Absent dedicated in-house personnel, it is virtually impossible for entities that sell their goods and services on a national scale to remain attuned to the constant evolution of these laws at the local level. It is also virtually impossible for entities found to have violated a local law to engender much sympathy from those charged with its enforcement by pointing out regulatory inconsistencies across the national spectrum or the relevant insignificance of the regulator’s jurisdiction to overall sales. Trust me, we’ve seen folks try it and it doesn’t go over well.
With this in mind, we thought it might be helpful to categorize a few representative jurisdictions to highlight some recent trends. This listing is not comprehensive but rather is designed to be illustrative. Moreover, these laws are always in a state of flux so be sure to check your local jurisdiction for recent updates before relying on what you read on the internet:
Jurisdictions that Impose Significant Restrictions on Contracting with a Potential Penalty of Debarment. The most aggressive jurisdictions ban entities from engaging in government contracting when they, or their agents (however defined), have made political contributions. Those doing business in such jurisdictions need to be especially watchful of their compliance systems and internal data gathering. The stakes are simply too high. With more and more jurisdictions employing online contribution databases, one can easily see how such laws will present a new realm of a “gotcha” bid protest for disgruntled losing bidders. We haven’t seen much of this tactic yet, but one can easily see how step one after being notified that one has lost a competitive bid will be to go online and see if the winner’s board, executives, spouses, family members or domestic partners have inadvertently made a contribution to a relevant government procurement o fficer’s campaign.
Examples of laws falling in this category include: California, Hawaii, Ohio, New Jersey, Virginia and West Virginia.
Jurisdictions that Mandate Disclosure of Pay-to-Play Contributions. Many jurisdictions do not prohibit entities from procuring government contracts if they, or their agents, have made political contributions. These jurisdictions simply require disclosure of those contributions with the relevant government agency. While such laws certainly lessen the stakes (and cases of “night sweats” so common with in-house compliance personnel), they do not obviate the often unpleasant task of reaching out to your Chairman’s spouse every quarter to inquire about contributions the spouse might have made.
Examples of laws falling in this category include: Connecticut, Illinois, New Mexico, Pennsylvania, and Rhode Island.
Jurisdictions that have limited Pay-to-Play Restrictions to Specific Municipal or Contracting Subsets. Examples of such jurisdictions include Indiana, in which contractors with the State Lottery Commission, and the contractor’s directors, officers and political action committees, are prohibited from making contributions to candidates for state, state legislative or local office, and to a candidate’s committee, a regular party committee or a state legislative caucus committee, while the contract is in effect and during the three years following expiration or termination of the contract.
Likewise, in Louisiana, persons entering into contracts, subcontracts or transactions to provide goods or services related to hurricane rebuilding efforts, which are not publicly or competitively bid, are prohibited from making a contribution to an elected official if such contract or transaction is under the jurisdiction or supervision of the elected official’s agency. In New York, while no expansive regulations have been enacted to date, the State Comptroller has issued an Executive Order which sets forth robust “pay-to-play” regulations relating to entities who do business, or seek to do business, with the New York State Common Retirement Fund.
Jurisdictions that are Designing, but have not yet Implemented, Pay-to-Play Laws. Candidly, this category captures just about every other jurisdiction. It is simply too easy for a legislator, county commissioner, city council or school board to adopt such laws - or talk about adopting such laws - when one of their own has been caught with her hands in the cookie jar.
Examples of laws falling in this category include: Colorado, Georgia, Michigan, North Carolina, Texas and Wisconsin.
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