Where We’ve Been and Where We’re
Going
Rutgers Public Purchasing
Educational Forum
Center for Government Services
Atlantic City, April 30, 2014

Michael Long, Esq.
Partner
Lowenstein Sandler LLP
Joseph A. Valenti (Ret.)
Former Chief, Bureau of Local Management
Services
Division of Local Government Services
New Jersey Department of Community Affairs
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 The Basics
 Definitions & Rules
 Local Procurement & Contracting
 Fair & Open Contracts
 Window Contracts
 Quotations
 The Laws
 State-level
 County & Local
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 Pay to play laws regulate the political activity of companies that do business with government
 Public perception that government officials expect companies to
“pay” (i.e., make political contributions) in order to “play”
(i.e., be considered for government work)
 Includes making and soliciting contributions
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(1)Disqualification Laws
 Penalty is disqualification from certain gov’t contracts
 Can be severe – 5 years or more
(2) Disclosure Laws
 Periodic disclosure – can be “per contract” or “per year”
 Can be extremely burdensome
 Penalties for nondisclosure can vary
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Dollar Threshold
 Rule of Thumb -- in excess of $300
Attribution Rules
 Whose contributions are attributed to the business?
 May include:
• Entities: subsidiaries
•
Major shareholders,
Individuals: Officers, directors, partners, LLC members, spouses, resident children
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Aggregation Rules
 Small contributions can be combined to exceed $300.
 For candidates -- per election
(primary or general).
 For political organizations -- per calendar year.
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 Which contributions are prohibited?
 Differs considerably under the various laws
 May include
• Candidates for / holders of elective office at various level of government
• State, county, or local political party committees
• Legislative leadership committees
• PACs (a/k/a “continuing political committees”)
• Inaugural expense committees
• Ballot question committees
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Dollar Threshold -- More Than
$17,500
 Contracts valued at $17,500 or less are excluded from most pay to play laws.
• Not linked to the agency’s bid threshold
• Will not increase based on index rate
• Includes some contracts with non-profits
9

Dollar Threshold – Multi-Year
Contracts
 For determining the $17,500 threshold, value of the contract over its entire term is considered.
 Contractor receiving a non-fair and open contract cannot make disqualifying contributions during the life of the contract.
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Dollar Threshold – Aggregation
Rules
 Multiple contracts/purchases between a contractor/vendor and a government agency in a single product/service category
• Aggregated for the purpose of the $17,500 threshold
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Fair and Open vs. “Non-Fair and
Open” (Alternate Process)
 (1) Public competitive bidding;
 (2) Competitive contracting
(RFP); OR
 (3) minimum requirements for
“fair and open” process (see next slide)
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Fair and Open – Minimum
Requirements
 Public advertisement (either conventionally in newspapers OR posted on the entity’s website) with
“sufficient time to give notice” (10 days or more); and
 Award under “a process that provides for public solicitation of proposals OR qualifications”; and
 Established on the basis of an award and disclosure process documented in writing prior to any solicitation; and
 Publicly opened and announced when awarded by the governing body .
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Window Contracts
 Contracts over $17,500 but less than the agency’s bid threshold.
 Are subject to the law as a fair and open or non-fair and open process.
 Fair and open contracts must now be awarded by the governing body, not by the purchasing agent.
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Quotations
 Are still permissible, but must comply with pay to play laws.
 i.e., use a “fair and open” process OR comply with Ch. 19 and
Ch. 271.
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County & Local Contracting
 Disqualification Law -- 1 year from prohibited contribution
 “Willful and intentional” violations can be punished more severely:
• 5-year Debarment
• Fines up to $100,000
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 Fair & Open Exclusion
 But, if Contract is “Non Fair &
Open”:
• Certification of no disqualifying contributions
• Continuing duty to disclose to ELEC later made disqualifying contributions
 Ch. 19 Applies to Non-Profits
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 Prohibited Contribution – in excess of $300
 “Winner Rule” – in office at time contract awarded
 For County:
• County political party committees
• County candidates/officeholders
• For Municipality:
• County political party committees
• County candidates/officeholders
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 Relevant Contributors – Attribution
Rule
 Applies to:
• Business
• 10%+ owners (shareholders, partners,
LLC members, etc.)
• If proprietorship, also to proprietor’s spouse and resident children
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County & Local Contracting
Disclosure Law
 (1) “Per Contract” Disclosure
• Business must disclose all reportable contributions 10 days before award of contract
 (2) Annual Disclosure
• ELEC Form BE
• Potential significant impact of a single
 Non-Profits excluded from Ch. 271
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 Attribution Rules – broadest in NJ:
 (1) the business
 (2) 10%+ shareholders
 (3) partners, members, officers, and directors
 (4) their spouses and resident children; and
 (5) subsidiaries or PACs controlled by the business.
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 Relevant Recipients – broadest in
NJ:
 (1) State, county, and municipal political parties;
 (2) PACs;
 (3) Legislative leadership committees; or
 (4) any State, county, or municipal candidate in the jurisdiction where the contracting entity is located.
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
 http://www.state.nj.us/dca/divisio ns/dlgs/programs/pay_2_play.html
 Includes:
 Local Finance Notices
 Plain language guides
 Forms
 FAQs
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 County, local, and other government units are permitted to enact their own pay to play laws and rules
 Posted to the NJ Secretary of State
Website
 http://www.state.nj.us/state/dos_pay_ to_play.html
 Nearly 200 separate laws – county, municipal, school board, authority, etc.
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 Key possible differences to watch out for:
• Lower contract amount threshold
• No “fair and open” exception
• Broader attribution rules
• Lower contribution limits
• Different aggregation rules (Broader scope of relevant recipients
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 State Contracting
• Applies to all State executive agencies, authorities, instrumentalities, etc.
• Disqualification Law – at least 18 months disqualification
• NO “fair and open” exception
• Attribution rules – very broad
• Relevant recipients – very broad
 EO 18 – FHWA Exclusion
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 Circumvention of pay to play laws can be treated as a separate violation
 Certain acts can result in criminal sanctions and other punishments
• E.g., intentional use of
“strawmen” or sham companies to disguise contributions
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 Media coverage is driven by scandal -even being associated with the words “pay to play” carries risk
 “ELEC reports N.J. ‘pay to play’ money totaled $5.1B” (www.nj.com, April 4,
2009)
 Pay to Play: How Rod Blagojevich Turned
Political Corruption Into a National
Sideshow (book by Elizabeth Brackett,
2009)
 Bottom Line: You don’t want your name in
29 the headline

1.
Constitutional Challenges
2.
Boxer Report
3.
Reform Legislation
4.
Lobbyist Registration Laws
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Laws are New
 vague wording
 limited guidance
 few judicial and appellate decisions
Laws are in Flux
 constantly evolving body of laws, rules, regulations, and executive orders
 First Amendment and other challenges
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Enforcement is Uncertain
 lack of enforcement track record and transparency
 unclear boundaries of enforcement authority
Limited/Non-Existence of “Good
Faith” Defenses
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