A request for an Opinion has been received as to whether an employee of the Income Maintenance Administration (IMA or the Administration), a unit with the Department of Human Resources (DHR), may bid on DHR contracts through a sole proprietorship printing supply business.
This request is presented by an individual (the Employee) who is employed as an Office Clerk I in IMA's Division of Staff Support Services. This Division provides general administrative support for the Income Maintenance Administration. The Employee's duties include processing and working with local DHR units on social security number applications, doing fleet management reports for the Administration's vehicles, doing forms management work, maintaining Photo-ID files and supplies, working on requisitions for supplies and forms, and clerical duties such as typing, mail work and telephone answering.
The Employee has established a private forms supply business. She indicates it is a sole proprietorship. She is the owner, and her son is serving as consultant, doing much of the operational work of the firm, while the Employee is still learning about the forms supply business. The Employee indicates that she intends to bid on State contracts to supply items in the following categories: data processing cards and paper (category 250), plain or printed envelopes (category 310), continuous or snap-out forms (category 395), and tickets, coupon books, script books and sales books (category 860). The business would not actually print forms but would serve more as a distributor/broker, procuring forms from major suppliers to meet specific contract requirements. This request deals with whether she can submit quotes and enter into contracts to supply DHR and its administrations.
The forms purchasing process in DHR operates pursuant to procedures established by the Department of General Services (DGS). Under these procedures the DGS delegates authority to agencies to procure supplies amounting to $1,000 or under consistent with proscribed DGS procedures. Items under $200 may be purchased based on one bid, which may be by phone. Purchases of items between $200 and $1,000 must be based on at least two bids, which may be acquired by phone, but must be documented. Contracts are awarded to the lowest bidder. Purchases of items over $1,000 are made solely by the DGS Purchasing Bureau. This unit of DGS maintains a bidders list based on commodity classifications. An entity can be put on the list based on a written application and review by DGS of letterhead, the entity's size, supply capabilities and other factors. The Employee's firm has been approved to be on the list for the commodities she supplies. Most new businesses are treated as small businesses, and therefore receive a preference. All new businesses receive all requests for quotes in the classes of commodities they offer for the first year they are on a list. Department of General Services otherwise sends requests for quotes to ten suppliers and accepts the lowest responsive responsible bidder.
The Director of the DGS Purchasing Bureau indicates that he does not see a way that an individual could impact on this process, or gain any advantage by virtue of being a State employee, except to the extent of being involved in defining specifications for supply requirements. The Employee is involved in the forms purchase process for IMA, but apparently her duties relate only to requisitioning of forms involving small purchases between $200 and $1,000. She obtains and records telephone quotes from three suppliers. These sources are selected from a list of approximately eight to ten that are known to the agency through past experience. The Employee provides the quotes to IMA's Directives Control Officer who in turn provides them to DHR's Purchasing Division. The rest of the contract process is completed by the Purchasing Division, the award being made to the lowest bidder.
The Employee and her supervisor both indicate that she is not involved in purchases over $1,000 in value. According to the supervisor, IMA, which runs the State's welfare program, uses over 100 forms. Most of them are purchased in 50,000 to 100,000 copy batches, however, and apparently up to 85% of the agency's forms involve purchases over $1,000 and are handled totally by DHR Purchasing and DGS. Also, DHR's Purchasing Manager indicates that other DHR units purchase according to the same process as described for IMA. She says that similar types of forms tend to be comparable in price and a person familiar with the process in one area could have an advantage over an outsider. She indicates that forms tend to be identified by the particular DHR user unit, so that a bidder would be able to avoid any request for quotes from a given unit such as IMA. There are a very few forms that are general DHR forms.
