Conflict of interest management on school property procurements

An overview and the requirements for conflict of interest management on school property procurement.

Level of compliance	Main audience	Other
Required	Construction Suppliers Project Managers	Boards Principals and Tumuaki Proprietors Property Managers

Level of compliance

Main audience

Other

Required

Construction Suppliers
Project Managers

Boards
Principals and Tumuaki
Proprietors
Property Managers

All conflicts of interests must be identified and managed during a school property procurement activity to ensure there is no perceived or actual undue bias for or against a supplier, staff member or consultant involved in the procurement.

Overview

A conflict of interest is a circumstance where someone’s personal interests, obligations or relationships may influence the performance of their position. A conflict of interest may result in an individual’s independence, objectivity or impartiality being called into question.

Conflicts of interest may be:

actual — the conflict currently exists
potential — the conflict is about to happen, or could happen
perceived — another party may reasonably believe that a conflict exists.

They can be positive or negative, resulting in bias for or against a particular person.

How to manage conflicts of interest

Report and document

All staff involved in a procurement, regardless of procurement value, must immediately declare to the procurement officer any conflicts of interest that arise during the procurement (by submitting a Conflict of Interest and Confidentiality Agreement).

All staff involved in a procurement with a procurement value of $50,000 or more must submit a Conflict of Interest and Confidentiality Agreement at the start of their involvement.

Create a Conflict Management Plan

For each conflict of interest that is identified, a Conflict Management Plan must be approved by the project sponsor.

The plan should go at the back of the Conflict of Interest and Confidentiality Agreement form.
The board or project sponsor’s manager if the conflict is declared by the project sponsor.

Manage conflict

All staff involved, including the procurement evaluation team should be advised on any conflict of interest.

Conflict may be managed by:

reporting: request that any perceived undue bias is reported
restricting: limit the person’s involvement in the procurement
recruiting: engage an independent probity advisor to ‘live audit’ the procurement
removing: remove the person completely from the procurement
relinquishing: the person gives up their private interest
resigning: the person resigns from the board or their employment.

Periodically review Conflict Management Plans to ensure that the treatment of the conflict of interest is still appropriate.

Record the management of all conflicts of interest in the Procurement Recommendation Report.

Awarding contracts to board members

Written approval from the Ministry is required before awarding a contract of $25,000 or more (or $25,000 worth of work within a 12 month period) to a board member or a supplier organisation owned or controlled by a board member.

Submit a Conflict of Interest and Confidentiality Agreement form to the school’s property advisor for endorsement. They will forward it to us for our approval.

Commercial conflicts of interest

A commercial conflict of interest is when a person acting on behalf of a school has a commercial interest that could be seen to conflict with the school’s interests.

A commercial interest can include any business or financial interest, relationship, or duty that has the potential to incentivise the person to act in a way that is not in the best interests of the school.

When commercial conflicts can occur

A person involved in a school property procurement or project has the potential to both:

influence decisions made about the project or procurement, such as which supplier gets the work, or how the supplier’s contract or performance will be managed, and
gain financially or professionally from those decisions.

Why commercial conflicts need to be managed

Conflicts can make it hard to believe that those involved are acting impartially. This can:

reduce confidence and trust in the school’s procurement decisions
make it difficult for suppliers to believe they’ll have a fair opportunity to win work at schools
discourage capable suppliers from bidding for work
reduce competition for schools’ business
make it hard for schools to get a good deal
result in schools being accused of treating suppliers unfairly
negatively affect the reputation of schools
make suppliers less likely to want to work with schools
result in schools not achieving the best possible value or outcomes.

For this reason, commercial conflicts of interests must be carefully managed. This applies to all conflicts, whether they’re actual, potential or perceived.

