Reform of the Model Procurement Code (MPC) Article 12 (Ethics)

Article 12 of the American Bar Association (ABA) Model Procurement Code for State and Local Governments (2000) (“MPC”) is the Code’s anti-corruption article. This page will gather resources on updating Article 12 of the MPC, an initiative being coordinated through the ABA and other leaders in state and local procurement, including the National Association of State Procurement Officials (NASPO).

The references below are to subcommittees handling various aspects of the review of Article 12 as part of the ABA initiative.

This page was prepared by Professor Christopher Yukins, academic advisor to the MPC reform initiative, who is solely responsible for its content.

One of the open questions for the MPC reform effort is whether the MPC should reference the government ethics provisions developed by the American Law Institute (“ALI”) in its Principles of the Law, Government Ethics (“ALI Government Ethics Principles”), and then to address any procurement-unique questions separately.

When the MPC was last updated in 2000, states were still developing their ethics codes. See, e.g., Richard Blake, Jill A. Grob, Donald H. Potenski, Phyllis Reed & Pat Walsh, The Nature and Scope of State Government Ethics Codes, 21 Pub. Productivity & Management Rev. 453 (1998). Apparently to fill that gap, the MPC drafters in 2000 included detailed ethics provisions in Article 12.

Since then, however, the ALI has developed detailed guidelines on government ethics. Those ALI guidelines overlap with and (as the discussion below reflects) are arguably better than the MPC provisions. Were the MPC to retain its own, overlapping provisions while states have in place more general (and potentially conflicting) ethics codes, the MPC would be making compliance more difficult for both governments and contractors.

The ALI Government Ethics Principles have been, as of February 2025, adopted by the ALI and are (in “tentative draft” form) undergoing final review by the reporters. The draft ALI Government Ethics Principles are available on Westlaw and for purchase from ALI.

The discussion below compares the current (2000) MPC provisions to the ALI guidelines. One possible approach would be for the revised MPC Article 12 to endorse the ALI approaches, reserving for the MPC only those provisions which are unique to public procurement and which have not, therefore, been addressed adequately in the ALI guidelines.

Table of Contents

Background

Definitions

Article 12 includes, in Section 12-101, important defined terms:

Blind Trust means an independently managed trust in which the employee-beneficiary has no management rights and in which the employee-beneficiary is not given notice of alterations in, or other dispositions of, the property subject to the trust.
Confidential Information means any information which is available to an employee only because of the employee’s status as an employee of this [State] and is not a matter of public knowledge or available to the public on request.
Conspicuously means written in such special or distinctive format, print, or manner that a reasonable person against whom it is to operate ought to have noticed it.
Direct or Indirect Participation means involvement through decision, approval, disapproval, recommendation, preparation of any part of a purchase request, influencing the content of any specification or procurement standard, rendering of advice, investigation, auditing, or in any other advisory capacity.
Financial Interest means:
- ownership of any interest or involvement in any relationship from which, or as a result of which, a person within the past [year] has received, or is presently or in the future entitled to receive, more than [$ ] per year, or its equivalent; ownership of such interest in any property or any business as may be specified by the [Ethics Commission]; or
- holding a position in a business such as an officer, director, trustee, partner, employee, or the like, or holding any position of management.
Gratuity means a payment, loan, subscription, advance, deposit of money, services, or anything of more than nominal value, present or promised, unless consideration of substantially equal or greater value is received.
Immediate Family means a spouse, children, parents, brothers and sisters, [and such other relatives as may be designated by the Ethics Commission].
Official Responsibility means direct administrative or operating authority, whether intermediate or final, either exercisable alone or with others, either personally or through subordinates, to approve, disapprove, or otherwise direct [State] action.
Purchase Request means that document whereby a Using Agency requests that a contract be entered into for a specified need, and may include, but is not limited to, the technical description of the requested item, delivery schedule, transportation, criteria for evaluation, suggested sources of supply, and information supplied for the making of any written determination required by this Code.

Ethics Commission

Section 12-401 of the MPC contemplates a new “Ethics Commission” which would be established under the model code. Section 12-401, under Part D of the current MPC, states:

§12-401 [Ethics Commission].

Regulations. The [Ethics Commission] shall promulgate regulations to implement this Article and shall do so in accordance with the applicable provisions of the [Administrative Procedure Act] of this State.

