STATE OF NEW YORK
________________________________________________________________________
7916
2017-2018 Regular Sessions
IN ASSEMBLY
May 18, 2017
___________
Introduced by M. of A. PEOPLES-STOKES -- (at request of the State Comp-
troller) -- read once and referred to the Committee on Governmental
Operations
AN ACT to amend the state finance law, in relation to establishing the
ethical standards for state agency contractors act
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Legislative findings and intent. The legislature finds that
2 to a great extent, state agencies and public authorities rely on
3 contractors to help accomplish a broad array of complex, inherently
4 governmental and mission-critical functions. State agencies and public
5 authorities contract for services that involve the contractors' exercise
6 of judgment, providing operational and policy advice to state officers
7 and employees, overseeing other contractors and, at times, working
8 alongside state officers and employees on the same projects. This inter-
9 mingling of public and private workforce reveals a need to address what
10 processes are in place to ensure the integrity of government operations
11 and maintain public confidence.
12 While a majority of contractors deliver services with integrity, some
13 contractors could, nonetheless, engage in misconduct during the course
14 of the contract term - for example, engaging in acts for personal finan-
15 cial gain, accepting inappropriate gifts, or inappropriately negotiating
16 for certain jobs.
17 Furthermore, in carrying out the day-to-day tasks for state agencies
18 and public authorities, contractors often require extensive access to
19 and use of nonpublic government information. Protection of nonpublic
20 information is critical, because unauthorized disclosure can erode the
21 integrity of government operations and lead to situations in which such
22 information is misused for private gain, potentially harming important
23 interests such as the privacy of individuals, commercial business
24 proprietary rights, security, and law enforcement.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD00495-01-7
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1 The legislature further finds that opportunities for organizational
2 and personal conflicts of interest by contractors, and the misuse of
3 nonpublic information by contractors through negligence or misconduct,
4 can have a significant effect on the government's ability to perform its
5 primary functions, potentially resulting in inappropriate use of taxpay-
6 er dollars, damaged reputation, and loss of public trust.
7 The legislature further finds that while few cases of improper conduct
8 by contractors have been publicly identified, safeguards are lacking to
9 identify whether organizational or personal conflicts of interest exist
10 among contractors. The cost to the state of contractors or their employ-
11 ees engaging in actions reaping organizational or personal gain - an
12 outcome increasingly likely based on sheer numbers - would likely never
13 be known, let alone calculable, as long as there is no transparency.
14 § 2. Short title. This act shall be known and may be cited as the
15 "ethical standards for state agency contractors act".
16 § 3. The state finance law is amended by adding a new section 148 to
17 read as follows:
18 § 148. Ethical standards for contractors performing inherently govern-
19 mental and mission-critical functions or rendering services pursuant to
20 an information-risk contract. 1. For the purposes of this section, the
21 following terms shall have the following meanings:
22 (a) "State agency contractor" or "contractor" shall mean an individ-
23 ual, subcontractor, or other agent of the contractor who, or an entity
24 which, pursuant to contract or other arrangement with a state agency and
25 under the supervision or oversight of a state officer or employee, (i)
26 performs or assists a state agency in the performance of inherently
27 governmental activities and mission-critical functions, or (ii) renders
28 services pursuant to an information-risk contract.
29 (b) "State agency" shall mean any state department, or division,
30 board, commission, or bureau of any state department; the state univer-
31 sity of New York or the city university of New York and the independent
32 institutions operating statutory or contract colleges on behalf of the
33 state; any public benefit corporation, public authority or commission at
34 least one of whose members are appointed by the governor other than a
35 local authority as defined in section two of the public authorities law;
36 and any governmental entity performing a governmental or proprietary
37 function for the state, other than the legislature or the judiciary.
38 (b-1) "Employee" shall mean any officer, employee, agent or represen-
39 tative of a state agency contractor.
40 (c) "Inherently governmental and mission-critical function" shall mean
41 a function that involves the discretionary exercise of state government
42 authority, or involves monetary transactions and entitlements including,
43 but not limited to, program management support, systems engineering,
44 technical assistance, or contract and acquisition support. Inherently
45 governmental and mission-critical functions shall include, but are not
46 limited to:
47 (i) The determination of state budget priorities, policy, guidance or
48 strategy;
49 (ii) The determination of state agency policy, such as determining the
50 content and application of regulations;
51 (iii) The direction and control of state employees;
52 (iv) The selection or non-selection of individuals for state govern-
53 ment employment, including the interviewing of individuals for employ-
54 ment;
55 (v) The approval of position descriptions and performance standards
56 for state employees;
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1 (vi) The approval of state government property to be acquired or
2 disposed of and on what terms; provided, however, a state agency may
3 give contractors authority to dispose of property at prices within spec-
4 ified ranges and subject to other reasonable conditions deemed appropri-
5 ate by such state agency;
6 (vii) Approving any state contractual documents, including documents
7 defining requirements, incentive plans and evaluation criteria;
8 (viii) Awarding, administering or terminating contracts;
9 (ix) Determining whether contract costs are reasonable, allocable and
10 allowable;
11 (x) The approval of state licensing actions and inspections;
12 (xi) The conduct of criminal investigations; or
13 (xii) The control of prosecutions and performance of adjudicatory
14 functions.
