An opinion has been requested by a Management Specialist in the Department of Budget and Fiscal Planning (DBFP) concerning whether he may be a stockholder and officer of a company engaged in the sale of microcomputers and electronic accessories, if that company does business with the State. The Requestor is an employee in DBFP's Division of Management Analysis and Audits. He is a grade 14 Management Specialist III, a position which was determined in May 1986 not to be within the Public Ethics Law's definition of public official.1 The Department of Budget and Fiscal Planning is an executive department charged with the general responsibility of budget development, supervision of budget execution, revenue estimating, and coordination of State information processing. The Secretary of DBFP serves as principal advisor to the Governor on fiscal matters and also serves as a fiscal representative on several State boards and commissions. The Department has four Divisions: Administration, Budget Analysis, Management Analysis and Audits, and Management Information Systems.
The Division of Management Analysis and Audits performs broad-based management studies, reviewing organizational structures, management procedures and agency policies. It also provides technical assistance to State agencies in management, planning, program evaluation, and systems development. The Division is a staff agency assigned to the Governor and by law may study any executive branch agency. It receives requests, however, from the General Assembly as well as the Governor and may also do studies in response to individual agency requests. Matters referred to the Division may be controversial, and reflect questions raised in the public or legislative forum. The review would be directed at evaluating an agency's management functions to determine ways that productivity can be increased and waste eliminated. A study may also be statewide but still have this same general approach, such as, for example, the Division's study of State compensatory time and overtime. This involved surveying individual agency policies as well as Department of Personnel policies, and preparing a report and recommendations.
Studies prepared by Management Analysis are provided to the agency that requested the study, the Governor and several Maryland record repositories. They do not carry with them any authority or requirements. The Management Analysis Division Chief indicates that the unit has no authority to compel any agency or unit of government to do anything. The Division itself may follow up by letter inquiry to see if any action was taken to implement recommendations, but it has no official sanction authority. Very often, however, a Management Analysis report may become an important factual or research document used by various parties, such as the legislative auditors, in making or encouraging management changes. Agency officials may be involved, for example, in legislative considerations that grow out of a management study done by the Division.
According to both the Requestor and his supervisor, his duties do not involve computer or data processing activities that would bring him into contact with the Department Management Information Systems Division (MISD). This unit has the responsibility for all of the State's automated information processing, coordination and planning. According to the Division Chief, Management Analysis does relatively broadbased management studies that may involve a very general recommendation that productivity would be improved by automating, but do not involve specific recommendations regarding particular approaches or computer procurement activities. The Division Chief of MISD indicates that his unit does not do studies, and hardly works at all with Management Analysis. He says that MISD works more closely with the Budget Analysis unit of DBFP, doing review and approval of particular computer purchase projects with the State. The Department, through MISD, has significant impact on all State agencies that want to computerize, in the initial decision of whether this can be done and whether funds can be budgeted, as well as in the actual procurement approval.
The MISD Chief states that he does not recall a situation where a particular project was directly related to a Management Analysis recommendation for automation. He also indicates as a general matter that his group does not get involved in review and evaluation of the responses of particular vendors. His staff works with a user agency in developing a needs evaluation and in planning and budgeting the purchase. He says that generally they provide guidelines on making the procurement and have a list of potential vendors by general product or service area. Division staff review an agency's proposed mailing to vendors to see that it is representative, that the addresses are right, and that the proposed vendors are geographically suitable. He says, however, that his agency does not qualify potential bidders or maintain an official list or otherwise deal directly with the vending companies. According to the MISD Chief, his Division does not actually make the award decisionthat is done by the user agencybut it does review the entire action to ensure the procurement is in order. He says that they very rarely disapprove an agency decision and cannot directly influence which vendor is chosen.
The Requestor indicates that he has never had to deal with MISD in any of his projects. He says that Management Analysis has several analysts, whose assignments tend to reflect their area of expertise. As his background is in personnel, he says that his projects have involved more general broadly-based management studies. He has advised that he had some computer training through his former State agency, the Department of Health and Mental Hygiene, and that some of his general management analysis work there included advising agency offices about computer issues. The Requestor indicates that his projects have not involved computer issues at all since his employment there in May 1985. He says that he has not been involved in any personnel-related studies dealing with office computerization.
