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John Roberts' Subject Files
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Ronald Reagan Presidential Library
Digital Library Collections
This is a PDF of a folder from our textual collections.
Collection: Roberts, John G.: Files
Folder Title: JGR/OMB
(Office of Management and Budget)
(1 of 2)
Box: 35
To see more digitized collections visit:
https://reaganlibrary.gov/archives/digital-library
To see all Ronald Reagan Presidential Library inventories visit:
https://reaganlibrary.gov/document-collection
Contact a reference archivist at: [email protected]
Citation Guidelines: https://reaganlibrary.gov/citing
National Archives Catalogue: https://catalog.archives.gov/
THE WHITE HOUSE
WASHINGTON
February 3, 1983
Pls see me
MEMORANDUM FOR FRED F. FIELDING
FROM:
JOHN G. ROBERTS
DDR
SUBJECT:
OMB Proposed Rules on Political Advocacy
by Government Grantees and Contractors
By notice published in the Federal Register on January 24,
1983, OMB sought comments on a proposal to revise rules on
government grants and contracts with nonprofit organizations.
The purpose of the proposed revisions is stated to be to
ensure that "federal tax dollars are not used, directly or
indirectly, for the support of political advocacy." This
purpose would be served by disallowing the costs of political
advocacy in government grants and contracts. If any group
that has a government grant or contract engages in political
advocacy, it must segregate the costs associated with that
advocacy and not recoup such costs from the government. The
proposed revisions apply only to nonprofit groups, but the
notice states that similar revisions will be proposed for
civilian and defense contractors by Defense, NASA, and GSA.
Craig Fuller has raised the concern that the logic of the
proposed rules would affect traditional lobbying activities
of government contractors. One of the "Q&A's" accompanying
the proposal, for example, specifically notes that the costs
of a corporate jet used in part to fly officials for discus-
sions with congressmen could not be included as allocated
overhead in a government contract. The definition of
political advocacy - essentially attempting to influence
any sort of governmental decision -- could snare many
traditional activities of government contractors, although
there is an exception of uncertain breadth for providing
information in connection with a bid at the request of a
government agency. The proposals paint with a much broader
brush than is necessary to address the activities of govern-
ment grantees that have been perceived as most objectionable
It is possible to "defund the left" without alienating TRW
and Boeing, but the proposals, if enacted, could do both.
It is also important to recognize that the notice somewhat
disingenuously takes a high moral ground by citing legal
-2-
precedent of limited relevance. Two decisions are cited in
the notice and accompanying Q&A's for the general proposition
that First Amendment values are promoted by an effort to
restrict government support for political advocacy. The
decisions, however, are only vaguely relevant to the pro-
posed revisions. Elrod V. Burns, 427 U.S. 353 (1976), cited
four times, was a 3-2-3 decision holding no more than that
the routine patronage dismissal of government employees in
nonpolicymaking, nonconfidential positions was illegal.
Abood V. Detroit Board of Education, 431 U.S. 209 (1977),
held that non-union government employees in an agency shop
could not be forced to contribute funds to the union to be
used for political purposes, but could be forced to contri-
bute dues for more typical union activities.
/
VOI.
48,
No.
16
/
Monday,
January
OFFICE OF MANAGEMENT AND
grantees and contractors with the
advocacy in whole or in part. The
BUDGET
legitimate governmental interests of
revision makes unallowable the costs of
ensuring that the government does not
buildings and office space where 5
[Circular A-122]
subsidize, directly or indirectly, the
percent or more of the space is devoted
political advocacy activities of private
to political advocacy. When federal
Cost Principles for Nonprofit
groups or institutions. These
grant or contract recipients use
Organizations
governmental interests are based on
facilities, equipment, or personnel
concern for protecting the free and
funded in part with federal monies for
AGENCY: Office of Management and
robust interchange of ideas.
political advocacy, they may create the
Budget.
Americans have the First Amendment
appearance of government support for
ACTION: Notice.
right both to engage freely in speech and
their positions. Moreover, if federal
political expression, and to refrain from
funds are used to defray the overhead
SUMMARY: This notice offers interested
speaking, without interference or control
costs of organizations engaged in
parties an opportunity to comment on a
on the part of the government or its
political advocacy, it frees up the
proposed revision to Circular A-122,
agents. Wooley V. Maynard, 430 U.S.
organization's other funds for use in this
"Cost Principles for Nonprofit
705, 714 (1977). The proposed revision is
political activity.
Organizations." The proposed revision
intended to ensure that the use of
The principal effect of the revision
establishes special provisions for costs
Federal grants, contracts and other
will be that federal grantees and
related to political advocacy. Similar
agreements by private organizations
contractors that choose to engage in
revisions are being simultaneously
engaging in political advocacy does not
political advocacy must separate their
proposed for civilian and defense
erode or infringe these constitutional
grant or contract activity from their
contractors through appropriate actions
rights, or distort the political process by
political activity. If they mix the two,
by the Department of Defense, NASA
encouraging or discouraging certain
then they will not receive government
and GSA, the three agencies with
forms of political activity.
reimbursement for the jointly allocable
authority to issue procurement
The activities of government in a
regulations. The purpose of these
democracy necessarily involve a degree
costs. Contractors or grantees will not
proposals is to ensure that federal tax
of political advocacy, since government
be permitted to require or induce
dollars are not used, directly or
officials are expected to communicate
employees paid in part or in whole with
indirectly, for the support of political
with the people, explain their programs,
federal funds to engage in political
advocacy.
and provide leadership and direction to
advocacy activities, either as a formal
Over the past 25 years, the volume of
the nation. Thus, Members of Congress
part of job responsibilites or on their
own time.
federal activity conducted through
and their staffs, the President and his
grantees and contractors has
political appointees, necessarily
The definition of political advocacy
dramatically grown. Sound management
participate in forms of political
used in this proposal is derived
of federal grants and contracts has
advocacy. However, it is a distortion of
generally from the Internal Revenue
correspondingly gained in importance.
the market place of ideas for the
Code, 26 U.S.C. 4911, defining attempts
The responsibility of the President
government to use its financial power to
to "influence legislation," with
through OMB to improve the
"tip the electoral process," Elrod V.
modifications designed to comprise
management of the executive branch of
Burns, 427 U.S. 353, 356 (1976), by
direct participation in elections or
government with a view to efficient and
subsidizing the political advocacy
referenda, administrative processes,
economical service, and to fulfill other
activities of private organizations and
certain judicial processes, and other
statutory and constitutional
corporations. This proposal will ensure,
activity of a political advocacy nature.
responsibilities, extends to issues of
to the extent consistent with the
These proposed revisions will become
grant and contract management no less
communications function of the
effective 30 days after final notice in the
than to issues of direct federal activity.
government, that taxpayers are not
Federal Register. The revisions will
In recent years, the problem of the use
required, directly or indirectly, "to
affect only grants, contracts, and other
of federal funds for political advocacy
contribute to the support of an
agreements entered into after the
by grantees and contractors has been
ideological cause[they] may oppose."
effective date. Existing grants, contracts,
identified by members of the public, by
Abood V. Detroit Board of Education,
and other/agreements will not be
the Comptroller General, and by
431 U.S. 209, 235-236 (1977). The
immediately affected. Agency contracts
Members of Congress. As many of these
proposal also seeks to avoid the
and regulations will incorporate these
parties have observed, the diversion to
appearance that, by awarding Federal
provisions to the same extent and in the
political advocacy of federal funds, and
grants, contracts, or other agreements to
same manner as they do other
of equipment procured with and
organizations engaged in politicial
provisions of Circular A-122.
personnel compensated by federal
advocacy on particular sides of public
Violations of these provisions will be
funds, is an abuse of the system and an
issues, the Government has endorsed,
a basis for cost disallowance, and in
uneconomical, inefficient and
fostered, or "prescribe[d] [as] orthodox"
instances of serious or willful violations,
inappropriate use of the public's
a particular view on such issues, West
may be a basis for debarment or
resources. Moreover, the commingling of
Virginia State Board of Education V.
suspension.
federal grant or contract activity with
Barnette, 319 U.S. 624, 645 (1943).
private political advocacy creates the
Comments should be submitted in
The proposed revision would make
appearance of federal support for
unallowable the cost of political
duplicate to the Financial Management
particular positions in public debate.
advocacy, whether direct or indirect.
Division, Office of Management and
This appearance can create
The revision would also make
Budget, Washington, D.C. 20503. All
misunderstanding and interfere with the
unallowable any costs of
comments should be received within 45
neutral, non-ideological administration
communications equipment, personnel,
days of this notice.
of federally funded programs.
other equipment, meetings or
FOR FURTHER INFORMATION CONTACT:
This proposal is designed to balance
conferences, or publications, where such
John J. Lordan, Chief, Financial
the First Amendment rights of federal
cost items are used for political
Management Branch, Office of
Federal Register / Vol. 48, No. 16 / Monday, January 24, 1983 / Notices
3349
Management and Budget, Washington,
activities-such as transporting corporate
to the organization's own interest) have been
D.C. 20503, (202) 395-6823.
officials to discussions with Congressmen-
included in the proposal's definition, to
Issued in Washington, D.C., January 20,
then under the principles proposed by the
ensure that such activities are not conducted
1983.
Defense Department, the contractor cannot
at the expense of the public.
include the cost of the aircraft or of any use
Candice C. Bryant,
Question: What is the penalty for violating
of the aircraft as part of overhead costs
these provisions?
Acting Deputy Associate Director for
allocated in part to the contract.
Answer: Cost recovery, and in instances of
Administration.
As an example in the non-profit area, take
serious or willful violations, suspension or
an organization which receives a federal
Appendix
debarment from federal grants or contracts.
grant to promote better health services for
The following questions and answers have
Question: How does this proposal affect
low-income individuals, which decides to
been prepared by the Office of Management
organize a political rally to promote more
the First Amendment right of freedom of
and Budget for informational purposes only.
federal funding for medical programs. The
speech?
Question: What is the purpose of these
organization could not be reimbursed for any
Answer: This proposal will promote the
revisions?
portion of the salaries of individuals engaged
First Amendment value that a person can
Answer: The purpose is to ensure that
in organizing the political rally or for any
freely speak, or refrain from speaking. on
federal contracts and grants are not used to
portion of other overhead costs (office
political matters. The Supreme Court has
support political advocacy either directly or
machines, printing facilities, etc.) if the same
recognized constitutional problems with
indirectly. Thousands of contractors and
overhead items were used for the rally. The
requirements on a person "to contribute to
grantees, administering hundreds of billions
organization would be free to hold the rally-
the support of an ideological cause he may
of federal dollars, have had wide latitude to
but it would do so at its own expense, and
oppose." Abood V. Detroit Board of
engage in political advocacy activities, often
without using people, facilities or resources
Education, 431 U.S. 209, 235-236 (1977).
using the same facilities and personnel paid
partially funded by the Federal Government.
Although government in a democracy
for in part by the taxpayers. The current lack
Question: How is it possible to define
necessarily involves some degree of political
of a government-wide policy prohibiting the
"political advocacy"?
advocacy because of the need to
use of federal grant and contract funds for
Answer: The concept of political advocacy,
communicate with citizens, taxpayers cannot
political advocacy has been criticized by the
or "influencing legislation," is used in the
rightly be required to support the political
General Accounting Office. It is unfair to use
Internal Revenue Code restrictions on tax-
advocacy of private organizations and
federal tax money to support political causes.
exempt organizations. The Internal Revenue
corporations through federal grants and
Nor is it an efficient or economical use of
Code definition of "influencing legislation" is
contracts.
public resources to allow funds to be diverted
employed in this proposal, with several
Moreover, the freedom of First Amendment
from statutory purposes to political
modifications to take account of changes in
political advocacy is jeopardized when the
advocacy.
political practices (e.g., development of
views of particular groups are financed by
A particularly important abuse is that
political action committees), Supreme Court
the government. The use of federal grants or
many contractors and grantees have been
developments (e.g., decisions declaring
contracts for the support of one side in a
able to defray the overhead costs of their
certain forms of litigation to be political
political debate, like the use of political
political advocacy, at public expense, by
expression), and shifts in the decisionmaking
patronage for the support of a political party,
allocating some part of the cost to the
process (e.g., the growth of administrative
can injure the "free functioning of the
administration of the contract or grant. Not
agencies and referenda as means of political
electoral process." Elrod V. Burns, 427 U.S.
only does this free up the organization's own
decisionmaking).
353, 356 (1976). In the marketplace of ideas,
resources for further political activity; it also
In particular, the scope of the Code
where differing political opinions compete for
creates the appearance that the government
definition ("influencing legislation") has been
public acceptance, the government should not
is supporting one or another side in a political
expanded to cover "governmental decisions"
be in the position of subsidizing the
controversy.
in general. Thus, for example, the Internal
expression of views of particular
Question: How will the proposals work?
Revenue Code defines the term "influencing
organizations or corporations, as to defense
Answer: The proposals will revise cost
legislation" as including "any attempt to
or domestic policy. Nor should the
principles applicable to federal grants,
influence any legislation through an attempt
government create the appearance of official
contracts (other than competitive, firm fixed
to affect the opinions of the general public or
support for the political advocacy of its
price contracts), and other agreements.
any segment thereof." The proposed revision
grantees or contractors.