COMMENTARY:

The [Ethics Commission] may particularly wish to require disclosure of substantial political contributions of contractors under applicable State or local laws.

Advisory Opinions. On written request of employees or contractors, the [Ethics Commission] may render written advisory opinions regarding the appropriateness of the course of conduct to be followed in proposed transactions. Such requests and advisory opinions must be duly published in the manner in which regulations of this [State] are published. Compliance with requirements of a duly promulgated advisory opinion of the [Ethics Commission] shall be deemed to constitute compliance with the ethical standards of this Article.
- Waiver. On written request of an employee, the [Ethics Commission] may grant an employee a written waiver from the application of Section 12-204 (Employee Conflict of Interest) and grant permission to proceed with the transaction to such extent and upon such terms and conditions as may be specified. Such waiver and permission may be granted when the interests of the [State] so require or when the ethical conflict is insubstantial or remote.

COMMENTARY:

Some jurisdictions may want to use existing agencies to issue regulations pertaining to standards of ethical conduct. Other jurisdictions may wish to create a special “Ethics Commission” for this purpose. Therefore, the words “Ethics Commission” are bracketed wherever they appear in this Article.
If an enacting jurisdiction chooses to create an [Ethics Commission], it will be necessary to adopt a regulation pertaining to its structure, duties, powers, and the appointment of its members.
Subsection (2) authorizes an advisory opinion procedure which will provide guidance to public employees and contractors as to whether a prospective course of conduct is proper.
Subsection (3) authorizes the [Ethics Commission] to waive the application of specified provisions of Article 12 to public employees when the public good will be served.
If invoked, the waiver provision provides an administrative mechanism for averting the necessity of litigating such questions as whether an employee has a conflict of interest, and if so, to what extent that employee’s further participation in the matter is barred. In Graham v. McGrail, 345 N.E.2d 888 (Mass. 1976), a dispute over such questions resulted in litigation which could have been avoided if a provision similar to Subsection (3) had been available.

The language highlighted in the commentary above is important because it signals that implementing jurisdictions “may want to use existing agencies to issue regulations pertaining to standards of ethical conduct.” The 2000 MPC thus already contemplates that state and local governments may have existing ethics commissions, and existing ethics regulations, already in place.

According to the National Conference of State Legislatures (NCSL), as of early 2025 the following states have ethics commissions in place:

The NCSL provides a compendium of state ethics materials here.

Sub-Committee 1: Employee Conduct (Chair: Seanna Brandmeir)

Employee Conflict of Interest (12-204)

The current 2000 version of the MPC provides as follows in Section 12-204, Employee Conflicts of Interest:

§12-204 Employee Conflict of Interest.

(1) Conflict of Interest. It shall be a breach of ethical standards for any employee to participate directly or indirectly in a procurement when the employee knows that:

(a) the employee or any member of the employee’s immediate family has a financial interest pertaining to the procurement;

(b) a business or organization in which the employee, or any member of the employee’s immediate family, has a financial interest pertaining to the procurement; or

(c) any other person, business, or organization with whom the employee or any member of the employee’s immediate family is negotiating or has an arrangement concerning prospective employment is involved in the procurement.

(2) Financial Interest in a Blind Trust. Where an employee or any member of the employee’s immediate family holds a financial interest in a blind trust, the employee shall not be deemed to have a conflict of interest with regard to matters pertaining to that financial interest, provided that disclosure of the existence of the blind trust has been made to the [Ethics Commission].

(3) Discovery of Actual or Potential Conflict of Interest, Disqualification, and Waiver. Upon discovery of an actual or potential conflict of interest, an employee shall promptly file a written statement of disqualification and shall withdraw from further participation in the transaction involved. The employee may, at the same time, apply to the [Ethics Commission] in accordance with Section 12-401(3) ([Ethics Commission], Waiver) for an advisory opinion as to what further participation, if any, the employee may have in the transaction.

(4) Notice. Notice of this prohibition shall be provided in accordance with regulations promulgated by the [Ethics Commission].

COMMENTARY:

The term “financial interest” used in this Section is defined in Section 12-101(5).

