CEO 76-76 -- April 16, 1976

CONFLICT OF INTEREST

FIRM OWNED BY UNIVERSITY EMPLOYEES DOING BUSINESS WITH STATE AGENCIES

To: (Name withheld at the person's request.)

Prepared by: Bonnie Johnson

SUMMARY:

A state employee is prohibited from acting in his private capacity to rent, lease, or sell any realty, goods, or services to his own agency. See Fla. Stat. s. 112.313(3)(1975). Each unit of state government -- including each department, division, bureau, and commission -- constitutes an "agency," pursuant to the definition of that term as found in s. 112.312(2). Consequently, employees of a state university who own a material interest in an educational research and development firm are not prohibited from doing business with departments of state government other than the employer university, their own agency. Pursuant to s. 112.311(1) and a previous ruling of this commission as contained in CEO 75-208, however, such firm would be prohibited from subcontracting on a project for which the firm previously prepared the project proposal. Where one bids on a project for which he wrote the specifications, he is in a much better position to meet the bid requirements than would be other bidders, thus breaching the spirit of the law as expressed in s. 112.311(1).

QUESTIONS:

1. Would a prohibited conflict of interest be created were an educational research and development firm wholly owned by me, a faculty member at a state university; three other faculty members; and a doctoral student to contract for services with divisions of the state Department of Education?

2. Would the Code of Ethics be violated by me and my business associates were I to bid, in behalf of the subject firm, on a subcontract within a project for which the firm prepared the project proposal?

Question 1 is answered in the negative.

You advise us in your letter of inquiry that Alpha Associates, a firm principally devoted to educational research and development, is wholly owned by you, three other faculty members of Florida State University, and a doctoral student at the university. Of these five persons, you serve as president of the company, Dr. ____ is its secretary-treasurer, and the Board of Directors consists of ____. The business currently constitutes a joint venture, but you inform us that you plan to incorporate soon. Business is transacted with clients either in the form of personal service consulting contracts or through contracts for research and/or particular projects.

The Code of Ethics for Public Officers and Employees provides in relevant part:

DOING BUSINESS WITH ONE'S AGENCY. -- No employee of an agency acting in his official capacity as a purchasing agent, or public officer acting in his official capacity, shall either directly or indirectly purchase, rent, or lease any realty, goods, or services for his own agency from any business entity of which he or his spouse or child is an officer, partner, director, or proprietor or in which such officer or employee or his spouse or child, or any combination of them, has a material interest. Nor shall a public officer or employee, acting in a private capacity, rent, lease, or sell any realty, goods or services to his own agency, if he is a state officer or employee, or to any political subdivision or any agency thereof, if he is serving as an officer or employee of that political subdivision. The foregoing shall not apply to district offices maintained by legislators when such offices are located in the legislator's place of business. This subsection shall not affect or be construed to prohibit contracts entered into prior to:

(a) October 1, 1975.

(b) Qualification for elective office.

(c) Appointment to public office.

(d) Beginning public employment.

[Emphasis supplied; Fla. Stat. s. 112.313(3)(1975).]

Accordingly, a state employee is prohibited from acting in a private capacity to sell services to his own agency. Where one is an officer or director of a business entity, and/or where he owns a material interest in such entity, he is deemed to be "acting in his private capacity" where such firm transacts business. See CEO 75-196 and CEO 76-12.

The term "agency" is defined by the Code of Ethics to mean

. . . any state, regional, county, local, or municipal government entity of this state, whether executive, judicial, or legislative; any department, division, bureau, commission, authority, or political subdivision of this state therein; or any public school, community college, or state university. [Fla. Stat. s. 112.312(2)(1975).]

Accordingly, your public agency -- and that of your business associates -- clearly is Florida State University. The state Department of Education likewise constitutes an agency, as does each division within that department. Section 112.313(3) prohibits a state employee only from selling to his own public agency. Accordingly, that provision is not violated where you sell, by competitive bid or otherwise, to the Department of Education or to any of its divisions inasmuch as, for purposes of the Code of Ethics, they are agencies separate and distinct from your agency, Florida State University.

The Code of Ethics further provides that

[n]o public officer or employee of an agency shall have or hold any employment or contractual relationship with any business entity or any agency which is subject to the regulation of, or is doing business with, an agency of which he is an officer or employee, excluding those organizations and their officers who, when acting in their official capacity, enter into or negotiate a collective bargaining contract with the state or any municipality, county, or other political subdivision of the state; nor shall an officer or employee of an agency have or hold any employment or contractual relationship that will create a continuing or frequently recurring conflict between his private interests and the performance of his public duties or that would impede the full and faithful discharge of his public duties. [Fla. Stat. s. 112.313(7)(a)(1975).]

Accordingly, a public officer may not contract with any agency which does business with or is subject to the regulation of his own agency. Inasmuch as your agency, Florida State University, neither regulates nor transacts business with the Department of Education or any of its divisions, no violation of this provision would be constituted were the subject firm to contract, by competitive bid or otherwise, with the Department of Education or any division therein. Your question is answered accordingly in the negative.

Question 2 is answered in the affirmative.

Enclosed please find a copy of CEO 75-203, the rationale of which is, in our view, equally applicable to the circumstances about which you inquire. Whether one bids on the proposal contract or on a subcontract thereof makes no difference within the rationale employed in the above-cited opinion. In either case, one who prepares the project proposal subsequently, as a bidder, is likely to be in a much better position to meet the bid specifications than will other bidders. Accordingly, Florida Statute s. 112.311(1)(1975) would be breached by one's bidding in any way on a project whose specifications were based on his own proposals.