Companion Guide to Video August 2012

www.fhwa.dot.gov/federal-aidessentials

When the Federal government entrusts its funds to 

the care of your agency, you are responsible for 

ensuring their proper use, including taking all the 

steps necessary to prevent fraud, waste and 

abuse. 

Your State and your agency should have internal 

policies and practices designed to prevent 

conflicts of interest and help you comply with 

Federal regulations. 

A conflict of interest occurs when 

one’s private interests and one’s 

public duties and responsibilities 

diverge or are not consistent.

The Federal government, through its regulations, 

focuses on three primary sources of conflict: 

• The independence of the people 

associated with the procurement, 

management and administration of 

consultants or vendors

• The independence of the people providing 

engineering or other professional services 

• The independence of the people involved 

in matters related to the acquisition of real 

property for a project.

Furthermore, Federal regulations and guidance 

address both direct and indirect conflicts of interest, 

as well as the concerns regarding an appearance 

of a conflict of interest or bias.

Federal-aid Program Overview

Consultant Services

Organizational and Consultant Conflicts of Interest

Defining conflicts of interest and how to prevent and mitigate them
Federal-aid Essentials for Local Public Agencies

To illustrate, let’s look at a few 

examples. 

In the first example, an agency employee asks to 

be involved in a decision related to the hiring of a 

family member as an environmental consultant. If 

she participates in the decision, a potential conflict 

of interest would arise because of her personal 

interest in the procurement. 

In the second example, a consulting engineering 

firm is under contract to serve as the city engineer 

to provide oversight of engineering functions and 

the work of engineering consultants procured by 

the city. A large Federal-aid roadway project is 

planned and the same consulting firm serving as 

city engineer would like to compete to provide 

project-related design services for the project. 

Although a full-time, public agency employee must 

be in responsible charge of the project and would 

oversee the consulting firm serving as city 

engineer, a potential conflict of interest would arise 

if the consulting firm were awarded the projectrelated design services. In addition, the firm would 

have an unfair advantage in competing for the 

work and would be in the position to review and 

accept its own work and invoices for payment. 

Our final example involves a project engineer who 

is selected to manage an upcoming project in 

which he owns property that may be in the right-ofway. If he accepts the project engineer position, his 

financial interest in the property would constitute a 

conflict of interest.

As a leader in your organization, it's critical that you 

establish a business culture mindful of the potential 

for conflicts of interest. This culture includes having 

comprehensive policies and procedures to address 

conflicts of interests, as well as providing qualified, 

full-time agency employees to provide project 

oversight. 

Make certain that everyone in your agency reads 

and understands the written policies and 

procedures that are designed to avoid or mitigate 

conflicts of interest. If you are in a position to 

influence a procurement or right-of-way decision, 

seek proper guidance to recognize potential 

sources of conflict.

Providing a separation of public- and private-sector 

roles allows for independence in decisions and 

actions to protect public funds from fraud, waste 

and abuse.

A conflict of interest – direct or indirect – violates 

Federal regulations. Your State or local agency 

may have additional conflict of interest laws, 

regulations or policies. Violating these Federal, 

State, or local requirements has serious 

consequences for the project sponsors. 

Additionally, the appearance of a conflict of interest 

or lack of impartiality should be avoided as it may 

undermine public trust if not sufficiently mitigated.
Federal-aid Essentials for Local Public Agencies

Federal regulations establish the framework for 

project stewardship and oversight, but the State 

department of transportation, the State DOT, is 

responsible for enforcing the requirements of 

these regulations. The State DOT is also 

responsible for establishing procurement policies 

and procedures that address conflicts of interest. 

If you are using or planning to use 

consultants on a Federal-aid 

project, the State DOT can provide 

or assist with the development of a 

range of controls to prevent or 

mitigate the potential for conflicts.

The State DOT is an excellent source of 

information to answer your questions regarding 

conflicts of interest. Additional resources and 

guidance information concerning conflicts of 

interest are also available on the Federal Highway 

Administration’s Consultant Services Web site. You 

will find a link to it on the Federal-aid Essentials for 

LPAs Web site.
Federal-aid Essentials for Local Public Agencies

The content of this 

document is not a 

substitute for 

information obtained 

from State departments 

of transportation, 

appropriate FHWA 

Division Offices, and 

applicable laws. 

Scenarios have been 

simplified for emphasis 

and do not necessarily 

reflect the actual range of 

requirements applicable 

to the scenario or this 

topic. This document

was created under 

contract number

DTFH61-11-D-00025 by 

the Federal Highway 

Administration, U.S. 

Department of 

Transportation, and is 

offered to the public to 

heighten and focus 

awareness of Federal-aid 

requirements within the 

local public agencies 

community and 

reinforces the 

importance of these 

necessary policies, 

procedures, and 

practices.

This companion resource 

is the script content for 

the video production of 

the same name. 

Web Resources

• Information on procurement, management, and administration of consultant 

services 

http://www.fhwa.dot.gov/programadmin/consultant.cfm

• FHWA's conflicts of interest regulations

http://www.ecfr.gov/cgi/t/text/textidx?c=ecfr&sid=df7972764d951c0b011fa11eb3f88f07&rgn=div8&view=text

&node=23:1.0.1.1.1.0.1.13&idno=23

• Conflicts of interest requirements for engineering- and design-related 

consultant services

http://www.fhwa.dot.gov/programadmin/172qa.cfm

• Requirements of an "employee in responsible charge" of a Federal-aid 

project

http://www.fhwa.dot.gov/federalaid/110804.cfm