Conflict of Interest

Questions? Contact SCM Response Team

Overview

Policy concerning conflict of interest in supplier purchases and contracts.

Conflict of Interest Defined

When making purchases, departments should avoid doing business with suppliers if there is a conflict of interest.

University of California policy requires that an employee’s University and private interests are kept separate. This separation protects the University and its employees from charges of favoritism when purchasing goods and services.

Policy prohibits an employee from participating in or making a decision about a purchase if there is a financial conflict of interest. Requirements governing such decision making are outlined in the University Conflict of Interest Code and must be followed when the University purchases goods and services.

When Does Conflict of Interest Apply?

Conflict of interest may apply when you are considering making a purchase from a supplier who is one or more of the following: ​​​​​​

  • UC employee
  • UC employee who owns or controls more than 10 percent interest in the business
  • Former UC employee who has separated from the University within the past two years
  • Near relative of a UC employee when the employee has any involvement in the department’s decision to do business and/or approve the transactions with the supplier
  • Near relative of a UC employee who owns or controls more than a 10 percent interest in the business and the employee has any involvement in the department’s decision to do business and/or approve the transactions with the supplier.

If you are considering doing business with a supplier where there is a possible conflict of interest, the supplier needs to complete the Conflict of Interest Form. Supply Chain Management will determine if the purchase can be made with the supplier.

BearBuy Form to Use

Attach the completed Conflict of Interest Form to your BearBuy requisition.

The Legal Basis

Senate Bill 1467

  • Law took effect 1/1/03  Guidance from UCOP
  • Is operative 7/1/03

Definition of “Consulting Services Contract” from Public Contract Code

The law contains four (4) Conflict of Interest provisions, and provides significant penalties for violations.

  • Prohibits “Successor Contracts”  (follow-on consulting agreements)
  • Further restricts hiring UC employees as Independent Contractors
  • Restricts hiring back UC employees for 12 or 24 months
  • Requires assignment of “unique supplier number” for all contracts over $10K
Penalties
  • 10520 - Any contract/transaction entered into in violation of this law is void.
  • 10521 - UC or anyone acting on UC’s behalf may bring an action.
  • 10522 - Any officer or employee who “corruptly” performs an official act hereunder is guilty of a felony.
  • 10523 - Any person contracting with UC orally or in writing who “corruptly” permits a violation is guilty of a felony.
  • 10524 - Persons convicted are also liable for double what UC may have lost.
The statute does not define "corruptly," but the Office of the General Counsel advises that a University officer or employee will generally not be considered to have performed an official act "corruptly" as a result of simple mistake or negligence.
 
Business and Finance Bulletins, specifically BUS 34 (Securing the Services of Independent Consultants,  and BUS 43 (Part 7, Employee-Vendor Relationships) provide more detail.

Successor Contracts

Section 10515 – “Successor Contracts”
- The statute requires that any person or business entity awarded a consulting services agreement by UC shall not bid on or be awarded a successor contract after July 1, 2003 to provide goods or services required, suggested, or otherwise deemed appropriate in the end product of the original consulting services agreement. In simple terms, Consultants who have performed work for the University cannot participate on subsequent projects relating to the Consultant’s findings or recommendations.
 
– Does not apply if amount of extension is < 10% of original contract value.
 
Recommendations:
  1. Use an Independent Consultant Agreement (ICA) only when acquiring advice and the “Deliverables” are no more than a memorialization of the advice and/or recommendation(s).  Do not issue an Amendment or another ICA for follow-on work, as it may be a “Successor Contract”.
  2. For technical and professional services which execute an objective defined by UCSF, use a Professional Services Independent Contractor Agreement (PSA).

    Note: These are still subject to the prohibition against implementing a recommended action.  Check with Purchasing at [email protected].
  3. Issuing a Single Contract for all possible scope or with contingent future scopes may avoid the need to issue a “Successor Contract”.  However, Competitive Proposals will be required at the outset if the Cumulative Value including contingent scopes will exceed $15,000. 
  4. If a multiphase project is contemplated, such as a pilot or prototype to be followed by full implementation, any agreement should cover all potential phases of the project with appropriate language reserving final cost figures and the University's discretion to proceed or not with full implementation.  See Advice from Office of General Counsel and check with Purchasing.

Contracting With UCSF Employees

Section 10516 – Employees as Independent Contractors/Consultants

– No officer or employee may engage in any employment, activity or enterprise from which (they) receive compensation, in which (they) have a financial interest, or which is funded by or through any university department, activity, enterprise or contract, unless it is within the course and scope of their employment.
 
– Exemption:  This provision does not apply to officers or employees with teaching or research responsibilities.
 
– The law restates more strictly current university Employee-Vendor policy, but creates a limited exception for teaching and research employees.
 
– Employees without teaching or research responsibilities can no longer be hired as independent contractors.  No exceptions.
 

Recommendations:

  1. Review the Employee-Vendor materials on the Purchasing Department’s web page. 
  2. Consult HR for options to pay teaching and research employees for limited services and/or goods through the payroll system provided the Campus Materiel Manager has granted an Employee-Vendor waiver.
  3. Hiring teaching and research employees as Independent Contractors still requires a finding by the Campus Materiel Manager that the services are not otherwise commercially available.
  4. Use an Independent Consultant Agreement only where the service is advice only.  Where a tangible Deliverable is involved use a Professional Services/Independent Contractor Agreement.

Contracting With Former Employees

Section 10517 – Contractors who are former UC employees
– (a) No retired, dismissed, separated or formerly employed or otherwise appointed person may enter into a contract for 2 years in which s/he engaged in any negotiations, transactions, planning, arrangements, or any part of the decision making process relevant thereto.
 
– (b) For 12 months after retirement, dismissal or separation, no contracting with any university department if s/he was employed there in a policymaking position “in the same general subject area as the proposed contract”.
 
– ( c) Does not apply to allowable rehire and excludes inventors and authors of intellectual property licensed under technology transfer agreements.
 

Recommendations:

  1. Check with HR to verify the separation date of any former UC (not just UCSF) employee being considered for an Independent Contractor or Consultant contract.
  2. Check with HR to determine whether the proposed activities touch on any policymaking duties the employee had in the “same general subject area” in which s/he served.
  3. Check with Purchasing or Campus Counsel where a former UC employee will be providing services related to their former UC employment through another independent contractor, if it is within 24 months of their separation.
  4. Exceptions may be available for employees whose separation from UC was because of retirement.

Unique Contractor ID Number

Section 10518 – Required assignment of unique ID number

  • Requires UC assignment of a unique contractor identification number to be displayed on ALL contracts of $10,000 or more.
  • Unique identifier must remain unchanged regardless of change of name.

Recommendations:

1. Campus Departments should check the signature page of all Professional Services Agreements to make sure the Federal Tax ID Number has been affixed, and put that number on all invoices if the Contractor has not done so.

California State Resources

The California Political Reform Act and California Government Code Section 81000-81016 prohibit an employee from participating in or making a decision about a purchase if there is a financial conflict of interest.