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§ 570.489 carry out specific activities which, in turn, generate payments to the fund for additional grants to units of gen- eral local government to carry out such activities. Program income in the revolving fund must be disbursed from the fund before additional grant funds are drawn from the Treasury for pay- ments to units of general local govern- ment which could be funded from the revolving fund. (3) A revolving fund established by ei- ther the State or unit of general local government shall not be directly fund- ed or capitalized with grant funds. (g) Procurement. When procuring property or services to be paid for in whole or in part with CDBG funds, the state shall follow its procurement poli- cies and. procedures. The state shall es- tablish requirements for procurement policies and procedures for units of general local government, based on full and open competition. Methods of pro- curement (e.g., small purchase, sealed bids/formal advertising, competitive proposals, and noncompetitive pro- posals) and their applicability shall be specified by the state. Cost plus a per- centage of cost and percentage of con- struction costs methods of contracting shall not be used. The policies and pro- cedures shall also include standards of conduct governing employees engaged in the award or administration of con- tracts. (Other conflicts of interest are covered by § 570.489(h).) The state shall ensure that all purchase orders and contracts include any clauses required by Federal statutes, executive orders and implementing regulations. (h) Conflict of interest—(1) Applica- bility. (i) In the procurement of sup- plies, equipment, construction, and services by the States, units of local general governments, and subrecipi- ents, the conflict of interest provisions in paragraph (g) of this section shall apply. (11) In all cases not governed by para- graph (g) of this section, this para- graph (h) shall apply. Such cases in- clude the acquisition and disposition of real property and the provision of as- sistance with CDBG funds by the unit of general local government or its sub - recipients, to individuals, businesses and other private entities. 24 CFR Ch. V (4-1-12 Edition) (2) Conflicts prohibited. Except for eli- gible administrative or personnel costs, the general rule is that no per- sons described in paragraph (h)(3) of this section who exercise or have exer- cised any functions or responsibilities with respect to CDBG activities as- sisted under this subpart or who are in a position to participate in a decision- making process or gain inside informa- tion with regard to such activities, may obtain a financial interest or ben- efit from the activity, or have an inter- est or benefit from the activity, or have an interest in any contract, sub- contract or agreement with respect thereto, or the proceeds thereunder, ei- ther for themselves or those with whom they have family or business ties, during their tenure or for one year thereafter. (3) Persons covered. The conflict of in- terest provisions for paragraph (h)(2) of this section apply to any person who is an employee, agent, consultant, officer, or elected official or appointed official of the state, or of a unit of general local government, or of any designated public agencies, or subrecipients which are receiving CDBG funds. (4) Exceptions: Thresholds requirements. Upon written request by the State, an exception to the provisions of para- graph (h)(2) of this section involving an employee, agent, consultant, officer, or elected official or appointed official of the state may be granted by HUD on a case-by-case basis. In all other cases, the state may grant such an exception upon written request of the unit of gen- eral local government provided the state shall fully document its deter- mination in compliance with all re- quirements of paragraph (h)(4) of this section including the state's position with respect to each factor at para- graph (h)(5) of this section and such documentation shall be available for review by the public and by HUD. An exception may be granted after it is de- termined that such an exception will serve to further the purpose of the Act and the effective and efficient adminis- tration of the program or project of the state or unit of general local govern- ment as appropriate. An exception may be considered only after the state or unit of general local government, as 126 40 Attachment 3