THOMAS W. KELTY, Chief Counsel,
Illinois Municipal League

HAPPY ETHICAL NEW YEAR!

The recent celebration of the new year evokes memories of many traditions which accompany that celebration: resolutions, parties, remembering old friends and contemplating new laws becoming effective in Illinois. This year many new laws took effect that require attention by municipal officials, however, one law deserves special mention.

Public Act 85-1295 has emerged from Senate Bill 2002 and became effective January 1, 1989 (ch. 38, par. 33E-1 through 33E-11). The Act defines and creates several new of tenses in the Criminal Code which relate to the bidding, awarding and changing of public contracts. This law and its meritorious purpose should be welcome additions to Illinois Statutes for all municipalities. However, there are pitfalls that can trap the most innocent official that should be considered.

The Act begins with the findings of the General Assembly with which no one would disagree. The General Assembly states that the cost of goods, services and construction increases and the quality of those items decreases when contracts are awarded on any other basis than through "independent noncollusive submission" of bids and awarding of contracts based upon "criteria publicly announced in advance." While these findings are true, the expansive nature of the type of contracts encompassed by the Act could create difficulty for the municipal official.

The Act defines "public contract" as "any contract for goods, services or construction let with or without bid by any unit of state or local government." (Emphasis Added.) Whether the contract is a multi-million dollar construction contract or a contract to buy spark plugs from the local wholesaler, it is covered by the Act.

Whether there is one seller of spark plugs in the community who agrees to sell on a cost plus basis to the municipality or the purchase of spark plugs occurs after a formal bidding process, the Act applies to the contract. Therefore, the balance of the provisions of the Act are of critical importance to all municipal officials in all communities.

The Act then continues by defining seven offenses: Bid rigging, Bid rotating, Acquisition or disclosure of bidding information by public official, Interference with contract submission and award by public official, Kickbacks, Bribery of inspector employed by contractor, and Change orders. Each of the seven offenses defined is a felony that is punishable by a fine and imprisonment.

Bid rigging is an offense that would occur between competitors for a contract. The offense occurs when persons who would be competing for the award of a contract provide information to each other regarding prices or other terms of their bids that they would otherwise not disclose to a competitor or submit a bid "of such a price or other material term or terms that he does not intend his bid to be accepted." This offense could most often occur in bids submitted based upon prepared specifications in which two competitors desire, for whatever reason, that one should gain an advantage in the submission of a bid. Conviction on a charge of bid rigging not only subjects the violators to criminal penalties but also bars them for five years from the date of conviction from bidding on any contract by any unit of state or local government.

Bid rotating occurs when contract bidders submit

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bids in a pattern on periodic contracts that are similar in nature with the intent of causing the bids to rotate among the participants in the scheme. For example, three spark plug salesmen would agree that each year one of them would submit the low bid and the other two would submit high bids in order that the business would circulate among them. Any person convicted of bid rigging is subject to a permanent bar from bidding on any public contract in addition to the criminal penalties.

Kickbacks and bribery of an inspector employed by a contractor are similar offenses. Both involve the payment of money to a party in an attempt to influence certain actions pursuant to the contract. In the case of kickbacks, the payment is made in an attempt to influence the award or performance under a contract. Any unit of government may recover, in a civil action, a penalty from any person who pays a kickback in an amount which is double the amount of the kickback. In addition, the section providing the penalties for paying a kickback does not limit the ability of any unit of government to recover other damages as a result of a kickback being paid. The section prohibiting bribery of an inspector is to prevent contractors from attempting to influence the judgment of an inspector with respect to certification or approval of any material or services provided by a subcontractor to a contractor with a unit of local government. In addition to prohibiting such bribery, the section provides that failure to report an offer of such a bribe to law enforcement officials is also a felony.