Looking to the ALI Government Ethics Principles

The open question is whether the MPC should incorporate the American Law Institute (“ALI”) Principles of Law – Government Ethics (“ALI Government Ethics Principles”), which offer a more updated and in-depth approach to these issues. The ALI Government Ethics Principles generally bar employee conflicts of interest, in Section 302, Avoiding Financial Conflicts of Interest:

(a) Except in an emergency requiring that the public servant act, a public servant should recuse from a governmental action that is so likely to substantially affect a financial interest either of the public servant or of someone so closely associated with the public servant that a reasonable observer with knowledge of the relevant facts would likely question whether the financial interest would influence the public servant’s performance of official duties.

(b) A public servant should not acquire or retain a financial interest that would require the public servant to recuse from a core responsibility of the public servant’s government position.

Section 311 of the ALI Government Ethics Principles, Prohibition on Participation in Particular Matters that Involve Financial Conflict of Interest, provides more detail:

(a) Except as provided in § 314, and except in an emergency that requires the public servant to act, a public servant shall not participate substantially in a particular matter that he or she knows or reasonably should know is likely to have a direct and predictable effect on a financial interest of the public servant or of a person associated with the public servant.

(b) Defined terms:

(1) Associated. A person is associated with a public servant if that person is:

(A) the public servant’s spouse, domestic partner, household member (i.e., someone who shares a residence with the public servant, except for someone who is only a market rate co-renter, landlord, or tenant of the public servant), minor child, or other dependent; or

(B) a person with whom the public servant is acting, has an arrangement to act in the future, or is in negotiations with to act in the future, as officer, director, trustee, general partner, agent, attorney, consultant, contractor, or employee.

(2) Direct and predictable effect on a financial interest. An effect is direct if there is a close causal link between the government’s action in a matter and the effect on that financial interest. An effect is predictable if there is a real, as opposed to speculative, possibility that the matter will affect the financial interest.

(3) Participate substantially in a matter. A public servant participates substantially in a matter if the public servant’s involvement is of significance to the matter, such as by making a decision or a recommendation, providing advice, participating in deliberations, investigating, analyzing, or taking any other action that involves the exercise of discretion. A public servant participates substantially in a matter by actively supervising a subordinate who participates substantially in it.

(4) Particular matter. A particular matter is any government action or initiative (including legislation, regulation, and policymaking) that involves deliberation or decision and is focused on the interests of an individual or a discrete and identifiable class of persons.

(c) This Section shall not apply to a part-time public servant who is appointed to an agency as a representative of a profession, industry, or other interest group pursuant to a law requiring members of the agency to include members of the interest group when:

(1) the function of the agency is solely to provide advice to government decision-makers; or

(2) the agency serves as a professional licensing or discipline board if the financial interest arises from the public servant’s employment with that profession, industry, or interest group. However, the exemption provided by this Section applies only with respect to matters that affect the profession, industry, or interest generally, and not to matters that affect the public servant or a person associated with the public servant specifically.

Advantages of the ALI Text

The ALI provision has many advantages over the current MPC 12-204 text:

The ALI provision speaks more broadly to a “particular matter,” while the MPC references only a “procurement.” The ALI provision, for example, would extend to rulemaking; the MPC provision would not.
The ALI provision, unlike the current MPC text, asks whether the government employee participated “personally and substantially” in the disqualifying matter, rather than (per the MPC) “directly or indirectly.”
The ALI provision provides more focus on the type of financial nexus at issue: one that will have a “direct and predictable effect on a financial interest of the public servant or of a person associated with the public servant.”

An important (and recurring) residual issue is whether there are procurement-specific issues that are not sufficiently addressed by the MPC or the ALI text. FAR 3.104-7, for example, an implementing regulation for the federal Procurement Integrity Act (see background), establishes special (and stricter) disqualification requirements for federal procurement officials, compared to the laxer Standards of Conduct for all executive-branch employees.

Personal Conflicts of Interest for government roles that are outsourced to private employees

Employee Disclosure (12-205)

The 2000 version of MPC 12-205 states:

§12-205 Employee Disclosure Requirements.
(1) Disclosure of Benefit Received from Contract. Any employee who has,
or obtains any benefit from, any [State] contract with a business in
which the employee has a financial interest shall report such benefit to
the [Ethics Commission]; provided, however, this Section shall not apply
to a contract with a business where the employee’s interest in the
business has been placed in a disclosed blind trust.

