STATE OF MICHIGANDepartment of Treasury

Purchasing Section

Request For Proposal No. 271Q3208 Originating Depository Financial Institution (ODFI) Services

Buyer Name: Thomas FalikTelephone Number: 517-373-3185

E-Mail Address: falikt@michigan.gov

Estimated Timeline:

Key Milestone: Date:Issue Date November 26, 2012Questions Due December 10, 2012Bid Due Date January 3, 2013Anticipated Contract Start Date March 1, 2013

RFP Checklist for Bidder Proposal Contents and Responsiveness

This checklist is provided for your convenience to help remind Bidders of the important requirements of the RFP. The list may not be all inclusive. The Bidder is responsible to read the RFP and submit all the required responses. If Bidders have any questions concerning these requirements please contact the Buyer listed on the front page of this RFP document.

Article 1 and Attachment A:

__________ Responses have been provided for all items requested in Article 1, Statement of Work, as requested. Technical Proposal Requirements have been met and responses are included within the format designated by the State in Article 3.

__________ Price Proposal, Article 1, Section 1.061, for the proposal has been included in Bidder’s proposal, according to the instructions laid out in Article 3 and using the format in Attachment A (if required in 1.061). If the RFP requires that pricing be sealed separately, these directions must be followed, or the proposal may be viewed as noncompliant.

Article 2:

__________ Statement that a Certificate of Insurance will be provided as a condition of award has been included.

__________ Acknowledgment and concurrence with each term and condition listed in Article 2 of the RFP document has been provided within Bidder’s proposal, with any comments or issues clearly identified.

Article 3:

__________ Attended any mandatory pre-bid meetings or site visit listed in Article 3.

__________ The complete proposal was submitted in www.bid4michigan.com or to the appropriate location and on time with the appropriate number of additional copies, and the instructed number of copies of the electronic version on CD.

__________ Bond requirements were met and submitted with the proposal (if applicable) per Article 3.

Article 4:

__________ Responses have been provided for all items requested in Article 4 and includes signature by an individual authorized to legally bind Bidder’s company.

Other:

__________ A copy of the Certifications and Representations from the Bidder’s bid4michigan registration has been submitted with the original technical proposal.

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Table of Contents

Article 1 – Statement of Work (SOW)........................................................................................................121.010 Project Identification...........................................................................................................................12

1.011 Project Request......................................................................................................................121.012 Background.............................................................................................................................12

1.020 Scope of Work and Deliverables........................................................................................................171.021 In Scope..................................................................................................................................171.022 Work and Deliverable..............................................................................................................19

1.030 Roles and Responsibilities.................................................................................................................461.031 Contractor Staff, Roles, and Responsibilities (Also See Section 4.013).................................461.032 State Staff, Roles, and Responsibilities..................................................................................471.033 Other Roles and Responsibilities............................................................................................47

1.040 Project Plan..........................................................................................................................................471.041 Project Plan Management.......................................................................................................471.042 Reports...................................................................................................................................48

1.050 Acceptance..........................................................................................................................................511.051 Criteria.....................................................................................................................................511.052 Final Acceptance....................................................................................................................51

1.060 Proposal Pricing..................................................................................................................................511.061 Proposal Pricing......................................................................................................................511.062 Price Term...............................................................................................................................531.063 Tax Excluded from Price.........................................................................................................531.064 Holdback – Deleted – N/A.......................................................................................................54

1.070 Additional Requirements....................................................................................................................541.071 Additional Terms and Conditions specific to this RFP............................................................54

Article 2, Terms and Conditions.............................................................................................................572.000 Contract Structure and Term.............................................................................................................57

2.001 Contract Term.........................................................................................................................572.002 Options to Renew...................................................................................................................572.003 Legal Effect.............................................................................................................................572.004 Attachments & Exhibits...........................................................................................................572.005 Ordering..................................................................................................................................572.006 Order of Precedence...............................................................................................................572.007 Headings.................................................................................................................................572.008 Form, Function & Utility...........................................................................................................582.009 Reformation and Severability..................................................................................................582.010 Consents and Approvals.........................................................................................................582.011 No Waiver of Default...............................................................................................................582.012 Survival...................................................................................................................................58

2.020 Contract Administration.....................................................................................................................582.021 Issuing Office..........................................................................................................................582.022 Contract Compliance Inspector...............................................................................................582.023 Project Manager......................................................................................................................592.024 Change Requests...................................................................................................................592.025 Notices....................................................................................................................................592.026 Binding Commitments.............................................................................................................592.027 Relationship of the Parties......................................................................................................592.028 Covenant of Good Faith..........................................................................................................592.029 Assignments...........................................................................................................................60

2.030 General Provisions..............................................................................................................................602.031 Media Releases......................................................................................................................602.032 Contract Distribution...............................................................................................................602.033 Permits....................................................................................................................................602.034 Website Incorporation.............................................................................................................602.035 Future Bidding Preclusion.......................................................................................................602.036 Freedom of Information...........................................................................................................602.037 Disaster Recovery...................................................................................................................61

2.040 Financial Provisions...........................................................................................................................612.041 Fixed Prices for Services/Deliverables...................................................................................612.042 Adjustments for Reductions in Scope of Services/Deliverables.............................................612.043 Services/Deliverables Covered...............................................................................................612.044 Invoicing and Payment – In General.......................................................................................612.045 Pro-ration................................................................................................................................612.046 Antitrust Assignment...............................................................................................................62

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2.047 Final Payment.......................................................................................................622.048 Electronic Payment Requirement...........................................................................................62

2.050 Taxes....................................................................................................................................................622.051 Employment Taxes.................................................................................................................622.052 Sales and Use Taxes..............................................................................................................62

2.060 Contract Management.........................................................................................................................622.061 Contractor Personnel Qualifications.......................................................................................622.062 Contractor Key Personnel.......................................................................................................622.063 Re-assignment of Personnel at the State’s Request..............................................................632.064 Contractor Personnel Location...............................................................................................632.065 Contractor Identification..........................................................................................................632.066 Cooperation with Third Parties................................................................................................632.067 Contractor Return of State Equipment/Resources..................................................................642.068 Contract Management Responsibilities..................................................................................64

2.070 Subcontracting by Contractor...........................................................................................................642.071 Contractor Full Responsibility.................................................................................................642.072 State Consent to Delegation...................................................................................................642.073 Subcontractor Bound to Contract............................................................................................642.074 Flow Down..............................................................................................................................652.075 Competitive Selection.............................................................................................................65

2.080 State Responsibilities.........................................................................................................................652.081 Equipment...............................................................................................................................652.082 Facilities..................................................................................................................................65

2.090 Security................................................................................................................................................652.091 Background Checks................................................................................................................652.092 Security Breach Notification....................................................................................................652.093 PCI Data Security Requirements – Deleted – N/A..................................................................65

2.100 Confidentiality (Also See Sections 1.022.11 and 12).......................................................................662.101 Confidentiality.........................................................................................................................662.102 Protection and Destruction of Confidential Information...........................................................662.103 Exclusions...............................................................................................................................662.104 No Implied Rights....................................................................................................................662.105 Respective Obligations...........................................................................................................66

2.110 Records and Inspections....................................................................................................................672.111 Inspection of Work Performed................................................................................................672.112 Examination of Records..........................................................................................................672.113 Retention of Records..............................................................................................................672.114 Audit Resolution......................................................................................................................672.115 Errors......................................................................................................................................67

2.120 Warranties............................................................................................................................................672.121 Warranties and Representations............................................................................................672.122 Warranty of Merchantability....................................................................................................682.123 Warranty of Fitness for a Particular Purpose..........................................................................682.124 Warranty of Title......................................................................................................................682.125 Equipment Warranty...............................................................................................................682.126 Equipment to be New..............................................................................................................692.127 Prohibited Products.................................................................................................................692.128 Consequences For Breach.....................................................................................................69

2.130 Insurance.............................................................................................................................................692.131 Liability Insurance...................................................................................................................692.132 Subcontractor Insurance Coverage........................................................................................712.133 Certificates of Insurance and Other Requirements.................................................................71

2.140 Indemnification....................................................................................................................................722.141 General Indemnification..........................................................................................................722.142 Code Indemnification..............................................................................................................722.143 Employee Indemnification.......................................................................................................722.144 Patent/Copyright Infringement Indemnification.......................................................................722.145 Continuation of Indemnification Obligations............................................................................722.146 Indemnification Procedures....................................................................................................72

2.150 Termination/Cancellation...................................................................................................................732.151 Notice and Right to Cure.........................................................................................................732.152 Termination for Cause............................................................................................................732.153 Termination for Convenience..................................................................................................742.154 Termination for Non-Appropriation..........................................................................................742.155 Termination for Criminal Conviction........................................................................................742.156 Termination for Approvals Rescinded.....................................................................................75

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2.157 Rights and Obligations upon Termination.............................................................752.158 Reservation of Rights..............................................................................................................75

2.160 Termination by Contractor.................................................................................................................752.161 Termination by Contractor......................................................................................................75

2.170 Transition Responsibilities................................................................................................................762.171 Contractor Transition Responsibilities....................................................................................762.172 Contractor Personnel Transition.............................................................................................762.173 Contractor Information Transition...........................................................................................762.174 Contractor Software Transition...............................................................................................762.175 Transition Payments...............................................................................................................762.176 State Transition Responsibilities.............................................................................................76

2.180 Stop Work.............................................................................................................................................762.181 Stop Work Orders...................................................................................................................772.182 Cancellation or Expiration of Stop Work Order.......................................................................772.183 Allowance of Contractor Costs................................................................................................77

2.190 Dispute Resolution..............................................................................................................................772.191 In General...............................................................................................................................772.192 Informal Dispute Resolution....................................................................................................772.193 Injunctive Relief.......................................................................................................................782.194 Continued Performance..........................................................................................................78

2.200 Federal and State Contract Requirements........................................................................................782.201 Nondiscrimination...................................................................................................................782.202 Unfair Labor Practices............................................................................................................782.203 Workplace Safety and Discriminatory Harassment.................................................................782.204 Prevailing Wage......................................................................................................................78

2.210 Governing Law....................................................................................................................................792.211 Governing Law........................................................................................................................792.212 Compliance with Laws............................................................................................................792.213 Jurisdiction..............................................................................................................................79

2.220 Limitation of Liability..........................................................................................................................792.221 Limitation of Liability................................................................................................................79

2.230 Disclosure Responsibilities...............................................................................................................792.231 Disclosure of Litigation............................................................................................................792.232 Call Center Disclosure – Deleted – N/A..................................................................................802.233 Bankruptcy..............................................................................................................................80

2.240 Performance........................................................................................................................................802.241 Time of Performance..............................................................................................................802.242 Service Level Agreements (SLAs)..........................................................................................812.243 Liquidated Damages – Deleted – N/A.....................................................................................812.244 Excusable Failure...................................................................................................................81

2.250 Approval of Deliverables – Deleted – N/A.........................................................................................822.260 Ownership............................................................................................................................................82

2.261 Ownership of Work Product by State – Deleted – N/A...........................................................822.262 Vesting of Rights – Deleted – N/A..........................................................................................822.263 Rights in Data.........................................................................................................................822.264 Ownership of Materials...........................................................................................................83

2.270 State Standards...................................................................................................................................832.271 Existing Technology Standards..............................................................................................832.272 Acceptable Use Policy............................................................................................................832.273 Systems Changes...................................................................................................................83

2.280 Extended Purchasing..........................................................................................................................832.281 MIDEAL...................................................................................................................................832.282 State Employee Purchases – Deleted – N/A..........................................................................83

2.290 Environmental Provision....................................................................................................................832.291 Environmental Provision.........................................................................................................83

2.300 Other Provisions.................................................................................................................................842.311 Forced Labor, Convict Labor, Forced or Indentured Child Labor, or Indentured Servitude Made Materials......................................................................................................................................84

Article 3 – Bid Process and Evaluation Criteria....................................................................................863.010 Introduction..........................................................................................................................................86

3.011 Pre Bid Meetings – Deleted – N/A..........................................................................................863.012 Communications.....................................................................................................................863.013 Questions................................................................................................................................86

3.020 Award Process....................................................................................................................................863.021 Method of Evaluation..............................................................................................................86

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3.022 Technical Proposal Evaluation Criteria.................................................................863.023 Price Evaluation......................................................................................................................863.024 Award Recommendation.........................................................................................................873.025 Reservations...........................................................................................................................873.026 Award Decision.......................................................................................................................873.027 Protests...................................................................................................................................873.028 State Administrative Board.....................................................................................................87

3.030 Laws Applicable to Award..................................................................................................................873.031 Reciprocal Preference............................................................................................................883.032 Qualified Disabled Veteran Preference...................................................................................883.033 Independent Price Determination...........................................................................................883.034 Taxes......................................................................................................................................88

3.040 Possible Additional Considerations/Processes...............................................................................883.041 Clarifications...........................................................................................................................883.042 Past Performance...................................................................................................................883.043 Financial Stability....................................................................................................................883.044 Samples/Models – Deleted – N/A...........................................................................................883.045 Energy Efficiency/Environmental Purchasing Policy...............................................................893.046 Pricing Negotiations................................................................................................................893.047 Deficiency Report and Clarification Request (DR/CR)............................................................893.048 Best and Final Offer (BAFO)...................................................................................................89

3.050 Proposal Details..................................................................................................................................893.051 Complete Proposal.................................................................................................................893.052 Efficient Proposal....................................................................................................................893.053 Price and Notations.................................................................................................................903.054 Double Sided on Recycled Paper...........................................................................................903.055 Proposal Format.....................................................................................................................90

3.060 Submitting Bids and Proposals.........................................................................................................903.061 Sealed Bid Receipt.................................................................................................................903.062 Proposal Submission..............................................................................................................903.063 Responses..............................................................................................................................90

3.070 Possible Bond Requirements – Deleted – N/A.................................................................................91

Article 4 – Required Bidder Information................................................................................................924.010 Bidder Information.............................................................................................................................92

4.011 Company Information..............................................................................................................924.012 Prior Experience.....................................................................................................................924.013 Staffing (Also See Section 1.031)...........................................................................................934.014 Past Performance...................................................................................................................934.015 Contract Performance.............................................................................................................934.016 Place of Performance.............................................................................................................934.017 Place of Performance.............................................................................................................944.018 Disclosure of Litigation............................................................................................................944.019 RFP Preparation.....................................................................................................................944.020 Former State of Michigan Employees.....................................................................................944.021 Persons with Disabilities.........................................................................................................954.022 Community Rehabilitation Organizations................................................................................954.023 MIDEAL...................................................................................................................................954.024 Business Owned by Qualified Disabled Veteran....................................................................96

Attachment A, Pricing

Appendices

A FY2011 Volume of ACH and Warrant TransactionsB FY2011 Volume of ACH Revenue Program TransactionsC Implementation Guideline for FEDI 829 CancellationsD Financial EDI Implementation Guide at X12 Version/Release 4010E ReservedF Daily Processing ScheduleG Confirmation Data Page ExampleH EDI Capable QuestionnaireI Safeguard Requirements of Confidential Data

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J Principal or Branch OfficeK State Deposit LimitL Bulletin BT-10001, Deposits of State Funds and Collateral RequirementsM Incident Report N General Security RequirementsO Form 4621, What Is An Incident? (Brochure)P DTMB Technical Standard 1340.00.07 (Electronic Data Encryption)Q DTMB Technical Standard 1345.00.02 (Telecommunication Infrastructure Facility Standard)R DTMB Technical Standard 1340.00.06 (Storage of Sensitive Information on Mobile Devices and

Portable Media)S DNR ACH File SpecificationsT MLCC ACH File SpecificationsU Treasury Collections ACH File Specifications

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DEFINITIONS

AGENCY TERMS DEFINITIONS24x7x365 24 hours a day, seven days a week, and 365 days a year (including the 366th

day in a leap year).ACH The Automated Clearing House funds transfer system governed by the Rules of

the National Automated Clearing House Association which provides for interbank clearing of electronic entries for participating financial institutions. ACH also refers to an EFT Transaction.

ACH Operator It is the ACH Operator to whom the ODFI transmits entries pursuant to the authorization of or agreement with such ACH Operator. The ACH Operator then transmits the entries to the RDFI.

Additional Service Any Services within the scope of the Contract, but not specifically provided under any Statement of Work.

Audit Period The seven year period following Contractor’s provision of any work under the Contract.

Authorization Form A written authorization for a debit and/or credit Electronic Fund Transfer. The form will list all information required by NACHA in order to process the EFT (i.e., account number, routing number, account type, etc.)

Bidder(s) Those companies that submit a proposal in response to this RFP.Blanket Purchase Order

An alternate term for Contract and is used in the State’s computer system.

Business Day Any day on which the State of Michigan is open for business.Confirmation The Confirmation by the ODFI to MAIN and ACH Revenue Programs of the

receipt of a specific number of items, the total dollar value of those items, and items rejected by the ODFI within the time frame specified after receipt of electronic line transmission.

Cancellation A request from the State to the ODFI to cancel an ACH transaction, or transactions, or file. A cancellation transaction or file occurs before the ODFI has transmitted EFT transactions to the ACH Operator.

CCI Contract Compliance Inspector (see Section 2.022).Days Calendar days unless otherwise specified.Deleted – N/A That section is not applicable or included in this RFP. This is used as a

placeholder to maintain consistent numbering.Deliverable Physical goods and/or services required or identified in a Statement of Work.DTMB The Michigan Department of Technology Management and Budget.DXG Data Exchange Gateway (DEG or DXG). A solution of hardware and software

positioned as the point of contact between the State and outside partners. It is a platform of hardware and software used to store and forward data transmissions. DXG is used by ACH Revenue Programs to transmit files to the ODFI and receive files and confirmations from the ODFI.

EDI Electronic Data Interchange. Intercompany, computer-to-computer communication of data which permits the receiver to perform the function of a standard business transaction and is in a predefined standard data format.

EFT Electronic Fund Transfer Entry through an ACH system. Also referred to as ACH.

Effective Entry Date The date specified by the State on which it intends a batch of Entries to be settled. In this RFP the terms Effective Entry Date and Settlement Date are assumed to mean the same thing, unless otherwise specified.

Electronic Mailbox Sender has the ability to write to a file on Receiver’s System.Environmentally Preferable Products

A product or service that has a lesser or reduced effect on human health and the environment when compared with competing products or services that serve the same purpose. Such products or services may include, but are not limited to: those which contain recycled content, minimize waste, conserve energy or water, and reduce the amount of toxics either disposed of or consumed.

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RFP No. 271Q3208

AGENCY TERMS DEFINITIONSEncryption The procedure of scrambling data by performing a series of calculations initiated

with a secret key. The resulting encrypted data stream is indecipherable to the outside observer. The receiver of encrypted data, performing the same calculations initiated by the same key to convert the data back to its original form.

Erroneous Entry An Entry that: (1) is a duplicate of an Entry previously issued by Treasury or the ODFI; (2) orders payment to a Receiver not intended to be credited by Treasury, or (3) that orders payment in an amount different than was intended by Treasury.

Errors An error results when MAIN transmits the FEDI Transaction Sets to the ODFI and the ODFI runs an edit program and one or more entries are not complete or have other format problems. Errors are also referred to as Rejected Transaction Sets.

FEDI Financial Electronic Data Interchange. The electronic exchange of payments, payment-related information or financial-related documents in standard formats between business partners.

Hazardous Material Any material defined as hazardous under the latest version of federal Emergency Planning and Community Right-to-Know Act of 1986 (including revisions adopted during the term of the Contract).

Incident Any interruption in any function performed for the benefit of the State (also see Appendix O).

Key Personnel Any personnel identified in Section 1.031 as Key Personnel.MAIN Michigan Administrative Information Network. An agency within the State of

Michigan Department of Management and Budget. MAIN also refers to the State’s Accounting System.

New Work Any Services/Deliverables outside the scope of the Contract and not specifically provided under any Statement of Work, such that once added will result in the need to provide the Contractor with additional consideration. “New Work” does not include Additional Service.

Notification of Change (NOC)

Created by an RDFI to notify the ODFI that previously valid information contained in a posted entry has become outdated or that information contained in a prenotification is erroneous and should be changed by the State. A Notification of Change transaction is a zero dollar transaction. Paper NOCs are not acceptable.

ODFI Originating Depository Financial Institution. The financial institution awarded the contract under this RFP.

ON-US Entries An entry received for credit to an account maintained by the ODFI.Ozone-depleting Substance

Any substance the Environmental Protection Agency designates in 40 CFR part 82 as: (1) Class I, including, but not limited to, chlorofluorocarbons, halons, carbon tetrachloride, and methyl chloroform; or (2) Class II, including, but not limited to, hydrochlorofluorocarbons.

Payee Vendor payments including childcare, foster care, and adoption subsidy payments from the State, to name a few. Vendor payments include most all payments made by the State that are not included in the PFOS category. Vendor payments include payments for almost all State programs.

Pollution Prevention The practice of minimizing the generation of waste at the source and, when wastes cannot be prevented, utilizing environmentally sound on-site or off-site reuse and recycling. The term includes equipment or technology modifications, process or procedure modifications, product reformulation or redesign, and raw material substitutions. Waste treatment, control, management, and disposal are not considered pollution prevention, per the definitions under Part 143, Waste Minimization, of the Natural Resources and Environmental Protection Act (NREPA), 1994 PA 451, as amended.

Post-Consumer Waste

Any product generated by a business or consumer which has served its intended end use; and which has been separated or diverted from solid waste for the purpose of recycling into a usable commodity or product, and which does not include post-industrial waste.

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AGENCY TERMS DEFINITIONSPost-Industrial Waste Industrial by-products which would otherwise go to disposal and wastes

generated after completion of a manufacturing process, but does not include internally generated scrap commonly returned to industrial or manufacturing processes.

Prenotification The procedure used to test the ACH format for individual commercial and consumer EFTs. This is a non-dollar (zero amount) entry initiated by the State and transmitted to the ODFI. The ODFI, through the ACH Operator, then transmits the EFT Prenotification to the RDFI to test the entry data for accuracy.

RDFI A Receiving Depository Financial Institution is a participating depository financial institution which receives Entries directly or indirectly from its Automated Clearing House Operator for debit or credit to the accounts of its customers.

Receiver A person or business or commercial entity or organization that has authorized the State to initiate a credit or a debit entry to the Receiver's deposit account with an RDFI or, if the receiver is also the RDFI, to such receiver.

Recycling The series of activities by which materials that are no longer useful to the generator are collected, sorted, processed, and converted into raw materials and used in the production of new products. This definition excludes the use of these materials as a fuel substitute or for energy production.

Rejected Transaction Sets

Transaction Sets that fail the predefined edits the State has arranged with the ODFI.

Reclamation The reversal of a retirement, or other benefit payment. A Reclamation Entry may be initiated by the State or the ODFI if the Receiver is deceased and neither the Receiver’s estate nor any other account holder is entitled to the payment. A Reclamation Entry from the State is a debit Entry that may be originated in an amount equal to pension, retirement, or other benefit payment to which the Reclamation relates. The Reclamation Entry must be sent within 5 banking days after the originator receives notice of the receiver’s death.

Request for Returns A request from Treasury to the ODFI to callback an Entry that originated in error (e.g. duplicate Entry or invalid receiver). The ODFI will in turn make the request to the RDFI. A Request for Return will occur after the period has expired for requesting the reversal (5 banking days after settlement). It is a manual process for both the ODFI and RDFI. The process is initiated when the originator requests the ODFI to call the RDFI to determine if there are funds available to return the credit. It is our understanding that not all financial institutions will honor a “Request for Return”. Treasury will receive credit when the RDFI returns the Entry in question to the ODFI.

Residual Payment Portion of a payment that remains after being offset against debts.Returned Entry The process that allows the ACH Operator or RDFI to exercise their respective

rights not to accept an Entry (debit or credit) and to return it to the State through the ACH Network. The ACH Operator will return an Entry to the ODFI that cannot be processed through the ACH system (e.g. receiving RDFI not qualified to participate or improper debit item). RDFIs must return Entries that are not posted to Receivers’ accounts. For example: account is closed, there are insufficient funds to cover the debit Entry, or the account number is invalid.

Reuse Using a product or component of municipal solid waste in its original form more than once.

Reversal A “Reversal” or “Reversing Entry” is a debit or credit Entry initiated by Treasury to the ODFI, in order to correct a previous erroneous credit or debit Entry. The Reversing Entry must be transmitted to the RDFI by midnight of the fifth banking day following settlement of the erroneous Entry. Treasury will receive a credit or debit for the Reversal on the settlement date, if initiated before the settlement date; or, if initiated after the settlement date, the day after transmission to the ODFI. However, if there are not enough funds in the account at the RDFI (a request for a debit Reversing Entry), Treasury’s account will be debited and the State will pursue reimbursement from the Receiver.

RFP A Request for Proposal designed to solicit proposals for services.

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RFP No. 271Q3208

AGENCY TERMS DEFINITIONSSegment In an EDI standard, a unit of a transaction set made up of related data elements.SEM Systems Engineering Methodology.Services Any function performed for the benefit of the State.Settlement Date The date funds are to be debited from or credited to Treasury's account. And, the

day that transactions are credited to or debited from the receiver's account (for example, pay day). Settlement date will be on the effective Entry date, unless otherwise specified.

SLA Service Level Agreement.Source Reduction Any practice that reduces the amount of any hazardous substance, pollutant, or

contaminant entering any waste stream or otherwise released into the environment prior to recycling, energy recovery, treatment, or disposal.

State State of Michigan.State Location Any physical location where the State performs work. State Location may

include state-owned, leased, or rented space.State Workday Any day on which the State of Michigan is open for business.Subcontractor A company selected by the Contractor to perform a portion of the Services, but

does not include independent contractors engaged by Contractor solely in a staff augmentation role.

SUITE State Unified Information Technology Environment. It is a standardized methodology for project and systems development based on standardized and repeatable practices.

Transaction Set A collection of EDI standard segments that contain the information required by a receiver to perform a standard business transaction. In an EDI standard, a transaction set is defined as having three sections, header, detail, and summary, and is comprised of a predefined group of segments in each section.

Tracer A tracer is a request from Treasury to the ODFI. The tracer will include sufficient information for the ODFI to research what happened to the particular ACH transaction in question. The ODFI will process tracers in accordance with the timing provision in this contract.

Transmission An electronic transfer of a signal, message, or other form of intelligence from one location to another.

Treasury Michigan Department of Treasury.Unauthorized Removal

The Contractor’s removal of Key Personnel without the prior written consent of the State.

Unbalanced File A file that contains only credit or debit transactions with no offsetting transaction against the originator’s bank account. Typically the offsetting transaction is inserted by the ODFI. Conversely, a balanced file of credit transactions would contain a single debit transaction to the originator’s bank account for the total dollar amount of the credits contained in the file.

Vendor The State’s Vendors that receive purchases of products and services, and Payees. Payee Vendor payments include childcare, foster care, and adoption subsidy payments from the State, to name a few. Vendor payments include most all payments made by the State that are not included in the PFOS category. Vendor payments include payments for almost all State programs.

Waste Prevention Source reduction and reuse, but not recycling.Work in Progress A Deliverable that has been partially prepared, but has not been presented to the

State for Approval.Work Product Any data compilations, reports, and other media, materials, or other objects or

works of authorship created or produced by the Contractor as a result of an in furtherance of performing the services required by the Contract.

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RFP No. 271Q3208

Article 1 – Statement of Work (SOW)

Note to Bidders: Proposals must include detailed responses to all tasks as requested in Article 1 and provide all information requested in Article 4. Bidders should provide thorough responses to each task, or, when appropriate, state their agreement that the Bidder will provide the requested services. Bidders are encouraged to provide detailed responses in order to allow the State to fully evaluate the Bidder’s capabilities.

As stated in Section 3.012 of this document, Bidders are reminded that the sole point of contact concerning the RFP is the Buyer, listed on the cover page of this document, in Treasury Purchasing. Any communication by a potential Bidder in regards to this RFP with anyone other than the Buyer during the RFP process may result in disqualification and/or debarment.

Throughout this RFP, language referring to Contract or Contractor(s) refers to any Contract awarded from this RFP. This RFP in itself is not to be construed as a Contract.

1.010 Project Identification

1.011 Project RequestThis is an RFP for a financial institution (bank) to serve as Originating Depository Financial Institution (ODFI) for both the State’s ACH payments and certain ACH revenue programs. There are five types of ACH payments and three ACH Revenue Programs. ACH payments include Vendor, Income Tax Refunds, Payroll, Retirement, and Department of Human Services – Supplemental Security Payments. The Department of Human Services – Supplemental Security Payments are scheduled to be converted from warrant (check) to ACH by March of 2013. This is a formal request to prospective Bidders to solicit bids or price quotations. Bidders must submit written proposals according to the instructions contained within this document, discussing how they will meet the specific requirements.

The Contract will be effective March 1, 2013 through December 31, 2018 (also see Section 2.001). The period of March 1 through December 31, 2013 will be for implementation and transition. The Contractor must begin providing services, without interruption, on January 1, 2014.

Any awarded Contract(s) between the State and any awarded Contractor(s) is a separate document, whose terms are limited by Article 2.

1.012 BackgroundThe State began making ACH payments for select payments in the early 1990’s. Since that time, ACH has been expanded to other programs including the three ACH revenue programs included in this Contract. Please see Appendices A and B for the State’s FY 2011 volume of transactions paid and collected via ACH.

Financial electronic data interchange (FEDI) will be utilized to originate ACH payments using the 4010 version or any upgrades that are agreed upon in advance of the ANSI X 12 standards. FEDI files will typically be released into the ACH network 5 days per week. ACH revenue transactions are processed in standard ACH format and will be transmitted to the Contractor on state business days only.

The State transmits ACH Payment files from the Department of Technology, Management and Budget (DTMB), Michigan Administrative Information Network (MAIN) Processor to the ODFI over dedicated redundant circuits encrypted with SFTP via eVPN. Electronic datasets at MAIN and ODFI will be the single control point for MAIN to communicate with ODFI. MAIN will deliver and pick up files from ODFI’s electronic dataset. Redundant T1 lines are in place as a back-up.

The State transmits ACH Revenue files from the State’s TANDEM Data Exchange Gateway to contractor over a Gateway-to-Gateway VPN. Files are encrypted. The back-up line is a second Gateway-to-Gateway VPN.

VPN Requirements - An IPSEC compliant Gateway-to-Gateway VPN connection is an acceptable option for transfer of electronic files. This option will require the Contractor to provide:

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1. A public static IP address for the remote gateway device2. Both a primary and secondary technical point of contact for customer end support3. The TCP/IP data needed to configure the tunnel i.e. destination IP addresses and ports.

All Contractors are advised that the implementation of a VPN requires excellent communication and collaboration with the State telecommunications experts assigned to its implementation.

The Contract Compliance Inspector will be with the Department of Treasury. DTMB, MAIN, partners with Treasury, similar to a subcontractor. Vendor and PFOS files will be sent to the Contractor from the DTMB, MAIN. ACH Revenue Programs will send their files to the Contractor directly through the State’s Data Exchange Gateway (DXG).

