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SB 1467: Memo to campus 7/1/03 | SB 1467 Summary | SB 1467 Sample scenarios

SB 1467: Memo to campus 7/1/03

PLEASE DISTRIBUTE WIDELY

July 1, 2003

TO: The Campus Community

FR: Julie Sears, Assistant Director
------Business Services

RE: SB 1467 - Public Contracts: Conflict of Interest

Senate Bill 1467 (SB 1467), which became effective July 1, 2003, significantly changes certain University business practices by extending the State's Public Contract Code conflict of interest and penalty provisions to procurement by the UC system. Prior to the passage of SB 1467, UC was exempt from those provisions.

SB 1467 establishes new restrictions, with severe penalties for violation, in four areas:

Awarding successor contracts or follow-on agreements to entities providing consulting to the University.
Hiring university employees to provide goods or services to UC under agreement as independent contractors.
Hiring former UC employees as independent contractors to perform work related to contracts that were planned, negotiated, executed or involving policy created by the employee before the employee's separation from UC.
Assigning a supplier number to all contracts over $10,000.

Successor Contracts
SB 1467 requires that any person or business entity awarded a consulting services agreement by UC shall not be awarded a successor contract after July 1, 2003 to provide goods or services required, suggested or otherwise deemed appropriate in the end product of the original consulting services agreement. In simpler terms, Consultants who have performed work for the University cannot participate on subsequent projects relating to the Consultant's findings.

If you are planning to hire a consultant with the expectation that that consultant could conceivably perform work related to the consultant's findings, please contact the Contracts Office for direction at 893-3001.

Employee Vendors
SB 1467 prohibits university employees (or entities in which the employee has a financial interest) 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 (see Bus 43, Part 7, http://www.ucop.edu/ucophome/policies/bfb/bus43j.html).

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 requiring the services of an existing UC employee should compensate the employee through the payroll system.

Contractors who are Former UC Employees
SB 1467 contains two restrictions on contracting with former employees:

A former university employee cannot enter into a contract 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 cannot be paid 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 that department in a policymaking position in the same general subject area as that contract.

Exceptions may be available for employees whose separation from UC was due to retirement. University departments requiring the services of a former UC employee should consult with Academic Personnel, Human Resources, and/or the Contracts Office to determine whether the former employee is subject to the prohibition.

Supplier Numbers
Each contractor who enters into a contract with UC for $10,000 or more must be assigned an identification number that will remain unchanged regardless of future name changes. The contractor must list this number on each contract entered into with the UC.

Penalties
Penalties for lack of compliance with the statute are serious and include personal criminal sanctions.

Every contract or other transaction entered in violation of SB 1467 is void.
Any officer or employee of the University of California who "corruptly" performs any official act to the injury of the University is guilty of a felony.
Any contractor to the University of California who "corruptly" permits the violation of any contract is guilty of a felony.
Persons convicted under these provisions will be liable for monetary damages.

Resources
For additional information on SB 1467, please refer to the following web site:

http://www.busserv.ucsb.edu/campusnews.htm

Compliance
You will be kept informed of any further changes to this legislation and of any future information that will assist in understanding and complying with the statute. In the meantime, please submit any questions you may have regarding application of this legislation to Julie Sears at julie.sears@buss.ucsb.edu .

SB 1467 Summary

Effective date: July 1, 2003

Successor Contracts: Consultants who have performed work for the University cannot submit a bid for, nor be awarded a contract for, projects relating to the previous contract's findings or recommendations.

Hiring former university employees as independent contractors:

A former university employee cannot be paid 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 cannot be paid as an independent contractor for one year from the date of separation to perform work on a contract if he/she was employed by that department in a policymaking position in the same general area as that contract.

Employee-vendor relationships:

You may not rent or purchase goods from a university employee (unless the employee has a teaching or research title).
You may purchase or rent goods from a teaching or research employee ONLY AFTER there has been a specific determination by the Materiel Manager that the goods are not available from either the university's own facilities or from commercial sources.

Purchasing services from a university employee (excluding those in research or teaching titles):

You may not pay a university employee as an independent contractor to provide services. There are NO EXCEPTIONS.
It may be possible to compensate a university employee through the payroll system for services outside the scope of their university employment. Contact Melinda Crawford in HR for more information.

