SPECIAL ETHICS LAW MEMO

TO: Agency Procurement Officers, Vendors

SUBJECT: Ethics Law – Procurement Provisions

The purpose of this memorandum is to provide an overview to the Public Ethics Law (Md. Code Ann., State Gov’t § 15-508 (Supp. 2005)) related to procurement issues and the ethics provisions contained in the State General Procurement Law (Md. Code Ann., State Fin. & Proc. Title 11 et seq. (Supp. 2005)). It also provides some guidance on these issues based on questions to which the Commission and Commission staff have responded both formally and informally.

1. Procurement Specifications Involvement (Section 15-508) - In 1994, pursuant to the recommendations from the Legislative Joint Task Force on Maryland’s Procurement Law, the General Assembly enacted amendments to the Public Ethics Law to restrict certain activities of individuals who are involved in assisting executive agencies in drafting specifications, invitations of bids, and requests for proposals. It is important to understand:

a. Executive agencies include all State executive branch agencies (including community colleges, each county’s Sheriff’s office and State Attorney’s office, and some other agencies that might be considered local for some purposes).

b. If an individual assists an executive agency in drafting specifications, invitations of bids, or requests for proposals, the individual and the entity or person that employs the individual may not submit a bid or proposal in that procurement or assist or represent another person in submitting a bid or proposal.

c. Individuals or persons who assist in the selection or award made in response to an invitation for bids or request for proposals are also subject to this prohibition.

d. Generally, the State Ethics Commission enforces violations of this provision administratively, and the administrative enforcement may be the basis for a court to void the procurement and may also result in the vendor’s debarment from State business.

2. Exempt Activities. The following seven activities are exempt from procurement restrictions:

a. Providing descriptive literature such as catalogue sheets, brochures, technical data sheets or standard specification "samples," whether requested by an executive agency or provided on an unsolicited basis;

b. Submitting written comments on a specification prepared by an agency or on a solicitation for a bid or proposal when comments are solicited from two or more persons as part of a request for information or pre-bid/proposal process;

c. Providing specifications for a sole source procurement made in accordance with Section 13-107 of the State Finance and Procurement Article;

d. Providing architectural and engineering services for programming, master planning, or other project planning services.

e. Providing architectural and engineering services for the design of a construction project if the design services do not involve lead or prime design responsibilities or construction phase responsibilities on behalf of the State and the anticipated value of the procurement contract at the time of advertisement is at least $2,500,000 and not more than $100,000,000;

f. Providing architectural and engineering services for the design of a construction project if the design services do not involve lead or prime design responsibilities or construction phase responsibilities on behalf of the State and the payment to the individual or person for the design services does not exceed $500,000 (regardless of the amount of the procurement contract); or

g. Providing specifications for an unsolicited proposal procurement made in accordance with § 13-107.1 of the Procurement Law.

STATE PROCUREMENT LAW - PARTIAL SUMMARY OF PROVISIONS

The sections of the State General Procurement Law discussed below have particular relevance to ethics and lobbying activity. The State Ethics Commission does not administer these laws.

1. Contractor Conduct Prohibitions - §13-211 (State Finance & Procurement Article) During procurement, a competing contractor or its agent or consultant may not knowingly:

a. Make an offer or promise future employment or business opportunity to, or engage in any discussion of future employment or business opportunity with any procurement official (procurement official includes a procurement officer or an individual who participates in the drafting of specifications for procurement). (Note: This is a broader prohibition than the § 15-501 restriction barring officials and employees from participating in any matter involving an entity with which they have applied for or are discussing employment.)

b. Offer, give, or promise to offer or give any money, gratuity or other thing of value, including gifts and entertainment, to any procurement official of the agency conducting the procurement. Procurement officials may not accept gifts prohibited by the procurement law and § 15-505 of the Public Ethics Law.

c. Before the award of a contract, solicit or obtain from any officer or employee of an agency conducting the procurement any proprietary or source selection information regarding the procurement. (Note: The Ethics Law contains broad prohibitions barring an official or employee from disclosing confidential information for his or her own gain or that of another or otherwise using the prestige of his or her position.)

