11 Essential Elements for your Conflict of Interest Policy

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11 Essential Elements for your Conflict of Interest Policy 3

Why do you need a Conflict of Interest Policy?

A Conflict of Interest Policy (also called a “Conflicts of Interest Policy” or a “Conflicts Policy”) is an important document that every contractor and consultant dealing with any government or quasi-government entities should have in place. It serves as a guide to navigate the complex landscape of personal and professional interests, ensuring transparency and integrity in all dealings.

A comprehensive Conflict of Interest Policy is a cornerstone of ethical business practices, particularly for contractors and consultants wanting to deal with the Australian Government, State Governments, Councils, Universities, Institutions and other Government or quasi-government bodies.

To state it simply – if you want to enter into a contract with any of these clients, you need to have a Conflict of Interest Policy for your business. Now more than ever, in the changing landscape of Probity and Conflicts of Interest in Australia.

This article outlines 11 essential elements that your Conflict of Interest Policy should contain to ensure transparency, integrity, and compliance with relevant Laws in Australia.

Key Takeaways

Understanding and implementing a comprehensive Conflict of Interest Policy is crucial for contractors and consultants dealing with the Australian government. Here are my key takeaways:

  1. The Importance of a Conflict of Interest Policy: A well-crafted policy is a cornerstone of ethical business practices, ensuring transparency, integrity, and compliance with relevant Laws in Australia.
  2. The Role of Disclosure: Prompt and transparent disclosure of potential conflicts is key to maintaining trust and credibility with clients.
  3. Impact on Public Trust and Organisational Reputation: Conflicts of interest, if not managed properly, can have detrimental effects on public trust and the reputation of your organisation.
  4. The Balance of Transparency and Confidentiality: While transparency is key in managing conflicts of interest, it’s equally important to respect the confidentiality and privacy of the individuals involved.
  5. The Consequences of Breaching the Policy: Clear consequences for breaching the policy can act as a deterrent and reinforce the importance of adhering to the policy.
  6. The Need for Regular Policy Reviews: Regular reviews and updates ensure that the policy remains relevant and effective, keeping pace with changes in the industry, legislation, or the organisation itself.
  7. The Importance of Training and Awareness: Regular training sessions can ensure that everyone in the organisation understands the policy and knows how to apply it effectively.
  8. The Role of Ethical Culture: An ethical culture within the organisation can greatly assist in managing conflicts of interest, setting clear expectations for conduct and decision-making.
  9. The ‘Speak Up’ Culture: A Conflict of Interest Policy can promote a culture of openness and honesty, encouraging everyone in the organisation to ‘Speak Up’ about potential conflicts.

Should we put a Conflict of Interests Policy in place?

Remember, a comprehensive Conflict of Interest Policy is not just about compliance – it’s about building trust, maintaining integrity, and ensuring the success of your projects.

Even if you don’t deal with government entities or quasi-government entities, it is still a good idea to have one of these policies in place. While it’s more optional for startups and SMEs to have a Conflict Policy in place, in my view if your annual revenue is above $10 million, it’s important to draft one, particularly since it can help to protect your organisation from staff Conflicts of Interest (even if you don’t deal with government).

Read what the Australian National Audit Office (ANAO) says about Managing Conflicts of Interest – their Audit Insights Report gives some great insights about what is required when it comes to declaring and managing Conflicts of Interest.

Essential Elements for Your Conflict of Interest Policy

Here are some of the essential elements you should deal with in your Conflict of Interest Policy:

1. Definition of Conflict of Interest

It’s essential to start with a clear definition of what constitutes a conflict of interest. This could be any situation where a personal interest might contradict the professional duty towards the client or the project.

For instance, a contractor might have a personal relationship with a supplier, which could influence their decision-making process when procuring materials.

Read my article on What is a Conflict of Interest if you’re looking for some inspiration.

In my experience: It’s important for contractors and consultant’s to understand that having a Conflict of Interest doesn’t necessarily imply wrongdoing. It’s about making sure that any actual, potential or perceived bias can be identified and managed transparently. By putting in place a Conflict of Interest Policy, you show your potential clients that you take seriously the need to avoid Conflicts of Interest, and that you can be relied upon to act appropriately if you are awarded a contract.

Rachelle Hare – Blaze Business & Legal

2. Purpose of the Policy

The purpose of a Conflict of Interest policy is to provide a framework for identifying, disclosing, and managing Conflicts of Interest. It’s about ensuring that decisions and actions are made in the best interest of the project and the client.

In my experience… a well-articulated purpose can set the tone for the entire Policy. It communicates your businesses’ commitment to ethical practices and sets clear expectations for all parties involved.

Rachelle Hare – Blaze Business & Legal

A clear purpose stated in the Policy can help your staff understand why the Policy is in place and how it protects both their interests and those of potential clients.

3. Scope of the Policy

The scope of the Conflicts of Interest Policy should clearly define who it applies to. This typically includes all employees, contractors, and consultants involved in the project.