An explanation of the State’s various payment and revenue collection processes follows:

1. ACH Revenue Programs

The Contractor will process ACH debit files for the following three ACH Revenue Programs:

Department of Natural Resources, Retail Sales System, Licensing Deposits Department of Licensing and Regulatory Affairs, Michigan Liquor Control Commission, Liquor

Sales Revenue Department of Treasury, Office of Collections, Installment Agreement Payments.

ACH Revenue Programs will transmit files in standard ACH format.

All three ACH Revenue Programs utilize hardcopy authorization forms. Each program is responsible for retaining the authorization forms and making them available as required.

State Credit Card and ACH Revenue Programs may migrate to the State’s enterprise-wide electronic payment module called CEPAS (Centralized Electronic Payment and Authorization System). As a result, the Revenue Programs may discontinue processing under this Contract and process through the CEPAS platform during the Contract term.

All three Programs receive “null” files when there are no NOCs or Returned items for a particular day. This positive action by the Contractor confirms that a file was sent, but there weren’t any NOCs or Returns.

A brief description of the programs follows:

Department of Natural Resources, Retail Sales System, Licensing Deposits

The Department of Natural Resources (DNR) Retail Sales System (RSS) is a point of sale application for collection of hunting and fishing license revenue from licensing agents. Licensing agents use point of sale terminals to enter license information and generate a license. License sales revenue is deposited to the agent’s bank account. Each week, DNR utilizes reports from the point of sale terminals along with agent bank account information in a DNR database to generate an ACH debit file to debit the agent’s account for the sales revenue.

Participation is mandatory. Files are generated and transmitted to the Contractor on Wednesdays. Agents complete, sign, and return an ACH authorization form to participate.

DNR ACH file specifications are provided in Appendix S.

Department of Licensing and Regulatory Affairs, Michigan Liquor Control Commission, Liquor Sales Revenue

The Michigan Liquor Control Commission (MLCC) is responsible for sale and delivery of liquor to liquor licensees statewide. The distribution and sales process was privatized and Authorized

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Distribution Agents (ADAs) provide this service. Currently there are 6 liquor ADAs statewide. ACH debit files are generated daily on state business days. For liquor licensees, payment by ACH debit is voluntary. Licensees complete, sign, and return an ACH authorization form to MLCC to participate.

The ADA delivery representative delivers liquor to the liquor licensee. The delivery representative returns the delivery invoice to the ADA after delivery. The ADA updates their sales database and creates a billing file that is transmitted electronically to MLCC. The ADA billing file is interfaced to the MLCC database that contains liquor licensee bank account information. An ACH debit file is generated and transmitted to the Contractor. The file contains a separate batch for each ADA.

MLCC ACH file specifications are provided in Appendix T.

Department of Treasury, Office of Collections, Installment Agreement Payments

This program allows debtors with installment agreements to make periodic recurring payments by ACH debit. Debtors can be both consumers and businesses. Participation is voluntary but strongly encouraged. ACH files are generated daily on State business days. Debtors complete, sign, and return a hardcopy authorization form to authorize periodic recurring debits from their account. Office of Collections staff enter the information into a database. Each day the database is searched and an ACH record is created for each debtor whose payment is due the next day.  A file is created and forwarded to the Contractor. Office of Collections also originates transactions using the TEL Standard Entry Class Code. Consumer debtors can call the Office of Collections and authorize a one-time debit to their account to make a payment.

Treasury Collections ACH file specifications are provided in Appendix U.

2. ACH Payments

a. Vendor Payments:

These payments are initiated through the State’s mainframe accounting and purchasing system, called the Michigan Administrative Information Network (MAIN). This accounting system assigns payment numbers. The MAIN system is the home for the State’s centralized Vendor file. Within this file, information about State Vendors is maintained, that includes but is not limited to: Federal ID number, addresses, types of services or products the Vendor can supply, bank routing transit and account number information, etc. The State’s definition of ‘Vendor’ is much broader than in its standard definition. The State’s Vendors include Vendors the State purchases products and services from and a much larger percentage of the Vendor population is referred to as the ‘Payee’ population. ‘Payee’ Vendor payments include childcare, foster care, and adoption subsidy payments from the State, to name a few. ‘Vendor’ payments include most all payments made by the State that are not included in the PFOS category below (Section 1.012.2.b). As such, Vendor payments include payments for almost all State programs.

Within the MAIN system there are a few ways to generate payments, as follows:

1. On-line: Employees from all agencies of State government key these payments into the MAIN system. On-line payments utilize the State’s centralized Vendor file.

2. Front door interfaces: These payments are interfaced from certain State agencies to the MAIN accounting system. These payments utilize the State’s centralized Vendor file.

3. Side door interfaces: These payments are interfaced from certain State agencies to the MAIN accounting system. However, these payments do not utilize the State’s centralized Vendor file.

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Generally the Vendor payments are initiated on-line and through the front door interfaces are allowed to participate in the FEDI (ACH) payment process. The side door interfaced payments are generally converted to front door interfaces utilizing the State’s centralized Vendor file before they can be paid via ACH. In order for the side door interfaces to be ready to pay by FEDI, programming changes will need to be made by the State agencies’ that own those systems. Each State agency that owns a side door interface will need to determine when and if those interfaces will be converted to front door interfaces. The State anticipates that more of the side door interfaces may be converted to front door interface processes. The State does not know the timing of when/if the side door conversions will occur. Therefore, Treasury will work closely with the Contractor to coordinate the addition of Vendor payments to this Contract.

It should be noted that according to Public Act 533 of 2004, “Beginning October 1, 2005, all contracts that the state enters into for the purchase of goods or services shall provide that payment shall be made by electronic funds transfer”.

Description of the State’s enhanced Vendor Registration, ACH, FEDI, and Remittance Advice Process

The Department of Technology, Management and Budget (DTMB) is responsible for administering the State’s Vendor registration process. Currently DTMB offers Vendors/Payees two payment options: ACH (FEDI) or warrant (check). The State may expand payment options to include Debit Cards in the future, that capability is not included in this contract.

Vendors are able to register with the State online through the Internet. The ACH authorization form is available through the Internet. The form will need to be printed, completed and signed by the appropriate Vendor representative, mailed to the DTMB or the form can be authorized and submitted online when registering. Vendors can also specify multiple bank accounts to receive ACH payments.

DTMB offers Vendors/Payees the option to utilize the State’s web site to obtain remittance advice information for payments. At the time of registration, Vendors will select payment and remittance options. Within the ACH option, the Vendor may choose FEDI with remittance or FEDI with web remittance. If the Vendor chooses FEDI with web remittance, the Vendor will receive a FEDI ACH payment and may use the State’s Internet site to view and print remittance information. Proper security is required for a Vendor to view its remittance information on the State’s web site. Vendors that choose FEDI with remittance will receive remittance in the form of addenda records along with the payment.

While the State has large corporate Vendors, the majority of the payments are made to Payees (clients) or small Vendors. Consumer type payees are paid via the PPD ACH standard entry. Small business Vendors receive a CCD ACH standard entry class and access the State’s Internet site to obtain their remittance information, if needed. Many of these Vendors receive regular payments from the State and the purpose of the payment and dollar amount do not change. In many cases, the Vendor only needs the date of the payment and the dollar amount. Also, many of these Vendors do not have sophisticated computer systems to interface accounts receivable receipts. The PPD and CCD payments will be sent to the Contractor utilizing FEDI.

The State’s large Vendors are offered the option for FEDI via the CTX ACH standard entry. These Vendors obtain the remittance information from their Receiving Depository Financial Institution (RDFI).

Occasionally, zero dollar payments are utilized using CCD+.

The PPD, CCD, CCD+, and CTX standard entries are sent to the Contractor utilizing the 820 FEDI transaction set.

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b. Payments from Other Systems (PFOS)

The State will initiate payments from four other systems outside of the MAIN system. The MAIN system is updated with these payments.

The payments are:

a. Payrollb. Retirementc. Income Taxd. Department of Human Services – Supplemental Security Payments (DHS-SSP).

The PPD standard entries are sent to the Contractor utilizing the 820 FEDI transaction set.

c. Prenotifications

For Vendor payments, prenotifications will be done at the point a Vendor registers with the State. Quite some time could pass before a Vendor actually receives a payment. However, once registered, the Vendor is responsible for updating direct deposit details on the DTMB web site if account information changes. Some will never receive a payment. Some Vendors may choose not to provide information for the ACH option until they have a contract with the State.

For PFOS and ACH Revenue programs, prenotifications are initiated upon receipt of a signed authorization form or from online submission. No prenotifications are done for Income Tax Refunds, Retirement, or DHS - SSP transactions. At a later date the State may choose to discontinue originating all prenotifications.

Prenotifications use PPD and CCD Standard Entry Classes.

d. Foreign ACH Transactions

The State does not anticipate utilizing International ACH Transactions (IATs). However, it is anticipated that during the Contract term IAT transactions are possible. Thus, pricing for IAT transaction processing is being requested.

e. Reversals and Reclamations

FEDI transaction sets will be transmitted to the Contractor to initiate reversals and reclamations for Vendor and PFOS payments. The Contractor is required to have a web based ACH product with a minimum 128 bit encryption capable of initiating reversal and reclamation transactions as a back up. Reversal of ACH Revenue transactions or files is possible but unlikely.

f. Cancellations

An 829 Payment Cancellation Request transaction set is used for cancellation of a previously transmitted electronic payment before funds are released. Vendor or PFOS payments can be cancelled. See the diagram in Section 1.021 titled EFT: Flow of EDI Transactions for the timing and flow of the 829-transaction set. Manual processes are required to notify the Contractor and provide approval for the 829 since the 831 transaction set is processed prior to transmission.

An 829-transaction set is sent every business day. On days when no cancellations are required a “null” 829-transaction set is sent.

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Appendix C contains the following document: Guidelines for FEDI 829 Cancellations Combined Implementation.

g. Business Day

Business day is defined as any day the State of Michigan is open for business. FEDI transactions may be transmitted to the Contractor on weekends and holidays (also see Section 1.022.3.h for Warehousing). When a payment date is a holiday or a weekend, payments will be given a settlement date of the next State business day. This process will be further clarified during implementation.

Federal Reserve holidays that are not State holidays are also observed (Columbus Day).

h. Translator

The State uses IBM WebSphere Data Interchange – Version 3.3.

i. Batches

Each Payment Type (Vendor, Payroll, Income Tax, Retirement, and DHS - SSP) and its corresponding payment action will be in a separate batch within the daily transmission. For example, the Vendor Payment Type will have separate batches for payments, prenotifications, reversals, and cancellations. Payroll can have separate batches for payments, prenotifications, reversals, and cancellations. Income Tax can have payments, reversals, and cancellations. Retirement can have payments, reversals, reclamations, and cancellations. Each batch receives its own 824 and 997 response. In addition, 824 and 997 responses must be received at the transaction level where specified.

1.020 Scope of Work and Deliverables

1.021 In ScopeThe Contractor must process the State’s ACH payments and certain ACH Revenue Programs. The State will be originating payments in the FEDI format for Vendor and PFOS ACH payments. ACH Revenue Programs will be originated in standard ACH format. Deliverables/Services include the following:

1. Provide ODFI services to the Department of Treasury.2. Receive FEDI transaction sets from the State for Vendor and PFOS payments. (The State will

use the 4010 version and any upgrades that are agreed upon in advance of the ANSI X12 standards.) Convert to ACH for transmission through the ACH Operator. Receive standard ACH formatted files for ACH Revenue transactions.

3. Process ACH transactions for PPD, CCD, CCD+, TEL, and CTX transactions, with the option of processing IATand WEB if Treasury chooses to utilize these options.

4. For Vendor and PFOS payments, utilize/process the following transaction sets:

820Payment Order/Remittance Advice 824Application Advice 827Financial Return Notice (and Notification of Change) 829Payment Cancellation Request 831Application Control Totals 835Health Care Claim Payment/Advice (possible in the future) 997Functional Acknowledgement

5. Warehouse transactions for at least three holiday cycles during the year: Thanksgiving, Christmas, and New Years and it may be required on other occasions. Assume a maximum of five days for warehousing per year.

6. FEDI capability to originate reversals and reclamations.

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7. Provide security controls to ensure integrity and accuracy of financial, confidential and remittance data including encryption (minimum 128 bit in strength) of files transmitted between the State and Contractor as required.

8. Provide a dedicated, experienced, and knowledgeable FEDI implementation team to ensure the efficient and timely migration from the State’s current contractor.

9. Provide customer service support and maintenance. Customer support staff must be experienced. Experienced back-up staff are also required.

10. Provide timely responses to tracer requests. This includes requests that are considered ‘current’ and those that may be ‘dated’ once received by the Contractor from the State.

11. Provide Web based access that uses a minimum 128 bit encryption to initiate ACH transactions on an exception basis. This includes origination, reversals, and reclamations. (This will typically be used as a backup contingency plan.)

12. Provide bank electronic cash management access to view daily bank statements, adjustments, etc.

13. Acquire a high quality FEDI/ACH process that ensures timeliness, accuracy, security, integrity, and confidentiality of data.

14. Compliance with designated State banking statutes, The State Constitution, National Automated Clearing House Association rules, Uniform Commercial Code Section 4A, Regulation E, and State policies and procedures.

15. Reporting that meets Treasury needs.16. Follow the State FEDI Implementation Guide (see Appendix H). 17. Out of Scope

a. The State currently has a Contract with First Data Government Solutions (FDGS) to provide an enterprise-wide electronic payment and authorization solution called Centralized Electronic Payment and Authorization System (CEPAS) that supports credit card and ACH debit transactions. All State ACH debit applications are processed through the CEPAS system and are excluded from this Contract except the three ACH revenue programs described in Section 1.012. In addition, the three ACH revenue programs described in Section 1.012 may migrate to the CEPAS system.

b. Credit and Debit card processing is not included in this Contract.

c. Electronic Benefit Transfer (EBT) processing is not included in this Contract.

d. Wire Transfer processing is not included in this Contract.

e. Remote capture and deposit of checks that may utilize ACH.

f. It is not anticipated that the 835-transaction set will be utilized for Vendor payments and thus no file layout is attached. However, it is feasible the State will add the 835-transaction set in the future. The 835-transaction flow will be the same as the 820-transaction set flow reflected on the EDI chart in the following Diagram.

Diagram

The following diagram titled EFT: Flow of EDI Transactions reflects the FEDI flow. The State anticipates the same flow for 835-transaction sets if utilized. At this time, the State anticipates the 835 and 820-transaction sets will be sent as separate files. Multiple transaction sets may be sent together even though the chart depicts them as separate transmissions. These issues will be resolved during implementation, as the Contractor may have different policies on transaction flow and content.

If a cancellation is required, the 829-transaction set will be utilized.

The Contractor will send a 997-transaction set back to the State to acknowledge receipt of the file for all transaction sets.

EFT: Flow of EDI Transactions

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Refer to the following diagram for the proposed flow of transactions between MAIN FACS and the Contractor. Times are tentative.

After the receipt of the 829 transaction set and correct balancing of total counts and amount the Contractor Bank releases the approved payments, prenotes, reversals, and reclamations into the ACH network.

1.022 Work and DeliverableContractor must provide Deliverables/Services and staff, and otherwise do all things necessary for or incidental to the performance of work, as set forth below:

1. Overall Plan

An overall project plan must be developed Section 1.041.3 as a basis for executing subsequent steps as the implementation progresses. Essential to the process of this task is the preparation of a sound approach to attaining the objectives.

Bidder Response:

2. Pre-notification Process

a. Format

1. MAIN will initiate a Pre-notification transaction for all ACH Payment Entries except Income Tax, Retirement, and Department of Human Services - SSP. The Pre-notification

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process for ACH Payments will incorporate the FEDI 820-transaction set using the standard ACH formats of PPD or CCD.

2. The Pre-notification process for ACH Revenue programs will use standard ACH format. 3. Pre-notification Entry Data will not be commingled with live Entries, but must be

transmitted in a separate batch. 4. Contractor must convert the 820-transaction set to the ACH standard entry formats for

submission to the ACH operator. 5. Pre-notifications for each Payment Type (Vendor and Payroll) will be in a separate batch.

Bidder Response:

b. Pre-notification Returns and Notifications of Change (NOC)

1. Contractor must notify MAIN, via the 827-transaction set, of Pre-notification Returns and NOCs. Pre-notification Returns and NOCs will be on the same 827-transaction set files as NOCs and Returns for live transactions. These Returns and NOCs will be referred by MAIN to the appropriate State system to process appropriate data corrections. See Appendix D for the 827-transaction set file layout.

2. MAIN can initiate an 824-transaction set to reject an untimely or incorrect NOC and dishonor a return in cases of incorrect or missing information.

3. Pre-notification Returns and NOCs for the ACH Revenue Programs must be transmitted in standard ACH format directly to a designated state electronic mailbox for program retrieval.

4. If no Returns or NOCs are received for a particular Revenue Program a “null” file will be sent to confirm no Returns or NOCs were received.

5. Null files are used with ACH Revenue Programs and MAIN. 6. In addition, other types of daily Return and NOC reporting (such as auto faxed or web

based reports) are required to supplement/back up the electronic file process.

Bidder Response:

c. Timing

1. Vendor Pre-notifications will be done at the time a Vendor registers with the State. It may be some time before a registered Vendor provides a product or service that necessitates an ACH payment (see Section 1.012.2.a). Some registered Vendors may never receive an ACH payment. Some Vendors may not provide their banking information to the State until they are selected as a Contractor, in which case the Pre-notification will be done at that time.

2. For PFOS and ACH Revenue Programs the Pre-notification will be originated upon receipt of a signed authorization form.

Bidder Response:

3. File Origination

a. Format.

1. The transaction data for Vendor and PFOS payments will be transmitted to Contractor in an 820-transaction set. The file transmitted to Contractor will be an Unbalanced File (see Definitions).

2. Files for the ACH Revenue Programs will be in Standard ACH Format.

Bidder Response:

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b. Standard Entry Class Codes .

1. Consumer transactions will be paid using the PPD standard entry class code (SEC). In the future, the State may use PPD+.

2. Commercial payments will be paid using the CCD SEC. 3. Commercial payments that contain remittance information will be paid using the CCD+

and CTX SEC. The CTX SEC includes addenda records. 4. In the future, IAT may be used for transmission of international payments. 5. ACH Revenue Programs will use PPD, CCD, TEL, and WEB.

Bidder Response:

c. Transmission Timing and Method.

1. The ACH transmissions to Contractor will generally take place one or two State business days prior to settlement date (see Appendix F, Daily Processing Schedule for current timing of file transmissions).

a. Typically the ACH Payment files will be sent two business days prior to the settlement date.

b. ACH Revenue Programs will be transmitted one business day prior to the settlement date.

c. The settlement date for Reversals and Reclamations will be the current date.

Bidder Response:

2. Contractor must originate the ACH Credit and Debit Entries so they are passed to the RDFI on the appropriate date.

Bidder Response:

3. Method Used to Transmit Vendor and PFOS Payments

a. Single or multiple daily electronic line transmissions (see Section 1.012).

Bidder Response:

b. A redundant T1 line is used as a back-up in case of primary line failure.

Bidder Response:

4. Method Used to Transmit ACH Revenue Programs

a. Gateway-to-Gateway VPN between the State’s Data Exchange Gateway (DXG) and the Contractor. The data will be encrypted during transmission (see Section 1.022.11.a.4, Encryption).

Bidder Response:

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b. The back-up line will have a second Gateway-to-Gateway VPN.

Bidder Response:

d. Confirmation. The Contractor must institute verification procedures with MAIN and ACH

Revenue Programs.

Bidder Response:

1. ACH Revenue Programs – This verification must include a confirmation of the number of transactions, the total dollar amount, the settlement date, and any erred transactions for all files delivered (See Appendix G for the required components of the Confirmation data page that must be sent by the Contractor to confirm the file was received).

Bidder Response:

a. The confirmation must be available within 30 minutes of the receipt of the files.

Bidder Response:

b. Describe methods available to receive confirmation. Typical methods include IVR Confirmation and Contractor transmission of Confirmation file data to the ACH Revenue Program mailbox.

Bidder Response:

2. MAIN – Confirmation must be in the form of an 824-transaction set and a 997 Functional Acknowledgement.

Bidder Response:

a. The 824 must supply positive confirmation for each transaction transmitted to the Contractor. Summarized confirmation is not acceptable.

Bidder Response:

e. Error Notification . When the Contractor performs its edit of the State’s transactions, the Contractor must notify MAIN and/or ACH Revenue Programs of errors in formatting or other errors that the Contractor cannot correct that will prohibit the successful transmission of the file.

Bidder Response:

1. For MAIN, the notification will be in the form of an 824-transaction set (See Implementation Guide in Appendix D) and a 997 Functional Acknowledgement.

Bidder Response:

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2. The notification for the ACH Revenue Programs will be by phone. A Contact List will be provided during implementation.

Bidder Response:

3. The edits performed by the Contractor will be determined during planning and testing prior to implementation. Sample edits should be identified in proposal.

Bidder Response:

f. Other Edits. Edits must include verifying that routing transit numbers are valid. This edit will likely occur in the ACH file processing.

Bidder Response:

1. The other edits that the Contractor will perform will be determined during implementation. Sample edits should be identified in proposal.

Bidder Response:

2. Any FEDI rejects must be returned in the 824-transaction set.

Bidder Response:

g. 835-Transaction Set. It is possible the State may use the 835-transaction set, Health Care Claim Payment/Advice, for delivery of health care payments in the future. A separate batch or file will be sent for these payments. The State anticipates that this transaction set may be utilized for Medicaid Provider payments. It may also be utilized for other medical related payments that the State may pay.

1. The FEDI format selected must comply with Federal requirements or standards.

Bidder Response:

h. Warehousing. Warehousing of transactions will be necessary for at least three holiday cycles during the year: Thanksgiving, Christmas, and New Years. It may be required on other occasions. Assume a maximum of five days for warehousing.

Bidder Response:

1. Explain how warehoused data will be protected (also see Section 1.022.11).

Bidder Response:

i No File. It is extremely unlikely, but possible, the State may encounter business days when no FEDI/ACH payments are generated. If this occurs the State will transmit an 820 to notify the Contractor there is no payment data today (see page 80 of the FEDI Implementation Guide in Appendix D).

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Bidder Response:

j. ACH Operator. The Contractor must identify the ACH Operator to be utilized by the

Contractor.

Bidder Response:

1. If the Contractor changes ACH Operators during the term of this Contract, notification of the change must be provided to the Contract Compliance Inspector and Contract Administrator at least 60 days prior to implementing the change.

Bidder Response:

k.   EDI Capable Questionnaire. Bidders must complete the EDI Capable Questionnaire in Appendix H.

Bidder Response:

4. Returns and Notifications of Change (NOC)

a. Returned Entries. Entries initiated into the ACH system, either Pre-notification Entries or live dollar Entries, may be returned for specific reasons. Returns may be originated by the Contractor, ACH Operator, or the RDFI.

1. The Contractor’s receiving software must be able to recognize returns and sort them by batch type.

Bidder Response:

2. Returns for Vendor and PFOS payments must be sent to MAIN using the 827-transaction set.

Bidder Response:

3. Returns for the ACH Revenue Programs must be sent directly to a designated State electronic mailbox for program retrieval using standard ACH format.

Bidder Response:

4. ACH Revenue Programs must receive or have access to electronic reports that list the details of that days return items.

Bidder Response:

b. Notifications of Change (NOC). Entries initiated into the ACH system, either Pre-notification Entries or live dollar Entries, may be responded to by an NOC. NOCs may be originated by the Contractor or the RDFI.

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1. The Contractor’s receiving software must be able to recognize NOCs and sort them by batch type.

Bidder Response:

2. NOC’s for Vendor and PFOS payments must sent to MAIN using the 827-transaction set.

Bidder Response:

3. NOCs for the ACH Revenue Programs must be sent directly from the Contractor to the appropriate Revenue Program using standard ACH format.

Bidder Response:

4. ACH Revenue Programs must receive or have access to web based reports that list the details of those days NOC items.

Bidder Response:

c. General

1. Processing Window. The Contractor must be aware of specific processing windows offered by ACH Operators for the processing of Returns and NOCs. The Contractor must make sure, on a daily basis, the files containing Returns and NOCs are retrieved from the ACH Operator prior to the close of business for proper posting and handling.

Bidder Response:

2. Automated Returns and NOCs. The State does not want to receive manual Returns or NOCs. For example, if Returns or NOCs error out at the Contractor, the State does not want Returns posted to our bank account that are not received on the 827-Transaction Set or in a standard ACH return file. Returns can error out at the Contractor because of various edits in place at the Contractor.

Bidder Response:

a. Treasury and the Contractor must agree what the edits will be to ensure rejected Returns or NOCs are NOT presented to the State in a paper report without an automated entry received through the 827-Transaction Set for ACH Payments or in a standard ACH return for ACH Revenue Programs.

Bidder Response:

b. Please describe how the Contractor can ensure all the State’s Returns and NOCs are

received on the 827-Transaction Set or in a standard ACH return files. (Please see below Section 1.022.4.c.6, Dishonored Returns and Refused NOCs before responding.)

Bidder Response:

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3. 827-Transaction Set . The Contractor must transmit all Vendor and PFOS Return Entries and NOCs to MAIN in an 827-transaction set (see Appendix D for the 827-transaction set).

Bidder Response:

a. ON-US Returns and NOCs cannot be received by the State prior to the settlement date of the original transaction.

Bidder Response:

4. Transmission Time. According to the 2012 NACHA Rules, each Return Entry and NOC must be received by the RDFI’s ACH Operator by its deposit deadline for the Return Entry or NOC to be made available to the Contractor no later than the opening of business on the second banking day following the settlement date of the original entry. Warehousing of return files may be required for State holidays (see Section 1.022.3.h).

Bidder Response:

5. State Responsibilities. The State of Michigan will electronically update the State’s Vendor and PFOS databases to reflect the Returns and NOCs. Other databases will be updated accordingly. ACH Revenue Programs will electronically update their databases as well.

Bidder Response:

6. Dishonored Returns and Refused NOCs. The State occasionally receives Returns that have not been formatted correctly by the RDFI. In an effort to minimize manually updating to the extent possible, returns received that are incomplete and cannot be transmitted to the ACH Revenue Program electronically must be dishonored by the Contractor.

Bidder Response:

a. MAIN may dishonor incorrect or duplicate returns received in the 827-transaction set by returning them in the 824-transaction set.

Bidder Response:

b. Incorrect or untimely NOCs may be refused. MAIN will return NOCs received in the 827-transaction set by returning them in the 824-transaction set.

Bidder Response:

7. Reinitiation. For ACH Revenue Programs, the Contractor must reinitiate entries returned for insufficient or uncollected funds two times following the return of the original entry.

Bidder Response:

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d. Additional Issues related to EFT Return Entries.

1. State Processing. The State is responsible for correcting Returned Entries that are not the result of errors of the Contractor. The State may initiate a substitute payment (FEDI/ACH, wire, or State warrant) for a returned credit. The State will use an alternate form of collection for a returned debit for ACH Revenue Programs.

Bidder Response:

2. Contractor Error. The Contractor must correct rejected Entries that are a result of the Contractor's error in sorting or accumulating Entries for transmission to the ACH Operator, if these errors are known and can be corrected with the same settlement date.

Bidder Response:

e. Confirmation. MAIN will acknowledge receipt of the 827-transaction set by sending an 824-transaction set and a 997-Functional Acknowledgment for ACH Payment returns.

Bidder Response:

f. No File. It is possible there may be days where the Contractor has not received any Returns or NOCs for the ACH Revenue Programs. On days when no returns or NOCs are received the Contractor will initiate a “null” file to positively confirm that no returns or NOCs were received.

Note: If no returns or NOCs are received for the ACH Payment programs, transmission of a “null” 827 transaction is not required or expected.

Bidder Response:

5. Reversals and Requests for Returnsa. Reversals

1. The State may initiate Reversing Entries to correct erroneous credit or debit entries previously initiated to a Receiver’s account. Reversing entries will be transmitted to the Contractor under the following conditions:

a. The State will initiate a debit or credit entry to correct a previously initiated erroneous credit or debit entry.

b. The State will submit a file to the Contractor containing the reversing entry in order for it to be delivered to the RDFI by midnight of the fifth banking day following settlement of the erroneous Entry. If the time period for requesting a Reversing Entry has expired, Treasury will initiate a Request for Return. (See Definitions for Request for Returns term).

Bidder Response:

2. As a back-up process the Contractor must provide to Treasury web based access to generate the Reversing Entries electronically. Sufficient security and controls (including

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minimum 128 bit encryption per Section 1.022.11.a.4) must exist to safeguard sensitive information from exposure to unauthorized access.

Bidder Response:

3. For ACH Payment entries, Treasury will receive a credit for the Reversal on the settlement date; or, if initiated after the settlement date, the day after transmission to the Contractor.

Bidder Response:

a. If there are not enough funds in the account at the RDFI (a request for a debit Entry), Treasury’s account will be debited and the State will have to pursue reimbursement from the Receiver.

Bidder Response:

4. It is anticipated that Reversals will be forwarded to the Contractor by one of two of the following:

a. Mainframe. The current mainframe method is the method preferred by the State to ensure a fully automated FEDI/ACH system. The mainframe process would involve issuing a FEDI 820 transaction set through a secure FTPmainframe batch process transmitted from MAIN. ACH Revenue Programs will send a file in standard ACH format.

b. Web Based. The Contractor must furnish web based ACH access as a back-up process. This is not the preferred method since it will require manual updating to the accounting system, and it would not allow complete updating to the accounting system. This method would be acceptable as a back-up process. Web access must use a minimum of 128-bit encryption to protect sensitive data (see Section 1.022.11.a.4).

Bidder Response:

b. Requests for Returns . A Request for a Return can occur if a single entry was originated in error (e.g. duplicate payment, wrong amount, wrong Receiver) and it is beyond the deadline for reversal. The request is a manual process. It is anticipated that Requests for Returns will be requested of the Contractor by such process as established between the Contractor and Treasury.

Bidders must describe the proposed process.

Bidder Response:

c. Confirmation. For ACH Payments the Contractor must transmit an 824-Application Advice and a 997-Functional Acknowledgement for Reversals.

Bidder Response:

1. For ACH Revenue Programs the Contractor must confirm as defined in Section 1.022.3.d.

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Bidder Response:

6. Reclamations

a. It is anticipated that Reclamations will be forwarded to the Contractor by one of two of the following:

1. Mainframe. The current mainframe method is the method preferred by the State to ensure a fully automated FEDI/ACH system. The mainframe process would involve issuing a FEDI 820 transaction set through a secure FTP mainframe batch process transmitted from MAIN.

Bidder Response:

2. Web Based. The Contractor must furnish Web based ACH access with a minimum 128-bit encryption as a back-up process (also see Section 1.022.11.a.4). This is not the preferred method since it will require manual updating to the accounting system, and it would not allow complete updating to the accounting system. This method would be acceptable as a back-up process.

Bidder Response:

b. Confirmation. For ACH Payments the Contractor must transmit an 824 Application Advice and a 997-Functional Acknowledgement for Reversals.

