Obama Administration Outlines Enhanced Reporting for Government Contractors and Grantees
In the wake of Citizens United, the failure of the last Congress to enact the Democracy is Strengthened by Casting Light on Spending in Elections (DISCLOSE) Act, and the current stalemate at the Federal Election Commission (FEC), the Obama Administration has proposed enhanced political contribution and expenditure disclosures for government contractors. These disclosures would extend beyond existing reporting related to direct contributions to candidates and independent expenditures to include certain contributions to outside groups, as well as individual contributions by senior executives.
According to an April 13 draft Executive Order (EO), this disclosure would be required as part of the bidding process and would apply to all contracts resulting from solicitations issued on or after the date the EO was released.
The draft EO cites the public policy objective of removing the possibility of misconduct, or the appearance thereof, in the bidding process. While federal contractors are already prohibited under existing law from certain political activity, the Administration believes that "additional measures" such as state pay-to-play laws and enhanced disclosures are "appropriate and effective."
Key Features of the Proposed Disclosure Regime
The EO (as yet un-numbered) would vest the oversight of the disclosure program in the Federal Acquisition Regulatory Council (FAR Council). The disclosure would be required to include the following:
- All contributions or expenditures to or on behalf of federal candidates, parties, or party committees made by the bidding entity, its directors or officers, or any affiliates or subsidiaries within its control
- Any contributions made to third party entities with the intention or reasonable expectation that parties would use those contributions to make independent expenditures or electioneering communications.
This disclosure will be required when the aggregate amount of contributions or expenditures made by the bidding entity, its officers, directors, affiliates, and subsidiaries exceeds $5,000 to a given recipient during a given year.
If the draft EO is finalized, corporations seeking to do business with the Federal government will incur considerable internal political contribution tracking obligations. An entity will be required to track all contributions and expenditures, as outlined above, that are made by every director and officer of an entity and its affiliates or subsidiaries. For many corporations, this may involve tracking the personal political contributions and expenditures made by dozens of corporate officers and directors in order to monitor whether the aggregate $5,000 threshold has been reached by the entity.
The leak of the draft proposal has sparked renewed debate over the appropriate scope of required political disclosures, and the call from a number of government watchdog groups for greater transparency with respect to contributions by corporations to advocacy groups that make independent expenditures. Already, House Small Business Committee Chairman Sam Graves (R-MO) has outlined his objections to the draft EO in a letter to President Obama, citing his belief that the EO actually politicizes the contracting process by bringing political activity to the government's attention. With the FEC deadlocked and a divided Congress unlikely to enact campaign finance restrictions in the near term, the debate over free speech and political contribution disclosure will take place through other avenues, such as this draft EO.
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