84.21

OPINION NO. 84-21

An opinion request has been presented inquiring as to whether a conflict of interest exists if a Community College (the College) purchases computer equipment and service from a vendor company with which a professor and departmental coordinator (hereinafter the Professor) has private affiliations.

This request is presented by the attorney to the College's Board of Trustees, and involves a procurement action currently being considered by the College's Administration Division. The action is for the purchase of computer equipment (30—50 computer terminals with maintenance) for the College's Computer Center and Computer Science Department. According to the Dean of Administration, the procurement, consistent with the College's purchasing process, involved the generation of a request for the equipment by the Chief of the Computer Center and the Chairman of the Computer Science Department. As a general matter such requests are then reviewed by the Purchasing Division and bid specifications are developed and published in newspapers. Bids are received in a sealed bid procedure and opened and reviewed with the user. The College almost always selects in these situations the lowest responsible and responsive bidder.

In this particular procurement, there were two bids, the lower from a vendor (the Company) whose President and sole stockholder is the spouse of a professor of engineering and the Coordinator of Mechanical Engineering Technology at the College. The Professor is an officer of the Company, serving as Vice-President and Secretary, and is an employee of the Company. He has been paid a minimum compensation (approximately $250 every two months), and performs significant management services for the Company. The Professor indicates that the Company has a retail store and has several commission sales people. His work in the store involves general management assistance, support to the sales personnel, and some deliveries.

The Professor is also involved in the service provided to customers, and is the Company representative who takes most of the training courses regarding servicing equipment. The firm has only one other person who does service work. He states that most service is done at the store, with even "on-site" service consisting of picking up a unit and bringing it back to the store for service. The maintenance provision of the Company's proposal is specifically for this type of service, with costs including a few extra units to be available as loaners. The Professor indicates that he would be the likely person to provide the service under the contract, though this could be changed if it presents a problem. He also indicates that he was involved in preparation of the firm's bid; he states that they became aware of this procurement through the bid advertisement, but have requested to be put on the bid list to receive future invitations. In particular, the Professor's participation involved the service portion of the bid, which College officials indicate is a major factor in the acceptability of the bid.

The specifications for this procurement were apparently drafted by the Dean of the Computer Center (a unit under the Dean of Administration), and the Professor was not involved in drafting specifications or otherwise preparing bid documents or processing this procurement on behalf of the College. He is the Coordinator of the Mechanical Engineering Program, which is within the Engineering Division, which is in turn under the Dean of Career Technology Programs. This part of the College is geared to students interested in acquiring a two-year, 70-credit Associate of Arts degree that involves technical/practical career training. While some students are regular full-time students working toward the A.A. degree, most students are older and returning to work toward a degree with a few courses a semester or to upgrade themselves in a particular work skill.

The Mechanical Engineering Program is directed at training individuals to handle jobs in the manufacturing industry, and involves courses such as technical drawing, hydraulics, and tool and fixture design. It does not generally use the College's computer terminals, though it has a computer-aided drafting course, and may have equipment that uses computers (such as computer driven robot arm). The Professor says that as Coordinator, he is involved in equipment decisions, and participated in preparation of procurement documents defining the computer requirements for the computer-aided drafting course. The Computer Sciences Division, which is apparently offering a course next semester that would use these terminals, has coordinated with the Computer Center in this procurement. This Division is a different instructional division under the same Dean (Career Technology) as the Engineering Division.

The Professor's affiliations with the Company raise questions as to whether he would be in violation of the Public Ethics Law (Article 40A, Annotated Code of Maryland, the Ethics Law) if the College were to enter into a contract with the Company to buy these terminals, or if the Company were to do any business with the College.1 The primary questions arise under §3-103(a)(1)(i) of the Law, which prohibits an employee or official from being employed by or having a financial interest in an entity that has or is negotiating a contract with his agency. The Company clearly proposes to contract with the Professor's agency, as to this particular procurement, and also to be on the bid list, and present bids in negotiation of future contracts with the College. Also, we believe that the Professor has an employment relationship with the Company.2 He receives some compensation for his services, and even if he did not, we believe that his status as a corporate officer and his significant management involvement in the business result in the type of duty of loyalty, fiduciary duty and commitment that we have consistently treated as employment for purposes of §3-103(a). (See, for example, our Opinions No. 84-17, No. 83-24, No. 82-45, and No. 82-43.3

This employment relationship with the Company would be prohibited by §3-103(a)(1)(i) if the Company submits bids or enters into contracts with the College, unless an exception is allowable under the introductory language of §3-103(a). This language provides that the prohibition applies "except as permitted by regulation of the Commission...where such employment does not create a conflict of interest or appearance of conflict." This exception provision was added to the Ethics Law in 1981 partly based on the recommendation of the Commission that flexibility be added to the absolute prohibitions in §3-103(a). Its purpose is to avoid situations where a violation would result from purely technical application of the elements of §3-103(a), even where there is no conflict or appearance of conflict between the private interest or employment and official duties. In developing exception criteria implementing the employment portion of this provision (COMAR 19A.02.01), we sought to define circumstances where the relationship between an employee's official duties or his agency and the private employment is so remote that the possibility of a conflict of interest or the appearance of conflict is unlikely. The criteria include findings that:

A) The State duties do not significantly impact on the outside employer or a contract between the outside employer and the agency.

B) The employee is not directly supervised by a person whose duties significantly impact on the outside employer or a contract between the outside employer and the agency.

C) The employee does not supervise a person whose duties significantly impact on the outside employer or a contract between the outside employer and the agency.

D) The employee is not affiliated with the specific unit in the agency that exercises authority over or contracts with the outside employer.

E) The employee has complied with other relevant sections of the Ethics Law.

F) The outside employment involves no non-ministerial duties significantly relating to the agency's authority over the employer.

