White House still reviewing plan for disclosing contractor campaign gifts

The White House has been largely silent since the April leak of a draft executive order that would require federal contractors to disclose their donations to political campaigns, a move actively opposed by Republican lawmakers and many in the contractor community.

The issue was revived late last month when 62 House Democrats sent a letter to President Obama urging him to issue the order because "more transparency, not less, places us on the right side of history." The New York Times in an Aug. 5 editorial also urged Obama to sign it.

White House Associate Communications Director Eric Schultz on Monday told Government Executive that Obama is still considering the order and would approve legislation with similar aims. "The draft executive order is still undergoing review," he said. "But broadly speaking, the president is committed to improving our federal contracting system, making it more transparent and more accountable. He believes that American taxpayers deserve that, and that is why he has asked Congress to pass a full disclosure law." The leaked draft order directs that "in order to increase transparency and accountability to ensure an efficient and economical procurement process, every contracting department and agency shall require all entities submitting offers for federal contractors to disclose certain political contributions and expenditures that they have made within the two years prior to submission of their offer. Certification that disclosure of this information has been made in the manner established by the Federal Acquisition Regulatory Council pursuant to Section 4 shall be required as a condition of award."

The order would require companies to list expenses of more than $5,000 made on behalf of federal candidates, parties or political action committees. Contractors also would be required to disclose contributions to third-party nonprofit groups -- known as a 501(c)(4) organizations -- in which the company has a "reasonable expectation" that the money would be spent on certain campaign activities, such as paid advertisements. The disclosed information would be posted on Data.gov in a "searchable, sortable, downloadable and machine readable format."

Critics of the plan charge that it would introduce politics into what all agree should be a merit-based process for awarding federal contracts. "Tying such information to the source selection process is inappropriate -- we think that it injects pay-to-play politics into the source selection environment in which no such elements exist today," Roger Jordan, vice president for federal relations at the Professional Services Council, told reporters in a July conference call. "Contractors are being used as a political football."

No sooner was the draft order leaked than 27 senators, led by Susan Collins, R-Maine, sent a letter criticizing the proposal, which they saw as a way to intimidate political critics. The order "could have a chilling effect on the First Amendment rights of individuals to contribute to the political causes or candidates of their choice," the letter said. "Political activity would obviously be chilled if prospective contractors have to fear that their livelihood could be threatened if the causes they support are disfavored by the administration."

They also asked the White House to release legal analysis that led to the draft order.

In May, Rep. Darrell Issa, R-Calif., chairman of the House Oversight and Government Reform Committee, held a joint hearing with the House Small Business Committee titled, Politicizing Procurement: Will President Obama's Proposal Curb Free Speech and Hurt Small Business?

House Republicans have since offered legislation (H.R. 2008) that would block the Obama order, and a companion bill was sponsored in the Senate by Collins, Mitch McConnell, R-Ky.; Lamar Alexander, R-Tenn.; and Rob Portman, R-Ohio.

Bidders on federal contracts have long been required to disclose contributions made directly through formal political action organizations. But proponents of Obama's draft order are concerned that the contractor situation has changed since the Supreme Court's 2010 decision in Citizens United v. Federal Election Commission, striking down limits on indirect campaign contributions through third-party advocacy nonprofits.

"It's more than ironic that many of the people who argue against the order focused on contractors are the same people who blocked the across-the-board disclosure we've long favored," said Fred Wertheimer, president of the campaign finance reform group Democracy 21, referring to the last year's defeat of the Disclose Act by Senate Republicans. The argument that Obama's order would politicize contracting is "bogus," Wertheimer told Government Executive. "Disclosure allows everyone to know what's going on, which makes it harder to politicize a decision. Absent disclosure, the donors and the beneficiaries know what's going on, but the American people are kept in the dark."

The House Democrats' letter stressed that laws requiring contractor disclosure are in effect around the country. "Forms of contractor political spending are actually banned in Connecticut, New Jersey, West Virginia, Hawaii, and elsewhere," they wrote. "At the federal level, since 1994, the Securities and Exchange Commission has prohibited brokers and dealers of municipal securities and their PACs, from making campaign contributions to bond-issuing officials, and requires disclosure of their campaign contributions to maximize transparency."

But Alan Chvotkin, executive vice president and counsel to the Professional Services Council, told the May House hearing that "the draft executive order is based on a number of misconceptions, including: (1) that political contributions are currently impacting federal contract awards; (2) that contracting officers would find useful the information required by the draft executive order; and (3) that much of the information required is currently hidden from public view."

He said there is "no evidence that campaign contributions -- for either the president or Congress -- have had any impact on any agency's procurement evaluation or award decisions."

Given the months that have elapsed since the draft order was leaked, the timing of the plan may be a problem if Obama proceeds to sign it, observers note. The order would require the FAR Council to complete implementation regulations by the end of 2011.