Court Upholds Federal Ban on Pay-to-Play

Update: In January 2016, the United States Supreme Court turned down a challenge to the Court of Appeals ruling.

This week, the U.S. Court of Appeals for the District of Columbia Circuit upheld the ban on campaign contributions by federal contractors. In a unanimous decision, the Court upheld the constitutionality of a 75-year-old law that bars individuals and corporations from making federal campaign contributions while they negotiate or perform federal contracts.

The three plaintiffs who challenged the law are individuals who hold or have held federal contracts. (Two of the plaintiffs are retired employees of the agency that hired them as contractors to do the same work they did as government employees—at greater cost to taxpayers, we assume.) They argued that the restriction violated their First Amendment free speech and Fifth Amendment due process rights.

The Court rejected the plaintiffs’ challenge, reasoning that “the concerns that spurred the original bar remain as important today as when the statute was enacted, and…the statute is closely drawn to avoid unnecessary abridgment of associational freedoms.” The Court found that the Federal Election Commission (FEC) presented “an impressive, if dismaying, account of pay-to-play contracting scandals,” albeit mostly involving state government contracts. Nonetheless, the Court was convinced that “if the dam barring contributions were broken, more money in exchange for contracts would flow through the same channels already on display.” Indeed, the Court saw the relative lack of federal pay-to-play scandals as proof that the law is working as intended. Like the district court that ruled in the FEC’s favor three years ago, the appellate court found that the contractor campaign contribution ban serves two crucial purposes: to protect federal lawmakers and contracting officials from the corrupting influence of the private sector, and to protect contractors from political pressure when conducting business with the government.

So, for the time being, individual and corporate contractors cannot make direct contributions to candidates or parties, nor can they make contributions to so-called SuperPACs, which are political action committees (PACs) that do not directly support a candidate or party. However, contractors can still engage in other forms of political activity, such as speaking or writing about candidates and political issues, volunteering for campaigns, and hosting fundraisers. And while corporate contractors cannot directly contribute to candidates or parties, they can form their own PACs, and the employees, officers, directors, and stockholders of the corporation are free to make personal political contributions. Contractors can also covertly influence elections through dark money spending.

In 2004, the Project On Government Oversight exposed the unsavory, conflict-ridden underside of federal contracting in our report, The Politics of Contracting. We found that the top 20 contractors spent approximately 8 cents on lobbying and campaign contributions for every $100 in contracts they received between fiscal years 1997 and 2004. In that report, POGO recommended reversing a 1976 change to the contribution ban that allowed contractors to establish PACs.

POGO continues to push for reforms, including the still-unissued executive order that would require contractors to disclose political contributions and expenditures from the previous two years. We hope the unanimous Court of Appeals decision will encourage President Obama to finally issue that executive order. Unrestricted and non-transparent contractor campaign spending undermines the integrity and efficiency of the federal contracting system.