930 CMR, § 6.26

Current through Register 1538, January 3, 2025

Section 6.26 - Exemption Permitting Public Employees to Have Financial Interests in Contracts That Pre-date Their Election or Appointment or That are Substantially Similar to Contracts That Pre-date Their Election or Appointment

(1)Purpose. The purpose of 930 CMR 6.26 is to allow public employees who had business interests involving government before they entered public service to retain those interests, while providing safeguards to ensure that they do not use their public positions to advance their business interests.

(2)Definitions. For purposes of 930 CMR 6.26:

A public employee is elected to a position on the date on which the election is held.

A contract is substantially similar to another contract if the two contracts involve the same type of services, goods, benefits (such as insurance coverage), or access to and/or use of premises. Contracts may be substantially similar even though the parties or the contract terms are not the same.

Example: An office furniture company's contract to sell ten desks to state agency A is substantially similar to the company's contract to sell 100 filing cabinets to state agency B, because both contracts involve the sale of office equipment.

Example: The office furniture company's contract to sell 100 filing cabinets to state agency B is not substantially similar to its contract to sell inventory software to state agency C, because the two contracts do not involve the same type of services or goods.

Example: An extermination service company's one-year contract to spray Town Hall for insects is substantially similar to the company's three-year contract to inspect another municipal building for rodents and place glue traps as needed, because the two contracts involve the same type of services.

Contract terms are non-negotiable if the contract is a standard form contract containing only terms and conditions available to any similarly situated public agency, person, or entity, and is not a contract developed for, or containing negotiated terms specific to, a particular transaction between a public agency and the contractor.

Example: A state contract that consists of the Commonwealth of Massachusetts Standard Contract Form, Commonwealth Terms and Conditions, and a Statement of Work negotiated between the state agency and the contractor setting forth what the contractor will do and how much it will be paid, contains negotiated terms, and does not satisfy the definition of non-negotiable contract terms.

(3)Exemption for Financial Interests in Contracts That Pre-date Public Service. A public employee may retain a direct or indirect financial interest in a contract with a public agency (other than a financial interest arising from employment with, or funded by, a public agency, or from the provision of legal or other professional services to a public agency), if the financial interest pre-dates his election or appointment to a state, county, or municipal position, without violating M.G.L. c. 268A, §§ 7, 14, or 20, provided that the public employee makes a disclosure as required by 930 CMR 6.26(6), and complies with the restrictions set forth in 930 CMR 6.26(7). The public employee may retain such financial interest during the original contract term, as well as during any additional term resulting from an automatic extension of the contract or a renewal of the contract upon notice by either party, as long as the same terms and conditions apply during any such additional term, and no action is taken by either party other than the notice to renew. Changes in contract payments will not be considered a change in the terms and conditions as long as the methodology for computing such changes is specified in the original contract, such that no negotiations are needed or required. A "change order", as defined by M.G.L. c. 7C, § 17, shall be considered a continuation of the same contract for purposes of 930 CMR 6.26(3), (4), and (5), rather than an amendment of the contract, only if any added cost resulting from the change order is based upon pre-existing labor rates, unit costs and allowable mark-up for overhead and profit, or similar objective criteria, as established in the original contract. Retention of a financial interest in an amendment to a contract is permissible only in accordance with 930 CMR 6.26(5).

Example: The owner of a construction company is elected mayor. Prior to his election, his company contracted with the municipality to construct an addition to a municipal office building. The mayor may retain his financial interest in that contract until the term of the contract is completed, because it pre-dates his election as mayor, provided that he makes a disclosure as required by 930 CMR 6.26(6), and complies with the restrictions set forth in 930 CMR 6.26(7). The mayor may retain his financial interest in the contract if a change order is executed authorizing the company to buy more pipe than was originally anticipated based upon the unit price for pipe agreed to in the original contract, but he would not be able to retain his financial interest in the contract if a change order were executed involving payment of a negotiated lump sum amount for specified additional work. The mayor may have a financial interest in a new or amended municipal contract entered into after his election only if he can satisfy the requirements of 930 CMR 6.26(5) or some other exemption to M.G.L. c. 268A, § 20.

