Beware of state, local pay-to-play laws.

• Author: Epstein, Steve
• Position: Ethics Corner

* Many companies that have provided goods and services to the U.S. military are now evaluating new markets with state and city law enforcement agencies, which are seeking sophisticated security systems to address their expanding public safety needs.

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Before making this leap, vendors should understand that states, cities, regional authorities and other local governments also bring into play a new world of contracting and political compliance requirements.

In this world, the Federal Acquisition Regulation and the Defense Federal Acquisition Regulation Supplement don't count. However, pay-to-play laws may derail even the best proposals.

Pay-to-play laws are anti-corruption measures enacted by at least 22 states, as well as a number of cities and regional authorities such as the Los Angeles County Metropolitan Transportation Authority. These laws often are legislative responses to scandals in which elected officials awarded contracts--particularly no-bid contracts--to individuals or companies that made substantial donations to an official's campaign.

While the awards may not have been influenced by the contributions, the appearance that the public official may have been improperly influenced by the contributions was sufficient to provoke the legislation.

While each pay-to-play law is unique to the enacting jurisdiction, the laws generally come in three flavors: Those that disqualify a contributor or fundraiser from bidding on contracts; those that bar an existing contractor from making campaign contributions or fundraising; or those that require contractors to report all campaign contributions and fundraising.

In general, political contributions over certain minimum amounts and fundraising activities will trigger the laws. The sources of such contributions include corporate treasury, company political action committees (PACs), subsidiaries and personal contributions from owners, directors, corporate officers or any employee who is involved in soliciting, administering or managing contracts with a pay-to-play jurisdiction. In Pennsylvania and Kentucky, all employees are included. And in many jurisdictions, spouses and minor children are covered.

New Jersey provides a perspective on how pay-to-play laws can affect a business plan.

There, a bidder may not be awarded a contract with the state worth more than $17,500 if within 18 months preceding the start of contract negotiations, or during the term of office of the elected...