Reporting Requirement for Political Contributions and Correspondence Proposed

Most Government contractors, perhaps all of them, know and understand that contributions and donations, including cash, property and services, regardless of recipient, are unallowable (see FAR 31.205-8). The cost principle is simple, straight-forward, and contains none of the nuances found in many other cost principles.

As long as contributions are excluded from forward pricing estimates and incurred costs, the Government is satisfied, right? Not if Rep. Ellison gets his way. Rep Ellison has introduced an amendment to the 2018 NDAA (National Defense Authorization Act) that establishes a new reporting requirement for Defense contractors.

The amendment reads:

Not later than 30 days after a contract is awarded using funds authorized under this Act (i.e. the Fiscal Year 2018 NDAA), the relevant contractor and subcontract at any tier (and any principal with at least 10 percent ownership interest, officer, or director of the contractor or subcontractor or any affiliate or subsidiary with the control of the contractor or subcontractor) shall disclose to the Administrator of General Services all electioneering communications, independent expenditures, or contributions made in the most recent election cycle supporting or opposing a Federal political candidate, political party, or political committee, and contributions made to a third-party entity with the intention or reasonable expectation that such entity would use the contribution to make independent expenditures or electioneering communications in Federal elections.

We have no idea whether this amendment will be adopted into the NDAA. A requirement to send all electioneering communications to the GSA (General Services Administration) seems draconian. Then there is the question of what the GSA will do with the information. Who will have access to it? What will they do with it? How will it be cataloged and referenced? We hope this amendment dies.

Political Contributions

It is important to know that political contributions by federal contractors to any political party or candidate for Federal office would not only be unallowable under relevant FAR cost principles but are unlawful to make in the first place. Specifically 11 CFR 115 states:

It shall be unlawful for a Federal contractor ... to make, either directly or indirectly, any contribution or expenditure of money or other thing of value, or to promise expressly or impliedly to make any such contribution or expenditure to any political party, committee, or candidate for Federal office or to any person for any political purpose or use. This prohibition does not apply to contributions or expenditures in connection with State or local elections.

This prohibition works both ways. It is also unlawful for any such person to solicit contributions from a Federal contractor.

In the context of this law, Federal contractor is a person (including legal person) who enters into any contract with the United States or any department or agency thereof either for the rendition of personal services or furnishing any material, supplies, or equipment or selling any land or buildings.The funds for these purchases must have been appropriated by Congress.

The prohibition lasts as long as the contract.The prohibition also applies to active bids.

Contracts include sole-source, negotiated or advertised procurements and contract modifications.

Individuals or sole proprietors who are Federal contractors are prohibited from making contributions or expenditures from their business, personal, or other funds under their dominion or control. The spouse of an individual or sole proprietor who is a Federal contractor is not prohibited from making a personal contribution or expenditure in his or her name.

Here's the big loophole. Stockholders, officers, or employees of a corporation can make contributions from their personal assets. There have been many allegations over the years that Federal contractors give bonuses to their executives with the implicit understanding that those funds would go to targeted candidates.