[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
POLITICIZING PROCUREMENT: WILL PRESIDENT OBAMA'S PROPOSAL CURB FREE
SPEECH AND HURT SMALL BUSINESS?
=======================================================================
JOINT HEARING
before the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
and the
COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
MAY 12, 2011
__________
Serial No. 112-47
__________
Printed for the use of the Committees on Oversight and Government
Reform and Small Business
Available via the World Wide Web: http://www.fdsys.gov
http://www.house.gov/reform
_____
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
DARRELL E. ISSA, California, Chairman
DAN BURTON, Indiana ELIJAH E. CUMMINGS, Maryland,
JOHN L. MICA, Florida Ranking Minority Member
TODD RUSSELL PLATTS, Pennsylvania EDOLPHUS TOWNS, New York
MICHAEL R. TURNER, Ohio CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah DENNIS J. KUCINICH, Ohio
CONNIE MACK, Florida JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
ANN MARIE BUERKLE, New York GERALD E. CONNOLLY, Virginia
PAUL A. GOSAR, Arizona MIKE QUIGLEY, Illinois
RAUL R. LABRADOR, Idaho DANNY K. DAVIS, Illinois
PATRICK MEEHAN, Pennsylvania BRUCE L. BRALEY, Iowa
SCOTT DesJARLAIS, Tennessee PETER WELCH, Vermont
JOE WALSH, Illinois JOHN A. YARMUTH, Kentucky
TREY GOWDY, South Carolina CHRISTOPHER S. MURPHY, Connecticut
DENNIS A. ROSS, Florida JACKIE SPEIER, California
FRANK C. GUINTA, New Hampshire
BLAKE FARENTHOLD, Texas
MIKE KELLY, Pennsylvania
Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Robert Borden, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director
COMMITTEE ON SMALL BUSINESS
SAM GRAVES, Missouri, chairman
ROSCOE G. BARTLETT, Maryland NYDIA VELAZQUEZ, New York, Ranking
STEVE CHABOT, Ohio Member
STEVE KING, Iowa KURT SCHRADER, Oregon
MIKE COFFMAN, Colorado MARK S. CRITZ, Pennsylvania
MICK MULVANEY, South Carolina JASON ALTMIRE, Pennsylvania
SCOTT R. TIPTON, Colorado YVETTE D. CLARKE, New York
JEFFREY M. LANDRY, Louisiana JUDY CHU, California
JAIME HERRERA BEUTLER, Washington DAVID N. CICILLINE, Rhode Island
ALLEN B. WEST, Florida CEDRIC L. RICHMOND, Louisiana
RENEE L. ELLMERS, North Carolina GARY C. PETERS, Michigan
JOE WALSH, Illinois WILLIAM L. OWENS, New York
LOU BARLETTA, Pennsylvania WILLIAM R. KEATING, Massachusetts
RICHARD L. HANNA, New York JANICE HAHN, California
ROBERT T. SCHILLING, Illinois
Lori Salley, Staff Director
Paul Sass, deputy Staff Director
Barry Pineles, Chief Counsel
Michael Day, Minority Staff Director
C O N T E N T S
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Page
Hearing held on May 12, 2011..................................... 1
Statement of:
Chvotkin, Alan, senior vice president, Professional Services
Council; Mark Renaud, partner, Wiley Rein LLP; M.L. Mackey,
CEO, Beacon Interactive Systems; Lawrie Hollingsworth,
president, Asset Recovery Technologies, Inc.; Marion
Blakey, president and CEO, Aerospace Industries
Association; and Brad Smith, professor, Capital University
Law School................................................. 135
Blakey, Marion........................................... 173
Chvotkin, Alan........................................... 135
Hollingsworth, Lawrie.................................... 169
Mackey, M.L.............................................. 165
Renaud, Mark............................................. 145
Smith, Brad.............................................. 178
Gordon, Daniel, Administrator for Office of Federal
Procurement Policy, Office of Management and Budget........ 99
Letters, statements, etc., submitted for the record by:
Blakey, Marion, president and CEO, Aerospace Industries
Association, prepared statement of......................... 175
Chvotkin, Alan, senior vice president, Professional Services
Council, prepared statement of............................. 138
Cummings, Hon. Elijah E., a Representative in Congress from
the State of Maryland, prepared statement of............... 8
Gordon, Daniel, Administrator for Office of Federal
Procurement Policy, Office of Management and Budget,
prepared statement of...................................... 102
Gosar, Hon. Paul A., a Representative in Congress from the
State of Arizona, prepared statement of.................... 70
Hollingsworth, Lawrie, president, Asset Recovery
Technologies, Inc., prepared statement of.................. 171
Issa, Hon. Darrell E., a Representative in Congress from the
State of California:
Letter dated May 12, 2011................................ 35
Prepared statement of.................................... 4
Mackey, M.L., CEO, Beacon Interactive Systems, prepared
statement of............................................... 167
Renaud, Mark, partner, Wiley Rein LLP; M.L. Mackey, CEO,
Beacon Interactive Systems, prepared statement of.......... 147
Smith, Brad, professor, Capital University Law School,
prepared statement of...................................... 180
POLITICIZING PROCUREMENT: WILL PRESIDENT OBAMA'S PROPOSAL CURB FREE
SPEECH AND HURT SMALL BUSINESS?
----------
THURSDAY, MAY 12, 2011
House of Representatives, Committee on Oversight
and Government Reform, joint with the Committee
on Small Business,
Washington, DC.
The committees met, pursuant to notice, at 2:40 p.m., in
room 2154, Rayburn House Office Building, Hon. Darrell E. Issa
(chairman of the Committee on Oversight and Government Reform)
presiding.
Present from the Committee on Oversight and Government
Reform: Representatives Issa, McHenry, Jordan, Walberg,
Lankford, Amash, Buerkle, Gosar, Labrador, DesJarlais, Gowdy,
Guinto, Farenthold, Kelly, Cummings, Kucinich, Connolly,
Quigley, Braley, Welch, and Murphy.
Present from the Committee on Small Business:
Representatives Graves, Chabot, Mulvaney, West, Ellmers, Hanna,
and Velazquez.
Staff present from the Committee on Oversight and
Government Reform: Richard A. Beutel, senior counsel; Robert
Borden, general counsel; Will L. Boyington and Drew Colliatie,
staff assistants; Molly Boyl, parliamentarian; Lawrence J.
Brady, staff director; Benjamin Stroud Cole, policy advisor and
investigative analyst; John Cuaderes, deputy staff director;
Gwen D'Luzansky, assistant clerk; Adam P. Fromm, director of
Member liaison and floor operations; Linda Good, chief clerk;
Frederick Hill, director of communications and senior policy
advisor; Christopher Hixon, deputy chief counsel, oversight;
Justin LoFranco, press assistant; Mark D. Marin, senior
professional staff member; Laura L. Rush, deputy chief clerk;
Jeff Solsby, senior communications director; Becca Watkins,
deputy press secretary; Daniel Epstein, professional staff
member; Kevin Corbin, minority staff assistant; Ashley Etienne,
minority director of communications; Jennifer Hoffman, minority
press secretary; Carla Hultberg, minority chief clerk; Lucinda
Lessley, minority policy director; Adam Miles and Any Miller,
minority professional staff members; Dave Rapallo, minority
staff director; and Mark Stephenson, minority senior policy
advisor/legislative director.
Chairman Issa. Since we have a quorum for a hearing, I am
going to go forward. We won't go past the first opening
statement until or unless the--one of the ranking members
arrives. Today we have a joint hearing on the politicizing
procurement: Will President Obama's proposal curb free speech
and hurt small business?
The Oversight Committee's mission statement is we exist to
secure two fundamental principles. First, Americans have a
right to know that the money Washington takes from them is well
spent. And second, Americans deserve an efficient, effective
government that works for them.
Our duty on the Oversight and Government Reform Committee
is to protect these rights. Our solemn responsibility is to
hold government accountable to taxpayers, because taxpayers
have a right to know what they get from their government. We
will work tirelessly in partnership with citizen watchdogs to
deliver the facts to the American people and bring genuine
reform to the Federal bureaucracy.
Today's hearing is about the Federal Government and its
honest contracting proposals. I am glad to see that the
administration has agreed to testify before this joint hearing.
There are many questions to be answered, and I have been
concerned about the indifference, and perhaps disdain, of the
administration as shown at times toward congressional
oversight.
There is clear concern about a now well-circulated
Executive order that may have a chilling effect on political
participation, free speech, based on partisan issues. The
American people have a right to know what the government is
doing and to impact, through this Congress, proposed rules,
regulations, and statutes in this country.
There is now bipartisan and bicameral alarm on Capitol Hill
regarding the proposed Executive order and its potential
effects on politics in procurement.
The concern about injecting politics into procurement is
not new. It is not a Republican concern. It is not a Democratic
concern. The acquisition and procurement laws and regulations
are designed to preserve impartiality. We hold our very
dedicated contractors to a high standard of seeking to get a
level playing field, maintained fairness, and in fact obtain
goods and services from the best sources on a decision made on
price and quality.
To protect the interest of U.S. taxpayers, contracts must
be awarded on the merits of the proposed bid and not on
political affiliations or political donations of the
prospective contractors. Yet, under the President's proposed
Executive order, contractors would be required to disclose
information about political contributions of some employees,
and the information would be readily available to political
appointees who are intimately involved in the decisions to
award contracts. The risk that politics could play a role in
the outcome of contracting and award decisions is too high.
I believe the United States has some of the finest public
servants in the Federal contracting officers. Day after day,
they do the hard work of examining proposed bids, crunching the
numbers, always seeking to get the best for the U.S. taxpayer.
Notwithstanding an attempt to always do an analytical
assessment, we will always have some contracts that are awarded
on a no-bid or cost-plus basis. Particularly in these
contracts, there is a high risk that the whim of a political
appointee could in fact be swayed one way or the other based on
a public record of contributions.
During the Bush administration, when my friends on the
other side of the aisle were in the majority, the committee
spared no expense to hurl accusations of political bias in
contracting process, and in the process the names and
reputations of some very good people were smeared. This
committee is not going to take that approach, precisely because
we want to protect procurement officers and contractors alike
from the charge of political bias when we have this and other
hearings. Meanwhile, I believe it is telling that the
President's proposal says nothing about requiring similar
disclosures from labor unions and liberal advocacy groups.
Is the President not concerned about transparency on
grantees, many of them trade unions, trade unions themselves or
other groups that serve the country but do not fall under the
general umbrella of Corporate America?
Nevertheless, we are here to examine what effects this
proposed order will have on the contracting community. We must
determine the cost both to contractors and the U.S. taxpayers
if this proposal or one similar goes into effect.
We must consider the efficiency of such a requirement. Will
the President's political disclosure rule serve to delay the
delivery of goods and services to the Federal Government? We
have to ask if it is appropriate for government to require
businesses to ask for information from employees that may be
deeply personal and potentially detrimental to their career.
Imagine your employer demanding to know, have you made
donations to an organization that supports or opposes abortion?
Do you have or have you given money to a group that advocates
gay rights--gay and lesbian rights, or those that may have a
religious objection? Can you imagine the effect of having to
disclose that and then questioning whether your career is in
jeopardy.
Further, you could ask, are you supporting organizations
that seek to expand union representatives of workers or seek to
implement rights related to work laws.
And finally, we must consider the constitutionality of this
proposal. In fact, it appears that the order currently is not
narrowly tailored to a compelling government interest. Although
we will not ask questions as to deliberative process here
today, we do feel that, as drafted, it is legitimate to ask
what the effects might be on Federal work force, on employees
that would be covered under this, and ultimately whether or
not, constitutionally, this is ground we should go into.
And with that, I recognize the distinguished ranking member
for his opening statement, Mr. Cummings.
[The prepared statement of Hon. Darrell E. Issa follows:]
Mr. Cummings. Thank you very much, Mr. Chairman.
The Committee on Oversight and Government Reform is
supposed to enhance transparency and shine light on waste,
fraud, and abuse. I have been a member of this committee for 15
years and I never thought I would see the day when our
committee would view transparency as the enemy.
The draft Executive order being developed by the
administration would require Federal contractors to disclose
more information about their political contributions than they
currently provide, particularly those given to a third-party
entity.
Chairman Issa said this week that he opposes this effort
because additional information could be used nefariously to
create, ``a Nixonian-type enemy list.'' In other words,
companies should not disclose more information, because people
in power could misuse the information to retaliate against
them.
I have a fundamental problem with this premise. Under this
logic, all campaign disclosures would be bad, not just new
ones. Government contractors already disclose contributions and
expenditures by their PACs and those who contribute to them.
Contributions by the officers and directors of government
contractors are also required to be disclosed. Should we
eliminate those provisions, too? Of course not.
A second argument made by the opponents is that contracting
officers might review political contributions in order to
reward allies or punish foes by awarding or withholding
government contracts. Again, this can happen now under current
law, under current disclosure rules, but Federal procurement
laws prohibit it.
The draft Executive order also reiterates that, ``every
stage of the contracting process,'' must be free from the undue
influence of factors extraneous to the underlying merits of
contracting decisionmaking such as political activity or
political favoritism.
A third argument that the draft Executive order violates
the First Amendment is also misplaced. Even in the recent
Citizens United case, eight of nine justices agreed that
campaign disclosure rules are consistent with the First
Amendment because they do not prohibit contributions and do not
prevent anyone from speaking.
For all of these reasons, a broad coalition of dozens of
open government groups and other organizations strongly
supports the administration's draft Executive order. More than
30 groups, including nonpartisan, nonprofit organizations like
Democracy 21, the Project on Government Oversight, Public
Citizens, and many others have concluded that the draft
Executive order would enhance transparency and decrease
corruption.
Unfortunately, we will not be hearing from these groups
today because Chairman Issa refused my request to invite Fred
Wertheimer, the president of Democracy 21, to testify on behalf
of this coalition.
Although I was encouraged when Chairman Graves agreed to to
request from his ranking member, Ms. Velazquez, to invite a
small business owner to today's joint hearing, Chairman Issa
chose not to follow this example.
These are not the only groups that support the draft
Executive order. On Tuesday, a coalition of institutional
investors and investor coalitions, collectively managing more
than $130 billion, also wrote to express their support. In
their letter they explained that corporate political activity
presents significant risk to shareholder value, and
transparency allows investors to put together a more complete
picture of the various risks to our investments.
For these reasons, I ask unanimous consent to place the
following documents into the official record of today's
hearing.
First, I would like to submit the testimony that Mr.
Wertheimer prepared for today's hearing but was not allowed to
deliver.
Second, I would like to submit a letter written on May 4th
by more than 30 open government organizations and others
expressing their, ``strong support,'' for the Executive order
and its transparency goals.
And third, I would like to submit a letter written on May
10th from the Coalition of Institutional Investors who support
the draft Executive order to protect the interest of corporate
shareholders.
And I would ask that they be admitted into the record, Mr.
Chairman.
Chairman Issa. Without objection so ordered.
[The prepared statement of Hon. Elijah E. Cummings
follows:]
Mr. Cummings. Thank you very much and with that I yield
back.
Chairman Issa. I thank the gentleman. And we now recognize
the chairman of the Committee on Small Business, Mr. Graves.
Chairman Graves. Good afternoon. I want to thank Chairman
Issa for working with me on this joint hearing and look forward
to hearing all of our witnesses today and their testimony.
All Americans should be concerned by a policy that directly
and purposefully injects political giving into the contracting
process, the integrity of which every single person here has
worked so hard to maintain. Ensuring that contracts are awarded
based on the merits to be offered, free of political and other
inappropriate bias, is a fundamental responsibility of the
procurement system of committees and Congress.
As chairman of the Small Business Committee, I would like
to address the impact of this proposal to small businesses.
Small businesses play a vital role in the U.S. economy in
general and in the government contracting process in
particular. There are over 360,000 small businesses seeking to
do business with the Federal Government. Small businesses
received over a $100 billion in Federal contracts in fiscal
year 2010. That is over 20 percent of all Federal contracts.
Previous statements from the President have recognized that
small businesses have the capability, the flexibility, and
innovation needed by Federal agencies, and that small business
participation keeps Federal contracting costs down.
Why then has he not publicly rejected an Executive order
that will force small businesses out of this market where they
are clearly needed?
Make no mistake, the compliance burden of this Executive
order will force small businesses out of the market and keep
them from entering, since small business--some small businesses
will be ill-prepared to comply with the proposed Executive
orders, recordkeeping requirements, reporting regimes,
potential criminal liability.
Small businesses already bear a disproportionate share of
the regulatory burdens. Businesses with fewer than 20 employees
annually spend 45 percent more per employee in larger firms to
comply with the Federal regulations. Given that small
businesses create 64 percent of net new jobs, I want these
businesses growing, not stifled by unnecessarily duplicative
and punitive regulations.
Any small business brave enough to face the compliance
burden of the Executive order will need to worry about their
contributions being used against them by competitors alleging
the improper disclosure by politically motivated appointees,
which will again deter small business participation.
Contracting officers under pressure from political
appointees may choose not to award any contract to small
businesses who may have been unable to donate to a political
entity, but who nonetheless may have the appropriate winner.
Even if this hypothetical never materializes, the fear of
improper scheming will remain and will have a chilling effect
on small businesses and their willingness to compete in the
Federal marketplace.
The Obama administration is already failing to meet the
congressionally mandated small business goals, and the
President should be focused on bringing small businesses into
the Federal marketplace. Instead, this proposed Executive order
will drive small businesses away. While this would be harmful
at any time, it is especially ill-conceived now when our
economy needs vibrant, small business participation at every
level. And I hope this hearing is going to convince the
President to disavow this proposal.
You know, the way I see it, this is a very simple argument
and has already been pointed out. After the fact, after the
contract has been awarded, anybody can find out which small
businesses gave to whom, and that process is completely open.
But doing this ahead of the fact, doing this ahead of the
contract award and having that information out there, can serve
no other purpose than to be politically motivated or
politically charged or preventing somebody from getting a
contract just based on who they are giving to and why they are
giving it.
