Avoiding Even the Appearance of a Conflict of Interest: How ?

1. Theodore G. Lucas, JD, CPPO Director, Procurement & Contracts Division Sound Transit, Seattle, Washington Avoiding Even the Appearance of a Conflict of Interest: How? Thursday, March 21, 2013 WA NIGP Excellence in Procurement Summit

2. Avoiding Even…. How? • The Problem: • Falling into “traps” unintentionally • Constant scrutiny and exposure (public sector) • Challenges to personal integrity and integrity of the process. • When?: • Allegations of conflict of interest

3. Avoiding Even…How? • The Purpose: • Avoiding conflicts of interest “in fact” and even the “appearance” of a conflict of interest. • Why?: • Protection and peace of mind. • How?: • Not so easy. Show me how…

4. Avoiding Even…How? • TwoKinds: • Conflict of interest “infact” (or “actual” conflict of interest; reasonably well known and frequently described in ethics codes and standards of conduct; usually referred to as “prohibited” “interests” or “relationships”); and, • The “appearance” of a conflict of interest” (often stated but rarely defined or regulated).

5. Avoiding Even…How? • Avoiding “the appearance of a conflict of interest” is the hard part. • Why? • Because it’s so subjective and ambiguous. That is what we are going to tackle here. (Because an “appearance” of conflict of interest can “bite us” and imperil our integrity and our processes as much as an “actual” conflict of interest.)

6. Avoiding Even…How? • Let’s build a Policy, a Process and a Disclosure Form for your Procurement Organization (Division, Department, Unit, etc.). • See the sample “Procurement Guideline” and “Conflict of Interest Disclosure Form”, provided here as handouts Attachments “A” and “B”.

7. Avoiding Even…How? • Policy: • “…we understand and appreciate the importance of avoiding conflicts of interest “in fact”, and even the appearance of a conflict of interest, inrelationto the bids, proposals, offers and contracts that we solicit, evaluate, negotiate and award, andto the respective vendors including their owners, officers, managers and staff.” (See Attachment “A”.)

8. Avoiding Even…How? • Process: • “The key process features are (a) awareness of our roles and responsibilities, and our commitment to avoid conflicts of interest “in fact” and even the “appearance” of a conflict of interest, (b) timely, written disclosure; and (c) recusal from personal participation in any transaction in which there is a conflict of interest, and even the appearance of a conflict of interest. (See Attachment “A”.)

9. Avoiding Even…How? • DisclosureForm: • “For the purposes of this disclosure form, a conflict of interest, or the appearance of a conflict of interest, shall take into consideration any and all of the following categories of “interests” or “relationships”: financialinterest; employmentrelationship; familyrelationship; and friendship, as defined below…” (See Attachment “B”.)

10. Avoiding Even…How? • Internal keys to making this work: • “Context” (“in relation to”); • “Standards” (“the eyes of a reasonable observer”); and • “Definitions” (“interests” and “relationships”). • Include them in your Policy and Disclosure Form. • They are essential. • However, don’t get “hung up” on them by your attorneys, HR and Compliance Officers and others. They will all disagree on the exact definitions and standards. Take whatever consensus you can get. It’s much better then having nothing!

11. Avoiding Even…How? • Key “standard”: “For purposes of this Procurement Guideline, “the appearance of a conflict of interest” means the appearance of a conflict of interest in the eyes of a reasonable observer.” (See Attachment “A”.)

12. Avoiding Even…How? • Each definition in the sample “Procurement Guideline” and “Conflict of Interest Disclosure Form” is important, but especially see: - “Friendship: A relationship between the Procurement Department employee and an individual associated with the particular vendor that does in fact exceed, or that would “appear” to exceed in “the eyes of a reasonable observer,” a routine workplace or professional acquaintance, either at the present time or at any time in the past five years.” (See Attachments “A” and “B”.)

13. Avoiding Even…How? • You decide the detail of your Definitions. But be specific. If not, you are not helping your staff, because the purpose here is to give clarity about potential “appearance” problems and reduce (or eliminate) the confusion and subjectivity.

14. Avoiding Even…How? • Process A. Disclose: The sample “Guideline” and “Conflict of Interest Disclosure Form” instruct the employee to fill out the form and disclose as soon as she/he “reasonably knows, or foresees, that she/he may have either (a) a conflict of interest “in fact”… or (b) an “appearance” of a conflict of interest in “the eyes of a reasonable observer.” (See Attachments “A” and “B”.)

15. Avoiding Even…How? • Process B. Resolve: The employee’s Manager/Supervisor, together with the Procurement Director, evaluate the written disclosure and determine either: (a) there is neither an “actual” nor a reasonable “appearance” of a conflict of interest with a written statement to the record; or (b) there is an “actual” or a reasonable “appearance” of a conflict of interest, and shall establish the appropriate protection for the employee, and for the Agency, as early as possible, in the form of the employee’s recusal from future work in relation to the project, procurement or contract, or other reasonable remedy.

16. Avoiding Even…How? • The purpose is protection for you and your procurement staff. Give them the remedy: (a) awareness, (b) disclosure and (c) recusal. Give them the tools: (a) an explanatory “Guideline” or “Policy” and (b) a “Conflict of Interest Disclosure Form” (that includes avoidance of even the “appearance” of a conflict of interest.)

17. Avoiding Even the Appearance of a Conflict of Interest: How? Further discussion Many Thanks, TED