The Act provides a restriction on the method by which change orders under contracts may be validly executed. The section applies only to change orders which authorize an increase or a decrease in a cost of a contract by ten thousand dollars or more or a change in the completion date by thirty days or more. The section requires that change orders within the scope of the section require a determination "in writing by the unit of State or local government or its designee on whose behalf the contract was signed, that the circumstances said to necessitate the change in performance were not reasonably foreseeable at the time the contract was signed, were not within the contemplation of the contract as signed or are in the best interest of the unit of state or local government . . ." Therefore, absent a designation in a contract of an authorized representative of the municipality, the governing body itself must authorize change orders which significantly change the price or time of performance of the contract. Failure by a municipal official or employee to obtain such a determination prior to execution of the change order results in a violation of this section which could subject the offender to substantial criminal penalties.

The other two offenses defined by the Act are the provisions pertaining to acquisition or disclosure of bidding information and interference with contract submission and award. Both of these sections affect the way in which public officials may respond to bidder inquiries pertaining to the bidding process on any contract of a municipality.

The prohibition against certain disclosures of bidding information provides that an official or employee of a unit of local government may not open a sealed bid at a time or place other than as specified in the invitation to bid, nor outside the presence of witnesses required by the applicable statute or ordinance. Also, an official or employee may not disclose "any information" related to the terms of a sealed bid or any bidder's response to the request for bids. The only exception provided is where the disclosure made is also made "generally available to the public." This language does not restrict the availability of the information solely to those persons bidding on the contract. Periodically, the municipality will correct minor errors in invitations to bid or will provide explanations of unclear portions of invitations to bid to those persons who have requested copies of the specifications upon which the bid will be based. However, under this provision, the information may only be provided if it is made generally available to the public.

The provision prohibiting interference with contract submissions and awards prohibits three acts, requires one act and creates an exemption from the provisions of the section.

First, no public official or employee may provide any information regarding the proposed contract, the

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specifications or the invitation to bid to any contractor, bidder or proposed bidder when inclusion of the information in the bid would likely influence the acceptance of the bid. Such information may be provided if it is given in a "publicly available invitation to bid, pre-bid conference or a solicitation for contracts in a sheltered market procurement. (A "sheltered market procurement" is a procedure for the inclusion of minority and female contractors in public works projects pursuant to the "Minority and Female Business Enterprise Act.") Strictly interpreted, this provision prohibits any clarification of specifications through any means, except, perhaps through the conduct of a pre-bid conference.

Second, no employee or official may inform a bidder that a bid will be accepted (i.e., conditioned upon) only if certain individuals are included as subcontractors.

Third, any employee or official violates the Act if they knowingly award a contract violating the provisions of the section (i.e., prohibited dissemination of information or communications regarding such contractors) .

A bidder, who knows of a violation of the Act, violates the Act by failing to report the violation to the Attorney General or the local State's Attorney. The only exception is when the acts prohibited occur pursuant to "procedures established by federal or State minority or female owned business enterprise programs."

It is these provisions that should be carefully reviewed and understood by all municipal officials and employees. No clarification, modification or additions should be given to any bidder, proposed or actual, without a clear understanding of the provisions of this Act. Regrettably, an innocent conveyance of explanatory information could be considered to be a felonious act. Any official doubting the correctness of an inquiry by a bidder or a disclosure of information should consult their municipal attorney before proceeding.

Finally, the Act requires certain certifications by bidders and contractors regarding compliance with the Act. Each bid or contract must contain a certification that the contractor is not barred from bidding as a result of a violation of the bid rigging or bid rotating sections of the Act. The municipality is required by the Act to provide the appropriate forms for certification to the contractors.

The uniquely American form of government derives part of its power from the trust that its citizens place in officials that are elected to execute the will of the people. The Illinois statutes that govern these officials in their official dealings on behalf of the government and, hence, the people, set a high and demanding standard. However, no official, except the dishonest one, need fear the operation of their provisions. They merely prescribe a standard that the citizens are entitled to expect as a result of the trust that they have placed in those officials. •

News items and photographs of interest indicating new developments and progress in your municipality are always of interest to our readers. You are urged to send such information to the ILLINOIS MUNICIPAL REVIEW for publication. Be sure your information is complete. All photographs should be black and white glossy prints. —Editor

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