Conflict of Interest

Facilities Check List
Practical, step-by-step guides for the busy FM
December 1998

Conflict of Interest

Ethical conduct is becomingincreasingly important in the fields of facilities and property managementfor several reasons:

• A company’s public image has directfinancial ramifications in the marketplace
• Technology has made closescrutiny of company operations easier than ever to perform
• Thefinancial stakes of property operations continue to escalate.

Inthis environment, the most likely target for scrutiny is any indication ofconflict of interest. But what exactly is conflict of interest?Avoiding conflict of interest is essential to “preserve the exercise ofindependent judgment”; ethical failure results when a property manager”subordinates the interests [of employer or client] to his or her own orsomeone else’s interests.”¹ Or put more simply,one person cannot serve two masters whose interests are at odds with eachother. Although this sounds simple, practicing independent judgment is morecomplex.

We have provided a few practical examples of conflictinginterests, how to avoid them, and how to resolve them if theyarise.

The BOMI Institute Code of Ethics clause on conflict ofinterest is as follows:

Each designee shall fullydisclose to the client any known conflict of interest between a) theclient; client’s employees; supplier; and other related parties, and b) theowner; manager; or their employees arising prior to the engagement ofmanagement services. Each designee shall use every reasonable means toresolve such conflicts. No designee shall permit a conflict of interest toremain undisclosed, nor shall he or she create any appearance ofimpropriety.

The italicized phrases are the ones thatrequire the most careful interpretation to avoid problems on thejob.

Full disclosure to the client

Anyone who haswatched the confirmation process for high government officials knows thatdisclosure means providing “the whole truth” about any individual or groupthat has conflicting loyalties that may impair its ability to make cleardecisions in the interest of those they serve. This is most apparent inbusiness relationships. This matter is so sensitive we will examine it twoways, first in terms of what disclosure means, and second, with examples ofactual conflicts of interest.

FullDisclosure:

• Clearly stating any previous or currentinterest you have had with any companies your firm does businesswith
• Reporting a discovery that a subcontractor has a vested businessinterest with the general contractor for a project
• Disclosing to a newemployer any noncompetition agreements you signed with previousemployers

Conflicts ofInterest:

• Accepting gratuities, inappropriately largegifts or entertainment from a vendor
• Supervising a constructioncontract with a firm in which you have a financialinterest
• Participating in a panel to award a lease when you have afinancial interest in one of the companies competing for theaward
• Acting as your client’s expert evaluator of construction bidsprepared for multiple projects, by several firms — including yourown
• Petitioning for a zoning variance to a board on which one of yourrelatives serves

Resolving SuchConflicts

Resolution of conflicts is best explained byoffering appropriate actions in the examples just givenabove:

• Gratuities: Decline gifts other than modest ones(calendars, etc.); pay your own way for entertainment or decline theinvitation
• The space planning contract: alerting both parties andsetting out separate, mutually exclusive scopes of work for eachcontract
• Construction supervision: Remove yourself and assign anotherproject manager
• Lease award panel: Excuse yourself from evaluation ofthe firm in which you have an interest
• Bid evaluator: Excuse yourselffrom your evaluation function, refrain from preparing bids for the sameclient,or do not take on the evaluation contract
• Zoning variance: Letsomeone else make the case

Avoiding the Appearance ofImpropriety

This admonition has been taken to extreme lengthsby some; an old government motto advised refusing all gifts, “not even somuch as a cigar.” There is a fine line between avoiding gifts designed toaffect judgments and decisions, and unnecessary rudeness, such as refusinga sandwich ordered by a client for you during a working lunch. Here aresome other examples:

• Keeping a friendship with a businesscolleague where it belongs: out of the office. Also, vice-versa: keepingbusiness out of your friendship
• Using business resources, time andstaff to advance or support political activity
• Undocumented exchangesof services and fees outside of regular business dealings (e.g., buildingmaintenance work for a client for whom your firm is doing an officebuilding for, without any record of time spent or feespaid)

Flexible Standards

Although almost allcompanies have an ethics policy, they vary widely in what they considerethical violations ñ particularly in the matter of what constitutes theappearance of impropriety. For example, accepting free lunches or smallgifts (say, up to $25 in value) from vendors during the holidays isaccepted by some companies but strictly forbidden in others. Be sure tocheck what your company considers appropriate. This may include asignificant amount of unwritten personal interpretation.

¹ Guidelines for Business Conduct,Rockefeller Group, Inc., New York, June, 1988.

Thisinstallment of FM Check List is adapted from BOMI Institute’sFundamentals of Real Property Administrationcourse, (www.bomi-edu.org/11071.html), an elective in the RealProperty Administrator (RPA) designation program.