In my experience… A broad scope ensures that everyone involved in the project is held to the same standards, promoting a level playing field. It’s important to be explicit about the scope of the Conflicts Policy to avoid any ambiguity. For example, if subcontractors are part of the project, they should be included in the scope of the policy.

Rachelle Hare – Blaze Business & Legal

4. Roles and Responsibilities

This section should outline the roles and responsibilities of all parties in identifying, disclosing, and managing conflicts of interest.

In my experience… Clearly defined roles and responsibilities can prevent misunderstandings and ensure that everyone knows what is expected of them. If you are a contractor, the Policy will state that you are responsible for disclosing any potential conflicts of interest. If you are a principal, the Policy will state that your role will be to make the decision about managing certain Conflicts of Interest.

Understanding your roles and responsibilities can help contractors and consultants proactively manage potential conflicts of interest and maintain a transparent relationship with the client.

5. Procedure for Identifying Conflicts of Interest

The Policy should provide a clear procedure for identifying potential conflicts of interest. This could include regular reviews of business relationships, financial interests, and personal connections of and between your staff. It is critical to also consider your other clients and how their interests may conflict with those of your government client.

Keep in mind that Government is not just concerned with actual and potential Conflicts of Interest – they also need to know about perceived Conflicts of Interest.

In my experience… having a systematic procedure can make it easier to spot potential conflicts of interest before they become a problem. For example, as a contractor, you might review your relationships with suppliers and other clients before bidding on a project, to ensure there are no conflicts of interest.

Rachelle Hare – Blaze Business & Legal

A systematic identification process can provide reassurance for your potential client that conflicts of interest are being proactively looked for, identified and managed.

6. Procedure for Disclosing Conflicts of Interest

Once a potential conflict of interest is identified, it should be disclosed promptly and transparently. The Policy should outline how and to whom these disclosures should be made.

A clear disclosure procedure can help maintain trust and transparency. For instance, a contractor might disclose a potential conflict of interest to the principal as soon as they become aware of it, even if it doesn’t impact their decision-making.

In my experience… Prompt and transparent disclosure can help contractors maintain their credibility and build trust with the client. And keep in mind, the existence of a Conflict of Interest and a disclosure on its own do not mean you will be booted off the project. Often, your client will be able to manage a Conflict of Interest that they know about – it’s the ones they don’t know about that can cause the problems!

Rachelle Hare – Blaze Business & Legal
Infographic titled "Elements to Consider when Creating a Conflicts of Interest Policy". Blaze Business & Legal logo
11 Essential Elements for your Conflict of Interest Policy 4

7. Management and Mitigation Strategies

The Policy should outline strategies for managing and mitigating identified conflicts of interest. This could include measures like recusal from decision-making processes or divestment from conflicting interests.

Effective management and mitigation strategies can help Government entities ensure that Conflicts of Interest don’t compromise the integrity of their procurements. And they help contractors and consultants to know what actions they need to take in certain circumstances.

In my experience… having a range of management and mitigation strategies can provide flexibility in dealing with conflicts of interest. For example, a contractor with a personal relationship with a supplier might choose to recuse themselves from procurement decisions to avoid any perceived bias. By identifying and making this decision early, and communicating thoroughly with the potential client, contractors and consultants can give themselves the best chances of being awarded a tender and building a solid relationship with the potential client long-term.

Rachelle Hare – Blaze Business & Legal

8. Confidentiality and Privacy Considerations

Conflicts of interest often involve sensitive information. The Policy should therefore include provisions for maintaining confidentiality and respecting privacy.

In my experience… balancing transparency with confidentiality can be a delicate task. While contractors and consultants need to disclose conflicts of interest, they also need to respect the privacy of the individuals involved.

Rachelle Hare – Blaze Business & Legal

Understanding the confidentiality and privacy considerations in their Conflicts of Interest can help staff of a business to navigate sensitive disclosures responsibly.

9. Consequences of Breaching the Policy

The Policy should clearly outline the consequences of breach. This could range from not being awarded a contract to disciplinary action to termination of contracts.

Clear consequences within the Policy can act as a deterrent and reinforce the importance of adhering to the policy. For example, a contractor who fails to disclose a conflict of interest might face penalties or even lose their contract.

Having clear consequences can provide contractors and consultants with a framework for dealing with breaches and allow the Government entity to maintain the integrity of the procurement or the project.

10. Policy Review and Update Procedures

The Policy should include procedures for regular review and updates to ensure it remains relevant and effective.

In my experience… regular reviews can help keep the Policy up to date with changes in the industry, legislation, or the organisation itself. It is worthwhile for contractors and consultants to review their Conflict of Interest Policy at least annually or whenever there are significant changes in their business relationships.

Rachelle Hare – Blaze Business & Legal

Regular reviews of your Policy can provide potential clients or clients with reassurance that the Policy is being actively managed and remains fit for purpose. They can also show that your business takes Conflicts of Interest seriously (and is therefore a better service provider for Government).