Example: A software company has a contract with a state agency to develop software. The term of the contract is six months. An owner of the software company is hired by a state agency during the term of the contract. The new state employee may retain his financial interest in that contract until its term is completed, because it pre-dates his appointment to his new position, provided that he makes a disclosure as required by 930 CMR 6.26(6), and complies with the restrictions set forth in 930 CMR 6.26(7). He may have a financial interest in a new or amended state contract entered into after his appointment only if he can satisfy the requirements of 930 CMR 6.26(5) or some other exemption to M.G.L. c. 268A, § 7.

(4)Exemption for Financial Interests That Are Transferred by a Disabled Family Member or Are Inherited. A public employee may have a direct or indirect financial interest in a contract with a public agency (other than a financial interest arising from the provision of legal or other professional services to a public agency) without violating M.G.L. c. 268A, §§ 7, 14, or 20, if he acquired that financial interest after his election or appointment to a state, county, or municipal position, provided that the public employee acquired the financial interest in the public contract by transfer from an immediate family member because of the family member's incapacitating disability, or by inheritance. The public employee must make a disclosure as required by 930 CMR 6.26(6), and comply with the restrictions set forth in 930 CMR 6.26(7). The public employee may retain such financial interest during the original contract term, as well as during any additional term resulting from an automatic extension of the contract or a renewal of the contract upon notice by either party, as long as the same terms and conditions apply during any such additional term, and no action is taken by either party other than the notice to renew. Changes in contract payments will not be considered a change in the terms and conditions as long as the methodology for computing such changes is specified in the original contract, such that no negotiations are needed or required. A "change order", as defined by M.G.L. c. 7C, § 17, shall be considered a continuation of the same contract for purposes of 930 CMR 6.26(3), (4), and (5), rather than an amendment of the contract, only if any added cost resulting from the change order is based upon pre-existing labor rates, unit costs and allowable mark-up for overhead and profit, or similar objective criteria, as established in the original contract. Retention of a financial interest in an amendment to a contract is permissible only in accordance with 930 CMR 6.26(5).

(5)Exemption for Financial Interests in Contracts That Are Substantially Similar to Contracts That Pre-date Public Service. A public employee may have a direct or indirect financial interest in a contract with a public agency other than his own municipal or county agency as defined in M.G.L. c. 268A § 1(c) and (f), or governmental body as defined in 930 CMR 7.00: Definition of Governmental Body (and other than a financial interest arising from employment with, or funded by, a public agency, or from the provision of legal or other professional services to a public agency), which is entered into or amended after the public employee's election or appointment to a public position if all the following criteria are met:

(a) The new or amended contract is substantially similar to a contract with a public agency that pre-dated the public employee's election or appointment, and in which the public employee had a direct or indirect financial interest, or in which an immediate family member of the public employee had a financial interest for purposes of 930 CMR 6.26(4), provided that the termination date of the earlier contract was within the previous five-year period; and (b) Either:

1. the new or amended contract was awarded pursuant to a competitive bidding process, as defined by M.G.L. c. 268A, § 1(b); or

2. the contract terms are non-negotiable, and the contract is available to the public generally and/or to all who meet the eligibility requirements for the contract, in accordance with a standard process that incorporates objective standards and eligibility criteria; and

(c) The public employee, in any public position he holds or has held, did not participate in or have official responsibility for the contents, design, making or award or management of the contract, and did not participate in or have official responsibility for determining the eligibility requirements for the contract; and

(d) The public employee makes a disclosure as required by 930 CMR 6.26(6); and

(e) The public employee complies with the restrictions set forth in 930 CMR 6.26(7).

