10. Backup Data Centers. The RFP states that the backup data center, if located in a shared facility, must be physically and logically separated from any other system. This requirement is overly restrictive as it limits the Contractor’s ability to leverage the best-suited technology to deliver interactive/iLottery systems (like virtualization technology). The Lottery addressed this in Addendum 1 stating the backup data center need only be logically separated; however, the RFP was not amended. Will the Lottery modify this requirement to remove the need to have the data center physically separated, and amend the RFP as such?

Response: Lottery agrees and has modified the RFP language within Addendum No. 5.

85. Inquiry: Pages 64-66, Sections 3.1.13, 3.1.14, 3.1.15, 3.1.16, and 3.1.17: Network and Telecommunications Monitoring. Much of the telecommunications and monitoring requirement in these RFP sections are more relevant to traditional Online Lottery Systems. Without a large retailer or point of sale (POS) telecommunications network, many of the requirements in these sections are unnecessarily restrictive. One example is the requirement in section 3.1.17 C whereby the contractor must provide a Communications Technician at the primary data center during all hours of operation. Without a retailer network and


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with 24 hour operations, this technician is unnecessary for iLottery Systems operations. The Lottery addressed these requirements in Addendum 1, but did not modify the RFP to reflect the Lottery’s comments. Will the Lottery amend the RFP to reflect its response in Addendum 1?

Response: Please reference Protest #17 within Addendum No. 1. Lottery will not remove this requirement and has attempted only to affirm its need for trained personnel that is available 24/7/365.

86. Inquiry: Page 67, 3.2. Channel Mix and Portal Development. Paragraph 6 of this section states: “Contractor will be required to procure any domain names and manage domain name system (“DNS”) associated with the deployment of Portals. Hosting must be provided by Contractor when necessary for Portals.” Contractors should look to establish a partnership approach to business, but it is important that there be commercial provision to cover any direct costs resulting from a request by the lottery to extend the services being offered. Will the Lottery confirm that remuneration to the Contractor will extend to purchasing such domain names?

Response: This is not correct. The responsibility and cost of procuring domain names should be inclusive in a Bidder’s Proposal and Baseline pricing.

87. Inquiry: Page 69, 3.3.1: Player Registration. As a requirement, will the Contractor be required to import the Lottery’s current club membership to the new iLottery system of will this continue to remain separate? If the club is to be included, how many distinct players are represented in the current club that the lottery maintains?

Response: Please reference Item G within Section 3.3.1 of the RFP for clarification on this requirement. To expand on the language in the RFP, the Lottery would make such strategic decisions in the future based on many factors including receiving advisement from Contractor regarding any benefits or risks of such an approach. Bidders may reference Appendix I under the heading Player’s Club for information on the number of current members. Also, please reference a related response in Inquiry #50 within this Addendum.

88. Inquiry: Page 71, 3.3.3: Player Database, H. Signature capture. While possible using a tablet application, capturing a player’s signature using a mobile phone or a web application is very difficult. Having this as a requirement for player registration or activation would present a major obstacle to the successful launch of an iLottery system.


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The Lottery removed the signature capture requirement in Addendum 1; however, it did not amend the RFP. Will the Lottery amend the RFP to remove the signature capture requirement?

Response: Lottery does not agree to remove this requirement. Please reference Protest #18 within Addendum No. 1 whereby Lottery has only attempted to make clarifications regarding the requirement. For further clarification the requirement itself already states; “The application must store a digitized signature for the player”. Contractor does not need to develop a solution for obtaining a signature using a mobile phone or web application but merely must have the capability to store this information.

89. Inquiry: Page 72, Section 3.3.4. Player Banking Services. In the second paragraph the requirement states: “...Contractor is required to provide software and services that allow players to transfer funds to and from a virtual wagering account (“VWA”). The System must support configurable fees, by each payment mechanism available (e.g. credit card transfers vs. ACH transfers), for Lottery to designate and assess the player upon the transferring of funds to and from a VWA. Fees must be configurable in real-time and not require software development to perform a change. For transfer of funds into a VWA, fees must be charged to the originating payment source and not deducted from the VWA. Lottery will have the sole discretion to designate and retain any fees assessed to players...” Will the Lottery confirm that the ‘configurable fees’ sited above are fees that the lottery would charge the player for a specific service? Additionally, will the Lottery confirm that these fees will, as a minimum, include covering the cost of loading funds into the VWA (e.g., association fees for debit card deposit, acquiring fees, etc.)?

