Understanding the Term CONFLICT OF INTEREST

In almost every walk of life you will encounter the term, “Conflict of Interest” (COI).  It is an ethical term that is often used to destroy a person’s credibility, or to weaken their position in matters of professional opinion.  One of the most interpretive questions relating to a COI is the question of impartiality.  Can a person act with impartiality where an apparent conflict of interest exists?  The reason this question is so interpretive is because of the many and different ways in which it can be answered.

Answer #1 – The Government Purchasing Agent: “Yes, I own a cleaning business that does business with the Government, but as the Head of Purchasing for the agency to which I am employed, I have never used my authority to interfere with the letting of cleaning contracts, even when my other company benefited from it.”  Does this sound ethical or unethical?  Supposing that every cleaning contract was accompanied by a solicitation for sealed bids, that those bids were submitted and opened in a public forum, and, as fate would have it, this person’s other business was the “Apparent Low Bidder”.  Clearly, there is very little opportunity for impropriety in this case since he had no prior knowledge of what the other bids would be and he submitted his proposal in the same manner and format that the other companies submitted theirs.   But consider this…first of all, the Head of Purchasing will have far more knowledge of what the requirements for the contract are, how they will be enforced, and how they will be compensated.  In other words, he knows both what the risks and the rewards are when pursuing this work.  Another potentially more hidden conflict might exist in the manner in which the solicitations were publicized.  Were notices sent to anyone?  After all, he is aware of the Notice of Solicitation on the day that it is posted in the purchasing record.  How much does his awareness or the timing of his awareness play into his ability to estimate and prepare his proposal, versus his competition.

Simply put, even where there is no obvious act of impropriety, there exists an ethical question of COI.  And because this COI exists, the company that is partly owned by the Head of Purchasing, should be disqualified.

Answer #2 – The Specifying Engineer: “Yes, I was offered a trip to Cancun by the Equipment Vendor, and, yes, I accepted it.  But I also told the vendor that my participation in this trip would in no way alter my decisions when it comes to selection of a Basis of Design.  In fact, I even told him that I thought his equipment was inferior to that which I have been basing my designs upon.”  Here again, there is a lack of action in response to the apparent gift from the vendor, and so the question of ethics seems obscured.  If the record were checked and it was determined that this particular Engineer never once used the vendor’s products as basis of design, then it could be inferred even more so that no ethical violation occurred.   That is, of course, until you consider a couple of matters.  For instance, what degree of access is granted to the vendor as a result of their familiarity after having been on vacation together.  And what of the appearance that is it “okay” to accept gifts from vendors.  After all, in the State of Maryland and at the National level, there are clear guidelines that forbid the acceptance of valuable gifts from equipment vendors.  Why, because it sets a precidence and it gives the appearance of impropriety.

Answer #3 – The Contractor: “I buy from them because of their rewards program.  If I give them $1 million in business, I get a free ski trip to Colorado for my wife and me.  Once I reach the mark, however, I spread it around to the other programs, beginning with those that have other incentive programs.”  Sadly, no matter how unethical this may appear, there is nothing wrong with accepting gifts in return for business.  “Buy one, Get one free”, “Get 10,000 reward points for signing up for our Visa Card.”  That being said, if you own a Contractin g Business or are the President/CEO of one, be forewarned.  The people making the purchasing decisions may not always be acting in your or the client’s best interest.  And they will likely participate in some rather unethical schemes in order to drive the business to their preferred vendor.

So what is the point to all this…well, for starters, it is important to understand that there doesn’t have to be any impropriety for a Conflict of Interest to exist.  All there need to be is the appearance of influence or the appearance of opportunity to do wrong for a COI to exist.  Everyone wants to believe that they are above the line when it comes to professional ethics, particularily when it comes to the so called “Conflict of Interest” clauses in their professional regulations.  “I’ve never accepted anything more than Football Tickets.” Or “I would never let the fact that my child works for that vendor influence my decision making when it comes to the specification.”

Truth be told, it is very difficult to prove that an impropriety existed, some clandestined agreement occurred, as a result of a trip, a football game, or even a golf outing.  But what can be proven is that there is an appearance of impropriety, and therefore, a Conflict of Interest exists.  How close we, as professionals, walk that line defines how we view our ethical obligations to “avoid conflicts of interest” and our willingness to acknowledge and report these conflicts to our clients.