Every company that does business with the federal government is likely, at some point, to face the tangled web of restrictions surrounding the employment of current and former government officials. Recent changes in the law have eased these burdens somewhat, but some aspects are still confusing, and the overlap of prior restrictions injects a further level of uncertainty.
Regulated activities generally fall into one of three broad categories; (a) restrictions on employment discussions with current federal employees, (b) limits on hiring certain current or former employees, and (c) prohibitions affecting post-employment assignments. The first two are governed primarily by the Procurement Integrity Act, 41 U.S.C. § 423, as recently revised by the Federal Acquisition Reform Act of 1995 (FARA). Post-employment restrictions are largely governed by the Ethics Reform Act of 1989, 18 U.S.C. § 207.
Prior to the FARA revisions, the Procurement Integrity Act (the Act) imposed special rules on “procurement officials” seeking employment. A procurement official was any agency employee who participated “personally and substantially” in procurement activities such as preparing specifications or evaluating offers for a contract award. The former Procurement Integrity Act prohibited a “competing contractor” from offering employment to or discussing future employment or business opportunities with any “procurement official” during the conduct of any federal procurement.
As revised, the Act does away with this blanket prohibition, shifting the emphasis to the federal employee’s reporting of all employment “contacts.” The revised Act requires any “agency official who is participating personally and substantially” in a procurement exceeding $100,000 (the simplified acquisition threshold) to “promptly report” any contacts by a “bidder or offeror” regarding possible employment, in writing, to a supervisor and the designated agency ethics official. 41 U.S.C. § 423(c)(1)(A). The contacted agency official must also either “reject the possibility” of employment with the contacting party else “disqualify himself or herself from further personal and substantial participation” in the particular procurement. 41 U.S.C. § 423(c)(1)(B). If the official chooses disqualification, such disqualification must remain in effect until “the person is no longer a bidder or offeror” in the particular procurement, or until “all discussions . . . regarding possible non-Federal employment have terminated without an agreement or arrangement for employment.” Id.
Although the revised Act is fairly straightforward in this area, some critical details need to be mentioned. First, while the reporting procedures apply only to federal employees, anyone contacting an agency official runs the risk of the Act’s sanctions if they do so “knowing that the official has not complied” with the Act’s reporting requirements. 41 U.S.C. § 423(c)(4). Secondly, the Procurement Integrity Act is not the only law governing employment discussions. Even where the Act does not apply, the Disqualification Statute, 18 U.S.C. § 208, and the Standards of Conduct at 5 C.F.R. Part 2635 may require certain actions of an agency employee, and an employee’s failure to heed these requirements may affect adversely a contractor seeking to hire that particular individual. Finally, it is noteworthy that the revised Act replaces the broad term “competing contractor,” which included “any entity that is, or is reasonably likely to become” a competitor, with “bidder or offeror.” While the Act does not define “bidder or offeror,” it appears to narrow the scope somewhat.
Prior to engaging in any employment discussions with an agency official, a contractor should assess whether the official may even be hired in the first place. The revised Procurement Integrity Act incorporates a one-year ban on the acceptance of compensation for service, in any capacity, from a contractor by certain former agency officials. The officials affected are those who:
(A) served, at the time of selection of the contractor or the award of a contract to the contractor, as the procuring contracting officer, the source selection authority, a member of the source selection evaluation board, or the chief of a financial or technical evaluation team in a procurement in which that contractor was selected for award of a contract in excess of $10,000,000;
(B) served as the program manager, deputy program manager, or administrative contracting officer for a contract in excess of $10,000,000 awarded to that contractor, or
(C) personally made for the Federal agency-
(i) a decision to award a contract, subcontract, modification of a contract or subcontract, or a task order or delivery order in excess of $10,000,000 to that contractor;
(ii) a decision to establish overhead or other rates applicable to a contract or contracts for that contractor that are valued in excess of $10,000,000;
(iii) a decision to approve issuance of a contract payment or payments in excess of $10,000,000 to that contractor; or
(iv) a decision to pay or settle a claim in excess of $10,000,000 with that contractor.
