It is common knowledge that the use of consultants potentially raises a host of conflict problems when not done correctly.
For instance, some consulting firms have hidden links to municipalities and have been known to use their influence over sourcing to direct contracts to them.
Subtle steering may involve raising the spectres of “incompatibility” with existing equipment or software, the possibility of increasing “training costs” if new technologies are adopted and sundry other “risks” associated with a competitor’s products.
Captive consultants have also convinced public employees to sole-source a contract to their affiliated supplier, so as to bypass any formal tender or RFP by exaggerating the unique attributes of a particular supplier’s products or service.
Common sense is enough to justify the belief that consultant conflict of interest is as much a concern as conflict of interest involving an employee or elected official, because the work of a consultant, even if only advisory, is as likely to affect the actual decision-making of the municipality to the same extent as is the work of any employee or elected official.
No municipal consultant should be authorized to negotiate, make, accept or approve, or take part in negotiating, making, accepting or approving any contract or subcontract in connection with a project in which that consultant, or a person at arm’s length to the consultant, is likely to have, directly or indirectly, any financial or other personal interest in that contract or in any subcontract under it.
No consultant advising the municipality with respect to a project should have any direct or indirect financial or other personal interest in the project or any real property acquired for a project other than in relation to the consultancy contract itself.
Moreover, a strong argument can be made that in most cases disclosure is not the best solution in relation to a consultant where a conflict exists.
Where a person in a declared conflict is currently employed by the municipality, it is rarely practical to terminate the employment relationship. That person can be assigned to other tasks.
In much the same way, it is not practical to hold a new election every time an elected official declares a conflict of interest. In contrast, where a prospective consultant is in a conflict of interest, it is usually readily possible to hire an alternate person to fill the consultancy role.
There is no practical benefit in bringing a conflicted consultant on board, when the sole purpose of his or her being hired is to advise with respect to some matter that is tainted by a conflict of interest.
To avoid problems of this nature, consultants should be required to provide an expressed warranty identifying all direct and indirect close relationships with any supplier affiliate (or any parent, subsidiary, division, or related or affiliated entity), or with any person employed by such entity.
The warranty should be drafted in sufficiently comprehensive terms to cover any brokerage agreement, commissions or other fee agreement, or any contracts to perform any work or services for the previously described persons.
Hidden conflicts of interest can arise where a consultant is acting for a customer in relation to one contract, while competing against other suppliers to win a different but similar contract. For instance, a customer may retain a design consultant to advise in regard to a construction project. The same adviser may compete as part of a design-build team for a second contract.
In such a case, the consultant may be able to exploit information learned about the customer’s priorities, constraints and latitude for negotiation in relation to the first contract in order to compete more effectively for the second.
Moreover, the consultant may learn how to structure a bid so as to gain additional profit from the tender.
Stephen Bauld is a government procurement expert and can be reached at swbauld@purchasingci.com. Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.
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