(2) Failure to Disclose Benefit Received. Any employee who knows or
should have known of such benefit, and fails to report such benefit to
the [Ethics Commission], is in breach of the ethical standards of this
Section.

(3) Notice. Notice of this requirement shall be provided in accordance
with regulations promulgated by the [Ethics Commission].

The problem is that the current version of Section 12-205 appears to trigger an obligation to disclose whenever an employee obtains any benefit from a contract with a business in which the employee has a “financial interest,” as defined by Section 12-101.

Under 12-101, a financial interest includes “ownership of any interest or involvement in any relationship from which, or as a result of which, a person within the past [year] has received, or is presently or in the future entitled to
receive, more than [$______ ] per year, or its equivalent,” or “ownership of such interest in any property or any business as may be specified by the [Ethics Commission],” or “holding a position in a business such as an officer, director,
trustee, partner, employee, or the like, or holding any position of
management.”

One way forward would be to rely on ALI Government Ethics Principles 301 (discussed above in detail as a possible replacement for MPC 12-204), which as noted above provides:

Restrictions on Employment of Present and Former Employees (12-208)

The 2000 version of MPC 12-208 reads as follows:

(1) Contemporaneous Employment Prohibited. Except as may be permitted by regulations or rulings of the [Ethics Commission], it shall be a breach of ethical standards for any employee who is participating directly or indirectly in the procurement process to become or be, while such an employee, the employee of any person contracting with the governmental body by whom the employee is employed. Notice of this provision shall be provided in accordance with regulations
promulgated by the [Ethics Commission].
(2) Restrictions on Former Employees in Matters Connected with Their Former Duties.
(a) Permanent Disqualification of Former Employee Personally Involved in a Particular Matter. It shall be a breach of ethical standards for any former employee knowingly to act as a principal, or as an agent for anyone other than the [State], in
connection with any:
(i) judicial or other proceeding, application, request for a ruling, or other determination;
(ii) contract;
(iii) claim; or
(iv) charge or controversy,
in which the employee participated personally and substantially through decision, approval, disapproval, recommendation, rendering of advice, investigation, or otherwise while an employee, where the [State] is a party or has a direct and substantial interest.
(b) One Year Representation Restriction Regarding Matters for Which a Former Employee Was Officially Responsible. It shall be a breach of ethical standards for any former employee, within one year after cessation of the former employee’s official responsibility, knowingly to act as a principal, or as an agent for anyone other than the [State], in connection with any: (i) judicial or other proceeding, application, request for a ruling, or other determination; (ii) contract; (iii) claim; or (iv) charge or controversy,
in matters which were within the former employee’s official responsibility, where the [State] is a party or has a direct or substantial interest.
COMMENTARY:
Where considered appropriate, a jurisdiction may desire to enact a more stringent provision which provides that, for a period of one year following termination of employment, an employee may not enter into any arrangement with any contractor if the employee had personally and substantially dealt with such contractor or had official responsibility concerning a contract with the contractor.
(3) Disqualification of Business When an Employee Has a Financial Interest. It shall be a breach of ethical standards for a business in which an employee has a financial interest knowingly to act as a principal, or as an agent for anyone other than the [State], in connection with any:
(a) judicial or other proceeding, application, request for a ruling,
or other determination;
(b) contract;
(c) claim; or
(d) charge or controversy,
in which the employee either participates personally and substantially through decision, approval, disapproval, recommendation, the rendering of advice, investigation, or otherwise, or which is the subject of the employee’s official responsibility, where the [State] is a party or has a direct and substantial interest.
(4) Selling to the [State] After Termination of Employment is Prohibited.
It shall be a breach of ethical standards for any former employee, unless the former employee’s last annual salary did not exceed [$______] to engage in selling or attempting to sell supplies, services, or construction to the [State] for one year following the date employment ceased.
The term “sell” as used herein means signing a bid, proposal, or contract; negotiating a contract; contacting any employee for the purpose of obtaining, negotiating, or discussing changes in specifications, price, cost allowances, or other terms of a contract; settling disputes concerning performance of a contract; or any other liaison activity with a view toward the ultimate consummation of a sale although the actual contract therefor is subsequently negotiated by another person; provided, however, that this Section is not intended to preclude a former employee from accepting employment with private industry solely because the former employee’s employer is a contractor with this [State], nor shall a former employee be precluded from serving as a consultant to this [State].

