The decisions that city and town councilmembers make as they purchase goods and services is at the heart of how these elected officials steward public funds and public trust — and they can easily become the source of an ethics complaint, a bid dispute, a loss of grant funding or a loss of confidence from residents.
Addressing some of these challenges, the Municipal Association’s General Counsel Eric Shytle and Associate General Counsel Sara Weathers led a presentation on procurement and ethics at the Small Cities Summit in August. They covered six overall areas to consider to keep purchases legally sound and ethically appropriate.
Adopting a simple procurement code
SC Code Section 11-35-5320 requires all municipalities to adopt ordinances or procedures providing “sound principals of appropriately competitive procurement,” which helps ensure that taxpayer money is used as effectively as possible.
“If there are multiple sources of what you’re buying, and there almost always are, you have to compete. That's the core idea. That's what I want you to go away from here today with: is you should have a procurement ordinance, and it should require competition,” Shytle said. “You want to be able to tell the judge if you have a protest, and you want to be able to tell the public that elected you, or the public that elected your bosses, ‘We got the best price we could under the circumstances.’”
Shytle noted that although the procurement code for state agencies is available for cities to copy, it is in many cases more complicated than what municipalities need. The adopted code should be appropriate for the city’s size and staffing level, Shytle said, and its particular purchasing needs, but should in all cases require the city to use real competition to select vendors in cases where competition is reasonably appropriate.
Follow the code’s dollar thresholds and exceptions
The code can be broken into multiple levels, with the dollar amounts set by the city’s purchasing needs and experience.
- Small purchases below an authorized limit: approved employees can make purchases. At this level, requiring bids would be inefficient, but Shytle cautioned against practices like breaking a purchase into multiple invoices for the purpose of keeping it below a dollar threshold.
- Intermediate-level purchases: employees must obtain and document multiple quotes.
- Larger purchases: require formal competitive bids, or proposals, giving public notice of the request. The code can require city council approval for the very largest purchases. Shytle noted cases where a city would want the most suitable professional rather than the lowest builder — new buildings, or a fire engine — where the city would use a set scoring rubric taking into account professional experience, cost and how well the proposal fits the city’s needs.
Document purchases as well as emergency and exemption decisions
Allowable exemptions are an important part of a procurement code, Shytle said, and should be written into the code ahead of time, with all claimed exceptions documented at the time of the purchase. Exceptions can include things such as emergency purchases under unforeseeable circumstances, or purchases in the rare case where there is truly only a single vendor that could provide the item.
Purchases that can financially benefit the official or their family require recusal
Weathers covered South Carolina’s Ethics, Government Accountability and Campaign Reform Act, which prohibits officials from using of a public office or employment to obtain an economic interest for themselves, their family members, or other associated people or businesses. The definition of “family member” under the law is quite broad, including spouses, parents, siblings, in-laws, grandparents and grandchildren.
A perfectly valid procurement process can still create an ethics violation if the wrong person participates in the process, she said.
“If money can flow to you or anyone around you, you need to be really thoughtful in your decision-making process. Not because you are potentially doing anything nefarious, but because you can run afoul of these rules and you can create a whole mess of problems for yourself, your municipality, and those with whom you are associated,” she said.
The law also prohibits participating in or attempting to influence a governmental decision affecting those economic interests. Elected officials facing a conflict of interest must recuse themselves with a written statement describing the conflict entered into the minutes, and refrain from voting, deliberating or taking any action to influence the decision. Leaving the room during the process can help eliminate the possibility of having affected the decision.
Weathers gave an example of a town needing a roofing contractor in a situation where a councilmember’s brother owns a roofing company.
“The councilmember cannot be involved in drafting or reviewing the bids,” she said. “He or she cannot be involved in any part of it, not just the up-or-down, yes-or-no votes.”
SC Code Section 8-13-775 specifically addresses a public official, public member or public employee who has an economic interest in a government contract. These are situations that require legal analysis before the procurement process begins.
Find presentations from the Small Cities Summit.