Tuesday, November 6, 2018

Contractors Need to Avoid Even the Appearance of a Conflict of Interest

An anonymous source tipped off the Mayor of Nashville Tennessee that one of its public works contractors was improperly entertaining city officials who were responsible for directing city business to that contractor. The Mayor immediately requested an audit. The now completed audit concluded that there was an "appearance of preferential treatment" to that firm who has more than tippled its average yearly revenue from the City. Since 2010, it has received nearly $50 million in contracts for street paving, sidewalks, and other work.

City officials responsible for awarding those contracts were spotted (and photographed) in the Contractor's suite at sporting events (Bridgestone Arena) and according to the audit, those City employees did not appear to have paid for their own tickets. Photographic evidence also showed City employees having drinks after hours with the Company Vice President.

While the audit concluded that there was an appearance of a conflict of interest, the audit did not produce evidence that the Contractor received a benefit from the city in exchange for the entertainment. Most of the employees involved denied taking any tickets for free. One employee admitted to failure to reimburse the contractor for two of his tickets. With regard to the after-hours entertainment, claimed they paid cash for their drinks.

Other allegations the audit was unable to substantiate included:

  • Invoices with no support
  • Only inspectors on good terms with the Contractor were allowed to perform inspections
  • City officials "directed" the Contractor to work with specified subcontractors
  • There was a conflict of interest because the City's senior procurement officer once worked for the Contractor.

So what was the outcome of this audit?

  • The mayor returned the Contractor's campaign contributions
  • The Contractor agreed to pay for certain re-work for which it was trying to obtain an equitable adjustment
  • City employees will undergo ethics training.

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