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UC DAVIS: ACCOUNTING & FINANCIAL SERVICES August 7, 2003 DEANS, DIRECTORS, DEPARTMENT CHAIRS, AND CAMPUS ADMINISTRATIVE OFFICERS RE: Public Contracts -- Conflict of Interest (SB 1467) Last year, the Governor signed SB 1467 that made changes in state contracting law in the wake of the Oracle scandal. SB 1467, which became effective on July 1, 2003, adds Article 4 to Chapter 2.5 of Part 2, Sections 10515 through 10524, of the Public Contract Code. It applies standard California state agency conflict of interest and penalty provisions to procurements by the UC system. Before the passage of SB 1467, UC was exempt from those provisions. The language of the statute results in new restrictions to the way UC does business with consultants, employees, former employees and independent contractors. It primarily impacts the following four business practices: * Awarding successor contracts or follow-on agreements to entities providing consulting to the University. * Hiring university employees to provide services or goods to UC under agreements as independent contractors. * Hiring former UC employees as independent contractors to perform work related to contracts that were planned, negotiated, executed or involving policy created by the employee before the employee's separation from UC. * Assigning a supplier number to all contracts over $10,000. (NOTE: The Purchasing Department will administer this requirement.) SUCCESSOR CONTRACTS: The statute requires that any person or business entity awarded a consulting services agreement by UC shall not bid on or be awarded a successor contract after July 1, 2003 to provide goods or services required, suggested, or otherwise deemed appropriate in the end product of the original consulting services agreement. In simple terms, consultants who have performed work for the University cannot participate in subsequent projects relating to the consultant's findings. If a multi-phase project is contemplated, such as a pilot or prototype to be followed by full implementation, any agreement should cover all potential phases of the project with appropriate language reserving final cost figures and the University's discretion to proceed or not with full implementation. EMPLOYEE VENDORS: The statute prohibits university employees from contracting as individuals (independent contractors) with any university department to provide goods or services as an independent contractor. In addition, the statute prohibits employees from engaging in any employment, activity or enterprise from which the employee receives compensation, or in which he or she has a financial interest, and which is sponsored or funded, in whole or in part, through a contract with the University. UC employees with teaching or research responsibilities are exempted from this provision of the statute but are still subject to University guidelines for employee-vendors (See UCD Policy & Procedure Manual, Section 350-90). CONTRACTORS WHO ARE FORMER UC EMPLOYEES: The statute contains two restrictions on contracting with former employees: * A former university employee cannot enter into a contract, for two years from the date of separation, to perform work related to contracts that were planned, negotiated, or executed by that employee. * A former university employee cannot enter into a contract, for one year from the date of separation, to perform work on a contract if he or she was employed by that department in a policymaking position in the same general subject area as that contract. PENALTIES: Penalties for lack of compliance with the statute are serious and include personal criminal sanctions. * Every contract or other transaction entered in violation of the statute is void. * Any officer or employee of the University of California who "corruptly" performs any official act to the injury of the University is guilty of a felony. * Any contractor to the University of California who "corruptly" permits the violation of any contract is guilty of a felony. * Persons convicted under these provisions will be liable for money damages up to double the amount the University may have lost. If you have questions concerning this new statute, please contact Alex Martin, Purchasing Department, at (530) 757-8717. Mr. Martin will consult with the Office of General Counsel on issues that require guidance and/or clarification. Any additional information that may assist departments in understanding and complying with this statute will be distributed, via email, to subscribers of the Purchasing listserve. J. Michael Allred Associate Vice Chancellor - Finance 03-089
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