State Purchasing Ethics in Procurement: Maintaining the Public Trust

State Purchasing Ethics in Procurement: Maintaining the Public Trust

Few government activities create greater temptations or offer more opportunities for corruption than public sector procurement. State All Funds 42.6 B Non-Personnel Spend 28.2 B Addressable Spend 6.0 B Agency Contracts 3.1 B Statewide Contracts 0.9 B Purpose *Recognize the risks *Keep us and our employers out of the newspapers and out of jail 2

The main goals of procurement law are: 1) to promote competition and secure the best deal for the 2) minimizing opportunities for corruption and favoritism government, while 3

What is the spirit of the law/rule? Most procurement laws are based on related ethical principles: fairness, integrity and transparency. - acting without consideration of personal gain - resisting undue political pressure in decision making - impartiality and fairness (just, unbiased and equitable) 4

Georgia’s Code of Ethics Uphold the Constitution, laws and regulations of the United States and the state of Georgia and of all governments therein and should never be a party to their evasion; Never discriminate unfairly by dispensing special favors or privileges to anyone, whether for remuneration or not; and never accept for themselves or their families favors or benefits under circumstances which might be construed by responsible persons as influencing the performance of their governmental duties; Make no private promises of any kind binding upon the duties of office, since a government employee has no private work which can be binding on public duty; Engage in no business with the government either directly or indirectly which is inconsistent with the conscientious performance of their governmental duties; Never use any information divulged to them confidentially in the performance of governmental duties as a means for making private profit; and Expose corruption whenever discovered. 5

Procurement Professional’s Obligations The procurement professional must strive to develop and advance positive relationships with suppliers, customers, and other governmental procurement professionals: while avoiding the appearance and practice of unethical conduct in such relationships. avoid business relationships with personal friends; and must excuse himself/herself from state procurement activities to the extent such relationships create conflicts of interests. GPM Section I.4.4.4 All procurement professionals play an important role in ensuring needed goods and services are procured in an efficient and economical manner while gaining and retaining public trust and confidence. The procurement professional is responsible for developing contracts at competitive prices to avoid waste and deliver the best value to the employer and Georgia citizens. GPM Section I.4.4.3 (Fiduciary Duty) 6

Perception is important 7

Conflicts of Interest 8

Avoiding Conflicts of Interest The procurement professional should avoid any actions, relationships, or business transactions that conflict with the lawful interests of the employer or otherwise create conflicts of interests that taint the procurement process and the reputation of the state entity and the state of Georgia. All professionals must comply with the employer’s guidelines with respect to reporting outside employment. GPM Section I.4.4.5. 9

Individual conflicts of interest: Anything that may call your impartiality into question Person/entity with whom you are seeking employment Your financial interests Your family’s financial interests *Can arise at any stage of the procurement process. 10

Organizational Conflicts of Interest “Organizational Conflict of Interest” means that because of other activities or relationships with other entities, the institution is unable to render impartial assistance or advice to the Government, cannot perform the contract work in an objective way, or has an unfair competitive advantage compared to other entities. There are three basic categories where OCIs may be found: biased ground rules: preparing/writing specifications or work statements (third party consultants that may have other commercial relationships with bidders which could lead to bias). impaired objectivity: evaluating or assessing performance of products/services of related organization; and unequal access to information: gaining access to non-public information (i.e., budget(s)/budget information, statements of work, evaluation criteria, etc.) through performance of a contract (not technically COI) 11

GIFTS OR OTHER BENEFITS May not at any time or under any circumstances accept directly or indirectly, gifts, gratuities, or other things of value from suppliers which might influence or appear to influence purchasing decisions. GPM Section I.4.4.6 Agency gift policy Governor’s Executive Order Grant terms O.C.G.A. § 50-5-78 governs the receipt of gifts, receipt of educational materials, attendance at seminars, courses, lectures, briefings or similar functions provided by suppliers and the provision of meals and travel for such functions O.C.G.A. § 50-5-80 prohibits any person from obtaining for his or her own personal benefit, or for the benefit of any other person, any goods, services or other things of value, through a state entity in any method, including, but not limited to, purchase orders, government contracts, credit cards, charge cards, or debit cards. 12

Neither the commissioner of administrative services, nor any assistant of his, nor any employee of the department shall be financially interested or have any personal beneficial interest either directly or indirectly in the purchase of or contract for any materials, equipment, or supplies, nor in any such firm, corporation, partnership, or association furnishing any such supplies, materials, or equipment to the state government or any of its departments, institutions, or agencies. It shall be unlawful for the commissioner of administrative services or any of his assistants or any employee of the department to accept or receive, directly or indirectly, from any person, firm, or corporation to whom any contract may be awarded any money or anything of more than nominal value or any promise, obligation, or contract for future reward or compensation. Exception: when attending seminars, courses, lectures, briefings, or similar functions at any manufacturer's or vendor's facility or at any other place if any such seminar, course, lecture, briefing, or similar function is for the purpose of furnishing the commissioner, assistant, or employee with knowledge and information relative to the manufacturer's or vendor's products or services and is one which the commissioner determines would be of benefit to the department and to the state. In connection with any such seminar, course, lecture, briefing, or similar function: Permitted to receive meals from a manufacturer or vendor. Permitted to receive educational materials and business related items of not more than nominal value Under no circumstances may you accept free travel from a manufacturer or vendor outside the State of Georgia or free lodging in or out of the State of Georgia. O.C.G.A. § 50-5-78 13