Examples of commercial conflicts of interest

The scenario	The main problems
A contracting company owned by a project manager puts in a bid for work the project manager will be responsible for managing.	This represents a conflict because it makes it difficult for the project manager to: evaluate a bid from their own company free from bias, and manage performance issues if their company get the work. It could also create the perception that other suppliers will not have a fair opportunity to win the work. This could discourage capable suppliers from bidding, reducing competition for the school’s business and making it harder for the school to get a good deal.
A project manager awards themselves a contract to provide design services for a project they are managing.	This represents a conflict of interest because it could create the perception that: the project manager is only getting the work because of the position they’re in and not the value they can offer, and performance issues may not be managed in the best interests of the school. In limited circumstances, it may make sense for a project manager to provide other professional services. See ‘When project managers wish to provide other services’
A consultant engaged to carry out a condition assessment intends to put in a bid to provide design services for the subsequent remediation.	This represents a conflict because it could create the perception that the consultant will overstate the work that needs to be done for their own financial benefit.
A designer includes a requirement for a particular brand of building material to be used in a school property project, even though other equivalent materials could fulfil the requirement. They do this because that material can be only supplied by one supplier, and they have a private agreement with that supplier to put work each other’s way.	This represents a conflict of interest because the designer’s decision to include the requirement: is influenced by what they stand to gain from their commercial relationship with the supplier may not be in best interests of the school.
A project manager includes a requirement for the main contractor to use a sub-contractor they know in a Request for Tender, even though the work could be done by any number of sub-contractors.	This represents a conflict of interest because the project managers’ decision to include the requirement: is based on their relationship with the sub-contractor precludes other capable sub-contractors from participating in the contract opportunity, and may compromise the school’s ability to get the best value from the procurement.
A designer is on the evaluation team for a school property project. The designer is in a consortium with one of the suppliers who intends to bid for the work. The consortium is working on another design and build project, separate from the school’s one. The supplier intends to bid for the school work themselves and not as part of the consortium.	Although the supplier intends to bid for the work independently from the consortium, the designer still has a commercial relationship with them. This relationship could make it difficult for the designer to: evaluate the supplier’s bid impartially, and raise concerns about the supplier’s performance with the project manager if the supplier gets the work. It could also discourage other suppliers from bidding for the work, as they may not believe they’ll have a fair chance of winning it.

Declaring commercial conflicts of interest

Complete a Commercial Conflict of Interest Declaration [DOCX, 43 KB] and submit it to your School Property Advisor for approval.

Any commercial conflict must be declared as soon as you become aware of it.

Managing commercial conflicts of interest

Don’t include people who have commercial conflicts of interest on your Evaluation Team, unless there’s no other choice.

Avoid situations where a person is engaged to complete work they’ve assessed themselves, unless you can manage the conflict by having an independent or separate person review the person’s assessment.
Don’t specify particular brands of building material or components, unless there is a good reason for doing so, for example, for compatibility with existing materials or components.
Don’t require that main contractors use particular sub-contractors or consultants, unless there is a good reason for doing so, for example, so as not to void the warranty of existing equipment.
Avoid situations where project managers are involved in managing the performance of a company they have a commercial interest in.

When project managers wish to provide other services

In some situations it may represent better public value for a project manager to provide other professional services, such as design or quantity surveying services on a project they are managing. Apply the following standards to help you determine if this is appropriate for your project:

Standards for selecting project manager services
When the value of the fees is $50,000 or more	If the value of the professional fees, for example design fees is $50,000 or more, the project manager can’t provide the services themselves. They can’t have a commercial interest or commercial relationship with the supplier who is engaged to do the work either. When you’re estimating the value of the fees, consider the maximum value of the spending, including extra services or contracts that may be needed to complete the work. If the value of the fees is likely to add up to $50,000 or more over any 12 month period, then this standard applies.
When the value of the fees is less than $50,000	If the value of the professional fees is less than $50,000, then the Project Manager may be permitted to provide the services, if the School Property Advisor gives their approval to do so. The procurement sponsor (this is the board member who approves procurement decisions on behalf of the rest of the Board) can apply for this approval by submitting the project manager’s completed commercial conflict of interest form, including their proposed conflict of interest management plan to the School Property Advisor. Consider the maximum value of the spending to ensure the maximum value of the fees is less than $50,000 before applying.

Standards for selecting project manager services

When the value of the fees is $50,000 or more

If the value of the professional fees, for example design fees is $50,000 or more, the project manager can’t provide the services themselves.
They can’t have a commercial interest or commercial relationship with the supplier who is engaged to do the work either.
When you’re estimating the value of the fees, consider the maximum value of the spending, including extra services or contracts that may be needed to complete the work.
If the value of the fees is likely to add up to $50,000 or more over any 12 month period, then this standard applies.

When the value of the fees is less than $50,000

If the value of the professional fees is less than $50,000, then the Project Manager may be permitted to provide the services, if the School Property Advisor gives their approval to do so.
The procurement sponsor (this is the board member who approves procurement decisions on behalf of the rest of the Board) can apply for this approval by submitting the project manager’s completed commercial conflict of interest form, including their proposed conflict of interest management plan to the School Property Advisor.
Consider the maximum value of the spending to ensure the maximum value of the fees is less than $50,000 before applying.

Last reviewed: 21 January 2021 Has this been useful? Give us your feedback