2. Mandatory Vendor Contract Clauses or Disclosure - The Procurement Law (§13-223(a)) requires that contracts contain a clause certifying that vendors have complied with the provisions relating to lobbying and contingent fees, including a statement that its lobbyist or other bona fide agent has not received a contingent fee. The Procurement Law also requires that bidders disclose actual or potential conflicts of interest in consultant procurements (§13-212).

3. Solicitation of Contingent Fees Prohibition - The Procurement Law (§13-223(b)) prohibits lobbyists and certain other persons from offering, or agreeing to solicit or secure, a procurement contract if the fee is contingent on or results from the making of the procurement contract.

4. State Employees Conduct Prohibition – The Procurement Law (§13-223(b)(3)) prohibits State employees from soliciting, securing, or offering to solicit or secure a contract between their State agency (or unit) and another person if the State employee is to be paid a fee contingent on the making of the contract. Additionally, the Ethics Law (§§15-506 and 15-507) prohibits a State employee from using the prestige of his or her position or confidential information for the employee’s private gain or that of another. A State employee should never benefit from a procurement involving his or her State agency or unit and should not misuse his or her position to benefit a vendor.

5. Unsolicited Proposals – During the 2002 Legislative Session, the General Assembly enacted an exemption for certain unsolicited proposals. See §13-701 of the State Finance and Procurement Article. In order to qualify for this exemption, the following procedure is required:

a. The Procurement Officer submits the unsolicited bid to the interagency panel, who review it and determine if it meets the requirements that it:

(1) Is in writing;

(2) Contains a novel or innovative concept, application, approach, or method which, to the knowledge of the procurement officer, is not used by or available to another unit; or

(3) Demonstrates a novel capability of the offeror of the proposal;

(4) Has not previously been submitted to the unit by another person; is for the delivery of educational services, health or social services, or business and economic development; and

(5) Meets a need of or is otherwise advantageous to the unit.

b. If the interagency panel determines that the unsolicited proposal does not meet the requirements, the procurement officer may not award a procurement contract based on the unsolicited proposal.

FREQUENTLY ASKED QUESTIONS

1. If an individual or firm is paid by the State to assist in drafting specifications, an invitation for bids, or request for proposals, can that individual or the employing firm of that individual bid on the procurement?

Answer: No. Individuals who assist in these activities and their employers are barred from bidding on that procurement. This provision applies to the activities of both private individuals and State employees. Therefore, if a State employee or official assists in the specifications, that official or employee cannot be in the employ of a bidder when the bid is submitted.

2. If an individual or firm assists the State in drafting specifications, an invitation for bids, or request for proposals, but is not compensated by the State for this activity, may that person or firm bid on the procurement?

Answer: No. The statute also covers non-State compensated assistance by private individuals and organizations.

3. What kinds of actions can a potential vendor take that would not be viewed as "assisting" in drafting specifications, invitations for bids, or requests for proposals that would bar subsequent participation in a procurement?

Answer: Generally, a potential vendor may respond to requests for information or, in some circumstances, submit unsolicited information. The potential vendor may also meet with State representatives to discuss product information. However, when a vendor or its employee takes a role, either individually or as a member of a group, in connection with the actual drafting of specifications or development process, the bar will be applied. Distinguishing between significant consultation with the agency and "assisting in drafting" is generally a factual determination to be judged by all of the surrounding circumstances. Considerations include, but are not limited to, the nature of the input, the frequency and timing of the input, and the nature of the process, including, for example, whether there was access to draft specification documents.

4. The procurement assistance law contains seven activities that would not bar subsequent procurement involvement. Are these seven provisions intended to limit activity considered allowable under prior law but not specifically referenced?

Answer: No. They clarify certain issues and expressly allow certain previously prohibited activity, but they are not intended to be a full description of allowable activity.

5. What is meant by: allowing descriptive literature such as catalogue sheets, brochures, technical data sheets, or standard specification "samples" whether requested by an executive agency or provided on an unsolicited basis?

Answer: This provision clarifies and reduces some of the uncertainty that may have previously existed. The focus of the provision is on allowing “standard materials” as opposed to preparing or creating and submitting “special new documents” for the purpose of having these included in specifications. The focus is on facilitating the collection of information rather than the generation of assistance in drafting specifications.

6. The Law allows submission of written comments on a specification prepared by an agency related to a solicitation for a bid or proposal if comments are solicited from two or more persons as part of a request for information, a pre-bid or a pre-proposal process. How is this section to be applied?