Recipients of federal grants, contracts, or
to Circular A-122, correspondingly, defines
Question: Does this proposal infringe the
other agreements will be barred from
"political advocacy" as including "attempting
receiving government reimbursement for any
to influence governmental decisions through
First Amendment rights of recipient
activities connected with political advocacy
an attempt to affect the opinions of the
organizations?
at the national, state, or local levels. This
general public or any segment thereof." The
Answer: No. Recipients remain free to
includes membership or dues in trade
body of experience in interpreting the
engage in political advocacy on any side of
associations or other organizations that have
Internal Revenue Code provision, as
any issue. The proposals merely ensure that
political advocacy as a substantial
appropriately modified, is expected to aid in
organizations engage in political advocacy at
organizational purpose. In addition, salary
the interpretation of the proposed revisions.
their own expense-not the public's. If an
costs will be unallowable to recipients who
The proposals thus include as "political
organization chooses to exercise its First
either require their employees to pay dues to
advocacy" direct participation in elections or
Amendment rights, it is only fair that it keep
political advocacy organizations or require
referenda by means of contributions,
those political activities separate from its
them to engage in political advocacy on the
endorsement, publicity, administration of
work at the expense of the public. It should
job or during non-working hours. Finally,
political action committees, or similar
not expect to have its political advocacy
government funds will not be permitted to
activity; contributions to political advocacy
subsidized, or to be able to put facilities
pay for facilities in which significant political
organizations; attempting to influence
purchased in part by tax dollars to political
advocacy activities are conducted, thus
government policy made through the
use. Like federal agencies and employees,
requiring physical separation of such
regulatory process as well as the legislative
federal grantees and contractors are
activities from those involved in the
process; and attempts to influence
"expected to
execute the programs of the
performance of grants and contracts.
government policy through litigation as an
Government without bias or favoritism-for or
Question: What is an example of how this
amicus curiae, on behalf of the members of
against any political party or group or the
will work?
the organization, or on behalf of another
members thereof." CSC V. National
Answer: Take the example of a defense
party. In addition, several categories of
Association of Letter Carriers, 413 U.S. 548,
contractor which uses a corporate aircraft for
activity excluded from the Code definition of
565 (1973). Federal grant and contract activity
översight and management of a federal
"influencing legislation" (e.g.,
will be more efficiently and fairly performed
contract. If the contractor chooses to use the
communications with organization members
if it is not mixed with advocacy activities on
aircraft also for lobbying or other political
on political topics and lobbying with respect
one or the other side of political debate.
3350
Federal Register / Vol. 48, No. 16 / Monday, January 24, 1983 / Notices
Question: Will these proposals prevent
defend their interests in court?
contributing to, or paying the expenses
corporations or other organizations from
Answer: No. So long as an organization
of a political action committee, either
lobbying in Congress or the agencies for
appears in court on its own behalf, litigation
directly or indirectly;
grants or contracts?
is not defined as political advocacy.
Answers: No-but they will do it at their
(3) Attempting to influence
However, when an organization goes into
own expense, not the public's.
court to represent others, or to support the
governmental decisions through an
Question: Will organizations engaged in
claim of others, such attempts to influence
attempt to affect the opinions of the
political advocacy be eligible to receive
policy through the judicial process are a form
general public or any segment thereof;
federal grants and contracts?
of political advocacy, as the Supreme Court
(4) Attempting to influence
Answer: Absolutely. In a memorandum
has held. NAACP V. Button, 371 U.S. 415, 429
governmental decisions through
dated April 26, 1982, the Director of OMB
(1963); In re Primus, 436 U.S. 412, 428 (1978).
communications with any member or
made clear that:
Such activities should not be supported by
employee of a legislative body, or with
"The Administration will continue to
federal grant or contract money, unless the
any government official or employee
award grants and contracts to those parties
grant or contract was made expressly for that
who are most effective in fulfilling statutory
who may participate in the
purpose. Attorneys fee award statutes are not
purposes [and that] political advocacy groups
affected by these proposals.
decisionmaking process;
may continue to receive grant and contract
Question: Will these proposals make it
(5) Participating in or contributing to
awards."
more difficult for the federal government to
the expenses of litigation other than
This policy will continue in effect, and just
reward its political supporters?
litigation in which the organization is a
as agencies will be forbidden to award grants
Answer: Yes. Currently, the federal
party with standing to sue or defend on
and contracts because of the political views
government may be able to reward its
its own behalf; or
of applicant groups, they will also be
supporters, and punish its opponents, by
(6) Contributing money, services, or
forbidden from discriminating against
granting or denying federal grants to
"parties most effective in fulfilling statutory
any other thing of value, as dues or
organizations engaged in political advocacy.
purposes."
By making such awards to a friendly
otherwise, to an organization that has
Question: What will be the practical effect
organization the government assumes a
political advocacy as a substantial
on organizations that engage in political
portion of that organization's overhead costs,
organizational purpose, or that spends
advocacy?
and thus supports the organizations political
$100,000 or more per year on activities
Answer: Federal grantees and contractors
activities. In this way, the govenment can
constituting political advocacy.
that choose to engage in political advocacy
influence the political process by inducing
C. Political advocacy does not include
will need to separate their grant or contract
recipients of federal funds to conform their
the following activities:
activity from their political activity. If they
behavior to the governments desires. This
(1) Making available the results of
mix the two, then they will not receive
was one of the dangers of the political spoils
government reimbursement for the joint
nonpartisan analysis, study, or research,
system recognized by the Supreme Court in
costs.
Elrod V. Burns, 427 U.S. 347, 355-356 (1976).
the distribution of which is not primarily
Question: What will be the effect on the
These proposals will help make the process
designed to influence the outcome of
employees of contractors and grantees?
neutral again, by eliminating the "political
any Federal, State, or local election,
Answer: Employees whose salary is paid in
spoils" aspect of the government funding
referendum, initiative, or similar
part with federal funds may not be required
process.
procedure, or any governmental
or induced to engage in political advocacy,
Question: Will these proposals solve the
decision;
either as a part of the job or on their own
whole problem of federal tax money being
(2) Providing technical advice or
time. Nor may they be required to join or pay
used to support political advocacy?
dues to an organization involved in
assistance to a governmental body or to
Answer: No, but they make a major step in
a committee or other subdivision thereof
substantial political advocacy. This will
the right direction. Congress and the agencies
ensure that federal funds are not used to hire
must continue to be vigilant to ensure that
in response to a written request by such
political armies or to generate political
grants and contracts are not awarded for
body or subdivision;
membership support-practices analogous to
purposes that involve political advocacy.
(3) Participating in litigation on behalf
these held unconstitutional in Elrod V. Burns,
of other persons, if the organization has
427 U.S. 347 (1976). Of course, individual
employees remain free to engage in political
Circular A-122-Cost Principles for
received a Federal, State, or local grant,
Nonprofit Organizations
contract, or other agreement for the
advocacy on their own it they wish to do SO.
express purpose of doing so;
Question: To what organizations do the
Circular A-122 is revised by
proposals apply?
(4) Applying or making a bid in
modifying Attachment B as follows:
Answer: The proposed revision to OMB
connection with a grant, contract,
Circular A-122 will apply to all non-profit
1. Insert a new paragraph "B 33
unsolicited proposal, or other
organizations receiving federal grants,
Political Advocacy."
agreement, or providing information in
contracts, or other agreements. Similar
a. The cost of activities constituting
connection with such application at the
proposals are being applied by the
political advocacy are unallowable.
request of the government agency
Department of Defense, NASA, and the
b. Political advocacy is any activity
awarding the grant, contract, or other
General Services Administration to civilian
that includes:
agreement; or
and defense contractors. The proposed
(1) Attempting to influence the
(5) Engaging in activities specifically
revisions will apply to grants, contracts, and
outcome of any Federal, State, or local
other agreements entered into after the
required by law.
election, referendum, initiative, or
effective date of the revisions. Existing
d. An organization has political
grants, contracts, and other agreements will
similar procedure, through contributions,
advocacy as a "substantial
not be affected.
endorsements, publicity, or similar
organizational purpose" if:
Question: Will these proposals interfere
activity;
(1) The organization's solicitations for
with organizations due process rights to
(2) Establishing, administering,
membership or contributions
Federal Register / Vol. 48, No. 16 / Monday, January 24, 1983 / Notices
3351
acknowledge that the organization
(3) Any licensing. grant, ratemaking.
(2) The following costs are
engages in activities constituting
formal adjudication or informal
unallowable:
political advocacy; or
adjudication, other than actions or
(a) Building or office space in which
(2) Twenty percent (20%) or more of
decisions related to the administration
more than 5% of the usable space
the organization's annual expenditures,
of the specific grant, contract, or
occupied by the organization or an
other than those incurred in connection
agreement involved.
affiliated organization is devoted to
with Federal, State or local grants,
f. Notwithstanding the provisions of
activities constituting political
contracts, or other agreements, or
other cost principles in this circular:
advocacy;
incurred in connection with political
(b) Items of equipment or other items
(1) Salary costs of individuals are
advocacy.
used in part for political advocacy;
unallowable if:
(c) Meetings and conferences devoted
e. The term, "governmental decisions"
(a) The work of such individuals
in any part to political advocacy;
includes:
includes activities constituting political
(d) Publication and printing allocable
(1) The introduction, passage
advocacy, other than activities that are
in part to political advocacy; and
amendment, defeat, signing, or veto of
both ministerial and non-material; or
(e) Membership in an organization
legislation, appropriations, resolutions,
(b) The organization has required or
that has political advocacy as a
or constitutional amendments at the
induced such individuals to join or pay
substantial organizational purpose, or
Federal, State, or local level;
dues to an organization, other than a
that spends $100,000 or more per year in
(2) Any rulemakings, guidelines,
labor union, that has political advocacy
connection with political advocacy.
policy statements or other
as a substantial organizational purpose,
2. Renumber subsequent paragraphs.
administrative decisions of general
or to engage in political advocacy during
[FR Doc. 83-2031 Filed 1-21-83: 1:28 pm]
applicability and future effect; or
non-working hours.
BILLING CODE 3110-01-A
MEMORANDUM
THE WHITE HOUSE
WASHINGTON
March 3, 1983
MEMORANDUM FOR FRED F. FIELDING
FROM:
JOHN G. ROBERTS
SUBJECT:
Lyn Nofziger Correspondence on OMB's
Proposed Revision of Circular A-122
Lyn Nofziger has written objecting to OMB's proposed limits
on political advocacy by government grantees and contractors.
This proposal has become known, through shorthand designa-
tion, as the "A-122 proposal.' Although A-122 itself only
concerns the activities of non-profit organizations receiving
government grants, the proposed revisions of A-122 announced
by OMB are linked to corresponding proposals issued by
Defense, GSA, and NASA concerning government contractors.
Nofziger states that the proposal is vague, would require
detailed records of the political activities of employees of
government contractors, and will prevent business from
helping obtain passage of legislation, an activity
traditionally requested by White Houses. He encloses a
two-page analysis of the A-122 proposal.
I have drafted a brief reply for your signature, stating
that OMB will soon publish a revised proposal and attaching
a copy of the OMB press release announcing this fact.
Attachments
THE WHITE HOUSE
WASHINGTON
March 3, 1983
Dear Lyn:
Thank you for your recent memorandum on OMB's proposed
revision of Circular A-122 and the related revisions
affecting government contractors. As you doubtless know by
now, OMB has announced its intention to publish a revised
proposal, which will start a new 45-day comment period. I
attach for your information a copy of the OMB press release
announcing this fact.
The questions which have been raised concerning these
proposals are being carefully reviewed within the White
House, and you may be assured that your views will be given
every appropriate consideration. Thank you for making us
aware of your concerns and for sharing your analysis of the
proposals with us.
With best personal regards,
Sincerely,
Fred /s/ F. Fielding
Counsel to the President
Mr. Lyn Nofziger
1605 New Hampshire Avenue, NW
Washington, D.C. 20009
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EXECUTIVE OFFICE OF THE PRESIDENT
STATE duning OFFICE
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
FOR IMMEDIATE RELEASE
OMB 83-6
February 25, 1983
OMB Public Affairs
395-3080
The Office of Management and Budget announced today that it
will provide another two months for comment on proposed
revisions to its Circular A-122 entitled "Cost Principles for
Nonprofit Organizations." This extension will be accomplished by
publication in two weeks of a revised proposal, which will start
a new 45-day comment period. Meanwhile, OMB will continue to
solicit comments on the current proposal until March 10, focusing
on a number of specified areas that have aroused concern among
affected parties.
Circular A-122 governs grants by Federal Agencies to
non-profit organizations. Changes have also been proposed for
Government contractors in the procurement regulations of the
Department of Defense and the General Services Administration,
which are also expected to be revised. In all cases the proposed
amendments deal with the long-standing problem of the use of
Federal dollars, directly or indirectly, for political advocacy.
It is anticipated that final changes in Circular A-122 will
be published in the Summer, following consideration of comments
received on the revised proposal. OMB stressed that any changes
will be effective only for grants and contracts entered into
after the conclusion of FY 1983 (September 30, 1983).
Further details are available, in question and answer form,
from OMB Public Affairs, 395-3080.
Prohibiting the Use of Federal Funds for Political Advocacy:
Commonly Asked Questions and Answers
On January 24, 1983, the Office of Management and Budget
published for comment proposals that would bar the use of
federal funds for political advocacy by non-profit
organizations. Defense and GSA published similar proposals
for government contractors. Since then, OMB officials have
heard many comments and questions. The following are
responses to the most commonly asked questions.
1. What is the purpose of the proposals?
Answer: The proposals are intended to provide uniform,
enforceable rules for the treatment of costs associated with
political advocacy by federal grantees and contractors.
Longstanding legal provisions have prohibited the use of
appropriated funds for political advocacy, but current procedures
have not been adequate. For example, the Comptroller General has
uncovered significant instances of improper diversion of federal
funds for political advocacy activities. After a recent study of
grantees under Title X (family blanning) of the Public Health
-2-
Services Act, the Comptroller General issued the following
recommendation:
"Clear federal guidance is needed both to ensure that Title
X program funds are not used for lobbying and to preclude
unnecessary controversy over whether grantees are violating
federal restrictions. The move to revise and make more
specific the cost principles applicable to all federal
grantees is the appropriate mechanism to achieve these
ends."
