Both in the public and private sector conflict of interest provisions must be followed by every employee on the purchasing team.
Conflicts of interest are of potential concern whenever a municipal official (whether elected or staff member) exercises any power, performs any duty on behalf of a municipality, or is otherwise concerned with a contract in some relevant capacity in relation to the municipality, such as:
- The selection or evaluation of a bidder or proponent seeking a municipal contract;
- the negotiation, preparation, authorization or approval of the contract;
- the authorization or approval of payments under the contract;
- the audit of invoices, bills or claims under the contract;
- the appointment of an officer or employee who has the power or duty to do any of the above; or
- to advise or direct any person who has the power or duty to do any of the above.
A conflict of interest will generally be perceived to exist where any of the following may reasonably be anticipated to enjoy a material financial direct or indirect benefit, or are exposed to a material direct or indirect risk of loss, depending on the manner in which that duty or power is exercised:
- The official’s spouse or children, or the spouse’s children or dependents (not including any contract of employment they may have with the municipality);
- a firm, partnership or association of which the official or his or her spouse is a member or employee;
- a corporation of which the official or the official’s spouse is an officer, director or employee; or
- a corporation any of whose stock the official’s spouse directly or indirectly owns or controls.
Generally, municipal purchasing bylaws in relation to conflict of interest are far less detailed than the corresponding rules and regulations set out in the Ontario Business Corporations Act and the bylaws of a business corporation with respect to conflict of interest.
It is possible, of course, that the purchasing bylaw may provide only part of the picture: quite possibly the provisions of the typical purchasing bylaw are supplemented by the general human resource policies of the municipalities in question.
Many aspects of these bylaws are ambiguous. Consider the following, for instance.
A city councillor has a $300,000 mortgage with the Bank of Burlington. The mortgage is in good standing and is on ordinary commercial terms. If that bank is being considered for a contract with the city, must that councillor declare that mortgage and is it permissible for the councillor to participate in any debate relating to the proposed contract?
The city manager invests heavily in mutual funds, one of which holds a substantial stock interest in ABC Co. If this corporation applies for a contract with the city, what would be the city manager’s responsibility with respect to that contract? What if the city manager does not know of the relationship between the mutual fund and ABC Co.?
The 16-year-old daughter of a member of the city’s public and social housing department applied for a trainee position with a company that had a $4.3 million contract with the housing department. Her father, who works in the housing department, faxed his daughter’s resume to the company using the office fax machine.
Some weeks later, the employee put forward a proposal to increase the company’s contract with the authority by $52,000. The employee claims that he did not realize that the company was the same firm to which he had sent his daughter’s resume. The company had hired his daughter during the interim period. Has the staff member violated the bylaws?
It is worthwhile to contrast provisions in municipal bylaws with the rules in force at a typical widely held business corporation.
Stephen Bauld is a government procurement expert and can be reached at [email protected]. Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.
