Slowing Down the Revolving Door

Friday, August 06, 2004

In the wake of the recent ethics scandal at Boeing1, Congress has begun to focus on the many issues that arise when government contractors hire former federal government employees. Because of Congress' involvement, government contractors are under close scrutiny when they hire such individuals, particularly those with whom the contractor had dealings prior to the offer of employment. While the "revolving door" between the federal government and private industry is controlled by the 1996 Procurement Integrity Act2 and the 1989 Ethics Reform Act3, many members of Congress have called for additional legislation further tightening the laws limiting post-government employment.

Congressional Involvement

While Congress has yet to enact any new laws to slow down the revolving door, such legislation may be on the horizon. Senator Robert Byrd (D-W.Va) submitted an amendment (S.A. 3286) to the 2005 Defense Authorization bill (S. 2400) that would have required government procurement officials to wait an additional year prior to accepting employment from a company to which they have awarded a contract worth more than $10 million.4 Currently, source selection officials, program managers, deputy program managers and administrative contracting officers must wait one year before accepting such employment. Byrd's amendment would have doubled the current waiting period to two years and expanded the application of the Procurement Integrity Act to include presidential appointees, members of the Senior Executive Service, those serving in executive branch positions in a pay grade above GS-12 and commissioned military officials. Byrd's amendment also would have required those government officials before leaving the government to file with the Office of Government Ethics a list of projects, programs and activities on which the person worked. Byrd withdrew his amendment on June 23, 2004 in the face of stiff opposition.5 However, similar legislation likely will be proposed again as members of Congress on both sides of the aisle have spoken out in support of such laws, as have government watchdog organizations.6 Senator John McCain (R-Az.) is expected to hold hearings in July regarding revolving door employment issues.7 In the meantime, companies seeking to hire former government employees should pay close attention to these laws and their implementing regulations.

Procurement Integrity Act

The Procurement Integrity Act has two main purposes: first, it limits contacts related to future employment between current government officials8 and government contractors,9 and second, prohibits former government officials who served as source selection officials, program managers, deputy program managers or administrative contracting officers on contracts worth in excess of $10,000,000 or more from accepting compensation, including employment, from the contractor that received the contract.10

Companies participating in government procurements exceeding the simplified acquisition threshold (currently $100,000)11 cannot contact government officials who are "participating personally and substantially"12 in the procurement regarding future employment. If a company contacts such a government official about employment, the official must notify his or her supervisor and the agency ethics official and either reject the offer of employment or disqualify himself or herself from further personal and substantial participation with the procurement.13 If a company engages in employment discussions with a government official knowing that the official has not notified his/her superiors or disqualified himself/herself from further participation in the procurement, the company is subject to civil penalties of up to $500,000 for each violation plus twice the amount of compensation offered.14 The government also may cancel the procurement if the contract has not yet been awarded, rescind the contract if already awarded and/or initiate suspension or debarment proceedings against the contractor.15 Government contractors also may not provide compensation to any former government official for a one year period if the official served as a source selection official, program manager, deputy program manager or administrative contracting officer or otherwise made decisions for the agency such as to award a contract, subcontract, modification, task order or delivery order, for a contract worth in excess of $10,000,000 that was received by the company offering the compensation.16

When the one-year period in which compensation may not be provided begins to run depends upon the former government official's prior duties. If the official served as the procuring contracting officer, the source selection authority, as a member of the source selection evaluation board or as the chief of a financial or technical evaluation team, the period begins to run from the date of contract award or the date of contractor selection if the official was not serving in the position on the date of award.17 If the official served as program manager, deputy program manager or administrative contracting officer, the period begins to run from the date the official last served in the position.18 If the official personally made decisions for the government agency regarding the contract, such as to award a contract, subcontract, modification, task order or delivery order, the period begins to run from the date the official made such a decision.19 If a contractor provides compensation to a former government official knowing that the official held one of the positions discussed above on a contract worth in excess of $10,000,000 during the one-year period in which compensation is not permitted, the contractor is subject to civil penalties of up to $500,000 for each violation plus twice the amount of compensation offered.20 The government also may cancel the procurement if the contract has not yet been awarded, rescind the contract and/or initiate suspension or debarment proceedings against the contractor.21 Former government officials who are uncertain whether they may accept compensation from a contractor can request advice from their former agency's ethics office.22 Requests must be made in writing and include all relevant information available to the former official.23 The agency ethics office, within thirty days or as soon as possible, then issues an advisory opinion regarding whether accepting compensation would violate the Procurement Integrity Act.24 If the advisory opinion states that the former official may accept compensation from the contractor, neither the official nor the contractor can be later found to have knowingly violated the Procurement Integrity Act.25 For this reason, it is important that government contractors ask former government officials to obtain such advice in any instance where there is doubt as to the applicability of the prohibition.

