Welcome to Feldesman’s Grants Practice Shorts series where we discuss helpful tips and strategies in common areas of federal grant management. Be sure to check out our other installments on our Grants Practice Shorts page.

Standards of Conduct: No Financial or Personal Benefit in/from Contracts

Federal Procurement Standards require that grantees maintain a written standards of conduct policy and provide in the policy for potential discipline for violation of the standards of conduct. 2 C.F.R. § 200.318(c)(1). Grantees’ written rules must provide that no officer, employee or agent acting on grantee’s behalf “participate in the selection, award, or administration of a contract supported by a Federal award if [the individual] has a real or apparent conflict of interest.”  Id. As explained in § 200.318(c), a conflict of interest would include “a financial or other interest in[,] or a tangible personal benefit from[,] a firm considered for a contract.” This prohibition extends to immediate family members, including situations in which an individual’s family member is employed, or about to be employed, by a contractor or prospective contractor. Id.

Of note, while Procurement Standards do not define the term “family member,” the select item of cost for “rental costs” at 2 C.F.R. § 200.465(c)(4) within the federal cost principles provides a useful list of family relationships that can reasonably be applied. It includes:

1. Spouse, and parents thereof;
2. Children, and spouses thereof;
3. Parents, and spouses thereof;
4. Siblings, and spouses thereof;
5. Grandparents and grandchildren, and spouses thereof;
6. Domestic partner and parents thereof, including domestic partners of any individual in 2 through 5 of this definition; and
7. Any individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship.

No Gifts or Gratuities (De minimis exception)

The Procurement Standards prohibit the solicitation and acceptance of any gifts or gratuities from a contractor, except that a grantee may establish by policy an exception for unsolicited items of low dollar value. 2 C.F.R. § 200.318(c)(1). Grantees may consider applying a “gifts of nominal value exception,” such as a $20.00 cap, sufficiently low to discourage improper behavior and flexible enough for routine interactions.

Organizational Conflicts of Interest

In addition, the Federal Procurement Standards require grantees to address organizational conflicts of interest in their standards of conduct or procurement policies. The restriction applies to situations where “because of relationships with a parent company, affiliate, or subsidiary organization, the non-Federal entity [i.e., the grantee] is unable or appears to be unable to be impartial in conducting a procurement action involving a related organization.” 2 C.F.R. § 200.318(c)(2).

These conflicts of interest restrictions are intended to promote objectivity and independence in grantees’ procurement decisions, furthering goals of transparency, and mitigating risk of fraud and waste in federally-funded procurements.