15 (d) "Nonpublic information" shall mean information under a state agen-
16 cy's authority or control, the unauthorized access to, or loss, misuse,
17 or modification of, which may compromise important interests, such as
18 personal or medical privacy, government security, law enforcement,
19 proprietary rights, or the conduct of state agency programs. Nonpublic
20 information includes, but is not limited to, information that:
21 (i) is exempt from disclosure under article six of the public officers
22 law or otherwise protected from disclosure by law, rule or regulation;
23 is private information, the release of which would constitute a security
24 breach under section two hundred eight of the state technology law; has
25 been designated as confidential by a state agency; has not been dissem-
26 inated to the public and is not authorized to be made available to the
27 public on request; is personal identifying information including, but
28 not limited to, a person's name, social security number, birth date,
29 health/medical information, financial information, or taxpayer data; or
30 is source selection information including, but not limited to, source
31 selection plans, technical evaluation plans, cost evaluations or rank-
32 ings;
33 (ii) is business proprietary information relating to trade secrets,
34 operations, apparatus, or processes; or
35 (iii) is state agency information related to continuity of operations
36 information; security management information, planning information,
37 budgeting information, protection services/ building security informa-
38 tion, or personnel records.
39 (e) "Proprietary information" shall mean information including, but
40 not limited to, source selection, business proprietary information or
41 personal information as such term is defined in section ninety-two of
42 the public officers law.
43 (f) "Information-risk contract" shall mean any contract pursuant to
44 which certain state agency contractors may:
45 (i) receive access to information relating to a state agency's deli-
46 berative processes, management operations, or staff, which is not gener-
47 ally released or available to the public;
48 (ii) have access to proprietary information that could be exploited
49 for financial gain; or
50 (iii) have access to nonpublic information.
51 (g) An "organizational conflict of interest" shall mean a state agency
52 contractor's present or currently planned interests, including business
53 or relationships with other private sector entities, which either
54 directly or indirectly relate to the work to be performed under a state
55 agency contract and (i) which may diminish its capacity to give impar-
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1 tial, technically sound, objective assistance or advice, or (ii) may
2 result in it having an unfair competitive advantage.
3 (h) A "personal conflict of interest" shall mean a state agency
4 contractor's employee's performance of services or exercise of
5 discretion under a state agency contract, in a way to benefit such
6 contractor's employee or his or her relative including, but not limited
7 to, financial conflicts of interest where the contractor's employee or
8 relative stands to gain or lose financially from the contractor's work;
9 lack of impartiality; acceptance of gifts valued at fifty dollars or
10 more alone or in the aggregate within a given twelve-month period from
11 an individual or entity reviewed, audited, or investigated under the
12 state agency contract, or from anyone who could be affected by the
13 performance of the contractor's duties.
14 (i) "Relative" shall mean any person living in the same household as
15 the individual and any person who is a direct descendant of that indi-
16 vidual's grandparents or the spouse of such descendant.
17 (j) "State agency contract" shall mean a contract with a state agency
18 to perform an inherently governmental and mission-critical function, or
19 an information-risk contract.
20 2. Any contract executed by a state agency with a contractor perform-
21 ing or assisting or providing advice to a state agency in the perform-
22 ance of an inherently governmental and mission-critical function, and
23 any information-risk contract shall:
24 (a) prohibit a contractor from organizational conflicts of interest
25 with respect to such state agency contract except to the extent that
26 such contractor has disclosed such conflict to the state agency and
27 proposed a method of mitigation or elimination satisfactory to such
28 agency;
29 (b) prohibit contractors' employees from taking any action that would
30 constitute a personal conflict of interest as defined in paragraph (h)
31 of subdivision one of this section and provide that such agency may,
32 when a contractor discloses that a personal conflict of interest has
33 occurred, take appropriate action;
34 (c) include a nondisclosure agreement or clause requiring the contrac-
35 tor to certify that they have an executed nondisclosure agreement for
36 each individual employed by such contractor pursuant to a state agency
37 contract as a condition of access to nonpublic information and requiring
38 that agreements between such contractors and third parties must protect
39 the state agency's nonpublic information;
40 (d) require contractors to obtain written consent from the state agen-
41 cy prior to disclosing nonpublic information to subcontractors or
42 others;
43 (e) require contractors to train at least biannually its employees and
44 subcontractors, if any, rendering services on state agency contracts
45 regarding organizational conflicts of interest, personal conflicts of
46 interest and protection of nonpublic information and the consequences
47 for unauthorized disclosure or misuse of such information;
48 (f) require contractors to immediately notify the state agency regard-
49 ing any such organizational or personal conflicts of interest, or the
50 misuse or unauthorized disclosure of nonpublic information; and
51 (g) impose consequences for violations.