I think it is a very simple argument. Again, I want to
thank all of our witnesses for their participation and the
Government and Oversight Committee for hosting the hearing
today. I thank the chairman.
Chairman Issa. I thank the chairman.
We now recognize the ranking member of the Small Business
Committee, the gentlelady from New York, Ms. Velazquez, for her
opening statement.
Ms. Velazquez. Thank you, Chairman Graves and Chairman
Issa.
Contracting with the Federal Government represents an
unparalleled opportunity for small businesses. In fact, the
Federal Government is the world's largest purchaser of goods
and services. For many of this, government contracts provides
reliable, sustainable growth. Last year alone, Federal
contracting accounted for $540 billion in taxpayers' dollars
and small businesses received over $100 billion of those funds.
Given the importance and enormity of the fairer procurement
process, the American taxpayer deserves to know that when
contracts are awarded, it is on the merits, not because of
political contributions. While contracts should be awarded
without such interference, recent court rulings on political
spending and current campaign finance laws making their
validity of the procurement process to remain insulated from
improper political influence.
Under the current campaign finance system, much of the
contractors' political spending may be undisclosed and unknown
to the public. And because of the Supreme Court's recent
ruling, big corporations can now contribute unlimited sums to
influence Federal campaigns. These undisclosed sums have great
potential to improperly influence Federal procurement and
disadvantage persons that play by the rules.
In 2010, there was nearly $300 million in spending on
elections by organizations not directly affiliated with
political campaigns. Nearly 50 percent of that total was spent
by organizations that did not disclose their donors. This type
of spending is increasing rapidly, outpacing spending by
political parties on congressional campaigns by nearly $100
million in 2010.
As undisclosed spending increases, so does the potential
for improper influence in fair procurements. The Obama
administration draft Executive order increases taxpayer
transparency regarding fairer contracts and levels the playing
field by publicly disclosing campaign contributions. Yet while
it is important to reform the system to prevent potential
improper influence and to engender public trust, it is
paramount that small business concerns be put first. This is
particularly important because small businesses are at the
forefront of the economic recovery, generating nearly two out
of every three new jobs.
Historically, small businesses have faced many challenges
in entering the Federal marketplace. Therefore, as we look to
work to level the playing field for businesses, we must also
work carefully to minimize the burden of disclosure
requirements on small businesses. There are a number of
sensible policy options to reduce the burden of disclosure on
small businesses. To this end, as the administration's
rulemaking moves forward, this committee will be certain to
carefully review and comment on this process so that
commonsense disclosure requirements are adopted and burden is
minimized.
In closing, companies that do business with the government,
and thus with taxpayers, should be transparent in their
political giving. However, as we seek to increase
accountability in the Federal marketplace, the needs of small
businesses must be a priority and we must take great care not
to discourage their participation in small businesses.
I look forward to today's testimony and thank the witnesses
for their participation.
I yield back.
Chairman Issa. I thank the gentlelady.
Without objection, I would like to submit for the record a
letter signed by Senators McCaskill and Lieberman, expressing
concern about this Executive order; comments made to the
Associated Press by Minority Whip Steny Hoyer expressing his
concerns; comments made by Mr. Connolly of this committee
reported in the Washington Post.
Additionally, I would like to submit the following
statements for the record: a statement from the chair of the
Federal Election Commission; a statement from the vice chair of
the Federal Election Commission; a statement from the president
of the Business Coalition for Fair Competition; a statement of
Paul Miller on behalf of the Virginia Small Business
Partnership; and a statement by Joel Gora, professor at
Brooklyn Law School.
Without objection, so ordered.
[The information referred to follows:]
Chairman Issa. All Members may have 7 legislative days
within which to insert opening statements and insert extraneous
material in the record.
[The prepared statement of Hon. Paul A. Gosar follows:]
Chairman Issa. The chair would now like to recognize our
first panel witness. The Honorable Dan Gordon is the
Administrator for Federal procurement policy.
Mr. Gordon, pursuant to committee rules all witnesses will
be sworn. Would you please rise and take the oath?
[Witness sworn.]
Chairman Issa. Let the record indicate the witness answered
in the affirmative. Please be seated.
It is customary, as you know, to have a 5-minute opening
statement. Your entire opening statement will be placed in the
record. If you go past the 5 minutes, we're not going to cut
you off, but please feel free to go off message at the greatest
amount--or on message, but off of your opening statement, and
then we will round of questions. Thank you.
Mr. Gordon.
STATEMENT OF DANIEL GORDON, ADMINISTRATOR FOR OFFICE OF FEDERAL
PROCUREMENT POLICY, OFFICE OF MANAGEMENT AND BUDGET
Mr. Gordon. Thank you Mr. Chairman. I'll try not to go off
message.
Chairman Issa. Actually, that was a Freudian slip, I am
sure.
Mr. Gordon. Chairman Issa, Chairman Graves, Ranking Member
Cummings, Ranking Member Velazquez, I appreciate the
opportunity to appear before you and all of the members of the
committee this afternoon. As the administrator for Federal
procurement policy, I am responsible for overseeing the
development of governmentwide acquisition policies and
regulations and ensuring that they promote economy, efficiency,
and effectiveness and the increased participation of small
businesses in our Federal marketplace.
As you know, our President has made contracting reform a
top priority, and he has called on agencies to expand
opportunities for our small businesses. I am pleased to say
that we are making progress on both fronts although, as we say
in my former employer, GAO, much work remains to be done.
I understand that the committee had requested testimony
from OMB about a draft Executive order regarding disclosure of
political contributions by Federal contractors. As you know, no
such Executive order has been issued and it would be
inappropriate for me or for any executive branch official to
testify about matters that are still undergoing comment and
review and do not yet reflect final administration policy.
As a result, I appreciate the committees' recognition that
my testimony today will be limited to addressing our efforts to
enhance integrity, efficiency, and transparency in Federal
procurement and will not address the draft Executive order.
That said, I can unequivocally state that this
administration has always been and remains fully committed, 100
percent committed, to a merit-based contracting process that
meets the highest standards of integrity and transparency.
There simply is no place for politics in Federal acquisition.
Accordingly, our process must ensure, and the public must have
confidence that it ensures, that no political considerations
are allowed to bear on Federal contracting decisions at any
point during the acquisition process.
In that regard, one of the bedrock principles in the
evaluation of proposals and the award of contracts in our
Federal procurement system is that agencies may consider only
the factors that are set out in the solicitation. Nothing more,
nothing less.
If a company that competes for a contract unsuccessfully
believes that it lost because the agency has taken into account
some factor that is not set out in the solicitation, it has
available an established accountability mechanism, the bid
protest process.
I had the honor, as some of you know, of working at GAO for
17 years, most of that time in the bid protest process. It is a
process I am intimately familiar with, and I can tell you that
it works well in providing disappointed bidders with an
opportunity to get independent review if they believe that the
award of a contract has been tainted by an improper factor or
any other factor not set out in a solicitation.
With respect to improving efficiency in our system, we are
strengthening tools to increase competition, to decrease the
use of sole-source or no-bid contracts. And I am pleased to
tell you that many of the successes we have had in that regard
in increasing competition have rebounded to the benefit of
small businesses. We are working to help small businesses more
easily navigate the Federal market space to find business
opportunities.
For example, earlier this spring, the General Services
Administration [GSA], unveiled a new Web-based tool that now
allows small businesses to access from one Web site all
information about agency outreach, business development
opportunities, and training events across the entire Federal
Government.
With respect to transparency, a very high priority for this
administration, we are shining a brighter light and a stronger
light on our acquisition processes to help protect the public
from wasteful spending practices and inspire public confidence
in the integrity of the contracting process. We have
significantly improved the content and the functionality of USA
Spending dot-gov, which is a one-stop source for information on
Federal contract spending, so that the public will have
unprecedented access to information about how their tax dollars
are being spent.
In addition, spending data on subcontracts is now posted on
that site so that taxpayers can see how much work is
subcontracted, and to whom, and for what purpose. In addition,
the public now has access to salary information for the top
executives of many of our Federal prime contractors and
subcontractors.
And finally, let me say a few words about the Federal
acquisition work force mentioned by several of the opening
speakers, a very important factor for me personally. The
Federal acquisition work force is our most important resource,
and it is the key to preserving the integrity of the
acquisition process. This administration has taken unparalleled
steps to increase the capability and the capacity of the
acquisition work force, as evidenced by the President's budget
request for both fiscal year 2011 and 2012, and it has been and
it remains my top priority to make sure that the good women and
men of our acquisition work force have access to the training
and to the development opportunities that they need, to be the
best possible stewards of our Federal taxpayer dollars. Their
professionalism is one of our greatest assets, and among my
core responsibilities as Administrator is to be their champion.
Finally, let me reiterate this administration's unwavering
commitment to protecting the integrity of the Federal
contracting process and ensuring that our taxpayer dollars
continue to be spent appropriately and that taxpayers see that
they can have confidence in our procurement system.
There is much left to be done. And we welcome the
opportunity to work with both of these committees and with
other Members of Congress to make meaningful and sustained
improvements to our procurement system, to ensure that it
remains merit-based and meets the highest standards of
integrity, efficiency, and transparency.
This concludes my prepared remarks, and I am happy to
answer questions from either of the committees.
Chairman Issa. Thank you.
[The prepared statement of Mr. Gordon follows:]
Chairman Issa. Could we go ahead and run that quick video
to set the theme for questioning?
[Video shown.]
Chairman Issa. The chair now recognizes himself for 5
minutes.
You undoubtedly saw that clip when it was fresher, I
suspect. It is clear that the President believes that the
unlimited right of free speech is not appropriately decided. He
made that clear.
Do you believe that free speech is in fact a right that
relies to a certain extent on privacy of how money is spent?
Mr. Gordon. Mr. Chairman, I am going to get a bit out of my
depth when I go beyond the procurement system.
Chairman Issa. Let's put it another way. Do you believe the
government has a legitimate right to know whether I gave to the
pro-life movement, whether I gave to United Gays and Lesbians,
or whether I gave to the Democratic Party, if I am a vendor of
the government submitting a bid?
Mr. Gordon. I don't feel comfortable addressing the issue
of campaign--of campaign finance disclosure.
Chairman Issa. It is not campaign finance disclosure. It is
political activity, not currently covered by the disclosure,
which ultimately we are not going to be endlessly asking you
questions about the specifics of that. But the broad question
is, do you believe that is necessary information in order for a
nonpartisan or a partisan appointee to participate fairly in
the procurement?
In your opening statement you made it very clear. You said
it is supposed to be only in the structured requirement. Have
you ever sent one out? Have you ever sent out a bid request
that asked how much you gave to United Gay and Lesbian
organizations or to the National Right to Life or any of these?
Has that ever been part of the procurement process?
Mr. Gordon. No, sir. I would not expect that to be an
evaluation criterion at any point in the future, just as it has
not been in the past.
Chairman Issa. So if I read you correctly--and I want to be
very careful--you don't see that as necessary information in
the procurement process?
Mr. Gordon. In the selection of a contractor, a contractor
can only be selected based on the factors that are set out in
the solicitation. If the question is would the public like to
know what contributions are made, that is separate from the
procurement process itself.
Chairman Issa. OK. So in looking at the draft Executive
order, we found that it would be a requirement in order to
participate in the contracting process.
Do you believe--not talking to the Executive order--but do
you believe that we have a right to ask for information
completely unrelated to the fitness of a vendor in order to
give information to the public that would not otherwise be
available, simply because somebody wants to be a vendor to the
government?
Mr. Gordon. There are many sorts of information that we
require vendors to submit; information about lobbying, for
example. It is not taken into account in the selection of
contractors. But it is required to be submitted and it is
publicly available. There are other examples I could give you
of information that we believe the public should have access
to, even though they are not taken into account in the award of
a contract.
Chairman Issa. So where is the constitutional charge of the
President, without an act of Congress, to in fact require
private citizens to turn over information in order to enter
into the flow of commerce? I don't want to know about historic
things that nobody argued about. We're now talking about
Chicago hardball politics that clearly could lead to a chilling
effect on contributions by those required to participate.
Clearly, unions are exempt from this draft order, while
corporations generally are not and their key employees. Where
is the authority, in your opinion, or the need? You've already
said there isn't a need. Where is the authority, in your
opinion?
Mr. Gordon. Mr. Chairman, you won't be surprised to hear
that I am not a constitutional lawyer, and I won't be citing to
the Constitution.
Chairman Issa. So you head up the procurement. You are the
responsible party at OMB. You see no need. So therefore if this
Executive order, or one substantially similar, were to happen,
it would not be based on need. It would probably be based on
the President's statement at the State of the Union and his
opinion that follows that, obviously?
Mr. Gordon. I don't understand your reference to ``need.''
Let me be clear. What I was saying was in the selection of the
contractor, the winning competitor for the contract, the
information about political contributions is not needed.
Chairman Issa. OK. So the Executive order, as we read it,
is asking for information that is not needed.
Mr. Gordon. To decide which company should receive a
contract; that is correct.
Chairman Issa. That's OK. So you're asking for unneeded
information.
Do you believe that people may choose not to make
contributions if they are forced to make, for example, known
that they gave to Planned Parenthood or National Right to Life?
Mr. Gordon. Sir, you're outside the area where I feel
comfortable expressing an opinion.
Chairman Issa. I think it is very clear this Executive
order is outside the procurement process.
With that, I recognize the ranking member for his
questions.
Mr. Cummings. Thank you very much. Mr. Gordon, I would
thank you for being here. And I want to help answer the
question that the chairman just asked.
He asked about full disclosure and whether that is
appropriate. And let me just read this quote--and listen
carefully. ``I think what we ought to do is we ought to have
full disclosure, full disclosure of all of the money that we
raise and how it is spent. And I think that sunlight is the
best disinfectant.'' And that was said by Speaker Boehner.
By the way, before he became Speaker, on Meet the Press
back on February 11, 2007. So I just wanted to help answer the
question. The Speaker clearly was of the opinion back then and
I think he's of the opinion now--and let's not get confused
about some things.
The public knowing--first of all, let's get back to what
the chairman talked about a few moments ago. He was very
complimentary of contracting officers. And I was just so
impressed and so moved. And then he implies that you talk about
how they must--folks must, in dealing with these contracts,
they must deal with only the factors stated and set out in, I
guess, the bid documents or whatever; is that correct?
Mr. Gordon. Yes, sir.
Mr. Cummings. Now, so it is true that it is not about bid
officers, these good people that the chairman just talked about
doing their job well, doing it with integrity. It is not about
them looking at these documents, trying to decide what a bid--
who should be awarded a bid; is that right?
Mr. Gordon. That is right.
Mr. Cummings. This is more about the public having an
opportunity to know, the public having an opportunity to know
generally what's going on with these contributions or whatever;
is that right?
Mr. Gordon. It is, sir.
Mr. Cummings. Now, Mr. Gordon, last week a coalition of 34
good government and other organizations sent a letter to the
President supporting this draft, you know, Executive order. And
the letter said this, and this is very interesting. It says,
``The undersigned organizations, on behalf of our members and
supporters, write today to express our strong support for the
April 13th draft Executive order. It simply requires that a
business entity, as a condition of bidding on a government
contract, disclose campaign contributions and expenditures of
the company. It seems management and afflicted political action
committees for all''--for all--``to see.''
And it just seems to me that we have disclosure now and
folks can always go to certain reports and see what people have
been giving; is that right.
Mr. Gordon. It is correct, sir.
Mr. Cummings. Yeah. So if they wanted to, I guess--so
following this logic, no disclosure would be appropriate. You
know, you've got a situation where folks already are
disclosing, and now they're giving money to organizations that
don't disclose. So I guess the public--and the public is
getting very, very frustrated.
All of our polling shows that the frustrated--the public,
not contracting officers, but the public wants to know more
about, you know, who's giving money where. They want to know.
They want to have an idea.
As a matter of fact, very shortly, in a matter of 3 or 4
days, you know what's going to happen, Mr. Gordon? Everybody up
here, we've got to do some disclosing.
And again, the organizations that have come forward, they
have said, Look, they have looked at this. This is what they
do. This is what they do. They are trying to make sure that the
public has an opportunity to know as much information as
possible. And you know why, Mr. Gordon? The reason why they
want to know is because many of them feel powerless. Many of
them feel that government goes off and does its thing, and they
have no idea what's going on generally behind the scenes.
And I think that is what these organizations, in the
letters that I asked to be admitted into the record, that is
what that is all about; 30 organizations basically begging the
President to sign the Executive order.
Now, there's another thing that is very interesting. I know
you're not commenting on all of this, but this is a draft. So
we're here talking about a draft. We don't know what--first of
all, we don't know that there will be a final Executive order.
We don't know what will be in the final Executive order. And so
with that, I just--it is kind of frustrating and I'm glad
you're here to testify.
Mr. Gordon. Thank you.
Chairman Issa. The chair now recognizes the chairman of the
full Committee on Small Business, Mr. Graves.
Chairman Graves. Thank you, Mr. Chairman. Just to kind of
dovetail on what the ranking member said--and he's correct. You
can find out this information, you know, if somebody gets a
contract for the Federal Government, you can go look at what
their contributions were. So in terms of the public feeling
powerless, I don't understand where that comes from because
they can find out. He stated himself.
So my question to you, Mr. Gordon, is, ahead of the fact,
submitting this information ahead of the fact--and you said
yourself it is information we don't need to make determination
on a contract--so submitting this information ahead of the
fact, what purpose does it serve?
Mr. Gordon. Chairman Graves, as you know, that would get me
into a discussion of the draft Executive order, and I don't
think it is appropriate for me to do that. But I can make a
couple of points that may be helpful.
I used to teach for a good number of years at George
Washington University's law school. I taught international and
comparative public procurement law. And one of the principles
that we talked about when we look both at our State procurement
systems and foreign procurement systems, the fact is a huge
amount of taxpayer funds flows through government contracting.
That is true whether you're talking about, in my home State,
the city of Annapolis, or the Federal Government or foreign
governments.
And one of the things that we talked about in those classes
is the importance of transparency, the enormous value of
transparency. I sometimes used to refer to it in class as
Vitamin T. It is enormously helpful to strengthen public
confidence that their tax dollars are being used properly, that
they feel that information is available to them.
