Establishes the ethical standards for state agency contractors act including ethical standards for contractors performing inherently governmental and mission-critical functions or rendering services pursuant to an information-risk contract.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A7020
TITLE OF BILL:
An act to amend the state finance law, in relation to establishing the
ethical standards for state agency contractors act
The purpose of this legislation is to establish ethical standards for
certain state agency contractors.
SUMMARY OF PROVISIONS:
Section 1 sets forth the Legislature's findings and intent.
Section 2. Provides that the proposal when enacted shall be known and
may be cited as "the ethical standards for state agency contractors
Section 3. This bill amends the State Finance Law by adding a new
Section 148 relating to ethical standards for contractors performing
inherently governmental and mission-critical functions or rendering a
service or services pursuant to an information-risk contract. This
Section also defines "state agency contractor," "state agency," "employ-
ee," "inherently governmental and mission-critical function," "nonpublic
information," "proprietary information," "information-risk contract,"
"organizational conflict of interest," "personal conflict of interest"
and "state agency contract."
Additionally, this Section requires that any contract executed by a
state agency with a contractor performing inherently governmental and
mission-critical functions or rendering services pursuant to an informa-
tion-risk contract, prohibit contractors from organizational conflicts
of interest with respect to such state agency contract and prohibit a
contractor's employees performing inherently governmental and mission-
critical functions or rendering information-risk contract services from
personal conflicts of interest arising with respect to such state agency
contract. The contract must also include a nondisclosure agreement or
clause requiring the contractor to certify that it has an executed
nondisclosure agreement for each individual employed by the contractor
pursuant to a state agency contract as a condition of access to nonpub-
lic information. The contract must require that agreements between
contractors and third parties must protect the state agency's nonpublic
information and require such contractors to obtain written consent from
the state agency prior to disclosing nonpublic information to subcon-
tractors or others. The contract must require contractors to train at
least biannually its employees and subcontractors, if any, rendering
services on state agency contracts regarding organizational conflicts of
interest, personal conflicts of interest and protection of nonpublic
information and the consequences for unauthorized disclosure or misuse
of such information. Finally, the contract must require contractors to
immediately notify the state agency regarding any such organizational or
personal conflicts of interest, or the misuse or unauthorized disclosure
of nonpublic information and impose consequences for violations.
This Section also provides that contractors shall be responsible for the
security of any system relating to nonpublic information whether such
system is maintained electronically or. otherwise. Contractors involved
in source selection and related activities supporting award of state
agency contracts shall be subject to laws and regulations preventing the
release of nonpublic information.
Contractors performing inherently governmental and mission- critical
services or information-risk contract services for which more than five
million dollars is to be paid and involving work in excess of one
hundred and twenty days shall be required to have a written code of
business ethics and conduct. The provisions of the Act shall not apply
to contracts for the purchase of commodities. Finally, this Section
authorizes the Comptroller, in his or her discretion, to promulgate
rules and regulations addressing the appropriate content for a model
written code of business ethics to be utilized by contractors performing
inherently governmental and mission- critical functions, or rendering
information risk contract services, for the purpose of preventing organ-
izational and personal conflicts of interest and protecting nonpublic
Section 4. Provides for an effective date of 180 days.
PRIOR LEGISLATIVE HISTORY:
S.7375 and A.9692 of 2013-2014
A.7512 of 2015-2016
A.7916 of 2017-2018
A.9528 and S.5449-A of 2019-2020
To a great extent, state agencies and public authorities rely on
contractors to help accomplish a broad array of complex, inherently
governmental and mission-critical functions. State agencies and public
authorities contract for services that involve the contractors' exercise
of judgment, providing operational and policy advice to state officers
and employees, overseeing other contractors and, at times, working
alongside state officers and employees on the same projects. This inter-
mingling of public and private workforce reveals a need to assess what
processes are in place to ensure the integrity of government operations
and maintain public confidence.
While a majority of contractors deliver services with integrity, some
contractors could, nonetheless, engage in misconduct during the course
of the contract term -for example, engaging in acts for personal finan-
cial gain, accepting inappropriate gifts, or inappropriately negotiating
for certain jobs. Furthermore, in carrying out the day-to-day tasks for
state agencies and public authorities, contractors often require exten-
sive access to and use of nonpublic government information. Protection
of nonpublic information is critical, because unauthorized disclosure
can erode the integrity of government operations and lead to situations
in which such information is misused for private gain, potentially harm-
ing important interests such as the privacy of individuals, commercial
business proprietary rights, security, and law enforcement. Opportu-
nities for organizational and personal conflicts of interest by contrac-
tors, and the misuse of nonpublic information by contractors through
negligence or misconduct, can have a significant effect on the govern-
ment's ability to perform its primary functions, potentially resulting
in inappropriate use of taxpayer dollars, damaged reputation, and loss
of public trust.
While few cases of improper conduct by contractors have been publicly
identified, safeguards are lacking to identify whether organizational or
personal conflicts of interest exist among contractors. The cost to the
state of contractors or their employees engaging in actions reaping
organizational or personal gain - an outcome increasingly likely based
on sheer numbers - would likely never be known, let alone calculable, as
long as there is no transparency.
FISCAL IMPLICATIONS FOR STATE:
This bill has no significant State fiscal impact.
This act shall take effect one year after the date on which it shall
have become a law and apply to contracts executed on and after such
date. Effective immediately, the addition, amendment and/or repeal of
any rule or regulation necessary for the implementation of this act on
its effective date are authorized to be made on or before such date.