52 3. Contractors shall be responsible for the security of any system
53 relating to nonpublic information whether such system is maintained
54 electronically or otherwise.
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1 4. Contractors involved in source selection and related activities
2 supporting award of state agency contracts shall be subject to laws and
3 regulations to prevent release of nonpublic information.
4 5. In addition to the requirements of subdivisions two, three and four
5 of this section, contractors performing inherently governmental and
6 mission-critical services or information-risk contract services for
7 which more than five million dollars is to be paid and involving work in
8 excess of one hundred twenty days shall be required to have a written
9 code of business ethics and conduct. The provisions of this subdivision
10 shall not apply to contracts for the purchase of commodities.
11 6. The comptroller, in his or her discretion, may promulgate rules and
12 regulations addressing the appropriate content for a model written code
13 of business ethics to be utilized by contractors and employees of such
14 contractors performing inherently governmental and mission-critical
15 functions, or rendering information risk contract services, for the
16 purpose of preventing organizational and personal conflicts of interest
17 and protecting nonpublic information.
18 (a) The comptroller's regulations may include safeguards to identify
19 and prevent organizational and personal conflicts of interest including,
20 but not limited to:
21 (i) prohibiting the contractor's employees from participating in a
22 state agency contract in which they have a personal conflict of inter-
23 est, absent notification to the contracting state agency and specific
24 approval to proceed following mitigation;
25 (ii) requiring the contractor's employees avoid the appearance of loss
26 of impartiality in performing contracted duties;
27 (iii) requiring the contractor to review and address any of its
28 employees' personal conflicts of interest before assigning them to
29 deliver services;
30 (iv) prohibiting the contractor's employees from using nonpublic
31 information obtained while performing work under contract for personal
32 gain;
33 (v) prohibiting the contractor's employees who provide procurement
34 support services from initiating a future employment contact or future
35 employment contacts involving a bidding state agency during an ongoing
36 procurement;
37 (vi) imposing limits on the ability of the contractor and its employ-
38 ees to accept gifts in connection with contracted duties;
39 (vii) prohibiting misuse of contract duties to provide preferential
40 treatment to a private interest; and
41 (viii) establishing disciplinary processes for violations of such
42 codes.
43 (b) Such regulations shall require contractors to:
44 (i) report any organizational or personal conflict of interest
45 violations by an employee of such contractor to the applicable state
46 agency contracting officer as soon as identified;
47 (ii) maintain effective oversight to verify compliance with safe-
48 guards; and
49 (iii) establish and maintain procedures to screen for potential
50 conflict of interest for all employees either on a task by task basis or
51 annually, through a financial disclosure statement.
52 7. When review of contractor disclosure pursuant to paragraph (a) of
53 subdivision six of this section reveals an actual or potential conflict
54 of interest, financial conflict of interest, impaired impartiality or
55 misuse of information and authority, contractors shall establish proce-
56 dures to mitigate such conflict, impairment or misuse including, but not
A. 7916 6
1 limited to, disqualification from being assigned to the government task,
2 reassignment or divestiture.
3 8. In addition to the vendor responsibility process, state agencies
4 may conduct regular background checks of state agency contractors and
5 employees of such contractors performing inherently governmental and
6 mission-critical functions, or rendering information risk contract
7 services. Such background checks may include, at the state agency's
8 discretion, fingerprinting of the state agency contractor's employees
9 performing inherently governmental and mission-critical functions, or
10 rendering information risk contract services or its personnel.
11 9. A contractor's failure to implement an adequate system for employee
12 conflict certification, to disclose or correct instances of personnel
13 misconduct, or to take appropriate disciplinary measures against an
14 employee who commits misconduct may be grounds for contract termination
15 by the state agency.
16 § 4. This act shall take effect on the one hundred eightieth day after
17 it shall have become a law and apply to contracts executed on and after
18 such date; provided, however, that effective immediately, any rule or
19 regulation necessary for the timely implementation of this act on its
20 effective date is authorized and directed to be made and completed on or
21 before such effective date.