Bidder Response:

7. Cancellations

a. Payment Cancellation. Payment cancellation must be facilitated by transmission of an 829-transaction set to the Contractor prior to the Contractor releasing the electronic file to the ACH Operator (the 829 file specifications are located in Appendix C). An 829 can contain one or more entries to be cancelled, including an entire batch or an entire file. MAIN will transmit a “null” 829 transaction set on days when no cancellations are required.

Bidder Response:

1. Please specify the timing constraints and deadlines associated with receipt of a cancellation file. Note the timing of the transmission of the 829 transactions set in the diagram in Section 1.012 titled EFT: Flow of EDI Transactions. Manual processes are required to notify the Contractor and provide approval for the 829 since the 831-transaction set is processed prior to the 829 transmissions.

Bidder Response:

2. ACH Revenue Program transactions cannot be cancelled.

Bidder Response:

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b. Confirmation. Receipt of the 829 must be confirmed with an 824-Application Advice and a 997-Functional Acknowledgment.

Bidder Response:

8. Tracers

The State will request that the Contractor trace certain payments. A Web based process with a minimum 128-bit encryption (also see Section 1.022.11.a.4) to submit tracer requests from Treasury to the Contractor is preferred.

a. The request will contain specific information related to the payment in question. The Contractor must:

1. Verify that the item was not returned.

Bidder Response:

2. If it was returned, notify Treasury of the return date.

Bidder Response:

3. If not returned, contact the RDFI to determine if the payment was posted. If so, the Contractor must inform Treasury.

Bidder Response:

4. If not returned and not posted by the RDFI, locate the trace number and contact the RDFI to request immediate credit to the Receiver’s account.

Bidder Response:

5. Notify Treasury in writing of the results of all tracer requests via facsimile.

Bidder Response:

6. Supply a contact name, phone number, facsimile number, etc. for questions related to tracer requests.

Bidder Response:

7. Contractor may recommend other secure methods of exchanging tracer requests and results. Recommendations that result in greater efficiency and effectiveness will be considered.

Bidder Response:

8. The timing of the Contractor responses to tracers follows:

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a. Requests with a payment settlement date less than 30 days old (‘current’ tracers). Written notification of results required within five (5) business days.

b. Requests with a payment settlement date 30 days or older (‘dated’ tracers). Written notification of results required within 10 business days.

Bidder Response:

9. Additional ACH Electronic Payments Using Web Based Access

This task relates to additional payments that need to be generated after the State’s daily file(s) have already been sent to the Contractor following the normal morning schedule. Generating such payments should be very rare, but need to be provided as a contingency plan. The processes below could also be utilized in the event there was a transmission or system problem that results in files not being able to be transferred by the mainframe computer.

a. Web Based ACH Software . The Contractor must provide web based access with the capability to originate PPD, CCD, CCD+ and CTX transactions, Reversals, and Reclamations. The State only intends to originate ACH through this software in the event of system problems at the State or the Contractor, or severe time constraints that require the State to originate ACH transactions in this manner.

Bidder Response:

1. Fully describe the origination capabilities of the web based ACH access.

Bidder Response:

2. In the event that CCD+ and CTX transactions cannot be initiated through this access, the State will utilize the CCD standard entry class and remittance information will be mailed under separate cover.

Bidder Response:

3. Please clearly specify the abilities of the web based access.

Bidder Response:

4. All web based transmissions must be protected by a minimum 128-bit encryption (also see Section 1.022.11.a.4).

Bidder Response:

10. File Acknowledgment

a. The following chart depicts the anticipated flow of acknowledgments between the State and the Contractor to confirm receipt of FEDI documents. Confirm this flow or describe any proposed variations.

State Generated Transaction Sets Contractor Acknowledgment

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820 824, 997

831 824, 997

829 824, 997

Contractor Generated Transaction Sets

State Acknowledgment

827 824,997

824 997

Bidder Response:

b. The 824 acknowledgment from the Contractor must contain all details for successful payments and those that failed the Contractor’s edits.

Bidder Response:

c. In case of line failures or system problems that cannot be resolved by a set deadline, the back-up process to transmit acknowledgment information between the State and Contractor will be by fax. Treasury will designate authorized signatures for this purpose. This method will only be used as a last resort. Timeframes and deadlines must be determined during implementation planning.

Bidder Response:

11. System Requirements (Also See Sections 1.022.12 and 13)

a. ACH Payments

1. Communication HardwareAll data transferred to and from MAIN systems must be through a secure connection. The Contractor must:

a. Arrange for installation of all telecommunication lines required for the secure connection. Currently T1 dedicated redundant lines are used. The Contractor is responsible for all costs associated with installing and maintaining both lines in compliance with telecommunications requirements (see Appendix Q, Telecommunication Infrastructure Facility Standard).

Bidder Response:

b. Provide access to appropriate building and telcom facilities (i.e. telco, patch panels).Bidder Response:

d. Provide raised floor space, power, and rack for the network components that support the secure connection.

Bidder Response:

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e. Provide operations staff that can visually verify equipment status and perform/activate minor resets and activate menu option features with direction from the State.

Bidder Response:

f. Provide connectivity from the secure connection termination point to the Contractor’s FEDI infrastructure.

Bidder Response:

2. Electronic Datasets

a. The State’s and ODFI’s datasets must have 24-hour availability, security, automatic notification, and reporting.

Bidder Response:

b. Periodic maintenance will be performed according to a mutually agreed schedule.

Bidder Response:

c. The datasets will be the single control point for MAIN to communicate with the Contractor.

Bidder Response:

d. The State must be able to send and receive files to the dataset independent of the Contractor’s batch processing window.

Bidder Response:

e. The State will deliver and pick up files from the Contractor.

Bidder Response:

3. PC Hardware

The minimum Treasury configuration for PC's available for PC or web based application access is:

a. Computers. Business Class Optiplex 390 Desktop, Dual Core i5_2400, 512 MB AMD Radeon HD 6350 Video, Integrated Sound, Internal 10/100/1000 NIC, 6 MB L2 Cache, USB Laser Mouse, USB Keyboard, 4 GB DDR3 (1 module), G , DVD+/-RW, 250GB HD, Serial ATA, WIN XP, 21.5 Flat Panel Monitor

b. Internet –enabled using MS Internet Explorer 8.0, 128-bit cipher strength.

c. Printers. Various models of Hewlett-Packard LaserJet or Ricoh.

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Bidder Response:

4. Encryption

a. All data transmissions/interfaces and storage at rest must meet the Department of Technology, Management & Budget’s (DTMB) encryption standards as outlined in DTMB Technical Standard 1340.00.07 (Electronic Data Encryption, see Appendix P) and DTMB Authoritative Policy 1340 (Information Technology Information Security). Per DTMB’s Standard 1340.00.7, the State’s requirements for encrypting transmitted data are:

1. Centrally managed digital certificates by DTMB 2. Approved data encryption methods include 3DES or AES with up to 256 bits, with

128 bits the absolute minimum for moving data over internally managed networks and 128 bit the required minimum for moving data over external networks.

3. Message data integrity from source to host will be verified by making sure the message hasn’t been modified since it left the storage source by adding an encrypted digest to the message, using either the MD5 or the SHA-1 algorithms.

Bidder Response:

b. The data will be encrypted before transmission. The State currently uses FTP over SSL encryption. The type of encryption will be determined at implementation.

Bidder Response:

c. Encryption Standard. The most secure and economical encryption standard must be used. Please specify the proposed secure transmission solution.

Bidder Response:

1. Please specify the advantages this type of encryption has over competing solutions. The exact product will be finalized during Contract negotiation. Bid pricing will be based on existing encryption.

Bidder Response:

b. ACH Revenue Programs

1. Communication Hardware

All data transferred to and from ACH Revenue systems must be through a secure connection. The Contractor is responsible for arranging for installation of all telecommunication lines and all costs for installation, hardware, and ongoing monthly or annual charges. All telecommunications provisioning must meet State requirements and standards (see Appendix Q, Telecommunication Infrastructure Facility Standard).

a. VPN. This connection will be a Gateway-to-Gateway VPN between the State’s TANDEM Data Exchange Gateway and the Contractor.

b. Backup. The VPN will have a second Gateway-to-Gateway VPN as backup.

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c. Protocols. File Transfer Protocol (FTP), ASYNC, SNA LU0, TCP/IP, NDM, ISDN, Connect Direct. The State currently utilizes SNA with Connect Direct.

d. Recoverability. If a transmission fails, data must be available for retransmission.

e. Line Needs. Contractor must arrange for installation of all telecommunication lines required for the secure connection. The Contractor is responsible for all costs associated with installing and maintaining the lines.

Bidder Response:

2. Electronic Mailboxes

a. The State and Contractor’s electronic mailboxes must have 24-hour availability, security, automatic notification, and reporting. Periodic maintenance will be performed according to a mutually agreed schedule.

b. The electronic mailboxes will be the single control point for the ACH Revenue Programs to communicate with the Contractor.

c. The State must be able to send and receive files to the electronic mailboxes independent of the Contractor’s batch processing window.

d. The State will deliver files to the Contractor’s mailbox, and the Contractor must deliver files to the appropriate mailbox for each of the ACH Revenue Programs.

Bidder Response:

3. PC Hardware

The minimum Treasury configuration for PC's available for web based application access is in Section 1.022.11.a.3.

Bidder Response:

4. Encryption. Data transmitted over the Gateway-to-Gateway VPN must be encrypted (see Section 1.022.11.a.4).

Bidder Response:

a. Data stored must be encrypted (see Section 1.022.11.a.4).

Bidder Response:

12. Security, Audit, and Quality Control (Also See Sections 1.022.11 and 13)

a. Fraud Controls. All necessary security to guard against fraudulent access, fraudulent creation, and fraudulent receipt of the State’s files or items on files must be included in the processing.

Bidder Response:

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b. Security Goals. The security utilized should accomplish the following:

1. Verification that the entity on the other end of the communication link is really the intended recipient of a transmission.

2. Undeniable proof of origin of transmitted data.3. Validation that information has not been tampered with during transmission.4. Assurance that data remains private during transmission.

Bidder Response:

c. Encryption. The State will utilize encryption to safeguard the transmission of payment data to and from the Contractor. The ACH Payment transmissions are encrypted using SFTP. ACH Revenue transmissions are also encrypted. (Also see Section 1.022.11.a.4.)

Bidder Response:

d. Other Security Issues. Firewall security, user IDs, and passwords must be used to protect the data transfer from unauthorized access.

Bidder Response:

e. Mailbox Authorization. The State of Michigan, MAIN, must be authorized to send and pick up files from the ODFI Datasets.

Bidder Response:

f. Mailbox Security The electronic mailboxes of the Contractor must have 24-hour availability, security, automatic notification, and reporting.

1. The electronic mailboxes must allow the State of Michigan to send and receive files independent of each other’s batch processing windows.

g. Other Security Requirements

1. Contractor must uphold all of the requirements for handling, storage, and processing of all records and services provided under the Contract (see Appendix N, General Security Requirements) to ensure that no leakage or inappropriate disclsoure of confidential or sensitive information occurs.

Bidder Response:

a) Bidder must identify the number of days when passwords expire for applicable systems (e.g., online reports and file transfers via FTP).

Bidder Response:

b) Bidders must identify if the number of days when passwords expire if configurable for applicable systems.

Bidder Response:

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2. If the Contractor staff member accidentally or purposefully releases restricted (e.g., sensitive/confidential) data, the Contractor must assume full responsibility for any resulting penalties.

Bidder Response:

f. Data Site Security1. Data sites must be secured 24 hours, 365 days a year2. Employees’ access to the data site must be controlled by an electronic access

system3. Guests, including contractors, must be required to sign in and shall be assigned a

temporary guest badge for identification4. Tapes, disks, and other storage media must be kept in a secure access controlled

environment when not being utilized by computer operations.5. No storage media must leave the data site without prior management authorization6. Programming personnel, including contractors, must be restricted from sensitive

storage unless prior management approval is obtained, and7. Sensitive output shall be shredded prior to disposal.

Bidder Response:

h. SOC 2 - Type II . The Contractor must supply the most current version of any applicable SOC 2 of the SSAE 16 Type II audit report with proposal.

Bidder Response:

1. An annual SOC 2 - Type II must be provided to the Contract Compliance Inspector within 30 days of audit report completion. The State reserves the right to perform additional testing.

Bidder Response:

h. Internal Audits. It is expected that the bank’s Internal Auditor or other auditors will perform annual audits of the bank’s ACH and FEDI processes as required by National Automated Clearing House Association Rules. The Contractor must submit the most current audit report or certification that the audit has been performed; additionally, the annual audit reports or certification must be provided to the Contract Compliance Inspector within 30 days of audit report completion.

Bidder Response:

i. Quality Control. The Contractor must have a Quality Control process in place. Describe the Quality Control process, and performance reviews of the FEDI/ACH services, and the use of Bank Administration Institute (BAI) Quality Indicators for FEDI.

Bidder Response:

j. Security Risk Assessment. As a result of the Systems Engineering Methodology (SEM) that is governed by the State Unified Information Technology Environment (SUITE), a DTMB-0170, Information Technology Project Security Plan & Assessment is required. It is a collaborated

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effort between DTMB, Treasury’s Office of Privacy and Security and the Contractor to complete the DTMB-0170. The DTMB-0170 provides an overview of the security requirements for the system and a description of the security controls in place or planned for meeting those requirements. Completion of the DTMB-0170, remedies of any identified issues, and approval, are required prior to implementation. This is a living document and must be reviewed when any system/organizational changes occur and new security control requirements are implemented (e.g., laws, policies, etc.); otherwise, it should be reviewed annually. The DTMB-0170 may need to be revised to address system/organizational changes or problems identified during implementation or security control assessments.

Bidder Response:

k. Data storage on equipment and portable media must meet DTMB Technical Standard 1340.00.06 (Storage of Sensitive Information on Mobile Devices and Portable Media, see Appendix R).

Bidder Response:

13. Confidentiality (Also see Sections 1.022.11, 1.022.12 and 2.150)a. Confidentiality of Data and Information . Contractor must uphold all of the requirements for

handling, storage, and processing of confidential/sensitive tax information for services provided under the Contract (see Appendix I). All tax payment information is confidential. All of the payments that are originated through this CONTRACT and resulting Contracts are considered confidential. The Contractor may not release any information related to the State’s payments or inappropriately utilize information gleaned from the State’s payment files.

Bidder Response:

b. Confidentiality Statements . The Contractor is bound by the same standards of confidentiality as State employees. The Contractor may not release any products or portions of products resulting from the Contract without approval of the Contract Compliance Inspector. Contractor, subcontractors, and staff must sign a tax confidentiality statement. See Appendix I, Attachment A for sample Confidentiality Agreement.

Bidder Response:

c. ACH Operator . Contractor(s) must designate the ACH Operator they expect to use. The Contractor must maintain the confidentiality of data up through the point of being transmitted to the ACH Operator. In addition, Returns, NOCs, or other information that is received from the ACH Operator or other parties is considered confidential.

Bidder Response:

f. Disclosure Training. A web based disclosure training is offered to Contractors and subcontractors to assist individuals in understanding how to apply the safeguards for tax data agreed to when they sign the Confidentiality Agreement (Appendix I, Attachment A). For non-disclosure purposes, Treasury’s Office of Privacy and Security provides a 35-minute web-based training course for Contractors, Subcontractors, temporary and seasonal staff. The course link will be made available prior to the Department providing access to any State tax data. All

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safeguards required by the Department of Treasury will be explained during the course.

Bidder Response:

14. Implementation, Testing and Training

a. Implementation

The tentative Contract start date of March 1, 2013 takes into account a 10-month transitional implementation period (see Section 1.011). The Contractor must present a detailed implementation (Project Plan) plan in Section 1.041.3. The plan must contain a timeline that lists pertinent information such as:

1. Team. Identify implementation team.2. Goals and Strategy. Review goals and overall strategy.3. Responsibilities/Functions. Define areas of responsibility and steps to be completed,

such as review of file format, security, platform, communications, acknowledgements, scheduling, funding procedures, returned items, tracers, operating procedures, reports, etc.

4. Assignments. Assign areas of responsibility and steps to be completed.5. Testing Time Frame. Specify the testing time frame. The State testing timeframe will be

determined based on the implementation plan, tentatively beginning May 13, 2013.6. Production Date. Planned live processing date, tentatively in early November 2013. 7. Web Based Application. Installation/Training of Web based application.8. Training. Identify and describe training requirements and timeframes.9. Telecommunication Lines. Provide a detailed plan for timely installation of the

telecommunication lines. Lines must be installed and available by Spring 2013.10. Other. Any other implementation issues that need to be addressed by either the

Contractor or the State.

Bidder Response:

b. Testing

1. Test Environment. The Contractor must utilize a test environment that is separate from the production environment.

Bidder Response:

2. Test Plan. The Contractor will submit a test plan that encompasses all processes and systems. The test plan will include all known scenarios that could occur for the various file formats and processes.

Bidder Response:

3. Testing Sign-off. All lines, equipment, and file formats utilized must be properly tested and accepted by the Contractor, MAIN, ACH Revenue Programs, and Treasury prior to using live data transmissions. This includes Web based access. The Contract Compliance Inspector requires signature sign-off from the Contractor, MAIN, and both (2) ACH Revenue Programs.

Bidder Response:

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4. State Test Plan. The State may develop its own test plan to supplement the Contractor’s plan.

Bidder Response:

5. Contractor Changes and Modifications – Testing Required. All changes or modifications that the Contractor makes prior to original implementation or subsequent to original implementation must be fully tested before actual use in production. This includes any changes or modifications the Contractor makes internally that may impact Treasury, MAIN FEDI, or ACH Revenue Program processes.

Bidder Response:

a. The Contractor must notify MAIN and the ACH Revenue Programs at least 14 days prior to making changes or modifications available for testing.

Bidder Response:

6. State Modifications and Testing. The State will test changes made to its system(s) that affect FEDI/ACH processing with the Contractor prior to implementation.

Bidder Response:

7. State system changes may require additional post implementation testing. Please specify how much notice the Contractor requires.

Bidder Response:

c. Training

1. Web Based Application Training. The Contractor must supply all training and materials necessary to operate the Contractor’s Web based ACH application. At the option of the State, the training will take place onsite at State locations specified during implementation. The Contractor can expect to train approximately 15 employees.

Bidder Response:

2. Other Training. The Contractor must identify and describe any training that is available and may be required by the State.

Bidder Response:

15. Customer Support and Maintenance

a. Support and Maintenance . Support and maintenance must consist of correction of errors, provisions for modifications, upgrades to Web software, and any other improvements and revisions that the Contractor may develop. For the purpose of this paragraph, an error is defined as a failure to credit payments to the Receiver or debit revenue from the Receiver on

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the settlement date because of Contractor error. Support and Maintenance also covers day-to-day processing and bank account administration issues.

Bidder Response:

b. Changes . Before implementing any Contractor processing changes, the Contractor must inform the Contract Compliance Inspector and MAIN of the changes as well as the potential impact to the FEDI/ACH processes for Treasury, MAIN, and ACH Revenue Programs. Treasury, MAIN, ACH Revenue Programs, and the Contractor will mutually agree upon the implementation date.

Bidder Response:

1. The Contractor must notify Treasury, MAIN and the ACH Revenue Programs at least 14 days prior to making changes or modifications available for testing.

Bidder Response:

c. Contractor Support.

1. The Contractor must provide a contact person(s) familiar with the business and technical aspects of the FEDI/ACH process. Please identify the contact person.

Bidder Response:

2. The contact person(s) must assist MAIN, Treasury, and ACH Revenue Programs with the development and maintenance of the FEDI/ACH system in a manner that will meets the Contract’s requirements.

Bidder Response:

3. The contacts must be available between 7:30 a.m. ET and 5:00 p.m. ET, Monday through Friday, except State holidays.

Bidder Response:

4. Live production operational support is required 24/7.

Bidder Response:

5. Response time to technical or other problems that occur in the operation of the system must be within 30 minutes after Treasury, MAIN, or ACH Revenue Program staff contact the Contractor.

Bidder Response:

6. Describe problem resolution procedures for technical transmission issues, tracers and other business issues.

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Bidder Response:

16. Continuity Planning and Disaster Recovery (Also see Section 2.203)

a. The Contractor must maintain adequate back-up procedures in case of system failures. The Contractor’s back-up and recovery provisions must include:

1. Daily back-ups of files and systems2. Backup communications solutions3. Written and tested recovery procedures4. Safe/secure storage of back up media5. Disaster recovery plans and hot site. The location (City and State) of the Contractor’s hot

site must be stated in the response.6. Regular testing of the backup hot site7. Redundant hardware.

Bidder Response:

b. Please specify whether back up files are stored on Contractor’s site or with a subcontractor. If with a subcontractor, identify the subcontractor and storage medium used.

Bidder Response:

c. Identify the following:

1. Recovery Time Objective (time to recover functionality)2. Recovery Point Objective (amount of data that can be lost).

Bidder Response:

17. General

a. On-Us Entries

1. In the case of an On-Us Entry received for credit or debit to an account maintained with the Contractor, the Contractor must credit or debit the Receiver's account in the amount of such Entry on the Effective Entry Date contained in such Entry.

Bidder Response:

2. All reporting, as specified in this CONTRACT, must include the On-Us Entries.

Bidder Response:

3. Returned Entries, NOCs, Adjustments, etc. must be processed under the same time constraints and general requirements as Non-On-Us Entries, unless specified otherwise.

Bidder Response:

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4. On-Us Returns and NOCs cannot be received from the Contractor prior to settlement date.

Bidder Response:

b. Authorized Transactions. The Contractor must reject any Entry which does not comply with the type of transactions authorized by this CONTRACT, the specified formats, or that is not in compliance with specified security, or which contains an Effective Entry Date more than five calendar days after the business day such Entry is received by the Contractor.

Bidder Response:

c. Data Retention

1. State Retention. For State payments, it is anticipated MAIN and ACH Revenue Programs will be capable of providing up to 15 working days of recoverable transmissions to and from the Contractor. This data shall be provided to the Contractor upon request.

Bidder Response:

2. Duplicate Files. The Contractor must maintain adequate controls to ensure that if substitute files (from Section 1.022.17.c.1 above) are requested, no duplicate transactions are transmitted to the ACH Operator.

Bidder Response:

a. The Contractor must also have edits in place to identify duplicate files received from the State.

Bidder Response:

3. Contractor Retention . The Contractor must retain 15 working days of recoverable MAIN files.

Bidder Response:

a. This data must be provided to MAIN upon request by the authorized MAIN contact.

Bidder Response:

b. The Contractor must also retain recoverable transmissions to the ACH Revenue

Programs for 15 working days.

Bidder Response:

d. Cancel Authorization. The State may cancel an ACH authorization from a Receiver under certain conditions, as appropriate.

Bidder Response:

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e. Authorization Form Retention. The State will retain the Authorization Forms from the Receivers. These forms are available to the Contractor as required under the NACHA Rules. The Contractor shall contact the Contract Compliance Inspector or designee for copies of these forms. In accordance with NACHA rules, authorization forms will be retained for at least two years after termination of the EFT authorization by the Receiver or the State.

Bidder Response:

f. State Authorized Contacts. The Contract Compliance Inspector will provide the Contractor with a letter indicating the names of Authorized Representatives from the State that may transmit Entries through the manual Web process or make phone inquiries. Treasury may add or delete any Authorized Representative by written notice to the Contractor signed by the Contract Compliance Inspector. Such notices will be effective on the second business day following the day of the Contractor's receipt thereof.

Bidder Response:

g. Bank Account Structure. The current bank account structure at the existing ODFI consists of a Master Zero Balance Account (ZBA) and 5 Sub ZBAs. The 5 Sub ZBAs are for the three (3) ACH Revenue Programs (MLCC, DNR Retail Sales and Treasury Collections) and one account for the ACH Payment Program, and one account for Contractor web application Originated Entries. The State may opt to open a separate Sub ZBA account for the Contractor ACH Payment Program to separate these transactions from the Payroll, Retirement, Income Tax Refund, and Department of Human Services - SSP transactions.

Bidder Response:

1. The 5 or 6 Sub ZBAs must roll up to the Master ZBA and the account balance exceeding the compensating balance (if applicable) will be transferred to the State’s concentration bank daily.

Bidder Response:

h. The Contractor must work with the State and other contractors to assist in testing, problem resolutions and other Contract related activities.

Bidder Response:

i. Other Tasks. The Contractor must indicate any other recommended tasks to successfully implement this Contract.

Bidder Response:

18. Banking Statutes

a. Principal or Branch Office. Current law MCL 487.714 requires that the principal office or a branch office of the financial institution, which will be utilized as a depository for the State funds, must be located in the state of Michigan (see Appendix J).

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Bidder Response:

b. Fifty Percent of Net Worth. The Constitution, Article IX, Section 20, and limits the amount of State money deposited in any bank to 50% of the net worth of such bank (see Appendix K).

Bidder Response:

c. Collateral. Current law also requires collateral to cover all monies in the bank accounts. Treasury policy requires collateral of two times the compensating balance less the $250,000.00 FDIC insurance (see Appendix L for Bulletin BT-10001, Deposits of State Funds and Collateral Requirements and Section 1.071.2, Collateral).

Bidder Response:

19. Liability and Penalty Provisions

a. Contractor Errors. The Contractor is liable to the State for the Contractor's errors or delays that are not a result of the State’s errors or delays, acts of God, or in the opinion of the Contract Compliance Inspector is beyond the control of the Contractor (also see Sections 2.131, Liability Insurance and 2.244, Excusable Failure).

Bidder Response:

b. Timely Processing of Files. The Contractor must ensure files are timely submitted to the ACH Operator and meet settlement date and other processing requirements. If files are not submitted timely, penalties may apply to Contractor as follows:

1. ACH Payments: Vendor late fees per Public Act 279 of 1984 (0.75% amount equal of the payment to the private enterprise to which payment is due).

2. ACH Revenue Programs: Daily liquidated damage amount (undeposited funds) will be calculated as follows:

Value of Undeposited Funds

X Treasury Bill three-month “ask yield” as stated in the last Friday of each month’s Wall Street Journal

= Liquidated Damage

Note: The Contractor must credit the applicable bank accounts with interest earnings on the calculated penalty amount.

Bidder Response:

c. Unauthorized Debits. The Contractor is also liable to Treasury if the Contractor debits Treasury's concentration account, or any other accounts, for settlement of a particular transmission at a time other than as authorized by Treasury. Penalty will be equal to the loss of earnings to the Treasury as a result of the error (see Section 1.022.19.b).

Bidder Response:

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1.030 Roles and Responsibilities

1.031 Contractor Staff, Roles, and Responsibilities (Also See Section 4.013)1. Bidder must identify staff who will be involved in the project, including the name of each individual,

work locations, and detailed descriptions of their roles and responsibilities. Descriptions of roles should be functional and not just by title

Note: If an overall organization chart has been developed, provide a reference to that chart as well. Note any part-time personnel.

Bidder Response:

2. Bidder must provide a dedicated, experienced and knowledgeable FEDI implementation team for to ensure the efficient and timely migration from the State’s current contractor.

Bidder Response:

3. Bidder must provide a Project Manager to act as a central point of contact for all contractual activities.

Bidder Response:

4. Bidder must provide an information technology manager.

Bidder Response:

5. Supply a contact name, phone number, facsimile number, etc. for questions related to tracer requests (see Section 1.022.8.f).

Bidder Response:

6. Provide operations staff that can visually verify equipment status and perform/activate minor resets and activate menu option features with direction from the State. (Section 1.022.11.a.1.e).

Bidder Response:

7. Bidder must provide Customer Support and Maintenance staff (see Section 1.022.15).

Bidder Response:

a. Experienced back-up staff are required.

Bidder Response:

b. Identify contact person(s) familiar with the business and technical aspects of the FEDI/ACH process (see Section 1.022.15.c.1).

Bidder Response:

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1.032 State Staff, Roles, and Responsibilities1. The Department of Treasury will oversee the statewide Contract. The Contract Compliance Inspector

will oversee the Contract performance on a day-to-day basis during the term of the Contract (see Section 2.022).

2. The Department of Technology, Management and Budget (DTMB), Office of Financial Management (OFM), Michigan Information Administrative Network (MAIN) will provide a point of contact for processing problems for all FEDI/ACH payment files and will be responsible for monitoring daily operations at MAIN.

c. MAIN, must be authorized to send and pick up files from the ODFI Datasets (see Section 1.022.12.e).

3. The Department of Treasury, Receipts Processing will provide a contact for ACH Revenue processing problems and issues associated with ACH Revenue (Debits).

4. The Department of Treasury, Receipts Processing will provide a contact for ACH Payments for processing problems and issues associated with ACH Payments (Credits).

5. Contacts for each of the three ACH Revenue Programs will provide a point of contact for processing problems with ACH Revenue files and monitoring internal systems to ensure files are generated and transmitted to the Contractor as expected.

7. Department of Treasury, Bureau of Investments will approve collateral.8. State Authorized Contacts. The Contract Compliance Inspector will provide the Contractor with a

letter indicating the names of Authorized Representatives from the State that may transmit Entries through the manual Web process or make phone inquiries. Treasury may add or delete any Authorized Representative by written notice to the Contractor signed by the Contract Compliance Inspector. Such notices must be effective on the second business day following the day of the Contractor's receipt thereof (see Section 1.022.17.f).

1.033 Other Roles and Responsibilities1. The State utilizes a contractor’s computer operations center to process the State’s accounting transactions, generate the FEDI/ACH file and transmit it to the Contractor. The role of this operation center is to monitor the progress of the nightly batch cycle and to notify State staff of any failures. The contractor also acts as a communication point for any issues that arise after normal business hours.

1.040 Project Plan

1.041 Project Plan Management1. The Contractor (ODFI) will carry out this project under the direction and control of the CCI.

2. Although there will be continuous liaison with the Contractor team, the CCI or designee will meet bi-weekly at a minimum, or as requested by the CCI, with the Contractor's Project Manager for the purpose of reviewing progress and providing necessary guidance to the Contractor in solving problems which arise. The CCI will include other parties, such as MAIN, as necessary.

a. Subsequent to implementation, the Contractor Team and the CCI or designee will meet quarterly, at a minimum. After implementation, Incident Reports will replace the biweekly summary reports as needed. Incidents must be resolved within 10 working days. See Appendix M for example of Incident Report document (also see Section 1.042.2.g.1).

3. Bidders must provide a draft project plan with proposal for the deliverables requested in Section 1.022. The plan must include the details noted in Sections 1.022.14.a and 1.041.4.

Bidder Response to Task:

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4. Within five working days of the award of the Contract, the Contractor must submit to the CCI for final approval a detailed project plan. This final project plan must be in agreement with Section 1.041.3 as proposed by the Contractor, in agreement with Section 1.022.14 (Implementation, Testing and Training) and accepted by the State for Contract, and must include the following:

a. The Contractor's project organizational structure.

b. The Contractor's staffing table with names and title of personnel assigned to the project. This must be in agreement with staffing of accepted proposal. Necessary substitutions due to change of employment status and other unforeseen circumstances may only be made with prior approval of the State.

c. The project breakdown showing sub-projects, activities and tasks, and resources required and allocated to each.

d. The time-phased plan in the form of a graphic display using Microsoft Project, showing each event, task, and decision point in your work plan.

