Ethics Oversight of Consultants

Consultants often fall between the cracks of government ethics. They are contractors, but professionals rather than suppliers or construction companies, and they often act just like government officials, only they're not on the payroll. And yet the ethics rules that apply to government officials often do not apply to consultants. Often, ethics commissions don't even have jurisdiction over consultants.

An audit report done by the Los Angeles City Controller for the Los Angeles Unified School District (LAUSD) just came out. It was commissioned after a consultant acting as a government employee allegedly funneled business to a company he co-owned. The school district, which had done a huge school construction program, wanted to see if there were other conflicts of interest. It calls its consultants CPs, that is, contract professionals.

Needless to say, the controller found conflicts, especially for the period 2002-2006, before more oversight procedures were established. "While LAUSD has a requirement that CPs selected to participate in hiring panels should not be from the same firm as the CP seeking to be hired, we found that in more than 225 instances during this time, a CP or a regional director sat on a panel which selected a person employed by their employer – thus creating a potential conflict of interest."

In fact, 80 CPs were hired without any panel being involved at all. But the biggest concern of the auditor was four instances where someone participating in a hiring panel "stood to receive a direct financial benefit because they selected a CP from a firm in which they had an investment." In other words, a direct conflict is far more serious than indirect conflicts.

But in the real world, this isn't true. Anyone who knows that consultants are picking people from their own firms or are getting jobs without any vetting at all will think that the process is rigged and that the people involved are just helping their friends help themselves. This audit shows that even limited oversight prevented much abuse of the contracting process.

The controller recommends that consultants file a statement of economic interests not only once a year, but every time they are hired and when their contract period ends. It also recommends that consultants get ethics training.

Ethics rules should apply to consultants, as the LAUSD has apparently done with its Contractor Code of Conduct. It is good to pull out rules that apply especially to contractors, with training that uses case studies that contractors will recognize, but I'm not sure whether a separate code is really necessary. This code of conduct goes far beyond ethics laws, and makes references to state and local laws. As long as the enforcement process is clear and the enforcer independent, this would seem to be a good way of giving contractors guidance on the many issues they face when working for a city. But here's the enforcement passage in the LAUSD code:

While Contractors and their Representatives are expected to self-monitor their compliance with this Contractor Code of Conduct, the provisions of this Code are enforceable by LAUSD. Enforcement measures can be taken by LAUSD’s Procurement Services Group or Facilities Contracts Branch in consultation with the Contract Sponsor, the Ethics Office, the Office of the General Counsel, and the Office of the Inspector General. The Office of the Inspector General may also refer matters to the appropriate authorities for further action.

This setup leaves a lot of room for conflict between enforcers, for enforcers not to take responsibility for oversight, and for misconduct to fall between the cracks.

The rules should include serious fines for being on a panel that selects someone from your own firm, and any contract not approved by an independent panel should be automatically void (as in Section D(1) of the LAUSD Contractor Code of Conduct (p. 3)), with money paid under the contract returned. Training is good, disclosure is good, but when a big construction regime is in process, it is important that it be accompanied by heightened procedures (including review of disclosure forms for possible conflicts) and both more focused rules and the full application of regular ethics rules to consultants.

In smaller cities and towns, school construction projects such as this one are often overseen by an ad hoc, volunteer school building commission, with the ethics commission brought in only when there is a complaint. This is not enough. Oversight responsibilities must be clearly delineated and the personnel must be professional, even if yet other consultants are required.

This extensive use of consultants makes me question the adequacy of the City Ethics Model Code consultants provision, which only applies certain provisions to consultants, at least with respect to large cities and large projects.

By the way, it's worth a visit to the LAUSD Ethics Office website. The first treat is its Ethics News flashes at the top of the homepage, with links to news sources on the web. The ethics news stories involve local governments as well as national, non-governmental ethics matters. There's an ethics IQ test, a quiz specially for contractors and, for post-secondary officials, there's an Ethics U. For the more old-fashioned official, there are several publications, including an "Ethics Gift Wizard" and, more relevant to the rest of this post, "Doing Business Ethically with LAUSD."

And best of all, there's an Ask Ethics Helpline. What a great idea!

Robert Wechsler
Director of Research-Retired, City Ethics

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