What can you accept: Gifts based on a personal relationship (not one formed on the job), that predates business relationship Gifts available to the general public **Strict liability statute; intent in giving or receiving is irrelevant. 14

What if you have been asked to serve on the advisory board of a contractor? Offered a ticket to a major sporting event? Receive gift basket at Christmas? Win a raffle item? Bottom Line: You should not accept anything of value from a bidder or contractor if you think the integrity of the procurement process could be questioned, so that a reasonable person would think you are using your public office for private gain. Ask yourself why you are receiving it? 15

TRANSPARENCY Transparency throughout the public procurement process is instrumental in preventing conflict of interest, corruption, misuse of government resources, fair competition. Justice Brandeis observed “sunlight is said to be the best of disinfectants” 16

CONFIDENTIALITY VS. TRANSPARENCY Are we supposed to maintain confidentiality or be transparent? ONLY when truly of a confidential nature, such as proprietary or evaluation info prior to award, should confidentiality be given a higher priority over transparency. AVOID: exchange of information that would give one contractor unfair advantage to another. Inappropriate obtaining or disclosing of contractor bid or proposal information or source selection information prior to award of contract Sharing non-public information - information you gain through your job that you should reasonably know has not been made available to the public. 17

SUPPLIERS’ ETHICAL OBLIGATIONS/RESTRICTIONS BRIBERY -- One who gives to any person acting for or on behalf of the state of Georgia or any state entity any benefit, reward, or consideration to which he is not entitled with the purpose of influencing them in the performance of any act related to the functions of his office or employment shall be guilty of bribery. An agent of the state may be guilty of bribery if he solicits or receives or agrees to receive such benefit, reward or consideration by inducing the reasonable belief that the giving of the thing will influence his official action. O.C.G.A. § 16-10-2. COLLUSION -- Collusion or conspiracy in restraint of free and open competition in transactions with the State of Georgia is prohibited by Georgia Law. O.C.G.A. § 16-10-22. 18

Where are the risks? 19

Precontract award 3rd party consultants – financial relationships with some bidders, financial interest in transaction. Such interests may not easily be identified. Design, specifications, requirements, evaluation and/or scoring identified by the end user may be manipulated to or deliberately biased to the benefit of a single supplier. Prequalification to limit field of competition to give a favored supplier an advantage. Deliberately writes a sole source justification to influence award. Vulnerable to high pricing, favorable terms, problems more likely to occur. Financial approval policy 20

Post contract award acceptance of inferior product falsely representing the need for additional goods, works or service than required payments and processes, creating of false invoices for incomplete or non existent services post award changes to specs invoice certification – deliberate overcharging 21

Political Influence in the Procurement Process Procurement professionals have an obligation to orient business leaders and office holders to the conduct, situations, relationships or conflicts that could negatively effect the process or be perceived by the public as unethical. 22

Indicators of a problem deviation from procedure poor record keeping missing files poor or no separation of duties (same person issues order and approves the payment) resistance to audit control over certain suppliers 23

Types of scandals Elimination or reduction of competition Biased supplier selection Corrupt contract negotiation and management Over or false payment Can be caused by political influence or personal conflict of interest or incompetence. 24

Duty to report? Where to Report: -Attorney General’s Office -chief procurement officer -ethics officer -legal services -Office of Inspector General 25

Despite broad network of rules governing ethical conduct, significant violations still occur. Attributed in part due to the complex nature of interrelated series of rules and the difficulties that contractors and government employees have in interpreting them. Procurement is about people. Mostly buyers and suppliers behave transparently but there are some who behave corruptly. Procurement professionals have to set the tone and enforce expectations. You play an important role in preserving the integrity of government contracting and assuring fair treatment of bidders, offerors and contractors. 26

If it isn’t specifically prohibited, is it permitted? Anything not prohibited is not necessarily permitted. Anything not specifically addressed is not necessarily unimportant. Should we sweat the small stuff? How to know what to do what is in the public interest in any given situation can be difficult. Ask yourself: - How will this action look to a government investigator or prosecutor? - How would this action look in the newspaper? - Does it “feel” appropriate in my gut? It takes less time to do things right than it is to explain why you did them wrong. – Henry Wadsworth Longfellow 27

Name of Presenter Rebecca Sullivan Assistant Commissioner and General Counsel [email protected]