Bidder Response:

1.042 Reports1. During implementation, the Contractor must submit brief written biweekly summaries of progress

which outline the work accomplished during the reporting period; work to be accomplished during the subsequent reporting period; problems, real or anticipated, which should be brought to the attention of the CCI; and notification of any significant deviation from previously agreed-upon work plans.

Bidder Response:

2. Reports to Contract Compliance Inspector

a. Provide examples of all reports that are customary and generated to track processing aspects. Include report due dates for the following:

Bidder Response:

b. Monthly report that includes number of items and dollar amounts for:

1) MAIN Contractor Payments2) Payroll Payments3) Retirement Payments4) Income Tax Payments5) Department of Human Services, SSP Payments6) Treasury Collection Debit Payments7) MLCC Liquor Revenue8) DNR Retail Sales Revenue9) Web Bank Software Originated Transactions.

Notes: Report must to contain the item count and dollar amount of any TEL Standard Entry Class (SEC) entries as a subtotal for any Revenue Programs utilizing this SEC.

Report must also contain an item count for the number of addenda records sent to the Contractor for MAIN Vendor Payments.

Bidder Response:

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c. Monthly report that includes the following for each Payment and Revenue Program:

1) Number of Returns and dollar amount2) Number of NOC’s and dollar amount3) Number of Prenotes 4) Number of Reversals and dollar amount5) Number of Reclamations and dollar amount (Retirement Payments only)6) Number of Cancellations and dollar amount.

Bidder Response:

d. Monthly rolling 12 month volume and transaction fee report

This report gives a rolling 12 months of volume under the Contract. It is used to determine the ACH transaction rate for the subsequent month.

Bidder Response:

e. Reports for Web based ACH Origination:

These reports will be generated for each transmission if the State uses the bank’s Web based application to originate ACH transactions, principally Reversals and Reclamations. However, this is not the State’s preferred approach to originating these transactions (see Sections 1.022.5.a.4, 5.a.4.b, 6.a.2 and 9).

1) Transmittal report2) Report listing transactions for:

a. Reversalsb. Reclamationsc. Originationsd. Returns (from Web generated transactions)e. Notifications of Change (from Web generated transactions).

Bidder Response:

f. Banking Reports:

1) The State has asked for some hardcopy reports in this section. If the reports are also available on-line, please provide on-line pricing for them as well, if applicable.

Bidder Response:

2) Hard Copy Reports

a. Monthly Account Analysis Statements.b. Monthly Bank Statements.

Bidder Response:

3) Web Based Reports (on-line):

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Include separate reporting for Banking Electronic Cash Management Reporting Systems for Bank Statements, etc., including:

a. Daily bank statement per account, Zero Balance Account, and sub Zero Balance Account.

b. Monthly bank statement per account, Zero Balance Account, and sub Zero Balance Account.

c. Daily reports detailing the Return and NOC transactions for the 827 transaction set. d. Other- provide examples of other reports available.

Bidder Response:

4. Electronic Reports – Mainframe

a. ACH Payments

Daily BAI Version 2 for electronic report for the accounts.This report must include the ability to have unique BAI type codes on the 16 records to identify returns, reversals, reclamations, and settlements.

Bidder Response:

d. ACH Revenue

Daily BAI Version 2 for electronic report for the accounts. This report must include the ability to have unique BAI type codes on the 16 records to identify returns, reversals, and settlements.

Bidder Response:

g. Other Reports:

1) Incident Reports

a. An Incident Report is a State form used to document system problems that affect State customers or State agencies and requires attention and resolution by the Contractor. Incident Reports are assigned a unique Incident Report Number in the format of YYMMDD representing the date the incident occurred. See a copy of the Incident Report form in Appendix M - Incident Report and Appendix O – Form 4621, What Is An Incident? (Brochure).

Bidder Response:

b. The incident report must provide the following information concerning the data breach incident:

1. Approximate cause(s) of the breach incident2. Approximate date of the breach incident3. Approximate size of the affected population (victims)4. The type of data exposed5. The routing and transit numbers (RTNs) of the affected accounts6. The designated security contact for inquiries from Contract compliance Officer7. Organizations that are involved in the breach.

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Bidder Response:

e. Once the problem is resolved, the Contractor must document its response and action taken by completing Part 3 of the form.

Bidder Response:

f. The Contractor must maintain and make available a document to summarize the status of all Incident Reports issued by the State.

Bidder Response:

1. This “Incident Report Summary” will be in the form of a table or spreadsheet and contain relevant information such as Incident Report Number, Date of Incident, Summary of the Problem, Contractor response, Resolution Date, Status (Open, Closed), etc.

Bidder Response:

g. The Contractor must make the initial notification of the incident upon discovery of the incident and potential security breach. In the event of a security breach, the Contractor agrees to provide full cooperation to conduct a thorough security review. The review will validate compliancy with federal and state laws and regulations.

Bidder Response:

1.050 Acceptance

1.051 CriteriaThe following criteria will be used by the State to determine Acceptance of the Services or Deliverables provided under this SOW:

1. Testing is completed, and required sign-off is acquired (see Section 1.022.14)2. Completion of deliverables per the project plan (see Sections 1.041.3 and 4).

1.052 Final AcceptanceFinal Acceptance is when testing is completed and accepted by the State per Section 1.051, and all requirements of the Contract are met.

1.060 Proposal Pricing

1.061 Proposal Pricing

1. For authorized Services and Price List, see Attachment A (Price Proposal). Please complete Attachment A and submit with proposal.

a. The State is reviewing two options to pay for services (i.e. compensating balance or direct invoicing process). Please provide pricing for the services requested as follows:

1) Standard Quarterly Invoicing Process

a. Invoices would be submitted to the Contract Compliance Inspector

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b. Payment/invoicing for this Contract would occur quarterly (see section 2.044) c. The invoice must include the Contract and/or purchase order number to ensure timely

processing.

2) Compensating Balance

a. If services are paid with a compensating balance, identify the account balance requirement in Attachment A based on the annual Contract price utilizing the listed calculation methodology.

b. If payments for this Contract shall be made to the Contractor via a compensating balance, the Contractor shall provide an Accounts Analysis Statement by the 15th of each month for the previous month. All Account Analysis Statements must reflect actual work done and include adjustments for penalties.

c. The Contract Compliance Inspector’s designee shall monitor and maintain enough funds to reimburse the Contractor for all charges for the Contract period.

1. In the event that the earnings credit is less than the total price of the services, Treasury shall reimburse the Contractor for the net charge by maintaining a higher compensating balance in the next month.

2. In the event that the earnings credit is greater than the total price of the services, Contractor shall reimburse Treasury for the net charge by requiring a lower compensating balance in the next month.

d. By the 20th of each month, the Contract Compliance Inspector, or their designee, and the Contractor will review the compensating balance for the remaining duration of the Contract year.

2. Bidders are encouraged to offer quick payment terms (i.e. _____% discount off invoice if paid within _____ days). This information can be noted on the Bidders price proposal (see Attachment A). This may be a factor considered in the award decision.

3. Contractor’s out-of-pocket expenses are not separately reimbursable by the State unless, on a case-by-case basis for unusual expenses, the State has agreed in advance and in writing to reimburse Contractor for the expense at the State’s current travel reimbursement rates. See www.michigan.gov/dtmb for current rates.

4. The Contractor must provide Analysis Statements for each Master ZBA and Sub ZBA account by the 15th of each month for the previous month.

a. The monthly Account Analysis Statements must reflect actual volumes of transactions processed and associated charges in accordance with the price proposal format in Attachment A.

b. The invoicing account analysis structure must be consistent with the manner in which costs have been priced in the price proposal.

c. The Contract Compliance Inspector or designee will review and approve the volumes and charges contained on the Account Analysis Statements and notify the Contractor of any required adjustments or if the Analysis is accepted as presented.

5. Service Charges will be paid subject to the following:

a. Program Development: Contractor’s system design document and program development has been reviewed and approved by the Compliance Inspector.

b. System Testing: Contractor completes system tests that follow the format agreed to by the Contractor and the Contract Compliance Inspector.

c. Complete Systems Implementation: The full system has been system tested and implemented. Implementation includes successful FEDI processing of all the applicable transaction sets, ACH

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Revenue files, communication lines, encryption, Pre-notification and live Entry processing with demonstrated ability to process NOC, Return, Reclamation, and Reversal items electronically, etc.

1) The Contractor must have completed the documentation supporting the system. 2) All paper reporting processes and reports and electronic files must be tested and approved. 3) Treasury, MAIN, and ACH Revenue program personnel must be adequately instructed on the

operation of the systems. 4) The Contract Compliance Inspector has approved results of the systems tests and full

implementation in writing.

d. Treasury Contract Compliance Inspector Certification of the Systems: All portions of the systems are successfully certified as stipulated, as approved in writing by the Contract Compliance Inspector, MAIN, and ACH Revenue Programs (see section 1.022.14).

e. Collateral has been presented to and approved by Treasury, Bureau of Investments (see Appendix L for Bulletin BT-10001 Bulletin, Deposits of State Funds and Collateral Requirements and Section 1.071.2).

6. Treasury will reimburse the Contractor for Automated Clearing House (ACH) payment transactions on the settlement date. Treasury will initiate reimbursements to the Contractor via ACH transactions originated from a different contractor for settlement on the same date as the originated transactions. If there is more than one file on a settlement date, separate ACH transactions will be issued for each file.

7. This is a unit price Contract. It is noted in the price proposal which portions of the pricing will be held firm for the duration of the Contract. The State will only pay for actual transactions processed, as noted in the price proposal. The Contractor is at risk for ALL additional costs, overhead, set-up, travel, out of pocket costs, etc.

8. Under the terms of the Contract all prices, except the ACH Operator ACH per Item and Addenda fees, will be held firm for the duration of the Contract.

a. The ACH Operator fees are considered to be “pass-through” fees. Contractor cannot include a mark-up on the ACH Operator pass-through fees. The Contract may be amended for ACH Operator increases in fees.

b. Each year (or as issued), the Contractor must provide the Contract Compliance Inspector with the new ACH pass-through fee structure issued by the ACH Operator. The Contract may be amended as appropriate.

9. During the Contract, the Contractor must reflect the costs for this Contract on the monthly Account Analysis Statement as the fees are presented in the price proposal. The Contractor cannot convert the pricing to coincide with its billing system, unless authorized to do so, in writing, by the Treasury Purchasing, as agreed to by the Contract Compliance Inspector.

10. Alternative Pricing – For purposes of bid comparison the Contractor must submit pricing using the method outlined above and in Attachment A. If the Contractor has alternative pricing method(s) that they wish the State to consider they should attach such proposals labeled as “Alternative Pricing” to the required pricing document. The Alternative Pricing should include a description of the pricing method and advantages of such pricing.

1.062 Price TermPrices quoted are firm for the entire length of the Contract. The only price changes allowed will be for rate decreases or increases for the ACH Operator ACH Item and Addenda Fees that are charged to the ODFI. If the Contract is renewed, the State and the Contractor may negotiate price increases or decreases. If mutually acceptable rates are not negotiated, the Contract will not be renewed.

1.063 Tax Excluded from Price

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(a) Sales Tax: For purchases made directly by the State, the State is exempt from State and Local Sales Tax. Prices must not include the taxes. Exemption Certificates for State Sales Tax will be furnished upon request.

(b) Federal Excise Tax: The State may be exempt from Federal Excise Tax, or the taxes may be reimbursable, if articles purchased under any resulting Contract are used for the State’s exclusive use. Certificates showing exclusive use for the purposes of substantiating a tax-free or tax-reimbursable sale will be sent upon request. If a sale is tax exempt or tax reimbursable under the Internal Revenue Code, prices must not include the Federal Excise Tax.

1.064 Holdback – Deleted – N/A

1.070 Additional Requirements

1.071 Additional Terms and Conditions specific to this RFP

1. MOVEMENT OF FUNDS/DAYLIGHT OVERDRAFTS

All funds must be deposited into demand account(s) as specified by Treasury. Treasury will remit funds to the Contractor via ACH. The funds will settle on the same day as the outgoing credit ACH transactions originated by the Contractor for MAIN and PFOS payments. The Contractor should experience no daylight overdraft.

A Master Zero Balance Account (ZBA) with a minimum operating balance will be established with the Contractor. In addition, five sub ZBA accounts will be established for the following:

FEDI Credit ACH Account (includes FEDI and PFOS ACH Programs) Web Originated Entries MLCC Debit ACH DNR Debit ACH Treasury Collection Debit ACH.

Bidder Response:

a. For ACH Payments:

1) One Entry per day must to be made (to reduce Treasury’s bank account for the amount of the payment files) to Treasury’s account for the total amount of the ACH payments, except when the value exceeds $99,999,999.99 (system limitation). In such cases, more than one Entry can be made for one payment file transmission. However, if there is more than one transmission in one day, there must be a separate bank debit Entry for the total of each transmission (or multiples if needed because of the system limitation).

Bidder Response:

2) If there are insufficient funds in Treasury’s account(s) to satisfy the credits (outgoing ACH payments) on the settlement date, the Contractor must call the Contract Compliance Inspector. The Compliance Inspector will immediately take steps to resolve the lack of funds, if deemed appropriate.

Bidder Response:

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3) The Contractor is not authorized to debit any other State Treasurer’s account that may be with the Contractor in order to satisfy the lack of funds in the ACH account established by the resulting Contract. As noted above, no daylight overdraft is anticipated.

Bidder Response:

4) Credits to the account resulting from a Return of an Entry must be posted to the account as of the date of receipt by the Contractor.

Bidder Response:

5) Each Return entry must be posted individually to Treasury’s account.

Bidder Response:

b. For ACH Revenue Programs

1) The Contractor must credit each ACH Revenue Program for the total dollar amount of its outgoing file transmission on the settlement date. Each ACH Revenue Program will maintain a separate sub zero balance account (sub ZBA).

Bidder Response:

2) Each Return entry shall be posted individually to the appropriate ACH Revenue Program account.

Bidder Response:

2. COLLATERAL

a. Contractor must provide collateral to cover all monies left in the Master ZBA bank account.

b. Compensating balance held in a ZBA bank account will require collateral of two times the compensating balance less $250,000 (FDIC insurance) (if applicable per Section 1.061.1.a.2).

c. The pledged collateral must be held in the name of the Michigan Department of Treasury at the Federal Reserve. (Also see Appendix L for Bulletin BT-10001, Deposits of State Funds and Collateral Requirements).

Bidder Response:

d. All collateral must be provided on the Implementation Date.

Bidder Response:

1) The Contractor must provide an initial list of the par amount, type cusip number and current market value of the collateral to the Contract Compliance Inspector.

Bidder Response:

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e. Updates must be sent when collateral is added.

Bidder Response:

f. The Department of Treasury retains the right to reject any collateral deemed unsatisfactory.

Bidder Response:

1) Upon rejection, the Contractor must provide approved substitute collateral within one business day.

Bidder Response:

g. The Department of Treasury also retains the right to set the amount of collateral needed to cover the bank account (see Appendix L, Bulletin BT-10001 - Reference Guide to U.S. Government and Agency Securities for collateral requirements). Treasury will not release collateral until the Contract is completed in its entirety.

Bidder Response:

h. Collateral must be adjusted during the Contract based upon increases and decreases in the compensating balance amount (if applicable per Section 1.061.1.a.2 and see Appendix L).

Bidder Response:

i. THE CONTRACTOR SHALL NOT SWITCH COLLATERAL AT ANY TIME WITHOUT APPROVAL FROM THE DEPARTMENT OF TREASURY. SWITCHING COLLATERAL WITHOUT APPROVAL FROM THE DEPARTMENT OF TREASURY MAY DISQUALIFY THE CONTRACTOR FROM BIDDING ON THIS JOB FOR THE NEXT CONTRACT PERIOD.

Bidder Response:

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Article 2, Terms and Conditions

2.000 Contract Structure and Term

2.001 Contract TermThe Contract is for a period of five years, 10 months beginning March 1, 2013 through December 31, 2018 (see Section 1.011). All outstanding Purchase Orders must also expire upon the termination (cancellation for any of the reasons listed in Section 2.150) of the Contract, unless otherwise extended under the Contract. Absent an early termination for any reason, Purchase Orders issued but not expired, by the end of the Contract’s stated term, will remain in effect for the balance of the fiscal year for which they were issued.

2.002 Options to Renew The Contract may be renewed in writing by mutual agreement of the parties not less than 30 days before its expiration. The Contract may be renewed for up to two additional one-year periods.

2.003 Legal EffectContractor must show acceptance of the Contract by signing two (2) copies of the Contract and returning them to the Contract Administrator. The Contractor must not proceed with the performance of the work to be done under the Contract, including the purchase of necessary materials, until both parties have signed the Contract to show acceptance of its terms, and the Contractor receives a Contract release/purchase order that authorizes and defines specific performance requirements.

Except as otherwise agreed in writing by the parties, the State assumes no liability for costs incurred by Contractor or payment under the Contract, until Contractor is notified in writing that the Contract (or Change Order) has been approved by the State Administrative Board (if required), approved and signed by all the parties, and a Purchase Order against the Contract has been issued.

2.004 Attachments & ExhibitsAll Attachments and Exhibits affixed to any and all Statement(s) of Work, or appended to or referencing the Contract, are incorporated in their entirety and form part of the Contract.

2.005 OrderingThe State will issue a written Purchase Order, Blanket Purchase Order, Direct Voucher or Procurement Card Order, which must be approved by the Contract Administrator or the Contract Administrator's designee, to order any Services/Deliverables under the Contract. All orders are subject to the terms and conditions of the Contract. No additional terms and conditions contained on either a Purchase Order or Blanket Purchase Order apply unless they are also specifically contained in that Purchase Order's or Blanket Purchase Order's accompanying Statement of Work. Exact quantities to be purchased are unknown, however, the Contractor must furnish all such materials and services as may be ordered during the CONTRACT period. Quantities specified, if any, are estimates based on prior purchases, and the State is not obligated to purchase in these or any other quantities.

2.006 Order of Precedence(a) The Contract, including any Statements of Work and Exhibits, to the extent not contrary to the Contract, each of which is incorporated for all purposes, constitutes the entire agreement between the parties with respect to the subject matter and supersedes all prior agreements, whether written or oral, with respect to the subject matter and as additional terms and conditions on the purchase order must apply as limited by Section 2.005.

(b) In the event of any inconsistency between the terms of the Contract and a Statement of Work, the terms of the Statement of Work will take precedence (as to that Statement of Work only); provided, however, that a Statement of Work may not modify or amend the terms of the Contract, which may be modified or amended only by a formal Contract amendment.

2.007 Headings

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Captions and headings used in the Contract are for information and organization purposes. Captions and headings, including inaccurate references, do not, in any way, define or limit the requirements or terms and conditions of the Contract.

2.008 Form, Function & UtilityIf the Contract is for use of more than one (1) State agency and if the Deliverable/Service does not the meet the form, function, and utility required by that State agency, that agency may, subject to State purchasing policies, procure the Deliverable/Service from another source.

2.009 Reformation and SeverabilityEach provision of the Contract is severable from all other provisions of the Contract and, if one (1) or more of the provisions of the Contract is declared invalid, the remaining provisions of the Contract remain in full force and effect.

2.010 Consents and ApprovalsExcept as expressly provided otherwise in the Contract, if either party requires the consent or approval of the other party for the taking of any action under the Contract, the consent or approval must be in writing and must not be unreasonably withheld or delayed.

2.011 No Waiver of DefaultIf a party fails to insist upon strict adherence to any term of the Contract then the party has not waived the right to later insist upon strict adherence to that term, or any other term, of the Contract.

2.012 SurvivalAny provisions of the Contract that impose continuing obligations on the parties, including without limitation the parties’ respective warranty, indemnity and confidentiality obligations, survive the expiration or termination of the Contract for any reason. Specific references to survival in the Contract are solely for identification purposes and not meant to limit or prevent the survival of any other section.

2.020 Contract Administration

2.021 Issuing OfficeThe Contract is issued by the Department of Treasury (including all other relevant State of Michigan departments and agencies, the “State”). Treasury Purchasing is the sole point of contact in the State with regard to all procurement and contractual matters relating to the Contract. Treasury Purchasing is the only State office authorized to change, modify, amend, alter or clarify the prices, specifications, terms and conditions of the Contract. The Contractor Administrator within Treasury Purchasing for the Contract is:

Thomas FalikMichigan Department of TreasuryPurchasing SectionAustin Building, 2nd FloorLansing, MI 48922Email: falikt@michigan.govPhone: 517-373-3185.

2.022 Contract Compliance Inspector After Treasury Purchasing receives the properly executed Contract, it is anticipated that the Manager of Treasury Purchasing will direct the person named below, or any other person so designated, to monitor and coordinate the activities for the Contract on a day-to-day basis during its term. However, monitoring of the Contract implies no authority to change, modify, clarify, amend, or otherwise alter the prices, terms, conditions and specifications of the Contract as that authority is retained by Treasury Purchasing. The CCI for the Contract is:

To Be Determined Department of TreasuryReceipts Processing Division.

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2.023 Project ManagerThe following individual will oversee the project:

To Be Determined.

2.024 Change RequestsThe State reserves the right to request, from time to time, any changes to the requirements and specifications of the Contract and the work to be performed by the Contractor under the Contract. During the course of ordinary business, it may become necessary for the State to discontinue certain business practices or create Additional Services/Deliverables. At a minimum, to the extent applicable, the State would like the Contractor to provide a detailed outline of all work to be done, including tasks necessary to accomplish the services/deliverables, timeframes, listing of key personnel assigned, estimated hours for each individual per task, and a complete and detailed cost justification.

If the Contractor does not so notify the State, the Contractor has no right to claim thereafter that it is entitled to additional compensation for performing that service or providing that deliverable.

Change Requests:(a) By giving Contractor written notice within a reasonable time, the State must be entitled to accept a Contractor proposal for Change, to reject it, or to reach another agreement with Contractor. Should the parties agree on carrying out a Change, a written Contract Change Notice must be prepared and issued under the Contract, describing the Change and its effects on the Services and any affected components of the Contract (a “Contract Change Notice”).(b) No proposed Change may be performed until the proposed Change has been specified in a duly executed Contract Change Notice issued by the Treasury Purchasing.(c) If the State requests or directs the Contractor to perform any activities that Contractor believes constitute a Change, the Contractor must notify the State that it believes the requested activities are a Change before beginning to work on the requested activities. If the Contractor fails to notify the State before beginning to work on the requested activities, then the Contractor waives any right to assert any claim for additional compensation or time for performing the requested activities. If the Contractor commences performing work outside the scope of the Contract and then ceases performing that work, the Contractor must, at the request of the State, retract any out-of-scope work that would adversely affect the Contract.

2.025 NoticesAny notice given to a party under the Contract must be deemed effective, if addressed to the State contact as noted in Section 2.021 and the Contractor’s contact as noted on the cover page of the contract, upon: (i) delivery, if hand delivered; (ii) receipt of a confirmed transmission by facsimile if a copy of the notice is sent by another means specified in this Section; (iii) the third Business Day after being sent by U.S. mail, postage pre-paid, return receipt requested; or (iv) the next Business Day after being sent by a nationally recognized overnight express courier with a reliable tracking system.

Either party may change its address where notices are to be sent by giving notice according to this Section.

2.026 Binding CommitmentsRepresentatives of Contractor must have the authority to make binding commitments on Contractor’s behalf within the bounds set forth in the Contract. Contractor may change the representatives from time to time upon written notice.

2.027 Relationship of the PartiesThe relationship between the State and Contractor is that of client and independent contractor. No agent, employee, or servant of Contractor or any of its Subcontractors must be deemed to be an employee, agent or servant of the State for any reason. Contractor is solely and entirely responsible for its acts and the acts of its agents, employees, servants and Subcontractors during the performance of the Contract.

2.028 Covenant of Good Faith

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Each party must act reasonably and in good faith. Unless stated otherwise in the Contract, the parties must not unreasonably delay, condition, or withhold the giving of any consent, decision, or approval that is either requested or reasonably required of them in order for the other party to perform its responsibilities under the Contract.

2.029 Assignments(a) Neither party may assign the Contract, or assign or delegate any of its duties or obligations under the Contract, to any other party (whether by operation of law or otherwise), without the prior written consent of the other party; provided, however, that the State may assign the Contract to any other State agency, department, division or department without the prior consent of Contractor and Contractor may assign the Contract to an affiliate so long as the affiliate is adequately capitalized and can provide adequate assurances that the affiliate can perform the requirements of the Contract. The State may withhold consent from proposed assignments, subcontracts, or novations when the transfer of responsibility would operate to decrease the State’s likelihood of receiving performance on the Contract or the State’s ability to recover damages.

(b) Contractor may not, without the prior written approval of the State, assign its right to receive payments due under the Contract. If the State permits an assignment, the Contractor is not relieved of its responsibility to perform any of its contractual duties, and the requirement under the Contract that all payments must be made to one (1) entity continues.

(c) If the Contractor intends to assign the Contract or any of the Contractor's rights or duties under the Contract, the Contractor must notify the State in writing at least 90 days before the assignment. The Contractor also must provide the State with adequate information about the assignee within a reasonable amount of time before the assignment for the State to determine whether to approve the assignment.

2.030 General Provisions

2.031 Media Releases News releases (including promotional literature and commercial advertisements) pertaining to the RFP and Contract or project to which it relates must not be made without prior written State approval, and then only in accordance with the explicit written instructions from the State. No results of the activities associated with the RFP and Contract are to be released without prior written approval of the State and then only to persons designated.

2.032 Contract DistributionTreasury Purchasing retains the sole right of Contract distribution to all State agencies and local units of government unless other arrangements are authorized by Treasury Purchasing.

2.033 PermitsContractor must obtain and pay any associated costs for all required governmental permits, licenses and approvals for the delivery, installation and performance of the Services. The State must pay for all costs and expenses incurred in obtaining and maintaining any necessary easements or right of way.

2.034 Website IncorporationThe State is not bound by any content on the Contractor’s website, even if the Contractor’s documentation specifically referenced that content and attempts to incorporate it into any other communication, unless the State has actual knowledge of the content and has expressly agreed to be bound by it in a writing that has been manually signed by an authorized representative of the State.

2.035 Future Bidding PreclusionContractor acknowledges that, to the extent the Contract involves the creation, research, investigation or generation of a future RFP, it may be precluded from bidding on the subsequent RFP. The State reserves the right to disqualify any bidder if the State determines that the bidder has used its position (whether as an incumbent Contractor, or as a Contractor hired to assist with the RFP development, or as a Vendor offering free assistance) to gain a competitive advantage on the RFP

2.036 Freedom of Information

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All information in any proposal submitted to the State by Contractor and the Contract is subject to the provisions of the Michigan Freedom of Information Act, 1976 PA 442, MCL 15.231, et seq (the “FOIA”).

2.037 Disaster RecoveryContractor and the State recognize that the State provides essential services in times of natural or man-made disasters. Therefore, except as so mandated by Federal disaster response requirements, Contractor personnel dedicated to providing Services/Deliverables under the Contract must provide the State with priority service for repair and work around in the event of a natural or man-made disaster.

2.040 Financial Provisions

2.041 Fixed Prices for Services/DeliverablesEach Statement of Work or Purchase Order issued under the Contract must specify (or indicate by reference to the appropriate Contract Exhibit) the firm, fixed prices for all Services/Deliverables, and the associated payment milestones and payment amounts. The State may make progress payments to the Contractor when requested as work progresses, but not more frequently than monthly, in amounts approved by the Contract Administrator, after negotiation. Contractor must show verification of measurable progress at the time of requesting progress payments.

2.042 Adjustments for Reductions in Scope of Services/DeliverablesIf the scope of the Services/Deliverables under any Statement of Work issued under the Contract is subsequently reduced by the State, the parties must negotiate an equitable reduction in Contractor’s charges under such Statement of Work commensurate with the reduction in scope.

2.043 Services/Deliverables Covered For all Services/Deliverables to be provided by Contractor (and its Subcontractors, if any) under the Contract, the State must not be obligated to pay any amounts in addition to the charges specified in the Contract.

2.044 Invoicing and Payment – In General(a) Each Statement of Work issued under the Contract must list (or indicate by reference to the appropriate Contract Exhibit) the prices for all Services/Deliverables, equipment and commodities to be provided, and the associated payment milestones and payment amounts.

(b) Each Contractor invoice must show details as to charges by Service/Deliverable component and location at a level of detail reasonably necessary to satisfy the State’s accounting and charge-back requirements. Invoices for Services performed on a time and materials basis must show, for each individual, the number of hours of Services performed during the billing period, the billable skill/labor category for such person and the applicable hourly billing rate. Prompt payment by the State is contingent on the Contractor’s invoices showing the amount owed by the State minus any holdback amount to be retained by the State in accordance with Section 1.064.

(c) Correct invoices will be due and payable by the State, in accordance with the State’s standard payment procedure as specified in 1984 PA 279, MCL 17.51 et seq., within 45 days after receipt, provided the State determines that the invoice was properly rendered.

(d) All invoices must reflect actual work done. Invoices and payments will be submitted/paid quarterly or paid via compensating balance per section 1.061. The specific payment schedule for any Contract(s) entered into, as the State and the Contractor(s) will mutually agree upon. The schedule should show payment amount and should reflect actual work done by the payment dates, less any penalty cost charges accrued by those dates. As a general policy invoices/statements shall be forwarded to the designated representative by the 15th day of the following month.

The State may make progress payments to the Contractor when requested as work progresses, but not more frequently than monthly, in amounts approved by the CCI, after negotiation. Contractor must show verification of measurable progress at the time of requesting progress payments.

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2.045 Pro-rationTo the extent there are any Services that are to be paid for on a monthly basis, the cost of such Services must be pro-rated for any partial month.

2.046 Antitrust AssignmentThe Contractor assigns to the State any claim for overcharges resulting from antitrust violations to the extent that those violations concern materials or services supplied by third parties to the Contractor, toward fulfillment of the Contract.

2.047 Final PaymentThe making of final payment by the State to Contractor does not constitute a waiver by either party of any rights or other claims as to the other party’s continuing obligations under the Contract, nor will it constitute a waiver of any claims by one (1) party against the other arising from unsettled claims or failure by a party to comply with the Contract, including claims for Services and Deliverables not reasonably known until after acceptance to be defective or substandard. Contractor’s acceptance of final payment by the State under the Contract must constitute a waiver of all claims by Contractor against the State for payment under the Contract, other than those claims previously filed in writing on a timely basis and still unsettled.

2.048 Electronic Payment RequirementElectronic transfer of funds is required for payments on State contracts. The Contractor must register with the State electronically at http://www.cpexpress.state.mi.us. As stated in 1984 PA 431, all contracts that the State enters into for the purchase of goods and services must provide that payment will be made by Electronic Fund Transfer (EFT).

2.050 Taxes

2.051 Employment TaxesContractors are expected to collect and pay all applicable federal, state, and local employment taxes.

