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Conflict of Interest
Overview Conflict of Interest is a legal matter, not just a University policy. The State of Michigan Conflict of Interest Statute (MCLA 15.322 et seq.) states that the University may not enter into a contract with any of its employees (or a company in which an employee has an interest), without first disclosing certain information, and receiving approval by a 2/3 vote of the Board of Regents, before completing the transaction.
Violation of the provision of The State of Michigan Conflict of Interest Statute is a misdemeanor (see MCL 15.327 at www.legislature.mi.gov).
University faculty and staff who purchase goods and services through Purchase Orders, Non-PO Vouchers, P-Card, and the PeoplePay process must be knowledgeable about and adhere to Conflict of Interest policy and procedures. Where possible, departments and units should avoid Conflict of Interest transactions.
The University of Michigan’s Office of the Vice President and General Counsel has published on their web site several FAQs that define and give examples of Conflict of Interest. Faculty and staff should familiarize themselves with this information to understand the factors involved in doing business with a Conflict of Interest vendor. See http://www.ogc.umich.edu/faq_conflict.htm.
Conflict of Interest Purchasing Policy Once a department becomes aware of or suspects a conflict of interest situation with a vendor, the department must comply with the Statute and follow the review process. While using a Conflict of Interest vendor is legally permissible if the proper process is followed, the approval process requires significant documentation with substantial detail. The process of receiving Regental approval is lengthy, generally taking up to two months to complete. Remember: the review process must be completed before the transaction occurs.
Note: A request for Regental review of a Conflict of Interest transaction does not preclude the normal purchasing policies and procedures. If the transaction is $5,000 or greater, the competitive bid process will be completed by the Procurement agent to ensure fair and reasonable pricing in an open and competitive environment.
There are 5 steps in the Conflict of Interest review process. Each step involves significant documentation, review and action, so plan well ahead.
- Check the M-Pathways Vendor Database (see below, Conflict of Interest Vendor Status) to determine if the vendor you wish to do business with is a known Conflict of Interest vendor. If the vendor holds that status, think carefully as to whether the purchasing need truly requires the Conflict of Interest vendor’s product or services.
- Contact your Procurement Services agent as far in advance as possible to review the purchase requirements. The agent will research the market to determine if any non-Conflict of Interest vendors are available to provide the product or service at a fair and reasonable price in an open and competitive environment. The department must present a detailed justification for using a Conflict of Interest vendor over other vendors. The agent has the discretion to determine whether or not the justification supports the purchase from a Conflict of Interest supplier.
- Required documentation. The department must submit to the Procurement Services agent the Conflict of Interest Disclosure Form and any quotations that may have already been received. The department must also provide details about the proposed transaction:
- The name of each party of the contract.
- The terms of the contract including, where applicable:
- Financial consideration between the parties
- The facilities or services of the University, which are affected by the contract
- Duration of the contract
- Description of goods or services provided
- The nature and degree to which the University of Michigan employee will be required to devote time to performing the contract.
- The nature of the financial interest of the University employee in or affected by the contract.
- Action Request. If the Procurement agent determines the Conflict of Interest transaction warrants review by the Regents, Procurement Services will prepare an Action Request based on the disclosure and supporting documentation provided by the department. The Action Request is reviewed by the Office of General Counsel, the Director of Procurement Services, the Associate Vice President for Finance, and the Executive Vice President and Chief Financial Officer, before it is placed on the Regents’ meeting agenda. For research areas and transactions using sponsored funds, the Action Request is also reviewed by the Office of the Vice President for Research and the Division of Research Development and Administration. The review of the Action Request by all required parties must be completed before the Regents agenda is written, which is at least 2 weeks prior to the Regents’ meeting.
- Transaction Approval and Processing. If the Action Request is approved by the Regents, Procurement Services receives notification and the appropriate Procurement agent works with the department to process the transaction.
- Where possible, University departments and units should avoid Conflict of Interest transactions.
- It is the department’s responsibility to demonstrate that the best business and purchasing practice requires the use of the Conflict of Interest vendor over other vendors.
- Once a department becomes aware of a conflict with a vendor, they must comply with the statute.
- The proper paperwork must be completed and submitted to the Board of Regents for review and approval before the transaction is made. Only after approval by the Regents can the transaction proceed. If the proper justifications are not made and the prior approval by the Board of Regents is not obtained, the contract can be voided by the University.
- Approval by the Board of Regents is per transaction and does not inherently constitute approval of the Conflict of Interest vendor for any future transactions. Each transaction is subject to independent review by the Regents.
- A request for Regental review of a Conflict of Interest transaction does not preclude the normal purchasing policies and procedures.
- Any increase in the dollar amount for a transaction approved by the Regents may need review by the Regents and is subject to their approval.
- Because of the number of steps in the review process, the minimum timeline is one to two months, and sometimes can take much longer. Units and departments wishing to use a Conflict of Interest vendor are advised to plan well ahead.
Conflict of Interest Vendor Status The M-Pathways vendor database captures information on Vendor Type, which includes Conflict of Interest status (abbreviated COI on the M-Pathways Vendor Identifying Information page). Department users with access to the M-Pathways Financials module can review the Vendor Type information for a particular vendor to determine if the status is COI. For instructions on how to view the Vendor Type in M-Pathways, see the My LINC document, Locate a Vendor v8.8 – Step-by-Step Procedure.