Among the deficiencies in current restrictions on the use of
federal funds for political advocacy are these:
Current rules are haphazard and inconsistent. Grantees
and contractors under different programs and agencies are
subject to different restrictions, and different forms of
political advocacy have been dealt with in different ways.
The proposals are intended to provide uniform, evenhanded,
comprehensive treatment of political advocacy by federal
grantees and contractors.
Present rules are often largely unenforceable, because
grant and contract activities and unauthorized political
advocacy activities are often conducted within the same
-3-
facilities and by the same personnel. It is often
impossible for auditors under the current system to
determine whether federal funds are being diverted to
political advocacy.
Even if current rules could be fully enforced, they still
permit grantees and contractors to maintain federally
subsidized organizational structures committed to political
advocacy. When the government, for example, pays
significant portions of the salaries of chief lobbyists of
grantees and contractors -- whose effectiveness as lobbyists
only requires periodic concentrations of their time in
lobbying activities -- the government effectively subsidizes
the lobbying process. And, because grantees and contractors
can be expected to favor programs which finance their
activities, present policies tend to subsidize only one side
of most public policy debates.
2. Will the proposals affect existing contracts and grants?
Answer: No. OMB is now receiving public comments on the
proposals. They will not become effective until after
scostantial revisions have been made. A final rule will not be
-4-
completed until midsummer at the earliest and then will apply
only to new contracts and grants entered into after Fiscal Year
1983 -- after September 30, 1983. Existing contracts and grants
will continue to be governed by current cost principles.
3. The comment period was originally scheduled to close on March
10. How does OMB intend to proceed? Will the comment period be
extended?
Answer: The comment period will effectively continue for an
additional 60 days. This extention will be accomplished by
publication in two weeks of a revised proposal, which will start
a new 45-day comment period. Meanwhile, comments will continue
to be solicited on the current proposal during the remaining
comment period, particularly in several specific areas that have
have aroused concern among affected parties.
4. Will the revised proposal contain substantive modifications?
Answer: Yes, and in a number of major respects. A number of
persons have suggested ways in which the practical concerns of
affected parties can be accomodated without compromising the
basic purpose of the proposals. In particular, ONB is
-5-
considering and is actively soliciting specific proposals from
affected parties in the following areas:
Exemption of contacts with non-legislative state and
local officials, such as zoning boards, from the definition
of political advocacy.
Exemption of most contacts with Executive branch
officials from the definition of political advocacy.
Exemption from the definition of political advocacy of
providing information to trade associations and similar
groups.
Exemption of standard marketing activities from the
definition of political advocacy.
Substantial exemption of equipment usage from rules
governing political advocacy.
Establishment of a waiver policy for inadvertent or
technical violations of the rules.
-6-
5. Do the proposals affect the tax deductibility of dues to
trade associations or like groups?
Answer: No. The tax exempt status of organizations paying dues
to trade association or like groups, and rules for the tax
deductibility of such dues, will in no way be affected by the
proposals.
6. DO the proposals affect organizations by reason of their
payment of dues to or membership in trade associations or
politically active groups?
Answer: No. The proposals do not in any way affect the status
of organizations that join or pay dues to trade associations or
politically active groups. The proposals merely prohibit the use
of federal grant or contract funds for the payment of such dues.
7. Are the proposals applicable across the board, to contractors
as well as non-profit grantees?
Answer: Yes. 003's proposed changes in Circular A-122 apply to
non-profit organizations, while identical proposals by Defense
and GSA apply to contractors. The proposals do not apply to
-7-
state and local governments or their contractors or grantees, or
to hospitals, universities, or Indian tribes.
8. Will the proposals be applicable to all forms of grants and
contracts?
Answer: No. Where the government acquires final products for a
fixed price, its only legitimate interest is that the goods or
services are of the kind and nature described in the contract.
The proposals primarily deal with so-called "cost plus" grants
and contracts in which the government is asked to pay for
portions of the time of officials and resources, otherwise used
for political advocacy purposes.
MEMORANDUM
THE WHITE HOUSE
WASHINGTON
February 24, 1983
MEMORANDUM FOR FRED F. FIELDING
FROM:
JOHN G. ROBERTS
esr
SUBJECT:
Lyn Nofziger Correspondence on OMB's
Proposed Revision of Circular A-122
Lyn Nofziger has written objecting to OMB's proposed limits
on political advocacy by government grantees and contractors.
This proposal has become known, through shorthand designa-
tion, as the "A-122 proposal." Although A-122 itself only
concerns the activities of non-profit organizations receiving
government grants, the proposed revisions of A-122 announced
by OMB are linked to corresponding proposals issued by
Defense, GSA, and NASA concerning government contractors.
Nofziger states that the proposal is vague, would require
detailed records of the political activities of employees of
government contractors, and will prevent business from
helping obtain passage of legislation, an activity
traditionally requested by White Houses. He encloses a
two-page analysis of the A-122 proposal.
I have drafted a brief reply for your signature, stating
that the proposal is being carefully reviewed by the
Administration -- which I take it is now the case.
THE WHITE HOUSE
WESHINGTON
March 3, 1983
Dear Lyn:
Thank you for your recent memorandum on OMB's proposed
revision of Circular A-122 and the related revisions
affecting government contractors. As you doubtless know by
now, OMB has announced its intention to publish a revised
proposal, which will start a new 45-day comment period. I
attach for your information a copy of the OMB press release
announcing this fact.
The questions which have been raised concerning these
proposals are being carefully reviewed within the White
House, and you may be assured that your views will be given
every appropriate consideration. Thank you for making us
aware of your concerns and for sharing your analysis of the
proposals with us.
With best personal regards,
Sincerely,
Orig. signed by FFF
Fred F. Fielding
Counsel to the President
Mr. Lyn Nofziger
1605 New Hampshire Avenue, NW
Washington, D.C.
20009
FFF: :JGR:aw 3/3/83
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Subj.
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126425
ID #
CU
WHITE HOUSE
FIDD1-02
CORRESPONDENCE TRACKING WORKSHEET
O . OUTGOING
H . INTERNAL
I . INCOMING
Date Correspondence
Received (YY/MM/DD)
/
/
Name of Correspondent:
Syn nofziger
MI Mail Report
User Codes: (A)
(B)
(C)
Subject:
OMB's circular A - 122, "Cost Principles
for non- Profit requization
ROUTE TO:
ACTION
DISPOSITION
Tracking
Type
Completion
Action
Date
of
Date
Office/Agency
(Staff Name)
Code
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WHolland
ORIGINATOR 483,02,21
/
/
WAT 18
Referral Note:
DD 83,02,21
583,03,02
Referral Note:
/
/
/
/
Referral Note:
/
/
/
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I
Referral Note:
/
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/
Referral Note:
ACTION CODES:
DISPOSITION CODES:
A - Appropriate Action
I . Info Copy Only/No Action Necessary
A Answered
C Completed
C Comment/Recommendation
R Direct Reply w/Copy
B - Non-Special Referral
S Suspended
D - Draft Response
S For Signature
F . Furnish Fact Sheet
X Interim Reply
to be used as Enclosure
FOR OUTGOING CORRESPONDENCE
Type of Response = Initials of Signer
Code = "A"
Completion Date = Date of Outgoing
Comments:
Keep this worksheet attached to the original incoming letter.
Send all routing updates to Central Reference (Room 75, OEOB).
Always return completed correspondence record to Central Files.
Refer questions about the correspondence tracking system to Central Reference, ext. 2590.
5/81
LYN NOFZIGER
Dobut
R to
February 17, 1983
126425
MEMORANDUM
TO:
Ed Meese
Jim Baker
Fred Fielding
Ed Rollins
FROM: Lyn Nofziger
R
Gentlemen:
I'm sure you are aware of OMB's circular
A-122, "Cost Principles for Non-Profit Organi-
zations." This, of course, is OMB's proposed
limits on political advocacy of government con-
tractors. I know that it was aimed primarily
at those people using government grants to
lobby the government. But in effect it goes
far beyond that intent. It is also affecting
many, many companies that do business with the
Federal Government and many businesses to whom
White Houses have traditionally turned when they
wanted help in getting legislation passed.
I am enclosing a copy of an analysis that
I asked to be drawn which shows you exactly
what the proposal does. In addition, lawyers
who have worked on this tell me the proposal is
vague and may be subject to a number of inter-
pretations. What this is going to do is force
companies to keep detailed records on the politi-
cal activities of their employees. If this is
Constitutional, and I doubt much that it is,
instead of getting government off of people's
backs as we promised to do for lo these many
years, you are adding an intolerable burden onto
1605 NEW HAMPSHIRE AVENUE. N.W. WASHINGTON, D.C. 20009 (202) 332-4030
2
the backs of many, many people. I think that
you could simplify the proposed rule by just
saying that persons or organizations receiving
grants from the government cannot use that
money to lobby the government.
In any event, Gentlemen, you're going to
make it almost impossible for a lot of people
who want to help you get a lot of things passed
from actually helping you. I really think you
ought to reconsider this thing.
P.S. I am sending out only four copies of this
to the named people. I certainly do hope that
it doesn't spread far and wide.
PPS - The opposition is growing not only
among the lobbyrots but also among
the Republissions on the Lill. feck Brooks
is thinking about hearings, Also I'm told
Bob michel is upset.
Ln
February 16, 1983
OMB'S PROPOSED LIMITS ON POLITICAL
ADVOCACY OF GOVERNMENT CONTRACTORS
OMB HAS PROPOSED CHANGES IN THE COST PRINCIPLES APPLICABLE
TO GOVERNMENT CONTRACTORS.
EXISTING LAW DISALLOWS PAYMENT OF "POLITICAL ADVOCACY" COSTS.
OMB'S DRAFT REGULATION (A-122) WOULD GO FURTHER BY DISALLOWING:
- The entire salary of any employee
-- whose work includes any political advocacy
----- this will inevitably include all corporate
officers, lawyers, public relations activity,
etc.
-- who has been "induced" to join any organization, other
than a labor union, that has political advocacy as a
substantial organizational purpose
--- such organizations include industry associations
like the Defense Preparedness Industry Association,
the American Bar Association, etc.
-- who has been "induced" to engage in any political
advocacy during non-working hours
- The entire cost of a building or office space if more than 5%
of the usable space is used for any political advocacy
-- thus the presence of a corporate vice president or
division head engaged (inevitably) in advocacy would
taint his entire facility, if he and his support staff
use more than 5% of the space
- The entire cost of items of equipment used in any part for
political advocacy.
-- thus, one "political" use would impugn charges for all
time of a
--- phone system
word processing system
--- company airplane
OMB'S DRAFT REGULATION WOULD GREATLY EXPAND THE DEFINITION OF
POLITICAL ADVOCACY TO INCLUDE:
- Attempting to affect any local, state or federal
decision by
-- communicating with officials or legislators, or
-- influencing public opinion
- Attempting to influence any federal, state or local
-- election and
-- referendum or initiative
- Starting, operating, or contributing to a PAC
THE PROPOSED CHANGES ARE OBJECTIONABLE BECAUSE THEY:
- Unfairly and unconstitutionally penalize government contrac-
tors for participation in public debate undertaken at their
own costs
-- the value of a contractor's service to the government
should not be reduced because, with his own funds, he
is involved in public discussions
- Undermines precisely the kind of support the administration
frequently requests from contractors
- unsolicited Congressional appearances, phone calls,
educative advertising, etc., are all proscribed
- Penalizes many activities required in the normal course of
business
- for example, participating in a municipal referendum
affecting zoning, environmental control, etc.
- Creates an administrative nightmare and a source of gross
inefficiency by demanding segregation of facilities and
corporate officers.
- 2 -
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF management AND BUDGET
.
STREET
/
WASHINGTON, D.C. 20503
For Immediate Release
OMB 84-4
January 20, 1983
The Administration announced today several steps designed to
ensure that Federal dollars are not used, directly or indirectly,
for political advocacy. The changes involve Federal contracts,
including military contracts, and Federal grants to nonprofit
organizations.
While assuring a full right of eligibility to compete for
and receive Federal grants and contracts by organizations in-
volved in political advocacy, the changes seek to assure that the
Government does not subsidize such activities. Political advo-
cacy includes lobbying and other attempts to influence legis-
lation, as well as direct participation in elections or refer-
enda, administrative processes and certain judicial processes.
Today's actions are designed to achieve a complete separa-
tion of costs involved in carrying out the Federal purposes for
which grants or contracts are made, from costs associated with
advocacy.
The separation of functions paid for by Federal grants and
contracts from all kinds of political advocacy would mean a rig-
orous division of such "overhead" elements as office space and
automobiles between those used for the Federal grant and those
used for advocacy. For example, office complexes housing
grantees or contractors where more than 5 percent of the space is
used for political advocacy may not be charged to Federal grants
or contracts, meaning that there would have be physical separa-
tion of the two activities.
The changes would also deny payment of salaries from Federal
grants or contracts for employees who engage in political advo-
cacy as part of their jobs, or who are required, coerced or in-
duced into joining advocacy organizations or participating in
political advocacy activities on the job or during non-working
hours. In addition, grant or contract funds could not be used to
pay for membership dues in advocacy organizations.
For contracts, the changes would assure that the cost of
lobbying Congress for specific weapons systems, for example,
would not be included in the contract amount to be paid by the
Government.
The changes announced are in two forms:
O The Office of Management and Budget proposed for comment
revisions in its Circular A-122, "Cost Principles for
Nonprofit Organizations. =
O The main contracting agencies -- the Department of Defense,
the General Services Administration and the National Aero-
nautics and Space Administration -- are simultaneously an-
nouncing proposed changes in their contracting regulations.
(Vol. 39)
179
News
Allowable Costs
tial organizational purpose, or to engage in political
advocacy during non-working hours."
