What is a conflict of interest?

A conflict of interest means that because of other activities or relationships with other persons, you are unable to render impartial assistance or advice; your objectivity in performing the work is or might be impaired; or you have an unfair competitive advantage. The conflict could be either personal or organizational.

What is a personal conflict of interest?

Personal conflicts result from personal activities or relationships that affect the contract work. Personal conflicts of interest occur when a faculty member, any of his/her family, or associated entity, receive personal financial reward from an external company, agency, institution, individual, or any other entity in a manner which may bias the individual’s judgment, or compromise his/her ability to carry out the contractual obligation to the university for teaching, research, administrative and service responsibilities. 

An actual or potential conflict of interest exists when it is determined that a significant financial interest could affect the design, conduct, or reporting of activities proposed. (Faculty Handbook, 2.16.3.4)

What is an organizational conflict of interest?

Organizational conflicts of interest are conflicts caused by activities or relationships of the university. The federal government has organizational conflict of interest rules to ensure that the contractor is not biased because of its financial, contractual, organizational, or other interests which relate to the work under the contract (FAR Subpart 9.5). For example, the university would be precluded from reviewing its own work or work that could impact any of the university’s interests.

In addition, the federal rules prevent any organizational conflicts that could provide an unfair competitive advantage to the university. For example, an organizational conflict of interest would prevent the university from proposing on work for which it had developed the specifications or work statements.

Are there any state laws that address conflicts of interest?

Yes. 

State law establishes guidelines for general conduct of state employees (State and Local Government Conflict of Interests Act, §2.2-3100 et seq. Code of Virginia, as amended). A university employee is prohibited by state law from having a “personal interest in a contract” with the university (§2.2-3106).

State law also places additional restrictions for state employees having official responsibility for a procurement transaction (Ethics in Public Contracting Act §2.2-4369). Such employees can not participate in a procurement transaction on behalf of the university if they have any conflicts listed in this section.

What is a “personal interest in a contract”?

There is a personal interest in a contract if the following three conditions are met:

1. Does the employee (or a member of his immediate family) have a “personal interest” with a business?

• More than 3% equity in business;
  
• Annual income more than $10K from ownership in real or personal property of business;
  
• Annual salary or other compensation more than $10K;
  
• More than $10K ownership interest in real or personal property of business; or
  
• Personal liability for business more than 3% of business’s assets

2. Does the business have a contract with VT?

3. Is the employee either:

• Party to the contract; or
• Personal interest in the business that is party to contract

IF “YES” TO ALL OF ABOVE, THERE IS A CONFLICT OF INTEREST PROHIBITED BY STATE STATUTE.

 

Are there exceptions to this state prohibition?

Yes. There are a number of allowable exceptions. Those relevant to contracts are:

1. Award was competitive or determined by Administrative head that competition is not in best interest of parties.

2. Uniform prices.Contract was at uniform prices available to the public

3. R&D or commercialization contract. Disclosure by employee and approval by Board of Visitors prior to the award of the contract.

4. No participation by employee in award. 

• On behalf of business, employee did not participate and has no authority to participate in letting of contract
  
  
• On behalf of VT:
  1. Employee does not participate in the procurement or letting of such contract; or
     
  2. Disqualifies himself as matter of public record and does not participate on behalf of VT in negotiating the contract or in approving the contract.

  NOTE:  This exception would not be available to an employee who is the PI, as the PI is involved in proposing and negotiating the contract.

Are there any federal laws regulating conflicts of interest on federal awards?

Yes. Both the Public Health Service (PHS) and the National Science Foundation (NSF) have regulations and policies requiring recipients of PHS and NSF funding to identify and manage potential financial conflicts.

To meet the requirements of the PHS and NSF, and similar requirements other agencies may impose, investigators (PI, co-PI, participating faculty, staff, and students) responsible for the design, conduct, or reporting of research or educational activities funded or proposed for funding must determine if they have a conflict of interest. Investigators must report significant financial interests ($10,000 or 3% ownership, or $10,000 income per annum) that they (or their spouse or dependent children) have that could reasonably appear to be affected by the activities funded. Previously reported interests must be updated on an annual basis during the term of the award. New interests must be disclosed at the time they are obtained. Interests are to be reported on Policy 13010 Disclosure Forms and provided to the reviewing official.

