Administration Moves to Shine Light on Contractors' Political Contributions

A draft executive order on disclosure of political contributions from government contractors is circulating among federal agencies and has caught the attention of a few media outlets. What the order will mean for contractors and the general public will need to be hashed out should the draft become official.

The draft order requires any entity bidding for a government contract to disclose political contributions to federal candidates or parties made within the past two years that, in aggregate, exceed $5,000. The disclosure is to include contributions made by the entity’s directors and officers as well as its affiliates and subsidiaries.

In addition, the disclosure is to include contributions made by a prospective contractor to third parties “with the intention or reasonable expectation” that those parties would use the money to make independent expenditures that support or oppose a candidate for federal office or electioneering communications (e.g., paid ads) that refer to a federal candidate. This would mean that some donors to certain nonprofit groups that are allowed to engage in electioneering (501(c)(4) organizations, unions, and trade associations, for example) would be disclosed.

The disclosed information would be posted on in a “searchable, sortable, downloadable and machine readable format.” There is no date by which the online database will be up and running, and this is a shortcoming of the draft executive order. However, the draft order requires the Federal Acquisition Regulatory Council to adopt implementation regulations by the end of this calendar year. Thus, depending on the effective date of the regulations, implementation could begin in time for the next election cycle.

There are many issues the FAR Council regulations would need to address, including:

  • How it will define “affiliates” and “subsidiaries”? Would those definitions include partnerships? What percent of ownership makes a company a subsidiary? Moreover, the draft order says affiliates or subsidiaries “within its control.” What does “within its control” mean?
  • What will be covered by the definition of “contributions made to third party entities”? While it is important to have disclosure about indirect political contributions, it’s unclear how far this could go. What happens if the third party provides money to yet another group? Does that still trigger disclosure?
  • When the order mentions disclosure to third parties with “the intention or reasonable expectation” that the party will use the money to make political contributions or electioneering communications, what does “reasonable expectation” mean? What happens if an entity bidding on a contract makes a general support contribution to a 501(c)(4) organization? Does that change if the 501(c)(4) comingles several general support contributions to produce paid ads in support or opposition to a federal candidate?
  • The disclosure occurs when an entity bids on a contract, and the draft order says the data should be posted on “as soon as practicable upon submission.” Will the regulations provide more specificity on how fast the data is to be posted? Will enforceable deadlines be included in the implementing regulations?
  • Will the regulations identify any penalty for incorrect information? How will information be updated or corrected?

The White House has been silent about the leaked draft executive order, neither confirming nor denying its existence.

In the aftermath of the U.S. Supreme Court's Citizens United decision and other court cases that have allowed a deluge of corporate money into elections, the Obama administration has been looking for ways to deal with the problems these cases have unleashed. The administration had supported the DISCLOSE Act, a legislative attempt to undo some of the damage caused by Citizens United and other cases, but it stalled in the Senate after passing the House last year. Another legislative approach from last year, the Shareholder Protection Act, called for disclosure to shareholders about company political contributions and shareholder votes on such matters. There is no chance of these bills moving in the current Congress, so it is now up to the administration to tackle the problems caused by the corrupting influence of money in politics.

This draft executive order would be one step in that direction. Some have already criticized the order as an attempt to squelch free speech, arguing that the disclosure requirements would somehow be "burdensome" and would discourage certain corporate entities from participating in the political process. Arguments about corporate personhood aside, the fact of the matter is that disclosure of political contributions, no matter who they come from, is good for democracy. The American people have thus far not been given all the information they need to make the most informed decisions possible about candidates and the policymaking process.

The public needs to know who is giving how much to which candidates, and no person or corporation should be allowed to hide behind a shroud of secrecy and prevent the people from seeing who is trying to influence government and policymaking through political contributions. Such secrecy fosters the type of undue influence that we've seen for decades, and it seriously damages the American people's trust in their government.

Unless the draft significantly changes or the implementing regulations drastically overreach, OMB Watch supports this executive order; it would help take us further down the road toward more transparency and accountability, allowing the sun to shine in.

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