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Federal Court Upholds Ban on Contractor Campaign Donations

Update: In January 2016, the ban on campaign contributions by federal contractors was upheld by the United States Supreme Court.

This week, a federal judge in Washington, citing the government's interest in preventing corruption, refused to block enforcement of a law that bans federal contractors from donating to political candidates and parties.

Three federal contractors, Wendy Wagner, Lawrence Brown, and Jan Miller, sued the Federal Election Commission (FEC) in October of last year claiming the Federal Election Campaign Act’s ban on contractor political contributions violates the First (free speech and association) and Fifth (Equal Protection) amendments. They sought an injunction to stop enforcement of the ban. On Monday, U.S. District Judge James Boasberg denied the injunction.

“The ban on such contributions guards against 'pay-to-play' arrangements, in which people seeking federal contracts provide financial support to political candidates in return for their help securing government business,” Boasberg wrote in his opinion. “It also protects such contractors from pressure to contribute or risk losing their work.”

As Boasberg noted, the restriction on federal contractor political contributions goes back more than 70 years, when Congress passed the Hatch Act to prevent corruption and “protect the integrity of the electoral system by ensuring that federal contracts be awarded based on merits.” To the plaintiffs’ argument that there’s no current evidence that federal contractors are corrupting the electoral process, Boasberg had a pithy response: “An absence of corruption does not necessarily mean…that the ban is no longer needed. It could simply be an indication that the ban is working.”

Contractors can still avail themselves of other means of political expression. They can still speak or write about their views on candidates and political issues, volunteer for campaigns, and offer the use of their homes for candidate- or political party-related activities.

Of course, if the contractor is a corporation (even a single-person corporation), the corporation itself is also subject to the ban, but officers, directors, stockholders and employees of the corporation, and political action committees (PACs) set up by the corporation, are free to contribute to federal elections. You might remember last year’s dust-up over the Obama administration’s proposed executive order requiring contractor companies to disclose their political contributions. The proposal sparked strong objections in Congress, which blocked it with a provision in the FY 2012 National Defense Authorization Act, but the administration has apparently not given up yet on the issue of contractor political spending transparency.

Back in 2004, POGO’s Politics of Contracting report highlighted the extent of “pay-to-play” in the federal contracting system. We discovered that the top 20 contractors had spent a combined total of $46 million in campaign contributions and secured $559 billion in contracts between fiscal years 1997 and 2004. If you include the $390 million they spent on lobbying during that period, you still end up with a whopping 1,281 percent return on investment. Looking at it another way, the top 20 contractors spent approximately 8 cents for every $100 they received in contracts. In that report, POGO recommended restoring the pre-1976 ban on contractor campaign contributions.

POGO supports restrictions on and greater transparency in contractor political spending. “Pay-to-play” threatens the integrity and efficiency of the federal contracting system.