INFOTECH AND THE LAW

Second-Career Path Closed to Some Consulting Not Always an Option for Former Government Officials

Devon Hewitt

As the new administration settles in, many individuals formerly employed by the government are looking for new jobs. For those who held senior positions in procurement, employment with a federal contractor appears to be a natural choice.

Most federal contractors are well-versed in the rules that apply to employing a former government official; many contractors, however, mistakenly believe that hiring one as a consultant avoids these statutory and regulatory pitfalls.

The issue typically arises when a former government official sets up shop as a business development or marketing consultant. Because of the person's previous role in the government and resultant contacts, he or she offers to represent one or more contractors in securing additional business within that agency. This type of consulting raises a number of red flags.

The first is that commonly associated with employing a former government official: conflict of interest. Under the 1996 Procurement Integrity Act, certain former agency officials involved in a procurement of more than $10 million are prohibited from accepting compensation from a contractor as a consultant for at least one year.

The 1989 Ethics Reform Act, a criminal statute, also limits the tasks certain former government officials may perform. For example, the statute prohibits a former agency official from engaging in communications with or appearing before the pertinent agency with an "intent to influence." The length of the ban on such contacts depends on the nature of the former agency official's participation in a particular matter.

Contractors should be aware of these regulations not only because they may effect the consultant's ability to deliver on his or her promises, but also because the Federal Acquisition Regulation requires that contractors strictly avoid any appearance of or actual conflict of interest.

In addition, contracts awarded in violation of any of these statutes could result in cancellation or rescission of a contract, suspension or debarment of the contractor and, possibly, the imposition of fines.

The second red flag involves how consultants are compensated. The Byrd Amendment prohibits a federal contract awardee from using appropriated funds to influence anyone in the government in connection with the award. The amendment applies to contracts valued at $100,000 or greater.

Appropriated funds mean those funds received pursuant to a federal contract, but specifically excludes profit. Even if appropriated funds are not used to compensate the consultant, the contractor must file a declaration in connection with an individual award disclosing the name of the individual or entity lobbying on its behalf, along with a certification that no appropriated funds will be used to compensate the individual. Contractors may suffer monetary penalties for violating the amendment or failing to make the required disclosures.

Many consultants request a commission or fee from any federal contract awarded pursuant to their marketing efforts on the contractor's behalf. Most federal contracts valued at greater than $100,000, however, include a standard clause known as a covenant against contingent fees.

The clause requires the contractor to warrant that it has not employed or retained any person or agency to obtain the contract for a contingent fee, a term which is broadly defined to include any commission, percentage or brokerage fee.

The clause exempts contacts made on the contractor's behalf by "an established commercial or selling agency" maintained by the contractor to secure business. As is the case with violations of the other statutes, violating the clause could result in rejection of a proposal, rescission of a contract, a suspension or debarment proceeding or referral of the matter to the Justice Department.

Consulting arrangements with former government officials can create traps for the unwary and do not necessarily avoid the restrictions placed on contractors employing such people. Given the penalties and loss of goodwill associated with violating the statutes or regulations, a contractor should carefully weigh the risks presented by a consulting opportunity against the potential business gain that might result from the same.

Devon Hewitt is a partner of government practices at ShawPittman in McLean, Va. She can be reached at devon.hewitt@shawpittman.com.

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