Employees in research or teaching titles:

It may be possible to compensate a teaching or research employee through the payroll system for services outside the scope of the employee's regular university employment. Contact academic personnel regarding compensation through the payroll system.
If unable to compensate a teaching or research employee through the payroll system for services outside the scope of the employee's regular university employment, it may be possible to pay the employee as an independent contractor for those same services ONLY AFTER there has been a specific determination by the Materiel Manager that the services are not available from commercial sources or from the university's own facilities.

Penalties

Every contract or other transaction entered in violation of the statute is void.
Any officer or employee of the University of California who "corruptly" performs any official act to the injury of the University is guilty of a felony.
Any contractor to the University of California who "corruptly" permits the violation of any contract is guilty of a felony.
Persons convicted under these provisions will be liable for monetary damages.

The following examples represent situations that, prior to the effective date of SB 1467, were paid through the vendor system, i.e., the employee was paid as an independent contractor.

	Scenario	Under SB 1467, can the employee be paid as an independent contractor?	Appropriate method of Payment/Explanation
1	A full-time Assistant III (non-exempt) is asked to transcribe tape-recorded interviews from Spanish to English on an as-needed basis for $50/hour.	No	UCSB dual employment policy and procedures apply, and overtime may need to be paid. Hire the employee in a variable limited appt; contact the Compensation Unit to determine the appropriate title code.
2	A full-time Assistant III (non-exempt) also plays the harp. She is asked to perform at a chancellor's reception for $200.	No	UCSB dual employment policy and procedures apply and overtime may need to be paid. Hire the employee in a variable limited appt; contact the Compensation unit to determine the appropriate title code.
3	An exempt staff member is asked to teach aerobics courses through the Recreation Center.	No	UCSB dual employment policy and procedures may apply. Use the BYA title code to pay through PPS.
4	An Assistant Analyst who owns part of a literature journal is asked to print an advertisement for a lecture sponsored by Arts & Lectures.	No	Goods can never be purchased from a non- teaching or research employee.
5	Orientation Services wants to purchase a video entitled "The Fraternity Experience at UCSB" that was privately produced by a College of L&S undergraduate advisor.	No	Goods can never be purchased from a non-teaching or research employee.
6	A UNEX cooking instructor is paid by UNEX for the use of his professional kitchen when he teaches cooking classes.	Yes	Because teaching/research employees are exempt from SB 1467 AND because the no other professional kitchen is available, the instructor may be paid for the use of his kitchen.
7	A UNEX art instructor is asked to restore a damaged sculpture.	Yes	Because teaching/research employees are exempt from SB 1467 AND if the restoration work cannot be done commercially or by someone within UCSB as part of their job duties, the instructor may be paid for these services after an exception has been made by the Materiel Manager.
8	A tenured professor in the Economics department prints t-shirts as a part-time business. The Bookstore proposes to purchase these t-shirts from the professor for re-sale.	No	Because t-shirt printing is commercially available, they cannot be purchased, even from a teaching/research employee.
9	A lecturer in the Music department has produced a CD of herself playing Bach. The library wants to purchase these CDs from the lecturer for resale.	Yes	Because teaching/research employees are exempt from SB 1467 AND because the CD is a unique artistic product (i.e. not available anywhere else), the CDs may be purchased from the lecturer.
10	The business officer in Mechanical Engineering has recorded a performance of himself playing guitar. The bookstore wants to purchase these CDs for resale.	No	Goods can never be purchased from a non-teaching/research employee.
11	A library Computer Network Technician, separated from UCSB for 4 months, establishes a network consulting business. She submits a proposal to the library to perform work that relates to work done under a contract completed before she left university employment. While employed, this employee was the principal CNT for the library and worked closely with library management.	No	Since the employee planned, negotiated or executed the initial contract, she cannot be hired as an independent contractor for two years after her date of separation. AND Since she was in a policymaking position in the library related to the initial contract, she cannot be hired as an independent contractor for one year from her date of separation.
12	Jane and John Smith were hired as independent contractors to assist the University Center in reorganizing staff functions and roles. They completed their contract and have now submitted a new proposal to complete the work they recommended in the initial contract.	No	Consultants who have performed work for the university cannot submit a bid or be awarded a contract for projects relating to the previous contract's findings or recommendations.