2.052 Sales and Use TaxesContractors are required to be registered and to remit sales and use taxes on taxable sales of tangible personal property or services delivered into the State. Contractors that lack sufficient presence in Michigan to be required to register and pay tax must do so as a volunteer. This requirement extends to: (1) all members of any controlled group as defined in § 1563(a) of the Internal Revenue Code and applicable regulations of which the company is a member, and (2) all organizations under common control as defined in § 414(c) of the Internal Revenue Code and applicable regulations of which the company is a member that make sales at retail for delivery into the State are registered with the State for the collection and remittance of sales and use taxes. In applying treasury regulations defining “two (2) or more trades or businesses under common control” the term “organization” means sole proprietorship, a partnership (as defined in § 701(a)(2) of the Internal Revenue Code), a trust, an estate, a corporation, or a limited liability company.

2.060 Contract Management

2.061 Contractor Personnel QualificationsAll persons assigned by Contractor to the performance of Services under the Contract must be employees of Contractor or its majority-owned (directly or indirectly, at any tier) subsidiaries (or a State-approved Subcontractor) and must be fully qualified to perform the work assigned to them. Contractor must include a similar provision in any subcontract entered into with a Subcontractor. For the purposes of the Contract, independent contractors engaged by Contractor solely in a staff augmentation role must be treated by the State as if they were employees of Contractor for the Contract only; however, the State understands that the relationship between Contractor and Subcontractor is an independent contractor relationship.

2.062 Contractor Key Personnel(a) The Contractor must provide the CCI with the names of the Key Personnel.

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(b) Key Personnel must be dedicated as defined in the Statement of Work to the Project for its duration in the applicable Statement of Work with respect to other individuals designated as Key Personnel for that Statement of Work.

(c) The State reserves the right to recommend and approve in writing the initial assignment, as well as any proposed reassignment or replacement, of any Key Personnel. Before assigning an individual to any Key Personnel position, Contractor must notify the State of the proposed assignment, must introduce the individual to the appropriate State representatives, and must provide the State with a resume and any other information about the individual reasonably requested by the State. The State reserves the right to interview the individual before granting written approval. In the event the State finds a proposed individual unacceptable, the State must provide a written explanation including reasonable detail outlining the reasons for the rejection.

(d) Contractor must not remove any Key Personnel from their assigned roles on the Contract without the prior written consent of the State. The Contractor’s removal of Key Personnel without the prior written consent of the State is an unauthorized removal (“Unauthorized Removal”). Unauthorized Removals does not include replacing Key Personnel for reasons beyond the reasonable control of Contractor, including illness, disability, leave of absence, personal emergency circumstances, resignation or for cause termination of the Key Personnel’s employment. Unauthorized Removals does not include replacing Key Personnel because of promotions or other job movements allowed by Contractor personnel policies or Collective Bargaining Agreement(s) as long as the State receives prior written notice before shadowing occurs and Contractor provides 30 days of shadowing unless parties agree to a different time period. The Contractor with the State must review any Key Personnel replacements and appropriate transition planning must be established. Any Unauthorized Removal may be considered by the State to be a material breach of the Contract, in respect of which the State may elect to exercise its termination and cancellation rights.

(e) The Contractor must notify the Contract Compliance Inspector and the Contract Administrator at least 10 business days before redeploying non-Key Personnel, who are dedicated to primarily to the Project, to other projects. If the State does not object to the redeployment by its scheduled date, the Contractor may then redeploy the non-Key Personnel.

2.063 Re-assignment of Personnel at the State’s RequestThe State reserves the right to require the removal from the Project of Contractor personnel found, in the judgment of the State, to be unacceptable. The State’s request must be written with reasonable detail outlining the reasons for the removal request. Additionally, the State’s request must be based on legitimate, good-faith reasons. Replacement personnel for the removed person must be fully qualified for the position. If the State exercises this right, and the Contractor cannot immediately replace the removed personnel, the State agrees to an equitable adjustment in schedule or other terms that may be affected by the State’s required removal. If any incident with removed personnel results in delay not reasonably anticipatable under the circumstances and which is attributable to the State, the applicable SLAs for the affected Service will not be counted for a time as agreed to by the parties.

2.064 Contractor Personnel LocationAll staff assigned by Contractor to work on the Contract must perform their duties either primarily at Contractor’s offices and facilities or at State facilities. Without limiting the generality of the foregoing, Key Personnel must, at a minimum, spend at least the amount of time on-site at State facilities as indicated in the applicable Statement of Work. Subject to availability, selected Contractor personnel may be assigned office space to be shared with State personnel.

2.065 Contractor IdentificationContractor employees must be clearly identifiable while on State property by wearing a State-issued badge, as required. Contractor employees are required to clearly identify themselves and the company they work for whenever making contact with State personnel by telephone or other means.

2.066 Cooperation with Third PartiesContractor must cause its personnel and the personnel of any Subcontractors to cooperate with the State and its agents and other contractors including the State’s Quality Assurance personnel. As reasonably requested by the State in writing, the Contractor must provide to the State’s agents and other contractors

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reasonable access to Contractor’s Project personnel, systems and facilities to the extent the access relates to activities specifically associated with the Contract and will not interfere or jeopardize the safety or operation of the systems or facilities. The State acknowledges that Contractor’s time schedule for the Contract is very specific and must not unnecessarily or unreasonably interfere with, delay, or otherwise impede Contractor’s performance under the Contract with the requests for access.

2.067 Contractor Return of State Equipment/ResourcesThe Contractor must return to the State any State-furnished equipment, facilities, and other resources when no longer required for the Contract in the same condition as when provided by the State, reasonable wear and tear excepted.

2.068 Contract Management ResponsibilitiesThe Contractor must assume responsibility for all contractual activities, whether or not that Contractor performs them. Further, the State considers the Contractor to be the sole point of contact with regard to contractual matters, including payment of any and all charges resulting from the anticipated Contract. If any part of the work is to be subcontracted, the Contract must include a list of Subcontractors, including firm name and address, contact person and a complete description of work to be subcontracted. The State reserves the right to approve Subcontractors and to require the Contractor to replace Subcontractors found to be unacceptable. The Contractor is totally responsible for adherence by the Subcontractor to all provisions of the Contract. Any change in Subcontractors must be approved by the State, in writing, prior to such change.

2.070 Subcontracting by Contractor

2.071 Contractor Full ResponsibilityContractor has full responsibility for the successful performance and completion of all of the Services and Deliverables. The State will consider Contractor to be the sole point of contact with regard to all contractual matters under the Contract, including payment of any and all charges for Services and Deliverables.

2.072 State Consent to DelegationContractor must not delegate any duties under the Contract to a Subcontractor unless the Treasury Purchasing has given written consent to such delegation. The State reserves the right of prior written approval of all Subcontractors and to require Contractor to replace any Subcontractors found, in the reasonable judgment of the State, to be unacceptable. The State’s request must be written with reasonable detail outlining the reasons for the removal request. Additionally, the State’s request must be based on legitimate, good-faith reasons. Replacement Subcontractor(s) for the removed Subcontractor must be fully qualified for the position. If the State exercises this right, and the Contractor cannot immediately replace the removed Subcontractor, the State will agree to an equitable adjustment in schedule or other terms that may be affected by the State’s required removal. If any such incident with a removed Subcontractor results in delay not reasonable anticipatable under the circumstances and which is attributable to the State, the applicable SLA for the affected Work will not be counted for a time agreed upon by the parties.

2.073 Subcontractor Bound to ContractIn any subcontracts entered into by Contractor for the performance of the Services, Contractor must require the Subcontractor, to the extent of the Services to be performed by the Subcontractor, to be bound to Contractor by the terms of the Contract and to assume toward Contractor all of the obligations and responsibilities that Contractor, by the Contract, assumes toward the State. The State reserves the right to receive copies of and review all subcontracts, although Contractor may delete or mask any proprietary information, including pricing, contained in such contracts before providing them to the State. The management of any Subcontractor is the responsibility of Contractor, and Contractor must remain responsible for the performance of its Subcontractors to the same extent as if Contractor had not subcontracted such performance. Contractor must make all payments to Subcontractors or suppliers of Contractor. Except as otherwise agreed in writing by the State and Contractor, the State will not be obligated to direct payments for the Services other than to Contractor. The State’s written approval of any Subcontractor engaged by Contractor to perform any obligation under the Contract will not relieve Contractor of any obligations or performance required under the Contract.

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2.074 Flow DownExcept where specifically approved in writing by the State on a case-by-case basis, Contractor must flow down the obligations in Sections 2.031, 2.060, 2.100, 2.110, 2.120, 2.130, 2.200 in all of its agreements with any Subcontractors.

2.075 Competitive SelectionThe Contractor must select Subcontractors (including suppliers) on a competitive basis to the maximum practical extent consistent with the objectives and requirements of the Contract.

2.080 State Responsibilities

2.081 EquipmentThe State must provide only the equipment and resources identified in the Statements of Work and other Contract Exhibits.

2.082 FacilitiesThe State must designate space as long as it is available and as provided in the Statement of Work, to house the Contractor’s personnel whom the parties agree will perform the Services/Deliverables at State facilities (collectively, the “State Facilities”). The Contractor must have reasonable access to, and, unless agreed otherwise by the parties in writing, must observe and comply with all rules and regulations relating to each of the State Facilities (including hours of operation) used by the Contractor in the course of providing the Services. Contractor must not, without the prior written consent of the State, use any State Facilities or access any State information systems provided for the Contractor’s use, or to which the Contractor otherwise gains access in the course of performing the Services, for any purpose other than providing the Services to the State.

2.090 Security

2.091 Background ChecksOn a case-by-case basis, the State may investigate the Contractor's personnel before they may have access to State facilities and systems. The scope of the background check is at the discretion of the State and the results will be used to determine Contractor personnel eligibility for working within State facilities and systems. The investigations will include Michigan State Police Background checks (ICHAT) and may include the National Crime Information Center (NCIC) Finger Prints. Proposed Contractor personnel may be required to complete and submit an RI-8 Fingerprint Card for the NCIC Finger Print Check. Any request for background checks will be initiated by the State and will be reasonably related to the type of work requested.

All Contractor personnel must comply with the State’s security and acceptable use policies for State IT equipment and resources. See http://www.michigan.gov/dit. Furthermore, Contractor personnel must agree to the State’s security and acceptable use policies before the Contractor personnel will be accepted as a resource to perform work for the State. The Contractor must present these documents to the prospective employee before the Contractor presents the individual to the State as a proposed resource. Contractor staff must comply with all Physical Security procedures in place within the facilities where they are working.

2.092 Security Breach NotificationIf the Contractor breaches this Section, the Contractor must (i) promptly cure any deficiencies and (ii) comply with any applicable federal and state laws and regulations pertaining to unauthorized disclosures. Contractor and the State will cooperate to mitigate, to the extent practicable, the effects of any breach, intrusion, or unauthorized use or disclosure. Contractor must report to the State, in writing, any use or disclosure of Confidential Information, whether suspected or actual, other than as provided for by the Contract within 10 days of becoming aware of the use or disclosure or the shorter time period as is reasonable under the circumstances.

2.093 PCI Data Security Requirements – Deleted – N/A

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2.100 Confidentiality (Also See Sections 1.022.11 and 12)

2.101 ConfidentialityContractor and the State each acknowledge that the other possesses, and will continue to possess, confidential information that has been developed or received by it. As used in this Section, “Confidential Information” of Contractor must mean all non-public proprietary information of Contractor (other than Confidential Information of the State as defined below) which is marked confidential, restricted, proprietary, or with a similar designation. “Confidential Information” of the State must mean any information which is retained in confidence by the State (or otherwise required to be held in confidence by the State under applicable federal, state and local laws and regulations) or which, in the case of tangible materials provided to Contractor by the State under its performance under the Contract, is marked as confidential, proprietary, or with a similar designation by the State. “Confidential Information” excludes any information (including the Contract) that is publicly available under the Michigan FOIA.

2.102 Protection and Destruction of Confidential InformationThe State and Contractor must each use at least the same degree of care to prevent disclosing to third parties the Confidential Information of the other as it employs to avoid unauthorized disclosure, publication, or dissemination of its own confidential information of like character, but in no event less than reasonable care. Neither Contractor nor the State will (i) make any use of the Confidential Information of the other except as contemplated by the Contract, (ii) acquire any right in or assert any lien against the Confidential Information of the other, or (iii) if requested to do so, refuse for any reason to promptly return the other party's Confidential Information to the other party. Each party must limit disclosure of the other party’s Confidential Information to employees and Subcontractors who must have access to fulfill the purposes of the Contract. Disclosure to, and use by, a Subcontractor is permissible where (A) use of a Subcontractor is authorized under the Contract, (B) the disclosure is necessary or otherwise naturally occurs in connection with work that is within the Subcontractor's scope of responsibility, and (C) Contractor obligates the Subcontractor in a written Contract to maintain the State’s Confidential Information in confidence. At the State's request, any employee of Contractor and of any Subcontractor having access or continued access to the State’s Confidential Information may be required to execute an acknowledgment that the employee has been advised of Contractor’s and the Subcontractor’s obligations under this Section and of the employee’s obligation to Contractor or Subcontractor, as the case may be, to protect the Confidential Information from unauthorized use or disclosure.

Promptly upon termination or cancellation of the Contract for any reason, Contractor must certify to the State that Contractor has destroyed all State Confidential Information.

2.103 ExclusionsNotwithstanding the foregoing, the provisions of Section 2.100 will not apply to any particular information which the State or Contractor can demonstrate (i) was, at the time of disclosure to it, in the public domain; (ii) after disclosure to it, is published or otherwise becomes part of the public domain through no fault of the receiving party; (iii) was in the possession of the receiving party at the time of disclosure to it without an obligation of confidentiality; (iv) was received after disclosure to it from a third party who had a lawful right to disclose the information to it without any obligation to restrict its further disclosure; or (v) was independently developed by the receiving party without reference to Confidential Information of the furnishing party. Further, the provisions of Section 2.100 will not apply to any particular Confidential Information to the extent the receiving party is required by law to disclose the Confidential Information, provided that the receiving party (i) promptly provides the furnishing party with notice of the legal request, and (ii) assists the furnishing party in resisting or limiting the scope of the disclosure as reasonably requested by the furnishing party.

2.104 No Implied RightsNothing contained in this Section must be construed as obligating a party to disclose any particular Confidential Information to the other party, or as granting to or conferring on a party, expressly or impliedly, any right or license to the Confidential Information of the other party.

2.105 Respective ObligationsThe parties’ respective obligations under this Section must survive the termination or expiration of the Contract for any reason.

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2.110 Records and Inspections

2.111 Inspection of Work PerformedThe State’s authorized representatives must at all reasonable times and with 10 days prior written request, have the right to enter Contractor’s premises, or any other places, where the Services are being performed, and must have access, upon reasonable request, to interim drafts of Deliverables or work-in-progress. Upon 10 Days prior written notice and at all reasonable times, the State’s representatives must be allowed to inspect, monitor, or otherwise evaluate the work being performed and to the extent that the access will not reasonably interfere or jeopardize the safety or operation of the systems or facilities. Contractor must provide all reasonable facilities and assistance for the State’s representatives.

2.112 Examination of RecordsFor seven (7) years after the Contractor provides any work under the Contract (the "Audit Period"), the State may examine and copy any of Contractor’s books, records, documents and papers pertinent to establishing Contractor’s compliance with the Contract and with applicable laws and rules. The State must notify the Contractor 20 days before examining the Contractor's books and records. The State does not have the right to review any information deemed confidential by the Contractor to the extent access would require the confidential information to become publicly available. This provision also applies to the books, records, accounts, documents and papers, in print or electronic form, of any parent, affiliated or subsidiary organization of Contractor, or any Subcontractor of Contractor performing services in connection with the Contract.

2.113 Retention of RecordsContractor must maintain at least until the end of the Audit Period, all pertinent financial and accounting records (including time sheets and payroll records, information pertaining to the Contract, and to the Services, equipment, and commodities provided under the Contract) pertaining to the Contract according to generally accepted accounting principles and other procedures specified in this Section. Financial and accounting records must be made available, upon request, to the State at any time during the Audit Period. If an audit, litigation, or other action involving Contractor’s records is initiated before the end of the Audit Period, the records must be retained until all issues arising out of the audit, litigation, or other action are resolved or until the end of the Audit Period, whichever is later.

2.114 Audit ResolutionIf necessary, the Contractor and the State will meet to review each audit report promptly after issuance. The Contractor must respond to each audit report in writing within 30 days from receipt of the report, unless a shorter response time is specified in the report. The Contractor and the State must develop, agree upon and monitor an action plan to promptly address and resolve any deficiencies, concerns, and/or recommendations in the audit report.

2.115 Errors(a) If the audit demonstrates any errors in the documents provided to the State, then the amount in error must be reflected as a credit or debit on the next invoice and in subsequent invoices until the amount is paid or refunded in full. However, a credit or debit may not be carried for more than four (4) invoices. If a balance remains after four (4) invoices, then the remaining amount will be due as a payment or refund within 45 days of the last quarterly invoice that the balance appeared on or termination of the Contract, whichever is earlier.

(b) In addition to other available remedies, the difference between the payment received and the correct payment amount is greater than 10%, then the Contractor must pay all of the reasonable costs of the audit.

2.120 Warranties

2.121 Warranties and Representations The Contractor represents and warrants:

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(a) It is capable in all respects of fulfilling and must fulfill all of its obligations under the Contract. The performance of all obligations under the Contract must be provided in a timely, professional, and workman-like manner and must meet the performance and operational standards required under the Contract.

(b) The Contract Appendices, Attachments and Exhibits identify the equipment and software and services necessary for the Deliverable(s) to perform and Services to operate in compliance with the Contract’s requirements and other standards of performance.

(c) It is the lawful owner or licensee of any Deliverable licensed or sold to the State by Contractor or developed by Contractor under the Contract, and Contractor has all of the rights necessary to convey to the State the ownership rights or licensed use, as applicable, of any and all Deliverables. None of the Deliverables provided by Contractor to the State under the Contract, nor their use by the State, will infringe the patent, copyright, trade secret, or other proprietary rights of any third party.

(d) If, under the Contract, Contractor procures any equipment, software or other Deliverable for the State (including equipment, software and other Deliverables manufactured, re-marketed or otherwise sold by Contractor under Contractor’s name), then in addition to Contractor’s other responsibilities with respect to the items in the Contract, Contractor must assign or otherwise transfer to the State or its designees, or afford the State the benefits of, any manufacturer's warranty for the Deliverable.

(e) The Contract signatory has the power and authority, including any necessary corporate authorizations, necessary to enter into the Contract, on behalf of Contractor.

(f) It is qualified and registered to transact business in all locations where required.

(g) Neither the Contractor nor any affiliates, nor any employee of either, has, must have, or must acquire, any contractual, financial, business, or other interest, direct or indirect, that would conflict in any manner or degree with Contractor’s performance of its duties and responsibilities to the State under the Contract or otherwise create an appearance of impropriety with respect to the award or performance of this Agreement. Contractor must notify the State about the nature of the conflict or appearance of impropriety within two (2) days of learning about it.

(h) If any of the certifications, representations, or disclosures made in the Contractor’s original bid response change after the Contract start date, the Contractor must report those changes immediately to Treasury Purchasing.

2.122 Warranty of MerchantabilityGoods provided by Contractor under this agreement must be merchantable. All goods provided under the Contract must be of good quality within the description given by the State, must be fit for their ordinary purpose, must be adequately contained and packaged within the description given by the State, must conform to the agreed upon specifications, and must conform to the affirmations of fact made by the Contractor or on the container or label.

2.123 Warranty of Fitness for a Particular PurposeWhen the Contractor has reason to know or knows any particular purpose for which the goods are required, and the State is relying on the Contractor’s skill or judgment to select or furnish suitable goods, there is a warranty that the goods are fit for such purpose.

2.124 Warranty of TitleContractor must, in providing goods to the State, convey good title in those goods, whose transfer is right and lawful. All goods provided by Contractor must be delivered free from any security interest, lien, or encumbrance of which the State, at the time of contracting, has no knowledge. Goods provided by Contractor, under the Contract, must be delivered free of any rightful claim of any third person by of infringement or the like.

2.125 Equipment WarrantyTo the extent Contractor is responsible under the Contract for maintaining equipment/system(s), Contractor must maintain the equipment/system(s) in good operating condition and must undertake all

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repairs and preventive maintenance according to the applicable manufacturer's recommendations for the period specified in the Contract.

The Contractor represents and warrants that the equipment/system(s) are in good operating condition and operate and perform to the requirements and other standards of performance contained in the Contract, when installed, at the time of Final Acceptance by the State, and for a period of one (1) year commencing upon the first day following Final Acceptance.

Within one business day of notification from the State, the Contractor must adjust, repair or replace all equipment that is defective or not performing in compliance with the Contract. The Contractor must assume all costs for replacing parts or units and their installation including transportation and delivery fees, if any.

The Contractor must provide a toll-free telephone number to allow the State to report equipment failures and problems to be remedied by the Contractor.

The Contractor agrees that all warranty service it provides under the Contract must be performed by Original Equipment Manufacturer (OEM) trained, certified and authorized technicians.

The Contractor is the sole point of contact for warranty service. The Contractor warrants that it will pass through to the State any warranties obtained or available from the original equipment manufacturer, including any replacement, upgraded, or additional equipment warranties.

2.126 Equipment to be NewIf applicable, all equipment provided under the Contract by Contractor must be new where Contractor has knowledge regarding whether the equipment is new or assembled from new or serviceable used parts that are like new in performance or has the option of selecting one or the other. Equipment that is assembled from new or serviceable used parts that are like new in performance is acceptable where Contractor does not have knowledge or the ability to select one or other, unless specifically agreed otherwise in writing by the State.

2.127 Prohibited ProductsThe State will not accept salvage, distressed, outdated or discontinued merchandise. Shipping of such merchandise to any State agency, as a result of an order placed against the Contract, is considered default by the Contractor of the terms and conditions of the Contract and may result in cancellation of the Contract by the State. The brand and product number offered for all items must remain consistent for the term of the Contract, unless Treasury Purchasing has approved a change order pursuant to Section 2.024.

2.128 Consequences For BreachIn addition to any remedies available in law, if the Contractor breaches any of the warranties contained in this section, the breach may be considered as a default in the performance of a material obligation of the Contract.

2.130 Insurance

2.131 Liability Insurance The Contractor must provide proof of the minimum levels of insurance coverage as indicated below. The insurance must protect the State from claims which may arise out of or result from the Contractor’s performance of Services under the terms of the Contract, whether the Services are performed by the Contractor, or by any Subcontractor, or by anyone directly or indirectly employed by any of them, or by anyone for whose acts they may be liable.

The Contractor waives all rights against the State of Michigan, its departments, divisions, agencies, offices, commissions, officers, employees and agents for recovery of damages to the extent these damages are covered by the insurance policies the Contractor is required to maintain under the Contract.

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All insurance coverage’s provided relative to the Contract/Purchase Order are PRIMARY and NON-CONTRIBUTING to any comparable liability insurance (including self-insurances) carried by the State.

The insurance must be written for not less than any minimum coverage specified in the Contract or required by law, whichever is greater.

The insurers selected by Contractor must have an A.M. Best rating of A or better, or as otherwise approved in writing by the State, or if the ratings are no longer available, with a comparable rating from a recognized insurance rating agency. All policies of insurance required in the Contract must be issued by companies that have been approved to do business in the State. See www.michigan.gov/deleg.

Where specific limits are shown, they are the minimum acceptable limits. If Contractor’s policy contains higher limits, the State must be entitled to coverage to the extent of the higher limits.

The Contractor is required to pay for and provide the type and amount of insurance checked below:

1. Commercial General Liability with the following minimum coverage:

$2,000,000 General Aggregate Limit other than Products/Completed Operations$2,000,000 Products/Completed Operations Aggregate Limit$1,000,000 Personal & Advertising Injury Limit$1,000,000 Each Occurrence Limit

The Contractor must list the State of Michigan, its departments, divisions, agencies, offices, commissions, officers, employees and agents as ADDITIONAL INSUREDS on the Commercial General Liability certificate. The Contractor also agrees to provide evidence that insurance policies contain a waiver of subrogation by the insurance company.

2. If a motor vehicle is used to provide services or products under the Contract, the Contractor must have vehicle liability insurance on any auto including owned, hired and non-owned vehicles used in Contractor‘s business for bodily injury and property damage as required by law.

The Contractor must list the State of Michigan, its departments, divisions, agencies, offices, commissions, officers, employees and agents as ADDITIONAL INSUREDS on the vehicle liability certificate. The Contractor also agrees to provide evidence that insurance policies contain a waiver of subrogation by the insurance company.

3. Workers’ compensation coverage must be provided according to applicable laws governing the employees and employers work activities in the state of the Contractor’s domicile. If the applicable coverage is provided by a self-insurer, proof must be provided of approved self-insured authority by the jurisdiction of domicile. For employees working outside of the state of qualification, Contractor must provide appropriate certificates of insurance proving mandated coverage levels for the jurisdictions where the employees’ activities occur.

Any certificates of insurance received must also provide a list of states where the coverage is applicable.

The Contractor also agrees to provide evidence that insurance policies contain a waiver of subrogation by the insurance company. This provision must not be applicable where prohibited or limited by the laws of the jurisdiction in which the work is to be performed.

4. Employers liability insurance with the following minimum limits:

$100,000 each accident$100,000 each employee by disease$500,000 aggregate disease

5. Employee Fidelity, including Computer Crimes, insurance naming the State as a loss payee, providing coverage for direct loss to the State and any legal liability of the State arising out of or

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related to fraudulent or dishonest acts committed by the employees of Contractor or its Subcontractors, acting alone or in collusion with others, in a minimum amount of $1,000,000.00 with a maximum deductible of $50,000.00.

6. Umbrella or Excess Liability Insurance in a minimum amount of ten million dollars ($10,000,000.00), which must apply, at a minimum, to the insurance required in Subsection 1 (Commercial General Liability) above.

7. Professional Liability (Errors and Omissions) Insurance with the following minimum coverage: $3,000,000.00 each occurrence and $3,000,000.00 annual aggregate.

8. Fire and Personal Property Insurance covering against any loss or damage to the office space used by Contractor for any reason under the Contract, and the equipment, software and other contents of the office space, including without limitation, those contents used by Contractor to provide the Services to the State, up to its replacement value, where the office space and its contents are under the care, custody and control of Contractor. The policy must cover all risks of direct physical loss or damage, including without limitation, flood and earthquake coverage and coverage for computer hardware and software. The State must be endorsed on the policy as a loss payee as its interests appear.

2.132 Subcontractor Insurance CoverageExcept where the State has approved in writing a Contractor subcontract with other insurance provisions, Contractor must require all of its Subcontractors under the Contract to purchase and maintain the insurance coverage as described in this Section for the Contractor in connection with the performance of work by those Subcontractors. Alternatively, Contractor may include any Subcontractors under Contractor’s insurance on the coverage required in this Section. Subcontractor must fully comply with the insurance coverage required in this Section. Failure of Subcontractor to comply with insurance requirements does not limit Contractor’s liability or responsibility.

2.133 Certificates of Insurance and Other RequirementsContractor must furnish to Treasury Purchasing, certificate(s) of insurance verifying insurance coverage or providing satisfactory evidence of self-insurance as required in this Section (the “Certificates”). The Certificate must be on the standard “accord” form or equivalent. THE CONTRACT OR PURCHASE ORDER NO. MUST BE SHOWN ON THE CERTIFICATE OF INSURANCE TO ASSURE CORRECT FILING. All Certificate(s) are to be prepared and submitted by the Insurance Provider. All Certificate(s) must contain a provision indicating that coverages afforded under the policies MUST NOT BE CANCELLED, MATERIALLY CHANGED, OR NOT RENEWED without 30 days prior written notice, except for 10 days for non-payment of premium, having been given to the Manager of Treasury Purchasing. The notice must include the Contract or Purchase Order number affected. Before the Contract is signed, and not less than 20 days before the insurance expiration date every year thereafter, the Contractor must provide evidence that the State and its agents, officers and employees are listed as additional insureds under each commercial general liability and commercial automobile liability policy. In the event the State approves the representation of the State by the insurer’s attorney, the attorney may be required to be designated as a Special Assistant Attorney General by the Attorney General of the State of Michigan.

The Contractor must maintain all required insurance coverage throughout the term of the Contract and any extensions and, in the case of claims-made Commercial General Liability policies, must secure tail coverage for at least three (3) years following the expiration or termination for any reason of the Contract. The minimum limits of coverage specified above are not intended, and must not be construed, to limit any liability or indemnity of Contractor under the Contract to any indemnified party or other persons. Contractor is responsible for all deductibles with regard to the insurance. If the Contractor fails to pay any premium for required insurance as specified in the Contract, or if any insurer cancels or significantly reduces any required insurance as specified in the Contract without the State’s written consent, then the State may, after the State has given the Contractor at least 30 days written notice, pay the premium or procure similar insurance coverage from another company or companies. The State may deduct any part of the cost from any payment due the Contractor, or the Contractor must pay that cost upon demand by the State.

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2.140 Indemnification

2.141 General IndemnificationTo the extent permitted by law, the Contractor must indemnify, defend and hold harmless the State from liability, including all claims and losses, and all related costs and expenses (including reasonable attorneys’ fees and costs of investigation, litigation, settlement, judgments, interest and penalties), accruing or resulting to any person, firm or corporation that may be injured or damaged by the Contractor in the performance of the Contract and 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.

2.142 Code IndemnificationTo the extent permitted by law, the Contractor must indemnify, defend and hold harmless the State from any claim, loss, or expense arising from Contractor’s breach of the No Surreptitious Code Warranty.

2.143 Employee IndemnificationIn any claims against the State of Michigan, its departments, divisions, agencies, sections, commissions, officers, employees and agents, by any employee of the Contractor or any of its Subcontractors, the indemnification obligation under the Contract must not be limited in any way by the amount or type of damages, compensation or benefits payable by or for the Contractor or any of its Subcontractors under worker’s disability compensation acts, disability benefit acts or other employee benefit acts. This indemnification clause is intended to be comprehensive. Any overlap in provisions, or the fact that greater specificity is provided as to some categories of risk, is not intended to limit the scope of indemnification under any other provisions.

2.144 Patent/Copyright Infringement IndemnificationTo the extent permitted by law, the Contractor must indemnify, defend and hold harmless the State from and against all losses, liabilities, damages (including taxes), and all related costs and expenses (including reasonable attorneys’ fees and costs of investigation, litigation, settlement, judgments, interest and penalties) incurred in connection with any action or proceeding threatened or brought against the State to the extent that the action or proceeding is based on a claim that any piece of equipment, software, commodity or service supplied by the Contractor or its Subcontractors, or the operation of the equipment, software, commodity or service, or the use or reproduction of any documentation provided with the 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.

