Earmarks and Lobbying

The Defense Contract Audit Agency has this friendly reminder: Contractors are not supposed to charge taxpayers for their efforts to lobby Congress for earmarks.

You read that right. It seems that some contractors want to have their cake, the icing and the cherry on top too. That's according to a DCAA memo, a wonderful dry little primer on the subject of pork.

"SUBJECT: Audit Alert -- Lobbying Costs Related to Legislative Earmarks," the April 24 memo says.

"A legislative earmark refers to a Congressional provision directing funds to be spent on specific projects. Typically, a legislator seeks to insert earmarks in spending bills that direct a specified amount of money to a particular contractor, organization, or project in his or her home state or district. The U.S. Office of Management and Budget reported that the FY 2008 DoD Appropriations Act included 2,092 earmarks with a total value of over $6.6 billion. Contractors may expend a significant amount of effort (and related costs) to support earmarks associated with specific contractors and programs. These costs should generally be considered unallowable lobbying cost as defined in FAR 31.205 22 and 52.203 12."

Take note: The DCAA gives a shout out to Taxpayers for Common Sense, which has done much to study earmarks over the years. Here's a database they maintain. If you find anything interesting, ugly or untoward, please send it my way.


By Robert O'Harrow |  May 26, 2008; 7:00 AM ET
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Comments

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But those costs are still tax-deductable, right???

Posted by: Apostrophe | May 26, 2008 7:54 AM

Apostrophe, no they have to come out of overhead. If you are getting directed earmarks the cost-benefit of this is probably quite good.

Posted by: Dagpotter | May 26, 2008 9:37 AM

Dagpotter,

I think you are partly correct, and partly incorrect, and the reason is that the FARS are written in such a way that anyone can take away the interpretation that suits them best and win.

Lobbying costs are described and in many cases allowed by the FARs, it just depends how you describe them when you submit your invoice to the Government.

The FARS say that if you get an agreement, in advance, that you can use the money for such things as professsional services or public relations to enhance your product's image. Once the advanced agreement is in place, Katie-Bar-the-Door you can do anything.

But then the FARS go even further and say, maybe you really don't even need this agreement. Your call. And then they say that even if you did need this agreement, you don't need it in advance.

Let me step your through:

Header language for FAR Section 31, which covers the topic of lobbying for earmarks:

+++++++++++++++++++++++++++++++++++++++++
31.109 Advance agreements.
(a) The extent of allowability of the costs covered in this part applies broadly to many accounting systems in varying contract situations. Thus, the reasonableness, the allocability and the allowability under the specific cost principles at Subparts 31.2, 31.3, 31.6, and 31.7 of certain costs may be difficult to determine. To avoid possible subsequent disallowance or dispute based on unreasonableness, unallocability or unallowability under the specific cost principles at Subparts 31.2, 31.3, 31.6, and 31.7, contracting officers and contractors should seek advance agreement on the treatment of special or unusual costs. However, an advance agreement is not an absolute requirement and the absence of an advance agreement on any cost will not, in itself, affect the reasonableness, allocability or the allowability under the specific cost principles at Subparts 31.2, 31.3, 31.6, and 31.7 of that cost.

++++++++++++++++++++++++++++++++++++++++
And here is from whom you must get the agreement. (If you can figure out who this person is, please let me know.)
+++++++++++++++++++++++++++++++++++++++++

(e) The cognizant administrative contracting officer (ACO), or other contracting officer established in Part 42, shall negotiate advance agreements except that an advance agreement affecting only one contract, or class of contracts from a single contracting office, shall be negotiated by a contracting officer in the contracting office, or an ACO when delegated by the contracting officer. When the negotiation authority is delegated, the ACO shall coordinate the proposed agreement with the contracting officer before executing the advance agreement.
++++++++++++++++++++++++++++++++++++++++++
And if you did need to get an advance agreement from this person to pay for lobbying costs, (except in those cases where you do not need to get an agreement in advance) you are certainly allowed to charge "public relations", which are those fees you pay to your K Street lobbyists to appear before Congress to plead your case, and make sure the right "loopholes" make it into the final legislation.

++++++++++++++++++++++++++++++++++++++++++
(h) Examples of costs for which advance agreements may be particularly important are-
...
(4) Precontract costs;
(5) Independent research and development and bid and proposal costs;
...
(12) Professional services (e.g., legal, accounting, and engineering);
...
(15) Costs of public relations and advertising; and
(16) Training and education costs (see 31.205-44(h)).

+++++++++++++++++++++++++++++++++++++++
So just make sure that you make your lobbyist do the dirty work on the Hill for you, and when you bill the Government, file the lobbyists fees under "public relations".

And if the GAO ever catches you passing a stack of $100 bills under the table to a lobbyist, just say this was one of those cases where you didn't know that you had to ask for permission in advance.

You're home free!

With the DOJ investigations in the hands of their current masters, the worst that can happen to you is that Justice will send John Ashcroft up to your place at $1000/hr, and you will have to serve him a cup of tea for the afternoon.

Posted by: Che in Great Falls | May 26, 2008 1:17 PM

The Wheel that squeaks gets the grease!

Posted by: Old Coot | May 26, 2008 5:59 PM

The valve on the spigot is broken! Call the plumber--a bargain at only $50 per hour. . .

Posted by: Henry Browne | May 27, 2008 2:49 PM

Henry,

Hmmm...

plumbers, who serve a useful function for mankind, are available, and undersubscribed, at a billable rate that is just 1/20 of that for DOJ "investigators" and John Ashcroft, who seem to have no apparent function.

Welcome to George Bush's America!

Posted by: aka ScottMclellan | May 28, 2008 9:28 PM

Scott,
Hate to disappoint you, but Bush hasn't been in office as long as I've worked for the feds. Actually, you can thank the Clinton administration and Al Gore's amazing mastery of nothing that was shoved down our throat.

Posted by: Rose Colored Glasses | June 4, 2008 12:50 PM

Earmarks and lobbyists are two of the most corrupting practises in the Federal government.
The Republicans once printed a "re-election guide" that instructed incumbents to pose for picture ops in front of their "earmark" projects.
Said projects are obviously intended to benefit the politician, not the general public. (RE: the bridge to nowhere). They are part of a "spoils system" fostered by each party.
I love the way "pork barrel" projects came to be renamed "earmarkS"
Lobbyists are the political prostitutes of corporations and special interest groups, including foreign powers. They have bought and sold most elected officials (R & D), perverting the election system and fertilizing the consequent production of corrupted politicians.
Purchasing regs are irrelevant in this environment.

Posted by: Debtor | June 5, 2008 11:13 AM

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