OMB PROPOSING DISALLOWANCE OF LOBBYING
Regarding building or office space, the entire space
COSTS FOR CONTRACTS, GRANTS
is unallowable if more than 5 percent of it is devoted
The Office of Management and Budget is proposing
to political advocacy. The same applies to items of
a stringent. governmentwide policy on the charging of
equipment or other items used in part for political
lobbying costs to federal contracts and grants.
advocacy; meetings and conferences devoted in any
Under the proposed policy. contractors and grantees
part to political advocacy; and publication and print-
would be barred from using federal funds for "politi-
ing allocable in part to political advocacy.
cal advocacy," a term that embraces far more than
the traditional notion of lobbying as trying to influ-
Exception for Legislative Liaison
ence a member of Congress to vote a certain way on a
However, certain activities are specifically ex-
particular issue.
cluded from the definition of political advocacy under
Political advocacy, as used in the OMB proposal,
the proposal. Such allowable activities include:
includes not only legislative activities but also efforts
making available the results of a nonpartisan
aimed at influencing rulemaking or other administra-
study or analysis, provided the distribution is not
tive processes in the executive branch of the govern-
intended to influence the outcome of any federal,
ment-the White House and the federal departments
state, or local election, referendum, or other proce-
and agencies.
dure, or any governmental decision;
The term also includes participation in or contribu-
applying for or bidding on a grant, contract, un-
tions to the expenses of litigation other than litigation
solicited proposal, or other agreement, or providing
in which the organization is a party or has standing to
information in connection with such application at the
participate in its own behalf.
request of the government agency awarding the grant,
In addition. particpation in elections or referenda at
contract, or other agreement;
any level of government, as well as contributions of
providing technical advice or assistance to a gov-
membership dues, money, or services to any organiza-
ernmental body or to a committee or subcommittee in
tion having political advocacy as a "substantial orga-
response to a written request.
nizational purpose," are considered political advocacy
This latter category includes certain legislative liai-
and thus would be off-limits to those receiving federal
son activities presently disallowed under the DOD
funds, under the new proposal.
lobbying cost policy and in this respect would be more
Currently, federal policies on lobbying costs vary
favorable to DOD contractors than the current policy,
from agency to agency. Under the lobbying cost policy
according to DAR Council director James Brannan.
issued by DOD last October. the costs of both lobbying
At present, there is no specific lobbying cost princi-
and legislative liaison activities at all levels of gov-
ernment are unallowable on defense contracts (38
ple governing all federal grants, though there are
statutory prohibitions governing lobbying in general
FCR 721, 741). A month later, the General Services
Administration issued a lobbying cost principle for all
and certain grantmaking departments in particular.
If adopted in final form, the proposed policy would
non-defense contracts that disallowed lobbying costs
suspersede both the DOD and GSA lobbying policies
but not costs for legislative liaison activities (38 FCR
and ensure a uniform approach to the issue for all uses
760).
of federal funds, grants and contracts alike.
Commingling Forbidden
Proposed Circular A-122, DAR Changes
Under current lobbying guidelines, contractors may
The changes as they affect grantees are being pro-
separate out the portion of time or other resources
posed as a revision to OMB Circular A-122, "Cost
devoted to unallowable activities when computing
Priniples for Nonprofit Organizations." The proposed
their costs on a contract. But that will be virtually
revision is scheduled to appear this week in the Fed-
impossible to do under the proposed policy, since any
eral Register and carries a 45-day comment period.
item or activity above a bare minimum that is devot-
Parallel changes are likewise being proposed to the
ed 10 political advocacy renders the entire item or
Defense Acquisition Regulation, the Federal Procure-
activity unallowable. In other words, contractors will
ment Regulations, and the NASA Procurement
be forced to keep their political advocacy items and
Regulation.
activities strictly separate from those devoted to per-
On Jan. 20, the same day that the proposed revision
forming the functions of the contract.
to OMB circular A-122 was formally released, DOD
For example. salary costs of individuals are totally
issued a letter to industry seeking comment within 45
unallowable if "the work of such individuals includes
days on the proposed DAR change. DOD, GSA, and
activities constituting political advocacy," or if the
NASA plan to coordinate their activities in order to
imployer has "required or induced" them
achieve the desired consistency in policy.
to "join or pay dues to an organization other than a
The circumstances surrounding the development
Libor union that has political advocacy as a substan-
and issuance of the proposed lobbying policy are
Federal Contracts Report
0014-9063/83/$00
180
(Vol. 39)
FEDERAL CONTRACTS REPORT
puzzling. Although OMB has been working with an
(3) Attempting to influence governmental decisions
interagency group for several weeks on the proposed
through an attempt to affect the opinions of the gener-
policy, many senior officials at DOD, GSA, and NASA
al public or any segment thereof;
were not aware that any change was being contem-
(4) Attempting to influence governmental decisions
plated until the day it was issued.
through communication with any member or employ-
Officials from those three agencies who were con-
ee of a legislative body, or with any government
tacted by FCR were not happy with the proposal, and
official or employee who may participate in the deci-
indicated that it was entirely OMB's initiative. All
sionmaking process;
indicated that the comments they receive on the pro-
(5) Participating in or contributing to the expenses
posal will shape the final form of the cost principle,
of litigation other than litigation in which the organi-
but the general expectation is that some changes to
zation is a party with standing to sue or defend on its
their current lobbying policies will be made in light of
own behalf: or
the OMB proposal.
(6) Contributing money, services, or any other thing
John Lordan, head of OMB's financial management
of value, as dues or otherwise, to an organization that
branch and the person directly responsible for coordi-
has political advocacy as a substantial organization
nating the development of the policy, said merely that
purpose, or that spends $100,000 or more per year on
the initiative stems from the Administration's concern
activities constituting political advocacy.
that federal dollars not be used in any way to subsi-
(c) Political advocacy does not include the following
dize political advocacy activities.
activities:
Text of the OMB proposal on lobbying that applies
(1) Making available the results of nonpartisan anal-
to grantees appears at page 230.
ysis, study, or research, the distribution of which is not
Text of the DAR letter to industry regarding the
primarily designed to influence the outcome of any
proposed cost principle on political advocacy follows:
Federal, State, or local election, referendum, initia-
The Administration is concerned with using Govern-
tive, or similar procedure, or any governmental
ment funds for political advocacy purposes. In con-
decision;
junction with proposed changes to OMB Circular A-
(2) Providing technical advice or assistance to a
122, "Cost principles for nonprofit organizations,"
governmental body or to a committee or other subdi-
concerning political advocacy, the attached proposed
vision thereof in response to a written request by such
cost principle is under consideration by DOD, GSA,
body or subdivision;
and NASA. The proposed changes define political ad-
(3) Participating in litigation on behalf of other
vocacy and make those costs unallowable.
persons, if the organization has received a Federal,
The definition of political advocacy used in this
State, or local grant, contract, or other agreement for
proposal is derived generally from the Internal Rev-
the express purpose of doing so;
enue Code, 26 U.S.C. 4911, defining attempts to "in-
(4) Applying or making a bid in connection with a
fluence legislation." with modifications designed to
grant, contract, unsolicited proposal, or other agree-
comprise direct participation in elections or refer-
ment, or providing information in connection with
enda, administrative processes, certain judicial pro-
such application at the request of the government
cesses, and other activity of a political advocacy
agency awarding the grant, contract, or other agree-
nature.
ment; or
Your comments (15 copies) are requested within 45
(5) Engaging in activities specifically required by
days of the date of this letter. Please address your
law.
comments to:
(d) An organization has political advocacy as a
"substantial organizational purpose" if:
Mr. James T. Brannan
(1) The organization's solicitations for membership
Director, Defense Acquisition
or contributions acknowledge that the organization
Regulatory System, OUSDRE(AM)
engages in activities constituting political advocacy;
Room 3C257, Pentagon
or
Washington, D.C. 20301
(2) Twenty percent (20%) or more of the organiza-
tion's annual expenditures, other than those incurred
Sincerely,
in connection with Federal, State or local grants,
contracts, or other agreements, are incurred in con-
WILLIAM A. LONG
nection with political advocacy.
Deputy Under Secretary
(e) The term, "governmental decisions" includes:
(Acquisition Management)
(1) The introduction, passage, amendment, defeat,
Attachment as stated
signing, or veto of legislation, appropriations, resolu-
15.XXX.XX Political Advocacy (CWAS-NA)
tions, or constitutional amendments at the Federal,
(a) The cost of activities constituting political advo-
State, or local level;
cacy are unallowable.
(2) Any rulemakings, guidelines, policy statements,
(b) Political advocacy is any activity that includes:
or other administrative decisions of general applica-
(1) Attempting to influence the outcome of any
bility and future effect; or
Federal. State, or local election, referendum, initia-
(3) Any licensing, grant, ratemaking, formal adjudi-
tive, or similar procedure, through contributions, en-
cation, or informal adjudication, other than actions or
dorsements. publicity, or similar activity;
decisions related to the administration of the specific
(2) Establishing, administering, contributing to, or
grant, contract, or agreement involved.
paying the expenses of a political action committee,
(f) Notwithstanding the provisions of other. cost prin-
either directly or indirectly;
ciples in this part:
1-24-83
Copyright © 1983 by The Bureau of National Affairs, Inc.
0014-9063/83/$00.50
NEWS
(Vol. 39)
181
$
(1) Salary costs of individuals are unallowable if:
curement decision should generally not be overturned
(i) the work of such individuals includes activities
unless a disappointed bidder can show that the deci-
constituting political advocacy, other than activities
sion lacked a rational basis, the court concludes.
that are both ministerial and non-material: or
(ii) the organization has required or induced such
Correct Size Standard Applied
individuals to join or pay dues to an organization other
Baird maintained that since the night vision devices
than a labor union that has political advocacy as a
would be installed in military tanks and other ar-
substantial organizational purpose, or to engage in
mored vehicles, the small business size standard (1,000
political advocacy during non-working hours.
employees) applicable to manufacturers of military
(2) The following costs are unallowable:
vehicles should have been applied. Moreover, the com-
(i) building or office space in which more than 5%
pany noted, the larger size standard is also used for
of the usable space occupied by the organization or an
producers of periscopes and other types of daytime
affiliated organization is devoted to activities consti-
viewing devices used in military vehicles.
tuting political advocacy;
However, Judge Lydon points out, all production
(ii) items of equipment or other items used in part
contracts for this particular night vision device since
for political advocacy;
the mid-1970s have used the [750-employee] size stan-
(iii) meetings and conferences devoted in any part to
dard for makers of light and heat detection devices.
political advocacy;
Furthermore, the SBA Size Appeals Board subsequent-
(iv) publication and printing allocable in part to
ly ruled against Baird, noting that the night vision
political advocacy; and
device is not only installed independently of any day-
(v) membership in an organization that has political
time viewing aids, but also that its two major compo-
advocacy as a substantial organizational purpose, or
nents (an image intensifier and a magnifier) are prop-
that spends $100,000 or more per year in connection
erly classifiable as light detection devices.
with political advocacy.
"The point here is that classification of an item is a
discretionary act and reasonable minds may well
disagree," the judge explains. Since the Army's use of
Judicial Review
the lower size standard was reasonable, there is no
basis for the court to change it, he concludes.
REVIEW OF PRE-AWARD PROTESTS IS
Attacking the Set-Aside
LIMITED IN SCOPE, CLAIMS COURT SAYS
Baird also contended that using a small business
The scope of the Claims Court's review of pre-
set-aside for the procurment was improper. The Army
award protests is limited. the court decides. Only
violated a Defense Acquisition Regulation provision
when an agency's pre-award decisions are clearly
which prohibits a total small business set-aside when
irrational or unreasonable should they be overturned,
at least one "planned emergency producer" wants to
the court rules, adopting the District of Columbia
"participate in the acquisition," Baird maintained.
Circuit's Steinthal standard. (Baird Corp. V. U.S., Cls.
The company argued that it had previously qualified
Ct. No. 645-82C, 1/14/83).
for PEP status.
Last year the Army issued a solicitation for night
However, Baird hasn't qualified under the PEP
vision devices. The procurement was set aside for
program with respect to the particular night vision
small businesses, and was limited to firms with less
device needed in this procurement, Judge Lydon
than 750 employees. Baird maintained that a larger,
states. Rather, Baird had attained PEP status for
1,000-employee size standard should have been used,
another night viewing device with a different federal
and asked the Army to delay the award pending a
stock number. "It should not be left to the PEP
ruling from the Small Business Administration's Size
supplier to determine on its own which item the
Appeals Board.
government wants, "he states.
The contracting officer denied the request, and bids
Moreover, the procurement was not a total set-aside
were opened as scheduled. Baird was low bidder, but
for small business, the judge adds. An Army form
was disqualified for noncompliance with the 750-em-
which provided information to prospective offerors
ployee size standard. The company filed suit in the
did indicate that a 100 percent small business set-
Claims Court to block the award.
aside was contemplated, he concedes. However, in
Standard of Review
considering pre-award protests, the court must consid-
er the totality of the procurement process, he
Writing for the court, Judge Thomas J. Lydon points
explains.
out that judicial review of an agency's pre-award
In fact, the Army planned to buy nearly 2,300 of
decisions must be limited in scope. "The court should
these night vision devices in 1982, and originally con-
not substitute its judgment on such matters for that of
templated two separate awards, the judge notes. Baird
the agency, but should intervene only when it is clear-
won the first (unrestricted) contract, but the second
ly determined that the agency's determinations were
solicitation (a partial set-aside) was the subject of
irrational or unreasonable."
several bid protests. As a result, the solicitation was
Citing M. Steinthal & Co. V. Seamans (400 FCR A-1,
split into two smaller procurements. Baird then won
D-1), the judge stresses that judicial intrusions into the
the first of these smaller contracts. The second pro-
procurement process should be infrequent. "In the
curement, which is the subject of this litigation, is a
absence of overriding public interest considerations,
direct descendant of the partial set-aside, he
the court should refuse to look favorably on declara-
emphasizes.
tory or injunctive relief requests in pre-award bid
Thus, it is reasonable to conclude that the set-aside
protest actions." Thus, an agency's pre-award pro-
was part of a larger procurement, the judge declares.
