Opinion 89-12

This opinion represents the views of the Office of the State Comptroller at the time it was rendered. The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.

CONFLICTS OF INTEREST -- Construction Contracts -- (propriety of engineer, who intends to bid, preparing specifications and supervising work)
CONFLICTS OF INTEREST - - Engineering Services -- (propriety of engineer, who intends to bid, preparing specifications and supervising work)
INDEPENDENT CONTRACTORS - - Conflicts of Interest -- (propriety of engineer, who intends to bid, preparing specifications and supervising work)
PUBLIC CONTRACTS -- Specifications -- (propriety of engineer, who intends to bid, preparing specifications and supervising work)

GENERAL MUNICIPAL LAW, §§103, 800(5); 8 NEW YORK CODES, RULES AND REGULATIONS, §29.3: The employment by a fire district of a professional engineer as an independent contractor to prepare plans and specifications, and to supervise work, on a construction project when the engineer also is a one-half owner of a construction firm which may bid on the building project presents possible violations of ethical or professional conduct standards and of the competitive bidding statute.

You ask if a conflict of interest exists in the following circumstances involving a fire district contract. You state that the fire district has retained a professional engineer to prepare plans and specifications for the erection of a prefabricated building. You also state that the district is considering retaining the engineer to inspect and approve the work of the successful bidder. Since the engineer is a stockholder owning a one-half interest in a corporation which may bid on the building project, you are concerned that there will be a conflict if the engineer continues in his individual capacity as an engineer and his firm also submits a bid as contractor.

We note initially that Article 18 of the General Municipal Law, (§§800 et seq.) relative to conflicts of interest involving contracts of municipalities, by definition, covers the conduct of municipal officers or employees only (General Municipal Law §800[5]). Therefore, an independent contractor, such as the engineer, would not be governed by Article 18. However, even though Article 18 apparently is not applicable to the instant situation, we note that the State Education Department has promulgated regulations relative to the professional conduct of design professionals, including engineers (8 NYCRR 29.3). Of relevance to the situation here is paragraph 7 of section 29.3(a) of the regulation which provides that unprofessional conduct shall include:

participating as a member, advisor or employee of a government body in those actions or deliberations which pertain to services provided by the practitioner or his or her organization for such government body (see also section 29.3[a][4]).

While it would appear that this provision addresses the situation at hand, we suggest the State Education Department be contacted with respect to the applicability of its regulations. Also, we note that, prior to the adoption of the cited regulation, this Office had expressed the opinion that an agreement between a design professional and a municipality should provide that the professional's duties not include a review of his or her own work (1970 Opns St Comp No. 70-678, unreported). Clearly, when one is charged with the duty of reviewing his or her own work, the objectivity of such review is placed in question.

In addition to the possible ethical impropriety of an engineer inspecting his or her company's work, we note that such an arrangement may also impair the competitive bidding process. In Olean v Cattaraugus County, 30 AD2d 758, 291 NYS2d 861, a case which appears to have pre-dated the above-cited regulation, the county had retained a chief engineer to prepare specifications to furnish and install equipment for courthouses. The engineer also generally was to supervise all work and, among other things, decide any questions as to quality and acceptability of materials or work. The engineer was an officer of a company which was a subcontractor of the firm that was awarded the contract. The county was aware of the relationship between the engineer and the low bidder. The court, in determining that, under the circumstances, free competition was impaired, stated as follows:

Open competitive bidding was impaired, in this case, by the reasonable apprehension of prospective bidders that performance of the resulting contract would be supervised by [the engineer] and that he might exercise his powers under the specifications favorably to [the low bidder], if it obtained the contract, and unfavorably to its competitors, if they secured it. The contract awarded to [the low bidder] is, therefore, void and should be annulled because, under these circumstances, it violates the requirements of Section 103 of the General Municipal Law.

Respondent Board of Supervisors, if it desires to proceed with the project, should retain a Design Consultant who is independent of any potential bidder, and advertise for bids in accordance with section 103 of the General Municipal Law. [citations omitted] (30 AD2d 758, 759, 291 NYS2d 861, 863)

With respect to the preparation of bid specifications by a prospective bidder, in 1980 Opns St Comp No. 80-503, p 140, we concluded that, although the fact that specifications are drafted by a potential bidder does not necessarily mean that the specifications will be tailored for that firm to the exclusion of others (see Bailey v Colonna, 73 Misc 2d 299, 341 NYS2d 359), such specifications might at least be considered suspect in this regard. In support of our conclusion, we cited McCardle v Board of Estimate, 4 Misc 2d 1014, 347 NYS2d 349, affd 45 AD2d 822, 357 NYS2d 1009.

In McCardle, supra, the City of Mount Vernon hired a computer consultant to make recommendations as to how the city could computerize its administrative departments. The consultant prepared specifications to implement his recommendations. After the consultant finished the project and ceased working for the city, his company bid on the contract for which the consultant had drawn the specifications. The consultant's company was the sole bidder. The city awarded the contract to the sole bidder, but later an Article 78 proceeding was commenced to set aside the award of the contract. The court stated:

Any situation in which a consultant is called upon to make a study and prepare detailed specifications for a contract subsequently to be bid upon by others is fraught with the danger that the specifications thus drawn may confer a special advantage upon a particular bidder, to the detriment of the city. . . . Indeed, it would be very difficult to ascertain in any given case whether certain specifications were unduly restrictive, so as to unnecessarily narrow the field of prospective bidders . . . . (74 Misc 2d 1014, 1018, 347 NYS2d 349, 354)

We are not in a position to determine whether the specifications in this instance have been drafted to confer an unfair advantage on the firm of which the engineer is a stockholder or whether open competitive bidding would be impaired because the engineer will inspect and approve the work of the successful bidder. Assuming, however, the validity of the bidding process, if the engineer's firm is the lowest responsible bidder, we believe, as previously noted, that, based on the ethical concerns discussed above, the engineer should not inspect or approve his company's work.

April 10, 1989
John Pace, Esq., Counsellor at Law
West Islip Fire District