This request involves the Requestor's ownership of an 812% interest (reflecting a $2400 investment) in a small minority business established primarily to market microcomputers and electronic accessories. The business was incorporated in June 1986. It has five owners, one of whom is a majority stockholder (with 51%), and whose spouse owns an additional 12%. The Requestor is listed as Secretary of the corporation and was one of the original incorporators. He says he was approached by the majority stockholder, who is a long-time friend. The company's focus is on selling and servicing microcomputers (IBM and IBM-compatible machines); it operates through a distributor and maintains very little inventory. The Requestor indicates that all of the owners provide services to the company, with one of the others handling all of the State procurement issues. He says that he does deliveries and set-ups and works as an instructor with first-time users. (He would not, however, perform these functions for State contracts.) None of the other owners are State employees.
Though the company has bid on a few projects with the State it has not been successful in sales to the State. The Requestor says that in State competition the company tends to lose out on a price basis because they are underbid by distributors. The company has applied for Minority Business Enterprise status, however, and would like to market to State agencies in the future. They would not, apparently, propose to do any business directly with DBFP. According to the Requestor, the company's current business is primarily corporate, with some private individual sales, and some federal projects.
This request involves application of the outside employment and interest provisions of §3-103(a) of the Ethics Law. This section prohibits an employee or official from being employed by or having financial interest in an entity that is under his or his agency's authority or that has or is seeking contracts with his agency (subsection (a)(1)(i)), and further prohibits any other employment that would impair the individual's impartiality and independence of judgment (subsection (a)(1)(ii)). The Requestor here has an employment relationship with an entity, but we do not believe that the circumstances here, particularly those regarding his official duties and the relationship of his DBFP unit to MISD, present the kind of concerns intended to be addressed by §3-103(a)(1)(ii). In applying the principles of this section, we look to the nature of the individual's official duties and position in his agency, and also consider factors regarding his private activities and their relationship to his agency. In considering this prohibition, we have generally found it to bar activities where there was some expectation that the activity would impact on the individual's performance of his State duties.
We have evaluated these principles as they apply to the circumstances presented by the Requestor, and believe that his private affiliations and official activities are sufficiently remote not to suggest an impairment, provided he takes certain steps to distance himself from company's management and procurement activities. The Requestor is not employed by the unit in DBFP that is most directly involved with computer vendors. He works in another unit that does more broadly-based management studies, and his own expertise is in personnel rather than in automation. He has not been, nor is he expected by his supervisor to be assigned to studies that would address office automation issues. Moreover, in view of the breadth of possible State agencies with which he would work, and the limited likely State business of the company, we think the possibility that he could be studying an agency that is engaged in dealings with his company is too speculative to present issues at this time. The DBFP has also considered this situation and indicated that it does not believe it presents a conflict of interest or appearance of conflict.
Also, we believe that the remoteness of his official and private activities is further enhanced by the limited nature of his services to the company. He indicates that he is not involved in the marketing part of the enterprise, and expects to have no dealings whatever either in sales, installation, training or servicing of products sold to State agencies. To further ensure that there is no relationship or potential for appearance of conflict, we advise the Requestor to discontinue his role as Secretary of the company. If he avoids any responsibility for signature of certifications and other bid documents, then he minimizes even more the possibility for his affiliation with the entity to be known or become factor as to State agencies that he may be studying as part of his official duties.
Under all of these circumstances, and if the Requestor takes the recommended action regarding his position as Secretary of the firm, we advise him and his agency that his relationship with the company is allowable, as long as the situation remains as it is described to us here. If his position or duties should change, or if the company's volume of State business (and therefore its potential dealings with DBFP) should become significant, however, then this result would need to be reconsidered. The Requestor should also take care to be aware of the continuing application of §3-101 (nonparticipation), 3-104 (use of prestige) and 3-107 (use of official information) of the Law.2
Barbara M. Steckel, Acting Chairman
William J. Evans
Reverend John Wesley Holland
M. Peter Moser
Betty B. Nelson
Date: February 26, 1987
1 See §1-201(aa), Article 40A, Annotated Code of Maryland (hereinafter the Ethics Law).
2 We have also considered the possible application to this situation of the strict prohibition of §3-103(a)(1)(i) against employment with an entity that contracts with or is under the authority of one's agency. However, given the level of detail information available regarding the management and functioning of MISD, it is not clear whether his business would be viewed, as a technical matter, as negotiating a contract with or being under the agency's authority for purposes of §3-103(a)(1)(i). Department managers have strongly asserted that the nature of MISD's work does not bring the agency into these kinds of relationships with computer vendors; they believe that there is no conflict here. For the reasons discussed above regarding §3-103(a)(1)(ii), we concur that there is no conflict, and do not apply the subsection (a)(1)(i) bar to this situation as it now stands.