COMMENTARY:
(1) This Section places restrictions on the contemporaneous employment of present employees who are involved in the procurement process. It also places permanent and temporary disqualifications on the employment of former employees.
(2) Subsection (1) provides that no employee participating directly or indirectly in the procurement process may become an employee of parties contracting with the particular governmental body in which the employee is employed except as may be permitted under [Ethics Commission] regulations. For the definition of “direct or indirect participation,” Section 12-101(4) should be consulted.
(3) Subsection (2)(a) provides that former employees are permanently disqualified from knowingly acting as a principal, or agent for anyone other than the [State], in certain matters in which the employee had participated personally and substantially while employed by the [State] where the [State] is a party or has a direct and substantial interest.
(4) Under Subsection (2)(b) a former employee is also prevented from appearing for one year after cessation of the employee’s official responsibility before any court, department, or agency in connection with any matter which was within the employee’s official responsibility where the [State] is a party or directly and substantially interested.

(5) Subsection (3) prohibits businesses in which the employee has a financial interest from knowingly acting as principals, or as agents for anyone other than the [State], in any matters in which the [State] employee personally and substantially participates or which is the subject of the employee’s official responsibility where the [State] is a party or has a direct and substantial interest. The definition of “financial interest” is found in Section 12-101(5). This provision, which applies to businesses of employees, is distinguishable from Subsection (1), which is applicable to employees themselves. Section 12-204 (Employee Conflict of Interest) is also applicable only to employees and, unlike the immediate Section which relates to employment and business arrangements, is aimed at a broader array of financial interests.

(6) Subsection (4) provides that former high-level employees above a salary level to be prescribed by the enacting jurisdiction are prohibited from selling to the [State] for one year following termination of their employment.

The current MPC covers four different situations, and may be replaced by the ALI Principles of Government Ethics as follows:

Contractor business ownership by a current employee: The prohibition in 12-208(1) regarding contemporaneous ownership would appear to be barred by Sections 302 and 311 of the ALI General Principles, discussed above, barring conflicts of interest.
Former government employees: The MPC’s bar against former employees working with contractors would be dealt with more elegantly by Section 513 of the ALI Government Ethics Principles, which provide:

ALI Government Ethics Principles Section 513: (a) Except as provided in subsections (b), (c), and (d), a public servant who has left public service shall not appear before or communicate with the agency or department that employed the public servant with the intent to influence any decision or action of such agency or department on behalf of any firm, organization, or other person for a period of one year after leaving such agency or department.

(b) For public servants who held high-level positions, the restriction in subsection (a) applies to any unit within the agency or department that reported to or was subject to the public servant’s authority and shall apply for two years. All agency or department heads and elected officials and the members of the personal staffs of agency or department heads and elected officials shall be considered to hold high-level positions.

(c) The restrictions in subsections (a) and (b) shall not apply to:

(1) any uncompensated appearance in any public hearing conducted by any agency or legislative committee;

(2) any appearance or communication on behalf of any government agency; or

(3) any appearance or communication required by an agency or court of appropriate jurisdiction.

(d) With respect to the public servants covered by subsection (a) only, the restriction in subsection (a) may be waived by the jurisdiction’s ethics agency, on the request of the head of the former public servant’s agency or department, if the ethics agency finds that such waiver is in the best interests of the jurisdiction.

3. Disqualification of Business When an Employee Has a Financial Interest: This prohibition goes to contractor disqualification, and, because it addresses a situation when a contractor has an unfair competitive advantage, perhaps should be addressed as an organizational conflict of interest (see below)

4. Selling to the State After Termination of Employment: This post-employment prohibition could perhaps be addressed by adopting ALI Government Ethics Principles, Section 513, above.

Use of Confidential Information (12-209)

Current MPC 12-209 provides:

§12-209 Use of Confidential Information.
It shall be a breach of ethical standards for any employee or former employee knowingly to use confidential information for actual or anticipated personal gain, or for the actual or anticipated personal gain of any other person.
COMMENTARY:
The term “confidential information” is limited by its definition in Section 12-101(2) to information which is available only because of one’s status as a [State] employee.

MPC 12-101 defines “confidential information” relatively narrowly:

Confidential Information means any information which is available to an employee only because of the employee’s status as an employee of this [State] and is not a matter of public knowledge or available to the public on request.