Chairman Graves. Let me ask you, then, how does this
information do that? How does your agency know ahead of time
who gave to what and how much they gave? How does that help in
terms of transparency? Are we talking about your contract or
how you're going to award the contract, or are we talking
about--you know, I don't understand that. I don't understand
the purpose when you can find out the transparency is there, if
you award a contract to a company and they can go see what that
company gave and who they gave to.
But it seems to me that it would serve no other purpose
doing it ahead of the fact. You already said your agency
doesn't need that information to make a determination on that
contract. So I still fail to see what purpose it serves,
whatsoever, in that determination.
Mr. Gordon. The transparency, transparency serves an
extremely important purpose to the information.
Chairman Graves. Can you get that information? Can the
public get that information? Once you've awarded a contract to
a company, can they get that information and find out, all
right, this company just got a contract for X number of dollars
from the Federal Government. I want to see who they gave to and
what organization, how much, whatever. Can they get that
information?
Mr. Gordon. I understand that. I am not an expert----
Chairman Graves. You agreed with Mr. Cummings they can get
that information. They can get that information. And you agreed
with Mr. Cummings when he said that.
Mr. Gordon. My understanding is that some information about
political contributions is currently available already.
Chairman Graves. The fact of the matter is it is available.
It is fully available. And so if a company gets a contract from
the Federal Government, you can go look and see total
transparency. But the simple idea that you want that
information ahead of time disturbs me in a big way. And why the
administration would want that information ahead of time, ahead
of awarding the contract, it disturbs me in a big way.
And the fact of the matter is, we asked a lot of small
businesses to come in and testify today, and they didn't want
to testify today because they are afraid of retribution from
this administration. Well, the simple fact that they are afraid
of retribution from this administration and they're in the
contracting process means that there is at least that paradigm
or that idea that is out there.
So my question to you is, how are you going to assure that
at least the appearance of awarding these contracts based on,
or the appearance of--let's look at it the other way. How are
you going to assure small businesses that the appearance is on
the up-and-up and that you don't need that information to make
that award? How are you going to assure that to these small
businesses who are already scared to even come in here and
testify?
Mr. Gordon. We have, as Chairman Issa said, we have a
terrific corps of contracting officers. They know what the
rules are. They are set out in the Competition in Contracting
Act and in the Federal Acquisition Regulation. No factors, no
factors can be considered except those set out in the
solicitation. If the company feels those rules weren't
followed, they can file a bid protest. They will get
independent review.
Chairman Graves. Are any of those people in that process
politically appointed?
Mr. Gordon. We are generally dealing with career people,
although there is an exemption and it is worth pointing out, by
statute chief acquisition officers of the agencies are in fact
politically appointed. I remember hearing years ago when that
was originally created some concern that having a political
appointee could cause trouble. In fact, at least to my
knowledge, there have never been allegations of interference. I
don't think that there is a problem, but if there were a
problem a company can file a bid protest.
Chairman Graves. I am out of time now, but the fact remains
you said you don't need that information for the contracting
process and that information is widely available after the
fact, after the contract is awarded, and anybody in this
country or worldwide can find out what that information is.
So submitting it ahead of the fact is something that
disturbs me a great deal, and what the motivation, the true
motivation, is behind asking for this.
Thank you, Mr. Chairman.
Chairman Issa. Thank you.
The chair now recognizes the ranking member, Ms. Velazquez.
Ms. Velazquez. Mr. Gordon, there are many concerns that
providing donor information to contract officers willfully
decides the procurement process. Is there an example of another
program where there are safeguards to prevent such a conflict
of interest?
Mr. Gordon. Conflicts of interest, if I could, Ranking
Member Velazquez, is a subject to which I'm particularly
sensitive and my office is particularly sensitive. In my year
and a half as the Administrator for Federal Procurement Policy,
I have led an effort to strengthen the rules about conflicts of
interest, both personal conflicts of interest and
organizational conflicts of interest. Those, again, go to the
importance of protecting the integrity of our process. It is a
very important area.
Ms. Velazquez. So let me ask you, are there situations
where an intermediary is placed between participants needing
sensitive information and a Federal agency who might be biased
by such information?
Mr. Gordon. I would want to hear more specifics, but we
would certainly be sensitive to ensuring that there is
insulation and there could--you can imagine an arrangement
where there would be a firewall so that contracting officials
could be separated from any sensitive information that could
create an appearance of a problem.
Ms. Velazquez. We hear from many people that say that
transparency can help engender public trust and increase
taxpayers' confidence in government. My question to you is, can
transparency efforts also generate cost savings by creating
more competitive and efficient Federal programs?
Mr. Gordon. Absolutely. I should tell you that the
Organization for Economic Cooperation Development, the OECD,
just did an international peer review of the U.S. Federal
procurement system. And I am happy to report that one of the
things they focused on was integrity and competition, and
frankly we came through with flying colors.
The fact is that increasing transparency and increasing
trust in the system brings more businesses in. It is a special
concern for us in the area of small businesses. When I go
around the country talking with small businesses, they so often
say, Dan, the system is so difficult; how are we ever going to
break in? We will never get a contract.
We work with our friends at the Small Business Association
and other agencies to get them to try to get a contract with
the Federal Government. The more trust we have in the system,
the more competition we have. The more competition we have, the
lower the prices, the more innovation we can get.
Ms. Velazquez. Whenever we are debating legislation here,
there are some that says that localities and municipalities,
that we should not be dictating the Federal Government to
localities of the State government. The fact of the matter is
that many States have enacted pay-to-play laws.
Even today there is in Wall Street Journal an article about
Andrew Cuomo putting pressure on the legislature to pass pay-
to-play laws to prevent favoritism in contracting. So given the
many recent scandals, contracting scandals, are there similar
issues in Federal procurement that need to be addressed
immediately?
Mr. Gordon. I am not an expert on State laws. But I will
tell you that because so many taxpayer dollars are at issue,
there is always concern about improper decisions. And the
little bit I know about the State pay-to-play statutes suggests
that you can have disclosure of those contributions there
without, in fact, ever taking them into account, in contracting
award decisions.
Ms. Velazquez. Thank you.
Chairman Issa. The chair recognizes the gentleman, Mr.
Walberg.
Mr. Walberg. Thank you, Mr. Chairman. And thank you, Mr.
Gordon, for being here.
Mr. Chairman, I would like to submit for the record an
article that was published in today's Washington Examiner. I
think it accurately points out that if this draft Executive
order goes through and gets finalized, it will effectively
restore the partisan spoil system in Federal contracting that
civil service reformers struggled for decades to eradicate.
I believe that acquisition award should be based on merits.
Despite what the administration may say, there is no way one
can claim that politics won't be taken into consideration in
the source selection process if this is EO finalized. So I
would like to submit this for the record.
Chairman Issa. Without objection so ordered.
Mr. Walberg. Mr. Gordon, the White House has stated clearly
that disclosure is one of their overall goals, but under this
draft Executive order, isn't it true that contributions to
unions that sign collective bargaining contracts with the
Federal Government, yet are engaged in independent political
activities, are exempt from the EO?
Mr. Gordon. Sir, as you know, I can't speak to the draft
Executive order at this point. But if the question is are
unions Federal contractors, I'm not aware of situations where
they actually hold a Federal contract, although I may be wrong
on that.
Mr. Walberg. But they're exempted in this draft Executive
order from this provision, so there must be some expectation
about that at the very least. And if transparency is the goal,
wouldn't this have the opposite effect?
Mr. Gordon. I'm not in a position to speak to that, sir,
sorry.
Chairman Issa. Would the gentleman yield?
Mr. Walberg. Yes, I'll yield.
Chairman Issa. Mr. Gordon, if you would presume that the
draft Executive order that you have read is a draft piece of
legislation from here forward and answer it as though it was
draft legislation of Congress which you are able to respond to.
I yield back.
Mr. Gordon. It feels, sir, like I'm being asked indirectly
to talk about the draft Executive order. I'm simply not
comfortable doing it. Although I must say I don't understand
the question about an exemption for unions. I'm simply not
familiar with that.
Chairman Issa. If the gentleman would further yield.
Mr. Walberg. To the chairman, yes.
Chairman Issa. We can only deal with what fortuitously
became available to us. It exempts unions which do have a
limited amount of contracts and a great many grants to the
Federal Government. We clearly saw that as a deliberate effort.
And if it is draft legislation, how would you feel about
exempting anybody who is a contractor to the government?
And I yield back and thank the gentleman.
Mr. Walberg. Well, thank you, Mr. Chairman. Good points.
And I have information in front of me that clearly indicates
that union support in elections goes on and there are grants
and contracts that are made effectively to these unions as
well.
But let me move on here. Is the Executive order, as you
understand it, I know you say you can't respond to it, but--I
mean, that's the purpose we're here today. Is the Executive
order narrowly tailored to serve an important government
interest, in your opinion?
Mr. Gordon. Sir, there is no Executive order that has been
signed by the President. There is a draft.
Mr. Walberg. Is the draft Executive order narrowly tailored
to serve an important governmental interest?
Mr. Gordon. I remember from my days working at the Office
of General Counsel at GAO that ``narrowly tailored'' is a
phrase not chosen at random, and I don't feel comfortable using
constitutional language. I can tell you that disclosure serves
an extremely important public purpose of transparency and
therefore increasing public trust in the procurement system.
Mr. Walberg. Now, let me ask you this, following up on
that. Does, in your opinion, disclosure per se eliminate
corruption in government contracting?
Mr. Gordon. You bring me back, sir, to Vitamin T.
Transparency is one of the best ways of fighting corruption.
Sunlight is the best disinfectant.
Mr. Walberg. One of the best ways of fighting corruption
within governmental system itself, within Congress, and I
certainly agree with Speaker Boehner on that statement as it
relates to us, our body, in being clear and with sunlight on
us, but to put sunlight on, as someone once said,
inappropriately on the private sector in ways like this is an
excessive amount of sunlight that can bring cancer. And that's
my concern with what's going on here, that it's a cancerous
approach, and within government contracting it can shut down
all sorts of good things.
Let me ask one more final question because of time. Do you
imagine certain entities will instead of giving up their
Federal contracts withdraw from engaging in political speech as
a result of this draft Executive order?
Mr. Gordon. I don't feel comfortable speculating on that
question, sir. I understand that many--much political speech
already has to be disclosed. I'm not aware of that chilling
that speech, but I'm really not in a position to speak.
Mr. Walberg. Well, I thank you for appearing, but I'm
concerned that the light of day from this administration was
not afforded to us today. Thank you.
Chairman Issa. The gentleman from Virginia, Mr. Connolly.
Mr. Connolly. Thank you, Mr. Chairman. And welcome, Mr.
Gordon. It's interesting to have sparring matches between
committee members and a witness when he really is not at
liberty to comment on the subject matter. And I must say I find
it a little ironic that many of the people who now are so
concerned about the rights of Federal contractors had no such
concern just a few weeks ago when this committee very
peremptorily decided that if you were a Federal contractor and
you were charged with delinquent taxes, by God, we were going
to judge you guilty and we were going to short circuit due
process and make sure that you were suspended from doing
business with the Federal Government.
Having said that, and having been a major critic of the
Supreme Court in what I consider one of the top 10 worst
Supreme Court decisions in American history with respect to
Citizens United which is going to upend the politics of America
and is going to profoundly affect how campaigns are funded and
what the public gets to see or not see, I am concerned about
unintended consequences. So if you and I can engage in a
hypothetical conversation, Mr. Gordon.
Hypothetically I might want--you and I might both agree
that disclosure is a good thing, it's the best disinfectant, as
Speaker Boehner said. However, I am concerned theoretically if
somebody were to come up with the idea of requiring contractors
before they--before an award of a contract were made, or even
after, immediately after the award of a contract being made, to
disclose any and all campaign contributions that their
political action committee may have made and their top officers
may have made, the unintended consequence of that is that it
suggests to the public that there's a relationship between the
two when in fact there may--as you have testified, there is
not. Would you share my concern that could be an unintended
consequence hypothetically of such activity?
Mr. Gordon. Thank you for setting out that hypothetical.
Let me say, sir, that I want to reflect both on those possible
unintended consequences, and in all fairness to all the Members
here, I want to reflect on the other comments that the Members
have shared. I do think it is--you could have a situation of an
unintended consequence and it is certainly worth reflecting on
that, because you don't want a situation where transparency
ends up rebounding against the intended goal.
Mr. Connolly. And to that end I would strongly urge you, at
least as one Member on this side of the aisle, to consider that
or to take that back to those colleagues you have who may be
participating in cogitating about theoretically such a draft,
because I am very concerned that all kinds of people are going
to make a conclusion that in fact it's false even though the
dots are both there. I made a contribution, I got an award of a
contract. You have testified we don't take that into account at
all, and you've never been aware of that being taken into
account. Yet nonetheless, once we change this procedure that is
the risk that both the media and the public could draw that
conclusion, albeit a false one, and now somebody's good name is
damaged. So I think that's not a trivial issue.
The other issue that concerns me, again, with the best of
intentions, the intention being disclosure is the best
disinfectant, I agree with that principle. But I am also
concerned that by changing the policy at this time it could
have a chilling effect on the ability or willingness of people
in fact to participate in the political process, to exercise
the First Amendment rights, whether we agree with it or not, to
make a contribution, to show up at an event, whatever it may
be.
Might that be, again hypothetically, a concern you and I
might have if we were contemplating such a change of policy?
Mr. Gordon. Your first hypothetical, sir, involved a
possible allegation against the procurement system, so I'm more
comfortable ruminating, if you will, and reflecting on that.
The second hypothetical takes me outside the procurement
system, and I'm not sure that my ruminations would lead to any
useful product on that score.
Mr. Connolly. Yes. I just thought you could put your
professorial hat back on, Mr. Gordon, and share with me just a
genuine concern--a general concern as a citizen that we not
have the unintended effect here of chilling, of having a
chilling effect on people's participation, including Federal
contractors.
Mr. Gordon. I understand, sir. The fact is, again, my
understanding is that many political contributions, although
not as--perhaps not all of them, but many political
contributions are already publicly available, including by
Federal contractors and their leaders. I'm not sure that
there's evidence that the political--excuse me, that the
transparency that already exists about those political
contributions has in fact had any chilling effect on government
contractors.
Mr. Connolly. My time is up. Thank you, Mr. Chairman.
Chairman Graves [presiding]. The chair now recognizes the
gentleman from Florida, Mr. West.
Mr. West. Thank you, Mr. Chairman. Honorable Gordon,
pleasure to have you here today. I would like to speak from
experience on this, because after serving 22 years in the U.S.
Army I was a DOD contractor. So I want to ask you this very
simple question. The Department of Defense sends out an RFP to
have, you know, recently retired individuals that can go and
help to augment the military in Afghanistan or Iraq. Why before
a contract is awarded would you then have the head of an
organization, a retired three-star or four-star general,
disclose his political affiliations or contributions? What
impact does that have on that request for proposal?
Mr. Gordon. I want to make very clear, Congressman West,
two points. One, to the extent that you're taking me into a
discussion of the details of the draft Executive order I don't
feel comfortable speaking, but I think I can still address the
point.
Mr. West. But why are you here, sir?
Mr. Gordon. I think I can address the point. As soon as I
heard the acronym RFP I realized that you do have experience in
this area and that's helpful.
Mr. West. Absolutely.
Mr. Gordon. The contracting officer who is awarding that
contract will never take into account political contributions,
but, but, the public may want to know, she the contracting
officer, he the contracting officer, will not take that
information into account. The only thing that they will take
into account are the factors in the RFP. The question isn't is
it going to be a factor in the selection, the question is does
the public have the right to know what contributions were made
by contractors.
Mr. West. But what bearing does that have on the request
for proposal for someone to come in and provide services for
the Department of Defense, you know, their political
contributions? I guess my question is, what has been broken in
the procurement process up to this point which leads to that
draft Executive order being proposed?
Mr. Gordon. As a general matter, as I said earlier, every
procurement system, ours, the States, the local governments and
foreign ones, are constantly facing a risk that the public will
view their system as tainted. Because the fact is enormous
numbers of dollars of taxpayer funds are at risk in the
procurement system, and in order to instill confidence in the
public you want to have as much transparency as you can.
Mr. West. But you don't think that the American people will
have confidence in a retired three-star or four-star general to
be able to, with his team, be able to write an RFP to compete
for a contract? What purpose does it have with this draft
Executive order to bring forth this requirement to disclose
your political contributions? What is the purpose of that with
that RFP? What is the purpose of that in the awarding of this
contract? As we have said, I can understand after a contract is
awarded that's public knowledge, but why is that part of the
criteria that we have up front?
Mr. Gordon. It would absolutely not be part of the
evaluation criteria, absolutely not part of the criteria, sir.
Mr. West. But correct me if I'm wrong, that's what this
draft Executive order brings forth?
Mr. Gordon. The only question is whether companies that
want to get contracts should be required to have made
disclosure of their contributions. Contributions would never
be, would never be a criterion for selecting a company.
Mr. West. And then I come back to my original premise. What
has been broken with the process up to this point that was the
impetus for this draft Executive order to be created?
Mr. Gordon. There is concern in every system, including
ours, that award decisions may have been affected by
inappropriate considerations. Having more information available
to the public, having more transparency, can help strengthen
confidence in the system.
Mr. West. Would subsequent subcontractors or subsequent
employees also be under the jurisdiction of this draft
Executive order, such as myself when I was hired on to go to
Afghanistan in June 2005?
Mr. Gordon. I don't feel comfortable responding to the
question, sir. I'm not in a position to.
Mr. West. Well, then I'm going ask this one last question.
As you sit here today do you support that draft Executive order
or not?
Mr. Gordon. I'm not in a position to talk about the draft
Executive order, sir.
Mr. West. Well, I don't understand why you're here. It's a
simple question. Do you support the draft Executive order that
is placed before you right now or not? Yes or no question.
Mr. Gordon. I am not in a position to express an opinion
about the draft.