Response: Lottery may assess these fees for the transfer of funds from an external source into the VWA. For example, a one dollar ($1.00) fee may be assessed to a player for transferring funds from a bank account into his or her VWA. In regards to the second part of the inquiry, Lottery does not confirm that these fees will cover the costs for loading funds into the VWA. In any scenario, it is expected that Bidders will include any third-party banking fees (e.g. acquiring fees) in its Baseline pricing within its Proposal. Also, please reference Inquiry #47, Inquiry #48, and Inquiry #65 within this Addendum.

90. Inquiry: Page 79, 3.4.4 CGS. Exposed Functionality. The RFP states that at the Lottery’s option during the Term of the Contract, Contractor will be required to develop and support additional integration methods that securely expose other areas of the System to third-parties. Further, the RFP states that should


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technologies advance and API services are no longer prominent in developer communities, then Contractor will be required to implement new integration technologies upon the Lottery’s request. Will the Lottery add a statement to this requirement that allows the Lottery and Contractor to negotiate the commercial terms for any such development requests to modify the iLottery System?

Response: Lottery does not agree to add a statement to negotiate the commercial terms. As clarified in Protest #20 within Addendum No.1, the Contractor will first be subject to handle any such change request against the allocated 2,500 annual support hours specified within Section 3.7.7 (System Engineering Support Services) of the RFP. If the hours necessary to implement such a change surpass the allocated hours, then Section 3.7.7 further states that Contractor will be able to obtain compensation for additional hours. Also, please reference Inquiry #60 within this Addendum.

91. Inquiry: Page 81, 3.4.6 iLottery Game Implementation. RFP requires bidder to propose a minimum of 20 iLottery Games that will be included for the initial launch. The RFP provided no guidance as to whether the Lottery would place value in being able to offer its existing jackpot games, such as Powerball and MegaMillions. Will the Lottery add a statement clarifying whether jackpot games should be included in the scope of the iLottery system?

Response: Please reference Inquiry #43 within this Addendum. As it relates to specific language within this inquiry, the Lottery has not expressed ‘placing value’ on delivering existing jackpot games in the RFP.

92. Inquiry: Page 82, 3.4.8.iLottery. Games Procurement and Integration. The integration of some third-party content or products could potentially cause Contractor to incur material costs, and therefore we would expect these demands to add third-party content or products to be fair and reasonable with a negotiation by the parties. Will the Lottery add a statement to this requirement that allows the Lottery and Contractor to negotiate the commercial model by which the Contractor and/or Lottery accommodates third-party products?

Response: Lottery does not agree to add a statement exactly as suggested by Bidder. However, the Lottery agrees that some degree of clarification would benefit the RFP. As such, language modifications have been published within Addendum No. 5 to reflect this.

93. Inquiry: Page 87, Section 3.5.4. Game Card Program (Specified Option). Will

the Contractor or Lottery provide and pay the cost of the game cards? If the Contractor pays the cost of the game cards, how many game cards does the Lottery estimate will be required for each year of the contract?

Response: The Contractor is required to provide for the cost of producing and distributing Game Cards. In terms of estimating volumes, the Lottery recognizes


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that many variables may affect volumes which may be better determined by Lottery and Contractor. In light of this inquiry, the Lottery will allow Bidders to propose a per card cost in addition to the fixed monthly cost for this Option in the RFP. As such, language modifications have been published within Addendum No. 5 to reflect this. Also, please reference Inquiry #49 within this Addendum.

94. Inquiry: Pages 87-88, Section 3.5.5. CGS Marketing Technology Solutions Option. This section appears to require the vendor to absorb all costs, except direct third-party procurement costs, of integrating unknown analytics systems. The Lottery stated in Addendum 1: “Per Section 3.7.7 System Engineering Support Services the Contractor will already be providing the Lottery with annual support hours to handle such change requests.” Will the Lottery please amend the RFP to reflect that the hours referenced in Section 3.7.7 will be used for this purpose and also address that the parties will negotiate terms for projects that exceed the hours mentioned in Section 3.7.7?


