United States: Lobbying Changes On The Horizon: Stay Alert…Stay Compliant!

(Part Four of a Four-Part Series on Government Ethics and Campaign Finance Matters)

As the recent lobbying and bribery scandals continue to rock the nation, companies can expect to endure increased oversight and scrutiny regarding their lobbying activities. It is important, therefore, that companies stay current on changes affecting lobbying reporting and disclosure requirements. This article highlights some changes to the lobbying provisions of the Federal Acquisition Regulations ("FAR") that will likely be implemented in the near future.

The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council ("Councils") are proposing to amend the FAR in order to make it consistent with the Lobbying Disclosure Act of 1995 ("LDA" or "Act") and the Office of Management and Budget ("OMB") government-wide guidance on lobbying. FAR Case 2005-035, Changes to Lobbying Restrictions, 71 Fed. Reg. 54,255 (Sept. 14, 2006). The proposed amendments will also improve the clarity and the use of plain language in the FAR lobbying provisions.

In 1989, the U.S. Congress enacted the Byrd Amendment, which prohibits a recipient of a federal contract, grant, loan, or cooperative agreement from using appropriated funds to pay any person for influencing or attempting to influence an employee of an agency, a Member of Congress, or an employee of Congress in connection with the awarding of any "covered Federal action." Covered federal actions include federal contracts, grants, loans, cooperative agreements, and also any actions to extend, continue, renew, amend or modify them.

There are, in the current FAR rules, two main exceptions to the prohibition against using appropriated funds for lobbying activities. First, a contractor can use appropriated funds for the payment of reasonable compensation to its employees for agency and legislative liaison activities as long as the activity is not directly related to a covered federal action. Second, a contractor can use appropriated funds for payment of professional or technical services rendered directly in the preparation, submission, or negotiation of any bid, proposal, or application for a covered federal action.

FAR requires that a contractor who submits an offer under a solicitation in excess of $100,000 satisfy two requirements. First, the offeror must certify that it has not used any appropriated funds for lobbying activities for that covered federal action. Second, it must disclose whether it has used any non-appropriated funds to influence or attempt to influence the award of the covered federal action. The reporting requirement does not apply to non-appropriated funds used to pay regularly employed officers or employees of the offeror. Offerors must complete OMB Standard Form LLL ("SF-LLL"), Disclosure of Lobbying Activities, to disclose any lobbying activities regarding covered federal actions that were paid for with non-appropriated funds. A "certifying official" of the contractor must verify and sign the form. A contractor must complete a certification of whether or not it has engaged in lobbying activities when the contract exceeds $100,000. The contractor must only file an SF-LLL, however, if it has actually engaged in lobbying activities regarding the contract. Offerors must submit certifications and SF-LLLs prior to making or entering into a contract with the federal government.

Recipients of subcontract awards in excess of $100,000 must also make the same certifications and disclosures. All subcontractor SF-LLLs (but not certifications), must be forwarded from tier to tier until received by the prime contractor. The prime contractor must submit all subcontractor SF-LLLs to the contracting officer. The prime contractor does not have to submit the subcontractor certification forms to the contracting officer; however, it must retain them in its files.

Contractors must file a new disclosure form at the end of each calendar quarter in which any event occurs that materially affects the accuracy of the information contained in previously filed disclosure forms. Events that materially affect the accuracy of disclosed information include: (1) a cumulative increase of $25,000 or more in the amount paid or expected to be paid for influencing or attempting to influence a covered federal action; (2) a change in the person influencing a covered federal action; or (3) a change in the employee or Member of Congress contacted.

Contractors that make improper expenditures under this provision, or that fail to properly file or amend disclosure forms, are subject to a civil penalty of not less than $10,000 and not more than $100,000 for each failure.

Currently, FAR includes several provisions that are inconsistent with LDA. LDA requires a lobbyist who makes a lobbying contact, or who is employed to make a lobbying contact, to register with the Secretary of the Senate and the Clerk of the House of Representatives. A lobbyist means any individual who is employed or retained by a client for financial or other compensation for services that include more than one lobbying contact. Lobbying registrants must file a semiannual report with the Secretary of the Senate and the Clerk of the House of Representatives regarding their lobbying activities. The Act requires that the Secretary of the Senate and the Clerk of the House of Representatives make the registrations and reports available for public inspection.

The Councils’ proposed rule seeks to bring FAR into line with LDA by making the following changes:

• Implement LDA concepts into FAR rules: The proposed rule directly implements LDA, bringing the concepts of "registrants" and "lobbying contacts" into FAR. It specifically mandates that if any "registrants under the Lobbying Disclosure Act of 1995 have made a lobbying contact on behalf of the offeror with respect to [a] contract, the offeror shall complete and submit, with its offer, SF-LLL, to provide the name of the registrants."

• Clarify "appropriated funds": The proposed rule clarifies that the term "appropriated funds" does not include any profit or fee from covered federal actions. Further, to the extent that the contractor can demonstrate it has sufficient monies other than appropriated funds, the government will assume that these other monies were spent for any influencing activities.
• Remove FAR requirement to forward lobbying disclosures: The proposed rule removes a provision requiring contracting officers to forward copies of all lobbying disclosures to a designated agency official. In the past, agencies were required to submit lobbying reports to the Congress. However, LDA eliminated this reporting duty.

• Apply lobbying prohibitions and reporting to subcontractors: Under the current rules, FAR does not apply the lobbying prohibitions and reporting requirements to subcontracts for the acquisition of commercial items. The Councils have proposed to change this rule, and apply the lobbying prohibitions and reporting requirements to such subcontracts.

• Modify process for amending lobbying disclosure forms: Currently, under FAR’s rules, a contractor must file an amended lobbying disclosure form at the end of each calendar quarter in which there occurs a material change from its prior disclosure. The following events are material changes: (1) a cumulative increase of $25,000 or more in the amount paid or expected to be paid for influencing or attempting to influence a covered federal action; (2) a change in the individuals influencing or attempting to influence a covered federal action; and (3) a change in the employee or Member of Congress contacted. The Councils have proposed to modify the material changes to be in line with LDA. Under the proposed rule, the only material change that the contractor must disclose is a change in the name and address of the lobbying registrant.

• Remove redundant sheet of SF-LLL: Currently, FAR allows contractors to use two forms to disclose lobbying activity: (1) SF-LLL and (2) OMB Standard Form LLL-A, "Disclosure of Lobbying Activities Continuation Sheet." In the proposed rule, the Councils discontinue use of OMB Standard Form LLL-A because it is unnecessary under the new guidelines.

Under the current schema, companies that wish to do business with the federal government must comply with two separate, and sometimes varying, sets of lobbying rules. They must not only follow LDA rules, but they must also comply with the lobbying rules set forth under FAR. If implemented, the proposed rule will simplify and clarify lobbying requirements by making FAR wholly consistent with LDA.

It is important that companies stay alert and monitor changes in lobbying requirements so they can ensure that their lobbying disclosures are consistent with the most up-to-date government guidance. Proper disclosures will be the key to staying alive in this heated lobbying environment.

This article is presented for informational purposes only and is not intended to constitute legal advice.