Who is responsible for identifying and resolving conflicts of interest?

Individual Employees. The individual employee is responsible for disclosing financial, consulting, or other interests that could create potential or actual conflicts of interest. The department is responsible for imposing any necessary conditions or restrictions to manage, reduce, or eliminate actual or potential conflicts.

Principal Investigator. The Principal Investigator must report to OSP any conflicts of interest that could affect the sponsored research. (PI responsibilities)

Office of Sponsored Programs. OSP is responsible for identifying and negotiating contract terms and conditions for conflict of interest restrictions. OSP is also responsible for taking any contract actions to resolve conflicts that may arise after award. For instance, OSP would be responsible for modifying the contract to name a co-PI for fiduciary responsibility.

What individual disclosures are required?

University Policy requires disclosure of the following:

• Financial interest in a company doing business with the university
  
• Significant financial interests of investigators responsible for the design, conduct, or reporting of research or educational activities when those interests could reasonable appear to be affected by the activities funded.
  
• Any activities outside the university which may potentially involve business, employment, consulting, or appointment to other positions or responsibilities within an external organization

Are disclosures confidential?

 “Disclosure forms, including the MOU, will be considered confidential within the university, to the greatest extent possible, and made available only to those individuals charged with the responsibility for review.” (Policy 13010 (PDF))

What are the requirements for investigators of sponsored research?

• Determine if there is a significant financial interest or a “personal interest in a contract”?  Determine if they have a conflict of interest and/or commitment.  “An actual or potential conflict of interest exists when it is determined that a significant financial interest could affect the design, conduct, or reporting of activities proposed”.  Determine if any new financial interest, activity, or relationship creates a personal interest in a contract that is prohibited by state law. 
  
• Identify conflicts on Policy 13010 Disclosure Forms and provide to the reviewing official. Update disclosures of significant financial interest annually during the contract and when new significant financial interests are obtained.
  
•  Inform the PI and/or OSP when any financial interest or activity disclosed as a potential conflict affects any research award.

What are the requirements of Principal Investigators?

• Remind investigators of the conflict identification and reporting requirements.
  
  
• Identify any conflicts of interest of investigators on the project. When submitting a proposal through OSP, the Principal Investigator must complete the Conflict of Interest Certification section of the "Sponsored Programs Approval Form" and identify whether there are significant financial interests involving any of the investigators. The PI must obtain this information from proposed investigators and remind investigators of their duty to identify and disclose any conflicts. During the term of the award, the PI is responsible for monitoring Policy 13010 Disclosure forms of investigators so they are provided to reviewing officials, updated annually, and any new significant financial interests are identified and disclosed.
  
  
• Identify whether the Sponsor of the research is a faculty-owned business.
  
  
• Obtain approval to participate in R&D and commercialization contracts in which there is a "personal interest in the contract" prior to award of the contract.
  
  
• Obtain agreement of department head to have fiduciary responsibility for the contract if the PI hasEmployee with a personal or family-related financial interest in a business contracting with the university may not serve as PI under that contract without the department head having fiduciary responsibility for the contract (Faculty Handbook 2.16.3.4)
  
  
• Negotiate MOU may need to be preparedif necessary to identify other actions to manage, reduce, or eliminate actual or potential conflicts of interest.
  
  
• Complete annually by January 15 the state required financial disclosure form if required to do so by the University.
  

Who should be contacted on conflicts of interest questions?

Questions regarding conflicts of interest pertaining to the award or administration of a contract or grant should be discussed with David Richardson (1-8680) or Carol Roberson (1-5520).

General conflict of interest issues should be addressed to the University Legal Counsel (1-6293). Advisory opinions can be provided by the Attorney General.

What is an advisory opinion?

While the state law provides severe penalties for violation of conflict of interest laws (§2.2-3121, Code of Virginia, as amended), the law also provides a safe harbor if you rely upon advisory opinions. If you have questions or do not know if a transaction presents a prohibited conflict, you may request a written advisory opinion. An employee will not be prosecuted for a knowing violation of the law if, in good faith, the employee relies on a written opinion from the Attorney General. §2.2-3121, Code of Virginia, as amended. To qualify for the protection of the section, full disclosure of all relevant facts must be made. Contact the University Legal Counsel (1-6293) or the Office of the Attorney General with any questions on obtaining an advisory opinion.

Last update: April 10, 2003