Mr. West. I yield back.
Chairman Graves. The chair recognizes the gentleman from
North Carolina, Mr. McHenry.
Mr. McHenry. I thank the gentleman. Thank you, Chairman.
Mr. Gordon, I want to thank you for your service to your
government. We know that this is probably not the highlight of
your career to come before Congress with this draft Executive
order that Mr. West was asking about. But I want to start by
saying, you know, for the average American business, small
businesses especially, they're dealing with high government
regulations, they're dealing with the burden of government
regulations every day.
I was just talking to a group of constituents up here,
small business folks, heating and plumbing contractors, and
they're talking about regulations, the burden on their ability
to hire folks. And what we're talking about with this is in
essence employers going to their employees and saying, we need
you to give us every donation you've made to the causes most
dear to you. That's an additional burden. And, you know,
Americans are private folks. You know, even if you have to
disclose a political contribution, for instance, on the
Internet, it's a little different when your boss comes in and
says, hey, tell me who you've been voting for. I mean, that's
basically what we're saying with this. So, you know, but I've
got a larger question.
In a time when the cost of government has gone up and
government is spending more this year as a percentage of the
economy than it has since World War II, so my question is, with
this disclosure requirement will this in any way reduce the
costs to the taxpayers of these government contracts?
Mr. Gordon. The issue of the cost that we spend on
contracts that you raise, sir, is an extremely important one
for us. I have to tell you, and I tell you this with pride,
that over the prior 12 years we saw the amount of money being
spent on government contracts year after year increasing. In
fact, over the 8 years before this administration came in we
were increasing on average year after year 12 percent. People
said to us you'll never be able to stop that. We stopped it. In
fiscal 2010 we spent something on the order of $15 billion less
on Federal contracts for services than the year before.
Mr. McHenry. Mr. Gordon, I appreciate that, and that's not
the question I'm asking, with all due respect. Someone is
offering--someone--you put out a bid for paper products. With
this disclosure requirement, this additional certification that
you would require, does that reduce the cost of those paper
products to the government?
Mr. Gordon. I understand the question, I think, sir.
Mr. McHenry. Does it reduce the cost of providing that good
or service to their government? And if you don't want to
answer, just say that.
Mr. Gordon. No, no. It's an area we focus on a lot. The
fact is transparency requirements impose burdens as we
implement them.
Mr. McHenry. Or costs, burdens or costs?
Mr. Gordon. Absolutely, sir. Those burdens turn into costs
and we the taxpayers pay for them. Transparency is not free.
One of the benefits we hope to get through transparency,
though, that was alluded to earlier, is more competition, and
more competition can lower cost, absolutely.
Mr. McHenry. So more competition by having a greater
requirement on a contractor to do business with government.
That seems a little interesting to me and sort of defies logic.
But let me ask another question. And, you know, you talk about
the bid protest process which you have a great level of
expertise in.
Would you anticipate that this additional disclosure would
increase the bid protests?
Mr. Gordon. Actually, sir, I don't think it is likely to do
that. I think it's good to have bid protests available as a
check. But if you have a system in place where there is
information available to the public but not taken into account
in award decisions, you shouldn't have an increase in protests.
Mr. McHenry. Well, thank you. And additionally, as this
would operate, in the bid process you would ask those that are
bidding, the government, if they--you would ask them to certify
that they've made these disclosures on their political
contributions, right, you would ask for a certification; is
that likely how it would work operationally?
Mr. Gordon. Boy, you're several steps ahead of me, sir. But
I understand that one method that's been used in some States is
to say that, yes, companies have to say they've made all
required disclosures, just like today we require companies to
say we don't have a tax liability above $3,000.
Mr. McHenry. OK. And would you verify that certification is
indeed correct or was made?
Mr. Gordon. Normally--we try to minimize the burden on our
contracting staff, so normally unless they have reason to doubt
a certification we don't require them to check. For example, if
a company certifies that they're small, normally the
contracting officer can simply accept that certification unless
she or he has a reason to believe that it's inaccurate.
Mr. McHenry. Thank you, Mr. Chairman. I appreciate the
opportunity to comment. And it is certainly interesting with
that certification, you know, we would just simply hope that
procurement officer wouldn't look at those contributions that
are publicly made to certify that they were indeed made public.
And if they did view those contributions, it would have to
necessarily influence the outcome of the bid.
Chairman Graves. The chair now recognizes Mr. Lankford from
Oklahoma.
Mr. Lankford. Thank you, Mr. Chairman. Mr. Gordon, thank
you for being here as well. Let me try to clarify something.
You were just talking about the hope of this and adding more
transparency and such as to increase competition. So it is your
belief if we ask companies to disclose who they're giving to
and ask their employees who they're giving to more companies
are going to say, yes, I want to get in that, this will
increase competition, therefore decrease price. Is that what
you're saying with that?
Mr. Gordon. We always hope that increasing trust in the
system will cause more companies to participate in the system,
yes.
Mr. Lankford. So you anticipate when we ask people who they
give to they're going to say, yes, I haven't done bidding
before, but I want to jump in, I want to participate in that,
now that I'm going to be required to say who I give to before I
bid I'm now going to engage in a process that's new so to
increase competition on that?
Mr. Gordon. Not because they're looking forward to making
the disclosure, but because the disclosure can increase trust
in the system, that's right.
Mr. Lankford. Where would this data be distributed? We
talked about a little bit about this before. Who will make the
decision on how this data gets out to the public?
Mr. Gordon. You're really then getting into the specifics.
And I should say a word about the specifics of a draft. The
fact is a draft Executive order is a confidential document,
we're discussing it internally.
Mr. Lankford. Right. I understand that. I've got several
questions. I understand that. I've heard that loud and clear.
My concern is, obviously, once this data comes in and the
political appointees begin to look at it there is a chance that
they're going to look at it and suddenly 57 percent of the
contracts gave predominantly to Democrats and this
administration will go, oh, that's not a good idea to release
because then it looks like we're giving preferential treatment
to more people, and then suddenly there is a statement if this
Executive order suddenly goes away, is this not a mining to go
out and look and say, we are either going to expose one thing
or another, and if it is politically not expedient there's the
opportunity to say, I don't think we're going to release it at
this time. Obviously, I understand we're two or three steps
down the path on that, but it becomes this circle on this.
And your comments about transparency, I understand the
transparency concept. But having gone through job interviews
and interviewed multiple people myself, I know when I'm looking
at an application that's not about transparency, that's about
who I'm hiring and who I'm not. Transparency is after the fact,
it's exposed to everybody what's happened. Before the fact the
information is an application. That's information I'm gathering
to make a decision. So to say ahead of time I'm going to gather
this information but I'm not going to really use it to make a
decision begs the question why it's on the initial information.
That seems to be something that would be exposed later, not
before. As I've gone through interviews there's not been a time
I've looked at it and said I'm not going to look at that
section of the application, I'm pretty much looking at all of
it.
Do you anticipate with this that there will be a time as we
get down the road, again it's a hypothetical, to say, we need
to balance this out better, we have too many people that are in
companies that give from Republicans or Democrats, let's
establish a quota system that will only do procurement based on
we need to have a balanced number of companies that give to
Democrats, Republicans or don't give at all? Do you anticipate
this is the way that would head to just try to balance things
out and make it more fair if we determine there are a lot of
Republicans, let's say, that give to these companies so we need
to make sure we have more companies that are Democrat owned
that actually get engaged in this in the procurement process
and set that quota aside?
Mr. Gordon. Absolutely not. We need to protect. We need to
keep politics out of the contracting process.
Mr. Lankford. I would completely agree, and there is a good
way to do that, is to keep it exposed as we are right now.
One last thought on this. OMB currently has the authority
to put out a circular to require, you know, information about
grant writing, in particular. Is there any conversation that
you're aware of in OMB on the grant writing to put out a
circular saying, well, let's do for all of those that get
grants, let's say, from unions, that they would have to give
who they give to and the union members that are leadership to
note political contributions. Now, that wouldn't take an
Executive order. OMB could do that now. They already have the
authority to do that.
Do you know if there's been any conversation related to
that.
Mr. Gordon. You won't be surprised to hear, sir, that I'm
not in a position to disclose internal discussions.
Mr. Lankford. OK. Well, that would be interesting to note
just on that.
The President has been very good to just say, we don't want
to do an end around Congress. But this certainly feels like the
previous Congress said this wasn't a good idea, and so they're
going to do an end around Congress just to be able to find a
way to legislate in an area that is not, does not have
legislative authority. I understand you have a responsibility,
but this was a clear decision made by a previous Congress not
to do this and now we're going to currently try to do it
anyway. And I find that fascinating and an interesting
conversation for another day on constitutional issues and
authority.
So thank you for your time.
Chairman Graves. The chair now recognizes Mr. Mulvaney of
South Carolina.
Mr. Mulvaney. Thank you, Mr. Chairman. Mr. Gordon, thank
you for coming before us today. I want to go back to something
that I thought I heard you say earlier on in the testimony,
which is I believe you said that the contractor's action, that
their conduct in participating in the political process doesn't
really, it's not really related to what they're doing for the
government, is that correct?
Mr. Gordon. What I said, sir, was that a contracting
officer in deciding who should win a contract will look only at
the selection factors in the solicitation, not at political
activities or political contributions.
Mr. Mulvaney. So political activity is not a selection
factor?
Mr. Gordon. That's right, sir.
Mr. Mulvaney. So it's fair to say that political activity
has nothing to do with whether or not they'll be fully able to
perform their duties to the government?
Mr. Gordon. Certainly nothing to do with whether they're
going to get the contract.
Mr. Mulvaney. Thank you. Well, if it did have an impact on
whether or not they could perform the contract, would you
consider it?
Mr. Gordon. Boy, it feels very hypothetical. If you told me
factor X would make a company incapable of performing should
that be taken into account, then the answer to that would be
yes.
Mr. Mulvaney. Certainly.
Mr. Gordon. But why would political activity have any
ability on their ability to perform.
Mr. Mulvaney. Actually, Mr. Gordon, I know will come as a
surprise to you, but I'm trying to agree with you on that
point.
Mr. Gordon. I had a suspicion of that.
Mr. Mulvaney. Which is why I asked the question, because
I'm trying to figure out where this directive is coming from.
If political activity has nothing to do with a firm's ability
to perform its contract for the government, is it coming from
your office, is this directive coming from the Office of
Federal Procurement?
Mr. Gordon. The direct answer is that's an internal matter
within the Executive Office of the President that I'm not in a
position to discuss. But I think the broader question is, would
it help the procurement system to have more disclosure, and
that takes us back to the earlier conversation. The hope is
that transparency increases public trust, which brings more
companies into the competitive process, which improves economy
and efficiency. That's the hope.
Mr. Mulvaney. Well, again, then it goes back to my original
question, which I understand you're not going to answer, which
is, did this directive come from your office? And I understand
that you're invoking a privilege that I'm not familiar with, is
that correct, that you're invoking a type of executive
privilege here today?
Mr. Gordon. No. I'm simply explaining that this is a matter
of internal deliberation that I don't think it's appropriate
for me to be disclosing here.
Mr. Mulvaney. What department does the OFPP operate under?
Mr. Gordon. OFPP is an office within the Office of
Management and Budget, which is within the Executive Office of
the President.
Mr. Mulvaney. Are you the head of that department?
Mr. Gordon. I am the Administrator and the head of the
Office of Federal Procurement Policy.
Mr. Mulvaney. Are you head of the department under which
OFPP functions?
Mr. Gordon. As I said, sir, there is not actually a
department, it's the Executive Office of the President, and no,
I'm not the head of the Executive Office of the President.
Mr. Mulvaney. Do you have--when we've been asking these
questions today about where this directive began, do you
actually know the answers to those questions?
Mr. Gordon. I'm not comfortable answering questions, sir. I
don't think it's appropriate for me to be disclosing our
internal deliberations.
Mr. Mulvaney. And I think you've explained for us at some
length why you're not comfortable giving that.
Let me ask you some general questions then, which is would
a disclosure requirement in general, not dealing with this
specific draft, would a disclosure requirement put an
obligation on members of the public in order to do business
with the United States of America?
Mr. Gordon. Yes. We have many disclosure requirements. I
mentioned one earlier. You have to disclose lobbying activities
if you want to get a Federal contract, you've got to disclose
the compensation of your five highest paid executives. We have
a whole series of things which frankly can be quite burdensome
for private companies. And we're always looking at the balance.
These are often driven, I might add, by statute.
Mr. Mulvaney. And that was my point. In fact they're always
driven by statute. That the requirement that you disclose your
lobbying activities and the other requirements are driven by
statute, not by Executive order, that's correct, isn't it?
Mr. Gordon. On those two specific ones, yes, but there are
others that are not driven by statute. For example,
organizational conflicts of interest, the requirement for
disclosure is driven by regulation.
Mr. Mulvaney. By regulation?
Mr. Gordon. That's right. That my office is responsible for
issuing.
Mr. Mulvaney. Mr. Gordon, finally, I'll ask you this. Is
the violation of an Executive order a punishable offense?
Mr. Gordon. That's a question to ask counsel, sir.
Mr. Mulvaney. Do you believe that it should be?
Mr. Gordon. I'm not in a position to express a view. I
would turn to the lawyers and ask them that question.
Mr. Mulvaney. I'm not asking you--I think you actually have
to answer that question unless you are invoking a privilege. Do
you think a violation of an Executive order should be a
punishable offense?
Mr. Gordon. I'm not sure I understand the question. Should
executive agencies be following Executive orders? Absolutely.
Mr. Mulvaney. No. Should a member of the public be able to
be punished for a violation of an Executive order?
Mr. Gordon. I'm not sure that it--you've got me over my
depth, but I don't think an Executive order would actually
apply to a member of the public. An Executive order typically
is implemented through regulations, and obviously the
regulations might apply to the public.
Mr. Mulvaney. Thank you, Mr. Gordon.
Chairman Issa [presiding]. I thank the gentleman. The
gentleman from Connecticut, Mr. Murphy.
Mr. Murphy. Thank you very much, Mr. Chairman. You know,
campaign finance laws have existed for more than a century. I
mean, going back to 1907, the Tillman Act prohibited
contributions by corporations to political parties for the
first time. And most recently in 2002 Congress passed the
bipartisan Campaign Finance Reform Act. Mr. Gordon, I know
you're a procurement expert, you're not an expert on campaign
finance laws, but I think it's useful to explain what's on the
books already today. Today, all individual contributors or
aggregate contributors in excess of $200 have to be disclosed.
All contributors from PACs and party committees have to be
disclosed. All contributors and expenditures made by PACs have
to be disclosed. All independent expenditures in electioneering
communications have to be disclosed.
I lay this out because one of the arguments that's used by
the opponents of increasing disclosure requirements is that by
doing so you're going to chill free speech, that by requiring
individuals or entities to disclose the contributions that they
make that all of a sudden they're going to stop making them.
But here's what we know: That political contributions from
people who do business with the Federal Government have
increased from $5 million in 1998 to almost $10 million today.
That's what we know about. That's the people that are
contributing through existing disclosure laws, mainly through
individual contributions. And so I guess I say all of this by a
means of asking you this simple question. We have a lot of
disclosure requirements on the books today. In fact, what we're
talking about is just really one loophole within our existing
laws that prevent donations to 527 and like organizations from
the light of day. And I'm interested to know, Mr. Gordon, if
you think that the disclosure requirements that we have already
have had a chilling effect on either contributions to political
candidates from existing government contractors or on firms or
companies willing to do government work.
Mr. Gordon. I can only tell you what I know, sir. No. 1,
I've never heard a complaint that the existing disclosure
requirements have deterred any company from competing for a
Federal contract. And No. 2, I'm not aware of any complaint
that the fact that we know which companies give money to which
political candidates that's publicly available, I've never
heard of a bid protest being filed because of an allegation
that information somehow was improperly used.
Mr. Murphy. It seems as if that we're litigating this issue
for the first time on this committee, as if this is a contest
of first impression. It's not. Individuals and companies for
100 years have been required in some way, shape or form to
disclose the political contributions that they make. And we
have pretty irrefutable data to show that over the last 10
years at least that government contractors have not been making
less contributions, they've been making more.
And I go straight to Justice Scalia when I think about this
argument regarding a chilling effect. In Doe v. Reed Justice
Scalia, one of the most conservative justices in the Court,
said that, ``requiring people to stand up in public for their
political acts fosters civic courage without which democracy is
doomed.''
And with that, I yield back.
Chairman Issa. I thank the gentleman. The gentleman from
Tennessee, Mr. DesJarlais.
Mr. DesJarlais. Thank you, Honorable Gordon, for attending
today. How does the draft EO improve transparency above and
beyond the status quo? I know we've talked about it, but can
you explain it again?
Mr. Gordon. Sir, I hesitate to point out again that I'm not
comfortable talking about the details of the draft. But I will
just say from the earlier conversation, and in fact from
Congressman Murphy's remarks, that there are some aspects of
political contributions which have long been required to be
disclosed and there are some aspects of political contributions
which are not today required to be disclosed.
Mr. DesJarlais. But you talked about how public perception
would improve this process.
Mr. Gordon. Absolutely, sir. Disclosure and transparency
can strengthen the public trust in the procurement system.
Mr. DesJarlais. Is the public involved in any way in
advance of the awarding of these contracts by your agency?
Mr. Gordon. In many ways actually. When there is public
trust--this is an issue that's come up when I've worked with
developing companies in improving their procurement system.
When there is public trust in the integrity of the system, you
get more companies willing to participate in competitions. It's
extremely important, absolutely.
Mr. DesJarlais. So you're saying then that by this draft
EO, essentially what we're going to see is that people will
have a better idea of who these contractors are and that would
influence your decision whether or not to award a contract.
Mr. Gordon. Without talking about the draft, as a general
matter when people have more trust in the system you can hope
to have greater competition, absolutely.
Mr. DesJarlais. So I guess what I'm trying to get at, are
you expecting the general public to influence your decision on
a specific contract award?
Mr. Gordon. I'm sorry, I'm not sure I understand the
question. The award decision has to be based on the selection
criteria and the solicitation, not public perception.