Federal Contracts Report
0014-9063/83/$00
3348
Federal Register / Vol. 48. No. 16 / Monday, January 24. 1983 / Notices
OFFICE OF MANAGEMENT AND
grantees and contractors with the
advocacy in whole or in part. The
BUDGET
legitimate governmental interests of
revision makes unallowable the costs of
ensuring that the government does not
buildings and office space where 5
[Circular A-122)
subsidize, directly or indirectly, the
percent or more of the space is devoted
political advocacy activities of private
to political advocacy. When federal
Cost Principles for Nonprofit
groups or institutions. These
grant or contract recipients use
Organizations
governmental interests are based on
facilities. equipment, or personnel
concern for protecting the free and
funded in part with federal monies for
AGENCY: Office of Management and
robust interchange of ideas.
political advocacy, they may create the
Budget.
Americans have the First Amendment
appearance of government support for
ACTION: Notice.
right both to engage freely in speech and
their positions. Moreover, if federal
political expression, and to refrain from
funds are used to defray the overhead
SUMMARY: This notice offers interested
speaking, without interference or control
costs of organizations engaged in
parties an opportunity to comment on a
on the part of the government or its
political advocacy, it frees up the
proposed revision to Circular A-122.
agents. Wooley V. Maynard, 430 U.S.
organization's other funds for use in this
"Cost Principles for Nonprofit
705, 714 (1977). The proposed revision is
political activity.
Organizations." The proposed revision
intended to ensure that the use of
The principal effect of the revision
establishes special provisions for costs
Federal grants, contracts and other
will be that federal grantees and
related to political advocacy. Similar
agreements by private organizations
contractors that choose to engage in
revisions are being simultaneously
engaging in political advocacy does not
political advocacy must separate their
proposed for civilian and defense
erode or infringe these constitutional
grant or contract activity from their
contractors through appropriate actions
rights, or distort the political process by
political activity. If they mix the two,
by the Department of Defense, NASA
encouraging or discouraging certain
then they will not receive government
and GSA. the three agencies with
forms of political activity.
reimbursement for the jointly allocable
authority to issue procurement
The activities of government in a
democracy necessarily involve a degree
costs. Contractors or grantees will not
regulations. The purpose of these
of political advocacy, since government
be permitted to require or induce
proposals is to ensure that federal tax
officials are expected to communicate
employees paid in part or in whole with
dollars are not used. directly or
indirectly, for the support of political
with the people, explain their programs,
federal funds to engage in political
advocacy.
and provide leadership and direction to
advocacy activities, either as a formal
Over the past 25 years, the volume of
the nation. Thus, Members of Congress
part of job responsibilites or on their
own time.
federal activity conducted through
and their staffs, the President and his
grantees and contractors has
political appointees, necessarily
The definition of political advocacy
dramatically grown. Sound management
participate in forms of political
used in this proposal is derived
of federal grants and contracts has
advocacy. However. it is a distortion of
generally from the Internal Revenue
correspondingly gained in importance.
the market place of ideas for the
Code, 26 U.S.C. 4911, defining attempts
The responsibility of the President
government to use its financial power to
to "influence legislation," with
through OMB to improve the
"tip the electoral process," Elrod V.
modifications designed to comprise
management of the executive branch of
Burns, 427 U.S. 353, 356 (1976), by
direct participation in elections or
government with a view to efficient and
subsidizing the political advocacy
referenda. administrative processes,
economical service. and to fulfill other
activities of private organizations and
certain judicial processes, and other
statutory and constitutional
corporations. This proposal will ensure,
activity of a political advocacy nature.
responsibilities. extends to issues of
to the extent consistent with the
These proposed revisions will become
grant and contract management no less
communications function of the
effective 30 days after final notice in the
than to issues of direct federal activity.
government, that taxpayers are not
Federal Register. The revisions will
In recent years. the problem of the use
required, directly or indirectly, "to
affect only grants, contracts, and other
of federal funds for political advocacy
contribute to the support of an
agreements entered into after the
by grantees and contractors has been
ideological cause [they] may oppose."
effective date. Existing grants. contracts,
identified by members of the public, by
Abood V. Detroit Board of Education,
and other agreements will not be
the Comptroller General. and by
431 U.S. 209, 235-236 (1977). The
immediately affected. Agency contracts
Members of Congress. As many of these
proposal also seeks to avoid the
and regulations will incorporate these
parties have observed. the diversion to
appearance that, by awarding Federal
provisions to the same extent and in the
political advocacy of federal funds. and
grants, contracts, or other agreements to
same manner as they do other
of equipment procured with and
organizations engaged in politicial
provisions of Circular A-122.
personnel compensated by federal
advocacy on particular sides of public
Violations of these provisions will be
funds. is an abuse of the system and an
issues, the Government has endorsed,
a basis for cost disallowance. and in
uneconomical. inefficient and
fostered, or "prescribe[d] [as] orthodox"
instances of serious or willful violations,
inappropriate use of the public's
a particular view on such issues, West
may be a basis for debarment or
resources. Moreover. the commingling of
Virginia State Board of Education V.
federal grant or contract activity with
suspension.
Barnette, 319 U.S. 624, 645 (1943).
private political advocacy creates the
Comments should be submitted in
The proposed revision would make
appearance of federal support for
unallowable the cost of political
duplicate to the Financial Management
particular positions in public debate.
advocacy, whether direct or indirect.
Division, Office of Management and
This appearance can create
The revision would also make
Budget, Washington, D.C. 20503. All
misunderstanding and interfere with the
unallowable any costs of
comments should be received within 45
neutral, non-ideological administration
communications equipment. personnel.
days of this notice.
of federally funded programs.
other equipment, meetings or
FOR FURTHER INFORMATION CONTACT:
This proposal is designed to balance
conferences, or publications, where such
John J. Lordan, Chief. Financial
the First Amendment rights of federal
cost items are used for political
Management Branch, Office of
Federal Register / Vol. 48, No. 16 / Monday, January 24, 1983 / Notices
3349
Management and Budget. Washington,
activities-such as transporting corporate
to the organization's own interest) have been
D.C. 20503. (202) 395-6823.
officials to discussions with Congressmen-
included in the proposal's definition. to
then under the principles proposed by the
ensure that such activities are not conducted
Issued in Washington. D.C., January 20.
Defense Department. the contractor cannot
1983.
at the expense of the public.
include the cost of the aircraft or of any use
Question: What is the penalty for violating
Candice C. Bryant,
of the aircraft as part of overhead costs
these provisions?
Acting Deputy Associate Director for
allocated in part to the contract.
Answer: Cost recovery, and in instances of
Administration.
As an example in the non-profit area, take
serious or willful violations, suspension or
an organization which receives a federal
Appendix
debarment from federal grants or contracts.
grant to promote better health services for
Question: How does this proposal affect
The following questions and answers have
low-income individuals, which decides to
been prepared by the Office of Management
organize a political rally to promote more
the First Amendment right of freedom of
and Budget for informational purposes only.
federal funding for medical programs. The
speech?
Question: What is the purpose of these
organization could not be reimbursed for any
Answer: This proposal will promote the
revisions?
portion of the salaries of individuals engaged
First Amendment value that a person can
Answer: The purpose is to ensure that
in organizing the political rally or for any
freely speak, or refrain from speaking, on
federal contracts and grants are not used to
portion of other overhead costs (office
political matters. The Supreme Court has
support political advocacy either directly or
machines, printing facilities, etc.) if the same
recognized constitutional problems with
indirectly. Thousands of contractors and
overhead items were used for the rally. The
requirements on a person "to contribute to
granices. administering hundreds of billions
organization would be free to hold the rally-
the support of an ideological cause he may
of federal dollars. have had wide latitude to
but it would do so at its own expense, and
oppose." Abood V. Detroit Board of
engage in political advocacy activities, often
without using people. facilities or resources
Education, 431 U.S. 209, 235-236 (1977).
using the same facilities and personnel paid
partially funded by the Federal Government.
Although government in a democracy
for in part by the taxpayers. The current lack
Question: How is it possible to define
necessarily involves some degree of political
of a government-wide policy prohibiting the
"political advocacy"?
advocacy because of the need to
use of federal grant and contract funds for
Answer: The concept of political advocacy.
communicate with citizens, taxpayers cannot
political advocacy has been criticized by the
or "influencing legislation," is used in the
rightly be required to support the political
General Accounting Office. It is unfair to use
Internal Revenue Code restrictions on tax-
advocacy of private organizations and
federal tax money to support political causes.
exempt organizations. The Internal Revenue
corporations through federal grants and
Nor is it an efficient or economical use of
Code definition of "influencing legislation" is
contracts.
public resources to allow funds to be diverted
employed in this proposal, with several
Moreover. the freedom of First Amendment
from statutory purposes to political
modifications to take account of changes in
political advocacy is jeopardized when the
advocacy.
political practices (e.g., development of
views of particular groups are financed by
A particularly important abuse is that
political action committees), Supreme Court
the government. The use of federal grants or
many contractors and grantees have been
developments (e.g., decisions declaring
contracts for the support of one side in a
able to defray the overhead costs of their
certain forms of litigation to be political
political debate. like the use of political
political advocacy. at public expense. by
expression). and shifts in the decisionmaking
patronage for the support of apolitical party.
allocating some part of the cost to the
process (e.g., the growth of administrative
can injure the "free functioning of the
administration of the contract or grant. Not
agencies and referenda as means of political
electoral process." Elrod V. Burns. 427 U.S.
only does this free up the organization's own
decisionmaking).
353, 356 (1976). In the marketplace of ideas,
resources for further political activity: it also
In particular, the scope of the Code
where differing political opinions compete for
creates the appearance that the government
definition ("influencing legislation") has been
public acceptance, the government should not
is supporting one or another side in a political
expanded to cover "governmental decisions"
be in the position of subsidizing the
controversy.
in general. Thus, for example, the Internal
expression of views of particular
Question: How will the proposals work?
Revenue Code defines the term "influencing
Answer: The proposals will revise cost
organizations or corporations, as to defense
legislation" as including "any attempt to
principles applicable to federal grants,
or domestic policy. Nor should the
influence any legislation through an attempt
contracts (other than competitive, firm fixed
government create the appearance of official
to affect the opinions of the general public or
price contracts). and other agreements.
support for the political advocacy of its
any segment thereof." The proposed revision
Recipients of federal grants. contracts, or
to Circular A-122. correspondingly. defines
grantees or contractors.
other agreements will be barred from
"political advocacy" as including "attempting
Question: Does this proposal infringe the
receiving government reimbursement for any
to influence governmental decisions through
First Amendment rights of recipient
activities connected with political advocacy
an attempt to affect the opinions of the
organizations?
at the national. state, or local levels. This
general public or any segment thereof." The
Answer: No. Recipients remain free to
includes membership or dues in trade
body of experience in interpreting the
engage in political advocacy on any side of
associations or other organizations that have
Internal Revenue Code provision. as
any issue. The proposals merely ensure that
political advocacy as a substantial
appropriately modified, is expected to aid in
organizations engage in political advocacy at
organizational purpose. In addition, salary
the interpretation of the proposed revisions.
their own expense-not the public's. If an
COSTS will be unallowable to recipients who
The proposals thus include as "political
organization chooses to exercise its First
wither require their employees to pay dues to
advocacy" direct participation in elections or
Amendment rights, it is only fair that it keep
political advocacy organizations or require
referenda by means of contributions,
those political activities separate from its
them to engage in political advocacy on the
endorsement, publicity, administration of
work at the expense of the public. It should
job OF during non-working hours. Finally,
political action committees, or similar
not expect to have its political advocacy
government funds will not be permitted to
activity; contributions to political advocacy
subsidized, or to be able to put facilities
pay for facilities in which significant political
organizations: attempting to influence
purchased in part by tax dollars to political
advocacy activities are conducted, thus
government policy made through the
use. Like federal agencies and employees,
requiring physical separation of such
regulatory process as well as the legislative
federal grantces and contractors are
activities from those involved in the
process; and attempts to influence
"expected to
execute the programs of the
performance of grants and contracts.
government policy through litigation as an
Government without bias or favoritism for or
Question: What is an example of how this
amicus curiae, on behalf of the members of
against any political party or group or the
will work?
the organization, or on behalf of another
members thereof." CSC V. National
Answer: Take the example of a defense
party. In addition, several categories of
Association of Letter Carriers, 413 U.S. 548,
contractor whit b uses a corporate aircraft for
activity excluded from the Code definition of
565 (1973). Federal grant and contract activity
oversight and management of a federal
"influencing legislation" (e.g.,
will be more efficiently and fairly performed
contract. If the contractor chooses to use the
communications with organization members
if it is not mixed with advocacy activities on
aircraft also for lobbying or other political
on political topics and lobbying with respect
one or the other side of political debate.
3350
Federal Register / Vol. 48. No. 16 / Monday. January 24. 1983 / Notices
Question: Will these proposals prevent
defend their interests in court?
contributing to, or paying the expenses
corporations or other organizations from
Answer: No. So long as an organization
of a political action committee, either
lobbying in Congress or the agencies for
appears in court on its own behalf. litigation
directly or indirectly;
grants or contracts?
is not defined as political advocacy.
