1. Similarities and Differences between Managing Simple and Complex Contracts Presented by Angela Zgabay-Zgarba and Andy Marker Texas Lottery Commission

2. Agency Overview Operate Lottery and Regulate Bingo Unaudited Sales FY 2012 $4,190,815,913 Unaudited Transfers to State FY 2012 $1,153,560,513 317 FTE’s

3. Contracts Administration 2 Contract Administrators 2 Attorneys who focus on Contracts 3 Purchasers 1 HUB Coordinator 1 Director & 2 Managers Contract Sponsors

4. TLC Contracts 75 -100 Active Contracts ◦ Prime (15) ◦ High Risk (11) ◦ Other  Lease  Interagency 60 Annual Promotional Event Contracts

5. Statutes & Rules Texas Gov’t Code ◦ §466.014 ◦ §466.101 ◦ §466.102 ◦ §466.103 ◦ §466.105 Texas Administrative Code ◦ §401.101 - 104

6. Procedures 36 for Purchasing/Contracts/HUB 19 govern Contracts Administration 3 specific to Lottery Operator Contract ◦ Vendor Background Risk Assessment ◦ Needs & Risk Assessment

7. Risk Assessment Solicitation Document Statutes & Rules Procedures Security and Integrity of Lottery Games Conflicts of Interest Background Investigations

8. Contract Management Monthly Disclosure of Litigation Bonds and Insurance Contract Sponsor reported issues Annual Contract Compliance meetings with Contract Sponsors Communication and Correspondence with Contractors Contract Amendments SOW’s or Change Orders

9. Sanctions & Liquidated Damages Liquidated Damages in most of our Contracts Sanctions are in many of our Contracts Compel Contractor Performance Provide Remedies Sanction, LD & Warning Letters

10. Lottery Operator Contract $1 Billion over life - $85M+ per year Over 1,000 deliverables Change orders Contract compliance vendor Approximately 70 Sanctions Approximately 10 LD’s

11. Advertising Contract $32 M per year Advertising & Media Planning Reporting Billing and invoicing Staffing

12. Instant Ticket Manufacturers 3 Contractors $19.5 M per year Approximately 75% of agency sales are instant tickets 85-90 instant games printed each year

13. Simple vs. Complex Complex ◦ Bonds and Insurance Required ◦ Long Contract Term ◦ Significant Risk Associated ◦ In-depth Background Investigations ◦ Many Sanctions or Liquidated Damages ◦ Extensive Terms & Conditions Simple ◦ No Bonds or Insurance ◦ Short Contract Term ◦ Limited Risk Associated ◦ Background Certification ◦ Few Sanctions or Liquidated Damages ◦ Minimal Terms & Conditions

14. Questions?