In addition, should the equipment, software, commodity, or service, or its operation, become or in the State’s or Contractor’s opinion be likely to become the subject of a claim of infringement, the Contractor must at the Contractor’s sole expense (i) procure for the State the right to continue using the equipment, software, commodity or service or, if the option is not reasonably available to the Contractor, (ii) replace or modify to the State’s satisfaction the same with equipment, software, commodity or service of equivalent function and performance so that it becomes non-infringing, or, if the option is not reasonably available to Contractor, (iii) accept its return by the State with appropriate credits to the State against the Contractor’s charges and reimburse the State for any losses or costs incurred as a consequence of the State ceasing its use and returning it.

Notwithstanding the foregoing, the Contractor has no obligation to indemnify or defend the State for, or to pay any costs, damages or attorneys’ fees related to, any claim based upon (i) equipment developed based on written specifications of the State; (ii) use of the equipment in a configuration other than implemented or approved in writing by the Contractor, including, but not limited to, any modification of the equipment by the State; or (iii) the combination, operation, or use of the equipment with equipment or software not supplied by the Contractor under the Contract.

2.145 Continuation of Indemnification ObligationsThe Contractor’s duty to indemnify under this Section continues in full force and effect, notwithstanding the expiration or early cancellation of the Contract, with respect to any claims based on facts or conditions that occurred before expiration or cancellation.

2.146 Indemnification ProceduresThe procedures set forth below must apply to all indemnity obligations under the Contract.

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(a) After the State receives notice of the action or proceeding involving a claim for which it will seek indemnification, the State must promptly notify Contractor of the claim in writing and take or assist Contractor in taking, as the case may be, any reasonable action to avoid the imposition of a default judgment against Contractor. No failure to notify the Contractor relieves the Contractor of its indemnification obligations except to the extent that the Contractor can prove damages attributable to the failure. Within 10 days following receipt of written notice from the State relating to any claim, the Contractor must notify the State in writing whether Contractor agrees to assume control of the defense and settlement of that claim (a “Notice of Election”). After notifying Contractor of a claim and before the State receiving Contractor’s Notice of Election, the State is entitled to defend against the claim, at the Contractor’s expense, and the Contractor will be responsible for any reasonable costs incurred by the State in defending against the claim during that period.

(b) If Contractor delivers a Notice of Election relating to any claim: (i) the State is entitled to participate in the defense of the claim and to employ counsel at its own expense to assist in the handling of the claim and to monitor and advise the State about the status and progress of the defense; (ii) the Contractor must, at the request of the State, demonstrate to the reasonable satisfaction of the State, the Contractor’s financial ability to carry out its defense and indemnity obligations under the Contract; (iii) the Contractor must periodically advise the State about the status and progress of the defense and must obtain the prior written approval of the State before entering into any settlement of the claim or ceasing to defend against the claim and (iv) to the extent that any principles of Michigan governmental or public law may be involved or challenged, the State has the right, at its own expense, to control the defense of that portion of the claim involving the principles of Michigan governmental or public law. But the State may retain control of the defense and settlement of a claim by notifying the Contractor in writing within 10 days after the State’s receipt of Contractor’s information requested by the State under clause (ii) of this paragraph if the State determines that the Contractor has failed to demonstrate to the reasonable satisfaction of the State the Contractor’s financial ability to carry out its defense and indemnity obligations under this Section. Any litigation activity on behalf of the State, or any of its subdivisions under this Section, must be coordinated with the Department of Attorney General. In the event the insurer’s attorney represents the State under this Section, the insurer’s attorney may be required to be designated as a Special Assistant Attorney General by the Attorney General of the State of Michigan.

(c) If Contractor does not deliver a Notice of Election relating to any claim of which it is notified by the State as provided above, the State may defend the claim in the manner as it may deem appropriate, at the cost and expense of Contractor. If it is determined that the claim was one against which Contractor was required to indemnify the State, upon request of the State, Contractor must promptly reimburse the State for all the reasonable costs and expenses.

2.150 Termination/Cancellation

2.151 Notice and Right to CureIf the Contractor breaches the Contract, and the State, in its sole discretion, determines that the breach is curable, then the State must provide the Contractor with written notice of the breach and a time period (not less than 30 days) to cure the Breach. The notice of breach and opportunity to cure is inapplicable for successive or repeated breaches or if the State determines in its sole discretion that the breach poses a serious and imminent threat to the health or safety of any person or the imminent loss, damage, or destruction of any real or tangible personal property.

2.152 Termination for Cause(a) The State may terminate the Contract, for cause, by notifying the Contractor in writing, if the Contractor (i) breaches any of its material duties or obligations under the Contract (including a Chronic Failure to meet any particular SLA), or (ii) fails to cure a breach within the time period specified in the written notice of breach provided by the State

(b) If the Contract is terminated for cause, the Contractor must pay all costs incurred by the State in terminating the Contract, including but not limited to, State administrative costs, reasonable attorneys’ fees and court costs, and any reasonable additional costs the State may incur to procure the Services/Deliverables required by the Contract from other sources. Re-procurement costs are not

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consequential, indirect or incidental damages, and cannot be excluded by any other terms otherwise included in the Contract, provided the costs are not in excess of 50% more than the prices for the Service/Deliverables provided under the Contract.

(c) If the State chooses to partially terminate the Contract for cause, charges payable under the Contract will be equitably adjusted to reflect those Services/Deliverables that are terminated and the State must pay for all Services/Deliverables for which Final Acceptance has been granted provided up to the termination date. Services and related provisions of the Contract that are terminated for cause must cease on the effective date of the termination.

(d) If the State terminates the Contract for cause under this Section, and it is determined, for any reason, that Contractor was not in breach of contract under the provisions of this section, that termination for cause must be deemed to have been a termination for convenience, effective as of the same date, and the rights and obligations of the parties must be limited to that otherwise provided in the Contract for a termination for convenience.

2.153 Termination for ConvenienceThe State may terminate the Contract for its convenience, in whole or part, if the State determines that a termination is in the State’s best interest. Reasons for the termination must be left to the sole discretion of the State and may include, but not necessarily be limited to (a) the State no longer needs the Services or products specified in the Contract, (b) relocation of office, program changes, changes in laws, rules, or regulations make implementation of the Services no longer practical or feasible, (c) unacceptable prices for Additional Services or New Work requested by the State, or (d) falsification or misrepresentation, by inclusion or non-inclusion, of information material to a response to any RFP issued by the State. The State may terminate the Contract for its convenience, in whole or in part, by giving Contractor written notice at least 30 days before the date of termination. If the State chooses to terminate the Contract in part, the charges payable under the Contract must be equitably adjusted to reflect those Services/Deliverables that are terminated. Services and related provisions of the Contract that are terminated for cause must cease on the effective date of the termination.

2.154 Termination for Non-Appropriation(a) Contractor acknowledges that, if the Contract extends for several fiscal years, continuation of the Contract is subject to appropriation or availability of funds for the Contract. If funds to enable the State to effect continued payment under the Contract are not appropriated or otherwise made available, the State must terminate the Contract and all affected Statements of Work, in whole or in part, at the end of the last period for which funds have been appropriated or otherwise made available by giving written notice of termination to Contractor. The State must give Contractor at least 30 days advance written notice of termination for non-appropriation or unavailability (or the time as is available if the State receives notice of the final decision less than 30 days before the funding cutoff).

(b) If funding for the Contract is reduced by law, or funds to pay Contractor for the agreed-to level of the Services or production of Deliverables to be provided by Contractor are not appropriated or otherwise unavailable, the State may, upon 30 days written notice to Contractor, reduce the level of the Services or the change the production of Deliverables in the manner and for the periods of time as the State may elect. The charges payable under the Contract will be equitably adjusted to reflect any equipment, services or commodities not provided by reason of the reduction.

(c) If the State terminates the Contract, eliminates certain Deliverables, or reduces the level of Services to be provided by Contractor under this Section, the State must pay Contractor for all Work-in-Process performed through the effective date of the termination or reduction in level, as the case may be and as determined by the State, to the extent funds are available. This Section will not preclude Contractor from reducing or stopping Services/Deliverables or raising against the State in a court of competent jurisdiction, any claim for a shortfall in payment for Services performed or Deliverables finally accepted before the effective date of termination.

2.155 Termination for Criminal ConvictionThe State may terminate the Contract immediately and without further liability or penalty in the event Contractor, an officer of Contractor, or an owner of a 25% or greater share of Contractor is convicted of a criminal offense related to a State, public or private Contract or subcontract.

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2.156 Termination for Approvals Rescinded The State may terminate the Contract if any final administrative or judicial decision or adjudication disapproves a previously approved request for purchase of personal services under Constitution 1963, Article 11, § 5, and Civil Service Rule 7-1. In that case, the State must pay the Contractor for only the work completed to that point under the Contract. Termination may be in whole or in part and may be immediate as of the date of the written notice to Contractor or may be effective as of the date stated in the written notice.

2.157 Rights and Obligations upon Termination(a) If the State terminates the Contract for any reason, the Contractor must (a) stop all work as specified in the notice of termination, (b) take any action that may be necessary, or that the State may direct, for preservation and protection of Deliverables or other property derived or resulting from the Contract that may be in Contractor’s possession, (c) return all materials and property provided directly or indirectly to Contractor by any entity, agent or employee of the State, (d) transfer title in, and deliver to, the State, unless otherwise directed, all Deliverables intended to be transferred to the State at the termination of the Contract and which are resulting from the Contract (which must be provided to the State on an “As-Is” basis except to the extent the amounts paid by the State in respect of the items included compensation to Contractor for the provision of warranty services in respect of the materials), and (e) take any action to mitigate and limit any potential damages, or requests for Contractor adjustment or termination settlement costs, to the maximum practical extent, including terminating or limiting as otherwise applicable those subcontracts and outstanding orders for material and supplies resulting from the terminated Contract.

(b) If the State terminates the Contract before its expiration for its own convenience, the State must pay Contractor for all charges due for Services provided before the date of termination and, if applicable, as a separate item of payment under the Contract, for Work In Process, on a percentage of completion basis at the level of completion determined by the State. All completed or partially completed Deliverables prepared by Contractor under the Contract, at the option of the State, becomes the State’s property, and Contractor is entitled to receive equitable fair compensation for the Deliverables. Regardless of the basis for the termination, the State is not obligated to pay, or otherwise compensate, Contractor for any lost expected future profits, costs or expenses incurred with respect to Services not actually performed for the State.

(c) Upon a good faith termination, the State may assume, at its option, any subcontracts and agreements for Services and Deliverables provided under the Contract, and may further pursue completion of the Services/Deliverables under the Contract by replacement contract or otherwise as the State may in its sole judgment deem expedient.

2.158 Reservation of RightsAny termination of the Contract or any Statement of Work issued under it by a party must be with full reservation of, and without prejudice to, any rights or remedies otherwise available to the party with respect to any claims arising before or as a result of the termination.

2.160 Termination by Contractor

2.161 Termination by ContractorIf the State breaches the Contract, and the Contractor in its sole discretion determines that the breach is curable, then the Contractor will provide the State with written notice of the breach and a time period (not less than 30 days) to cure the breach. The Notice of Breach and opportunity to cure is inapplicable for successive and repeated breaches.

The Contractor may terminate the Contract if the State (i) materially breaches its obligation to pay the Contractor undisputed amounts due and owing under the Contract, (ii) breaches its other obligations under the Contract to an extent that makes it impossible or commercially impractical for the Contractor to perform the Services, or (iii) does not cure the breach within the time period specified in a written notice of breach. But the Contractor must discharge its obligations under Section 2.190 before it terminates the Contract.

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2.170 Transition Responsibilities

2.171 Contractor Transition ResponsibilitiesIf the State terminates the Contract, for convenience or cause, or if the Contract is otherwise dissolved, voided, rescinded, nullified, expires or rendered unenforceable, the Contractor agrees to comply with direction provided by the State to assist in the orderly transition of equipment, services, software, leases, etc. to the State or a third party designated by the State. If the Contract expires or terminates, the Contractor agrees to make all reasonable efforts to effect an orderly transition of services within a reasonable period of time that in no event will exceed 270 days. These efforts must include, but are not limited to, those listed in Sections 2.171, 2.172, 2.173, 2.174, and 2.175.

2.172 Contractor Personnel TransitionThe Contractor must work with the State, or a specified third party, to develop a transition plan setting forth the specific tasks and schedule to be accomplished by the parties to effect an orderly transition. The Contractor must allow as many personnel as practicable to remain on the job to help the State, or a specified third party, maintain the continuity and consistency of the services required by the Contract. In addition, during or following the transition period, in the event the State requires the Services of the Contractor’s Subcontractors or vendors, as necessary to meet its needs, Contractor agrees to reasonably, and with good-faith, work with the State to use the Services of Contractor’s Subcontractors or vendors. Contractor must notify all of Contractor’s subcontractors of procedures to be followed during transition.

2.173 Contractor Information TransitionThe Contractor agrees to provide reasonable detailed specifications for all Services/Deliverables needed by the State, or specified third party, to properly provide the Services/Deliverables required under the Contract. The Contractor must provide the State with asset management data generated from the inception of the Contract through the date on which the Contractor is terminated in a comma-delineated format unless otherwise requested by the State. The Contractor must deliver to the State any remaining owed reports and documentation still in Contractor’s possession subject to appropriate payment by the State.

2.174 Contractor Software TransitionThe Contractor must reasonably assist the State in the acquisition of any Contractor software required to perform the Services/use the Deliverables under the Contract. This must include any documentation being used by the Contractor to perform the Services under the Contract. If the State transfers any software licenses to the Contractor, those licenses must, upon expiration of the Contract, transfer back to the State at their current revision level. Upon notification by the State, Contractor may be required to freeze all non-critical changes to Deliverables/Services.

2.175 Transition PaymentsIf the transition results from a termination for any reason, reimbursement must be governed by the termination provisions of the Contract. If the transition results from expiration, the Contractor will be reimbursed for all reasonable transition costs (i.e. costs incurred within the agreed period after contract expiration that result from transition operations) at the rates agreed upon by the State. The Contractor must prepare an accurate accounting from which the State and Contractor may reconcile all outstanding accounts.

2.176 State Transition ResponsibilitiesIn the event that the Contract is terminated, dissolved, voided, rescinded, nullified, or otherwise rendered unenforceable, the State agrees to perform the following obligations, and any others upon which the State and the Contractor agree:(a) Reconciling all accounts between the State and the Contractor;(b) Completing any pending post-project reviews.

2.180 Stop Work

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2.181 Stop Work OrdersThe State may, at any time, by written stop work order to Contractor, require that Contractor stop all, or any part, of the work called for by the Contract for a period of up to 90 calendar days after the stop work order is delivered to Contractor, and for any further period to which the parties may agree. The stop work order must be identified as a stop work order and must indicate that it is issued under this Section 2.180. Upon receipt of the stop work order, Contractor must immediately comply with its terms and take all reasonable steps to minimize incurring costs allocable to the work covered by the stop work order during the period of work stoppage. Within the period of the stop work order, the State must either: (a) cancel the stop work order; or (b) terminate the work covered by the stop work order as provided in Section 2.150.

2.182 Cancellation or Expiration of Stop Work OrderThe Contractor must resume work if the State cancels a Stop Work Order or if it expires. The parties will agree upon an equitable adjustment in the delivery schedule, the Contract price, or both, and the Contract must be modified, in writing, accordingly, if: (a) the stop work order results in an increase in the time required for, or in Contractor’s costs properly allocable to, the performance of any part of the Contract; and (b) Contractor asserts its right to an equitable adjustment within 30 calendar days after the end of the period of work stoppage; provided that, if the State decides the facts justify the action, the State may receive and act upon a Contractor proposal submitted at any time before final payment under the Contract. Any adjustment must conform to the requirements of Section 2.024.

2.183 Allowance of Contractor CostsIf the stop work order is not canceled and the work covered by the stop work order is terminated for reasons other than material breach, the termination must be deemed to be a termination for convenience under Section 2.150, and the State will pay reasonable costs resulting from the stop work order in arriving at the termination settlement. For the avoidance of doubt, the State is not liable to Contractor for loss of profits because of a stop work order issued under this Section 2.180.

2.190 Dispute Resolution

2.191 In GeneralAny claim, counterclaim, or dispute between the State and Contractor arising out of or relating to the Contract or any Statement of Work must be resolved as follows. For all Contractor claims seeking an increase in the amounts payable to Contractor under the Contract, or the time for Contractor’s performance, Contractor must submit a letter, together with all data supporting the claims, executed by Contractor’s Contract Administrator or the Contract Administrator's designee certifying that (a) the claim is made in good faith, (b) the amount claimed accurately reflects the adjustments in the amounts payable to Contractor or the time for Contractor’s performance for which Contractor believes the State is liable and covers all costs of every type to which Contractor is entitled from the occurrence of the claimed event, and (c) the claim and the supporting data are current and complete to Contractor’s best knowledge and belief.

2.192 Informal Dispute Resolution(a) All disputes between the parties must be resolved under the Contract Management procedures in the Contract. If the parties are unable to resolve any disputes after compliance with the processes, the parties must meet with the Manager of Treasury Purchasing, or designee, for the purpose of attempting to resolve the dispute without the need for formal legal proceedings, as follows:

(i) The representatives of Contractor and the State must meet as often as the parties reasonably deem necessary to gather and furnish to each other all information with respect to the matter in issue which the parties believe to be appropriate and germane in connection with its resolution. The representatives must discuss the problem and negotiate in good faith in an effort to resolve the dispute without the necessity of any formal proceeding.(ii) During the course of negotiations, all reasonable requests made by one (1) party to another for non-privileged information reasonably related to the Contract must be honored in order that each of the parties may be fully advised of the other’s position. (iii) The specific format for the discussions will be left to the discretion of the designated State and Contractor representatives, but may include the preparation of agreed upon statements of fact or written statements of position.

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(iv) Following the completion of this process within 60 calendar days, the Manager of Treasury Purchasing, or designee, must issue a written opinion regarding the issue(s) in dispute within 30 calendar days. The opinion regarding the dispute must be considered the State’s final action and the exhaustion of administrative remedies.

(b) This Section must not be construed to prevent either party from instituting, and a party is authorized to institute, formal proceedings earlier to avoid the expiration of any applicable limitations period, to preserve a superior position with respect to other creditors, or under Section 2.193.

(c) The State will not mediate disputes between the Contractor and any other entity, except state agencies, concerning responsibility for performance of work under the Contract.

2.193 Injunctive ReliefThe only circumstance in which disputes between the State and Contractor will not be subject to the provisions of Section 2.192 is where a party makes a good faith determination that a breach of the terms of the Contract by the other party is the that the damages to the party resulting from the breach will be so immediate, so large or severe and so incapable of adequate redress after the fact that a temporary restraining order or other immediate injunctive relief is the only adequate remedy.

2.194 Continued PerformanceEach party agrees to continue performing its obligations under the Contract while a dispute is being resolved except to the extent the issue in dispute precludes performance (dispute over payment must not be deemed to preclude performance) and without limiting either party’s right to terminate the Contract as provided in Section 2.150, as the case may be.

2.200 Federal and State Contract Requirements

2.201 NondiscriminationIn the performance of the Contract, Contractor agrees not to discriminate against any employee or applicant for employment, with respect to his or her hire, tenure, terms, conditions or privileges of employment, or any matter directly or indirectly related to employment, because of race, color, religion, national origin, ancestry, age, sex, height, weight, marital status, or physical or mental disability. Contractor further agrees that every subcontract entered into for the performance of the Contract or any purchase order resulting from the Contract must contain a provision requiring non-discrimination in employment, as specified here, binding upon each Subcontractor. This covenant is required under the Elliot Larsen Civil Rights Act, 1976 PA 453, MCL 37.2101, et seq., and the Persons with Disabilities Civil Rights Act, 1976 PA 220, MCL 37.1101, et seq., and any breach of this provision may be regarded as a material breach of the Contract.

2.202 Unfair Labor PracticesUnder 1980 PA 278, MCL 423.321, et seq., the State must not award a Contract or subcontract to an employer whose name appears in the current register of employers failing to correct an unfair labor practice compiled under Section 2 of the Act. This information is compiled by the United States National Labor Relations Board. A Contractor of the State, in relation to the Contract, must not enter into a contract with a Subcontractor, manufacturer, or supplier whose name appears in this register. Under Section 4 of 1980 PA 278, MCL 423.324, the State may void any Contract if, after award of the Contract, the name of Contractor as an employer or the name of the Subcontractor, manufacturer or supplier of Contractor appears in the register.

2.203 Workplace Safety and Discriminatory HarassmentIn performing Services for the State, the Contractor must comply with the Department of Civil Services Rule 2-20 regarding Workplace Safety and Rule 1-8.3 regarding Discriminatory Harassment. In addition, the Contractor must comply with Civil Service regulations and any applicable agency rules provided to the Contractor. For Civil Service Rules, see http://www.mi.gov/mdcs/0,1607,7-147-6877---,00.html.

2.204 Prevailing WageThe rates of wages and fringe benefits to be paid each class of individuals employed by the Contractor, its subcontractors, their subcontractors, and all persons involved with the performance of the Contract in

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privity of contract with the Contractor must not be less than the wage rates and fringe benefits established by the Michigan Department of Energy, Labor and Economic Development, Wage and Hour Bureau, schedule of occupational classification and wage rates and fringe benefits for the local where the work is to be performed. The term Contractor must include all general contractors, prime contractors, project managers, trade contractors, and all of their contractors or subcontractors and persons in privity of contract with them.

The Contractor, its subcontractors, their subcontractors and all persons involved with the performance of the Contract in privity of contract with the Contractor must keep posted on the work site, in a conspicuous place, a copy of all wage rates and fringe benefits as prescribed in the contract. You must also post, in a conspicuous place, the address and telephone number of the Michigan Department of Energy, Labor and Economic Development, the office responsible for enforcement of the wage rates and fringe benefits. The Contractor must keep an accurate record showing the name and occupation of the actual wage and benefits paid to each individual employed in connection with the Contract. This record must be available to the State upon request for reasonable inspection.

If any trade is omitted from the list of wage rates and fringe benefits to be paid to each class of individuals by the Contractor, it is understood that the trades omitted must also be paid not less than the wage rate and fringe benefits prevailing in the local where the work is to be performed.

2.210 Governing Law

2.211 Governing LawThe Contract must in all respects be governed by, and construed according to, the substantive laws of the State of Michigan without regard to any Michigan choice of law rules that would apply the substantive law of any other jurisdiction to the extent not inconsistent with, or pre-empted by federal law.

2.212 Compliance with LawsContractor must comply with all applicable state, federal and local laws and ordinances in providing the Services/Deliverables.

2.213 JurisdictionAny dispute arising from the Contract must be resolved in the State of Michigan. With respect to any claim between the parties, Contractor consents to venue in Ingham County, Michigan, and irrevocably waives any objections it may have to the jurisdiction on the grounds of lack of personal jurisdiction of the court or the laying of venue of the court or on the basis of forum non conveniens or otherwise. Contractor agrees to appoint agents in the State of Michigan to receive service of process.

2.220 Limitation of Liability

2.221 Limitation of LiabilityNeither the Contractor nor the State is liable to each other, regardless of the form of action, for consequential, incidental, indirect, or special damages. This limitation of liability does not apply to claims for infringement of United States patent, copyright, trademark or trade secrets; to claims for personal injury or damage to property caused by the gross negligence or willful misconduct of the Contractor; to claims covered by other specific provisions of the Contract calling for liquidated damages; or to court costs or attorney’s fees awarded by a court in addition to damages after litigation based on the Contract.

2.230 Disclosure Responsibilities

2.231 Disclosure of Litigation(a) Disclosure. Contractor must disclose any material criminal litigation, investigations or proceedings involving the Contractor (and each Subcontractor) or any of its officers or directors or any litigation, investigations or proceedings under the Sarbanes-Oxley Act. In addition, each Contractor (and each Subcontractor) must notify the State of any material civil litigation, arbitration or proceeding which arises during the term of the Contract and extensions, to which Contractor (or, to the extent Contractor is aware, any Subcontractor) is a party, and which involves: (i) disputes that might reasonably be expected

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to adversely affect the viability or financial stability of Contractor or any Subcontractor; or (ii) a claim or written allegation of fraud against Contractor or, to the extent Contractor is aware, any Subcontractor by a governmental or public entity arising out of their business dealings with governmental or public entities. The Contractor must disclose in writing to the Contract Administrator any litigation, investigation, arbitration or other proceeding (collectively, "Proceeding") within 30 days of its occurrence. Details of settlements which are prevented from disclosure by the terms of the settlement may be annotated. Information provided to the State from Contractor’s publicly filed documents referencing its material litigation will be deemed to satisfy the requirements of this Section.

(b) Assurances. If any Proceeding disclosed to the State under this Section, or of which the State otherwise becomes aware, during the term of the Contract would cause a reasonable party to be concerned about:

(i) the ability of Contractor (or a Subcontractor) to continue to perform the Contract according to its terms and conditions, or(ii) whether Contractor (or a Subcontractor) in performing Services for the State is engaged in conduct which is similar in nature to conduct alleged in the Proceeding, which conduct would constitute a breach of the Contract or a violation of Michigan law, regulations or public policy, then the Contractor must provide the State all reasonable assurances requested by the State to demonstrate that:

(a) Contractor and its Subcontractors must be able to continue to perform the Contract and any Statements of Work according to its terms and conditions, and (b) Contractor and its Subcontractors have not and will not engage in conduct in performing the Services which is similar in nature to the conduct alleged in the Proceeding.

(c) Contractor must make the following notifications in writing: (1) Within 30 days of Contractor becoming aware that a change in its ownership or officers has occurred, or is certain to occur, or a change that could result in changes in the valuation of its capitalized assets in the accounting records, Contractor must notify Treasury Purchasing.(2) Contractor must also notify Treasury Purchasing within 30 days whenever changes to asset valuations or any other cost changes have occurred or are certain to occur as a result of a change in ownership or officers. (3) Contractor must also notify Treasury Purchasing within 30 days whenever changes to company affiliations occur.

2.232 Call Center Disclosure – Deleted – N/A

2.233 BankruptcyThe State may, without prejudice to any other right or remedy, terminate the Contract, in whole or in part, and, at its option, may take possession of the “Work in Process” and finish the Works in Process by whatever appropriate method the State may deem expedient if:

(a) the Contractor files for protection under the bankruptcy laws; (b) an involuntary petition is filed against the Contractor and not removed within 30 days;(c) the Contractor becomes insolvent or if a receiver is appointed due to the Contractor's insolvency; (d) the Contractor makes a general assignment for the benefit of creditors; or(e) the Contractor or its affiliates are unable to provide reasonable assurances that the Contractor or its affiliates can deliver the services under the Contract.

Contractor will fix appropriate notices or labels on the Work in Process to indicate ownership by the State. To the extent reasonably possible, materials and Work in Process must be stored separately from other stock and marked conspicuously with labels indicating ownership by the State.

2.240 Performance

2.241 Time of Performance

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(a) Contractor must use commercially reasonable efforts to provide the resources necessary to complete all Services and Deliverables according to the time schedules contained in the Statements of Work and other Exhibits governing the work, and with professional quality.

(b) Without limiting the generality of Section 2.241(a), Contractor must notify the State in a timely manner upon becoming aware of any circumstances that may reasonably be expected to jeopardize the timely and successful completion of any Deliverables/Services on the scheduled due dates in the latest State-approved delivery schedule and must inform the State of the projected actual delivery date.

(c) If the Contractor believes that a delay in performance by the State has caused or will cause the Contractor to be unable to perform its obligations according to specified Contract time periods, the Contractor must notify the State in a timely manner and must use commercially reasonable efforts to perform its obligations according to the Contract time periods notwithstanding the State’s failure. Contractor will not be in default for a delay in performance to the extent the delay is caused by the State.

2.242 Service Level Agreements (SLAs)

(a) SLAs will be completed with the following operational considerations:(i) SLAs will not be calculated for individual Incidents where any event of Excusable Failure has been determined; Incident means any interruption in Services.(ii) SLAs will not be calculated for individual Incidents where loss of service is planned and where the State has received prior notification or coordination.(iii) SLAs will not apply if the applicable Incident could have been prevented through planning proposed by Contractor and not implemented at the request of the State. To invoke this consideration, complete documentation relevant to the denied planning proposal must be presented to substantiate the proposal.(iv) Time period measurements will be based on the time Incidents are received by the Contractor and the time that the State receives notification of resolution based on 24x7x365 time period, except that the time period measurement will be suspended based on the following:

1. Time period(s) will not apply where Contractor does not have access to a physical State Location and where access to the State Location is necessary for problem identification and resolution.2. Time period(s) will not apply where Contractor needs to obtain timely and accurate information or appropriate feedback and is unable to obtain timely and accurate information or appropriate feedback from the State.

(b) Chronic Failure for any Service(s) is defined as three unscheduled outage(s) or interruption(s) on any individual Service for the same reason or cause or if the same reason or cause was reasonably discoverable in the first instance over a rolling 30 day period. Chronic Failure will result in the State’s option to terminate the effected individual Service(s) and procure them from a different vendor for the chronic location(s) with Contractor to pay the difference in charges for up to three additional months. The termination of the Service must not affect any tiered pricing levels.

(c) Root Cause Analysis must be performed on any business critical outage(s) or outage(s) on Services when requested by the Contract Administrator. Contractor must provide its analysis within two weeks of outage(s) and provide a recommendation for resolution.

(d) All decimals must be rounded to two decimal places, with five and greater rounding up and four and less rounding down, unless otherwise specified.

2.243 Liquidated Damages – Deleted – N/A

2.244 Excusable FailureNeither party will be liable for any default, damage, or delay in the performance of its obligations under the Contract to the extent the default, damage or delay is caused by government regulations or requirements (executive, legislative, judicial, military, or otherwise), power failure, lightning, earthquake, war, water or other forces of nature or acts of God, delays or failures of transportation, equipment shortages, suppliers’ failures, or acts or omissions of common carriers, fire; riots, civil disorders; strikes or other labor disputes, embargoes; injunctions (provided the injunction was not issued as a result of any

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fault or negligence of the party seeking to have its default or delay excused); or any other cause beyond the reasonable control of a party; provided the non-performing party and its Subcontractors are without fault in causing the default or delay, and the default or delay could not have been prevented by reasonable precautions and cannot reasonably be circumvented by the non-performing party through the use of alternate sources, workaround plans or other means, including disaster recovery plans.

If a party does not perform its contractual obligations for any of the reasons listed above, the non-performing party will be excused from any further performance of its affected obligation(s) for as long as the circumstances prevail. but the party must use commercially reasonable efforts to recommence performance whenever and to whatever extent possible without delay. A party must promptly notify the other party in writing immediately after the excusable failure occurs, and also when it abates or ends.

If any of the above-enumerated circumstances substantially prevent, hinder, or delay the Contractor’s performance of the Services/provision of Deliverables for more than 10 Business Days, and the State determines that performance is not likely to be resumed within a period of time that is satisfactory to the State in its reasonable discretion, then at the State’s option: (a) the State may procure the affected Services/Deliverables from an alternate source, and the State is not be liable for payment for the unperformed Services/ Deliverables not provided under the Contract for so long as the delay in performance continues; (b) the State may terminate any portion of the Contract so affected and the charges payable will be equitably adjusted to reflect those Services/Deliverables terminated; or (c) the State may terminate the affected Statement of Work without liability to Contractor as of a date specified by the State in a written notice of termination to the Contractor, except to the extent that the State must pay for Services/Deliverables provided through the date of termination.