The ALI Government Ethics principles, Section 512, deal with misuse of confidential information as follows, taking a very different approach which turns not on the confidential information but rather on influencing a matter in which the public servants was personally and substantially involved:

ALI Section 512: (a) Except as provided in subsection (b), a former public servant may not appear before or communicate with that public servant’s former government agency or department on behalf of another person or entity, or assist any other person or entity appearing before or communicating with such agency or department, in order to influence any action of such agency or department with respect to any particular matter in which the former public servant was personally and substantially involved while in government service.
(b) The prohibition in subsection (a) shall not apply if:
(1) the former public servant’s agency or department head determines, and the jurisdiction’s ethics agency agrees, that waiving the restriction in subsection (a) in whole or in part is in the best interests of the jurisdiction; or
(2) the former public servant was an elected official and the jurisdiction’s ethics agency finds that waiving the restriction in subsection (a) is in the best interests of the jurisdiction; or
(3) the former public servant’s action is pursuant to an order of a court with jurisdiction over the matter; or
(4) the former public servant is employed by and acting on behalf of another agency or department of the same government.

The commentary to Section 512 of the ALI Government Ethics principles makes clear that the ALI provision, like MPC 12-209, aims to block former employees from exploiting confidential information gained while the employees worked for the government:

Comment
a. Purpose and Scope. The classic “revolving door” concerns about misuse of confidential information acquired while in government service and the impact on public confidence in government resulting from a public servant “switching sides” are most acute when the former public servant appears before his or her former agency or department, communicates with that agency or department, or assists with an appearance or communication with respect to a particular matter in which the former public servant was personally and substantially involved while in government service.

Sub-Committee 2: Vendor Conduct (chair: Enrique Acosta)

Organizational Conflicts of Interest

As Trowbridge vom Baur pointed out in his history of the MPC, a key role for the MPC has always been to provide a model for federal grantees that want to ensure that their procurement processes, when using federal grant funds, conform to the Office of Management & Budget (OMB) grants guidance. The 2000 version of the MPC is silent on OCI’s.

The updated OMB grants guidance calls for (among other things) federal grantees to have organizational conflict of interest (OCI) protections in place. Specifically, section 200.318 of the OMB guidance says that if a “non-Federal entity [a grantee] has a parent, affiliate, or subsidiary organization that is not a State, local government, or Indian tribe, the non-Federal entity must . . . maintain written standards of conduct covering organizational conflicts of interest. Organizational conflicts of interest means that because of relationships with a parent company, affiliate, or subsidiary organization, the non-Federal entity is unable or appears to be unable to be impartial in conducting a procurement action involving a related organization.”

Resources on OCI’s

Proposed Federal Reforms: Federal legislative reforms and a proposed revamp of the federal OCI rules are summarized here.
Minnesota: Minn. Stat. 16C.02, subdivision 10a, defines OCI’s. Minn. Stat. 16C.04, subdivision 3, says that the Commissioner of Administration must take reasonable measures to address OCI’s, and allows for limited waivers. A state regulation, Minn. R. 1230.0750, addresses OCI’s. The state Department of Administration has promulgated an Organizational Conflict of Interest Policy.
South Carolina: Section 11-35-1840 of the South Carolina Code of Laws, within Title 11, Chapter 35, South Carolina Consolidated Procurement Code, provides that the board (the governing body of the State Fiscal Accountability Authority “may promulgate regulations to prescribe responsibilities, general rules, and procedures for identifying, evaluating, and resolving organizational conflicts of interest. The aims of such regulations are preventing the existence of conflicting roles that might bias a contractor’s judgement, and preventing unfair competitive advantage.” (History: 2019 Act No. 41 (S.530)) A South Carolina regulation, S.C. Code Regs. § 19-445.2127, discusses OCI’s and how they should be addressed. The South Carolina State Fiscal Accountability Authority, Division of Procurement Services, has adopted Organizational Conflicts of Interest: Procedures, Guidance and Information (vers. 1.0, June 2023).
Tennessee: Policy Number 2013-009, Central Procurement Office of the State of Tennessee, Business Conduct and Ethics Policy and Procedures (May 28, 2013, as amended Aug. 17, 2017) (see, e.g., section 8, which addresses OCI’s).

