Courtney Haueter

Child Nutrition Programs

USDA Food and Nutrition Service

Standards of Conduct in Procurement: Ensuring Integrity

Ethics in Procurement

“Do Right and Feed Everyone.” Sonny Perdue

1. Gain knowledge

2. Discuss

3. Apply knowledge

Objectives

Ethics in Procurement

What are ethics?

Ethics in Procurement

In the news…

In the news…

Ethics in Procurement

• Ensuring full and open competition is the basis for procurement rules

• Fairness and integrity encourages competition

Competition

•SP 09-2015, CACFP 03-2015, SFSP 02-2015, dated November 21, 2014: Written Codes of Conduct and Performance of Employees Engaged in Award and Administration of Contracts

•2 CFR 200.318-319

•State and local requirements

What are the rules?

Ethics in Procurement

•SP 09-2015, CACFP 03-2015, SFSP 02-2015, dated November 21, 2014: Written Codes of Conduct and Performance of Employees Engaged in Award and Administration of Contracts

What is the policy?

Ethics in Procurement

7 CFR 210.21(c)•Procurements made using nonprofit school food service account must have procurement procedures that include a written code of standards of conduct which meet the requirements of 2 CFR 200.318

Ethics in Procurement

2 CFR 200.318(c)•No employee, officer, or agent may participate in the selection, award, or administration of a contract supported by a Federal award if he or she has a real or apparent conflict of interest.

Ethics in Procurement

What is a conflict of interest?• An employee, officer, or agent, any member of his or her immediate family, his or her partner, or an organization which employs or is about to employ any of the parties indicated herein, has a financial or other interest in or a tangible personal benefit from a firm considered for a contract.

Ethics in Procurement

What does “a financial or other interest in or a tangible personal benefit from” look like?

• The officers, employees, and agents of the non-Federal entity may neither solicit nor accept gratuities, favors, or anything of monetary value from contractors or parties to subcontracts.

Ethics in Procurement

Examples of items that SFA staff generally may accept – even from a contractor – include:

• Coffee or doughnut; • Gifts valued at $20 or less per “source” per occasion; • Gifts based on a personal relationship;• Meals, lodging, transportation, or other benefits that are from

your spouse’s employer, provided that the gift was not given or enhanced because of your job at the SFA;

• Gifts or discounts available to the general public, to all Government employees, or to all military personnel; and

• Free attendance at a conference or similar “widely attended gathering.”

Ethics in Procurement

What are the consequences?• The standards of conduct must

provide for disciplinary actions for violations

• Document in the written standards of conduct what is considered “substantial” and “nominal”

Ethics in Procurement

2 CFR 200.318(h)

Ethics in Procurement

•Responsible contractors have the ability to perform successfully under the terms and conditions of a proposed procurement

What is a responsible contractor?

•Full and open competition

•Developing and drafting specifications vs. providing specifications

2 CFR 200.319

Ethics in Procurement

NSLA Sec. 12(o) & 2 CFR 200.319

In order to ensure objective contractor performance and eliminate unfair competitive advantage, contractors that develop or draft specifications, requirements, statements of work, or invitations for bids or requests for proposals must be excluded from competing for such procurements.

. . . a State, State agency, school, or school food authority may enter into a contract with a person that has providedspecification information to the State, State agency, school, or school food authority for use in developing contract specifications for acquiring such good or service.

2 CFR 200.213

Ethics in Procurement

•This Suspension and Debarment provision restricts awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities.

Improper disclosure of information in the procurement process

Ethics in Procurement

SFA employees may not knowingly obtain or disclose contractor bid or proposal information or source selection information before the award of the contract, other than as permitted by law.

Improper use of information in the procurement process

Ethics in Procurement

Ethics rules prohibit SFA employees from disclosing any nonpublic information to further private interests, or those of another person, such as a contractor or contractor employee.

Examples of Standards of Conduct

• Clear and concise policy

• Leadership endorsement

• Readily available

• Regular improvement

• Training

Correcting and Avoiding Procurement Ethics Problems

Common ethical risks• Bribery

• Coercion

• Collusion

• Conflict of interest

• Corruption

• Extortion

• Favoritism

• Fraud

• Illegal sourcing

• Traffic of influence

Ethics in Procurement

E = ethical, U = unethical, BBP=bad business practice

• You are responsible for the procurement of food supplies for your mid-sized school. A potential supplier sends you its catalogue together with a gift of an expensive-looking ballpoint pen with the supplier’s logo on it.

• You have agreed a two-year supply contract with a small, domestic supplier, but a drop in school lunch participation is seriously depressing meal reimbursements. Another supplier guarantees lower supply prices that would re-establish the margins your school needs. This would mean breaking the contract with the first supplier without just cause. Legal action by that supplier would be unlikely, because of its small size.

Application Activity

E = ethical, U = unethical, BBP=bad business practice

• Intentionally over/understating financial data on state reports

• The same individual collects cash, reconciles cash receipts to sales, makes the bank deposit, and receives the deposit slip

• Ignoring local school board, city, and/or county policies

• Claiming second lunches as reimbursable meals

Activity

E = ethical, U = unethical, BBP=bad business practice

• Items, such as an iPod, to be used for the benefit of the school nutrition program, accepted in place of a monetary rebate on a purchased product

• Accepting a trip/vacation from a supplier

• Giving a wedding present to the district superintendent

• Asking vendors for items to be used for the staff holiday party

Activity

Q: Are rewards programs and other value-added options allowable?

A: FNS recognizes that rewards programs have been an issue and is planning to issue guidance soon.

Frequently Asked Questions

Questions?