Ethics Reform Act

The Ethics Reform Act of 1989 ("the Act") substantially revised the post-employment conflict of interest restrictions of the Ethics in Government Act of 1978. These restrictions criminalize several activities including certain lobbying activities by individuals after they leave government service, negotiating for prospective employment by government employees, as well as government employees supplementing their income by accepting compensation from contractors.

The Act places permanent restrictions against former executive branch government officers and employees from knowingly communicating with the intent to influence current government employees regarding matters26 which the United States has a direct and substantial interest and which the former employee participated personally and substantially27 when employed by the government.28

The Act also establishes a two-year lobbying restriction for matters that were pending under the individual's official responsibility, even if they were not personally involved in the matter.29 Thus, former executive branch government officers and employees cannot knowingly communicate with the intent to influence current government employees for two years following their leaving the government regarding matters30 which the United States has a direct and substantial interest and which the former employee knew or should have known was pending under his/her official responsibility during the one-year prior to the individual's termination of his/her government service.

The Act also has specific restrictions for former senior executives of the government as well as for former Members of Congress and their staffs.31 Former senior government executives may not communicate with any employee of the office in which the former executive served with the intent to influence a matter which the former executive is seeking official action for one year following the former executive's government service.32 Similarly, former employees of the legislative branch, including Members of Congress, may not knowingly communicate with a Member, officer or employee of either House of Congress with the intent to influence regarding a matter which the former employee seeks action by a current Member, officer or employee of the legislative branch for one year following their government service.33

In addition, the Act precludes officers or employees of the executive branch from participating personally and substantially in any matter in which the employee knowingly has a financial interest.34 This includes matters in which the employee's spouse, child, partner has a financial interest, as well as any organization in which the employee serves or with whom the employee is negotiating future employment or has an arrangement for future employment.35 Thus, government employees that are seeking employment in the private sector must disqualify themselves from any matter involving their prospective future employers36 unless they have received a waiver authorizing them to work on the matter.37 The Act also prohibits government employees from receiving a salary from any source other than the government as compensation for services performed as a government employee.38 As with the Procurement Integrity Act, current and former government employees can seek advice from their agency's ethics office regarding whether their conduct will violate the Ethics Reform Act. Such employees also may seek advisory opinions from the Office of Government Ethics.39 Any person who relies upon a formal advisory opinion and acts in good faith in accordance with the provisions and findings of the opinion, shall not be subject to prosecution under the Act or subject to adverse administrative or civil actions.40

Persons found guilty under the Act may serve between one and five years in prison, depending upon the willfulness of the action.41 The government also may seek civil penalties of not more than $50,000 for each violation or the amount of compensation which the person received or offered for the prohibited conduct, whichever amount is greater.42 Recommendations Given the ramifications of the Boeing tanker lease debacle, government contractors must be very cautious when hiring former government officials because of the potential penalties and because of the increased attention being given to the "revolving door." Contractors should protect themselves from scrutiny by closely following the laws and regulations discussed herein. Hiring a former government employee without verifying the restrictions on his/her work can lead to criminal penalties, civil fines, the termination of contracts and suspension or debarment proceedings.43 Contractors should consider making positions of employment contingent on the employee's certification that s/he has not and will not violate the Procurement Integrity Act (41 U.S.C. § 423) and the Ethics Reform Act provisions discussed above (18 U.S.C. §§ 207, 208 and 209) by accepting the position. Contractors should also recommend, and in some circumstances require, that potential employees obtain an advisory opinion from an agency ethics office or the Office of Government Ethics stating that accepting the position will not violate the Procurement Integrity Act and the Ethics Reform Act. Taking these steps is not particularly burdensome on the company or the potential employee or consultant and can provide a safe harbor against allegations of impropriety.

Brian A. Bannon is a Partner in the Maritime, International Trade and Procurement Practice Group at Blank Rome LLP and focuses his practice on Government Contract issues.

David A. Leib is an Associate in the Maritime, International Trade and Procurement Practice Group at Blank Rome LLP and focuses his practice on Government Contract issues.

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