Michigan Public Purchasing Officers Association Buy the Bay Conference October 6, 2011

1. Ethics - Is Anyone Watching? Michigan Public Purchasing Officers Association Buy the Bay Conference October 6, 2011 Rob Rickard, CPPO Oregon Secretary of State’s Office Retired!

2. Anation, as a society, forms a moral person, and every member of it is personally responsible for his society. -- Thomas Jefferson

3. Words of Wisdom “We should learn from the mistakes of others. We don’t have time to make them all ourselves.” Groucho Marx

4. “Integrity is something that you cannot afford to compromise.” - Colin Powell

5. Objectives • Describe the foundational structure of ethical decision making. • Explain the value of ethical behavior • Learn to identify questionable ethical situations when they occur. • Learn ways to share Ethical Expectations with others. • Determine acceptable practices for interacting with suppliers.

6. Goal Be able to face yourself and your family in the morning.

7. Definitions* • Legalis defined as: permitted by law. Bottom line: not against the law • Ethicalis defined as: being in accordance with the rules or standards for right conduct or practice, esp. the standards of a profession. Bottom line: abides by standards that are set by an organization or group, but that alone may not make it the right thing to do. • Moral is defined as: founded on the fundamental principles of right conduct rather than on legalities, enactment, or custom. Bottom line: Standards set by you and doing what’s right for you. • Integrity is adherence to moral and ethical principles; soundness of moral character; honesty. Bottom line: A blend of the above to make decisions. Source: Dictionary.com Unabridged (v 1.0.1). Based on the Random House Unabridged Dictionary, Random House Inc. 10 Nov. 2006. * Provided by Christine Mitchell, CPPB, DTMB Purchasing

8. Food for thought… “Our character is what we do when we think no one is looking.” H. Jackson Brown Jr.

9. “When people are evil – they are evil. You are not going to change them.” Dr. Laura

10. Findings of Ethics Resource Center National U.S. Government Ethics Survey • 3,452 federal, state, and local government employees were polled. • Randomly selected nation-wide. • Interviews were conducted from June 25, August 15, 2007. • They found bad news and good news:

11. First The BAD News! • Misconduct across government is very high – nearly 6 in 10 government employees observed some form of misconduct in the past 12 months. • 1 in 4 employees works in an environment conducive to misconduct. • The strength of ethical culture in government workplaces is declining, while pressure to commit misconduct is growing.

12. Now the GOOD News!!! • More than 8 in 10 employees say that they feel prepared to handle situations inviting misconduct. • A sizeable majority (70 percent) of government workers who observe misconduct report it to management. • When both a well-implemented ethics and compliance program and a strong ethical culture are in place within a government organization, misconduct drops by 60 %, and reporting rises by 40%.

13. WHY BE ETHICAL?

14. Some Reasons for Being Ethical • Inner benefit: Virtue is its own reward • Personal advantage • Approval of those around you • So you don’t embarrass yourself or your agency • Religious satisfaction • Habit

15. Ethical Decision-Making Models • Universality • The Golden Rule • Kant’s Categorical Imperative • Consequentialism • Utilitarianism • Rules-utilitarianism • Non-materialism

16. Background • In 1970 a major car manufacturer was losing market share to Japanese imports. • To compete the manufacturer needed to produce a small, fuel-efficient car. • The objective was to produce a car weighing less than 2,000 pounds and costing less than $2,000 dollars. • Due to the impact of market share loss, it was a RUSH project. Styling and engineering were sacrificed.

17. Early Problems • Crash test faster than 20 miles per hour revealed that the gas tank would sometimes rupture, possibly spraying gas into the passenger area. • Sparks could explosively ignite this fuel. • Passengers could be trapped, and possible burned.

18. Justification to Continue Production • The design met all legal and government standards. • Management determined the car as designed was comparable in safety to several other cars being produced by competitors. • The company performed a cost-benefit study showing that the cost of engineering changes would not offset the benefits to the public.

19. Costs Versus Benefits • Costs to modify gas tanks for 12.5 million autos would be $11 per auto. ($11 X 12.5 Mil autos = $137 million) • Approximately 180 burn deaths, plus 180 burn injuries, and 2,100 burned autos. • Government statistics valued human life @ $200,000, insurance companies valued a serious burn injury @$67,000, and the residual value of a used sub-compact was $700.

20. Conclusions • The modification would have the benefit of preventing losses with a total value of only $49.15 million. (180 deaths X $200,000) + (180 injuries X $67,000) + (2,100 autos X $700) = $49.15 million. • The study concluded that it was not right to spend $137 million of society’s money to provide a benefit to society valued at $49.15 million. Taken from “Business Ethics”, by Manuel G. Velasquez.

21. Six Pillars of Character • Trustworthiness • Respect • Responsibility • Fairness • Caring • Citizenship Taken from “Making Ethical Decisions”, by Michael Josephson.

22. Pillar 1: Trustworthiness Trustworthiness includes such qualities as: • Honesty • Integrity • Reliability • Loyalty

23. Honesty Honesty can manifest itself in a couple different ways in our daily activities: • Communication – always accurate and not misleading • Conduct – Do we play by the rules?