The Contractor will not have the right to any additional payments from the State as a result of any Excusable Failure occurrence or to payments for Services not rendered/Deliverables not provided as a result of the Excusable Failure condition. Defaults or delays in performance by Contractor which are caused by acts or omissions of its Subcontractors will not relieve Contractor of its obligations under the Contract except to the extent that a Subcontractor is itself subject to an Excusable Failure condition described above and Contractor cannot reasonably circumvent the effect of the Subcontractor’s default or delay in performance through the use of alternate sources, workaround plans or other means.

2.250 Approval of Deliverables – Deleted – N/A

2.260 Ownership

2.261 Ownership of Work Product by State – Deleted – N/A

2.262 Vesting of Rights – Deleted – N/A

2.263 Rights in Data(a) The State is the owner of all data made available by the State to the Contractor or its agents, Subcontractors or representatives under the Contract. The Contractor must not use the State’s data for any purpose other than providing the Services, nor will any part of the State’s data be disclosed, sold, assigned, leased or otherwise disposed of to the general public or to specific third parties or commercially exploited by or on behalf of the Contractor. No employees of the Contractor, other than those on a strictly need-to-know basis, have access to the State’s data. Contractor must not possess or assert any lien or other right against the State’s data. Without limiting the generality of this Section, the Contractor must only use personally identifiable information as strictly necessary to provide the Services and must disclose the information only to its employees who have a strict need-to-know the information. The Contractor must comply at all times with all laws and regulations applicable to the personally identifiable information.

(b) The State is the owner of all State-specific data under the Contract. The State may use the data provided by the Contractor for any purpose. The State must not possess or assert any lien or other right against the Contractor’s data. Without limiting the generality of this Section, the State may use personally identifiable information only as strictly necessary to utilize the Services and must disclose the information only to its employees who have a strict need to know the information, except as provided by law. The

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State must comply at all times with all laws and regulations applicable to the personally identifiable information. Other material developed and provided to the State remains the State’s sole and exclusive property.

2.264 Ownership of MaterialsThe State and the Contractor will continue to own their respective proprietary technologies developed before entering into the Contract. Any hardware bought through the Contractor by the State, and paid for by the State, will be owned by the State. Any software licensed through the Contractor and sold to the State, will be licensed directly to the State.

2.270 State Standards

2.271 Existing Technology Standards The Contractor must adhere to all existing standards as described within the comprehensive listing of the State’s existing technology standards at http://www.michigan.gov/dmb/0,4568,7-150-56355-108233--,00.html.

2.272 Acceptable Use PolicyTo the extent that Contractor has access to the State computer system, Contractor must comply with the State’s Acceptable Use Policy, see http://www.michigan.gov/cybersecurity/0,1607,7-217-34395_34476---,00.html. All Contractor employees must be required, in writing, to agree to the State’s Acceptable Use Policy before accessing the State system. The State reserves the right to terminate Contractor’s access to the State system if a violation occurs.

2.273 Systems ChangesContractor is not responsible for and not authorized to make changes to any State systems without written authorization from the Project Manager. Any changes Contractor makes to State systems with the State’s approval must be done according to applicable State procedures, including security, access, and configuration management procedures.

2.280 Extended Purchasing

2.281 MIDEAL1984 PA 431 permits DTMB to provide purchasing services to any city, village, county, township, school district, intermediate school district, non-profit hospital, institution of higher education, community, or junior college. A current listing of approved program members is available at: www.michigan.gov/buymichiganfirst. Unless otherwise stated, the Contractor must ensure that the non-state agency is an authorized purchaser before extending the Contract pricing.

The Contractor must supply Contract Services and equipment to these local governmental agencies at the established State of Michigan contract prices and terms to the extent applicable and where available. The Contractor must send its invoices to, and pay the local unit of government, on a direct and individual basis.

To the extent that authorized local units of government purchase quantities of Services and/or equipment under the Contract, the quantities of Services and/or equipment purchased must be included in determining the appropriate rate wherever tiered pricing based on quantity is provided.

2.282 State Employee Purchases – Deleted – N/A 2.290 Environmental Provision

2.291 Environmental ProvisionHazardous Materials:For the purposes of this Section, “Hazardous Materials” is a generic term used to describe asbestos, ACBMs, PCBs, petroleum products, construction materials including paint thinners, solvents, gasoline, oil, and any other material the manufacture, use, treatment, storage, transportation, or disposal of which is

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regulated by the federal, State, or local laws governing the protection of the public health, natural resources, or the environment. This includes, but is not limited to, materials such as batteries and circuit packs, and other materials that are regulated as (1) “Hazardous Materials” under the Hazardous Materials Transportation Act, (2) “chemical hazards” under the Occupational Safety and Health Administration standards, (3) “chemical substances or mixtures” under the Toxic Substances Control Act, (4) “pesticides” under the Federal Insecticide Fungicide and Rodenticide Act, and (5) “hazardous wastes” as defined or listed under the Resource Conservation and Recovery Act.

(a) The Contractor must use, handle, store, dispose of, process, transport and transfer any material considered a Hazardous Material according to all federal, State, and local laws. The State must provide a safe and suitable environment for performance of Contractor’s Work. Before the commencement of Work, the State must advise the Contractor of the presence at the work site of any Hazardous Material to the extent that the State is aware of the Hazardous Material. If the Contractor encounters material reasonably believed to be a Hazardous Material and which may present a substantial danger, the Contractor must immediately stop all affected Work, notify the State in writing about the conditions encountered, and take appropriate health and safety precautions.

(b) Upon receipt of a written notice, the State will investigate the conditions. If (a) the material is a Hazardous Material that may present a substantial danger, and (b) the Hazardous Material was not brought to the site by the Contractor, or does not result in whole or in part from any violation by the Contractor of any laws covering the use, handling, storage, disposal of, processing, transport and transfer of Hazardous Materials, the State must order a suspension of Work in writing. The State must proceed to have the Hazardous Material removed or rendered harmless. In the alternative, the State must terminate the affected Work for the State’s convenience.

(c) Once the Hazardous Material has been removed or rendered harmless by the State, the Contractor must resume Work as directed in writing by the State. Any determination by the Michigan Department of Community Health or the Michigan Department of Environmental Quality that the Hazardous Material has either been removed or rendered harmless is binding upon the State and Contractor for the purposes of resuming the Work. If any incident with Hazardous Material results in delay not reasonable anticipatable under the circumstances and which is attributable to the State, the applicable SLAs for the affected Work will not be counted in Section 2.242 for a time as mutually agreed by the parties.

(d) If the Hazardous Material was brought to the site by the Contractor, or results in whole or in part from any violation by the Contractor of any laws covering the use, handling, storage, disposal of, processing, transport and transfer of Hazardous Material, or from any other act or omission within the control of the Contractor, the Contractor must bear its proportionate share of the delay and costs involved in cleaning up the site and removing and rendering harmless the Hazardous Material according to Applicable Laws to the condition approved by applicable regulatory agency(ies).

Michigan has a Consumer Products Rule pertaining to labeling of certain products containing volatile organic compounds. For specific details visit http://www.michigan.gov/deq/0,1607,7-135-3310_4108-173523--,00.html

Refrigeration and Air Conditioning: The Contractor must comply with the applicable requirements of Sections 608 and 609 of the Clean Air Act (42 U.S.C. 7671g and 7671h) as each or both apply to the Contract.

Environmental Performance: Waste Reduction Program: Contractor must establish a program to promote cost-effective waste reduction in all operations and facilities covered by the Contract. The Contractor's programs must comply with applicable Federal, State, and local requirements, specifically including Section 6002 of the Resource Conservation and Recovery Act (42 U.S.C. 6962, et seq.).

2.300 Other Provisions

2.311 Forced Labor, Convict Labor, Forced or Indentured Child Labor, or Indentured Servitude Made Materials

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Equipment, materials, or supplies, that will be furnished to the State under the Contract must not be produced in whole or in part by forced labor, convict labor, forced or indentured child labor, or indentured servitude.

“Forced or indentured child labor” means all work or service: exacted from any person under the age of 18 under the menace of any penalty for its nonperformance and for which the worker does not offer himself voluntarily; or performed by any person under the age of 18 under a contract the enforcement of which can be accomplished by process or penalties.

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Article 3 – Bid Process and Evaluation Criteria

3.010 Introduction

3.011 Pre Bid Meetings – Deleted – N/A

3.012 CommunicationsThe State will not respond to telephone inquiries or visitation by Bidders or their representatives. Bidder’s sole point of contact concerning the RFP is the Buyer in the Treasury Purchasing. Any communication outside of this process may result in disqualification or debarment or both.

3.013 QuestionsQuestions concerning the RFP are to be submitted, in writing, no later than 3:00 p.m. Eastern Time on December 10, 2012 to:

Thomas FalikMichigan Department of Treasury430 West AlleganLansing, MI 48922Email: falikt@michigan.gov

All questions must be submitted in writing and sent as an attachment in Microsoft Word or Rich Text Format (RTF). Changes to the RFP and answers to questions will be prepared as an addendum and posted on the State’s web site under the corresponding bid number: www.bid4michigan.com. The posted addendum officially revises and supercedes the original RFP. The addenda will be posted approximately December 14, 2012.

3.020 Award Process

3.021 Method of EvaluationIn awarding the Contract, proposals will be evaluated by a Joint Evaluation Committee (chaired by Treasury Purchasing).

3.022 Technical Proposal Evaluation CriteriaThe following chart represents the scoring of the particular factors:

Weight1. Statement of Work (Article 1) 652. Bidder Information (Section 4.011) 53. Prior Experience (Section 4.012) 154. Staffing (Sections 1.031 & 4.013) 15TOTAL 100

Oral PresentationBidders who submit proposals may be required to make oral presentations of their proposals to the State. These presentations provide an opportunity for the Bidders to clarify the proposals through mutual understanding. Treasury Purchasing will schedule these presentations, if required.

Site VisitThe State may conduct a site visit to tour and inspect the Bidder’s facilities. Treasury Purchasing will schedule these visits if required.

3.023 Price Evaluation(a) Only those proposals receiving a score of 80 points or more in the technical proposal evaluation will have their pricing evaluated to be considered for award.

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(b) Evaluation of price proposals includes consideration for a Qualified Disabled Veteran Preference. 1984 PA 431, as amended, establishes a preference of up to 10% for businesses owned by qualified disabled veterans meeting the minimum point threshold for passing.

(c) The State reserves the right to consider economic impact on the State when evaluating proposal pricing. This includes, but is not limited to: job creation, job retention, tax revenue implications, and other economic considerations.

3.024 Award Recommendation The award recommendation will be made to the responsive and responsible Bidder who offers the best value to the State of Michigan. Best value will be determined by the Bidder meeting the minimum point threshold and offering the best combination of the factors stated in Section 3.022, and price, as demonstrated by its proposal.

3.025 Reservations(a) The State reserves the right to consider total cost of ownership factors in the final award recommendation (i.e. transition costs, training costs, etc.).

(b) The State reserves the right to award by item, part or portion of an item, group of items or total proposal, to reject any and all proposals in whole or in part, if, in the Manager of Treasury Purchasing’s judgment, the best interest of the State will be so served.

(c) The State reserves the right to award multiple, optional use contracts. In addition to the other factors listed, offers will be evaluated on the basis of advantages and disadvantages to the State that may result from making more than one award.

(d) The State reserves the right to consider overall economic impact to the State in the final award recommendation. This includes considering principal place of performance, number of Michigan citizens employed or potentially employed, dollars paid to Michigan residents, Michigan capital investments, economically disadvantaged businesses, etc.

(e) The State reserves the right to award to another ‘best value’ contractor in case the original Awardee does not accept the award. This reservation applies for all of our solicitations whether they are quotes, bids, proposals, pre-qualified or pre-registered programs.

(f) The State reserves the right to give a preference for products manufactured or services offered by Michigan firms if all other things are equal and if not inconsistent with federal statute. (See MCL 18.1261)

(g) The State reserves the right to disqualify any bid based on Sections 1.1 through 4.1 in the general Certifications and Representations (completed at vendor registration).

3.026 Award DecisionAward recommendation will be made to the Manager of Treasury Purchasing.

3.027 ProtestsIf a Bidder wishes to initiate a protest of the award recommendation, the Bidder must submit a protest, in writing, by 5:00 p.m. on the date stated on the notice of recommendation to award. Bidder must include the RFP number and clearly state the facts believed to constitute error in the award recommendation along with the desired remedy.

3.028 State Administrative BoardThe State Administrative Board (SAB) must approve all contracts/purchase orders in excess of $25,000. The decision of this Board regarding the recommendation is final; however, SAB approval does not constitute a Contract. The award process is not completed until the Bidder receives a properly executed Contract or Purchase Order from Treasury Purchasing.

3.030 Laws Applicable to Award

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3.031 Reciprocal Preference1984 PA 431 allows that if the low bid for a state procurement exceeds $100,000.00 and is from a business located in a state which applies a preference law against out-of-state businesses, the department shall prefer a bid from a Michigan business in the same manner in which the out-of-state bidder would be preferred in its home state.

3.032 Qualified Disabled Veteran Preference1984 PA 431 establishes an up to 10%+ price preference for businesses owned by qualified disabled veterans. The Act includes a stated goal of making awards amounting to 5 percent (5%) of total state expenditures for goods, services, and construction to qualified disabled veteran-owned companies.

3.033 Independent Price Determination(a) By submission of a proposal, the Bidder certifies, and in the case of a joint proposal, each party

certifies as to its own organization, that in connection with this proposal:(i) The prices in the proposal have been arrived at independently, without consultation, communication, or agreement, for the purpose of restricting competition as to any matter relating to the prices with any other bidder or with any competitor; and(ii) Unless otherwise required by law, the prices which have been quoted in the proposal have not been knowingly disclosed by the Bidder and will not knowingly be disclosed by the Bidder before award directly or indirectly to any other bidder or to any competitor; and(iii) No attempt has been made or will be made by the Bidder to induce any other person or firm to submit or not submit a proposal for the purpose of restricting competition.

(b) Each person signing the proposal certifies that the person:(i) Is responsible for the prices offered in the proposal and has not participated (and will not participate) in any action contrary to (a), (i), (ii), and (iii) above; or(ii) Is not the person in the Bidder’s organization responsible within that organization for the decision as to the prices being offered in the proposal but has been authorized, in writing, to act as agent for the persons responsible for the decision in certifying that the persons have not participated (and will not participate) in any action contrary to (a), (i), (ii), and (iii) above.

3.034 TaxesThe State may refuse to award a contract to any Bidder who has failed to pay any applicable State taxes. The State may refuse to accept Bidder’s bid, if Bidder has any outstanding debt with the State.

3.040 Possible Additional Considerations/Processes

3.041 ClarificationsThe State may request clarifications from one (1) or all Bidders. The State will document, in writing, clarifications being requested and forward to the Bidders affected. This process does not allow for changes. Instead, it provides an opportunity to clarify the proposal submitted.

If it is determined that a Bidder purposely or willfully submitted false information, the Bidder will not be considered for award, the State will pursue debarment of the Bidder, and any resulting Contract that may have been established will be terminated.

3.042 Past PerformanceThe State may evaluate the Bidder’s prior performance with the State, and the prior performance information may be a factor in the award decision.

3.043 Financial Stability In making an award decision, the State may evaluate the financial stability of any Bidder. The State may seek financial information from the Bidder and from third parties. If the State determines in its sole discretion that contracting with a Bidder presents an unacceptable risk to the State, the State reserves the right to not award a contract to that Bidder.

3.044 Samples/Models – Deleted – N/A

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3.045 Energy Efficiency/Environmental Purchasing PolicyThe State seeks wherever possible to purchase energy efficient products. This may include giving preference to U.S. Environmental Protection Agency (EPA) certified ‘Energy Star’ products for any category of products for which EPA has established Energy Star certification. For other purchases, the State will include energy efficiency as one of the priority factors to consider when choosing among comparable bids.

The State of Michigan is committed to encouraging the use of products and services that impact the environment less than competing products. This can be best accomplished by including environmental considerations in purchasing decisions, while remaining fiscally responsible, to promote practices that improve worker health, conserve natural resources, and prevent pollution. Environmental components that may be considered in Best Value Purchasing evaluation include: recycled content and recyclability; energy efficiency; and the presence of undesirable materials in the products, especially those toxic chemicals which are persistent and bioaccumulative. Bidders able to supply products containing recycled and environmentally preferable materials that meet performance requirements are encouraged to offer them in bids and proposals. Information on any relevant third party certification (such as Green Seal, Energy Star, etc.) should also be provided.

3.046 Pricing Negotiations At any time during the evaluation process, the State may enter into price negotiations with Bidders determined to be in the competitive range.

3.047 Deficiency Report and Clarification Request (DR/CR)If the selection process described in the RFP does not lead to a viable award recommendation, significant deficiencies are identified, or changes in the technical requirements or specifications are needed, the Buyer/JEC, at its discretion, may prepare a Deficiency Report and Clarification Request (DR/CR) for each proposal determined to be in the competitive range. The DR/CR may include any changes to the original proposal to address the listed deficiencies, including alterations to the original cost proposal to address correction of the deficiencies. Bidders will be allowed to respond in writing to the DR/CR with a revised proposal. The DR/CR response must be submitted by the deadline established by Treasury Purchasing.

After reviewing the DR/CR, the Buyer or the JEC will re-evaluate the proposals using the original evaluation method. If an alteration to the originally published evaluation criteria is to be made, the changes in the criteria will be published to all Bidders as part of the issuance of the DR/CR.

3.048 Best and Final Offer (BAFO)At any time during the evaluation process, the Buyer/JEC may request a Best and Final Offer (BAFO) from any Bidder. This will be the final opportunity for a Bidder to provide a revised proposal. The scope of the changes allowed in the BAFO will be published as part of the issuance of the BAFO request.

Bidders are cautioned to propose the best possible offer at the outset of the process, as there is no guarantee that any Bidder will be allowed an opportunity to engage in Pricing Negotiations (3.046) or requested to submit a Best and Final Offer (3.048).

3.050 Proposal Details

3.051 Complete ProposalTo be considered, each Bidder must submit a COMPLETE proposal in response to this RFP, using the format specified. No other distribution of proposals is to be made by the Bidder. The proposal must state how long it remains valid. This period must be at least 120 days from the due date for responses to this RFP.

3.052 Efficient ProposalEach proposal should be prepared simply and economically, providing a straightforward, concise description of the Bidder’s ability to meet the requirements of the RFP. Fancy bindings, colored displays, promotional material, etc., will receive no evaluation credit. Emphasis should be on completeness and clarity of content in the format specified.

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3.053 Price and NotationsPrices and notations must be typed or in ink. Prices must be for new items only unless specified otherwise in the RFP. The person signing the proposal should initial any form of pricing corrections made to the proposal by the bidder before submission in ink. In the event of un-initialed pricing corrections, the Buyer, with management approval, may require an affidavit from the Bidder confirming the price correction was made before the bid submission.

3.054 Double Sided on Recycled Paper Bidders, when possible, should use recycled paper for all printed and photocopied documents related to the submission of their bid and fulfillment of any resulting contract and must, whenever practicable, use both sides of the paper and ensure that the cover page of each document bears an imprint identifying it as recycled paper.

3.055 Proposal FormatThe following information must be included in all proposals. Bidders must respond to all sections of the RFP. Failure to respond to every section in each Article could result in disqualification from the bidding process. Uniform Resource Locator (URL) links to information will not be considered for evaluation. The State does not control the data and cannot assure that it is static and not subject to change. We will only evaluate the materials submitted to us by the bid due date and time and in accordance with Section 3.060 Submitting Bids and Proposals. Proposals should be formatted to include each of the following sections, which should be clearly identified using the same format as the RFP is written in and with the appropriate headings:

Article 1 – Statement of Work – Bidder must respond to each section. Proposal must include detailed responses to all tasks as requested in Article 1. Bidders must copy these sections, and provide Bidder’s response in the area specified for “Bidder Response”. This area has been designed to expand as necessaryArticle 2 – Terms and Conditions – Bidder should include a statement agreeing to the Terms and Conditions contained in this sectionArticle 4 – Evaluation Information – Bidder must respond to each section

3.060 Submitting Bids and Proposals

3.061 Sealed Bid ReceiptSEALED BIDS (PROPOSALS) MUST BE RECEIVED AND TIME-STAMPED IN WWW.BID4MICHIGAN.COM OR TREASURY PURCHASING ON OR BEFORE 3PM ON THE DUE DATE SPECIFIED ON THE COVER PAGE OF THIS RFP. BIDDERS ARE RESPONSIBLE FOR SUBMITTING THEIR PROPOSALS TO TREASURY PURCHASING ON TIME. PROPOSALS THAT ARE RECEIVED AFTER THE SPECIFIED DUE DATE AND TIME CANNOT BE CONSIDERED UNLESS (a) ALL OTHER BIDS RECEIVED ON TIME DO NOT MEET SPECIFICATIONS, OR (B) NO OTHER BIDS ARE RECEIVED.

3.062 Proposal SubmissionProposal is due January 3, 2013 at 3:00 p.m. Eastern Time. Submit an electronic copy of proposal via www.bid4michigan.com in a Microsoft Office format. If an electronic proposal cannot be submitted via www.bid4michigan.com, eight copies with an electronic version on CD-ROM can be mailed to the following address:

Michigan Department of TreasuryPurchasing SectionAttn: Tom Falik430 West AlleganLansing, MI 48922.

3.063 Responses(a) Each proposal submitted must contain the response to only one RFP. Do not submit responses to more than one RFP in one proposal. Also, faxed bids will not be accepted unless specifically requested in writing by Treasury Purchasing.

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(b) BIDDERS ARE RESPONSIBLE FOR ASSURING THAT THE FOLLOWING IDENTIFYING INFORMATION APPEARS ON THE OUTSIDE ENVELOPE, if applicable: The RFP Number; the Date Due; Bidder Name and the Bidder Identification Number (FEIN – do not write on outside of envelope if FEIN is social security number). If a delivery service is used which prohibits the markings on their envelope or package, this information must be placed on the outside of an interior envelope or package.

3.070 Possible Bond Requirements – Deleted – N/A

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Article 4 – Required Bidder Information

Bidders must provide the following required information. Failure respond to each requirement may disqualify the Bidder from further participation in this RFP.

4.010 Bidder Information

4.011 Company InformationState the full name and address of your organization and, if applicable, the branch office or other subordinate elements that will perform, or assist in performing, the work. Indicate whether it operates as an individual, partnership, or corporation; if as a corporation, include the State in which it is incorporated. If applicable, state whether it is licensed or registered to operate in the State of Michigan.

Bidder Response:Name:Address:City, State, Zip:Phone: ( )Web Page:Legal Status:Business Structure:How long in business:Sales volumes by year for each of the last five (5) years:

Name, title, address, email, phone and fax numbers for Bidder’s RFP Contact.

Bidder Response:Name:Address:City, State, ZipPhone: ( )Fax: ( )E-Mail

Note: Person named above will be sole contact for your company to receive the Contract. Include the name and telephone number of person(s) in your company authorized to expedite any proposed contract with the State.

4.012 Prior Experience1. Indicate the prior experience of your firm, which you consider relevant to your ability to successfully

manage a contract for the services defined by this RFP. Include sufficient detail to demonstrate the relevance of this experience.

Bidder Response:

2. Proposals submitted should include, in this section, descriptions of a minimum of three (3) qualifying relevant experiences to include project/client descriptions, costs, and starting and completion dates of projects/contracts successfully completed. Also, include the name, email address and phone number of the responsible official of the customer organization who may be contacted.

Bidder Response:

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The State will include in the evaluation the relevancy of experience, compatibility of the experience to the Services requested in this RFP, and the performance record of the listed experience. The State reserves the right to verify all submissions and perform further background checks of experience and performance. Background checks may include other prior experiences not submitted in as a response to this section. Additionally, the State will not agree to notification of any Bidder prior to checking any listed references.

4.013 Staffing (Also See Section 1.031)1. The written proposal should indicate the competence of personnel whom the Bidder intends to assign

to the project as specified Section 1.031. Qualifications will be measured by education or experience, with particular reference to experience on projects similar to that described in the RFP.

Bidder Response:

2. For all personnel identified in Section 1.031, Bidder must provide resumes, which must include detailed, chronological work experience. It is the Bidder’s responsibility to provide clear, detailed resumes which make it easy for the JEC to determine relevant experience of proposed staff.

Bidder Response:

3. Bidder must provide a list of all subcontractors, including firm name, address, contact person, and a complete description of the work to be contracted. Include descriptive information concerning subcontractor's organization and abilities.

Bidder Response:

4.014 Past PerformancePlease list any contracts that you have had with the State in the last three (3) years.

Bidder Response:

4.015 Contract PerformanceIndicate if the Bidder has had a contract terminated for default in the last three (3) years. Termination for default is defined as notice to stop performance which was delivered to the Bidder due to the Bidder's non-performance or poor performance and the issue of performance was either (a) not litigated due to inaction on the part of the Bidder, or (b) litigated and determined that the Bidder was in default. If the Bidder has not had a contract terminated for default, the Bidder must affirmatively state this under "Reason" below.

If no the terminations exist, the Bidder must affirmatively state this.

Note: If the Bidder has had a contract terminated for default in this period, the Bidder must submit full details including the other party's name, address, and phone number Treasury Purchasing will evaluate the facts and may, at its sole discretion, reject the proposal on the grounds of past experience.

Termination:Reason:

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4.016 Place of PerformanceBidders must provide the place of performance for work to be done by the prime Contractor under any resulting contract:

Description of Service to be provided at location:

Percentage of total contract value:

Location (city & state):

4.017 Place of PerformanceBidders must provide the place of performance for work to be done by all Subcontractors under any resulting contract:

Subcontractor name: Description of Service to be provided at location:

Percentage of total contract value:

Location (city & state):

4.018 Disclosure of LitigationBidder must disclose any material criminal litigation, investigations or proceedings involving the Bidder (and each Subcontractor) or any of its officers or directors or any litigation, investigations or proceedings under the Sarbanes-Oxley Act of 2002, 18 USC 1514 et seq. In addition, each Bidder (and each Subcontractor) must disclose to the State any material civil litigation, arbitration or proceeding to which Bidder (or, to the extent Bidder is aware, any Subcontractor hereunder) is a party, and which involves: (i) disputes that might reasonably be expected to adversely affect the viability or financial stability of Bidder or any Subcontractor hereunder; or (ii) a claim or written allegation of fraud against Bidder or, to the extent Bidder is aware, any Subcontractor hereunder by a governmental or public entity arising out of their business dealings with governmental or public entities. Any litigation, investigation, arbitration or other proceeding (collectively, "Proceeding") must be disclosed in a written statement in Bidder’s bid response. Details of settlements which are prevented from disclosure by the terms of the settlement may be annotated as such. Information provided to the State from Bidder’s publicly filed documents referencing its material litigation will be deemed to satisfy the requirements of this Section.

Bidder Response:

4.019 RFP PreparationBidder must notify the State in its bid proposal, if it or any of its Subcontractors, or their officers, directors, or key personnel have assisted with the drafting of this RFP, either in whole or in part. This includes the conducting or drafting of surveys designed to establish a system inventory, and/or arrive at an estimate for the value of the solicitation.

Except for materials provided to all Bidders as part of this RFP, Bidder must provide a listing of all materials provided by the State to the Bidder containing information relevant to this RFP, including, but not limited to: questionnaires, requirements lists, budgetary figures, assessments, white papers, presentations, RFP draft documents. Bidder must provide a list of all State employees with whom any of its personnel, and/or Subcontractors’ personnel has discussed the RFP after the issuance date of the RFP.

Bidder Response:

4.020 Former State of Michigan EmployeesIf former State of Michigan employees are not involved in the performance of any resulting contract, Bidder may answer “N/A”. If former state employees are involved in the performance of any resulting contract, Bidder must provide the following information:

Name Department, Division Date of Employment

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4.021 Persons with DisabilitiesIf Bidder will purchase supplies and/or services from a business owned by persons with disabilities in the performance of any contract, the table below must be completed, Bidder may answer “N/A”. if Bidder does not intend to purchase supplies and/or services from a business owned by persons with disabilities in the performance of any contract,

Company Name Estimated percentage of total contract value

4.022 Community Rehabilitation OrganizationsIf Bidder will purchase supplies and/or services from a community rehabilitation organization in the performance of any contract, the table below must be completed, Bidder may answer “N/A”. if Bidder does not intend to purchase supplies and/or services from a community rehabilitation organization in the performance of any contract,

Company Name Estimated percentage of total contract value

4.023 MIDEAL 1984 PA 431 permits the State of Michigan, DTMB, to provide purchasing services to any city, village, county, township, school district, intermediate school district, non-profit hospital, institution of higher education, community, or junior college. The Bidder is requested to complete the attached "Non-State Agency Statement" to indicate a willingness to supply commodities to these authorized local units of government, school districts, etc. as well as to the State departments and agencies.

Estimated requirements for authorized local units of government are not included in the quantities shown in this RFP.

NON-STATE AGENCY STATEMENT

1984 PA 431 permits the State of Michigan, DTMB, to provide purchasing services to any city, village, county, township, school district, intermediate school district, non-profit hospital, institution of higher education, community, or junior college. As a result of the enactment of this legislation, the MIDEAL Program has been developed. This program extends the use of state contracts to program members. The governmental agency must enter into an agreement with the State of Michigan to become authorized to participate, thus ensuring that local units of government secure a greater return for the expenditure of public funds. It is the policy of the DTMB-Purchasing Operations, that the final approval to utilize any contract in this manner must come from the contract vendor.

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In those cases, Contractors supply merchandise at the established State of Michigan contract prices and terms. The Bidder must submit invoices and pay the authorized MIDEAL member on a direct and individual basis according to contract terms.

All bidders must indicate, by checking the appropriate box below, whether they will (first box) or will not (second box) honor orders on any contract resulting from this Request for Proposal from State of Michigan authorized MIDEAL members. It is the responsibility of the contractor to ensure the non-state agency is an authorized MIDEAL member before extending the state contract price.

BIDDER MUST CHECK ONE BOX BELOW

[   ] Commodities and/or services on this Request for Proposal will be supplied to State of Michigan departments and agencies, and authorized MIDEAL Program members according to the terms and prices quoted. A complete listing of eligible participants in the MIDEAL Program will be provided if this option is selected.

[   ] Commodities and/or services on the Request for Proposal will not be supplied to State of Michigan authorized MIDEAL members. We will supply to State of Michigan departments and agencies only.

4.024 Business Owned by Qualified Disabled Veteran

“Qualified Disabled Veteran,” as defined by Public Act 431 of 1984, means a business entity that is at least 51% owned by one or more veterans with a service-connected disability. The Act defines “Service-Connected Disability” as a disability incurred or aggravated in the line of active military, naval, or air service as defined in 38 USC 101 (16).

The Bidder represents that it IS _____, IS NOT ______ a disabled Veteran-owned business.