Mr. DesJarlais. OK. So there's no political involvement in
the decision?
Mr. Gordon. Absolutely not. It is prohibited. And we have a
very strong core of acquisition professionals that know that
the Competition in Contracting Act would prohibit them from
considering any factor, except what's set out on the
solicitation.
Mr. DesJarlais. OK. And so you believe contracting
officials are able to award contracts without regard to
political consideration or how it is achieved?
Mr. Gordon. Absolutely.
Mr. DesJarlais. Are political appointees removed from the
selection process, for example?
Mr. Gordon. It depends on the situation. There are very
large procurements where the selecting official, I think, could
be a political appointee, but they are bound just like anybody
else by the evaluation criteria. No one can deviate from what's
in the solicitation. And if someone deviates they're going to
face an independent review by GAO or the Court of Federal
Claims.
Mr. DesJarlais. And you feel that we do need more
disclosure than we currently have; the current system that we
have in place is not good enough?
Mr. Gordon. I will say as a general matter I am an advocate
of transparency.
Mr. DesJarlais. OK. So you think we need more than we
currently have, you agree with this draft EO?
Mr. Gordon. I was asked earlier, sir. I want to say that
respecting the sensitivity and the confidentiality of
deliberations on drafts is very important. That's true whether
it's a discussion in the Situation Room or whether we're
talking about a draft Executive order. Until the President
decides I don't think either I or any executive branch official
should be discussing the content.
Mr. DesJarlais. Do you think this is an important hearing
for this process?
Mr. Gordon. I always respect congressional committees. I
worked at GAO for 17 years, sir. I know the enormous value that
congressional oversight committees bring.
Mr. DesJarlais. Just earlier when Ranking Member Cummings
seemed shocked that we were doing this and that we needed more
disclosure, it just kind of took me back to the last time
before I was an elected official when we heard that we need to
pass the bill before we know what's in it, and that was of
course the Affordable Health Care Act that was referred to by
both the President and the former Speaker. And I think that the
example of the 1099 provision which was repealed and the
President subsequently signed into law would be an example of
why we have these hearings. So I was a little shocked at
Ranking Member Cummings' displeasure for this hearing today.
But I appreciate your attendance and I yield back.
Chairman Issa. I thank the gentleman. The gentleman from
Ohio, Mr. Chabot.
Mr. Chabot. Thank you, Mr. Chairman. Just a number of
questions for Mr. Gordon. I would like to read to you a few
descriptions of what others have called this Executive order
and see if you agree with them or not. One example was that
this order amounts to the White House brazenly directing the
power of government against its political opponents. And it's
an unabashedly partisan move. Would you agree with that
representation?
Mr. Gordon. Sir, I'm not going to feel comfortable coming
up with a view on the various opinions that have been
expressed, but I guess on that particular one I will tell you
that, no, I don't agree with it.
Mr. Chabot. All right. Let me ask you about this one. The
minority leader of the U.S. Senate said that this was the
crassest political move he's ever seen, this is almost gangster
politics to shut down people who oppose them, referring to the
administration. I would assume that you probably don't agree
with that statement.
Mr. Gordon. You assume correctly, sir.
Mr. Chabot. I thought so. Let me ask you this one. As
designed to muzzle corporations and businesses, it would at the
same time allow unions to continue spending at will, isn't that
accurate? Even though you may not agree with it, wouldn't that
be accurate?
Mr. Gordon. No, sir, I don't believe it's accurate.
Mr. Chabot. All right. Well, let me try another one then.
This particular individual is also in the Senate, and this
person is a moderate, and in fact actually voted for the
McCain-Feingold campaign finance reform, which a lot of
Republicans did not vote for. This person did. This person
called this Executive order Orwellian, and also said that the
order undermines decades of work by this person and others to
ensure Federal business is free of corruption of political
influence, called it the equivalent of repealing the Hatch Act,
and further said that it's taken decades to create a Federal
contracting system based on best prices, best value, best
quality, and that the effect of this order is to again have
politics play a role in determining who gets contracts.
Companies may choose not to bid, which will reduce competition
and raise government cost.
Now, I know you believe that this is going to help us
relative to cost and make there be more transparency and more
competition, but this person disagrees with that. I assume you
would disagree with the statement that I just read there as
well.
Mr. Gordon. Yes, sir.
Mr. Chabot. And let me conclude with this one. Supporters
of the President, President Obama, are predicting that he's
going to raise $1 billion this year for his campaign. Talk
about campaign finance reform and the corruption of money and
politics and all of that, $1 billion this year for the first
time if he attains that. And that simultaneously that he'd be
positioned even more strongly if he could in effect by this
Executive order dry up some at least, and maybe a substantial
amount, of Republican donations.
I would assume that you would disagree with that point of
view.
Mr. Gordon. I've spent many years, sir, working to improve
and protect the integrity of the procurement system. I intend
to continue doing that.
Mr. Chabot. Let me just conclude, because I've only got a
minute left.
Now I will tell you what I think. I think that this is
nothing more than blatant raw politics, and I think in the 15
years that I've been here I've not seen anything as outrageous
and as much of an exercise of naked political power than this
Executive order. I think it's shameful, I think it's
disgusting, I think it's despicable, I think it's outrageous.
And this administration is talking about doing this by fiat
essentially. That is what an Executive order is. Rather, if
you're going to do something this dramatic it ought to be done
by the will of the people, by their elected representatives.
That's the U.S. Congress, it's not by an Executive order coming
out of a White House. And I think the administration ought to
be ashamed of what it's trying to do here. And as I say, I've
been here a while, 15 years now, although I had a 2-year
involuntary sabbatical.
Chairman Issa. Would the gentleman yield?
Mr. Chabot. I would be happy to yield.
Chairman Issa. On that I agree. Thank you for your
comments.
Mr. Chabot. Thank you. I yield back.
Chairman Issa. The gentleman from Iowa, Mr. Braley.
Mr. Braley. I thank the chairman. And I want to start by
going back to the clip the chairman played at the beginning of
this hearing. Because if you go back and listen closely to what
President Obama said, he is a prophet, because that is exactly
what happened after Citizens United. We've seen a massive flow
of secret money, which is something that's a much greater
threat to democracy in this country than this Executive order
is. And you indicated, Mr. Gordon, that you had taught at a law
school dealing with procurement issues, so you know that the
Federal procurement slice of nearly $500 billion is an enormous
part of the Federal budget. And yet 4 years ago in this very
committee we had a hearing where the head of the General
Services Administration, Lurita Doan, came and testified about
illegal activity taking place in a Federal agency in violation
of the Hatch Act when a gentleman named Scott Jennings, who
worked in the White House as Karl Rove's chief deputy, was
doing political briefings on government time in violation of
the Hatch Act. And President Bush fired her because of that.
That was the only recourse he had. And it's ironic that Scott
Jennings was the deputy of Karl Rove, who heads Crossroads and
many of the secret donor groups that are engaged in pumping
millions of dollars of secret money to try to influence the
outcome of political elections. And one of the things that
nobody talked about in this hearing is the very different
levels of scrutiny applied to different types of speech.
Because as a fundamental part of constitutional First Amendment
law there's the regulation of content, which is a high level of
scrutiny, and the government is supposed to have very little
impact on what you say, and then there's the regulation of
time, manner and place of speech, where the government is given
much more leeway. And that's exactly what this Executive order
is all about.
So I am confused by the people who come to this hearing and
claim about the threat to the right of free speech and the
threat to our democracy when in fact it's the unlimited amount
of secret money coming into elections that's the biggest threat
to democracy we face today. And I'll say that whether it's
money coming in to support a Republican candidate or a
Democratic candidate.
One of the things we know is that in their opinion the
Supreme Court rejected the arguments being offered today,
because Justice Kennedy wrote for the majority and made it
clear that disclosure doesn't prevent speech. He said, the
First Amendment protects political speech and disclosure
permits citizens and shareholders to react to the speech of
corporate entities in a proper way. This transparency enables
the electorate to make informed decisions and give proper
weight to different speakers and different messages.
The Executive order, Mr. Gordon, does nothing to regulate
the content of what anyone wants to say, isn't that true?
Mr. Gordon. Transparency is what is at issue here, and
transparency is something that I very much agree with as an
extremely important value, including in the Federal procurement
system.
Mr. Braley. And one of the reasons why that's so important
is something we've talked about, and that's because American
taxpayers are the ones whose money is being used to fund these
projects with these contractors, isn't that true?
Mr. Gordon. Absolutely. More than half a trillion dollars a
year.
Mr. Braley. Absolutely. And that's a big chunk of money. So
taxpayers across the political spectrum have a strong interest
in making sure those contracts, regardless of who is in the
White House, are not being unduly influenced by political
contributions, isn't that true?
Mr. Gordon. Absolutely.
Mr. Braley. And you look at what goes on in this country,
in States where they elect judges, and the massive amount of
money that's being spent to elect judges, and then you come
into court in some of these States and you may be facing a
judge that your opponent has given millions or hundreds of
thousands of dollars to, and I think everyone should have a
right to know what those donations are so that they can judge
for themselves whether that's a fair and impartial
decisionmaker.
Isn't that the same way we're talking about here with this
level of transparency.
Mr. Gordon. I think that is the goal of the advocates,
absolutely.
Mr. Braley. And one of the reasons why this is so important
is because the Supreme Court made clear in Citizens United that
you can have opportunities to engage in greater forms of
political speech, but that transparency is a legitimate and
noble purpose that everyone should embrace, and apparently the
Speaker of the House himself has embraced, isn't that true?
Mr. Gordon. Indeed.
Chairman Issa. The gentleman's time has expired.
Mr. Braley. I yield back.
Chairman Issa. Thank you. In support of the gentleman's
statements, I would ask unanimous consent that the copy of The
Hill from May 10, 2011 entitled, Unions Spent $100 Million in
2010 Campaigns to Save Democratic Majorities, and the Wall
Street Journal entitled, Public Employee Union is Now
Campaign's Biggest Spender. Without objection so ordered.
And I now recognize the gentlelady from North Carolina.
Mrs. Ellmers. Thank you, Mr. Chairman. Thank you for being
here today, Mr. Gordon. I don't usually--I usually maybe jot
down a few things, but I have pages here. I keep running into
conflict after conflict after conflict in your statements, so
I'm going to start off with No. 1, one being you said that you
believe that this will increase competition amongst businesses
wanting to participate because of this up front disclosure, is
that correct?
Mr. Gordon. I wasn't actually speaking about the draft
Executive order. I said that in general the hope with
transparency is that transparency engenders more trust in the
system and therefore increases competition, that's correct.
Mrs. Ellmers. OK. But the Office of Advocacy in the Small
Business Administration found that regulations cost small
businesses 45 percent more than large businesses in regard to
this situation. Doesn't that show that we will have a decrease
in the number of small businesses that will participate in
this?
Mr. Gordon. You're actually talking about one of our very
highest priorities. We are working hard to meet the statutory
goal of 23 percent of our Federal contracting dollars going to
small businesses. And the President has made clear meeting that
goal is not enough. We need to exceed that goal, including for
the subcategories, such as the small businesses owned by our
service disabled vets.
Mrs. Ellmers. On the point of the idea of the trust in the
system by the American people, which is what you are saying
that this process will provide, did you or did you not say that
there is, that these things will be handled internally so that
the information will not come out as to which candidates or
contributions are made? Is that information disclosed right off
the bat as soon as that contract is bid on or is that held
internally, as you stated?
Mr. Gordon. Actually, I don't believe I spoke to that issue
before. But it's been said earlier that the information about
political contributions would be publicly available.
Mrs. Ellmers. Publicly available immediately.
Mr. Gordon. You're getting into a level of detail that--
we're in a situation where we're talking about or rather not
talking about a draft Executive order, and I don't feel
comfortable getting into the details. The advantage of having
our executive branch review of a draft is Executive orders are
improved.
Mrs. Ellmers. So what is the difference then? What is the
difference, because we know that these things have to be
disclosed after the contracts are obtained? This is
information, the transparency is already there. So the
difference I'm seeing is the time that they would have to
disclose this information up front with their application, the
contract process rather than afterwards. So what is the change?
Mr. Gordon. I'm not an expert in campaign finance
disclosures, but my understanding is there is, and it was said
earlier in one of the colloquies, more information being
disclosed than is in fact disclosed today. I'm not sure that
the timing is actually any different at all. The timing, the
information is, some information is already available today.
Mrs. Ellmers. Well, in closing I just would like to say
this. You know, the American people, I know you have basically
stated that this is about transparency for the American people
and instilling trust in the system. I don't see how that
happens with this. And I think that the American people are so
wonderfully filled with common sense that they're going to come
up with the same conclusion that I have right now, which is
this is nothing more than a political move, I agree with my
colleague Mr. Chabot, that this is politics at its worst, and
this is nothing more than retaliation against the Supreme Court
decision for Citizens United.
Thank you, and I yield back.
Chairman Issa. Will the gentlelady yield?
Mrs. Ellmers. Yes, sir.
Chairman Issa. I thank the gentlelady.
Mr. Gordon, you've basically said you're not comfortable,
you don't know, you're not an expert repeatedly. Isn't that the
best reason that your part of government should not be
reviewing or doing this, that in fact the Federal Election
Commission, which is charged with campaign disclosure and which
is charged by Congress, should be the appropriate way to handle
this?
Your choice is to say yes or suddenly become an expert and
start answering our questions. You may pick.
Mr. Gordon. There is one other possibility, Mr. Chairman,
and that's that there are other people in the Executive Office
of the President and across the executive branch who have
knowledge and expertise that I do not.
Chairman Issa. Well, we asked for the person most
knowledgeable in an agreement when the OMB Director wasn't
available. They sent you. We'll undoubtedly have to ask for
some additional people who are more knowledgeable, because it
does appear as though the questions of the procurement--the
only thing we've decided today is this is not necessary to do
your job, your people will not look at it, but in fact we can
see that the draft order circumvents current IRS laws that
protect disclosure for nonprofits and other groups that would
fall under this.
With that, I recognize the gentleman from Vermont Mr.
Welch.
Mr. Welch. Thank you, Mr. Chairman. You know, part of the
issue for me, sitting here listening to this, is if it were, if
the things that are feared by opponents of this were in fact to
be allowed, then I would share their concerns. So I just want
to pin down what is the effect of this. No. 1, any individuals
or corporations that make contributions have to disclose them
under current law, isn't that right?
Mr. Gordon. I do believe that there is extensive disclosure
already.
Mr. Welch. And the effect of this would be to put in one
place for easier review by the public the contributions that
were made, correct?
Mr. Gordon. I think that is one of the ideas.
Mr. Welch. And so to the extent there's a reporting
requirement, that burden is already part of what a contributor
must deal with, right?
Mr. Gordon. Yes.
Mr. Welch. And have you had input from some of the--also,
if a union were to get a contract, a Federal contract, they
would be subject to this law just like a private corporation,
is that correct?
Mr. Gordon. You heard my colloquy earlier. I was rather
surprised at reference to an exemption for unions.
Mr. Welch. Right. I mean, everybody is in the same boat
here basically?
Mr. Gordon. This applies--the draft, if it were ever
finalized, the draft would apply, as I understand it, to
contractors, whoever they are.
Mr. Welch. And have you had reactions from corporations
that are saying one thing or another about this requirement or
this draft order?
Mr. Gordon. I think the committees are going to have an
opportunity in the next panel to hear from many of those
responses. I've seen several articles in the press.
Mr. Welch. In the drafting of this--let me ask you this. Do
you anticipate any difficulties that contractors would have in
complying with this?
Mr. Gordon. I don't feel comfortable talking about a draft.
The fact is that a draft Executive order as it goes through the
process may be changed substantially, may never be finalized. I
can't predict that. What I can tell you is that disclosure
requirements, and there are many of them today, can be
challenging for the companies, especially for small companies.
We look for ways to minimize the burden on companies because we
don't want disclosure requirements to deter them from
participating in the procurement process.
Mr. Welch. The disclosure requirement here would be that,
if I were a small company, that I would just simply have to
list the contributions that I made and the individuals and
where I made them, correct?
Mr. Gordon. I understand your point, sir.
Mr. Welch. All right. I yield back.
Chairman Issa. I thank the gentleman. The gentleman from
South Carolina, Mr. Gowdy.
Mr. Gowdy. Thank you, Mr. Chairman. Mr. Gordon, I want to
thank you for being here and also thank you for your service to
our country.
Can you please describe for me what involvement you
personally had in the drafting of this draft Executive order?
Mr. Gordon. Sir, I don't think it's appropriate for me or
any executive branch official to disclose our internal
deliberations.
Mr. Gowdy. Are you relying on any specific testimonial
privilege in reaching that conclusion?
Mr. Gordon. I'm telling you, sir, that in my experience it
is extremely important to protect the confidentiality of advice
shared within the Executive Office of the President and across
the executive branches.
Mr. Gowdy. Well, rather than disclose for me the contents
of any communication, can you answer whether or not there was
communication? Not the content of it, but whether or not there
was any between you and the President.
Mr. Gordon. I understand, sir. My concern, and our shared
concern across the government, and I should say this is true
across administrations, there is nothing unique in this
administration about this. We need to be able to have frank
discussions internally and not share even the fact of who
participated outside.
Mr. Gowdy. Do you believe the privilege belongs to you as
the witness or to the President if we were to seek a waiver of
that privilege?
Mr. Gordon. Actually, sir, I didn't mention the word
``privilege.'' I was talking about the need to protect the
confidentiality of our process.
Mr. Gowdy. But that would be the only legal basis for not
answering the question, would be the executive privilege,
correct.
Mr. Gordon. Sir, I'm not talking about privilege, I'm
talking about my belief about the importance of protecting the
confidentiality of our internal deliberations.
Mr. Gowdy. Well, let me ask you this. Would you agree with
me, let's assume arguendo that there were a privilege, well,
let's assume arguendo about the need for confidentiality in all
regards, would you agree with me that confidentiality is waived
by the presence of third parties who are not members of the
executive branch? So let me ask you this. Were there any third
parties who were not members of the executive branch present
for any communications, thereby waiving any confidentiality?