The Public Ethics Law provision that is relevant here is the outside employment and interest prohibition of §3-103(a)(1)(i). (Article 40A, §3-103(a)(1)(i), Annotated Code of Maryland, the Ethics Law.) This section bars any employment or financial interest in an entity that contracts with one's agency. As a sole proprietor, the Employee would, under our prior interpretations, have both an employment and interest relationship with the business. (See, for example, our Opinions No. 84-22, No. 83-28, No. 83-5, and No. 82-52.) If the entity contracts with her agency (here DHR) she would be covered by the §3-103(a)(1)(i) bar by virtue of her employment alone. The financial interest language would also apply, if she has or anticipates income of $1,000 or more per annum from the entity. (See §1-201(m) of the Law.) We therefore believe that any contracts of under $1,000 that are bid by and directly with DHR or any unit of the Department, including IMA and other administrations (such as the Social Services Administration and the Child Support Enforcement Administration), would be prohibited by §3-103(a)(1)(i).
Moreover, we do not believe that these transactions between the Employee's private business and DHR or DHR administrations can be allowed under the exception criteria developed by us pursuant to statutory exception language set forth in §3-103(a). Basically, this language allows exception from the prohibition in accordance with Commission regulations, where the relationship would result in no conflict of interest or appearance of conflict. Our regulations are published at COMAR 19A.02.01 (outside employment exception) and 19A.02.02 (financial interest exception). Their approach is to set forth general guidance criteria for assuring that an outside employment or interest relationship is so remote from the individual's agency activities and official duties that the possibility of a conflict or appearance thereof is remote.
In evaluating the situation presented here under these criteria, we have concluded that the relationship is not sufficiently remote to warrant application of an exception as to any DHR purchases. We recognize that the Employee is not involved in any printing procurement activities except those of IMA. However, as she is the sole proprietor of her business, she would be the person negotiating with her own agency, and would also be receiving compensation directly from her agency. She could also be in a better position than competitors to understand agency processes and needs, even as to those of other administrations than her own. These types of circumstances are similar to other situations where we have generally not allowed individuals to enter into contractual relationships with any part of their own agency. (See, for example, Opinion No. 82-8.)
Moreover, this Employee's particular duties do involve processing or printing purchases for her own Administration. She apparently has some discretionary authority to solicit bids from suppliers of small printing needs, and could well be interacting directly with the very businesses against which she would be competing for business in other parts of DHR. Under all of these circumstances, we cannot conclude that transactions between her private business and DHR or its administrations would be sufficiently remote to allow an exception. We therefore advise the Employee that to bid on or enter into a contract on behalf of her company on any of the under $1,000 awards directly with DHR or any of its administrations would be prohibited by §3-103(a)(1)(i) of the Law, and that this prohibition may not be overcome by the statutory exception.
Contracts whose value exceeds $1,000 are, according to the procedure discussed above, not directly with the Employee's agency, but with another Department, DGS. Transactions of this type between the Employee's business and DGS would not be within the strictly defined prohibition of §3-103(a)(1)(i) since her business would not be an entity that contracts with her agency. The question, then, would be whether the more general inconsistent employment provision of §3-103(a)(1)(ii) would limit these transactions. This section prohibits an official or employee from having any employment relationship that would impair his impartiality or independence of judgment. We have generally looked to an individual's official duties in evaluating application of this provision. (See Opinions No. 84-22, No. 83-39, No. 83-30, and No. 83-21.)
In considering the particular situation here, including the Employee's duties, we have concluded that her private business transactions, through DGS, as to purchases of over $1,000 would not, as a general matter, result in an impairment of her official activities as contemplated by this section. An exception to this general conclusion would be as to procurement action for forms for IMA. Even though a contract in excess of $1,000 would be with DGS and not IMA or DHR, we believe that her involvement with IMA's forms purchasing process would result in issues under this section if her private business were to become an IMA supplier. As to other State procurements, however, she is clearly not involved in the forms purchasing process for other DHR units, for DHR itself, or for other State agencies. Moreover, this entire process involves much less personal interaction with suppliers, and many more potential bidders than those likely to be bidding on the smaller purchases. We therefore advise the Employee that her private affiliation with a business that bids on DGS forms supply contracts of $1,000 or over in value would not, except as to contracts for IMA forms, violate §3-103(a)(1)(i) or §3-103(a)(1)(ii) of the Ethics Law.
Herbert J. Belgrad, Chairman
Reverend John Wesley Holland
Betty B. Nelson
Barbara M. Steckel
Thomas D. Washburne
Date: December 12, 1984