Written Codes of Conduct and Performance of Employees Engaged in Award and Administration of Contracts

Summary

In November 2014, the U.S. Department of Agriculture (USDA) Policy Memo SP-09-2015, CACFP-03-2015, SFSP-02-2015: Written Codes of Conduct and Performance of Employees Engaged in Award and Administration of Contracts provides clarifying guidance to agencies participating in the federal Child Nutrition Programs (CNP). All agencies are required to have a written Code of Conduct covering procurement practices. This policy memo refers to CNP-participating school districts, community-based organizations, childcare centers, sponsors, etc., as agencies.

Background

In accordance with the general procurement standards in Title 2, Code of Federal Regulations (2 CFR), Section 200.318(c), each agency must develop and maintain written standards of conduct to cover potential personal and organizational conflicts of interest. These written standards must govern the actions of agency employees, officers, or agents who engage in the selection, award, and administration of contracts funded by federal awards.

The written Code of Conduct must:

• Prohibit employees, officers, or agents from soliciting gifts, travel packages, and other incentives from prospective contractors
• Prohibit an employee, officer, or agent from participating in the selection, award, and administration of any contracts supported by a federal award if the employee has a real or apparent conflict of interest
• Set standards for situations when the financial interest is not substantial, or a gift is an unsolicited item of nominal value and may be acceptable
• Establish disciplinary actions to be taken in the event the standards are violated

A conflict of interest arises when an agency’s employee, officer, agent, or any member of their immediate family, a partner, or an organization that employs or is about to employ any immediate family member, has a financial or other interest in—or would gain a tangible personal benefit from—a firm considered for a contract.

Nonfederal entities with a parent, affiliate, or subsidiary organization that is not a state, local government, or Indian tribe must also maintain written standards of conduct covering organizational conflicts of interest. Organizational conflicts of interest include relationships with a parent, affiliate, or subsidiary organization, and where the nonfederal entity is unable or appears to be unable to be impartial in conducting a procurement action involving a related organization (2 CFR, Section 200.318[c][2]).

Pursuant to 2 CFR, Section 400.2(b), agencies must disclose any potential conflicts of interest in writing to the overseeing state agencies.

California Government Code (GC), Section 87100, states:

No public official at any level of state or local government shall make, participate in making or in any way attempt to use his official position to influence a governmental decision in which he knows or has reason to know he has a financial interest.

Public officials at every level of state and local government must disclose reportable investments, business positions, interests in real property, and income (financial interests). Each state and local agency must adopt a conflict of interest code tailoring the disclosure requirements for each position within the agency to the types of governmental decisions a person holding that position would make. A financial interest is reportable under a conflict of interest code if the business entity in which the investment or business position is held, the interest in real property, or the income or source of income may foreseeably be affected by any decision made or participated in by the public official. (California GC sections 87301 and 87302).

For more information, please visit the California Fair Political Practices Commission web site.

Procurement Standards

CNP agencies must conduct all procurement transactions in a manner that allows full and open competition consistent with the standards stated in 2 CFR, Section 200.319. To ensure objective vendor performance and eliminate any unfair competitive advantage, vendors that develop or draft specifications, requirements, statements of work, Invitation for Bids (IFB), or Request for Proposal (RFP) must be excluded from competing for the bid (2 CFR, Section 200.319[a]).

Actions that restrict competition include, but are not limited to:

• Placing unreasonable requirements on firms in order for them to qualify to do business
  
• Requiring unnecessary experience and excessive bonding
• Conducting noncompetitive pricing practices between firms or between affiliated companies
• Awarding noncompetitive contracts to consultants who are on retainer contracts
• Allowing organizational conflicts of interest
• Specifying a brand name product instead of allowing an equal product to be offered by describing product performance or other relevant requirements
• Engaging in any arbitrary action during the procurement process, such as awarding a contract—without a valid reason—to a vendor that did not score highest (with price a primary factor) according to the agency’s evaluation criteria when awarding a contract.

Incentives

Incentives that may serve to induce or influence an employee engaged in the selection, award, or administration of contracts may be unlawful. Examples of incentives include, but are not limited to:

• Extra goods or services that were not solicited
• Gifts (such as free merchandise, event tickets, gift cards)
• Money for scholarships
• Cash
• Points that can be redeemed for merchandise

To avoid noncompliance with federal procurement regulations (including, but not limited to, 2 CFR sections 200.318, 200.319, and 400.2) and to prevent bid protests, the agency’s written Code of Conduct must prohibit agency staff from accepting any incentives offered by a bidder for any agency staff member’s personal use.

Incentives solicited by agencies in their RFP or IFB are a complex matter and should be handled with caution. Incentives may be allowable if the incentive or related item benefits the food service operation. If there is a question about the incentive meeting this requirement, consider removing the incentive. The overseeing state agencies can help assess allowability; however, compliance is ultimately the agency’s responsibility.

When requesting incentives, agencies must keep in mind that:

• All responsive bids or proposals, including those without the requested incentives, must be evaluated
• All requested incentives must exclusively and directly benefit the food service program; incentives that are retained by an agency for nonprogram use, or given to employees or students as a reward for an accomplishment, are not allowed
• Soliciting incentives must not create a barrier to full and open competition
• Eliminating bidders based on the provision of incentives or points programs limits full and open competition by placing unreasonable requirements on those bidders that are unable or unwilling to provide such incentives
• Requesting incentives may reduce the pool of bidders
• Unless all bidders can offer the solicited incentives, agencies may not score the solicited item as part of the evaluation criteria
• Bids and proposals that include unsolicited incentives are considered overly responsive and agencies may be required to disqualify overly responsive bids, especially if it causes a material change to the RFP

Note: Best procurement practices include proper procurement planning. If agencies are interested in soliciting incentives, procurement planning should include market research regarding the types of incentives commonly offered by vendors. With this information, agencies can write a solicitation that does not limit competition and is not difficult to evaluate.

Agencies must be familiar with federal, state, and local laws regarding the misuse of public funds that could lead to other consequences, including civil or criminal penalties, lawsuits, and bid protests that may also result in public mistrust. Agencies remain responsible for ensuring that their procurements and contracts comply with all applicable laws, program instructions, and guidance materials, and should consult their legal counsel regarding any proposed procurement methods or contract language.

This institution is an equal opportunity provider.
Esta institución es un proveedor que ofrece igualdad de oportunidades.