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Matter of Protest of Award of On-Line Games Production and Operation Services Contract

Decided: February 17, 1995.


On appeal from Final Administrative Action of the Treasurer, State of New Jersey.

Before Judges Brody, Long, and A.m. Stein


The opinion of the court was delivered by LONG, J.A.D.

This appeal arises out of the State Treasurer's award of a five-year contract to respondent, Automated Wagering International, Incorporated (AWI), for equipment, materials and services to implement and operate the on-line gaming system of the New Jersey State Lottery Commission. Appellants, GTECH Corporation (GTECH), the incumbent vendor, and Autotote Lottery Corporation (Autotote), challenge the Treasurer's determination that AWI's bid conformed to the Request for Proposals (RFP). Autotote also challenges the Treasurer's decision that its bid was non-conforming. We reverse the determination that AWI's bid was conforming, affirm the determination that Autotote's bid was non-conforming, and remand the case to the Treasurer to decide whether to award the contract to GTECH or to rebid it.


A. The RFP

On August 9, 1993, the Division of Purchase and Property issued an RFP for On-Line Games Production and Operation Services, Division of Lottery, Contract No. 95-X-20175. The 250-page RFP contained many requirements; only those which are relevant to this appeal will be set forth.

1. Terminals and Customer Display

The technical section relating to terminals stated that: "The Contractor must provide terminals that meet the requirements as specified below." Those requirements included:

The Contractor must provide (a) customer visual display unit(s), for each on-line Agent location. Due to the wide diversity of space in Agent locations, the visual display unit may be terminal mounted in some locations, or mounted elsewhere (wall, pole, window, etc.) in others. All unit messages must be clearly visible from fifteen feet (15') by customers. Special features (scrolling, flashing, etc.) are welcomed and must be described fully.

[RFP § 6.3.2 (emphasis added).]

The purpose of a customer display visible from fifteen feet is advertising. It is meant to catch the attention of other individuals at the premises at which lottery tickets are sold and induce them to buy. Each bidder had to

respond to this section by addressing each and every portion of subsection 6.3 of the RFP, entitled, "Terminals. " The response must ensure fulfillment of the Scope of Work. In doing so, the bidder must ensure that all terms cited below are incorporated in his response.

Bidders must provide complete documentation on the terminals proposed, including pictorial exhibits and the technical specifications for the terminal equipment including, but not limited to, the functional capabilities and physical and environmental characteristics for each proposed terminal.

[RFP § 7.5.2 (emphasis added).]

In addition, the bids had to clarify which terminal features were included and which were excluded from the basic bid price.

2. Implementation and Backup

RFP § 6.9 incorporated a "Big Bang" approach to convert from the current lottery system to the new system. "Big Bang" was defined as:

A form of terminal network conversion in which the new agent terminals are installed gradually in retail locations but do not take over sales until a complete cutover following the last sales day on the existing Contract. All new agent terminals go into production on the same day. The old terminal can then be removed from the premises.

[RFP § 4.0.]

RFP § 6.9 further explained that the new contractor's secondary site would be used to stage and test the new system, and that operations would proceed from November 24, 1994, supported only by that site until the primary site could be fitted out and installed. The RFP envisioned that the remote backup location would serve as the primary site for the first six months of implementation. During that period, GTECH, the incumbent vendor, would remove its equipment now located adjacent to Lottery headquarters in Lawrenceville, and the new vendor would prepare and install the central processing systems that would eventually become the primary operations site. In other words, when the primary site became operational, the secondary site was to assume its original backup function.

During the conversion when the secondary site was initially operating the Lottery, RFP § 6.9 required:

For the period between November 24, 1994, and the availability of the data center at Lottery Headquarters as the primary site, the Contractor must provide sufficient backup capabilities equal to the current contingency plan: A hot backup system for the active primary system, and the ability to restore service within seventy-two (72) hours following a disaster at the single processing site.

RFP § 6.9 also required each bidder to propose a specific implementation plan for conversion, with a detailed Discussion of, among other things, the installation and testing of the system's hardware and software components and the training of agents and Lottery personnel. Specifically, RFP § 6.9 stated:

If the Contractor proposed (an) alternative(s) to the specified implementation approach and schedule, it (they) must meet or exceed all the requirements specified in the RFP resulting in this Contract.

The Contractor is required to carry out their proposed implementation plan. The plan must detail hardware production capability, software development, and installation and testing of hardware and software components.

The implementation plan must also detail the structuring of the network and the installation of the network through the combined efforts of the communications carrier, the State, and the Contractor. . . .

Among other things specifically required to be included in the implementation plan were plans for: production and installation of the hardware; upgrade of the communications network; design, development, installation and testing of software; and on-site installation and transition methodology. Also required were personnel training plans and a delineation of the breakdown of responsibility between the contractor and the State.

