A Byrd (Amendment) in hand

The late Sen. Robert Byrd (D-W.Va.) is known for many enduring contributions to the nation and his state of West Virginia, but one of his more obscure legislative legacies is now attracting attention.  A recent federal settlement is a stark warning that corporations and their lobbyists had better understand and heed the “Byrd Amendment.”

The provision, 31 USC § 1352, entitled “Limitation on the use of appropriated funds to influence certain federal contracting and financial transactions,” is commonly known as the “Byrd Amendment.”  With no hearing or legislative debate at the time, Byrd added this provision to the 1990 Department of Interior Appropriations Act to ban the use of appropriated funds to lobby Congress.  The law prohibits the use of appropriated funds to pay any person to influence Congress or any agency regarding the making of a federal award.  Legend has it Byrd was motivated to offer the amendment by outrage after meeting with a lobbyist representing a West Virginia educational institution.  Apparently, Byrd didn’t care for the fact that the school may have been paying the lobbyist with money the senator himself was credited with bringing home to West Virginia.

{mosads}Beyond the prohibition on paying lobbyists with appropriated funds, the Byrd Amendment and related government contracting regulations require applicants for federal contracts, loan guarantees, grants and other funding also to also file disclosure statements stating that they have not used appropriated funds to influence Congress; if they use non-appropriated funds for influencing a funding decision, they must disclose that along with other information about any permissible lobbying activities.  The requirement flows down to sub-contractors and sub-grantees as well.  These statements are in addition to any reporting obligations under the Lobbying Disclosure Act.  Filing untrue reports can result in more than a Byrd Amendment or LDA violation and can include a False Claims Act violation.

Although there have been several prosecutions for violations of the Byrd Amendment over the years, none has been as exceptional as the one announced recently by the Department of Justice (DOJ).  The case against Sandia Corporation, a wholly owned subsidiary of Lockheed Martin Corporation, is in connection with a competitively awarded multi-billion contract issued in 1993 by the Department of Energy (DOE)’s National Nuclear Security Administration to manage and operate the Sandia National Laboratories.  According to a report issued by DOE’s Office of Inspector General (OIG), in the run up to the contract’s expiration, Sandia used personnel funded by the contract to plan and execute a strategy to obtain a contract extension on a non-competitive basis.  Anxious to keep the contract going, Sandia also retained the services of an outside lobbyist to assist in this effort.

Sandia and Lockheed believed their activities were legal and typical of what a contractor might do to extend the terms of a long-term contract.   Those activities included communications with senior DOE officials and providing the New Mexico Congressional Delegation with information about how it could assist Sandia.  Ironically, according to the OIG report, the information was provided at the request of the congressional delegation.

The OIG concluded that the company’s activities violated the Byrd Amendment, the Federal Acquisition Regulations, and the terms of the DOE contract.  The report evidenced the fact that in-house legal counsel at Sandia had raised red flags about the company’s activities and warned that “Neither Sandia nor NNSA could tolerate even the suspicion that Sandia was assisting in the competition at prime contract expense.”  Apparently, Sandia was nevertheless emboldened to do so, because it had done so in the past! 

With benefit of the OIG report, DOJ pursued Byrd Amendment charges against Sandia Corporation. On August 21, DOJ announced that Sandia had resolved the case by agreeing to pay over four and a half million dollars, without having to admit liability.

In the past, this settlement would have been of concern to those lobbying Congress for earmarks.  Before earmarks were eliminated, companies employing lobbyists to obtain earmarks had to be sure that no appropriated funds were used to pay them.  But with little congressionally directed spending, the Byrd Amendment is really only relevant in instances such as the Sandia matter, where lobbyists paid with appropriated funds—either in-house or under contract—have urged members and congressional staff to intervene with a contracting department.

Urging Congress to contact an agency or department in furtherance of a client’s interest is a common lobbying practice today.  The Sandia matter demonstrates the need for companies and their lobbyists to fully understand the context and purpose underlying such intercessions and how they are being funded.

The Sandia case dramatically highlights that a high price can be paid for aggressively attempting to influence the award or extension of a government contract.  At least if you’re using the government’s money to do so.

Spulak is a King & Spalding partner and chair of its Government Advocacy and Public Policy Practice Group. He served as staff director and general counsel of the House Committee on Rules, and as general counsel of the House.