Mr. Gordon. Sir, you're talking in the area of privileges,
and that's not where I am. But you're also asking me questions
where frankly if you or other members of the committee want to
pursue that it's something that I think we should pursue with
the assistance of counsel.
Mr. Gowdy. Can you tell me where the Executive order
originated?
Mr. Gordon. No, sir, I don't think that it's appropriate
for me to be disclosing that.
Mr. Gowdy. And by your answer I take it that you do know
the answer to it but you choose not to disclose the answer?
Mr. Gordon. I don't think it's appropriate for me to be
talking about any of the--either the content or the process in
the development of a draft document.
Mr. Gowdy. How did you become aware of the Executive order,
or the draft Executive order?
Mr. Gordon. Sir, it's another way of asking me to disclose
either the content or the process. I'm not comfortable
disclosing that. Protecting the confidentiality of
deliberations within the Executive Office of the President is
nothing unique to this President. It is, in my opinion,
extremely important, extremely important, for us to be able to
deliberate without having to disclose outside who we met with
and what we discussed and who participated.
Mr. Gowdy. Does it strike you at all as being ironic to
invoke confidentiality and not answering questions when we're
having a hearing about transparency?
Mr. Gordon. It does not, sir. I think that there are
discussions even about transparency and developing rules about
transparency that we need to be able to have quietly and behind
closed doors. That's true when we were working recently on a
rule about conflicts of interest. You could say, well, surely
if you're talking about conflicts of interest you should be
open. In fact, we needed to have quiet discussions internally.
Mr. Gowdy. You would agree with me, though, let's assume
for the sake of argument that your analysis is correct, and I
in some regards do agree with you about the need for
confidentiality, if there were third parties who are not part
of the executive branch who were present for those
conversations then your need for confidentiality or your desire
for it has already been breached, correct?
Mr. Gordon. Sir, I feel like the conversation--the question
feels too hypothetical. I would need to think about that
afterwards and get back to you if you would like.
Mr. Gowdy. Well, let me ask you this. Are you aware of one
scintilla of evidence or study supporting the notion that
contracting officials are swayed by undue influence or factors
extraneous to the underlying merits of contracting
decisionmaking such as political activity or political
favoritism?
Mr. Gordon. Am I aware of such allegations? Absolutely.
Mr. Gowdy. Have any hearings been conducted in that regard?
Mr. Gordon. I'm not aware of a hearing by a congressional
committee, but there have certainly been allegations. In fact,
in GAO, in bid protests we would--you would get occasionally
allegations that an award decision was swayed by an improper
and in some cases a political consideration, absolutely.
Mr. Gowdy. Were there studies that were relied upon in the
drafting of this draft Executive order?
Mr. Gordon. You're asking me a question about our internal
deliberations. I'm not comfortable disclosing our internal
deliberations.
Mr. Gowdy. All right. One final question. And I apologize,
Mr. Chairman. The draft says, the failure to make a full
disclosure in the certification could result in criminal
prosecution. That's an interesting word to me, because if it
could then it could not. And my question is who are you going
to prosecute and who is going to make the decision?
Mr. Gordon. I can answer the question in general terms.
When we have requirements for disclosure, to give you an
example, contractors today have to disclose whether they have a
tax delinquency above $3,000 and over a certain period of time.
If they fail to accurately disclose, they could be making
themselves liable for prosecution, absolutely. Do we prosecute
every case? No.
Mr. Gowdy. So an Executive order can provide criminal
liability for average citizens?
Mr. Gordon. That I don't know, sir, to be the case. But an
Executive order is frequently, and in fact in the area of
procurement is generally implemented through a regulation, and
if in fact a contractor takes action inconsistent or that
violates a regulation that's a very serious matter, absolutely.
Mr. Gowdy. Thank you, Mr. Chairman.
Chairman Issa. The gentleman's time has expired. I would
ask unanimous consent that the article, The Daily Briefing,
from March 31, 2011 be inserted into the record. It's entitled,
Former OSC Scott Bloch Sentenced to One Month in Prison. Of
course he was the one who found Lurita Doan to have committed
the Hatch Act. Without objection, so ordered.
We now recognize the gentleman from Idaho, Mr. Labrador.
Mr. Labrador. Thank you, Mr. Chairman. And it seems to me,
and I think the comment was already made by the good gentleman
from South Carolina, that in a transparency hearing this has
been one of the most opaque hearings that I've ever been a
participant in. And I'm not really sure why you're here.
Can you tell me why you're here? Why exactly did the
administration send you, because I have no idea what exactly
you have aided this committee in doing today?
Mr. Gordon. I was asked--I was asked to appear in order to
talk about the general issues of integrity. And in fact I think
the issues of integrity are directly relevant to the subject
matter of the hearing. And I think you've seen, although I
can't talk about a draft Presidential document before the
President makes a decision, I can certainly, and I have talked
at some length, about the principles that are at issue.
Mr. Labrador. Let's talk about those principles real quick.
You told us toward that the no award decision will be based on
this information that's being given, that you're going to base
it on the selection criteria; is that correct.
Mr. Gordon. Award decisions can only be based, according to
the Competition in Contracting Act, on the selection criteria
in the solicitation.
Mr. Labrador. So you're a law school professor. You were a
law school professor. I was a law school student at one point,
so this is kind of fun for me. Let's--when you gave law school
exams, there was--at least in my law school I was not able to--
I never wrote down my name. Did your law school have that
same--that same requirement?
Mr. Gordon. At GW where I taught, yes. You used the number
rather than a name.
Mr. Labrador. Why is that?
Mr. Gordon. Because you want to be sure that your judgment
about the quality of the exam is not based on your knowledge of
the individual, but rather on the content of their answer.
Mr. Labrador. And that's because there are certain
students, right, that you don't like in your class or that you
have a problem with.
Mr. Gordon. Never in my class, sir.
Mr. Labrador. OK. But some professors--hypothetically there
are some professors who don't like some of their students.
Mr. Gordon. They also may like somebody------
Mr. Labrador. Or they may like somebody too much; is that
correct?
Mr. Gordon. Yes.
Mr. Labrador. OK. So it's in order for us to make--for the
professor to make an unbiased decision; isn't that correct?
Mr. Gordon. Absolutely.
Mr. Labrador. So under this proposed rule, and let's just
speak hypothetically about it, any requirement to do this,
would the contracting agent have the document in front of him
or her that shows what those donations were?
Mr. Gordon. It depends, sir. My understanding is that in
some of the States that have pay-to-play laws, in fact, the
contracting officials do not have the information. All they
know is that the company affirms that it made the disclosure.
So if you had that on the Federal level, all you would know is
the company says, yes, we made all required disclosures. The
contracting officer would see nothing, nothing about who
received the money or how much.
Mr. Labrador. But somebody would in the administration see
that document, correct?
Mr. Gordon. Oh, just as today. Today there is already
public information about contractors' disclosures. Absolutely.
Mr. Labrador. Absolutely.
Then let's followup on that comment. There's already public
information, and you're telling us that you're an advocate of
transparency, correct?
Mr. Gordon. I am an advocate of transparency in
procurement.
Mr. Labrador. And it increases public trust.
Mr. Gordon. That is always our hope.
Mr. Labrador. So what is unavailable at this time that you
think we need to have more information of that is not currently
found in the public documents out there?
Mr. Gordon. As actually several members of the committee
has pointed out, there is information about third-party
donations which is not publicly disclosed today.
Mr. Labrador. OK. Now, does that have anything to do--were
you an advocate or did you have a problem with Citizens United?
Mr. Gordon. Sir, I'm a procurement person, Not a campaign
finance person.
Mr. Labrador. No, but you must have an opinion. You're a
law school professor.
Mr. Gordon. I was a law school professor before I came into
this job, before Citizens United was decided, and I was
professor of procurement law, sir.
Mr. Labrador. And did you read the opinion of Citizens
United?
Mr. Gordon. I did not.
Mr. Labrador. You are aware that the administration has
some problems with that opinion?
Mr. Gordon. Yes, sir. I am aware of that.
Mr. Labrador. So let me just give you another hypothetical.
If I am the procurement officer--you know, one of the concepts
that I was taught in law school is to make sure in drafting
legislation you have to be really careful not to encourage
future lawsuits when you're drafting legislation. So let's say
we have a Republican conservative--socially conservative
administration, and we have one contractor who shows that he or
she has donated thousands and thousands of dollars to the
prolife community, and you have another contractor who shows
that he or she has donated thousands and thousands of dollars
to a prochoice or a proabortion community, and this Republican
administration gives the contract to the person who did the
prolife--gave the money to the prolife community. Don't you
think there might be a cause for a lawsuit? Because you are an
expert in procurement law. Would there be a cause for a lawsuit
here?
Mr. Gordon. There are? You do have allegations. As I said,
in my years--in the 17 years I was at GAO, we had a small
number, I am happy to say, but there were a few cases where
there were allegations that political interference had caused
the contract to go one way or the other. In my recollection,
GAO found when it did an independent investigation, it never
found a basis for it to be true. But could a company have
concern about that today already? Absolutely.
Mr. Labrador. Let me ask you another hypothetical. OK. My
time is up.
Chairman Graves. Thank you.
This concludes the first part of our panel. Mr. Gordon, we
appreciate you being here during the first part of our hearing.
Appreciate you being here, and appreciate your testimony. We
will now seat the second panel.
Chairman Graves. We will now recognize our second panel of
witnesses. We have with us today Mr. Alan Chvotkin, senior vice
president of Professional Services Counsel.
We have Mr. Mark Renaud. He's a partner at the law firm of
Wiley and Rein.
We have Ms. M.L. Mackey, who is the CEO of Beacon
Interactive Systems and the vice chair of the small business
division of the National Defense Industrial Association. And of
all of the businesses that raised this issue with our
committee, Ms. Mackey was the only one that wanted to testify
today. All of the other cited feared some reprisals. So we
thank you very much for coming Ms, Mackey.
We also have Lawrie Hollingsworth, who is president of
Asset Recovery Technologies, Inc., and is testifying on behalf
of the U.S. Women's Chamber of Commerce.
We have Ms. Marion Blakey, who is the president, chief
executive officer of the Aerospace Industries Association.
And Mr. Brad Smith, who is the former Federal Election
Commission chairman and is professor of law at Capital
University Law School.
Pursuant to the committee rules, we have to swear in all of
the witnesses, all of you today. So you if you will please
stand and raise your right hands.
[Witnesses sworn.]
Chairman Graves. Let the record reflect that all witnesses
answered in the affirmative.
Please be seated.
In order to allow time for discussion, I would ask that you
please limit your testimony to 5 minutes. But your entire
written testimony will be made a part of the record. And we
will start with you, Mr. Chvotkin. And, again, I want to thank
all of the witnesses for coming today. I appreciate it very
much. I am looking forward to your testimony.
STATEMENTS OF ALAN CHVOTKIN, SENIOR VICE PRESIDENT,
PROFESSIONAL SERVICES COUNCIL; MARK RENAUD, PARTNER, WILEY REIN
LLP; M.L. MACKEY, CEO, BEACON INTERACTIVE SYSTEMS; LAWRIE
HOLLINGSWORTH, PRESIDENT, ASSET RECOVERY TECHNOLOGIES, INC.;
MARION BLAKEY, PRESIDENT AND CEO, AEROSPACE INDUSTRIES
ASSOCIATION; AND BRAD SMITH, PROFESSOR, CAPITAL UNIVERSITY LAW
SCHOOL
STATEMENT OF ALAN CHVOTKIN
Mr. Chvotkin. Chairman Graves, Mr. Issa, members of the two
committees, thank you for your invitation and the opportunity
to testify at this joint hearing. So there's no mistake about
it, the Professional Services Council is opposed to the draft
Executive order in its current form, and we hope that it will
not be issued.
Political contributions currently are not and should not be
disclosed as part of the bidding and source selection process
for Federal contract awards. Yet the draft Executive order
takes the ill-conceived approach of injecting that very
information into the contracting process, forcing all bidders
for Federal contracts to disclose--collect and disclose that
information as part of their bid.
Furthermore, only those competing for Federal contracts are
covered by this draft order. We are not aware of any action
that has been taken elsewhere to cover other entities or even
the Federal employees who are source decisionmakers for those
Federal procurements. Singling out Federal contractors adds its
own political tinge to the draft order.
The first paragraph of section 1 of the draft order spells
out the policy foundation. We fully endorse those statements.
They spell out a necessary and appropriate requirement that is
and, in our view, must be at the very heart of the Federal
contracting process. Today no information about campaign
contributions or other political activity is ever asked to be
presented to a contracting officer or other source selection
official.
I doubt that any procurement official has done her own
research in the publicly available campaign contributions to
aid them in their source selection, but if there is that
concern, rather than insulating contracting officers from this
tainted information, this draft order requires every bidder for
a Federal contract to affirmatively disclose that information,
and further provides that making the required disclosure is a
condition of award. For us, this is not a question of
disclosure of political contributions; it is a question of the
linkage to the Federal procurement process.
The first paragraph of section 2 of the draft order
requires a certification that disclosure of this information
has been made and the FAR Council is given authority to
establish the manner in which the certification is made. It is
not clear whether the draft order also gives the FAR Council
the flexibility to determine the nature of the certification
required.
Certifications have special importance in the Federal
procurement system. Typically and ideally where they are
required, they should be made subject to the certifier's best
knowledge and belief where the contractor's dependent on
obtaining information from others in order to make the
necessary certification.
Second, there should be some method for the bidder to be
able to identify areas outside the contractor's control where
the certification cannot be made, such as when a contributor
refuses to provide the relevant information to a bidding
entity.
Section 2 of the order also requires the disclosure of two
types of contributions. The first is contributions to Federal
candidates, like the discussion, while that is publicly
available. Today companies are not now required to collect this
information. Once the contributions are made, it is the
recipient of the contribution that makes the disclosure, not
these companies.
We also have concerns about the threshold that has been
established, because the bidder still has to collect the
information in order to know whether the aggregate exceeds the
$5,000 threshold in the Executive order.
The second type of contribution is to third-party entities
with the intent or reasonable expectation that those parties
would use the contribution to make independent expenditures.
None of these contributions as have been discussed today are
now subject to reporting, yet the draft order used as an
undefined standard of reasonable expectation whose
interpretation may vary, thus undercutting the value of the
information.
Further, by adding a requirement that the bidder ascertain
from the contributor whether she was aware of the intent of the
third party or had reasonable expectation of the likely use of
the contribution, the bidding entity would have to further pry
into the contributor's knowledge of the actions of the third-
party recipient. While the reporting requirements are not
duplicative of existing reporting requirements, it would still
impose a heavy information collection and compliance burden on
contractors that does not exist today.
PSC is opposed to this draft order and recommends that it
not be issued. This type of political information has been
intentionally kept out of source collection to ensure a merit-
based evaluation and award process. But the order would make
its disclosure a condition of award. While the purpose of this
order is to prevent pay-to-play contracting seen in some State
procurement environments, the result will be to create the very
pay-to-play environment on the Federal level where none exists
today.
Thank you for the opportunity to present these comments. I
look forward to any questions you may have.
Chairman Graves. Thank you, Mr. Chvotkin.
[The prepared statement of Mr. Chvotkin follows:]
Chairman Graves. Mr. Renaud.
STATEMENT OF MARK RENAUD
Mr. Renaud. Thank you, Mr. Chairman, and Mr. Ranking
Member, and the members of these two committees, for inviting
me to testimony. This is an important issue facing Congress,
and I hope my comments prove useful. These views are solely my
own and do not reflect the views of my firm or any of its
clients.
In short, there is simply no connection between the
political information sought by the President's draft Executive
order and the contracting process, no corruption to be
remedied, and no need to burden on core First Amendment rights
of speech and association.
Among other things, under current campaign finance law,
employees and PACs of government contractors are subject to the
same contribution limits as other contributors, and their
contributions are fully reported. As just mentioned, businesses
are currently not required to collect or report their
employees' contributions and are advised against it. All
contributions are voluntary.
The President's draft EO is styled as a pay-to-play law,
the laws that stops the giving of contributions for the receipt
of contracts. But terminology alone is insufficient. I have
extensive experience working on compliance issues related to
Federal, State and local pay-to-play laws. Many of these laws
suffer from the same infirmities as this draft EO. Here there
is no evidence of corruption from campaign activity in the
Federal contracting process; maybe in New Jersey and
Connecticut in the past, but not here.
The nexus, then, between the contracting process and the
contributions is created solely by this draft EO and its
supporters, because Federal acquisition officers, as we just
heard today, are insulated from the campaign system, as they
ought to be. The connection put forward pollutes the
marketplace of ideas with this idea of corruption.
Because there is no nexus, the draft EO is unlike pay-to-
play regimes that target elected officials and their political
cronies who are thoroughly and unavoidably involved in the
procurement process.
The draft EO also reaches beyond contributions to
independent expenditures, which no other pay-to-play regime
does directly, save the rules of the Nebraska Lottery
Commission. The Supreme Court has reminded us frequently that
independent expenditures do not cause corruption or the
appearance of corruption. The Securities and Exchange
Commission, in its recent rigorous pay-to-play rulemaking,
fully disclaimed affecting independent expenditures.
The draft EO, unlike any other pay-to-play system, also
targets grassroots lobbying in the form of electioneering
communications. Because of its inclusion in the contracting
process--that's the key, inclusion in the process--the
disclosures under the draft EO will have a negative effect on
corporate and personal political activities of those covered.
Because of uncertainty about how the information will be
used, the contractors will rationally move to eliminate any
activity that might make them less competitive. The disclosures
also will politicize the employer and employee relationship
with officers, especially for small businesses who may not be
able to afford parallel compliance systems that many large
corporations use, forcing subordinate officers to report
political activity to their superiors and fear for the
consequences.
The vagueness of the draft EO exacerbates this chilling
effect. The FAR Council is tasked with providing guidance, but
campaign finance is not its core competency, and it will be
undertaking this task on an accelerated basis during the
Presidential election cycle. With vagueness, an ever larger
group of persons will curtail an even wider set of activities.
