Conflict of Interest: SB 1467

California Public Contract Code Conflict of Interest Law

SB 1467 is complex and has been modified several times over the past few years. The University of California Office of the President (UCOP) has therefore not yet issued an official interpretation. However, due to the penalties for violating SB 1467, the University of California must comply with the current understanding of the law. 


SB 1467 applies to:

  • Successor or follow-on contracts
  • Current UC Employees as Independent Contractors
  • Former UC Employees as Independent Contractors

The timeline of this law is as follows: 

  • In 2002, Governor Davis signed Senate Bill 1467 (SB 1467) to apply state agency conflict of interest guidelines and penalties to procurement by the UC system. 
  • In October 2003, Governor Davis signed SB 41, a bill modifying SB 1467. 
  • Effective July 1, 2003, the language of SB 1467 placed restrictions on certain business practices within the University of California, which were modified by the provisions of SB 41, effective January 1, 2004.

 

Successor or Follow-On Contracts

SB 1467 states that any business entity awarded a consulting services agreement by the University of California is neither eligible to bid for nor be awarded a subsequent contract after July 1, 2003 to provide goods or services which are “required, suggested, or otherwise deemed appropriate to the end product” from the original consulting services contract. This means that consultants who have performed work for the University cannot participate on subsequent projects relating to or implementing the consultant's findings.

Exemptions

Certain professional services firms are exempt from these restrictions. They include: architectural, landscape architectural, engineering, environmental, land surveying, real property development services and construction project management firms.

To qualify for the exemption, the contracts for these services must be advertised using procedures specified in SB 41.  SB 41 also exempts medical centers when the follow-on contract is necessary to avoid a competitive disadvantage in the hospital industry, improve patient care, protect the privacy of patient information, or avoid significant delay and additional expense. Reporting to Sacramento is required when this medical center exemption is exercised. 

 

Current UC Employees as Independent Contractors

SB 1467 prohibits university employees (or entities in which the employee has a financial interest, or from which the employee receives compensation) from contracting with any University department to provide goods or services as an independent contractor. UC employees with teaching or research responsibilities are exempted from this provision of SB 1467 but are still subject to University guidelines for employee-vendors and other UC conflict of interest policy. 

UC employees without teaching or research responsibilities can no longer be hired as independent contractors by university departments to provide goods or services. University departments that require the services of an existing UC employee must work with Human Resources to compensate the employee through the payroll system, if possible, in accordance with existing law and University policy.

 

Former UC Employees as Independent Contractors

The following rules govern former UC employees as independent contractors:

  • A former University employee may not enter into a contract as an independent contractor for two years from the date of separation to perform work related to contracts that were planned, negotiated or executed by that employee.
  • A former University employee may not enter into a contract with any University department as an independent contractor for one year from the date of separation to perform work on a contract if he or she was employed by the department in a policymaking position in the same general subject area as the contract.
  • The rehire or reappointment of UC employees after retirement, consistent with university administrative policies, is permitted.
  • University departments requiring the services of a former UC employee should consult with the Purchasing Department to determine whether the former employee is subject to the prohibition.

 

Penalties and Remedies

Penalties for failure to comply with the section of the Public Contract Code formerly known as SB 1467 are serious and include personal criminal sanctions (felony), voiding the contract, and doubled damages.