Answers: No-but they will do it at their
(3) Attempting to influence
However, when an organization goes into
own expense. not the public's.
court to represent others, or to support the
governmental decisions through an
Question: Will organizations engaged in
claim of others. such attempts to influence
attempt to affect the opinions of the
political advocacy be eligible to receive
policy through the judicial process are a form
general public or any segment thereof:
federal grants and contracts?
of political advocacy. as the Supreme Court
(4) Attempting to influence
Answer: Absolutely. In a memorandum
has held. NAACP V. Button. 371 U.S. 415, 429
governmental decisions through
dated April 26. 1982. the Director of OMB
(1963); In re Primus, 436 U.S. 412. 428 (1978).
communications with any member or
made clear that:
Such activities should not be supported by
employee of a legislative body, or with
"The Administration will continue to
federal grant or contract money, unless the
award grants and contracts to those parties
any government official or employee
grant or contract was made expressly for that
who are mos! effective in fulfilling statutory
purpose. Attorneys fee award statutes are not
who may participate in the
purposes [and that] political advocacy groups
affected by these proposals.
decisionmaking process;
may continue to receive grant and contract
Question: Will these proposals make it
(5) Participating in or contributing to
awards."
more difficult for the federal government to
the expenses of litigation other than
This policy will continue in effect. and just
reward its political supporters?
litigation in which the organization is a
HS agencies will be forbidden to award grants
Answer: Yes. Currently, the federal
party with standing to sue or defend on
and contracts because of the political views
government may be able to reward its
its own behalf; or
of applicant groups. they will also be
supporters, and punish its opponents. by
(6) Contributing money, services, or
forbidden from discriminating against
granting or denying federal grants to
"parties most effective in fulfilling statutory
any other thing of value, as dues or
organizations engaged in political advocacy.
purposes."
By making such awards to a friendly
otherwise, to an organization that has
Question: What will be the practical effect
organization the government assumes a
political advocacy as a substantial
on organizations that engage in political
portion of that organization's overhead costs,
organizational purpose, or that spends
advocacy?
and thus supports the organizations political
$100.000 or more per year on activities
Answer: Federal grantees and contractors
activities. In this way, the govenment can
constituting political advocacy.
that choose to engage in political advocacy
influence the political process by inducing
C. Political advocacy does not include
will need to separate their grant or contract
recipients of federal funds to conform their
the following activities:
activity from their political activity. If they
behavior to the governments desires. This
mix the two. then they will not receive
(1) Making available the results of
was one of the dangers of the political spoils
government reimbursement for the joint
system recognized by the Supreme Court in
nonpartisan analysis, study, or research,
costs.
Elrod V. Burns. 427 U.S. 347, 355-356 (1976).
the distribution of which is not primarily
Question: What will be the effect on the
These proposals will help make the process
designed to influence the outcome of
employees of contractors and grantees?
neutral again, by eliminating the "political
any Federal, State, or local election.
Answer: Employees whose salary is paid in
spoils" aspect of the government funding
referendum, initiative, or similar
part with federal funds may not be required
process.
procedure, or any governmental
or induced to engage in political advocacy,
Question: Will these proposals solve the
decision:
either as a part of the job or on their own
whole problem of federal tax money being
time. Nor may they be required to join or pay
(2) Providing technical advice or
used to support political advocacy?
dues to an organization involved in
Answer: No. but they make a major step in
assistance to a governmental body or to
substantial political advocacy. This will
a committee or other subdivision thereof
the right direction. Congress and the agencies
ensure that federal funds are not used to hire
must continue to be vigilant to ensure that
in response to a written request by such
political armies or to generate political
grants and contracts are not awarded for
body or subdivision;
membership support-practices analogous to
purposes that involve political advocacy.
(3) Participating in litigation on behalf
these held unconstitutional in Elrod V. Burns.
of other persons, if the organization has
427 U.S. 347 (1976). Of course. individual
employees remain free to engage in political
Circular A-122-Cost Principles for
received a Federal, State, or local grant.
Nonprofit Organizations
contract, or other agreement for the
advocacy on their own it they wish to do so.
Question: To what organizations do the
express purpose of doing so;
Circular A-122 is revised by
proposals apply?
(4) Applying or making a bid in
Answer: The proposed revision to OMB
modifying Attachment B as follows:
connection with a grant, contract.
Circular A-122 will apply to all non-profit
1. Insert a new paragraph "B 33
unsolicited proposal. or other
organizations receiving federal grants.
Political Advocacy."
agreement. or providing information in
contracts. or other agreements. Similar
a. The cost of activities constituting
connection with such application at the
proposals are being applied by the
political advocacy are unallowable.
Department of Defense. NASA. and the
b. Political advocacy is any activity
request of the government agency
that includes:
awarding the grant, contract, or other
General Services Administration to civilian
and defense contractors. The proposed
agreement; or
(1) Attempting to influence the
revisions will apply to grants. contracts. and
(5) Engaging in activities specifically
outcome of any Federal, State, or local
other agreements entered into after the
required by law.
election, referendum. initiative, or
effective date of the revisions. Existing
d. An organization has political
grants, contracts. and other agreements will
similar procedure, through contributions.
advocacy as a "substantial
not be affected.
endorsements, publicity, or similar
organizational purpose" if:
Question: Will these proposals interfere
activity;
(1) The organization's solicitations for
with organizations due process rights to
(2) Establishing, administering,
membership or contributions
Federal Register / Vol. 48. No. 16 / Monday. January 24. 1983 / Notices
3351
acknowledge that the organization
(3) Any licensing. grant, ratemaking.
(2) The following costs are
engages in activities constituting
formal adjudication or informal
unallowable:
-
political advocacy: or
adjudication. other than actions or
(a) Building or office space in which
(2) Twenty percent (20%) or more of
decisions related to the administration
more than 5% of the usable space
the organization's annual expenditures.
of the specific grant. contract. or
occupied by the organization or an
other than those incurred in connection
agreement involved.
affiliated organization is devoted to
with Federal. State or local grants.
f. Notwithstanding the provisions of
activities constituting political
contracts. or other agreements. or
other cost principles in this circular:
advocacy:
incurred in connection with political
(b) Items of equipment or other items
(1) Salary costs of individuals are
advocacy.
used in part for political advocacy;
unallowable if:
(c) Meetings and conferences devoted
e. The term. "governmental decisions"
(a) The work of such individuals
in any part to political advocacy;
includes:
includes activities constituting political
(d) Publication and printing allocable
(1) The introduction. passage
advocacy, other than activities that are
in part to political advocacy: and
amendment. defeat. signing, or veto of
both ministerial and non-material: or
(e) Membership in an organization
legislation. appropriations. resolutions.
(b) The organization has required or
that has political advocacy as a
or constitutional amendments at the
induced such individuals to join or pay
substantial organizational purpose. or
Federal. State, or local level:
dues to an organization, other than a
that spends $100.000 or more per year in
(2) Any rulemakings, guidelines.
labor union. that has political advocacy
connection with political advocacy.
policy statements or other
as a substantial organizational purpose,
2. Renumber subsequent paragraphs.
administrative decisions of general
or to engage in political advocacy during
[FR Due 83-2031 Filed 1-21-83 1:28 pm)
applicability and future effect: or
non-working hours.
BILLING CODE 3110-01-M
(Vol. 39)
179
News
BNA
Allowable Costs
tial organizational purpose, or to engage in political
advocacy during non-working hours."
OMB PROPOSING DISALLOWANCE OF LOBBYING
Regarding building or office space, the entire space
COSTS FOR CONTRACTS, GRANTS
is unallowable if more than 5 percent of it is devoted
The Office of Management and Budget is proposing
to political advocacy. The same applies to items of
a stringent. governmentwide policy on the charging of
equipment or other items used in part for political
lobbying costs to federal contracts and grants.
advocacy; meetings and conferences devoted in any
Under the proposed policy. contractors and grantees
part to political advocacy; and publication and print-
would be barred from using federal funds for "politi-
ing allocable in part to political advocacy.
cal advocacy," a term that embraces far more than
the traditional notion of lobbying as trying to influ-
Exception for Legislative Liaison
ence a member of Congress to vote a certain way on a
However, certain activities are specifically ex-
particular issue.
cluded from the definition of political advocacy under
Political advocacy. as used in the OMB proposal,
the proposal. Such allowable activities include:
includes not only legislative activities but also efforts
making available the results of a nonpartisan
aimed at influencing rulemaking or other administra-
study or analysis, provided the distribution is not
tive processes in the executive branch of the govern-
intended to influence the outcome of any federal,
ment-the White House and the federal departments
state, or local election, referendum, or other proce-
and agencies.
dure, or any governmental decision;
The term also includes participation in or contribu-
applying for or bidding on a grant, contract, un-
tions to the expenses of litigation other than litigation
solicited proposal, or other agreement, or providing
in which the organization is a party or has standing to
information in connection with such application at the
participate in its own behalf.
request of the government agency awarding the grant,
In addition, particpation in elections or referenda at
contract, or other agreement;
any level of government, as well as contributions of
providing technical advice or assistance to a gov-
membership dues, money, or services to any organiza-
ernmental body or to a committee or subcommittee in
tion having political advocacy as a "substantial orga-
response to a written request.
nizational purpose," are considered political advocacy
This latter category includes certain legislative liai-
and thus would be off-limits to those receiving federal
son activities presently disallowed under the DOD
funds, under the new proposal.
lobbying cost policy and in this respect would be more
Currently, federal policies on lobbying costs vary
favorable to DOD contractors than the current policy,
from agency to agency. Under the lobbying cost policy
according to DAR Council director James Brannan.
issued by DOD last October. the costs of both lobbying
At present, there is no specific lobbying cost princi-
and legislative liaison activities at all levels of gov-
ple governing all federal grants, though there are
ernment are unallowable on defense contracts (38
statutory prohibitions governing lobbying in general
FCR 721, 741). A month later, the General Services
and certain grantmaking departments in particular.
Administration issued a lobbying cost principle for all
If adopted in final form, the proposed policy would
non-defense contracts that disallowed lobbying costs
suspersede both the DOD and GSA lobbying policies
but not costs for legislative liaison activities (38 FCR
and ensure a uniform approach to the issue for all uses
760).
of federal funds, grants and contracts alike.
Commingling Forbidden
Proposed Circular A-122, DAR Changes
Under current lobbying guidelines, contractors may
The changes as they affect grantees are being pro-
separate out the portion of time or other resources
posed as a revision to OMB Circular A-122, "Cost
devoted to unallowable activities when computing
Priniples for Nonprofit Organizations." The proposed
their costs on a contract. But that will be virtually
revision is scheduled to appear this week in the Fed-
impossible to do under the proposed policy, since any
eral Register and carries a 45-day comment period.
item or activity above a bare minimum that is devot-
Parallel changes are likewise being proposed to the
ed to political advocacy renders the entire item or
Defense Acquisition Regulation, the Federal Procure-
activity unallowable. In other words, contractors will
ment Regulations, and the NASA Procurement
be forced to keep their political advocacy items and
Regulation.
activities strictly separate from those devoted to per-
On Jan. 20, the same day that the proposed revision
forming the functions of the contract.
to OMB circular A-122 was formally released, DOD
For example. salary costs of individuals are totally
issued a letter to industry seeking comment within 45
unallowable if "the work of such individuals includes
days on the proposed DAR change. DOD, GSA, and
activities constituting political advocacy," or if the
NASA plan to coordinate their activities in order to
individuals' employer has "required or induced" them
achieve the desired consistency in policy.
in "join or pay dues to an organization other than a
The circumstances surrounding the development
Libor union that has political advocacy as a substan-
and issuance of the proposed lobbying policy are
Federal Contracts Report
0014-9063/83/$0050
180
(Vol. 39)
FEDERAL CONTRACTS REPORT
puzzling. Although OMB has been working with an
(3) Attempting to influence governmental decisions
interagency group for several weeks on the proposed
through an attempt to affect the opinions of the gener-
policy, many senior officials at DOD, GSA, and NASA
al public or any segment thereof;
were not aware that any change was being contem-
(4) Attempting to influence governmental decisions
plated until the day it was issued.
through communication with any member or employ-
Officials from those three agencies who were con-
ee of a legislative body, or with any government
tacted by FCR were not happy with the proposal, and
official or employee who may participate in the deci-
indicated that it was entirely OMB's initiative. All
sionmaking process;
indicated that the comments they receive on the pro-
(5) Participating in or contributing to the expenses
posal will shape the final form of the cost principle,
of litigation other than litigation in which the organi-
but the general expectation is that some changes to
zation is a party with standing to sue or defend on its
their current lobbying policies will be made in light of
own behalf: or
the OMB proposal.
(6) Contributing money, services, or any other thing
John Lordan, head of OMB's financial management
of value, as dues or otherwise, to an organization that
branch and the person directly responsible for coordi-
has political advocacy as a substantial organization
nating the development of the policy, said merely that
purpose, or that spends $100,000 or more per year on
the initiative stems from the Administration's concern
activities constituting political advocacy.
that federal dollars not be used in any way to subsi-
(c) Political advocacy does not include the following
dize political advocacy activities.
activities:
Text of the OMB proposal on lobbying that applies
(1) Making available the results of nonpartisan anal-
to grantees appears at page 230.
ysis, study, or research, the distribution of which is not
Text of the DAR letter to industry regarding the
primarily designed to influence the outcome of any
proposed cost principle on political advocacy follows:
Federal, State, or local election, referendum, initia-
The Administration is concerned with using Govern-
tive, or similar procedure, or any governmental
ment funds for political advocacy purposes. In con-
decision;
junction with proposed changes to OMB Circular A-
(2) Providing technical advice or assistance to a
122, "Cost principles for nonprofit organizations,"
governmental body or to a committee or other subdi-
concerning political advocacy, the attached proposed
vision thereof in response to a written request by such
cost principle is under consideration by DOD, GSA,
body or subdivision;
and NASA. The proposed changes define political ad-
(3) Participating in litigation on behalf of other
vocacy and make those costs unallowable.
persons, if the organization has received a Federal,
The definition of political advocacy used in this
State, or local grant, contract, or other agreement for
proposal is derived generally from the Internal Rev-
the express purpose of doing so;
enue Code, 26 U.S.C. 4911, defining attempts to "in-
(4) Applying or making a bid in connection with a
fluence legislation." with modifications designed to
grant, contract, unsolicited proposal, or other agree-
comprise direct participation in elections or refer-
ment, or providing information in connection with
enda, administrative processes, certain judicial pro-
such application at the request of the government
cesses, and other activity of a political advocacy
agency awarding the grant, contract, or other agree-
nature.
ment; or
Your comments (15 copies) are requested within 45
(5) Engaging in activities specifically required by
days of the date of this letter. Please address your
law.
comments to:
(d) An organization has political advocacy as a
"substantial organizational purpose" if:
Mr. James T. Brannan
(1) The organization's solicitations for membership
Director, Defense Acquisition
or contributions acknowledge that the organization
Regulatory System, OUSDRE(AM)
engages in activities constituting political advocacy;
Room 3C257, Pentagon
or
Washington, D.C. 20301
(2) Twenty percent (20%) or more of the organiza-
tion's annual expenditures, other than those incurred
Sincerely,
in connection with Federal, State or local grants,
contracts, or other agreements, are incurred in con-
WILLIAM A. LONG
nection with political advocacy.