The preparation and submission instructions relative to implementation, like the instructions relative to terminals, mandated that the "bidder must respond to this section by addressing each and every portion of subsection 6.9 of the RFP." This included the details of the bidders plan to achieve the aims of the RFP. Alternative plans were permissible so long as they met or exceeded all installation and testing requirements of the RFP, and could be shown to be otherwise favorable when compared to the envisioned approach.

3. General provisions

Among the general provisions of the RFP were the following:

Failure to furnish all required information or to follow the proposal format specified in this RFP may disqualify a proposal. However, the Director of [the] Division of Purchase and Property may waive any nonmaterial deviation in a proposal. The Director's waiver of a nonmaterial deviation shall in no way modify the RFP requirements or excuse the proposing bidder from full compliance with the contract requirements if the proposing bidder is awarded the Contract resulting from this procurement.

[RFP § 3.18 (emphasis added).]

RFP § 3.25 (emphasis added) stated in part:

Bidders who submit a proposal in response to this RFP may be required to give an oral presentation of their proposal to the State. The purpose of such a presentation is to provide an opportunity for the bidder to clarify or elaborate on his proposal. Original submissions cannot be supplemented, changed or corrected in any way.

The general proposal preparation and submission instructions section stated:

The bid response proposal is the State's primary vehicle for obtaining essential information on which contract award decisions are based.

Bidders are cautioned that their failure to submit the information required may result in a determination that the bidder's proposal is non-responsive to RFP requirements.

All instructions contained in the RFP should be met in order to qualify for consideration for award. Proposals which do not meet or comply with all instructions may be considered non-responsive.

[RFP § 7.1 (emphasis added).]

For instructions as to proposal contents and evaluation, RFP §§ 7.3 and 8.4 (emphasis added) provided:

Each bidder is expected to provide the Lottery with information, evidence and demonstrations which will make possible the selection of the bidder to be awarded the Contract in accordance with N.J.S.A. 52:34-12(d) [now (f)] . . . . Bidders are given wide latitude in the degree of detail they offer or the extent to which they reveal plans, designs, systems, processes and procedures. At a minimum, proposals must be fully responsive to the specific requirements stated in this RFP. All proposed hardware and software features must be included in the final delivered system unless specifically excluded by the Lottery. Each proposal must identify any requirement of this RFP the bidder cannot satisfy.

The bidder must be completely clear about which capabilities and services are integral to the bidder's offering, which are optional at no additional cost, and which are optional at additional cost.

Proposals are required to meet all submission requirements as stated in Section 7; to signify compliance with all terms and conditions in the RFP; and, to meet all technical mandatories identified in Section 6. Proposals which fail to do so may be rejected.

B. AWI--Agent Terminals and Customer Displays

The general section of AWI's bid referring to terminals declared, by way of introduction and summary, "[AWI] is proposing an innovative solution to every terminal requirement specified by the New Jersey State Lottery in its RFP."

According to the bid, included is "the Ovation Agent Terminal, a lightweight modular unit with what we believe to be the industry's fastest ticket printer." Ovation included

a basic model, the Ovation Deluxe, and the Norway model . . . , now named the Ovation Ultra, which includes as a standard item, the OSR [optical scanner reader] noted above. In between are options for the keyboard, reader, operator display, printer, customer display and reader that cater to the specific needs of every Lottery.

[AWI Proposal § 7.5.2 (emphasis omitted).]

"The Ovation is composed of small, modular units, while its competitors' consist of one large, all-in-one unit. . . . The three modules which comprise the Ovation Terminal are (1) a printer/power supply, (2) a keyboard/display, and (3) a media reader." AWI proposal § A picture of the proposed Ovation Agent Terminal was included in the bid.

Section 7.5.2 of the bid further declared that the Ovation would support a customer display and that many options were available:

AWI can provide, and the Ovation Terminal will support, a multiple-monitor display. Up to 12 monitors can be connected to the MasterLink System through an Ovation Terminal which would serve as their controller.

Specifically as to agent on-line terminal hardware, § 6.3.1 of AWI's proposal stated "Automated Wagering International is proposing its Ovation Agent Terminal to satisfy all requirements of the New Jersey State Lottery." In § 6.3.2, AWI listed and described its agent terminal attachments. As to customer displays, § 6.3.2 (emphasis added) of the proposal stated:

A. Customer Display

The AWI Ovation Agent Terminal proposed for the New Jersey State Lottery includes a one-line 16-character alphanumeric liquid crystal(LCD) screen designed to provide message readability for lottery customers [hereinafter, AWI's "personal display"].

The customer display is mounted on the back of the terminal's operator display, which in turn is mounted on a pole attached to the keyboard.

This customer display has proven to be a significant enhancement for Norway's Norsk Tipping, where it is used with AWI's ...

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