G) The employee's private duties do not involve negotiating or carrying out a contract between the agency and the outside employer (except for broad fixed reimbursement contracts).

H) The private compensation is not directly funded by the State contract.

I) The specific employment circumstances do not otherwise create a conflict of interest or the appearance of a conflict.

We have evaluated the Professor's situation in view of these criteria, particularly Item I dealing with the specific circumstances and conflicts of interest or appearances of conflict. In our view, §3-103(a) of the Law reflects a general legislative determination that State employees and officials should not have employment relationships with private entities that have contractual dealings with their agency. The exception provision in the Law was intended to allow flexibility to avoid technical application of a prohibition where there is no conflict of interest or appearance of conflict. Thus, the regulations were drafted as indicators by which to measure actual or potential conflicts of interest, rather than as a series of purely technical criteria. This approach reflects the purposes of the Law, set forth in §1-102, to assure the public of the impartiality of public officials, recognizing that the public may not be in a position to know or understand how reorganization of duties or non-participation actually serves to avoid a conflict or appearance thereof.

We recognize that the Professor did not participate in the development of the College's specifications for this particular contract, and that this transaction is not, based on the College's organizational structure, one with which he would be likely to be involved as a College employee. There are at least three aspects of this situation, however, that compel our conclusion that exception would not be appropriate here. First, our regulatory criteria deal both with an employee's involvement, as an employee, with his private employer, and also with his private activities and how they relate to his agency's dealings with the employer. The Professor has significant management responsibilities in the Company, which is essentially a family business, and involves the commitment of family financial resources. Also, he is the Company's primary service resource. He was responsible for the service portion of this bid, the very aspect of the bid that made the Company a significantly lower bidder in this procurement. Though the Professor says that he could assign service responsibilities to other employees as to the College contract, it is unlikely, given the significance of his involvement with the Company, that he could avoid management decisions and other activities that would relate to this and potential future College procurements on which the Company might bid.

A second aspect of concern in this request also relates to the Professor's role as the Company service expert, and appearance issues presented by this situation. The procurement is not a single-sale vendor/vendee transaction. It includes a continuing relationship under which the Company undertakes to provide service on the terminals sold by the Company, and provision of service on equipment is the very aspect of the Company's activities in which the Professor is most significantly involved. Moreover, both of the entities here are relatively small. Though the parties may with the best intentions undertake not to involve the Professor in implementation of this contract, the fact remains that he would be the person most likely to be working on a College unit brought to the Company's facility for repair. Also, he is located in the same building on the next floor from the College facility where these terminals will be housed. The College faculty is not so large that individuals would not be expected to at least be acquainted with each other, or that the Professor's involvement with these terminals would not be known. Under the circumstances, there is bound to be at least the appearance of conflict of interest; given the convenience of his location and service expertise, his assurance of non-participation would be unlikely to allay concerns of the public that he was gaining an economic benefit on behalf of a private employer by virtue of his College position.

A third issue also relates to appearance problems and general concerns presented by this particular contract, as well as by the proposed inclusion of the Company on the bid list for future procurements. As we have noted above, any contract between the College and the Company would result in a violation of §3-103(a)(1)(i), as long as the Professor continues his relationships with both the College and the Company. If the Company were to be on the College's bid list and regularly presenting bids, then the College would be in the position of having to evaluate (on its own and in referral to this Commission) each procurement to determine how the Professor's College duties relate to the procurement, how and if his private employment were organized to avoid involvement with the College's contract, and generally to assess the potential for conflict of interest or the appearance thereof. We believe that this situation is the type of concern intended to be addressed by §3-103(a)(1)(i) and by item I of our criteria, and to be the basis for our general conclusion that employees should not have private employment or interests that involve direct business with their agencies. (For an example of an earlier situation dealing with this, see our Opinion No. 82-8.)

In our view, employees should not be able to engage in private affiliations that create the types of issues that would result here, where the College's computer services procurements could, on a regular basis, be subject to the additional concerns, delays and disruption that could be raised by the inclusion on the bid list of an entity employing a College employee. This circumstance was, it appears to us, one of the types of situations intended to be addressed by the Legislature when it developed the general prohibition against outside employment with entities that contract with one's agency, and our exception regulations were not intended to overcome this general legislative intention. They are designed to deal with situations where the relationships between private affiliations and official activities are so clearly remote that the conflict of interest concerns addressed by §3-103(a) would not be raised. Under the total circumstances presented here, we do not believe that either this particular contract or inclusion of the Company on the bid list for future contracts would be sufficiently remote to justify application of the exception.

We therefore advise the Professor that this and any future contracts between the College and the Company would bring him into violation of the provisions of §3-103(a)(1)(i) of the Ethics Law, and that the exception provisions of the Law and the Commission regulations cannot be applied to overcome this bar, as to either the contract currently under consideration or future procurements.

Reverend John Wesley Holland
    Betty B. Nelson
    Barbara M. Steckel
    Thomas D. Washburne

Date: September 17, 1984

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1 We note, of course, that though this inquiry is from the College, and addresses its ability to enter into this particular contract with the Company, our authority extends to the Professor and addresses solely whether his private affiliation would, either generally or specifically, be in violation of the Ethics Law.

2 Given the corporate structure and financing of the Company, and his spouse's stockholdings, whether the Professor has a financial interest in the Company is a legal issue, as a technical matter, given the definitions and attribution provisions of the Law. While the financing of the business and the Professor's involvement with it could give rise to a financial interest, we do not believe that resolution of this legal issue is required here, since his employment relationship with the Company would clearly bring him within §3-103(a).

3 Except as expressly cited to the Maryland Register, Opinion citations are to Ethics Commission Opinions published in COMAR Title 19A.