Deputy Under Secretary
(e) The term, "governmental decisions" includes:
(Acquisition Management)
(1) The introduction, passage, amendment, defeat,
Attachment as stated
signing, or veto of legislation, appropriations, resolu-
15.XXX.XX Political Advocacy (CWAS-NA)
tions, or constitutional amendments at the Federal,
(a) The cost of activities constituting political advo-
State, or local level;
cacy are unallowable.
(2) Any rulemakings, guidelines, policy statements,
(b) Political advocacy is any activity that includes:
or other administrative decisions of general applica-
(1) Attempting to influence the outcome of any
bility and future effect; or
Federal, State, or local election, referendum, initia-
(3) Any licensing, grant, ratemaking, formal adjudi-
tive, or similar procedure, through contributions, en-
cation, or informal adjudication, other than actions or
dorsements, publicity, or similar activity;
decisions related to the administration of the specific
(2) Establishing, administering, contributing to, or
grant, contract, or agreement involved.
paying the expenses of a political action committee,
(f) Notwithstanding the provisions of other cost prin-
either directly or indirectly;
ciples in this part:
1-24-83
Copyright © 1983 by The Bureau of National Affairs, Inc.
0014-9063/83/$00.50
NEWS
(Voi. 39)
181
(1) Salary costs of individuals are unallowable if:
curement decision should generally not be overturned
(i) the work of such individuals includes activities
unless a disappointed bidder can show that the deci-
constituting political advocacy, other than activities
sion lacked a rational basis, the court concludes.
that are both ministerial and non-material; or
(ii) the organization has required or induced such
Correct Size Standard Applied
individuals to join or pay dues to an organization other
Baird maintained that since the night vision devices
than a labor union that has political advocacy as a
would be installed in military tanks and other ar-
substantial organizational purpose, or to engage in
mored vehicles, the small business size standard (1,000
political advocacy during non-working hours.
employees) applicable to manufacturers of military
(2) The following costs are unallowable:
vehicles should have been applied. Moreover, the com-
(i) building or office space in which more than 5%
pany noted, the larger size standard is also used for
of the usable space occupied by the organization or an
producers of periscopes and other types of daytime
affiliated organization is devoted to activities consti-
viewing devices used in military vehicles.
tuting political advocacy;
However, Judge Lydon points out, all production
(ii) items of equipment or other items used in part
contracts for this particular night vision device since
for political advocacy:
the mid-1970s have used the [750-employee] size stan-
(iii) meetings and conferences devoted in any part to
dard for makers of light and heat detection devices.
political advocacy;
Furthermore, the SBA Size Appeals Board subsequent-
(iv) publication and printing allocable in part to
ly ruled against Baird, noting that the night vision
political advocacy; and
device is not only installed independently of any day-
(v) membership in an organization that has political
time viewing aids, but also that its two major compo-
advocacy as a substantial organizational purpose, or
nents (an image intensifier and a magnifier) are prop-
that spends $100,000 or more per year in connection
erly classifiable as light detection devices.
with political advocacy.
"The point here is that classification of an item is a
discretionary act and reasonable minds may well
disagree," the judge explains. Since the Army's use of
Judicial Review
the lower size standard was reasonable, there is no
basis for the court to change it, he concludes.
REVIEW OF PRE-AWARD PROTESTS IS
Attacking the Set-Aside
LIMITED IN SCOPE, CLAIMS COURT SAYS
Baird also contended that using a small business
The scope of the Claims Court's review of pre-
set-aside for the procurment was improper. The Army
award protests is limited. the court decides. Only
violated a Defense Acquisition Regulation provision
when an agency's pre-award decisions are clearly
which prohibits a total small business set-aside when
irrational or unreasonable should they be overturned,
at least one "planned emergency producer" wants to
the court rules, adopting the District of Columbia
"participate in the acquisition," Baird maintained.
Circuit's Steinthal standard. (Baird Corp. V. U.S., Cls.
The company argued that it had previously qualified
Ct. No. 645-82C, 1/14/83).
for PEP status.
Last year the Army issued a solicitation for night
However, Baird hasn't qualified under the PEP
vision devices. The procurement was set aside for
program with respect to the particular night vision
small businesses, and was limited to firms with less
device needed in this procurement, Judge Lydon
than 750 employees. Baird maintained that a larger,
states. Rather, Baird had attained PEP status for
1,000-employee size standard should have been used,
another night viewing device with a different federal
and asked the Army to delay the award pending a
stock number. "It should not be left to the PEP
ruling from the Small Business Administration's Size
supplier to determine on its own which item the
Appeals Board.
government wants, "he states.
The contracting officer denied the request, and bids
Moreover, the procurement was not a total set-aside
were opened as scheduled. Baird was low bidder, but
for small business, the judge adds. An Army form
was disqualified for noncompliance with the 750-em-
which provided information to prospective offerors
ployee size standard. The company filed suit in the
did indicate that a 100 percent small business set-
Claims Court to block the award.
aside was contemplated, he concedes. However, in
considering pre-award protests, the court must consid-
Standard of Review
er the totality of the procurement process, he
Writing for the court. Judge Thomas J. Lydon points
explains.
out that judicial review of an agency's pre-award
In fact, the Army planned to buy nearly 2,300 of
decisions must be limited in scope. "The court should
these night vision devices in 1982, and originally con-
not substitute its judgment on such matters for that of
templated two separate awards, the judge notes. Baird
the agency, but should intervene only when it is clear-
won the first (unrestricted) contract, but the second
ly determined that the agency's determinations were
solicitation (a partial set-aside) was the subject of
irrational or unreasonable."
several bid protests. As a result, the solicitation was
Citing M. Steinthal & Co. V. Seamans (400 FCR A-1,
split into two smaller procurements. Baird then won
D-1). the judge stresses that judicial intrusions into the
the first of these smaller contracts. The second pro-
procurement process should be infrequent. "In the
curement, which is the subject of this litigation, is a
absence of overriding public interest considerations,
direct descendant of the partial set-aside, he
the court should refuse to look favorably on declara-
emphasizes.
tory or injunctive relief requests in pre-award bid
Thus, it is reasonable to conclude that the set-aside
protest actions." Thus, an agency's pre-award pro-
was part of a larger procurement, the judge declares.
Federal Contracts Report
0014-9063/83/$0050
3348
Federal Register / 48. No. 16 / Monday, January 24. 1983 / Notices
OFFICE OF MANAGEMENT AND
grantees and contractors with the
advocacy in whole or in part. The
BUDGET
legitimate governmental interests of
revision makes unallowable the costs of
ensuring that the government does not
buildings and office space where 5
[Circular A-122]
subsidize. directly or indirectly. the
percent or more of the space is devoted
political advocacy activities of private
to political advocacy. When federal
Cost Principles for Nonprofit
groups or institutions. These
grant or contract recipients use
Organizations
governmental interests are based on
facilities, equipment, or personnel
concern for protecting the free and
funded in part with federal monies for
AGENCY: Office of Management and
robust interchange of ideas.
political advocacy. they may create the
Budget.
Americans have the First Amendment
appearance of government support for
ACTION: Notice.
right both to engage freely in speech and
their positions. Moreover, if federal
political expression, and to refrain from
funds are used to defray the overhead
SUMMARY: This notice offers interested
speaking. without interference or control
costs of organizations engaged in
parties an opportunity to comment on a
on the part of the government or its
political advocacy, it frees up the
proposed revision to Circular A-122,
agents. Wooley V. Maynard, 430 U.S.
organization's other funds for use in this
"Cost Principles for Nonprofit
705, 714 (1977). The proposed revision is
political activity.
Organizations." The proposed revision
intended to ensure that the use of
The principal effect of the revision
establishes special provisions for costs
Federal grants. contracts and other
will be that federal grantees and
related to political advocacy. Similar
agreements by private organizations
contractors that choose to engage in
revisions are being simultaneously
engaging in political advocacy does not
political advocacy must separate their
proposed for civilian and defense
erode or infringe these constitutional
grant or contract activity from their
contractors through appropriate actions
rights, or distort the political process by
political activity. If they mix the two,
by the Department of Defense, NASA
encouraging or discouraging certain
then they will not receive government
and GSA. the three agencies with
forms of political activity.
authority to issue procurement
The activities of government in a
reimbursement for the jointly allocable
regulations. The purpose of these
democracy necessarily involve a degree
costs. Contractors or grantees will not
proposals is to ensure that federal tax
of political advocacy, since government
be permitted to require or induce
dollars are not used. directly or
officials are expected to communicate
employees paid in part or in whole with
indirectly, for the support of political
with the people, explain their programs,
federal funds to engage in political
advocacy.
and provide leadership and direction to
advocacy activities, either as a formal
Over the past 25 years. the volume of
the nation. Thus, Members of Congress
part of job responsibilites or on their
federal activity conducted through
and their staffs, the President and his
own time.
grantees and contractors has
political appointees, necessarily
The definition of political advocacy
dramatically grown. Sound management
participate in forms of political
used in this proposal is derived
of federal grants and contracts has
advocacy. However, it is a distortion of
generally from the Internal Revenue
correspondingly gained in importance.
the market place of ideas for the
Code, 26 U.S.C. 4911, defining attempts
The responsibility of the President
government to use its financial power to
to "influence legislation," with
through OMB to improve the
"tip the electoral process," Elrod V.
modifications designed to comprise
management of the executive branch of
Burns, 427 U.S. 353, 356 (1976), by
direct participation in elections or
government with a view to efficient and
subsidizing the political advocacy
referenda. administrative processes.
economical service. and to fulfill other
activities of private organizations and
certain judicial processes, and other
statutory and constitutional
corporations. This proposal will ensure,
activity of a political advocacy nature.
responsibilities. extends to issues of
to the extent consistent with the
These proposed revisions will become
grant and contract management no less
communications function of the
effective 30 days after final notice in the
than to issues of direct federal activity.
government, that taxpayers are not
Federal Register. The revisions will
In recent years. the problem of the use
required, directly or indirectly, "to
affect only grants, contracts, and other
of federal funds for political advocacy
contribute to the support of an
agreements entered into after the
by grantees and contractors has been
ideological cause [they] may oppose."
effective date. Existing grants. contracts,
identified by members of the public, by
Abood V. Detroit Board of Education.
and other agreements will not be
the Comptroller General. and by
431 U.S. 209, 235-236 (1977). The
immediately affected. Agency contracts
Members of Congress. As many of these
proposal also seeks to avoid the
and regulations will incorporate these
parties have observed. the diversion to
appearance that, by awarding Federal
provisions to the same extent and in the
political advocacy of federal funds. and
grants, contracts, or other agreements to
same manner as they do other
of equipment procured with and
organizations engaged in politicial
provisions of Circular A-122.
personnel compensated by federal
advocacy on particular sides of public
funds. is an abuse of the system and an
Violations of these provisions will be
issues, the Government has endorsed,
a basis for cost disallowance. and in
uneconomical. inefficient and
fostered, or "prescribe[d] [as] orthodox"
instances of serious or willful violations,
inappropriate use of the public's
a particular view on such issues, West
resources. Moreover, the commingling of
may be a basis for debarment or
Virginia State Board of Education V.
federal grant or contract activity with
suspension.
Barnette, 319 U.S. 624, 645 (1943).
private political advocacy creates the
The proposed revision would make
Comments should be submitted in
appearance of federal support for
unallowable the cost of political
duplicate to the Financial Management
particular positions in public debate.
advocacy, whether direct or indirect.
Division, Office of Management and
This appearance can create
The revision would also make
Budget, Washington, D.C. 20503. All
misunderstanding and interfere with the
unallowable any costs of
comments should be received within 45
neutral. non-ideological administration
communications equipment. personnel.
days of this notice.
of federally funded programs.
other equipment, meetings or
FOR FURTHER INFORMATION CONTACT:
This proposal is designed to balance
conferences, or publications. where such
John J. Lordan. Chief, Financial
the First Amendment rights of federal
cost items are used for political
Management Branch, Office of
Federal Register / Vol. 48, No. 16 / Monday, January 24, 1983 / Notices
3349
Management and Budget. Washington,
activities-such as transporting corporate
to the organization's own interest) have been
D.C. 20503, (202) 395-6823.
officials to discussions with Congressmen-
included in the proposal's definition. to
then under the principles proposed by the
ensure that such activities are not conducted
Issued in Washington, D.C., January 20.
Defense Department. the contractor cannot
1983.
at the expense of the public.
include the cost of the aircraft or of any use
Question: What is the penalty for violating
Candice C. Bryant,
of the aircraft as part of overhead costs
these provisions?
Acting Deputy Associate Director for
allocated in part to the contract.
Answer: Cost recovery, and in instances of
Administration.
