Conflict of Interest: Employee - Vendor Relationships

Determination - No employee or near relative shall purchase or lease goods or contract for services, unless there has been a specific determination by the materiel manager, or designee.

Employee - Any individual who is presently employed by the University.

Employee-Vendor Relationship - A relationship in which an employee, or near relative, acts as an independent contractor for the purpose of renting, selling goods or providing services to the University.

Former Employee - An individual who was retired, separated, dismissed or otherwise formerly employed by the University.

Financial Conflict of Interest - A financial or other interest in, or a tangible personal benefit from an organization considered for a contract. Financial benefits (whether real or perceived) can be derived from relationships in which an individual has the potential to receive a salary, gift, royalty, intellectual property rights, consulting fee, honoraria, or other financial benefit. A set of circumstances that reasonable observers would believe creates an undue risk that an individual’s judgment or actions regarding a primary interest of the University will be inappropriately influenced by a secondary financial interest.

Near Relative - The spouse/domestic partner, child, parent, sibling, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law of a University employee. UC step-relatives and relatives of the domestic partner in the same relationship are also applicable.

Public Official - University employees, officers, members, certain consultants who work on the University’s behalf, and Certain non-University employees who are members of decision-making bodies as defined by the Political Reform Act.

Teaching or Research Responsibilities - An academic appointee who is engaged in teaching and/or research activities, and certain staff employees (e.g., staff research associates) who may participate in teaching or research activities.

An Employee-Vendor Relationship, also referred to as an employee- vendor (supplier) relationship, exists when:

• An employee, acting alone, is proposing to rent, sell, or otherwise provide goods and/or services to the University
• An employee, owning or controlling a financial interest in the vendor business, is proposing to rent, sell, or otherwise provide goods and/or services to the University
• A former employee proposing to rent, sell, or otherwise provide goods and/or services to the University
• A near relative of a UC employee is proposing to rent, sell, or otherwise provide goods and/or services to the University; and/or
• A near relative of a UC employee, owning or controlling a financial interest in the vendor business, is proposing to rent, sell, or otherwise provide goods and/or services to the University

Such relationships must be disclosed at the supplier setup process through PaymentWork's vendor registration request when notified of the relationship via a PaymentWorks registration update, or within an Oracle requisition.

In the event, that a vendor's status changes and an Employee-Vendor Relationship becomes applicable, it is the responsibility of the department to notify Procurement and Contracts of such change and for the supplier to update their PaymentWorks information. 

Before Procurement and Contracts can provide a full internal review, the following packet must be submitted after input triggers from PaymentWorks supplier registration requests, supplier registration updates, or Oracle Requisition:

• Independent Contractor Packet (PDF) 
  • General instructions are available on page 1
  • Detailed instructions are available in KB0033650 at Services and Support
• SSPRJF (PDF) Source Selection and Price Rationale Justification Form**

 ** The Source Selection and Price Rationale Justification Form is required for any transactions involving active UC employee(s) to justify how the goods and/or services are not available either from commercial sources or from within the University. 

Submission of the forms does not constitute approval and departments may not request an individual/vendor to provide goods and/or services to the University without Procurement and Contract's prior authorization in the form of a Purchase Order(PO) or Agreement.

After a careful analysis of the request, Procurement and Contracts shall provide an impartial internal review and if deemed appropriate within policy and law an approval shall be provided. All forms and a statement of work, proposal, and quotes are required for an internal review. Missing documentation, incomplete forms, inaccurate information, missing employee, former employee, and/or Department Head signatures, will increase the review time. 

Please note disclosing an Employee Vendor Relationship does not automatically disqualify use of the proposed vendor. Procurement and Contracts actively works to faciliate the purchase within the constrains of the law.

BUS-43 sets the procurement policies and procedures for the University by incorporating State law, bylaws and policies of the University, as well as procurement best practices. The aforementioned restrictions imposed by the California Political Reform Act and Public Contract Code are incorporated into BUS-43 to denote the University's responsibility in adhering to State Law. 

Furthermore, as extension of University policy, pursuant to Section III, Part 5(b); the University may purchase or lease goods or services from a near relative of any employee, provided that the UC employee did not make, participate in making, or influence the decision for acquisition and the goods and/or services are not available from the University's own facilities. No UC employee shall be in a decision-making position, or reporting relationship, with a near relative contracted by the University. 

For more information regarding BUS-43, visit UCOP Purchases of Goods and Services Policy Manual.