24. Integrity A person with integrity is one who firmly adheres to a code or standards. • Four enemies of Integrity: • Self-interest • Self-protection • Self-deception • Self-righteousness

25. Reliability We accept the responsibility of making all reasonable efforts to fulfill our commitments.

26. Loyalty Many relationships create an expectation of allegiance, fidelity, and devotion. Loyalty is a responsibility to promote the interests of certain people, organizations or affiliations.

27. Pillar 2: Respect Follow the golden rule – Do unto others as you would have them do unto you.

28. Pillar 3: Responsibility Being accountable for what we do and who we are. It also means recognizing that our actions matter and we are (at least) morally on the hook for any consequences.

29. Pillar 4: Fairness • “Fairness involves equality, impartiality, openness, and due process.” - Josephson • It is the policy of the State of Oregon…. instill public confidence through ethical and fair dealing, honesty, and good faith….allow impartial and open competition, protecting both the integrity of the process and the competition. – ORS 279A.015

30. Pillar 5: Caring Caring is the heart of ethics, and ethical decision-making, because ethics is ultimately about good relations with other people.

31. Pillar 6: Citizenship …includes civic virtues and duties that prescribe how we ought to behave as part of a community.

32. Time Magazine “Many of the negative, highly visible stories we write about have their beginnings with a compromising of personal ethics.”

33. ORS 244.010Policy The Legislative Assembly hereby declares that a public office is a public trust, and that as one safeguard for that trust, the people require all public officials to adhere to the code of ethics set forth in ORS 244.040.

34. Michigan Says: • “Employment in the state classified service demands a high degree of loyalty and imposes high ethical standards on employees to ensure the integrity of state government…” Civil Service Rule 2.8.1 • “The citizens of Michigan deserve the utmost confidence in the integrity of state government. Leaders in state government should set an ethical example.” Executive Directive NO. 2003-1

35. Question! You are writing the specifications for equipment being purchased as part of your agency’s project. A friend works for a company that manufactures and sells the type of equipment being purchased. You call your friend and ask for some technical assistance concerning the equipment. Is that acceptable?

36. Factors that Contribute to Unethical Behavior • Fear of Retribution • Pressure to Perform • Greed • Aggressive People • Faltering Economy

37. Josephson Institute “Ethics is doing the right thing when it costs more than we want to pay…we have the courage to DO what is right.” Michael Josephson

38. But for… “BUT FOR” TEST • Davidson v. Oregon Government Ethics Commission (1985) But for your position as a public official would you have this opportunity?

39. Question “ If I attend a conference or training and they hand out pens, pencils, key chains, duffle bags and/or door or raffles prizes, are they gifts?” Can I keep it? Does the value of the gift/door prize change my answer?

40. Who is a Public Official? "Public official means any person who is serving the State of Oregon or any of its political subdivisions or any other public body of the state as an officer, employee, agent or otherwise, and irrespective of whether the person is compensated for such services.” ORS 244.020(14)

41. A Gift is… • Something of value that an official or relative accepts without paying a reasonable value. • The waiving of a debt, as well as the giving of some service or object. • Something received by an official that is not available to the general public for the same price or terms. • Any item or service given to a relative or a member of the household is a gift. ORS 244.020(6)

42. ORS 244.020(6)(a) Gifts Something of economic value given to a Public Official or his/her relatives or member of their household. Member of household: any person who resides with the public official. Relative definition is changed to include domestic partners and in-laws.

43. Gift Limit! • During a calendar year, a public official, a candidate or a relative or member of the household of the public official or candidate may not solicit or receive, directly or indirectly, any gift or gifts with an aggregate value in excess of $50 from any single source that could reasonably be known to have a legislative or administrative interest. (ORS 244.025) • The receipt of anything of value that is so de minimis that the appointing authority has determined that its receipt will not influence how the employee performs work or makes decisions. Limited to $20.00 ($80.00 in 3 mon.) CSR 2.8.7(b)(1&2)

44. Conflict of Interest Keys Oregon Government Standards and Practices laws define both “potential conflict of interest” and “actual conflict of interest”. ORS 244.020(1) &(12) MAY / COULD = Potential conflict SHALL / WILL = Actual conflict • “Guide for Public Officials”

45. Methods of Handling a Conflict of Interest • ORS 244.120 describes the process for handling actual or potential conflicts of interest.

46. ORS 244.350 Penalties for Violations Says that the OGEC or the court may impose civil penalties of up to $5,000.00 for violations of this Chapter. Further, any penalty imposed does not preclude additional penalty or sanction, including removal from office.

47. Purchasing with Public Funds • Do get a minimum of three quotes • Include all contractor and product requirements in your ITB / RFP or quote. • Make sure all vendors receive the same information and opportunity to compete for your business…At the same time! • Put it in writing! AND…

48. Documentation! • When using the phone • Create a form that helps you ask all vendors the same questions – take notes! • When using the fax machine • Send the same information to everyone on your vendor list – keep all responses in your files!

49. High Risk Areas to Breach Purchasing Ethics • Conflict of Interest • Kickbacks or Bribes • Circumventing Purchasing Authority • Back Door Selling • Employment

50. Conflict of Interest • Employees bidding on contracts. • Employees bidding on surplus property. • Employees conducting business with suppliers when there is a family or other personal connection. • Employee “marketing” product developed during normal job responsibilities.