The Bidder represents and warrants that the company meets the above criteria (when checked) and has provided the following supportive documentation:

A. Proof of service and conditions of discharge: DD214 or equivalentB. Proof of service-connected disability: DD214 if the disability was documented at discharge or

Veterans Administration (VA) Rating Decision Letter or equivalent if the disability was documented after discharge

C. Proof of Ownership: Appropriate legal documents setting forth the ownership of the business entity

IMPORTANT NOTE TO BIDDERS: Self certification alone will not initiate the price preference cited in Section 3.032, Qualified Disabled Veteran Preference. In order to be considered for the pricing preference your self certification must be accompanied by the qualifying documents listed above.

Loss of Preference: If during the term of the contract the contractor no longer qualifies for the preference, or if the contract is assigned to a business entity that does not qualify for the preference, they will be required to discount their contract price by the amount of the preference they received.

Fraudulently representing information about the use of businesses owned by persons with disabilities to procure this contract is a violation of the Business Opportunity Act for Persons with Disabilities of 1988 PA 112, MCL 450.791 – 450.795. A person who knowingly violates this act is guilty of a felony, punishable by imprisonment up to 2 years in prison, or a fine not less than $5,000. A person found guilty of violating this act may be barred from obtaining future contracts with the State.

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SIGNATURE AUTHORITY

I/We certify that the undersigned is authorized to submit bids/quotations on behalf of __________________. The information provided about __________________________ ability to provide the goods and/or services outlined in this RFP document is true and accurate. I/We understand that our product and/or service offerings must be in compliance with all requirements of this RFP document. ___________________________________________Name of Bidder/Contractor/Supplier

____________________________________________________________________________________________________________________________________________________________________________Address of Contractor/Supplier

___________________________________________Telephone and Fax No. of Contractor/Supplier

___________________________________________E-mail Address of Contractor/Supplier

____________________________________________Signature of Contractor/Supplier’s Authorized Representative

___________________________________________Title of Supplier Representative

______________________________Date

____________________________________________Additional Signature Contractor/Supplier’s Authorized Representative

___________________________________________Title of Supplier Representative

______________________________Date

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Attachment A, Price Proposal

ACH Transaction Volume Pricing Table

Price Per Transaction (Unit Rate) Annual Volume$ Less than 7,000,000$ 7,000,000 – 7,499,999$ 7,500,000 – 7,999,999$ 8,000,000 – 8,499,999 $ 8,500,000 - 8,999,999$ 9,000,000 – 9,499,999$ 9,500,000 – 9,999,999$ More than 10,000,000

NOTES:(1) All volumes in this Contract are estimates. The State does not guarantee the volumes stated below

or elsewhere in this Contract. (2) The above table allows the Contractor to provide for volume discounts. Charges by the Contractor

during the duration of the Contract will be in accordance with the volume pricing provided by the Contractor.

(3) First year of the contract will be based on an annual transaction volume of 7,320,000 transaction range or the transaction range associated with the actual 12 month volume of the 12 month period immediately preceding implementation of this contract, whichever is higher. For subsequent years the transaction range utilized to determine the unit rate will be based on the previous 12-month transaction volume. A rolling 12-month transaction volume report will be used to assess ‘annual volume’ and the movement to the next price range.

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PRICE PROPOSAL Preferred Format

1. General Information related to Bidders’ price proposal:

A) The ACH Operator (Pass-Through) Fees. No Mark Up allowed anywhere in price proposal. During the life of the Contract, this fee will be allowed to change, consistent with the ACH Operator increases or decreases in this pass-through fee (see Section 1.061).

B) This cost must reflect all of costs, including, but not limited to the following: development, implementation, transmission of electronic files, origination, Pre-notification, encryption, warehousing, Returns, notifications of change, On-us items, tracers, reversals, reclamations, FDIC charges, line charges, training, telecommunication charges, testing, reports as noted under Section 1.042 and other administrative costs. This cost includes the Standard Entry Class Codes of: PPD, PPD+, CCD, CCD+ CTX, CBR, and PBR – except addenda costs are separately requested. This cost shall include the cost for 820, 824, 827, 829, 831, 997 transaction set files.

Contractor must not include the ACH Operator Item fee in this price, nor any mark-up of the ACH Operator fee. The ACH Operator Item fee is separately stated in item A.

This charge must not include: FEDI setup fee, FEDI origination monthly fees, or addenda fees. These fees are separately listed in the Price Proposal.

C) ACH Operator Pass-Through Addenda Fee. Contractor is not allowed to add a mark-up to this fee in any of the other costs requested. During the life of the Contract, this fee will be allowed to change, consistent with the ACH Operator increases or decreases in this pass-through fee per Section 1.061. Estimated volume of 488,000 is based on FY 2011 addenda records generated.

ANNUAL TRANSACTION

ITEM UNIT RATE VOLUME COST

A) ACH OPERATOR PASS-THROUGH FEE FOR ACH CREDITS AND DEBITS (see additional information below) 7,320,000 $0

B) ACH RATE PER ITEM CHARGE FOR ACH CREDIT (PAYMENTS) AND ACH DEBIT (REVENUE) (see additional information below) 7,320,000 $0

C) ACH OPERATOR PASS-THROUGH ADDENDA FEE (see additional information below) 488,000 $0

D) CHARGE PER ADDENDA RECORD (CCD+, CTX, PPD+) (see additional information below) 488,000 $0

E) FEDI MONTHLY CHARGE 12 $0

F) ONE-TIME FEDI SETUP FEE 1

G) TOTAL ANNUAL COST BASED ON 7,320,000 TRANSACTIONS $0.000 7,320,000 $0

H) TOTAL COST FOR FIVE YEARS N/A N/A $0

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D) See ‘C’ above for estimated volume.E) No additional information.F) No additional information.G) No additional information.H) No additional information.

2. Please provide pricing for a compensating balance payment method if utilized at the State’s option. Bidders must propose the minimum earnings credit rate (ECR) to be used during the life of this Contract based on the Treasury Bill three-month “ask yield” as stated in the last Friday of each month’s Wall Street Journal. :

A. Bidders must provide an ECR based on the Grand Total Contract price from Attachment A, section 1.

ECR: December 14, 2012 3-Month T-Bill Ask Yield = _______%

B. Monthly Weighted Average Compensating Balance Using ECR in Section 2.1.1

Formula: (Average Monthly Contract Price) / (ECR * .90 Fed Reserve Requirement/12 months) and Rounded to 0 decimals= $ ___________

Note: The Earnings Credit Rate will be allowed to change from month to month, during the contract period. This change will be computed as described in the above formula. The (.90) in the formula reflects the 10% Federal Reserve requirement.

C. Annual Contract Price: $_____________.

3. The Contract price is determined by a combination of cost per transaction offered by the Contractor and the compensating balance required, if applicable per Section 1.061. The compensating balance formula will determine the compensating balance that will need to be left on deposit with the bank in order to pay for the contractual costs via earnings credits (if applicable). This compensating balance calculation is for bid purposes only. The compensating balance used for payment will be based upon actual volume, transaction costs, rates, and fees.

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Additional Banking Transaction and Reporting Costs.

The fees below will be held firm for the duration of the Contract. The fees below are considered maintenance fees. The reports included in this section are defined under Section 1.042.

ITEM UNIT COST

ANNUAL TRANSACTION

VOLUME COST1.) Monthly Account and Maintenance Fee (bank account or zero balance account fee). 5 accounts. 60 $0.00

2.) Cost per Debit to the Account 1000 $0.00

3.) Cost per Credit to the Account 900 $0.00

4.) Cost per outgoing EFT (e.g. To transfer balances in account to another Treasury bank account) 250 $0.00

5.) Cost per outging Wire Transfer (e.g. To transfer balances in account to another Treasury bank account) 250 $0.00

6.) Monthly Bank Statement Fee (Paper Statement) 12 $0.00

7.) Monthly Account Analysis Fee, if any 12 $0.00

8.) Daily BAI File Fee 250 $0.00

9.) Cost for Web based Reporting Software, if any 8 $0.00

10.) Cost per Web based Daily Bank Statement 250 $0.00

11.) Cost per Web based Monthly Bank Statement 12 $0.00

12.) Cost per Web based Reports other than the daily and monthly bank statement. List each type of report separately, how often the bidder believes we will need it, the cost per report, and the annual cost. $0.00

13.) Any other maintenance type costs that may be charged. Be specific as to purpose, per item cost, volume, and total annual cost for each item. $0.0014.) Total FIVE YEAR MAINTENANCE FEE COST $

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Appendix A

FY2011 Volume of Outgoing ACH Transactions

EFT SummaryNo. Issued Dollar Amount

Vendor* 529,595 $32,501,237,230.17 Income Tax 2,231,824 $1,264,748,107.94 Payroll 1,659,392 $1,700,171,344.06 Retirement 2,865,321 $4,332,879,680.59 Prenotes 32,696 $0.00Reversals & Reclamations 1,542 N/A Total 7,320,370 $39,799,036,362.76

* The number of issued EFTs for the vendor population does not include the Department of Human Services – SSP payments, approximately 1 million payments in total. In FY2013 DHS-SSP payments will be converted from warrant to EFT.

FY2011 Volume of Outgoing Warrant Payments*

Warrant SummaryNo. Issued Dollar Amount

Vendor** 3,345,984 $6,170,951,773.55 Income Tax 1,325,844 $745,239,677.70 Payroll 130,152 $154,641,067.93 Retirement 218,944 $206,015,702.44 Total 5,020,924 $7,276,848,221.62

* This list is provided as a guide to prospective Bidders as an estimate of potential increase in volume. It does not infer that all payments currently issued as a warrant will be converted to EFT.

** The number of issued warrants for the vendor population includes the Department of Human Services – SSP payments, approximately 1 million payments in total. In FY2013 DHS-SSP payments will be converted to EFT, therefore, in 2011 they were issued as warrants.

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Appendix B

FY2011 Volume of Incoming ACH (Revenue Program) Transactions

Revenue Program No. Collected

LARA - MI Liquor Control Commission 161,844 DNR - Retail Sales System 54,119Treasury Collections 315,680Total 531,643

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Appendix CImplementation Guidelines for FEDI 829 Cancellations

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Appendix DFinancial EDI Implementation Guides

at X12 Version/Release 4010

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Appendix EReserved

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Appendix F Daily Processing Schedule

While we have listed the normal processing schedule, restarts or late transmissions could be after 3:00 a.m. All the file transfers to and from the ODFI must be completed by 10:45 a.m.

Normal Weekly FlowDays of the Week – MAIN Runs Batch

Process In the Evening

Files Sent to ODFI(s) (between 12:00 a.m.

and 3:00 a.m.)*

Day ODFI Processes and Forwards Files to Federal Reserve

File Settlement Day

Monday Tuesday Tuesday ThursdayTuesday Wednesday Wednesday Friday

Wednesday Thursday Thursday MondayThursday Friday Friday Tuesday

Friday Saturday Monday Wednesday

Daily FlowState Generated Transaction Sets ODFI Acknowledgment

Transaction Sets Time Sent Transaction Sets Time Sent820

831

829

12:00AM – 3:00AM*

By 9:00AM

By 10:15AM

824, 997

824, 997

824, 997

Before 5:00AM

Before 9:30AM

Before 10:40AM

ODFI Generated Transaction Sets State Acknowledgment824 for 820824 for 831

827824 for 829

Before 5AMBefore 9:30AMBefore 9:30AMBefore 10:40AM

997997997997

Within one half hour of receipt

* This file may be sent before 12:00AM depending on the nightly batch size.

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Appendix G Confirmation Data Page Components

Required Components

Company NameApplication NameCurrent DateEffective DateCredit Item CountDebit Item CountCredit Dollar AmountDebit Dollar Amount

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Appendix HEDI CAPABLE QUESTIONNAIRE

I. BANK BACKGROUND

SAFETY AND SOUNDNESS

1. Identify key measures of the bank’s financial strength, e.g., capital ratios, market capitalization, total assets.

2. Provide ratings for the bank and/or bank holding company from two of the following agencies: Standard & Poor’s, Moody’s, Thomson BankWatch, Sheshunoff, or Lace. Include ratings for: [Customer to specify: e.g., senior debt, subordinated debt, long-term deposit].

II. ORIGINATION

1. For the customer input methods listed below, indicate which of the following payment formats the bank accepts.

Formats Accepted From CustomerCustomer Input Methods ASCX12 NACHA EDIFACT S.W.I.F.T. Other:

820 835 CCD CCD+ CTXMainframe TransmissionPC TransmissionVAB/VANOn-Line Balance/Information Reporting System

Tape/CartridgeDiskettePaperOther:

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2. For the customer formats accepted as listed below, indicate which payment types the bank is currently able to originate.

Payment Types Originated By BankFormats

AcceptedFrom

Customer

ASCX12 NACHACheck Fed

wireEDIFACT

S.W.I.F.T. CHIPS

Other:

820

835

CCD CCD+ CTX

CCDCCD+CTXASC X12 820ASC X12 835EDIFACTS.W.I.F.T.PPDOther:

3. Indicate which payment networks the bank employs to originate payments:

ACHFedwireCHIPSEDIBANXS.W.I.F.T.Other: ______________________________

4. For each network listed in questions II. #3, describe the cut-off times in relation to settlement/value date, and the procedures and time frames for deletion and cancellation of payment orders.

5. Describe the bank’s ability to accept and process a mixed payment file (e.g., single input with wires, ACH, and/or check output).

6. Describe the bank’s ability to warehouse payment orders. Is there a charge for warehousing? If there is a charge, what is it based on (e.g. $X for each day after day 10 etc.).

7. Indicate how the bank determines which payment type and remittance detail delivery method used to originate payments:

Bank Determines RDFI CapabilityBank Acts On Customer Instructions (e.g., by means of the Payment Method Code [BPR04])Bank Maintains a Receiving Company DatabaseOther

8. Describe the bank’s ability to originate Federal and state electronic tax payments.

9. Describe the bank’s ability to originate ACH multi-currency and international ACH payments with remittance information. List the countries you can originate ACH transactions to.

10. Discuss how daylight overdraft limits might impact your bank’s processing of EDI payments. (Please note: In our opinion, under this RFP, only our concentration bank, Bank One, Michigan, could potentially experience a daylight overdraft).

III. IMPLEMENTATION

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1. Please provide a detailed description of your EDI implementation and testing processes and a sample implementation schedule. Identify and describe any training which may be needed by our company.

2. What is the lead time for EDI implementation you anticipate for the State of Michigan? What are the critical factors which may impact that lead time? (Please be specific).

3. You will be required to supply an implementation team. Describe the support provided during implementation to include training, technical assistance, user manuals, and on-site meetings.

4. Please provide a sample copy of your bank’s EDI customer agreement. Include copies of agreements for ACH, wire transfer, etc. as appropriate to EDI. However, the State’s Terms and Conditions in the RFP will be the contractual terms.

5. Do you require or recommend the use of prenotifications prior to the transmission of live ACH payments? If so, how long in advance of a live transaction must a prenotification be sent?

IV. AUDIT, SECURITY & CONTROL

1. Indicate which methods of transmission security the bank currently supports.

Security Methods Mainframe PC VAB/VAN Other:

Hardware-Based Data EncryptionSoftware-Based Data EncryptionHardware-Based Message AuthenticationSoftware-Based Message AuthenticationAutomatic Call/Dial BackOther:

2. If any method of transmission security listed in question IV. #1 requires originator hardware/software, please describe.

3. Indicate which acknowledgment and control features the bank supports:

ASC X12 997 Functional AcknowledgmentASC X12 824 Application AdviceASC X12 831 Control TotalsOther: _____________________

4. Describe the bank’s procedures for tracing payments and remittance detail after release for each of the payment mechanisms that the bank uses.

5. Describe the controls the bank has in place to protect data integrity, ensure that payment files are not duplicated or lost, verify data syntax, etc., via means such as editing, audits, and control procedures.

Specify: Edits used with the 820, 835 transaction sets. How do you handle errors in an 820 and 835 transaction set? Do you process all error free items? Are individual errors listed on the 824? Do these errors need to be corrected and resubmitted by the State?

6. What measures has the bank undertaken to detect or prevent fraud for EDI payments? Please specify what tools are used to detect EDI fraud. What has been the bank’s experience with fraud in this area?

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7. Describe the hardware, software and physical/data security supporting your bank’s EDI processing. If encryption is described, specify if it is hardware or software encryption. Are any activities outsourced to third parties?

8. What historical/archival policies and procedures does the bank maintain for payments and remittances?

V. EXPERIENCE & CUSTOMER SUPPORT

1. Discuss the bank’s commitment to EDI in terms of strategy, capital investment and internal programs. Specify if your bank utilizes EDI for its own procurement payment process etc. How does the bank assess the future demand for EDI?

2. Does your bank have an active EDI user group? If so, please provide details of this group. (This question relates to an EDI user group for your bank, not industry groups).

3. How do you advise customers of NACHA rules changes and their implications?

4. On which ANSI, NACHA or other industry committees does your bank serve (e.g., Bankers EDI Council, ASC X12, etc.)?

5. Describe EDI initiatives that the bank currently has for other customers that you feel represent noteworthy accomplishments or innovative approaches.

VI. GENERAL

1. Please provide a listing of all ASC X12 transaction sets and versions of each that your bank supports.

2. With which Value Added Networks (VANs) does your bank currently maintain relationships? List and describe the VAB/VAN services your bank offers, such as receipt, storage, and transmission of non-payment information. Distinguish between those services your bank provides directly and those services which are provided through an affiliation with a third party.

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Appendix ISafeguard Requirements of Confidential Data

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Appendix J MCL 487.714

PRINCIPAL OR BRANCH OFFICEACT NO. 35

PUBLIC ACTS OF 1997

STATUTORY JOINT ACCOUNT ACT (EXCERPT)

Act 53 of 1978

487.714 Additional definitions.

Sec. 4. (a) “Financial institution” means a state or nationally chartered bank or a state or federally chartered savings and loan association, savings bank, or credit union whose deposits are insured by an agency of the United States government and which maintains a principal office or branch office located in this state under the laws of this state or the United States.

(b) “Person” means an individual, corporation, partnership, association, governmental entity, or any other legal entity.

History: 1978, Act 53, Imd. Eff. Mar. 9, 1978 ;--Am. 1997, Act 35, Imd. Eff. June 30, 1997.

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Appendix KSTATE DEPOSIT LIMIT

CONSTITUTION OF MICHIGAN OF 1963ARTICLE IX, FINANCE AND TAXATION

MCL Const.9.20

ß 20 Deposit of state money in certain financial institutions; requirements.

Sec. 20. No state money shall be deposited in banks, savings and loans associations, or credit unions, other than those organized under the law of this state or federal law. No state money shall be

deposited in any bank, savings and loan association, or credit union, in excess of 50 percent of the net worth of the bank, savings and loan association, or credit union. Any bank, savings and loan association, or credit union, receiving deposits of state money shall show the amount of state money so deposited as a separate item in all published statements.

History: Const. 1963, Art. IX, ß20, Eff. Jan. 1, 1964;--Am. H.J.R. GG, approved Nov. 7, 1978, Eff. Dec. 23, 1978. Former Constitution: See Const. 1908, Art. X, ß15.

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Appendix LBulletin BT-10001

Deposits of State Funds and Collateral Requirements

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Appendix MIncident Report

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Appendix NGeneral Security Requirements

On award of the Contract, the Contractor must comply with State and federal statutory and regulatory requirements, and rules; National Institute of Standards and Technology (NIST) publications; Control Objectives for Information and Related Technology (COBIT); all other industry specific standards; national security best practices and all requirements herein.

The Contractor must perform annual testing of all security control requirements to determine they are working as intended. Annual certification must be provided in writing to the CCI or designee in the form of a Service Organization Controls (SOC) 2, Type II review or similar audit report, if applicable.

A. Governing Security Standards and PublicationsThe State of Michigan information is a valuable asset that must be protected from unauthorized disclosure, modification, use, or destruction. Prudent steps must be taken to ensure that its integrity, confidentiality, and availability are not compromised.

The Contactor must collect, process, store, and transfer State personal, confidential or sensitive data in accordance with the contractual agreement, State of Michigan policies and the laws of the State of Michigan and the United States, including, but is not limited to the following:

The Michigan Identity Theft Protection Act, MCL 445.61 et seq;

The Michigan Social Security Number Privacy Act, MCL 445.82 et seq.

Family Educational Rights and Privacy Act

1. State of Michigan Policies The Contractor must comply with the State of Michigan information technology standards

http://www.michigan.gov/dmb/0,1607,7-150-56355-107739--,00.html.

B. Security Risk Assessment The Contractor must conduct assessments of risks and identify the damage that could result from unauthorized access, use, disclosure, disruption, modification, or destruction of information and information systems that support the operations and assets of the State. Security controls should be implemented based on the potential risks. The Contractor must ensure that reassessments occur whenever there are significant modifications to the information system and that risk assessment information is updated.

C. System Security PlanThe Contractor must develop and implement a security plan that provides an overview of the security requirements for the information system. If a security plan does not exist, the Contractor must provide a description of the security controls planned for meeting those requirements. The security plan must be reviewed periodically and revised to address system/organizational changes or problems.

D. Network SecurityThe Contractor is responsible for the security of and access to State data, consistent with legislative or administrative restrictions. Unsecured operating practices, which expose other connected networks to malicious security violations, are not acceptable. The Contractor must coordinate with DTMB to enter the proper pointers into the State of Michigan infrastructure.

E. Data SecurityThe Contractor has the responsibility to protect the confidentiality, integrity, and availability of State of Michigan data that is generated, accessed, modified, transmitted, stored, disposed, or used by the system, irrespective of the medium on which the data resides and regardless of format (such as in electronic, paper or other physical form).

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The Contractor must: 1. Process the personal data in accordance with the personal data protection laws of the State of

Michigan and the United States.

2. Have in place appropriate technical and organizational internal and security controls to protect the personal data against accidental or unlawful destruction or accidental loss, alteration, unauthorized disclosure or access, and which provide a level of security appropriate to the risk represented by the processing and the nature of the data to be protected. Technical and organizational security controls must be implemented that are appropriate to the risks, such as against accidental or unlawful destruction or accidental loss, alteration, unauthorized disclosure or access, presented by the processing.

3. Provide secure and acceptable methods of transmitting personal, confidential or sensitive information over telecommunication devices such as data encryption (128 bit minimum), Secure Socket Layer (SSL), dedicated leased line or Virtual Private Network (VPN).

4. Supply the State with information associated with security audits performed in the last three years.

5. Have in place procedures so that any third party it authorizes to have access to the personal data, including processors, will respect and maintain the confidentiality, integrity, and availability of the data.

6. Process the personal, confidential and sensitive data only for purposes described in the Contract.

7. Identify to the State a contact point within its organization authorized to respond to enquiries concerning processing of the personal, confidential or sensitive data, and will cooperate in good faith with the Department.

8. Not disclose or transfer the personal, confidential or sensitive data to a third party unless it is approved under this Contract.

9. Not use data transferred by the State as a result of this Contract for marketing purposes.

F. Media Protection1. The Contractor must implement measures to provide physical and environmental protection and

accountability for tapes, diskettes, printouts, and other media containing State personal, confidential and sensitive information to prevent the loss of confidentiality, integrity, or availability of information including data or software, when stored outside the system. This can include storage of information before it is input to the system and after it is output.

2. The Contractor must ensure that only authorized users have access to information in printed form

or on digital media removed from the information system, physically control and securely store information media, both paper and digital, restrict the pickup, receipt, transfer, and delivery of such media to authorized personnel.

G. Media Destruction and Disposal1. The Contractor must sanitize or destroy information system digital media containing personal,

confidential or sensitive information before its disposal or release for reuse to prevent unauthorized individuals from gaining access to and using information contained on the media.

2. Personal, confidential or sensitive information must be destroyed by burning, mulching, pulverizing or shredding. If shredded, strips should not be more than 5/16-inch, microfilm should be shredded to affect a 1/35-inch by 3/8-inch strip, and pulping should reduce material to particles of one inch or smaller.

3. Disk or tape media must be destroyed by overwriting all data tracks a minimum of three times or running a magnetic strip over and under entire area of disk at least three times. If the CD, DVD or tape cannot be overwritten it must be destroyed in an obvious manner to prevent use in any

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disk drive unit and discarded. Hand tearing, recycling, or burying information in a landfill are unacceptable methods of disposal. Electronic data residing on any computer systems must be purged based on retention periods required by the State.

H. Access ControlThe Contractor must limit information system access to authorized users, processes acting on behalf of authorized users, or devices (including other information systems) and to the types of transactions and functions that authorized users are permitted to exercise. Access must be immediately removed when a staff changes job duties or leaves the employment.

Authentication ProcessAuthentication is the process of verifying the identity of a user. Authentication is performed by having the user enter a user name and password in order to access the system.

To help protect information from unauthorized access or disclosure, users must be identified and authenticated per the table below prior to accessing confidential or sensitive information, initiating transactions, or activating services.

Publicly available information such as the mother’s maiden name, birth date, and address as the sole authenticator is not a secure means of authentication and should not be used.

Automatic user logons are prohibited. Device-to-device logons must be secured (preferably using client certificates or password via tunneled session). For certain implementations, source restrictions (sign-on can occur only from a specific device) provide a compensating control, in addition to the ID and password.

Authentication information (e.g., a password or PIN) must never be disclosed to another user or shared among users.

The authentication process is limited to three unsuccessful attempts and must be reinstated by the authorized personnel (preferably the System security Administrator). User accounts should be systematically disabled after 90 days of inactivity and must be deleted after one year of inactivity

Password Requirements The purpose of a password is to authenticate a user accessing the system and restrict use of a userID only to the assigned user. To the extent that the functionality is supported within the technology or product, the controls listed must be implemented.

These following controls or content rules apply at any point where a new password value is to be chosen or assigned. These rules must be enforced automatically as part of a new password content checking process:

Password Property Value

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Minimum Length Eight characters with a combination of alpha, numeric, and special characters

Composition At least two numeric characters (0 through 9), neither of which may be at the beginning or the end of the password

A combination of two upper (A through Z) and lower case (a through z) letters

Special characters (!, @, #, $, %, ^, &, *, (, ), +, =, /, <, >, ?,., :, ;, \)

UserID in password is not allowed

Revocation Passwords should be revoked after three failed attempts. (Treasury strongly supports password revocation after three failed attempts if system allows) Passwords should be systematically disabled after 90 days of inactivity to reduce the risk of compromise through guessing, password cracking or other attack and penetration methods.

Temporary passwords Must be randomly chosen or generated System must force the user to change the temporary

password at initial login

Change process System must force user to: Confirm their current password/PIN, Reenter current password/PIN Create a new password/PIN Reenter new password/PIN

System must prevent users from being able to consecutively change their password value in a single day (The goal is to prevent recycling through password history records to reuse an earlier-used password value)

Login process Password/PIN must not appear on the screen during the login process (The exception to this is during selection of a machine-generated password).

Encryption of passwords/PINs Passwords must be stored and transmitted with a minimum of 128-bit encryption. Passwords must be masked when entered on any screen

Compromise of password/PIN Must be changed immediately

Forgotten password/PIN Must be reset by authorized person (system Security Administrator)

Current user password/PIN Must not be maintained or displayed in any readable format on the system

Audit logs Maintain a record of when a password was changed, deleted, or revoked. The audit trail shall capture all unsuccessful login and authorization attempts for a one year period.

Password history Keep a password history and perform a check against the history to verify the password has not been used for a minimum of one year

Privileged account access (e.g. supervisor or root)

Security administrator must change the password for that account immediately when user changes responsibilities

I. System Security Application Control

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Application controls apply to individual computer systems and may include such controls as data origin, input controls, processing controls, output controls, application access controls, application interfaces, audit trail controls, and system documentation. Application controls consist of mechanisms in place over each separate computer system to ensure authorized data is processed completely, accurately, and reliably. The Contractor is responsible for ensuring application controls are in place and functioning properly within their organization. Ongoing testing and reporting of controls must be part of the business process in order to have a solid understanding of risks, strengths, and weaknesses. A comprehensive solution is required to ensure that business critical applications are handled efficiently and are prioritized. Dynamic recovery procedures and fail over facilities must be incorporated into the scheduling process whenever possible; and where manual processes are needed, extensive tools must be available to minimize delays and ensure critical services are least impacted.

J. System AuditingThe Contractor must (i) create, protect, and retain information system audit log records to the extent needed to enable the monitoring, analysis, investigation, and reporting of unlawful, unauthorized, or inappropriate information system activity, and (ii) ensure that the actions of individual information system users can be uniquely traced to those users so they can be held accountable for their actions.

The Contractor must observe the following guidelines regarding system auditing:

1. Audit record should contain the following:• date and time of the event• subject identity• type of event• how data changed• where the event occurred• outcome of the event

2. System alerts if audit log generation fails

3. System protects audit information from unauthorized access

4. Audit record should be reviewed by individuals with a “need to know” on a regular basis

5. Audit logs are retained for sufficient period of time.

K. Configuration Control and ManagementThe configuration management policy and procedures must be consistent with applicable federal laws, directives, policies, regulations, standards and guidance.

L. Incident Reporting1. The Contractor must immediately notify any security incidents and/or breaches to the CCI (see

Appendix O).

2. The Contractor must have a documented and implemented Incident Response Policy and Procedure

3. Incident handling form for consistent, repeatable process for monitoring and reporting when dealing with incidents.

4. Incident response resource identified to assist users in handling and reporting incidents.

5. Personnel trained in their incident response roles and responsibilities at least annually.

M. Physical and Environmental Security

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The Contractor must have established physical and environmental security controls to protect systems, the related supporting infrastructure, and facilities against threats associated with their physical environment.

1. The Contractor must have established environmental protection for magnetic and other media from fire, temperature, liquids, magnetism, smoke, and dust.

2. The Contractor must control all physical access points to facilities containing information systems (except those areas within the facilities officially designated as publicly accessible), review physical security logs periodically, investigate security violations or suspicious physical access activities, and initiate remedial actions.

3. The Contractor must periodically review the established physical and environmental security controls to ensure that they are working as intended.

N. Disaster Recovery and Business Continuity PlanThe Contractor must have developed, periodically update, and regularly test disaster recovery and business continuity plans designed to ensure the availability of State data in the event of an adverse impact to the contractors information systems due to a natural or man-made emergency or disaster event.

O. Security Awareness TrainingThe Contractor must ensure their staff having access to State information are made aware of the security risks associated with their activities and of applicable laws, policies, and procedures related to security identified in Section A of this document, and ensuring that personnel are trained to carry out their assigned information security related duties.

Contracted employees must obtain Department of Treasury provided security awareness training. (On-line training to be identified by the CCI).

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Appendix OForm 4621, What Is An Incident? (Brochure)

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Appendix PDTMB Technical Standard 1340.00.07 (Electronic Data Encryption)

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Appendix QDTMB Technical Standard 1345.00.02 (Telecommunication Infrastructure Facility Standard)

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Appendix RDTMB Technical Standard 1340.00.06 (Storage of Sensitive Information on Mobile Devices and

Portable Media)

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