Section 4.5035  Disclosure of Financial Interests and Potential Conflicts of Interest

a)         Disclosures of financial interests and potential conflicts of interest shall be obtained for all submissions to a vendor portal and from all bidders, offerors, vendors, or contractors.

1)         For the purposes of Section 50-35(a) of the Code, "bids and offers from responsive bidders, offerors, vendors, or contractors" means bids, offers and quotes received pursuant to any source selection method, except for sole source and emergency procurements, and that has an annual value of more than $50,000.

2)         Disclosures are not required in sole source and emergency contracts, but shall be obtained in whole or in part when practical and when the annual value exceeds $50,000.

3)         Disclosures shall be obtained for small purchases annually exceeding $50,000, except as otherwise provided in this Section.  If a small purchase could qualify as an emergency or sole source, disclosures are not required but shall be obtained when practical.

4)         In certain circumstances (e.g., emergency and sole source procurements) in which the vendor refuses or is unable to provide disclosures, the SPO may authorize the university to move forward with the transaction.  The university must provide documentation of efforts to obtain compliance in a form prescribed by the PPB and CPO-HE.

b)         For purposes of:

1)         Section 50-35(b) of the Code, "parent entity" means an entity that owns 100% of the bidding entity.

2)         Section 50-35(b)(1) of the Code, "contractual employment of services" means any contract to provide services to the State, whether as independent contractor or employee, that is by and between the State and the named individual.

c)          "Distributive Income" means income of a company after payment of all expenses, including employee salaries and bonuses and retained earnings, which is distributed to those entitled to receive a share of that income.  In the case of a for-profit corporation, distributive income means "dividends".  When calculating entitlement to distributive income, the entitlement shall be determined at the end of the company's most recent fiscal year.

d)        "Personal Services" shall be any contract for services subject to the Code, including, by way of example, professional and artistic services, repair services, cleaning and guard services, but excludes contracts with employees who are exempt from the Code under Section 1-10(b)(4).

e)         "Subject to Federal 10K Reporting" means subject to the reporting requirements of section 13 or 15(d) of the Securities Exchange Act of 1934.

f)         "10K Disclosure" means a report required under section 13 or 15(d) of the Securities Exchange Act of 1934.

g)         New disclosures are required on contract renewals.  New disclosures are not required for contract amendments.

h)         10K Disclosures

1)         Any vendor subject to federal 10K reporting requirements may submit its 10K to the university in satisfaction of the disclosure requirement of Section 50-35(b) of the Code.  The vendor may be required to identify the specific sections or parts in the 10K disclosure containing information, if any, pertaining to those who have an ownership interest or an interest in the distributive income of the vendor or its parent, or other information that the vendor knows or reasonably should know identifies a potential conflict of interest with the State.  If the financial interest or conflict of interest information requested by the university is not in the 10K, or in a document that may be submitted to the SEC in conjunction with or in lieu of the 10K, then that additional documentation shall be provided as well.

2)         10K disclosures are available for public review.  Any potential conflict of interest identified by the public and brought to the attention of the CPO-HE or SPO shall be investigated.

3)         In circumstances in which a vendor may submit a 10K disclosure in lieu of the specific disclosure requirements of the Code, the SPO or designee may consider information identified by the vendor in the 10K disclosure and any information disclosed pursuant to public review of the 10K disclosure in determining whether a potential conflict of interest exists.

i)          Form of Disclosure

The form of disclosures shall be prescribed by the CPO-HE and shall include at least the names, addresses and dollar or proportionate share of ownership of each person identified in this Section, their instrument of ownership or beneficial relationship, and notice of any potential conflict of interest.

j)          Intent of Disclosure

The disclosure required in subsection (i) is not intended to prohibit or prevent any contract.  The disclosure is meant to fully and publicly disclose any potential conflict to the CPO-HE, SPOs, their designees, and executive officers so they may adequately discharge their duty to protect the State. [30 ILCS 500/50-35(c)]

1)         Determination by Procurement Officer

A potential for a conflict of interest exists if a reasonable person would naturally and probably expect a conflict to come into existence even though one does not now exist.  Improbable or strained connections will not constitute a potential for a conflict.  The mere disclosure of one or more of the 10 relationships described in Section 50-35(b) of the Code is not sufficient, without a determination by the CPO-HE or SPO, to conclude a potential for a conflict exists.  When a potential conflict of interest is identified, discovered or reasonably suspected, it shall be reviewed by the CPO-HE or SPO, who will send the contract to PPB.  PPB shall recommend in writing to the CPO-HE whether to allow or void the contract, bid or offer or subcontract weighing the best interest of the State of Illinois.

2)         If the CPO-HE disagrees with the PPB's recommendation to void a contract, bid or offer, the Executive Ethics Commission will hold a hearing.  No contract with a potential conflict of interest shall be awarded before a hearing if the PPB recommends a contract, bid or offer be voided.  The written determination shall become a publicly available part of the contract, bid or proposal file.

3)         Requirements for Reasonable Care and Diligence

These thresholds for disclosure do not relieve the CPO-HE, SPO or their designees from reasonable care and diligence for any contract, bid, offer or submission to a vendor portal.  The CPO-HE, SPOs or their designees shall be responsible for using any reasonably known and publicly available information to discover any undisclosed potential conflict of interest and act to protect the best interest of the State of Illinois. [30 ILCS 500/50-35(e)]

4)         Inadvertent or Accidental Failure to Fully Disclose

Inadvertent or accidental failure to fully disclose shall render the contract, bid, offer, proposal, subcontract, or relationship voidable by the CPO-HE if he or she deems it in the best interest of the State of Illinois and, at his or her discretion, may be cause for barring from future contracts, bids, offers, proposals, subcontracts, or relationships with the State for a period of up to 2 years. [30 ILCS 500/50-35(f)]

5)         Intentional, Willful or Material Failure to Disclose

Intentional, willful or material failure to disclose shall render the contract, bid, offer, proposal, subcontract, or relationship voidable by the CPO-HE if he or she deems it in the best interest of the State of Illinois and shall result in debarment from future contracts, bids, offers, proposals, subcontracts, or relationships with the State for a period of not less than 2 years and not more than 10 years.  Reinstatement after 2 years and before 10 years must be reviewed and commented upon by the Governor, or by an executive ethics board he or she may designate. The comment shall be returned to the CPO-HE, who must rule in writing whether and when to reinstate.  [30 ILCS 500/50-35(g)]

6)         Other Procurements

In addition, all disclosures shall note any other current or pending contracts, bids, offers, proposals, subcontracts, leases or other ongoing procurement relationships the bidder, offeror, potential contractor, contractor, or subcontractor has with any other unit of State government and shall clearly identify the unit and the contract, offer, proposal, lease or other relationship.  [30 ILCS 500/50-35(h)]

7)         Continuing Obligation

The bidder, offeror, potential contractor, or contractor has a continuing obligation to supplement the disclosure required by this Section throughout the bidding process, during the term of any contract, and during the vendor portal registration process. [30 ILCS 500/50-35(i)]

(Source:  Amended at 43 Ill. Reg. 1781, effective February 15, 2019)