Tuesday, August 7, 2012

University of Illinois Voids $4.6 Million Contract Over Conflict of Interest Concerns

Perceptions surrounding a potential conflict of interest and how it was handled have led the University of Illinois to void a $4.6 million contract with BLDD Architects, ending a months-long debate about the situation. 

Straightforward disclosure?  In 2010, BLDD submitted a proposal for the planning phase of the university's $70 million renovation of its historic Natural History Building. As required, the firm disclosed that one of its principals, Bruce Maxey, was married to the university's associate director of planning, Jill Maxey, who had also worked for the firm in the past. Since Jill would normally be involved in the selection process, she recused herself from the project early on. University officials have stated that she was internally isolated from decisions that would affect BLDD. 

Further review requirements neglected:  The problem is whether the disclosure and internal controls were enough. The debate has centered around the issue of whether the potential conflict of interest meant the contract should have been reviewed by the Illinois Procurement Policy Board. As it was, the board didn't learn about the situation until over a year after the initial $368,000 conceptual design contract was signed, and several months after a $4.3 million contract for architectural and engineering services was added. 

The issue of additional review seems to have gotten lost in the midst of university staffing changes and confusion over the requirements for board review, which had only recently been mandated by a newly enacted law. 

Previous debate:  Shortly after discovering the issue, the Procurement Policy Board voted in April 2012 to recommend voiding the contract with BLDD over concerns about the potential conflict, but that decision was overturned by the Illinois Chief Procurement Officer, Ben Bagby, who oversees procurement for higher education in the state. 

Bagby maintained that adequate internal controls were exercised to prevent any misconduct or conflict of interest. Furthermore, he argued that going through a new selection process for the project would be too expensive, while negotiating with the second highest-rated firm would mean using a "stale" proposal from over a year before. 

Final decision:  Last week the Procurement Policy Board voted a second time to throw out the contract, referring it to the university's Board of Trustees. The Board of Trustees agreed with the board and voted on July 19, 2012 to void the contract, which will likely be subject to a new selection process. 

Lessons learned:  Interestingly, the debate seems to have sparked no accusations of actual misconduct. Concern seems to have centered instead on negative appearances and failure to follow proper procedures. This illustrates how critical perception can be (even if there is no actual misconduct) and the importance of following procedures. Small mistakes at the beginning of a project can be amplified as things go on and later escalate into significant delays, additional expense, and/or disciplinary action. 

Practical tips:
  1. Remember appearances:  Even if it seems clear that there is no conflict of interest, consider how the facts might appear to someone unfamiliar with the situation.
  2. Follow procedures:  The University of Illinois situation illustrates how easily important requirements can be misinterpreted or overlooked. If there's any question of whether an issue requires additional reporting or review, ask agency leadership or legal counsel.  As this incident shows, it's usually better to go the extra mile at the beginning of a project rather than try to clean up a mistake later.
  3. Stay current:  Keep on top of new legislation and policy changes, coupled with proper training and effective internal controls.  These are important tools to avoid controversies such as the one faced by the University of Illinois.
Additional resources:
Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC 

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