September 25, 2017
To: ACEC Indiana Member Firms
From: Beth Bauer, Executive Director
Re: INDOT/LPA Conflict of Interest, Final Approved Policy
This memo addresses the INDOT Conflict of Interest policy as contained in its Professional Services Contract Administration Manual, effective 9.16.17 as it impacts Local Public Agencies and communities that receive federal-aid highway funds as a sub-recipient of INDOT. FHWA approved INDOT’s Conflict of Interest, so it is final and in effect now. ACEC Indiana, along with AIM, AIC and IACC, worked with INDOT to include a few key provisions in the policy:
Chapter 2 of the Manual details the Conflict of Interest policy.
Sec. 2.1.2 applies to the LPA’s. The LPA manual is not expected to be updated. It applies to “Employees, officers or agents of sub-recipients of INDOT federal funds who are involved in the selection, award of discretionary administration of a contract.” Therefore, a local ordinance may not apply to all city or county employees or officials. It also contains an opportunity to “cure” a violation of the policy through INDOT.
Sec. 2.1.3 and 2.1.4 apply to Consultants to INDOT and Consultants to Sub-recipients, respectively. The process of Reporting of Conflict of Interest and actions taken to alleviate or mitigate it are contained in it.
Governing Regulations: Two regulations govern this policy: Federal 23 CFR 172.7 (b)(4) and Indiana Administrative Code 42 IAC 1-5 (Office of the Inspector General, Indiana Code of Ethics.)
Code of Federal Regulations 23 CFR 172.7 (b)(4), excerpted
(4) Conflicts of interest.
(i) A contracting agency shall maintain a written code of standards of conduct governing the performance of their employees engaged in the award and administration of engineering and design related services contractsunder this part and governing the conduct and roles of consultantsin the performance of services under such contractsto prevent, identify, and mitigate conflicts of interest in accordance with 2CFR 200.112, 23CFR 1.33 and the provisions of this paragraph (b)(4).
(ii) No employee, officer, or agent of the contracting agency shall participate in selection, or in the award or administration of acontractsupported by Federal-aid funds if a conflict of interest, real or apparent, would be involved. Such a conflict arises when there is a financial or other interest in the consultantselected for award by:
(A) The employee, officer, or agent;
(B) Any member of his or her immediate family;
(C) His or her partner; or
(D) An organization that employs or is about to employ any of the above.
(iii) The contracting agency's officers, employees, or agents shall neither solicit nor accept gratuities, favors, or anything of monetary value from consultants, potential consultants, or parties to subagreements. A contracting agency may establish dollar thresholds where the financial interest is not substantial or the gift is an unsolicited item of nominal value.
(iv) A contracting agency may provide additional prohibitions relative to real, apparent, or potential conflicts of interest.
(v) To the extent permitted by State or local law or regulations, the standards of conduct required by this paragraph shall provide for penalties, sanctions, or other disciplinary actions for violations of such standards by the contracting agency's officers, employees, or agents, or by consultantsor their agents.
(vi) A contracting agency shall promptly disclose in writing any potential conflict of interest to FHWA.
What happens next? INDOT’s policy includes an option for a local unit to adopt local policies which set a local code of ethics. If no local policy is set, the INDOT Conflict of Interest and Code of Ethics will apply. As a consultant doing business with LPA’s, it will be critical that you know and abide by each local ordinance. We expect that they will not be uniform across the state. Some provisions to look for:
1. Who does the policy apply to?
2. What is the “threshold” set at “where a financial interest is not substantial or the gift is an unsolicited item of nominal value”?
3. Is there an allowance for value of benefits that are provided to an entire governmental body rather to an individual, allowance for the value of educational offerings, or other exceptions for the local unit?
Pro-bono Professional Consulting Engineering Services: In a nutshell, it is prohibited under the federal and INDOT code of ethics and Conflict of Interest. “Free” work would be viewed as a gift of substantial value, and would create a competitive advantage for their firm that provides it. A main thrust of the update to the Conflict of Interest policy was to eradicate the practice of pro-bono work.
In a Q&A between INDOT and our working group, INDOT expressly stated that “the requirements contained in 23 CFR 172.7 (b)(4) go beyond gifts of free professional services and in addition addresses conflicts of interest that can adversely impact procurement and administrative decision making. Contracting agencies including sub-recipients are required to maintain specific conflict of interest and ethics policies compliant with 23 CFR 172.7 (b)(4).”
Under 2.1.4 Consultants to Sub-recipients, it states “Documented violations may result in sanctions, including ineligibility for upcoming federal aid or state funded projects financed through INDOT.”
Each member firm will need to conduct its business in accordance with any governing local ordinances established by their LPA clients, or the INDOT policy where no local ordinance is established. Consult your legal counsel as needed; this is not legal advice, but is a general discussion of information provided to ACEC Indiana member firms only.