Contractor Compliance Programs

Contractor compliance systems are internal controls instituted by contractors (and other firms and organizations) to control risks within the enterprise. While these compliance systems were originally designed to address corrupt and unlawful contract, they can also be used to reduce other types of legal risk, such as organizational conflicts of interest (OCIs).

As the MPC reform initiative considers whether contractor compliance systems should be included in the model code, the following are the questions which, in the normal course, need to be addressed.

1. How does the current MPC or regulations address the issue?

The current MPC was published in 2000, before contractor compliance systems were broadly recognized. The MPC is therefore silent on contractor compliance.

2. In what way is the current MPC or regulation deficient?

See above: the MPC is silent on corporate compliance. But to meet the requirements of the U.S. Office of Management & Budget (OMB) Uniform Guidance for grantees — a core benchmark for the MPC, which is regularly relied upon by federal grantees (see above) — the MPC could include a framework for contractor compliance.

Section 200.318 of the OMB Uniform Guidance requires federal grantees to “maintain and use documented procedures for procurement transactions under a Federal award or subaward,” which must be “consistent with State, local, and tribal laws and regulations.” Grantees must “must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders.”

In Section 200.501(h), the Uniform Guidance describes the “compliance responsibility for contractors.” In most cases, the Uniform Guidance notes, “Federal award compliance requirements normally do not flow down to contractors. However, for procurement transactions in which the contractor is made responsible for meeting program requirements, the auditee must ensure those requirements are met, including by clearly stating the contractor’s responsibilities within the contract and reviewing the contractor’s records to determine compliance.”

To meet these obligations — to ensure that a contractor working with federal grant funds meets its legal obligations — a state or local government may wish to require that its contractors put compliance systems in place.

3. Does the proposed solution represent well-established, enduring practices foundational to a state-of-the-art state and local public procurement system?

4. Does the solution belong in the Code or the regulations, and why?

5. Would alternative provisions of the MPC facilitate the adoption of the MPC among the various states?

Cone of Silence

Prohibition against contingent fees (12-207)

The current MPC Section 12-207 reads as follows:

§12-207 Prohibition Against Contingent Fees.
(1) Contingent Fees. It shall be a breach of ethical standards for a person to be retained, or to retain a person, to solicit or secure a [State] contract upon an agreement or understanding for a commission, percentage, brokerage, or contingent fee, except for retention of bona fide employees or bona fide established commercial selling agencies for the purpose of securing business.
(2) Representation of Contractor. Every person, before being awarded a [State] contract, shall represent, in writing, that such person has not retained anyone in violation of Subsection (1) of this Section. Failure to do so constitutes a breach of ethical standards.
(3) Contract Clause. The representation prescribed in Subsection (2) of this Section shall be conspicuously set forth in every contract and solicitation therefor.

The commentary to MPC 12-207 states:

COMMENTARY:
The proscription stated in Subsection (1) shall not be understood to prevent an attorney, an accountant, or other professional person from representing a client in the pursuit of professional duties. For example. it would not prevent an attorney from representing a client in a bid protest nor would it prevent an attorney or an accountant from entering into contract negotiations with a [State] agency. However, it would preclude a professional or any other person engaged in the actual act of soliciting or selling to the [State] from being paid on a contingent basis.

For historical background on the bar against contingent fees, please see a paper for the GW Law State & Local Procurement seminar by GW Law alumnus Kevin Mansheim.

Sub-Committee 3: Gratuities and Kickbacks (12-206) (chair: Keith McCook)

MPC Section 12-206, Gratuities and Kickbacks

In assessing whether the revised MPC might reference the ALI Government Ethics Principles and “add on” procurement-specific provisions, it’s useful to review the current MPC Section 12-206, which deals with gratuities as follows:

§12-206 Gratuities and Kickbacks.

(1) Gratuities. It shall be a breach of ethical standards for any person to offer, give, or agree to give any employee or former employee, or for any employee or former employee to solicit, demand, accept, or agree to accept from another person, a gratuity or an offer of employment in connection with any decision, approval, disapproval, recommendation, preparation of any part of a program requirement or a purchase request, influencing the content of any specification or procurement standard, rendering of advice, investigation, auditing, or in any other advisory capacity in any proceeding or application, request for ruling, determination, claim or controversy, or other particular matter, pertaining to any program requirement or a contract or subcontract, or to any solicitation or proposal therefor.