41 U.S.C. § 423(d).
If an agency official falls within any of these provisions, he or she is precluded from working with the affected contractor(s) “as an employee, officer, director, or consultant” for one year after the contract award or other decision date. See FAR 3.104-8. While these may appear, at first blush, to be rather onerous restrictions, the statute contains a major exception that particularly favors large, diverse corporations. The statute specifically does not prohibit affected officials from accepting compensation “from any division or affiliate of a contractor that does not produce the same or similar products or services as the entity of the contractor that is responsible for the contract referred to in subparagraph (A), (B), or (C) (above).” 41 U.S.C. § 423(d)(2).
A second exception allows for good faith reliance upon a written opinion from the designated agency ethics official. If such an official renders a written opinion, based on accurate information, finding that an agency official’s proposed employment would not violate the Act, “then neither the requester nor the contractor shall be found to have knowingly violated . . . the Act.” FAR 3.104-7(d)(3).
One other important aspect of this section is that the one-year ban does not apply to agency officials who left their agency position before January 1, 1997. FAR 3.104-2(d). Such officials may be subject to a narrower two-year prohibition on “personal and substantial” participation on behalf of an affected contractor, discussed below. Although the prior version of the statute will expire after December 31, 1998, it must be considered in the meantime, as the associated penalties continue to apply.
Post-employment restrictions are intended to prevent government employees from switching sides as representatives on matters formerly within their responsibility as government employees. Generally, they restrict the ability of a former government employee to represent a private employer in connection with particular matters in which the government has an interest for a one-year, two-year, or lifetime period, depending upon the employee’s seniority and level of involvement in the particular matter while a public employee.
The Ethics Reform Act of 1989 (the Ethics Act), which restricts post-federal employment activities, does not impose any restrictions directly on contractors; the prohibitions and criminal sanctions are directed at the former government employees. As with the Procurement Integrity Act, however, contractors may nevertheless suffer consequences as a result of their employees’ actions. A violation of the conflict of interest provisions can lead to cancellation or termination of a contract, as well as to criminal prosecution on conspiracy or other charges.
The post-employment restrictions cover only two very specific types of activities: the making, with an intent to influence the actions of the agency, of (i) an “appearance” before or (ii) any communication to government officers or employees. 18 U.S.C. § 207(a). We will refer to these as “representational activities.” The first such activity, making an appearance, requires an actual, physical presence before some person or body. The second does not require a physical presence, since it includes all forms of communication with the intent to influence.
The representational activities governed by these restrictions encompass the activities of anyone who has been authorized to represent the private employer. A person is considered to be a representative of a contractor only if he has been given authority to make decisions on behalf of the contractor or has been held out as having such decision-making authority. Representational activities include all appearances or communications with an intent to influence made to or before employees of any executive branch agency or the courts. Communications to or appearances before Congress and legislative staffs are not covered.
An appearance or communication is representational only if it is made with an “intent to influence.” This means that the contact must be made either: (i) with the purpose of seeking or influencing some discretionary governmental action, or (ii) in connection with a matter involving an appreciable element of dispute. Accordingly, there is no representational activity in routine contacts, such as in making requests for publicly available information or contacting government employees merely to deliver a proposal, since these contracts do not involve any potential for controversy or discretionary governmental action. In contrast, when there is a range of possible governmental action or some degree of adversariness, a person can be held to have engaged in representational activity even if he merely attends a meeting without speaking or addresses only non-controversial topics or issues unrelated to discretionary choices. See United States v. Coleman, 805 F.2d 474 (3d Cir. 1986) (appearance, even without speaking, so that the government official appreciates the connection with the client, found to be a violation of the Ethics Act); but see United States v. Schaltenbrand, 930 F.2d 1554 (11th Cir. 1991) (appearance at meeting, “in order to listen,” with no evidence of authority to make binding decisions for the company, deemed allowable under the Ethics Act).
