Infotech and the Law | Keep close tabs on your inner lobbyist

Does your company ever lobby for contracts? Is it legal? Do you disclose these activities, as required by law? Even if you don't lobby to win contracts, do you lobby to get contract modifications or the exercise of options?

The fact that you may not hire a lobbyist specifically to handle such tasks is no answer. Lobbying has a broad definition and an even broader spectrum of shadings under different laws.

Congress enacted "Limitations on Use of Appropriated Funds to Influence Certain Federal Contracting and Financial Transactions" (31 U.S.C. 1352), commonly known as the Byrd Amendment, in 1989 to prevent contractors from recycling taxpayer dollars to lobby government for more contracts. The act also was to provide visibility on all contractor lobbying activity.

The Byrd Amendment, which applies to contracts and subcontracts worth more than $100,000, has two parts. Part 1 is a lobbying prohibition, and part 2, which presents more of an issue for most companies, is a lobbying disclosure.

The law prohibits a contractor from using appropriated funds to pay someone to influence or try to influence a federal employee with respect to a new contract award or modification of a contract. It covers federal grants, loans and cooperative agreements, too.

The practical application of this prohibition is limited. Contractors don't sort their revenue into piles, such that payments for lobbying activities can be made neatly from the nonappropriated funds pile. Thankfully, the regulators realized this.

An early Office of Management and Budget notice indicated that as long as the contractor has earned profits on its federal contracts or has revenue from commercial customers, the law would assume that those funds are being used for lobbying activities.

Part 2 of the Byrd Amendment, however, requires offerers to make written disclosure if any funds are used to pay someone to influence or try to influence a federal employee with respect to a new contract award or modification of a contract. This disclosure requirement is potentially quite broad and not free from ambiguity.

The Byrd Amendment describes three exceptions in which no violation can occur and no disclosure is required. The first exception is contacts by the contractor's employees with the government, in which the contacts are not directly related to a specific contract opportunity. Thus, before a contractor makes a formal solicitation for the contract, its employees are expressly permitted to make marketing contacts.

A second exception is communications, whether by an employee or a consultant, about a procurement when those communications are part of the normal procurement process, such as negotiations.

A third exception is for consultants hired to help the company meet some other requirement of law or of the solicitation.

Thus, if you are, in even a loose sense of the word, lobbying someone in the government in an effort to get, modify or extend a contract, you may need to disclose that activity.

A contractor's disclosure obligation is curious. Congress in 1995 changed the Byrd Amendment to limit disclosure to the names of registrants, under another lobbying statute, the Lobbying Disclosure Act.

The regulators then amended Standard Form LLL, "Disclosure of Lobbying Activities," to require this information. The form, however, continues to ask in a separate block for the names of individuals who are performing services.

Many contractors err on the side of caution in interpreting this request, continuing to disclose all non-exempt lobbying activity relating to the contract.

The Byrd Amendment is not the easiest law to understand, but, like other ethics laws, can carry substantial penalties for noncompliance.