95. Inquiry: Page 91, 3.6.4. System Interfaces. The System must interface, using real-time and batch methods, with several applications in the Lottery’s environment or provided as third-party systems to the Lottery. All data elements logged by the System must be available for export to other third-party systems as directed by Lottery. Contractor will be required to provide new interfaces, while supporting existing interfaces, as directed by the Lottery through the Term of the Contract. For the initial implementation, and subject to change, the Contractor will need to interface with the following third-party systems: A. Player Rewards Program B. Prize Fulfillment Vendors C. Marketing Database System D. Customer Relationship Management System E. Customer Service Operations Software F. Advertising Performance Tracking System G. Survey, Scoring and Analytics Programs In order to accurately respond, will the Lottery provide details of the APIs (with version numbers) for each of these third-party systems?


96. Inquiry: Page 96, 3.6.11. ICS Requirements. Who is the current third party ICS contractor for the On-line Gaming System? Response: Please reference Inquiry #6 within this Addendum.


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97. Inquiry: Page 98, 3.7.3. Ongoing Staffing. In light of the change to the Lottery’s

in-state data requirement, will the Lottery confirm no staff is required to be in-state?

Response: This is not correct. To clarify, Section 3.7.3 of the RFP states “Minimally, in-state staff should include an account manager, project manager and a software lead.”

98. Inquiry: Page 100, 3.7.6.A. Customer Support Center (CSC). The Lottery has indicated that CSC is preferred to be located within Michigan. With respect to an iLottery system the location of CSC will have no impact on a vendor’s ability to meet the service requirements of the Lottery. Yet, this requirement creates a substantial disadvantage to bidders that do not currently have a CSC presence in Michigan while providing no service benefit to the Lottery. Will the Lottery delete from this RFP requirement that it will give preference to the CSC being located within Michigan?

Response: Lottery does not agree to remove the preference given to an in-state CSC.

99. Inquiry: Page 113, Section 4.3. Pricing and Scoring of Options. The RFP states: “Such Options included within the base price (N/C) may or may not favorably influence the Proposal score in the relevant technical section.” What are the Lottery’s specific criteria for determining whether such option(s) favorably influence technical proposal scores?

Response: Lottery has an evaluation committee that will make any such determinations when evaluating Proposals.

100. Inquiry: Pages 133-142, Appendix D: Schedule of Service Levels and Liquidated Damages. The definitions provided for liquidated damages along with the amount contemplated are based on a traditional lottery systems contract and do not take into consideration the differences in the new iLottery channel. More common to iLottery RFPs is to include a question that requires bidders to recommend liquidated damage penalties. This serves the evaluation team during the selection process and the legal team during contract negotiations. Will the Lottery adopt this approach?

Response: Lottery-specified Liquidated Damages provisions within its contracts are a common practice and will not be modified solely for the purposes of this RFP.

101. Inquiry: Page 148, Appendix F. Sales and Profit Projections. Please provide detailed assumptions (iLottery Game sales, prizes, and promo dollars) by game, by year.


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Response: This inquiry cannot be answered directly because specific iLottery Games were not utilized in determining the financial model. Please reference Inquiry #8 within this Addendum. To further expand as it relates to this specific inquiry, the Lottery believes that iLottery Game introductions will need to be fluid, innovative and dynamic to keep up with evolving market demands. Therefore a financial model based on predicting specific iLottery Games for an eight (8) year span was not utilized. Instead, it will be the ongoing responsibility of the Lottery and Contractor to optimize the iLottery Game portfolio (and future Channel Mix) in order to meet or exceed the revenue and profit model in the RFP.

102. Inquiry: General Question. Currently, what is the average price point of scratch-off tickets sold?

Response: The average price per Instant Game sold in Michigan is two dollars and sixty one cents ($2.61).

103. Inquiry: General Question. Currently, what is the average amount spent by players per Keno wager?

Response: The average transaction wager for Keno (drawn every 4 minutes) is eight dollars and twenty five cents ($8.25) which represents a unique ticket produced on the retail gaming system.

BIDDER INSTRUCTIONS:

Bidders are not required to return this Addendum with their Proposal.

Documents

Michigan Lottery · gaming system. While the Lottery’s selection of the ICS vendor among those submitted in a Proposal may be influenced by any internet gaming experience, it is