1 Investigation April 8, 2022 Potential Conflict of Interest May Require Voiding a $40 Million Construction Management Contract and Not Paying $5.4 Million of Invoices Office of the Inspector General Investigation Results BART may be required to void the remaining $27 million in capacity on a $40 million construction management contract and $5.4 million in unpaid invoices on that and another contract because a BART manager had roles in making the contracts with the firm while the manager’s spouse worked for the firm. 1 The family relationship means the manager may have a financial interest in the contract, in the form of the economic benefit resulting from the spouse’s income, which is prohibited under California Government Code § 1090. Some case law and Fair Political Practices Commission (FPPC) opinions can be interpreted to mean the BART manager may not have a financial interest in the contracts and that the contracts may therefore not need to be voided. However, it is difficult to conclude with certainty that the manager did not have a financial interest in the contract due to different circumstances between those cases and this situation. Those differences include the BART manager’s spouse receiving an annual profit-sharing distribution that may result, in part, from the payments the firm receives from its contracts with BART. Because of those differences the complexity in interpreting Government Code § 1090, we are recommending that BART seek outside expertise before drawing a firm conclusion. Some of the work the contractor performed under these contracts was federally funded. The Federal Transit Administration’s (FTA) regulations regarding conflict-of-interest prohibitions are more restrictive than Government Code § 1090. The FTA regulations also include a prohibition against being involved in the administration of the contract. The same BART manager was involved in performing contract administration tasks after these contracts were awarded. If this violation is substantiated, the FTA has the option of requiring the contractor to repay what it was paid with federal funds. Neither the firm nor the BART manager met their responsibilities to disclose the potential conflict of interest in compliance with BART’s Codes of Conduct, and the manager did not formally disclose the financial conflict of interest on their annual FPPC Forms 700, Statement of Economic Interests, as required by law. Factors that contributed to the lack of disclosure were inconsistencies in the language in and between BART’s Contractor and Employee Codes of Conduct, the lack of clear guidance and training regarding FPPC Form 700 requirements, and a lack of clarity in the Request for Proposal (RFP) documents regarding conflict-of-interest disclosure requirements. The allegations of potential violations of Government Code § 1090 and FTA conflict-of-interest rules came to our attention during the course of another investigation we are conducting. 1 Each work plan is a separate contract.