Chapter 13: Conflict of Interest

In this chapter:

• Authority
• Requirements
• Demonstrating Compliance
• Related Considerations

Authority

Section 330(a)(1) and 330(k)(3)(D) of the PHS Act; 42 CFR 51c.113 and 42 CFR 56.114; and 45 CFR 75.327

Requirements

• The health center must maintain written standards of conduct covering conflicts of interest¹ and governing the actions of its employees engaged in the selection, award, or administration of contracts that comply with all applicable Federal requirements.
• No employee, officer, or agent² of the health center may participate in the selection, award, or administration of a contract supported by a Federal award if he or she has a real or apparent conflict of interest.
• Officers, employees, and agents of the health center may neither solicit nor accept gratuities, favors, or anything of monetary value from contractors or parties to subcontracts.
• The health center’s standards of conduct must provide for disciplinary actions to be applied for violations of such standards by officers, employees, or agents of the health center.
• If the health center has a parent, affiliate, or subsidiary organization that is not a State, local government, or Indian tribe, the health center also must maintain written standards of conduct covering organizational conflicts of interest.

Demonstrating Compliance

A health center would demonstrate compliance with these requirements by fulfilling all of the following:

1. The health center has and implements written standards of conduct that apply, at a minimum, to its procurements paid for in whole or in part by the Federal award. Such standards:
   • Apply to all health center employees, officers, board members, and agents involved in the selection, award, or administration of such contracts;
   • Require written disclosure of real or apparent conflicts of interest;
   • Prohibit individuals with real or apparent conflicts of interest with a given contract from participating in the selection, award, or administration of such contract;³
   • Restrict health center employees, officers, board members, and agents involved in the selection, award, or administration of contracts from soliciting or accepting gratuities, favors, or anything of monetary value for private financial gain from such contractors or parties to sub-agreements (including subrecipients or affiliate organizations);⁴ and
   • Enforce disciplinary actions on health center employees, officers, board members, and agents for violating these standards.
2. If the health center has a parent, affiliate, or subsidiary that is not a State, local government, or Indian tribe, the health center has and implements written standards of conduct covering organizational conflicts of interest⁵ that might arise when conducting a procurement action involving a related organization. These standards of conduct require:
   • Written disclosure of conflicts of interest that arise in procurements from a related organization; and
   • Avoidance and mitigation of any identified actual or apparent conflicts during the procurement process.
3. The health center has mechanisms or procedures for informing its employees, officers, board members, and agents of the health center’s standards of conduct covering conflicts of interest, including organizational conflicts of interest, and for governing its actions with respect to the selection, award and administration of contracts.
4. In cases where a conflict of interest was identified, the health center’s procurement records document adherence to its standards of conduct (for example, an employee whose family member was competing for a health center contract was not permitted to participate in the selection, award, or administration of that contract).

Related Considerations

The following points describe areas where health centers have discretion with respect to decision-making or that may be useful for health centers to consider when implementing these requirements:

• The health center determines the appropriate methods for employees, officers, board members, and agents to disclose real or apparent conflicts of interest, as it applies to the procurement process.
• The health center determines how to inform its employees, officers, board members, and agents about the health center’s standards of conduct (for example, inclusion within operating procedures or staff manuals, as part of disclosure forms/statements, employee and board orientations or trainings).
• The health center determines whether to establish additional standards of conduct that are not addressed by Federal requirements.
• The health center determines whether to set standards that define when a financial interest is not substantial or a gift is an unsolicited item of nominal value and, therefore, could be accepted by employees, officers, board members, and agents of the health center.

Footnotes

^1. A conflict of interest arises when the employee, officer, or agent (including but not limited to any member of the governing board), 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 parties indicated herein, has a financial or other interest in or a tangible personal benefit from a firm considered for a contract. See: 45 CFR 75.327(c)1.

^2. An agent of the health center includes, but is not limited to, a governing board member, an employee, officer, or contractor acting on behalf of the health center.

^3. This includes, but is not limited to, prohibiting board members that are employees or contractors of a subrecipient of the health center from participating in the selection, award, or administration of that subaward. This also includes prohibiting board members who are employees of an organization that contracts with the health center from participating in the selection, award, or administration of that contract.

^4. Health centers may set standards for situations in which the financial interest is not substantial or the gift is an unsolicited item of nominal value. See Related Considerations in this chapter.

^5. Organizational conflicts of interest mean that because of relationships with a parent company, affiliate, or subsidiary organization, the health center is unable or appears to be unable to be impartial in conducting a procurement action involving a related organization. See: 45 CFR 75.327(c)(2).