STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 6706

November 1, 1991

CONFLICT OF INTEREST:

Const 1963, art 4, Sec. 10 and MCL 15.301 et seq; MSA 4.1700(21) et seq,--award of timber harvesting contracts to a person who subsequently becomes a member of the Natural Resources Commission

A member of the Natural Resources Commission is not in a substantial conflict of interest in violation of Const 1963, art 4, Sec. 10, and MCL 15.301 et seq; MSA 4.1700(21) et seq, if he holds contracts, not fully performed, for the purchase of standing timber to the stump with the Department of Natural Resources entered into pursuant to sealed bids prior to assumption of his office.

An extension of any of these contracts by supplemental agreement while the person holding the contract is a member of the Natural Resources Commission would constitute a contract amendment that would result in a substantial conflict of interest in violation of Const 1963, art 4, Sec. 10, and MCL 15.301 et seq; MSA 4.1700(21) et seq.

Honorable John Cherry

State Senator

The Capitol

Lansing, MI

Honorable John Kelly

State Senator

The Capitol

Lansing, MI

Honorable Arthur Miller

State Senator

The Capitol

Lansing, MI

Honorable Debbie Stabenow

State Senator

The Capitol

Lansing, MI

Honorable Tom Alley

State Representative

The Capitol

Lansing, MI

You have requested my opinion on a question which may be stated as follows:

Your question relates to Mr. David V. Holli of Ishpeming, Michigan. The records of the Secretary of State reveal that Mr. Holli was appointed by the Governor to the office of member of the Natural Resources Commission on July 18, 1991, and he filed his oath of office on the same date.

The Department of Natural Resources records indicate that 19 contracts for the purchase of timber on the stump by Mr. Holli from the Department were entered into between September 2, 1988, and June 28, 1991. One of these contracts was assigned to Mr. Holli by a third party on May 23, 1991. A twentieth contract was executed by Mr. Holli on June 26, 1991, and by the authorized representative of the Department on July 15, 1991. It is noted that, in addition, Mr. Holli was the successful bidder on a contract which was subsequently assigned by him to a third party on May 23, 1991.

Each of these contracts was entered into after the taking of sealed bids from qualified bidders in accordance with notice published by the Forest Management Division of the Department of Natural Resources in at least one newspaper of general circulation in the state. With the exception of the contract received by assignment, Mr. Holli was the successful bidder on each contract he holds.

Const 1963, art 4, Sec. 10, prohibits a state officer from being interested, directly or indirectly, in any contract with the state which shall cause a substantial conflict of interest. As directed by this constitutional provision, the Legislature has enacted MCL 15.301 et seq; MSA 4.1700(21) et seq, to implement this prohibition. This statutory enactment applies to appointed members of the Natural Resouces Commission. OAG, 1973-1974, No 4799, p 116, 119 (February 1, 1974).

In MCL 15.304; MSA 4.1700(24), the Legislature has described those contracts between the state and a state officer that do not constitute a conflict of interest as follows:

This provision of the statute "represent[s] a fair effort to explicate rather than restrict the terms of [Const 1963, art 4, Sec. 10]." OAG, No 4799, supra, p 119.

The above-quoted statutory provision speaks to the lowest qualified bidder. However, it should be read to encompass the best bid, highest or lowest, depending upon whether the state is selling or purchasing property based upon sealed bids after publication for bids, insulating the state against possible claims of conflict of interest where the lowest or highest sealed bidder, as the best bidder, is a state officer. Thus, a contract awarded to the person submitting the best bid pursuant to a sealed bid process is not a substantial conflict of interest. On the other hand, amending or renegotiating such a contract is a substantial conflict of interest.

OAG, 1979-1980, No 5489, p 162 (May 11, 1979), considered the question whether a member of the governing body of a state university was in conflict of interest in a contract between the university and a law firm of which the board member was a partner for legal services entered into prior to the time the board member was appointed to and assumed his public office. The opinion concluded that MCL 15.301 et seq; MSA 4.1700(21) et seq, barred only new contracts between the law firm and the university, or amendments to existing contracts. There was no indication in the opinion that the contract for legal services was awarded after sealed bids pursuant to publication. Thus, the above-quoted statutory provision dealing with the award of contracts pursuant to competitive bidding was neither considered nor discussed.

Because each of these twenty contracts was entered into prior to July 18, 1991, at each time when Mr. Holli was a private citizen and not a member of the Commission of Natural Resources, neither Const 1963, art 4, Sec. 10, nor MCL 15.301 et seq; MSA 4.1700(21) et seq, apply to the award of these contracts.

The Department of Natural Resources has informed this office that not all of the purchased standing timber to stumpage has been harvested to date. It further advises that only one of these contracts has been amended to extend its term for one year upon payment of a 5% extension fee. The amendment is dated November 15, 1990.

As to those contracts which have not yet been fully performed, since each was entered into after publication of notice for and receipt of sealed bids, and none has been renegotiated or amended since Mr. Holli assumed his office as Commissioner, there can be no violation of Const 1963, art 4, Sec. 10, as explicated by MCL 15.301 et seq; MSA 4.1700(21) et seq, because the Legislature has deemed, under these factual circumstances, that there is no substantial conflict of interest in a state officer holding such contracts. The competitive bidding provisions of MCL 15.304; MSA 4.1700(24), would also apply to any future contracts entered into after Mr. Holli assumed his office.

This office has been informed that six of the existing contracts are due to expire on October 31, 1991, without all the timber having been harvested. MCL 15.304; MSA 4.1700(24), makes it very clear that any amendments, renegotiations or additional payments concerning these competitively bid contracts would constitute a substantial conflict of interest. Any extension of one of these contracts by a supplemental agreement that requires additional payments of money and extends the date for harvesting the timber would be a contract amendment that would constitute a substantial conflict of interest.

It is my opinion, therefore, that a member of the Natural Resources Commission is not in a substantial conflict of interest in violation of Const 1963, art 4, Sec. 10, and MCL 15.301 et seq; MSA 4.1700(21) et seq, if he holds contracts, not fully performed, for the purchase of standing timber to the stump with the Department of Natural Resources entered into pursuant to sealed bids prior to assumption of his office. It is also my opinion that an extension of any of these contracts by a supplemental agreement while the person holding the contract is a member of the Natural Resources Commission would constitute a contract amendment that would result in a substantial conflict of interest in violation of Const 1963, art 4, Sec. 10, and MCL 15.301 et seq; MSA 4.1700(21) et seq.

Frank J. Kelley

Attorney General