New Earmark Rules Have Lobbyists Scrambling

New Earmark Rules Have Lobbyists Scrambling
By ERIC LICHTBLAU
New York Times
Published: March 11, 2010

WASHINGTON — Jolted by a sudden tightening of the rules, lobbyists and military contractors who have long relied on lucrative earmarks from Congress were scrambling Thursday to find new ways to keep the federal money flowing.

“The playing field has changed dramatically,” said Michael H. Herson, a lobbyist in Washington whose firm, American Defense International, represents numerous defense industry contractors who have already put in their requests this year for earmark money.

Those clients, who along with hundreds of other businesses got $1.7 billion last year through the controversial practice of awarding earmarks, will now be barred from receiving money under a new policy adopted Wednesday by Democrats on the House Appropriations Committee.

House Republicans, seeking to outdo the Democrats in ethics reform, went even further Thursday by agreeing to swear off all earmarks, for both nonprofit and commercial organizations, for the next year.

“This is the best day we’ve had in a while,” said Representative Jeff Flake, an Arizona Republican who has been a fierce opponent of earmarks — no-bid contracts directed by lawmakers — but had found little support among Republican colleagues before this week. “In terms of us getting this moratorium, the stars were aligned. What the Democrats did certainly motivated the Republicans.”

Senate leaders, however, have not rushed to follow the House, a situation that would set up a clash when the two chambers try to reconcile their spending bills.

No one was willing to predict on Thursday how that confrontation might play out. Meanwhile, defense contractors and the “K Street” lobbyists in Washington who often represent them were planning new ways of packaging their financing requests — and trying to keep the revenue coming in.

Some firms talked of partnering with hospitals, universities and other nonprofit organizations in seeking federal money, an idea that Congressional officials said might not be allowed under the new rules. Others said they planned to become more aggressive about applying directly to the Pentagon and other federal departments and agencies, and not Congress, for grant money. Still others are warning their clients to diversify their financing sources and become less reliant on Washington.

“For firms that have made their living on getting earmarks for their clients, this is a sea change,” said Joseph M. Donovan, managing partner at Nelson Mullins Public Strategies Group, a Boston lobbying firm that represents about 50 private and public clients. “It fundamentally changes their business model.”

Mr. Donovan said his company had anticipated a sharp cutback in earmarks because of the political mood in Washington and began taking steps to help clients navigate the new landscape. That includes hiring an in-house writer to help them apply for federal grants directly from executive branch agencies instead of Congress.

Because that grant money is usually awarded based on competitive bids, he said it would be harder for smaller companies with promising research-and-development ideas. Contractors will have to be “more strategic” in their thinking, he said, “because I don’t want to be in the position of telling them that things are being done through a wink and nod and you’re just going to get a million dollars.”

In the Senate, some lawmakers have defended earmarks as a necessary tool for Congress to exercise the power of the purse and influence federal spending. Supporters say that for every “Bridge to Nowhere,” the Alaska earmark project that became infamous five years ago, there are worthy projects that get less attention.

As one example, supporters pointed to the earmarking of tens of millions of dollars in the 1990s to General Atomics and other military contractors for early development of what became the Predator program, the unmanned drones now used frequently in airstrikes in Afghanistan. Senator Daniel K. Inouye, the Hawaii Democrat who leads the Senate Appropriations Committee, said that if the House ban on commercial earmarks had been in effect then, “we would not have the Predator today.”

Limiting earmarks to nonprofit recipients is not necessarily a cure-all. For example, Representative John P. Murtha, the Pennsylvania Democrat famous for his earmarking largess, set up the Concurrent Technologies Corporation in his district in the 1980s as a nonprofit research center for metalworking, and he helped guide more than $1 billion in defense earmarks to it before he died last month.

Executives at Concurrent contributed frequently to Mr. Murtha’s campaigns. The group has come under scrutiny by F.B.I. investigators looking into pay-to-play allegations against the now-defunct lobbying firm P.M.A., which represented Concurrent and other clients that got earmarks.

Whether earmark money will dry up complete