September 16, 1987

FACTS*:


Beginning in April, 1985, the state Office of Management
Information Systems (OMIS) procured bids from interested vendors
for stand-alone micro-computers. The original invitation for bids,
dated April 90, 1985, has subsequenlly been amended and extended
from time to time. In basic terms, the invitation lists a number
of system configurations and each configuration contains technical
specifications.[1] OMIS accepts the lowest two bidders pertaining
to each configuration. The selected vendors are called "blanket
vendors" because any state agency may buy equipment from the vendor
without having to go through the usual bidding procedures
applicable to an RFP. Each of the 46 vendors which currently
participate in the program signs the same blanket contract with the
state. The blanket contract in question here is limited to stand-
alone microcomputers. The contract, which is one out of seventeen
blanket contracts administered by OMIS, is distinct from the others
in that it contains a so-called employee discount provision which
is a mandatory condition applicable to all bidders. Specifically,
the discount term provides that employees may purchase any of the
listed micro-computers and compatible peripheral equipment and
software at a discount of at least 20%. Under this discount
procedure, employees interested in obtaining a micro-computer go
directly to the contract vendor and present to the vendor
appropriate state employee identification. According to the terms
of the contract, the vendor is then obligated to provide the
employee a 20% discount for the applicable equipment or software.

OMlS distributes an informational mailing to approximately 850
department heads or data processing clerks for each state agency.
You estimate that at least two people in each agency receive OMIS
mailings. A copy of the blanket contract for stand alone
microcomputers, with the accompanying vendor list, configurations,
technical requirements, and the availability of the employee
discount, would have been received by such department heads and/or
data processing clerks at least once a year since April of 1985.
Included in the package from OMIS is a notice for employees
announcing the opportunity to purchase micro-computers at
significant discounts. This notice contains a statement from OMIS
requesting that copies of this notice be posted in all employee
work areas. The degree to which state employees are actually
notified of the employee discount depends on the diligence of the
department heads and data processing clerks in posting the OMIS
notice.

You have stated that use of similar employee discounts is
prevalent in the private and public sector for major customers who
enter into high volume or high dollar level purchase agreements.
For example, IBM has an agreement with Travelers Insurance Company
where by employees of Travelers may purchase equipment at a
substantial discount by paying the corporation directly for the
computer equipment. OMIS, while providing for a similar discount,
has chosen not to act as intermediary so as to avoid the
administrative cost of holding state employees' money.

You state that no part of the employee discount cost is built
into the state's contract costs for micro-computer equipment given
the fact that OMIS accepts the two lowest compliant bidders for
each configuration. In addition, OMIS assures that vendors' bids
meet the prccurement technical specifications and has disqualified
vendors whose equipment did not meet those technical
specifications. You believe that the existence of configurations
permits comparison and evaluation ofvendors bids based on objective
criteria, and that the combination of competitive bidding and the
configuring of systems negates the potential that vendors build
into the cost of their bids the employee discount.[2]


QUESTION:


By requiring the availability of the discount, is OMIS securing
for state employees an unwarranted privilege of substantial value
which is not properly available to similarly situated individuals
within the meaning of s.29(b)(2) of the conflict law?

ANSWER:


No.


DISCUSSION:


Section 23(b)(2) regulates the granting of discounts or other
gifts of substantial value given to public employees. Where the
granting of a benefit is expressly authorized either by statute or
made available by common industry-wide practice to all employees
of participating organizations, we do not believe that the granting

Page 177

of the benefit ordinarily constitutes an "unwarranted privilege ...
not properly available to similarly situated individuals." See,
EC-COI-86-17
. On the other hand, a benefit selectively provided to
a single individual, EC-COI-87-7, or to a discreet group of
employees, EC-COI-86-14, 83-4, will not be regarded as permissible
for the purposes of s.23(b)(2).