Example: The owner of a construction company is elected to a board of selectmen. He used the exemption set forth in 930 CMR 6.26(3) to retain a pre-existing financial interest in a municipal contract to construct an addition to a building. The municipality is preparing to award a contract for construction of a new school by making a public announcement soliciting bids, and will award the contract to the lowest responsible bidder. The two contracts are substantially similar, and the contract will be awarded pursuant to a competitive bidding process, as defined by M.G.L. c. 268A, § 1(b), so the requirements of 930 CMR 6.26(5)(a) and (b)1. are satisfied. If the selectman can also meet the requirements of 930 CMR 6.26(5)(c), (d), and (e), then he may use the exemption set forth in 930 CMR 6.26(5) to have a financial interest in the new contract.

Example: A commercial fisherman is elected to his town's board of selectmen. Prior to his election, he leased a municipal boat berth from the town to conduct his business. Subsequent to his election, he has used the exemption set forth in 930 CMR 6.26(3) to retain his financial interest in that contract. He wishes to lease an additional boat berth from the town to expand his fishing operations. The town does not use a competitive bidding process to assign boat berths, but rather requires persons seeking boat berths to submit an application. The town maintains a waiting list of applicants. Applicants who are selected in accordance with the town's process must pay rent according to a set fee schedule. The new contract meets all of the requirements of 930 CMR 6.26(5)(a), (b)2., and (c). The selectman may use the exemption set forth in 930 CMR 6.26(5) provided that he also satisfies the requirements of 930 CMR 6.26(d) and (e).

Example: An owner of a software company has been hired by a state agency and has used the exemption set forth in 930 CMR 6.26(3) to retain a pre-existing financial interest in a state contract. His employing agency is preparing to award a contract for software pursuant to a competitive bidding process. The state employee cannot have a financial interest in that contract, because the contract is with his own agency. He could only have a financial interest in a new state contract if he met all the requirements of 930 CMR 6.26(5).

(6)Disclosure Requirement.

(a) Public employees using the exemption set forth in 930 CMR 6.26(3) shall file a disclosure identifying the public contract and providing information regarding their financial interest in the contract on a form prescribed by the State Ethics Commission within 30 days of election or appointment to a public position.

(b) Public employees using the exemptions set forth in 930 CMR 6.26(4) and/or 930 CMR 6.26(5) shall file a disclosure identifying the public contract and their financial interest in the contract, along with such other information as may be necessary to show that the requirements of 930 CMR 6.26(4) and/or 930 CMR 6.26(5) have been met, on a form prescribed by the State Ethics Commission within 30 days of acquiring the financial interest.

(c) A public employee who makes a disclosure pursuant to 930 CMR 6.26(6), and who subsequently has contacts with the contracting agency, may have an obligation to disclose those facts pursuant to M.G.L. c. 268A, § 23(b)(3).

(d) Disclosures made pursuant to 930 CMR 6.26(6) shall be public records and shall be made:

1. by elected municipal employees, to the municipal clerk, or, in the case of elected regional school district employees to the clerk or secretary of the regional school district;

2. by appointed state, county and municipal employees, to their appointing authorities; and

3. by elected state and county employees, to the State Ethics Commission, which shall list each such disclosure on the Commission website, and may also post each such disclosure in its entirety.

(7)Restrictions on Persons Using Exemptions. A public employee using the exemptions set forth in 930 CMR 6.26(3), 930 CMR 6.26(4), or 930 CMR 6.26(5):

(a) Remains subject to the other prohibitions of M.G.L. c. 268A, including, but not limited to, M.G.L. c. 268A, §§ 4, 6, 11, 13, 17, 19 and 23, except that any compensation derived from or provided for in the pre-existing contract, or new or amended contract, may be received; and

(b) May not, in either his official or his private capacity, communicate, directly or indirectly, with any public agency concerning any public contract in which he has a financial interest. This restriction shall not prohibit normal business dealings and communications between the private contracting party and the public contracting agency involving persons other than the public employee.

930 CMR, § 6.26