(2) Kickbacks. It shall be a breach of ethical standards for any payment, gratuity, or offer of employment to be made by or on behalf of a subcontractor under a contract to the prime contractor or higher tier subcontractor or any person associated therewith, as an inducement for the award of a subcontract or order.

(3) Contract Clause. The prohibition against gratuities and kickbacks prescribed in this Section shall be conspicuously set forth in every contract and solicitation therefor.

MPC Section 12-206 has several problems:

The gratuities definition seems both too narrow (it covers only bad acts related to certain steps in procurement) and too broad (for example, it seems to sweep up former employees who are hired for their knowledge of a state procurement).
The kickbacks paragraph is too narrow, for unlike the federal Anti-Kickback Act (discussed below), the MPC’s kickbacks provision does not capture “downstream” kickbacks (from a prime to a subcontractor).
Both the gratuities and kickback paragraphs fail to reach giving or receiving “anything of value,” the term which (for example) is at the heart of the federal statute criminalizing state officials’ receipt of bribes under federally funded programs, 18 U.S.C. § 666, see Snyder v. United States, U.S. Sup. Ct. 23-108 (2024), and which is used under the federal Anti-Kickback Act, 41 U.S.C. § 8701 et seq.

Referencing the ALI Provision on Gifts/Gratuities

The ALI general provision on restricting gifts, Section 201 of ALI Government Ethics Principles, is much simpler than the MPC’s Section 12-206. The ALI provision states:

“A public servant should not solicit or accept any gift or engage in any financial transaction or financial relationship under circumstances in which a reasonable person would infer that the gift or transaction could affect the public servant’s performance of official duties.”

The ALI Government Ethics Principles, Section 211, defines “gift” as “anything of more than nominal value in any form that is given to the public servant or to anyone else at the public servant’s request unless there is an exception set forth in these Principles or the public servant has promptly paid fair market value for it.”

Like Section 12-207 of the MPC, the ALI Principles also explain that an ethical violation under the Principles may complement a criminal prosecution under other provisions of law. Id. § 201 comment b (“These general principles impose obligations separate from the prohibitions on bribes and gratuities and attempted bribes and gratuities in criminal law. A gift or transaction that is not a bribe or gratuity under the criminal law may still violate ethical restrictions.”).

One possible solution: the revised MPC might reference Section 201 of ALI Government Ethics Principles barring improper gifts, and then give examples (perhaps drawn from the 2000 version of the MPC) of improper gratuities related to procurement.

Keeping Kickbacks in the MPC

The ALI Government Ethics Principles do not address kickbacks, and so keeping the current MPC provision (12-206) which specially prohibits kickbacks seems a sound approach. This is especially important because although prime-subcontractor kickbacks can be a form of criminal commercial bribery, a procurement regime bars kickbacks for reasons that go beyond that inform commercial bribery statutes.

The MPC definition of “kickback” might be updated to match the definition set forth in the federal anti-kickback statute, 41 U.S.C. § 8701:

(2) Kickback.—The term “kickback” means any money, fee, commission, credit, gift, gratuity, thing of value, or compensation of any kind that is provided to a prime contractor, prime contractor employee, subcontractor, or subcontractor employee to improperly obtain or reward favorable treatment in connection with a prime contract or a subcontract relating to a prime contract.

This same definition of “kickback” is carried into the federal implementing regulation, FAR 3.502, and into the implementing clause, FAR 52.203-7.

MPC Might Call for Compliance Protections Against Kickbacks

The federal Anti-Kickback Act is unique because it called for contractors to erect protective compliance systems (“procedures”) against kickbacks, see FAR 52.203-7, many years before contractor compliance programs were generally required under FAR Subpart 3.10. Whether the MPC should reference contractor compliance requirements is a separate question for the MPC reform effort.

Ban on gifts to governments

Fiscal law considerations

The MPC’s Gratuities Provision — Lessons from Snyder v. United States

In Snyder v. United States, the Supreme Court interpreted 18 USC 666 to cover only gratuities, not bribes, in connection with federal programs. The slide presentation here discusses potential implications of Snyder for the MPC. The presentation concludes that Snyder does not force any obvious changes to the MPC text, but does raise useful questions that could help clarify the MPC.