In closing, I leave you with a sample of the burdens
imposed. Contractors must report contributions made to third
parties with the intention or reasonable expectation that the
parties will use the contributions for independent expenditures
or electioneering communications. This is a precursor to an
unending number of disputes over contribution certifications.
With hindsight, competing and losing bidders will be able
to protest awards based upon donations, perhaps even trade
association dues paid by the bidder but not reported, given the
attention or reasonable expectation of the bidder at the time.
And some think there will be no chilling here.
Thank you. I am happy to answer any questions you might
have.
Chairman Issa. Thank you.
[The prepared statement of Mr. Renaud follows:]
Chairman Issa. Ms. Mackey.
STATEMENT OF M.L. MACKEY
Ms. Mackey. Good afternoon. I'm speaking to you today in my
capacity as vice chair of National Defense Industrial
Association small business division, legislative affairs
committee, and as CEO and cofounder of Beacon Interactive
Systems. NDIA membership is composed of over 90,000 individual
members and 17,000 corporate members, over half of which are
small businesses. Beacon Interactive Systems is a 17-year-old
small business that for the past 9 years has been a Federal
contractor actively developing and delivering innovative
technology and cost savings to the Department of Defense.
In terms of today's discussion, the contribution that I can
make is to describe the potential impact of this proposed
Executive order on small businesses that actively engage in the
Federal procurement process.
The intent of ensuring that campaign contributions do not
unduly influence the award of Federal contracts is laudable.
Unfortunately, the approach taken by this proposed order could
have serious negative consequences on business, especially
small business.
The order presents five areas of significant concern.
First, it politicizes the Federal procurement process, which by
all accounts should be completely independent and transparent.
Second, it puts company management in the distasteful
position of invading the privacy of their senior management by
requiring disclosure of their personal political contributions.
Third, this proposed Executive order could have the effect
of silencing the voice of small businesses, who might, in an
effort to mitigate potential contracting risks, no longer be
comfortable making the grassroots contributions to advocate for
the issues that are important to them.
Fourth, the small business may decide that operating under
the proposed order is not worth the effort of doing business
with the Federal Government.
And fifth, this order will increase the reporting burden on
small business and contracting officers, which in turn
increases costs and further prolongs an already lengthy
procurement process.
None of these consequences are acceptable.
Let me expand on some of these challenges.
It is imperative in the realm of government contracting
that small businesses be able to operate on a level playing
field. In order for small businesses to compete effectively,
proposals must be evaluated in an open and consistent manner
with a laser focus on three main factors: technical merit, cost
competitiveness, and past performance history.
The proposed disclosures will now shine a spotlight on a
company's political contributions. At the end of a lengthy,
rigorous, and often convoluted evaluation process, small
business owners will be required to provide contracting
officers with a detailed record of a company's political
expenditures. It is not hard to imagine that this information
could, whether intentionally or not, be used to influence the
procurement decision, precisely the outcome the proposed
Executive order seeks to prevent. Even if there were no
impropriety, a competing vendor who lost a procurement
opportunity might argue and protest that political affiliations
were a contributing factor in the decisionmaking.
Second, the proposed Executive order requires me, as an
example, to report individual contributions made by my company
officers. As a small business owner, I do not want to force my
employees to disclose their political leanings. How employees
allocate their campaign contributions should have no bearing on
my hiring, compensation or promotion policies. My employees
should be concentrating on how to best execute their job
responsibilities, not worrying about whether their political
choices are consistent with mine. This is a personal matter
that does not need to be thrust into the workplace. In the same
manner, personal political choices should not be unnecessarily
thrust into contracting.
The third area of concern is that this proposed Executive
order could have a chilling effect on the political activities
of small business and their management. It is difficult enough
for small businesses to compete effectively and navigate the
often complex waters of Federal contracting. Politicizing the
process will add one more possible obstacle to small business
participation. From my personal experience as a small business
owner, I can tell you that I do not have the resources or the
inclination to manage this unquantifiable risk. If my political
contributions can negatively affect my ability to win Federal
contracts, I will not make them.
As you know, true small business advocacy is funded at the
grassroots level. If small businesses fear that their
operations will be harmed by their political choices, they may
remove themselves from the public discourse and halt future
donations. This effectively limits free speech and may leave
the small business constituency without adequate
representation. Alternatively, some small businesses might feel
coerced into supporting the party in power in order to bolster
their chances of winning contracts. Either way, the political
process is compromised.
And finally, there is likelihood that the proposed
Executive order could discourage small businesses from pursuing
Federal contracts. The intrusive disclosures of personal
political contributions combined with the additional reporting
requirements would add unproductive time and costs to the
procurement process. If this pushed small businesses to adopt
the ``why bother'' stance, our Nation and particularly our men
and women in uniform would be deprived of the innovations,
agility and cost efficiencies that small business brings to the
table.
Mr. Chairman, on behalf of the National Defense Industrial
Association, I would like to thank you and the committee for
your leadership on this important issue. We appreciate your
efforts to keep the Federal procurement process fair and
independent, as this is a critical component of successful
small business participation.
I'd be pleased to respond to any of your questions. Thank
you.
Chairman Issa. Thank you.
[The prepared statement of Ms. Mackey follows:]
Chairman Issa. Ms. Hollingsworth.
STATEMENT OF LAWRIE HOLLINGSWORTH
Ms. Hollingsworth. Good afternoon, Chairman Graves, Ranking
Member Cummings, Chairman Issa and members of the committee. I
am here today as a member of the U.S. Women's Chamber of
Commerce representing our half a million members, three-
quarters of whom are American small business owners and Federal
contractors.
I am Lawrie Hollingsworth, president of Asset Recovery
Technologies. My engineering business, founded in 1994 and
headquartered in Chicago with multiple offices nationwide,
provides technical services for disaster recovery and disaster
response to business and government offices impacted by fire,
flood, and catastrophe; and the recovery of technology assets
to return these businesses and offices to operation. We were,
by the way, proud responders to 9/11 and Hurricane Katrina.
As a small business owner, I appreciate the opportunity to
provide this testimony and appreciate being here. Hopefully I
can impart some insights and perspectives from the small
business viewpoint on the issues of political spending,
campaign finance, transparency, and prevention of the
politicization of the procurement process through unscrupulous
pay-to-play tactics.
Our political system, which is already too full of cash for
influence, now faces a threat of undisclosed corporate
political spending. With the landmark Citizens United case, we
are already seeing a flood of corporate campaign spending, much
of which will not be publicly disclosed. At stake are millions
of dollars in undisclosed donations that will be provided by
large corporations to trade associations and other not-for-
profit organizations and entities that will use the money for
independent campaign expenditures.
To get a grasp of the amount of money known to be used by
the biggest firms to influence government, consider this. The
top 10 Federal contractors spent over $65 million in 2010 for
lobbying alone, and I believe I heard a figure of $100 million
tossed around today. That is an amount that is considerably
more than the gross annual sales of probably most small
businesses as the SBA defines them.
Small business owners do not possess the resources,
financial and otherwise, to compete with the enormous amount of
capital, influence and lobbyist activity the large businesses
employ to gain access to and win government contracts, and I'd
like to especially note single-source government contracts.
Through enacting a policy as is detailed in the draft of
the President's Executive order, it is my hope that by being
aware of the influences that govern the awarding of government
contracts, we will level the playing field for the small
business owner.
Currently small business owners have only limited resources
to compete with large corporations in the awarding of
government contracts. While many factors are at play, certainly
campaign contributions and other politically related acts of
large corporations place the small business owner at a
substantial disadvantage in the awarding of government
contracts.
While I feel that the stated purpose of this policy, which
is to cast light upon hidden interests and influences in
letting of government contracts, is admirable and desirable, it
is also desirable to impact small business with additional
burdens as little as possible in the process. Small business
owners already face substantial obstacles and impediments to
the point of entry to government contracting, so much so that
many small businesses literally give up on the process.
Clearly, regulations and paperwork that do not result in
increased opportunity for small business is undesirable.
However, if a policy is enacted that brings greater
transparency and integrity to our Federal contracting and our
political fundraising processes in such a manner that our small
business owners can respond without undue burden, then I feel
this is a worthy proposal deserving the support of small
business.
The draft EO would allow the public to see the flow of
money that is now hidden through third-party groups, cut-out
funding mechanisms and other political strategies that allow
donors to hide their contribution. Rather than hurting small
business by politicizing the process, it is very likely this
much-needed transparency will depoliticize the process, help to
prevent pay-to-play schemes, and assure small businesses
compete fairly. Public scrutiny will prevent contractors from
using their taxpayer-funded deep pockets to secure an
unwarranted advantage in the government procurement process.
I believe certain steps can be taken to approve the draft
Executive order, including raising the disclosure threshold and
establishing a contract site, assuring that the rules and
regulations developed to support the proposal provide easy,
clear steps for compliance. In short, the right sort of rules
will allow small business in many cases to be exempt from what
is allegedly an onerous burden to comply with this act.
I appreciate your time here today, and I would be happy to
answer any questions. Thank you.
Chairman Issa. Thank you.
[The prepared statement of Ms. Hollingsworth follows:]
Chairman Issa. Ms. Blakey.
STATEMENT OF MARION BLAKEY
Ms. Blakey. Thank you, Chairman Issa, Congressman Cummings,
Congresswoman Ellmers. I am delighted to be here testifying
today. My name is Marion Blakey, and I am the president and CEO
of the Aerospace Industries Association. I am here representing
the 345 member companies of aerospace and defense industry and
their 800,000 U.S. workers.
We want to express our grave concerns about the provisions
contained in the draft Executive order regarding political
contributions. Through our member companies, we represent
thousands of small businesses across the Nation, and I am
particularly offering their voice today.
As written, the draft EO would for the first time introduce
political contributions into the government contracting
process. It's unclear how that information will be used by a
contracting officer in the source selection process. This
creates the possibility that donations to a particular
political party or candidate would be a consideration when
evaluating contract proposals, whether specifically intended or
not.
This also might have the unfortunate consequence of
contributing to the belief among some that particular political
contributions are a requirement for winning contracts.
Political contributions should never be considered by any
procurement officer when making a decision to either award or
deny a contract to an entity.
In order to comply with this Executive order, any company
bidding on the Federal contract would have to develop,
implement and maintain a system to track and record all
personal political contributions, to include retroactive
contributions upon implementation. This will also result in an
additional cost burden that in most cases will be reflected in
higher contractor overhead rates. This is particularly
challenging for small companies such as those in the extensive
aerospace supplier base who don't have a large corporate
infrastructure to meet the Federal mandates.
Furthermore, the certification requirement places an undue
risk on small companies in the event that any of their
directors, officers, affiliates, subsidiaries would perhaps
provide inaccurate or even incomplete information. If the
company submission for the contract contains a list of donors
that's incomplete, even though the company tried to fully
comply, they may find themselves in an expensive legal
proceeding for a violation of both Title 18 and Title 31 of the
U.S. Code for making false claims or statements. Smaller
companies that can't afford to defend themselves in these
situations may instead opt to avoid government contracting
altogether.
The resulting impact is not necessarily restricted to small
companies. The imposition of disclosure and certification
requirements would also result in large and medium-sized
commercial businesses opting out of selling to the Federal
Government, potentially leaving the government without access
to technologies and services necessary for its mission. This is
a real liability in the aerospace and defense arena, where our
defense and industrial base has shrunk, and there may be only
one or two suppliers for a particular technology critical to
protecting our fighting men and women.
Requirements already exist, as has been reported out, to
ensure transparency of political contributions. Those
requirements apply evenly across the board for all individuals
and organizations that make political contributions.
AIA and its member companies support efforts to ensure
there is greater transparency and accountability in the Federal
contracting arena; however, we do not support actions which
would introduce politics into that arena, increase the
regulatory burden at risk for companies, or infringe upon the
constitutional rights of a particular segment of corporate
citizenry.
As I stated earlier, political contributions should never
be considered by any procurement officer when making a decision
to either award or deny a contract to any entity. Not levying
this requirement on companies to report such contributions to
the procurement officer is one important way to safeguard
against the risk that any such consideration would ever be
given.
Thank you very much.
Chairman Issa. Thank you.
[The prepared statement of Ms. Blakey follows:]
Chairman Issa. And now for the only person who has the
expertise our previous panel did not show, Mr. Smith.
STATEMENT OF BRAD SMITH
Mr. Smith. Thank you, Mr. Chairman.
First I will note that you--and thank the ranking member as
well. I'm sorry. I want to note first that I know you took some
flack for having an unbalanced panel. Fred Wertheimer, who has
left and is undoubtedly out issuing a press release now, has
said he's never seen such an unbalanced panel. And I just
thought I'd mention that I have been on many of those in the
last 4 years, usually as the minority witness. So in any case,
I appreciate you having this hearing today.
Whenever we get to a regulation speech, we find we talk
immediately about constitutional issues. And in interpreting
the Constitution, the Supreme Court, it's very clear, has
granted quite a bit of leeway to regulating disclosure laws
relating to campaigns, has given the government quite a bit of
leeway to regulate in the area of disclosure. However, as Mr.
Gordon eventually conceded in the last panel, transparency is
not an unequivocal good in all circumstances at all times. And,
in fact, the Supreme Court has never blessed everything that's
tabled as campaign finance disclosure, and the Supreme Court
has never blessed this particular kind of disclosure that is
proposed in this draft order.
Just to give a quick rundown, for example, in Thomas v.
Collins, the Supreme Court held that labor organizers don't
have to identify themselves; they can do that anonymously. In
Tally v. California, the Supreme Court held that picketers and
boycotters, such as people who might want to boycott the Koch
brothers or Target, don't have to identify themselves; they can
do that anonymously. In Watchtower Bible and Tract Society v.
Village of Stratton, the Supreme Court said that people going
door to door don't have to identify themselves, such as, for
example, maybe people working for, what is it, Organizing for
America; they could do that anonymously. In McIntyre v. Ohio
Elections Commission, the Supreme Court held directly that
individuals cannot be required to report small levels of
political activity to the government, which is what this draft
order would require to be done through an indirect process.
And, of course, in NAACP v. Alabama and a series of other
decisions, the Supreme Court held that membership
organizations, at least those at a minimum that feared--had
legitimate fears of harassment and retaliation, could not be
required to disclose their members to the government.
So the government--or the Court has not as a constitutional
matter generally approved all disclosure. When it has approved
disclosure, it has done so for political committees or where
there is no vagueness. That is, it has required a bright line
test.
It goes without saying that we're not being mean with
political committees here. So we're dealing with the question,
is there a bright line? I don't think this meets this test as
set forth in Buckley v. Vallejo and other cases. I won't go
into the details other than to say that terms such as
``intention'' or reasonable expectation that funds you gave to
somebody 2 years ago were going to be used for some type of
political activity are, I think, very vague terms.
Other terms that could be vague, ``officers,'' how far down
does it go, subsidiaries that are under control of a company or
other organizations under control of a company, and to even
terms such as ``independent expenditure'' and ``electioneer in
communications'' are malleable; that is, they have meanings for
election law specialists, but it is not at all clear that they
have meanings for Federal compliance officers. And I doubt that
most officers working there would have expertise in that area
or know the relevant judicial precedence.
Further, the government has to have a compelling government
interest. What is that government interest here? We've heard
repeatedly that A, this information won't actually be used by
the government in contracting; B, there is no problem with
contracting corruption, and if there were you should probably
be issuing some subpoenas and having some investigations of the
current process. We're told that it has been pointed out that
most of these activities are already disclosed.
What's not disclosed are contributions by contractors that
would go to a third party that might spend them for political
activity, but they're not designated for political activity.
We've never seen something like that required and approved by
the Court before.
This is what we call at the Center for Competitive
Politics--which, I should note, I also run--we call this ``junk
disclosure.'' It basically just duplicates. It requires extra
forms, extra reporting. It may create different standards for
different people. And indeed there is quite a bit of growing
evidence that this does not increase public confidence in
government. Studies by Nate Persily of Columbia, Kelly Lanny of
the University of Pennsylvania, Jeffrey Milo of the University
of Missouri, have shown that excessive disclosure often in fact
decreases public confidence in government.
Here you would have the presumption out there that, Ah,
here's disclosure and here is the contract and people are going
to draw the connection; ah, you have to give to get the
contract. What is a contractor going to think 6 years from now,
someone who is not in business today and he sits down to bid on
his first government contract and he sees who have you given
your major political contributions to?
So I don't see this reducing or, I mean, increasing public
confidence in government, and I think we should recognize that
the possibilities for retaliation that made the Supreme Court
hesitant are very real. We know the Nixon enemy list. We know
the K Street Project. We know that during the Clinton
administration there was concern that trips on--international
business trips were being sold to donors, and the answer to
that was not to require more disclosure, not to say tell us all
this stuff; it was to say, you cannot consider that, you cannot
put that in your application. And I think that's the way that
this should be dealt with here.
Thank you.
Chairman Issa. Thank you.
[The prepared statement of Mr. Smith follows:]
Chairman Issa. I'd recognize myself for 5 minutes.
Ms. Hollingsworth, are you concerned that the disclosure
nowhere in the draft Executive order would cause the unions of
companies who are contractors to be disclosed, meaning that--
let's just assume for a moment that all contractors gave all of
their money to Republicans and all unions gave all of their
money to Democrats. Are you concerned you'd be seeing only half
of the contributions?
Ms. Hollingsworth. Well, I just assume that's actually the
case today.
Chairman Issa. Of course, both sides have some crossover.
But I said assume for a moment just because, obviously, the
truth is there is a leaning, about 90 percent of union money
goes to the President's party. But that's not disclosed. Does
it concern you that 90/10 ratio historically would not be
disclosed and, more importantly, a specific independent
activity of millions of dollars of union money in some
independent way would not be disclosed, even if it's to further
the contract of one of your large competitors, Boeing or
somebody of that sort? You know, because you talked about small
business being impacted. Isn't small business
disproportionately not union, large business comparatively
highly union and wouldn't that nondisclosure be of concern to
you?