Based on the information you have provided, we find that the 20%
equipment discount arranged under OMIS vendor contracts is
available not only to at least 60,000 state employees but also to
a substantially large number of other public and private sector
employees who work for organizations which have negotiated similar
employee discounts with the same companies. The OMIS discount is
consistent with a common industry-wide practice and is therefore
properly available to similarly situated individuals. We find that
the benefit is warranted because the availability of the discount
has been communicated to eligible employees and the negctiation of
a discount is a commonly accepted business practice in the
microcomputer industry. [3]

Issues would arise under s.23 if the availability of the
discount were not widely publicized or known by all state
employees. In such a case, it might reasonably appear that
employees of OMIS or other officials who had participated in the
formulation of the terms of the invitation for bids would have an
inside track or advantage in obtaining an item of substantial value
not de facto available to other employees. Based on the facts as
you have presented them, however, it appears that OMIS has made
reasonable efforts to notify state employees through department
heads and computer personnel.

In this case, the discount is offered by a participating vendor
because it is a condition of the invitation to bid. Because the
condition is stated publicly as part of a competitive bid process
there is no opportunity for one vendor to gain advantage over
another. Therefore, this case is unlike the situation where a
particular company attempts to gain an advantage by winning the
gratitude or general good will ofa discreet group of public
officials.

For example, in EC-COI-86-I4, the Commission found improper a
discount that was available only to law enforcement officers, and
that other public or private groups would not qualify. Further, in
EC-COI-86-14, only one company offered the discount, the very same
company whose cars would be driven by law enforcement officers. In
this case, there is no potential for an appearance that one
computer company/vendor would have an advantage over another.

The phrases "similarly situated individuals" and "unwarranted
privilege" are not defined in the conflict of interest law. The
Commission is entitled to apply common experience and common sense
in the interpretation of those words. See, Langlitz v. Board of
Registration of Chiropractors, 396 Mass. 374, 381(1985). The
officials at OMIS properly recognize that the economic power of the
state regarding purchases of stand alone micro-computers enables
them to bargain on behalf of all state employees a benefit, just
like any other large organization. The process by which this
benefit accrued to state employees was competitive, public, and
presumably fair. There is no appearance of any advantage to any
particular vendor or to any specific or discreet group of state
employees. [4]

Therefore as long as OMIS takes reasonable steps to assure that
all state employees are given notice of the opportunity to
participate in the employee discount program applicable to stand-
alone micro-computers, we conclude that there is not an unwarranted
privilege not properly available to similarly situated individuals
within the meaning of s.23(b)(2) of the conflict law.

---------------

* Pursuant to G.L. c. 268B, s.3(g), the requesting person has
consented to the publication of this opinion with identifying
information.

[1] For example, configuration #12 is a configuration for an
80286/based micro computer system. This configuration lists the
technical specifications which in this case establishes a basic
512KB ram computer with a 20MB hard disk drive. There are at least
14 other such configuration.

[2] We have great difficulry in accepting your contention that the
state's contract costs do not reflect the employee discount cost.
See, note 4, infra.

[3] Unlike the case of the selective discount encountered in EC-
COI-86-14
, the broad-based employee discount eligibility negotiated
by OMIS precludes any appearance that employees have been selected
for a discount because they may be in an official position to
benefit the giver. Inasmuch as the discount is available to all
employees, it does not appear that the discount has been offered
to OMIS employees "for or because of their official acts." G.L. c.
268A, s.3; EC-COI-87-29. We note, however, that questions would be
raised under both s.3 and s.23(b)(2) if OMIS employees who
administer the contract were eligible to receive a greater discount
than other employees.

[4] Were the state's purchase cost increased because of the
discount requirement, the increased cost to taxpayers for a private
discount for employees may very well constitute an unwarranted
privilege. Our conclusion under s.23(b)(2) nonetheless remains the
same because the discount is available to similarly situated
individuals, i.e., persons working for large private and public
sector employers.

End Of Decision