11. Training and Awareness

Finally, the policy should include provisions for training and raising awareness about Conflicts of Interest and the Policy itself.

In my experience… Training and awareness are key to ensuring that everyone understands how to deal with Conflicts of Interest, is aware of the Policy, knows how to apply it, and understands that your business is not just paying “lip service” to these requirements. I’ve provided dozens of Probity Briefings and Probity Trainings, and regular trainings are important to remind people about probity considerations, Conflict of Interest issues, and how important it is that these are identified and managed.

Rachelle Hare – Blaze Business & Legal

From a contractor’s or consultant’s perspective, regular training can help them ensure that their team is well-equipped to handle Conflicts of Interest responsibly.

Need a hand drafting your Conflict of Interest Policy?

I’ve drafted many of these policies and have reviewed and advised on many policies of Contractors and Consultants while working in Government. Contact me if you’d like me to help you draft your organisation’s new Conflict of Interest Policy.

Conclusion

A comprehensive Conflict of Interest Policy is a cornerstone of ethical business practices, particularly for contractors and consultants in Australia who are dealing with Government, Universities, Councils, and other official bodies.

By incorporating these 11 essential elements, you can ensure transparency, integrity, and compliance with the Law and build trust with your clients (and potential clients). You can also help protect the integrity of your projects, whether you work in Government or private practice.

By maintaining a current Conflict of Interest Policy, and teaching your staff how to best approach actual, potential and perceived Conflicts of Interest, you can show that your client (or potential client) can rely on you to get the important probity aspects of the procurement or the project right – this is likely to lead to more Government work in the future.

FAQs:

1. What is a Conflict of Interest?

A Conflict of Interest arises when a personal interest may contradict your interests towards a potential client, a client, a procurement or a project. For instance, a contractor might have a personal relationship with a supplier, which could influence their decision-making process when procuring materials.

2. Why do I need a Conflict of Interest Policy?

A Conflict of Interest Policy is essential for maintaining transparency and integrity in all dealings, particularly if you are providing services to Government. It provides a framework for identifying, disclosing, and managing actual, potential and perceived Conflicts of Interest, ensuring that decisions and actions are made in the best interest of the project and the client.

3. How do I identify a Conflict of Interest?

Conflicts of Interest can be identified through regular reviews of business relationships, financial interests, and personal connections. A contractor or consultant should review their relationships with suppliers before bidding on a project, for example, to ensure there are no Conflicts of Interest.

4. How should I disclose a Conflict of Interest?

Once an actual, potential or perceived conflict of interest is identified, it should be disclosed promptly and transparently. The disclosure should be made to the relevant person or body as outlined in your Conflict of Interest Policy. Generally, disclosure will first be internal – within your organisation – and then external (to the Government body or other external entity identified in your Policy).

5. What happens if the Conflict of Interest Policy is breached?

The consequences of breaching the Conflict of Interest Policy should be clearly outlined in the Policy itself. Consequences could range from noting the actual, potential or perceived Conflict of Interest on a Conflict of Interest Register, taking action to mitigate the Conflict of Interest (eg encouring a staff member not to have contact with a friend during a particular period), and so on. It’s important to note that most Conflicts of Interests are not crimes, do not require disciplinary action, and do not lead to termination or even a “slap on the wrist”.

Often, simply being aware of the actual, potential or perceived Conflict of Interest is sufficient for those in charge of the Policy. Occasionally, a Conflict of Interest can lead to a contract being terminated, an employee being fired, or a tender not being awarded. But this is extremely rare, particularly where a conflict was disclosed.

6. How often should the Conflict of Interest Policy be reviewed and updated?

The Conflict of Interest Policy should be reviewed regularly to ensure it remains relevant and effective. This could be annually or whenever there are significant changes in the industry, legislation, or the organisation itself.

7. What resources are available to help me develop a Conflict of Interest Policy?

There are many resources available to help develop a Conflict of Interest Policy, including legal advisors, industry guidelines, and templates available online. However, it’s important to ensure that any policy is tailored to your specific circumstances and complies with relevant legislation and industry standards, and also that the person drafting your policy has experience dealing with Government Conflicts of Interest. Get in touch if you would like us to draft your Conflict of Interest Policy for you.

8. How does a Conflict of Interest Policy promote a ‘Speak Up’ culture in the organisation?

A Conflict of Interest Policy – if it is brought into the culture of an organisation – can promote a ‘Speak Up’ culture by encouraging transparency and open communication. It sends a clear message that the organisation values ethical conduct and expects everyone to take responsibility for identifying and managing Conflicts of Interest. However, it’s important that Leadership is seen to champion the Conflict of Interest Policy, otherwise it will just sit there gathering dust.

9. How does an ethical culture help in managing a conflict of interest?

An ethical culture helps in managing conflicts of interest by setting clear expectations for conduct and decision-making. It promotes transparency, integrity, and accountability, making it easier to identify and manage conflicts of interest effectively.

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