As an example in the non-profit area, take
serious or willful violations, suspension or
an organization which receives a federal
Appendix
debarment from federal grants or contracts.
grant to promote better health services for
Question: How does this proposal affect
The following questions and answers have
low-income individuals, which decides to
been prepared by the Office of Management
the First Amendment right of freedom of
organize a political rally to promote more
and Budget for informational purposes only.
federal funding for medical programs. The
speech?
Question: What is the purpose of these
organization could not be reimbursed for any
Answer: This proposal will promote the
revisions?
portion of the salaries of individuals engaged
First Amendment value that a person can
Answer: The purpose is to ensure that
in organizing the political rally or for any
freely speak, or refrain from speaking, on
federal contracts and grants are not used to
portion of other overhead costs (office
political matters. The Supreme Court has
support political advocacy either directly or
machines, printing facilities, etc.) if the same
recognized constitutional problems with
indirectly. Thousands of contractors and
overhead items were used for the rally. The
requirements on a person "to contribute to
grantees. administering hundreds of billions
organization would be free to hold the rally-
the support of an ideological cause he may
of federal dollars. have had wide latitude to
but it would do so at its own expense. and
oppose." Abood V. Detroit Board of
engage in political advocacy activities, often
without using people. facilities or resources
Education, 431 U.S. 209, 235-236 (1977).
using the same facilities and personnel paid
partially funded by the Federal Government.
Although government in a democracy
for in part by the taxpayers. The current lack
Question: How is it possible to define
necessarily involves some degree of political
of a government-wide policy prohibiting the
"political advocacy"?
advocacy because of the need to
use of federal grant and contract funds for
Answer: The concept of political advocacy.
communicate with citizens, taxpayers cannot
political advocacy has been criticized by the
or "influencing legislation." is used in the
rightly be required to support the political
General Accounting Office. It is unfair to use
Internal Revenue Code restrictions on tax-
advocacy of private organizations and
federal tax money to support political causes.
exempt organizations. The Internal Revenue
corporations through federal grants and
Nor is it an efficient or economical use of
Code definition of "influencing legislation" is
contracts.
public resources to allow funds to be diverted
employed in this proposal. with several
Moreover. the freedom of First Amendment
from statutory purposes to political
modifications to take account of changes in
political advocacy is jeopardized when the
advocacy.
political practices (e.g., development of
views of particular groups are financed by
A particularly important abuse is that
political action committees), Supreme Court
the government. The use of federal grants or
many contractors and grantees have been
developments (e.g., decisions declaring
contracts for the support of one side in a
able to defray the overhead costs of their
certain forms of litigation to be political
political debate. like the use of political
political advocacy. at public expense. by
expression). and shifts in the decisionmaking
patronage for the support of apolitical party.
allocating some part of the cost to the
process (e.g., the growth of administrative
can injure the "free functioning of the
administration of the contract or grant. Not
agencies and referenda as means of political
electoral process." Elrod V. Burns, 427 U.S.
only does this free up the organization's own
decisionmaking).
353, 356 (1976). In the marketplace of ideas.
resources for further political activity: it also
In particular, the scope of the Code
where differing political opinions compete for
creates the appearance that the government
definition ("influencing legislation") has been
public acceptance, the government should not
is supporting one or another side in a political
expanded to cover "governmental decisions"
be in the position of subsidizing the
controversy.
in general. Thus. for example, the Internal
expression of views of particular
Question: How will the proposals work?
Revenue Code defines the term "influencing
organizations or corporations. as to defense
Answer: The proposals will revise cost
legislation" as including "any attempt to
or domestic policy. Nor should the
principles applicable to federal grants.
influence any legislation through an attempt
contracts (other than competitive. firm fixed
government create the appearance of official
to affect the opinions of the general public or
price contracts). and other agreements.
support for the political advocacy of its
any segment thereof." The proposed revision
Recipients of federal grants. contracts, or
to Circular A-122. correspondingly. defines
grantees or contractors.
other agreements will be barred from
"political advocacy" as including "attempting
Question: Does this proposal infringe the
receiving government reimbursement for any
to influence governmental decisions through
First Amendment rights of recipient
activities connected with political advocacy
an attempt to affect the opinions of the
organizations?
at the national. state, or local levels. This
general public or any segment thereof." The
Answer: No. Recipients remain free to
includes membership or dues in trade
body of experience in interpreting the
engage in political advocacy on any side of
associations or other organizations that have
Internal Revenue Code provision, as
any issue. The proposals merely ensure that
political advocacy as H substantial
appropriately modified, is expected to aid in
organizations engage in political advocacy at
organizational purpose. In addition, salary
the interpretation of the proposed revisions.
their own expense-not the public's. If an
costs will be unallowable to recipients who
The proposals thus include as "political
organization chooses to exercise its First
either require their employees to pay dues to
advocacy" direct participation in elections or
Amendment rights, it is only fair that it keep
political advocacy organizations or require
referenda by means of contributions,
those political activities separate from its
them to engage in political advocacy on the
endorsement, publicity, administration of
work at the expense of the public. It should
job or during non-working hours. Finally,
political action committees, or similar
not expect to have its political advocacy
suvernment funds will not be permitted to
activity; contributions to political advocacy
subsidized. or to be able to put facilities
pay for facilities in which significant political
organizations: attempting to influence
purchased in part by tax dollars to political
advocacy activities are conducted. thus
government policy made through the
use. Like federal agencies and employees.
requiring physical separation of such
regulatory process as well as the legislative
federal grantees and contractors are
activities from those involved in the
process; and attempts to influence
"expected to
execute the programs of the
performance of grants and contracts.
government policy through litigation as an
Government without bias or favoritism for or
Question: What is an example of how this
amicus curioe, on behalf of the members of
against any political party or group or the
will work?
the organization. or on behalf of another
members thereof." CSC V. National
Answer Take the example of a defense
party. In addition, several categories of
Association of Letter Carriers. 413 U.S. 548.
contractor whit 5 uses a corporate aircraft for
activity excluded from the Code definition of
565 (1973). Federal grant and contract activity
oversight and management of a federal
"influencing legislation" (e.g.,
will be more efficiently and fairly performed
contract. If the contractor chooses to use the
communications with organization members
if it is not mixed with advocacy activities on
aircraft also for lobbying or other political
on political topics and lobbying with respect
one or the other side of political debate.
3350
Federal Register / Vol. 48. No. 16 / Monday. January 24. 1983 / Notices
Question: Will these proposals prevent
defend their interests in court?
contributing to, or paying the expenses
corporations or other organizations from
Answer: No. So long as an organization
of a political action committee, either
lobbying in Congress or the agencies for
appears in court on its own behalf. litigation
directly or indirectly;
grants or contracts?
is not defined as political advocacy.
Answers: No-but they will do it at their
(3) Attempting to influence
However, when an organization goes into
own expense. not the public's.
court to represent others, or to support the
governmental decisions through an
Question: Will organizations engaged in
claim of others. such attempts to influence
attempt to affect the opinions of the
political advocacy be eligible to receive
policy through the judicial process are a form
general public or any segment thereof:
federal grants and contracts?
of political advocacy, as the Supreme Court
(4) Attempting to influence
Answer: Absolutely. In a memorandum
has held. NAACP V. Button. 371 U.S. 415, 429
governmental decisions through
dated April 26, 1982. the Director of OMB
(1963); In re Primus, 436 U.S. 412. 428 (1978).
communications with any member or
made clear that:
Such activities should not be supported by
employee of a legislative body, or with
"The Administration will continue to
federal grant or contract money, unless the
award grants and contracts to those parties
any government official or employee
grant or contract was made expressly for that
who are most effective in fulfilling statutory
purpose. Attorneys fee award statutes are not
who may participate in the
purposes [and that] political advocacy groups
affected by these proposals.
decisionmaking process;
may continue to receive grant and contract
Question: Will these proposals make it
(5) Participating in or contributing to
awards."
more difficult for the federal government to
the expenses of litigation other than
This policy will continue in effect, and just
reward its political supporters?
litigation in which the organization is a
as agencies will be forbidden to award grants
Answer: Yes. Currently, the federal
party with standing to sue or defend on
and contracts because of the political views
government may be able to reward its
its own behalf; or
of applicant groups. they will also be
supporters, and punish its opponents, by
forbidden from discriminating against
(6) Contributing money, services, or
granting or denying federal grants to
"parties most effective in fulfilling statutory
any other thing of value, as dues or
organizations engaged in political advocacy.
purposes."
By making such awards to a friendly
otherwise, to an organization that has
Question: What will be the practical effect
organization the government assumes a
political advocacy as a substantial
on organizations that engage in political
portion of that organization's overhead costs,
organizational purpose, or that spends
advocacy?
and thus supports the organizations political
$100,000 or more per year on activities
Answer: Federal grantees and contractors
activities. In this way, the govenment can
constituting political advocacy.
that choose to engage in political advocacy
influence the political process by inducing
C. Political advocacy does not include
will need to separate their grant or contract
recipients of federal funds to conform their
activity from their political activity. If they
the following activities:
behavior to the governments desires. This
mix the two, then they will not receive
(1) Making available the results of
was one of the dangers of the political spoils
government reimbursement for the joint
system recognized by the Supreme Court in
nonpartisan analysis, study, or research,
costs.
Elrod V. Burns. 427 U.S. 347, 355-356 (1976).
the distribution of which is not primarily
Question: What will be the effect on the
These proposals will help make the process
designed to influence the outcome of
employees of contractors and grantees?
neutral again. by eliminating the "political
any Federal, State, or local election.
Answer: Employees whose salary is paid in
spoils" aspect of the government funding
referendum. initiative, or similar
part with federal funds may not be required
process.
procedure, or any governmental
or induced to engage in political advocacy,
Question: Will these proposals solve the
decision:
either as a part of the job or on their own
whole problem of federal tax money being
time. Nor may they be required to join or pay
(2) Providing technical advice or
used to support political advocacy?
dues to an organization involved in
Answer: No. but they make a major step in
assistance to a governmental body or to
substantial political advocacy. This will
the right direction. Congress and the agencies
a committee or other subdivision thereof
ensure that federal funds are not used to hire
must continue to be vigilant to ensure that
in response to a written request by such
political armies or to generate political
grants and contracts are not awarded for
body or subdivision;
membership support-practices analogous to
purposes that involve political advocacy.
(3) Participating in litigation on behalf
these held unconstitutional in Elrod V. Burns.
of other persons, if the organization has
427 U.S. 347 (1976). Of course. individual
employees remain free to engage in political
Circular A-122-Cost Principles for
received a Federal, State, or local grant.
advocacy on their own it they wish to do so.
Nonprofit Organizations
contract, or other agreement for the
Question: To what organizations do the
express purpose of doing so;
Circular A-122 is revised by
proposals apply?
(4) Applying or making a bid in
Answer: The proposed revision to OMB
modifying Attachment B as follows:
connection with a grant, contract,
Circular A-122 will apply to all non-profit
1. Insert a new paragraph "B 33
unsolicited proposal. or other
organizations receiving federal grants.
Political Advocacy."
agreement. or providing information in
contracts. or other agreements. Similar
a. The cost of activities constituting
proposals are being applied by the
political advocacy are unallowable.
connection with such application at the
Department of Defense. NASA. and the
b. Political advocacy is any activity
request of the government agency
General Services Administration to civilian
that includes:
awarding the grant, contract, or other
and defense contractors. The proposed
agreement; or
(1) Attempting to influence the
revisions will apply to grants. contracts. and
(5) Engaging in activities specifically
outcome of any Federal, State, or local
other agreements entered into after the
required by law.
election, referendum. initiative, or
effective date of the revisions. Existing
d. An organization has political
grants. contracts. and other agreements will
similar procedure, through contributions.
advocacy as a "substantial
not be affected.
endorsements, publicity. or similar
organizational purpose" if:
Question: Will these proposals interfere
activity:
(1) The organization's solicitations for
with organizations due process rights to
(2) Establishing, administering.
membership or contributions
Federal Register / Vol. 48, No. 16 / Monday, January 24. 1983 / Notices
3351
acknowledge that the organization
(3) Any licensing. grant, ratemaking.
(2) The following costs are
engages in activities constituting
formal adjudication or informal
unallowable:
political advocacy: or
adjudication. other than actions or
(a) Building or office space in which
(2) Twenty percent (20%) or more of
decisions related to the administration
more than 5% of the usable space
the organization's annual expenditures.
of the specific grant, contract. or
occupied by the organization or an
other than those incurred in connection
agreement involved.
affiliated organization is devoted to
with Federal. State or local grants.
f. Notwithstanding the provisions of
activities constituting political
contracts. or other agreements, or
other cost principles in this circular:
advocacy:
incurred in connection with political
(b) Items of equipment or other items
(1) Salary costs of individuals are
advocacy.
unallowable if:
used in part for political advocacy;
(c) Meetings and conferences devoted
e. The term. "governmental decisions"
(a) The work of such individuals
in any part to political advocacy;
includes:
includes activities constituting political
(d) Publication and printing allocable
(1) The introduction. passage
advocacy, other than activities that are
in part to political advocacy; and
amendment. defeat, signing, or veto of
both ministerial and non-material; or
(e) Membership in an organization
legislation. appropriations, resolutions.
(b) The organization has required or
that has political advocacy as a
or constitutional amendments at the
induced such individuals to join or pay
substantial organizational purpose. or
Federal, State, or local level;
dues to an organization, other than a
that spends $100.000 or more per year in
(2) Any rulemakings. guidelines.
labor union. that has political advocacy
connection with political advocacy.
policy statements or other
as a substantial organizational purpose,
2. Renumber subsequent paragraphs.
administrative decisions of general
or to engage in political advocacy during
[FR Doc. 80-2031 Filed 1-21-83: 1:28 pm)
applicability and future effect: or
non-working hours.
BILLING CODE 3110-01-M