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CHAPTER 4. ETHICS IN PUBLIC CONTRACTING
4.1 General
Ethical standards apply not only to PHA employees and Contracting Officers but to
others with a vested interest in PHA contracts such as members of the Board of
Commissioners, other officials and agents of the authority, and contractors with
whom the PHA does business.
This chapter explains the specific ethical requirements for PHA contracting 24 CFR
85.36 (b)(3).
4.2 Principles
Members of the Board of Commissioners, PHA employees, and any others serving in an
official position or acting as an agent of the PHA (hereafter referred to as
employees, officers, or agents) must discharge their duties impartially to ensure
fair competitive access to procurement opportunities by responsible contractors.
Moreover, employees, officers, and agents should conduct themselves in such a manner
as to foster the public’s confidence in the integrity of the PHA procurement
organization and process. Any attempt to realize personal gain through PHA employment
or to serve as an officer or agent of the PHA through actions inconsistent with the
proper discharge of duties is a breach of public trust.
4.3 Requirement for a Written Code of Standards (24 CFR 85.36(b)(3))
PHAs must maintain a written code of standards governing the performance of their
employees engaged in the award and administration of contracts. These standards shall
be included in the PHA’s procurement policy.
4.4 Conflicts of Interest (24 CFR 85.36(b)(3) and Section 19 of the ACC)
PHAs must observe the following conflict of interest prohibitions.
A. No PHA employee, officer, or agent shall participate in the
selection, award or administration of a contract supported by
Federal funds if a conflict of interest, financial or otherwise,
real or apparent, would be involved. Such a conflict would arise
when the 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 above, has a financial
or other interest in the firm selected for the award.
B. In addition to any other applicable conflict of interest
requirements, neither the PHA nor any of its contractors or their
subcontractors may enter into any contract, subcontract, or
arrangement in connection with a project under the ACC in which
any of the following classes of people have an interest, direct or
indirect, during his or her tenure or for one year thereafter:
1. Any present or former member or officer of the governing
body of the PHA, or any member of the officer’s immediate
family. There shall be excepted from this prohibition any
present or former tenant commissioner who does not serve
on the governing body of a resident corporation, and who
otherwise does not occupy a policymaking position with
the resident corporation, the PHA or a business entity.
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2. Any employee of the PHA who formulates policy or who
influences decisions with respect to the project(s),
or any member of the employee’s immediate family, or
the employee’s partner.
3. Any public official, member of the local governing body,
or State or local legislator, or any member of such
individuals’ immediate family, who exercises functions
or responsibilities with respect to the project(s) of
the PHA.
(Note: For additional important provisions see Section
19 of the ACC)
C. No present or former PHA employee, officer, or agent shall
engage in selling or attempting to sell supplies, services,
or construction to the PHA for one year following the date
such employment ceased (see Sections 515 of the old ACC,
form HUD-53011, dated 11/69, and Section 19 of the new ACC,
form HUD-53012A , dated 7/95). The term “sell” means signing
a bid or proposal, negotiating a contract, contacting any
PHA employee, officer, or agent for the purpose of obtaining,
negotiating, or discussing changes in specifications, price,
cost allowances, or other terms of a contract; settling
contract disputes; or any other liaison activity with a view
toward the ultimate consummation of a sale, although the
actual contract is negotiated by another person.
4.5 Gratuities, Kickbacks, and Use of Confidential Information
PHA solicitations and contracts above the Federal small purchase threshold shall
include clauses advising prospective contractors of the prohibitions against
gratuities and kickbacks (24 CFR 85.36(i)(4)). These rules are designed to
protect the integrity of the procurement system and to ensure that contracts
are awarded fairly, based on merit, without improper influence.
A. Gratuities (24 CFR 85.36(b)(3) and Section 19 of the ACC). PHA
officers, current employees, former employees within one year
of employment, or agents shall neither solicit, accept, or
agree to accept gratuities, favors, or anything of monetary
value from contractors, potential contractors, or parties to
sub-agreements. PHAs may set minimum rules where the financial
interest is not substantial or the gift is an unsolicited item
of nominal intrinsic value. These rules shall be incorporated in
the PHA’s Procurement Policy.
B. Kickbacks and Anticompetitive Practices. It is a breach of
ethical conduct and prohibited for any payment, gratuity, or
offer of employment to be made by, or on behalf of, a contractor
or subcontractor under contract to the prime contractor, higher
tier subcontractor, or any person associated therewith as an
inducement for the award of a subcontractor order.
The Contracting Officer shall report to the Executive Director, the
HUD Field Office, and the appropriate State and local officials
any suspected anticompetitive practices by contractors.
C. Use of Confidential Information. Disclosure of confidential
information to any person not authorized by the Contracting
Officer to receive such information shall be a breach of the
ethical standards. Confidential information includes but is
not necessarily limited to: the contents of a bid (prior to
bid opening) or proposal (prior to contract award using
competitive proposals), names of individuals or firms that
submitted bids (prior to bid opening) or proposals (prior to
contract award); PHA-generated information related to a
procurement (including PHA cost estimates, contractor
selection and evaluation plans, specifications [before
solicitation is issued]); and any other information the
disclosure of which would have a direct bearing upon the
contract award or the competitive process. It is a breach of
ethical conduct for any current or former employee, officer,
or agent to knowingly use confidential information for actual or
anticipated personal gain or for actual or anticipated personal
gain of any other person.
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4.6 Prohibition Against Contingent Fees (24 CFR 85.36(c) and (24 CFR 85.36(b)(8))
It is a breach of ethical conduct for a person to be retained to solicit or secure a
PHA contract upon an agreement or understanding for a commission, percentage,
brokerage, or contingent fee, except for the retention of bona fide employees or a
bona fide agency established for the purpose of securing business. This prohibition
includes the employment of former PHA officials and employees on a contingency basis
to obtain contracts with the PHA by a business seeking PHA contracts. Many States
also have specific laws against contingent fees.
4.7 Sanctions (24 CFR 85.36(b)(11) and (12))
The Executive Director and the Board of Commissioners are responsible for establishing
sanctions for violation of the ethical standards. As stated previously, many States
have passed laws governing the conduct of officials involved in procurement. All such
laws shall be enforced by the Executive Director and, in cases where the State or
local government has no such rules, appropriate sanctions for violation of the
standards of conduct in this Chapter shall be published and imposed.
Civil and administrative remedies should be established for use whenever employees,
officials, or agents breach ethical standards. References to State ethics laws, which
should be consulted by the PHA in developing and administering sanctions for
misconduct, should be included in the Procurement Policy. In addition, the PHA may
impose any one or more of the following:
• Oral or written warnings or reprimands;
• Suspension with or without pay for specified period of time;
• Termination of employment; or
• Dismissal from the official or agency position.
The value of anything received by an employee or a non-employee in breach of the
ethical standards shall be recoverable by the PHA either by confiscating the items
or by charging the violator for any and all gratuities received. All procedures in
this Chapter shall be in accordance with due process requirements and existing law.
In addition, notice and an opportunity for a hearing shall be provided before
imposing any suspension or termination of employment. Remedies against contractors
may include suspension and/or debarment, as provided in Chapter 11, Contracts,
Contract Clauses, and Contract Administration.
In the case of violations, HUD may exercise any available remedy under the ACC, the
federal regulation and statutes, and grant agreements including the U.S. Housing Act
of 1937 as amended, 24 CFR Parts 84 and 85, and sections 17 and 19 of the ACC.
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