Answer: This section of the Law authorizes only written comments. It is part of a process initiated by the procuring agency and may occur at various points in the procurement process. The Law does not provide much detail as to the nature of the process except to require the comments to be written and the solicitation of comments by two or more potential vendors. A transcription of a verbatim recording made at a meeting with potential vendors would satisfy the “written comments” provision of the Law. Generally, it would be expected that this would be an open process involving all anticipated vendors. It is important to remember that it is information collection rather than special involvement in specifications drafting assistance that is allowable.

7. The Law provides an exception as to specifications for a sole source procurement made in accordance with Section 13-107 of the State Finance and Procurement Article. How is this to be applied?

Answer: The Law clarifies that once a valid determination is made under the procurement law that sole source procurement is appropriate, the vendor can work directly with the State agency with regard to the detail of the procurement and related specifications. Activity prior to the sole source determination, however, must be carried out without vendor assistance and be consistent with the various provisions of the Law discussed in this memorandum.

8. The Law contains an exception for the provision of architectural and engineering services for programming, master planning or other project planning services. Who is exempted under this provision and for what subsequent activity?

Answer: The General Assembly added this section to the Public Ethics Law in 1996 as a result of concern that providers would be reluctant to participate in early (generally smaller and less lucrative) Architectural & Engineering (A&E) phases. To the extent the A&E firms clearly need to use subcontractors in this process, the exemption also applies to them. However, the exception applies only where the A&E firm and/or the subcontractor is providing A&E related services in the initial and subsequent phases. For example, having a general contractor involved in the specifications as part of A&E activity would bar the entity from being a general contractor in the construction project. This exception is aimed at A&E specifications assistance after the original service is acquired consistent with the Law. There is no exception from the assistance restrictions for the original purchasing of A&E services. The State Ethics Commission discussed this exemption in Advisory Opinion No. 99-01.

In 2004 and again in 2006, the General Assembly enacted legislation expanding the exception to include architectural and engineering services for the design of a construction project provided that the design services do not involve lead or prime design responsibilities or construction phase responsibilities on behalf of the State and the payment to the individual or person for the design services does not exceed $500,000. If the procurement at the time of advertisement is at least $2,500,000 and not more than $100,000,000, the fee for design services may exceed $500,000. [This exception was effective July 1, 2006 and will be abrogated on June 30, 2008 unless the General Assembly acts to extend it.] The exception for design services that do not involve lead or prime design responsibilities on construction phase responsibilities addresses concerns raised by the State Highway Administration as reliance on “detail-build” or “design-build” procurements has evolved. The concern was related to subcontractors of the State’s A&E contractor and whether subcontractor activity in generating factual material would be viewed as “assistance” in preparing the specifications for the subsequent “detail-build” procurement. The Commission has worked with officials at the State Highway Administration to identify activities that would not necessarily disqualify a sub-consultant firm from bidding on a detail build project. Examples of work that typically would not generally disqualify a subcontractor from subsequent bidding on a detail build project include:

1. Field surveys;

2. Wetland delineation;

3. Stream surveys;

4. Forest stand analysis;

5. Traffic counts;

6. Aerial mapping; and

7. Soil and foundation borings.

Some of the information generated by these activities could appear in the subsequent procurement document, but, generally, it is not part of the design, and SHA views these activities as a data collection.

9. The law contains an exemption for providing specifications for an unsolicited proposal procurement made in accordance with § 13-107.1 of the State Finance and Procurement Article. How will this be applied?

Answer: This section became effective on October 1, 2002, and has a specific procedure, which must be followed in order for the exemption to attach to an unsolicited proposal that is accepted by the agency. The Commission has determined that this provision was added to the law by amendment in 2002 to clarify that unsolicited proposals and subsequent contracts would not be barred by the restriction of Section 15-508(a). However, the exemption was not intended to address situations where an unsolicited proposal was not accepted by the agency, and was subsequently competitively bid later. The issue of whether the offeror of the unsolicited proposal “assisted” in the drafting of specification is a factual question to be addressed on a case-by-case basis under all the circumstances. The restrictions in the law resulted from several significant contract awards to vendors having a competitive advantage from drafting the specifications for the procurement.

(12/1/06)