With respect to Conflict of Interests, the legislative intent of the CA Public Contract Code is to eliminate favoritism, fraud, and corruption in the awarding of public contracts. With the approval of Senate Bill 1467, the Public Code Contract was amended to incorporate conflict-of-interest provisions specifically to the Regents of the University of California and its course of business contracting.

Current UC Employees as Independent Contractors

Public Contract Code §10516 prohibits active UC employees from contracting with the University to provide goods and/or services as an Independent Contractor. However, the University may contract for goods and/or services from an active employee provided that the UC employee has teaching or research responsibilities and the goods and/or services are not available either from commercial sources or from within the University. 

This restriction is not applicable to student employees for payment for additional campus activities or engagements outside of the scope of their primary University employment. Independent Contractor Guidelines for Federal Tax Purposes still apply to the review.

University departments that require the services of an active UC employee, students included, who does not fit the criteria to do business as an Independent Contractor must work with Human Resources to compensate the employee through the payroll system, if appropriate, in accordance with existing law and University policy.  

Former UC Employees as Independent Contractors 

Public Contract Code §10517 prohibits former UC employees from contracting with the University to provide goods and/or services as an Independent Contractor for a period of:

• Two (2) years beginning on the date the person separated from the University, if the individual was engaged, using their official UC capacity, in any of the negotiations, transactions, planning, arrangements, or any part of the decision-making process relevant to the proposed contract; or

• One (1) year beginning on the date the person separated from the University, if the individual was employed by the same department as that of the requesting department's proposed contract in a policy-making position.

Otherwise, if none of the above situations are applicable, the University may purchase or lease goods from or contract for services of any former employee.  Independent Contractor Guidelines for Federal Tax Purposes still apply to the review. University departments that require the services of a former UC employee,  who does not fit the criteria to do business as an Independent Contractor must work with Human Resources to compensate the employee through the payroll system, if appropriate, in accordance with existing law and University policy.  

This prohibition shall not apply to any proposed contract requiring the person's services as an expert witness in a civil case or to a contract for the continuation of an attorney's services on a matter such individual was involved with before leaving the University. 

Penalties for failure to comply with the Public Contract Code §10516 et seq include charges of felony and/or misdemeanor, contract nullification, and doubled damages to the University. 

For more information regarding the California Public Contract Code, visit the California Legislative Information site.

Adopted in 1974 as a response to the lack of transparency and trust in the government, the California Political Reform Act is the most foundational conflict of interest law in California governing campaign finance, financial conflicts of interest by public officials, lobbyist registration and reporting, post-governmental employment, political mass mailing at public expense, and gifts and honoraria given to public officials and candidates.

As a public institution, all members of the University must adhere to the law as public officials. With regards to Conflicts of Interests, the Act requires University employees to refrain from making, participating, or influencing a decision in which they have a financial interest.

A violation of the Act can be pursued in three ways: (i) administrative proceedings by the FPPC Enforcement Division; (ii) criminal prosecution by a local district attorney or the state attorney general; and/or (iii) civil action by the public, certain government agencies, or the FPPC Enforcement Division. 

For more information regarding the California Political Reform Act, visit the Fair Political Practices Commission site.

All University employees, even if they are not Statement of Economic Interest (Form 700 & 700-U) filers, are subject to the disqualification rule of the Political Reform Act (“Act”). This is consistent with one of the purposes of the Act, which is to prevent the personal interests of public employees from influencing the decisions they make for their agencies.

When Disqualification is Required

If a UC employee will be involved in or influence a University decision-making that will have a material effect on any of these six kinds of economic interests, the employee will likely have a conflict of interest. Where a conflict of interest exists, the employee must disqualify themselves from involvement in the University's decision-making. This includes not participating in University discussions or contacting University staff about the decision.

Even where the specific criteria are not met and a true conflict of interest does not exist, University employees should be sensitive to the appearance of conflict. They should carefully consider whether to participate in a decision-making process whenever they have any financial interest at stake.

The Political Reform Act’s disqualification rules are designed to be applied on a decision-by-decision basis. The Office of the General Counsel can advise you concerning a specific situation.

The state of California information practices act of 1977 requires the University to provide the following information to individuals who are asked to provide information about themselves:

• The principal purpose for requesting the information on this form is to determine any possible conflict of interest that might be involved in a proposed University purchasing transaction. University policy authorizes maintenance of this information.
• Furnishing all information required on this form is mandatory - failure to provide such information will delay or may even prevent completion of the action for which the form is being filled out.
• Information furnished on this form maybe used by various University departments as required in the regular course of business and will be transmitted to the state and federal governments if required by law.