To fall within the post-employment proscriptions, the representational activity must relate to a “particular matter.” General areas of activity, such as developing program policy, engaging in general rulemaking, or formulating technical concepts are not particular matters. 5 C.F.R. § 2637.201(c). Rather, a particular matter means “a judicial or other proceeding, application, request for a ruling or other determination, contract, claim, controversy, investigation, charge, accusation, arrest or other particular matter involving a specific party or parties in which the United States is a party or has a direct and substantial interest.” 5 C.F.R. § 2637.102(a)(7). A particular matter is some definable and isolatable transaction in which the government has a direct and substantial interest and which involves specific parties.
An employee is not barred from engaging in representational activity with respect to a particular matter unless the employee participated in that same matter while a government employee. Determining whether the matters are the same involves consideration of all relevant factors, and generally requires that the same subject matter and the same nucleus of operative facts be involved in both matters. See United States v. Medico Industries, Inc., 784 F.2d 840, 843 (7th Cir. 1986). Thus, a former employee’s personal and substantial participation in a contract will not preclude his representational activities with respect to a follow-on contract if there have been substantial changes in contract requirements. CACI, Inc. - Federal v. United States, 719 F.2d 1567 (Fed. Cir. 1983).
The most far-reaching restriction of the Ethics Act is the so-called “lifetime bar.” All former government employees and military officers are forever prohibited from knowingly engaging in representational activities on behalf of any person (other than the United States) with respect to any particular matter in which they personally and substantially participated while in government service. 18 U.S.C. § 207(a)(1).
Personal participation in a matter means direct hands-on involvement with the matter and includes involvement through the direction of subordinates. FAR 3.104-3. Substantial participation refers to a level of involvement that could fairly be characterized as significant and is something more than official (i.e., formal) responsibility, perfunctory involvement, or involvement on an administrative or peripheral issue. However, it should be noted that, “(w)hile a series of peripheral involvements may be insubstantial, the single act of approving or participating in a critical step may be substantial.” Id.
All former government employees are prohibited from engaging in representational activities for two years after leaving government service with respect to matters that they know, or reasonably should know, were actually pending under their official responsibility during their final year of government service. Apart from its duration, this bar differs from the lifetime bar only with respect to the “official responsibility” element.
The Ethics Act defines “official responsibility” as “the direct administrative or operating authority, whether intermediate or final, and either exercisable alone or with others, and either personally or through subordinates, to approve, disapprove, or otherwise direct Government action.” 18 U.S.C. § 202(b). In practical terms, a former employee’s official responsibilities include all matters in which he or she had some meaningful degree of oversight or involvement and could have influenced or decided the outcome.
For “procurement officials” who left government service prior to January 1, 1997, special post-employment restrictions may continue to apply until December 31, 1998. FAR 3.104-2(d). For two years after the end of his or her personal and substantial involvement with respect to a particular procurement, a procurement official may not participate in: (i) contract negotiations involving that procurement, (ii) the performance of the contract resulting from the procurement, or (iii) negotiations or performance of the same contract on behalf of subcontractors when the subcontract is in excess of $100,000 and the subcontractor was involved in the contract negotiations. See 41 U.S.C. § 423(f) (prior to FARA revisions).
TRADE NEGOTIATORS
Employees at any level who, during their last year of government service, participated personally and substantially in trade or treaty negotiations and who had access to non-public information concerning such negotiations, may not, for a period of one year, represent, aid or advise anyone concerning those trade or treaty negotiations. 18 U.S.C. § 207(b). This is a broader restriction than the other post-employment restrictions, since it prohibits not only representational activity, but also behind-the-scenes help.