Ms. Hollingsworth. Well, I think to answer the question
somewhat similar to the gentleman before me, from the OMB.
Chairman Issa. You mean evasively? Evasive? That's how the
gentleman from OMB was. He could answer ``yes'' to the minority
and he could answer ``I am not qualified to answer'' pretty
consistently to the majority.
Are you going to be more specific? Do you believe there is
a concern because the draft Executive order completely exempts
unions using their collective dues, involuntarily collected,
where that money goes? Do you have a concern, please? Yes or
no?
Ms. Hollingsworth. That sounds like have I quit beating my
dog, yes or no? But to answer that, the answer is no, I don't.
Chairman Issa. OK. You're not concerned.
Mr. Smith, because you came out of, among other things, the
time at the FEC, does the FEC operate, to the best of your
knowledge, under any Executive orders?
Mr. Smith. As an independent agency, generally the FEC is
not bound by Executive orders----
Chairman Issa. Right. So if I understand correctly, the
Federal Elections Commission was created by Congress under a
law; and, periodically, new laws have been passed that set
guidance and then empower the Federal Election Commission to
set rulemaking after those are passed, including even rules by
the House and Senate that you then act on; isn't that true?
Mr. Smith. Yes. And a crucial point of that is that the FEC
has a bipartisan makeup; that is, no one party can control that
rulemaking process, or the prosecution is under it and you
always have to have----
Chairman Issa. So wouldn't this Executive order essentially
circumvent that and create a new entity that is not bipartisan,
that in fact is inherently partisan? It goes to one party's
control or another, depending on who wins the Presidential
election?
Mr. Smith. That could certainly be an appearance that many
people would draw.
Chairman Issa. I am not trying to be argumentative.
Mr. Smith. That's a yes.
Chairman Issa. Thank you.
Ms. Blakey, you heard my earlier question to Ms.
Hollingsworth. Are you concerned that in fact there would be a
disparity between union and non-union companies' ability to
make undisclosed contributions because of their union
activities that are not covered in this?
Ms. Blakey. I think our feeling is that you have to have
real parity and real equity across all entities involved in the
political process. Our big concern is there simply should be no
link between the political contributions and the Federal
contracting process. That's making a false link and it is
something that really introduced politicization where it should
never be.
Chairman Issa. Ms. Mackey, you've been very courageous.
You're the only person that our side could find.
Ms. Mackey. Courageous or ignorant. I'm not sure which one
it is.
Chairman Issa. Well, we'll take courageous. Willing to come
forward both on behalf of an association and in a personal
capacity.
Do you feel--and this is a little bit of a stretch--that if
something like this were going to be instituted, that it should
be done by Congress, require full disclosure of all parties,
and be handled by the Federal Election Commission? In other
words, would you be more comfortable if this process was done
in a way in which it was deliberative, it was done nonpartisan
and, more importantly, you were not asked to ask your employees
questions, but if there was a requirement to disclose, that
requirement would be between the FEC and not your insisting on
various people telling you and having a penalty if you're
unable to get the facts right.
Ms. Mackey. I don't think I have the civics expertise to
know who should be making those calls. What I can tell you,
it's very important that this discussion this private
discussion gets taken out of two places for me: one, my
business; and, two, my business development with the
contracting officer. I am happy with transparency. I am happy
with everyone knowing where people are contributing. I just
don't want it brought into the private conversations in my
company or the business development relationship with my
contracting officer.
Chairman Issa. I thank you. We may have a second round, but
I recognize the gentleman from Maryland, Mr. Cummings.
Mr. Cummings. I stand here and I listened to all of this.
And one of the things that I say to my children is that I want
to leave a better world than the one that I found. I want to
leave a world with more opportunity. I want to leave a world
where the rivers are not polluted. I want to leave a world
that's safer and better.
And as I listened to all of this, there's another thing I
want to leave. A stronger democracy. A stronger democracy. You
know it's easy to--you know, the public is in a position now,
the general public is saying they want more disclosure. They
want to know what's going on. You know why? Because they don't
feel like they got--they have a chance, period.
Ms. Hollingsworth, I heard what you said, and there are a
lot of small business folks like you. Mr. Smith, you talked
about Mr. Wertheimer. It would have been nice to have him here,
I am sure you would agree with that. But his organization that
stands up for all of those little people were shut out and
unable to voice what they had to say in person.
And I think that if we're going to leave a better world,
we've got to be very careful, because, I mean, I think about
the elections and where we've got situations where you can drop
millions of dollars in a congressional district, millions, and
literally wipe out a Representative, period. Period. And you
know, a lot of people will talk and say Well, the Supreme Court
said in Citizens United we can do certain things.
I think we've got to guard this democracy that we've got,
because I think that at the rate we're going, there will come a
time when we won't even know it, you will have a district
that's owned by this corporation or that. And it's interesting
as I listen to all that has been said, on the one hand I hear
business saying, ``Trust us,'' which is great. But on the other
hand they say, ``We don't trust the President. We don't trust
our elected officials.''
You know, I think that when it comes to disclosure, if it
were up to me, I'd want every single thing. Everything
disclosed. Everything. Unions, everybody. Because I want the
public, I want the public to know. I want them to have a clue
of what's going on. And if they look at that information and
they determine that, you know, that they believe that something
is unfair, fine.
And I go back to what Mr. Gordon talked about. You know,
there is a thing about trust that I think he makes a point, and
people tried to make fun of him and ridicule him for saying it.
But there is something called the speed of trust. Covey writes
about it in his book, The Speed of Trust, one of the greatest
books ever written.
What he says is, when you can establish the mechanisms for
trust and if there is trust, that people are more likely--the
relationships are better. And it does make sense that there
would be more competition if people trust the process. If they
feel like everything is stacked against them before they even
get in the game, I mean that goes against everything. So why
bother?
But the interesting thing is that, you know, we're talking
about an Executive order, and I can understand the chairman's
position. We're talking about a draft document and, you know, I
think that some kind of way we've got to move more toward
disclosure than moving away from it, because the playing field
that we're playing on now is a playing field that says no--less
and less disclosure. And I don't think that's what America is
all about. I really don't. I don't think that our Founding
Fathers would about that.
So with that, Mr. Chairman, my time is up. I yield back.
Chairman Issa. Thank you. Mrs. Ellmers.
Mrs. Ellmers. Thank you, Mr. Chairman. My first question is
for Ms. Mackey.
Ms. Mackey, I understand that you are an SBIR success
story. And SBIR is near and dear to my heart, and I have
legislation pending right now for us to reenact it and get it
in place for another 3 years. So I would just like you to
elaborate on that, on that process. And then I know in your
opening statement, you did speak to the dangers that you feel
exist with this draft EO. And I would just like for you to
reiterate that as well.
Ms. Mackey. So first I am very pleased to tell you we're a
SBIR success story, on some level of effort. We started playing
with the SBIR program and participating in 2002. It's taken us
9 years. I can tell you that the technology that we were
delivering to the private sector was expanded on the innovation
and is now rolling out to every ship in U.S. Fleet Forces
Command. So every maintainer will look at our application to
understand what they should be maintaining to keep our ships
ready for mission readiness. So it is a very good thing. It's a
very proud experience for me. It's a great thing for my company
that's growing and expanding. It's a good thing for my company,
the jobs in my company, and my employees.
And when I think about the risk that this kind of--that the
approach taken by this Executive order could impact on stories
like mine is that, as intimately aware with the SBIR program
that you are, it takes some time--there are fits and starts
when you are developing technologies and innovation, and it
doesn't transition directly into a product. There are some
places--and there are times that, maybe when we were little, is
this going to happen, is this going to work; that if I had seen
this kind of an onerous reporting and if I had seen myself
exposed legally for the kind of HR challenges that I get by
asking my employees--you should see the checklist I have when I
recruit people of what I can ask, what I can't ask, and how I
tell my employees to interview people.
I could also tell you that in the business community in
general, but certainly for small businesses, it's more painful
as we don't have a lot of corporate resources. When you have to
let someone go for poor performance, no one wants to hear
they're being let go for poor performance, and they often want
to find another reason. And if they don't find another job,
they often want to be punitive on who let them go. I really
don't want to introduce politics into that equation.
So as far as your question about SBIR successes and will we
as a country be getting back the investment in RDT&E that we
need to go to our Federal Government, I think you run the risk
of encouraging people to back away and step out because it's
too much to overcome. I hope I answered your question.
Mrs. Ellmers. Actually, you have. I appreciate that. My
thought also is that would deter businesses from moving forward
when we know that it is a lengthy process. You're going to have
your ups and downs, and when faced with something like this,
that would deter someone. And that is my feeling on it. Thank
you very much.
Yes, please.
Ms. Mackey. I don't know that it would deter people to
participate, but in that place where you choose now the
investment that's been made, do I want to further look to
giving that to the Federal Government or should I step out to
the private sector, and that's the junction that I don't want
our tax dollars--I mean, I think it should go back to our
warfighters, especially in the DSDF division. Thank you.
Mrs. Ellmers. Thank you. Thank you.
Ms. Hollingsworth, I just wanted to clarify. My
understanding from your opening statement is that you are in
favor of this draft Executive order; is that correct?
Ms. Hollingsworth. That's correct, Congresswoman.
Mrs. Ellmers. But you feel that small businesses should be
exempt from it?
Ms. Hollingsworth. It seems to me this afternoon, I've
heard small business being used as a sympathy card being played
quite a bit. As a matter of fact, certain sized small
businesses and the definition of small businesses is a very
wide definition, depending on industry and so forth. I think a
very straightforward remedy is to raise the threshold for
contribution, whether it's 5,000 for a contribution or the size
of contractors.
So there are many of the concerns that Ms. Mackey and other
people are speaking here today that are simply answered by
exempting small business up to a certain point from falling
under this act.
Mrs. Ellmers. So at what point would you consider a
business that this should be adhered into? Where would you draw
the line? I mean, so you obviously do not see this as a
deterrent for government contracts or working with the Federal
Government. You just feel that it may be a little more costly
for a small business.
At what point would you consider a business, this Executive
order would apply to them?
Ms. Hollingsworth. Well, to answer the first part of your
question, Congresswoman, no. I mean, I do agree with this
potential draft EO. And in terms of thresholds or at what point
should it apply to a small business, I would defer that to
wiser if not older heads than my own. Certainly people familiar
with the government contract process know the size of
businesses that might fall under certain categories.
So I don't have a concrete opinion for you, but I do
believe that we can kind of take out the tiers aspect of this
for small business by some simple thresholds similar to the
thresholds that are in place for small business in other
arenas.
Mrs. Ellmers. OK. One last question on that. So along that
line do you agree that there's already transparency, it's just
an issue of when these things are divulged beforehand in the
contract process rather than afterwards as a business reporting
contribution, Federal contribution?
Ms. Hollingsworth. Well, again, I'm an engineer, not a
constitutional lawyer, as we've heard the excuse many times
today, so I can't pretend to be a complete expert about that.
From what I understand so far is the disclosure and the
transparency is incomplete and lacking. I don't feel it's
complete yet, and I do feel the parameters that have been
discussed in this draft EO would shed additional sunlight, and
I do think that is needed.
Mrs. Ellmers. Because it would be beforehand rather than
after an award of a contract?
Ms. Hollingsworth. I think in general that the public could
look at what influences are coming to bear, particularly on the
single source contracting, which is something that has been
jumped over constantly here today. That's contractors that
receive--you know, they are a single source, there's no
competition. And I think the public and small business has a
right to know just why these single source contracts are being
let the way they are. And obviously current disclosure rules
are not giving us enough sunshine on that.
Mrs. Ellmers. Mr. Chairman, will you indulge me for just--
--
Chairman Issa. One minute.
Mrs. Ellmers. OK. Wonderful. Mr. Smith, I have a question
for you. My understanding is that the order requires
information to be retroactive for the past 2 years. Would you--
could this be--I mean could this information not be used
politically in a campaign? For instance, we have the 2012
election coming up. Could this information not be used against
those running for office as to who is contributing to their
campaigns and possible affiliations?
Mr. Smith. I think of course it could. And to some extent
that's what I meant when I said earlier that we call this junk
disclosure. That is in some ways it's more misleading to the
public than leading. They're going to say, you know, here's the
contract, here's the donation, they're going to assume a
connection there. And that leads us to what seems to be the
purpose here. We can't have this discussion today without
ignoring it.
I mean, the question has been answered already. Is this
going to politicize the process, right? It already has
politicized the process. I mean, look at this hearing, look at
what's being said, look at what people are doing. And why would
the American people think that the purpose of this is to maybe
chill speech or to get people to give to the right side? They
might think that, because rightly or wrongly, correctly or
incorrectly, the President of the United States has been out
repeatedly saying, we need to do something about all this
secret hidden money that is going to come out after Citizens
United. And he has specifically identified groups that he wants
to silence; big oil, banks he calls them. We might think that
because last Congress on a straight party line vote with two
exceptions in this Chamber, this Chamber passed and the other
Chamber did not pass the DISCLOSE bill. We might think that
because then when the FEC attempted to issue new regulations
complying with Citizens United the three Democratic
commissioners insisted that the regulations go further and
include the kind of disclosure that's being asked for here.
People might think that because on a straight party line vote
the SEC recently put new restrictions on reporting.
And so is it true or not? I won't try to answer that. I'll
leave that for others to say whether this is politically
motivated. But people certainly might think it's politically
motivated, and I think there's a pretty good trail that might
lead them to that conclusion.
Chairman Issa. Ms. Velazquez.
Mr. Velazquez. I'm sorry that I wasn't here for your
testimony, but I was in a full committee markup on Financial
Services and I had an amendment.
Mr. Cummings. It was brilliant.
Mr. Velazquez. Thank you. Yeah. I can imagine. But I would
like to ask some questions if I may.
Ms. Hollingsworth, as a small business owner, do you have
concerns that undisclosed political spending could disadvantage
your firm in the contracting marketplace.
Ms. Hollingsworth. I am very concerned about that,
Congresswoman.
Mr. Velazquez. The Executive order will require your
business to report the political spending of yourself as the
owner and also that of your officers. Do you have any concerns
that asking colleagues about their political spending could
complicate your business relationships?
Ms. Hollingsworth. Congresswoman, I think one remedy to
that would be to use either third-party or in the case of a
very small business the bookkeeper-accountant who is already
privy to such things as compensation, you know perhaps special
medical issues, etc., insurance. I would designate a person
with the competence to as a third-party or entity, if you will,
to take that information and pass it along without it ever
coming to my eyes. And I would think that small, even much
larger, but still small business in mind, could easily
implement something like that.
Mr. Velazquez. Ms. Blakey, if a contractor spent millions
of dollars to influence fair elections in a congressional
district where it also conducts $1 billion defense contract
with taxpayer funds, doesn't the public have a right to know?
Ms. Blakey. The contractor of course does disclose all
contributions, so that information is out there in front of the
public. At any point people can access it. Our concern is we
are making a link between the procurement process and political
contributions. There is an inference there that really we
believe is fundamentally wrong. And we also look at the fact
that we're very supportive of the administration in terms of
strengthening the acquisition work force, trying to improve the
acquisition process. But at the same time you put this
information in front of contracting officers over and over and
over again in the procurement process, and it's looking to make
a connection that should never be there.
Mr. Velazquez. But my question is, taxpayers, do they have
a right to know since it's taxpayers' money that is given, is
awarded through Federal contracting?
Ms. Blakey. Taxpayers can go any time they choose to and go
to the information that is publicly available, and they can
choose to look up anything they want.
Mr. Velazquez. Is that a yes or no answer?
Ms. Blakey. The information is there.
Mr. Velazquez. That the public should know.
Ms. Blakey. Yes, the public can no and should know.
Mr. Velazquez. Thank you.
Mr. Smith, you have noted that this Executive order will
chill free speech. Could you explain how this order will
legally limit the amount of contributions that Federal
contractors could give to any political campaign or
organization at any time.
Mr. Smith. Sure. This illustrates one of the problems here
and one of the issues of vagueness and chilling. For example,
right now Federal contractors do not make any contributions to
political campaigns. It is illegal for them to do that. If
they're doing that, they're violating the law and they can be
prosecuted. What we're talking about here is Federal
contractors who might give money to a trade association which
then might spend money on independent expenditures down the
road. And we're going to say that should be held responsible
and the company has to report that kind of information. Now,
how would that chill companies?
Mr. Velazquez. But there is nothing that legally will
prohibit them from writing contributions to----
Mr. Smith. That's right. But the question you asked then
was how it would chill them from doing that. And it will chill
them because if people feel they are likely to be retaliated
against, that is government has tremendous power, somebody who
is bidding on contracts----
Mr. Velazquez. Mr. Smith, you're changing my question. My
question is, if legally they cannot.
Mr. Smith. My answer is legally they already cannot make
contributions, which was your question. And legally they will
still be able to do independent spending through others. But
your question was how will it chill them, which is different
from what they can legally do.
Mr. Velazquez. Mr. Smith, I don't think you understand my
question. How would it limit the freedom of an organization to
give how much it wants, to whom it wants, when it wants. It
wouldn't, would it, legally?
Mr. Smith. Legally the answer is no.
Chairman Issa. I thank the gentleman, thank the gentlelady.
You've all been very generous with your time. I realize the
hour is late. What I would ask, since we had so many members
who had questions and had other obligations, would each of you
be willing to answer additional questions put by both sides?
OK. We're going to leave----
Mr. Smith. Mr. Chairman, if I may say so, I will be leaving
the country in 2 days for a month. I would be delighted to
answer questions if I could have----
Chairman Issa. Are you fleeing the country to get away from
our questions?
Mr. Smith. I would be delighted to answer questions if I
could have an extension.
Chairman Issa. This committee has a long history working on
people fleeing the country not to answer our questions. But we
will try to get the questions to you immediately. But I
appreciate that. We're going to leave the record open for 7
days. If we see a need for an extension, the ranking member and
I can extend. But I think it's important. Your testimony was
very good and the questions were good, but I don't think we got
enough of them. So with your indulgence we'll do that.
And with that, we stand adjourned.
[Whereupon, at 5:53 p.m., the committees were adjourned.]