Government contractors aren't the problem they're made out to be

Recently legislation was introduced that would amend the Hatch Act. First enacted in 1939 and amended several times, the Act restricts the political activities of federal, state and local government employees. One of its restrictions prohibits state and local employees from running for political office, a prohibition that the legislation would relax. While appearing to be limited in application, the Hatch Act turns up in some interesting ways.

It is important to note the basis for the Hatch Act. Today most of the focus is on the Act’s prohibitions from the perspective of what the government employee is prohibited from doing. But in fact, the Act was in large part designed to protect the employee from being forced into political activity to benefit his or her superiors. For example, the reason the Act bars government employees from making political contributions to their superiors is to protect the employee from being coerced into contributing, for example, in exchange for continued employment.

The Act also serves as the basis for the current prohibition on campaign contributions by federal contractors found in 2 USC 441(c). The Federal Election Commission historically has interpreted that prohibition to extend to expenditures as well. Thus, under the FEC’s regulations, a corporation that is a federal contractor may not take advantage of the authority under Citizens United that allows corporations to make independent expenditures either directly or to third-party groups that advocate the election or defeat of federal candidates.

Today, the focus is on the conduct of the contractor. But in large part, the goal of the Act was to protect contractors from being coerced into making contributions to government officials who were in a position to award a contract. According to a brief filed by the FEC in opposition to a lawsuit that seeks to overturn 441(c), debate over the Act included references to what was referred to as the "Democratic Campaign Book Scandal," which involved a scheme which sounds familiarly like the basis of a plan that toppled a Speaker of the House. Back then, government officials required contractors to purchase books allegedly signed by the president. The books were sold at an inflated price and there was an expectation that contractors were to buy books in numbers related to the amount of government business that the contractor was enjoying.

Today, the focus has shifted from government officials seeking some form of a tithe to the actions of the government contractor. The government contractor is deemed to be the one seeking some unfair advantage or worse, and yet in today’s byzantine system of government contracting with all of its legal requirements of objectivity and transparency, it is difficult to imagine how a campaign contribution can result in a government contract.

And the focus goes beyond this prohibition. Although seemingly stalled, the White House still may be considering a plan to require government contractors to disclose contributions that are used for political purposes. But since 441(c) already prohibits contributions the draft order may really be directed at the expenditures now permitted by Citizens United, such as contributions to Super PACs. The word "may" is used because in its brief in the contractor litigation, the FEC stated "by regulating only contributions, Congress has carefully drawn section 441(c) to address the financial activity it deemed most likely to influence office holders …" Thus it is not clear if the FEC continues to believe that contractors are prohibited from making expenditures.

Even in Congress the world has changed. Perhaps there was a time when government contractors could use campaign contributions to curry favor with elected officials in the hopes of gaining a government contract. Such was the case with disgraced Rep. Duke Cunningham, who sought much more than campaign contributions and extracted huge sums of money in exchange for earmarks tied to government contracts. But today Congress is out of the earmarking business.

As long as it’s politically convenient, corporations, government contractors and lobbyists will be fodder for critics. Although not perfect, they certainly are not the problem that they are made out to be.

Spulak is a King & Spalding partner and chairman of the firm’s Government Advocacy and Public Policy Practice Group. He served as Democratic staff director and general counsel of the House Committee on Rules, and as general counsel to the House.

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