SENIOR EMPLOYEES
“Senior employees” are (1) civilians paid according to the Executive Schedule, (2) civilians paid at rates equivalent to Level V of the Executive Level or above, (3) certain Presidential and Vice Presidential appointees, and (4) uniformed service officers in pay grades O-7 and above. 18 U.S.C. § 207(c)(2).
Senior employees are subject to the lifetime and two-year bars applicable to all former employees. In addition, for a one-year period after they leave government service, senior employees are prohibited from engaging in any representational activities before their former agency. This one-year bar applies to all matters irrespective of the former senior employee’s official responsibilities or the extent of the employee’s personal and substantial participation in the matters. It also covers representational activities concerning any matter as to which the former senior employee seeks official action, without regard to whether it was a particular matter pending during the senior employee’s government service.
VERY SENIOR EMPLOYEES
“Very senior employees” may not knowingly engage in any representational activities before any Executive Schedule employee or any employee from their former agencies for a period of one year after termination of very senior service. 18 U.S.C. § 207(d). Very senior employees are also subject to the lifetime and two-year bars applicable to all former employees. The term “very senior employees” is defined as meaning those employees at least at Level I of the Executive Schedule, employees of the Executive Office of the President paid at Level II of the Executive Schedule, the Vice President, and certain Presidential and Vice Presidential appointees.
This restriction is different from the one-year bar applicable to senior employees only insofar as it defines a different class of persons whom very senior employees may not contact. Former senior employees are barred from engaging in representational activities before officials of any agency in which they served in any capacity during the one-year period prior to termination of their senior service. In contrast, former very senior employees are restricted from engaging in representational activities only with respect to the agency in which they served as a very senior employee, although former very senior employees are also barred from representing another person before individuals in Executive Schedule positions even though they are not within the former very senior employee’s agency. Very senior employees are not subject to the one-year bar applicable to senior employees.
RESTRICTIONS ON MEMBERS OF CONGRESS AND LEGISLATIVE EMPLOYEES
Members of Congress and legislative branch employees face a one-year bar against representational activities before the legislative branch. 18 U.S.C. § 207(e). Generally, members of Congress may not engage in representational services before any member, officer, or employee of either house of Congress for two years. Similar restrictions apply to congressional staffers.
The message to take away from a review of these restrictions is that the hiring of a current or former government employee is not a step to be undertaken without prior planning and thorough consideration of the specific circumstances. Here is a brief checklist of issues to consider when recruiting any federal employee:
Before entering into any employment discussions, determine the individual’s grade level and seniority, and matters of interest to your company with which the individual had personal and substantial involvement. In the case of a management-level employee, you should also assess matters of interest for which the individual had official responsibility.
Throughout the recruitment and hiring process, create a thorough paper trail documenting the process, including the written notice of contact, and any written disqualifications, or documentation of any rejection by the employee.
If you believe the individual to have possibly been involved in procurement-related matters, require written certification that he or she has not served within the last year in any of the positions, specified above, that would be subject to the hiring ban.
If there is any uncertainty whatsoever regarding the applicability of the hiring ban, insist that the employee seek an ethics advisory opinion from the designated agency ethics official, and that he or she provide you a copy of the opinion.
Once hired, ensure that all former government employees, and their supervisors, are thoroughly aware of the post-employment restrictions applicable to them, and that all questionable contacts are avoided. Remember that a former military member on “terminal leave” may begin working for you but is still considered a government employee and as such may not represent you before any federal agency.
Incorporate regular training and monitoring programs to ensure affected employees understand and comply in all respects with the statutory post-federal employment restrictions.
Finally, remember that this paper is simply an overview, and other restrictions not presented herein may apply to a particular situation. Whenever you undertake to recruit or hire a federal employee, particularly a fairly senior individual, make sure you or your legal advisor review the potentially applicable statutes and regulations, and determine the risks involved.
— Chris Jensen
Copyright © 1998 Kilcullen, Wilson & Kilcullen. All rights reserved.