Ethics Commission advice has been requested as to whether a consultant who assists clients in various Executive Branch matters (the Requestor) is required to register as a lobbyist pursuant to the provisions of Subtitle 7 of the Public Ethics Law (State Government Article, Subtitle 7, Annotated Code of Maryland). We advise that while registration does not appear to be required as the circumstances of her activities are now described, the lobbying law requirements could apply in some circumstances based on application of criteria discussed in the opinion.
The Requestor is a former employee of a private lobbying firm. She was registered and engaged in activities involving dealings with both legislative and executive officials as the lobbyist's assistant in connection with legislative and executive branch matters. She left employment with the lobbyist in 1999 and started her own business. She indicates that she does not anticipate dealing with legislative action issues, and presents two fact situations involving dealings with executive agencies. One involves a client who is a housing provider for the developmentally disabled; the other client is a minority business that has distributorship rights with a major oil company to distribute petroleum products in a 5-state territory. The second situation entails some start up issues relating to the Brownfields voluntary cleanup program being implemented by the Department of the Environment and would eventually involve selling products to the State.
The Requestor's first client is a provider of residential services to clients of the Developmental Disability Administration (DDA). According to the DDA Director, residential providers are first licensed by the agency based on review of particular housing units and provider management by the agency. Most licensees serve as alternative living units, housing from 1 to 3 individuals, though there are also a number of larger providers that are licensed as group homes and can serve up to 8 persons. Once licensed, the providers may be selected by an approved DDA client and the agency agrees on the payment rate with the provider. The payment is based on a regulatory fee system that includes a flat rate for administration and an amount to cover services to the client based on a client matrix that rates the level of services needed by a client. These fees are reflected in a fee payment provider agreement. Supplemental or "augmentation" agreements may also be negotiated to allow for additional payments to a provider where a client requires 24 hour awake supervision or for other special services. We understand that an average payment to a provider per client per year may be about $40,000, including augmentation payments.
According to the Requestor, the client Provider is already qualified and has a contract to provide housing to persons funded by the Developmental Disabilities Administration (a unit of the Department of Health and Mental Hygiene). She says that the Provider would occasionally have problems dealing with the DDA's Regional Office in not receiving client referrals or in not receiving timely payments for clients being served. The Requestor would serve as an intermediary in setting up meetings with DHMH headquarters offices to address these issues. She says that she has had no role in helping the Provider to be qualified or in acquiring clients, though occasionally issues arise about retaining as permanent clients individuals that have received temporary housing services from the Provider. Also, she may have a role in assisting the Provider in its dealings with the agency regarding the negotiation of augmentation payments for residents in the Provider's facilities who need 24-hour assistance. She is paid a per month retainer from the entity.
A second client that the Requestor is serving is a minority business that has distributorship rights with a major oil company to distribute petroleum products in a 5-state territory (the Distributor). The company has a plant in Maryland that has had hazardous waste contamination issues and has had some start up issues relating to the Brownfields voluntary cleanup program being implemented by the Department of the Environment. The Requestor indicates that the Distributor owns this property and has undertaken clean up activities on the property. He has been seeking a Brownfields certification of "no further requirements" from MDE. She advises that she has assisted this client in facilitating the process of the paperwork with MDE so that he can qualify for certification under the Brownfields program.
Apparently this client's project does not entail funding and the Requestor has not engaged in any activities on the client's behalf except the regulatory application process under the voluntary cleanup program. She states, however, that once the business gets started, she anticipates being retained by the Distributor to assist it in sales and possibly general business support. This would include monitoring State agency invitations for bids and following through once a procurement has been identified with assistance in actually negotiating sales agreements. Apparently these would be supply contracts providing for delivery of products on an ongoing basis. The Requestor indicates that she expects to be compensated with a monthly retainer and possibly a percentage of the value of any non-State contract in which she is involved.
This request presents issues under the lobbying registration provisions of §15-701(a)(3) of the Ethics Law as amended in 1994 (State Government Article, §15-701(a)(3), Annotated Code of Maryland). Section 15-701 prior to 1994 required registration in connection with activities directed solely at executive branch action only when there was a personal presence before officials to influence executive branch action, and the individual or entity had expenditures of over $100 for food, gifts or other entertainment for officials. There was no compensation standard for this type of executive branch action as was the case with legislative action lobbying. In 1994, however, there were amendments to the Law that resulted from a Joint Legislative Task Force on Procurement, and added several provisions dealing with lobbyists engaging in procurement types of activities. These included the procurement lobbying registration criteria of subsection (a)(3).
The amended §15-701(a)(3) provides, in addition to the original legislative and executive action "in the presence" lobbying thresholds, for registration if during a reporting period an entity "is employed to influence executive action on a procurement contract that exceeds $100,000." Bona fide salespersons and commercial selling agencies maintained or employed by an employer are excluded. "Procurement contract" is defined in §15-102(ee) as having the meaning provided in §11- 101 of the State Finance and Procurement Article, which in turn defines "procurement contract" very broadly as an agreement in any form entered into by a unit for procurement. The definition, however, specifically excludes from procurement contract a Medicaid, Judicare, or similar reimbursement contract for which law sets user recipient eligibility and the price payable by the State.
We believe that there are three fundamental issues presented by the Requestor relating to interpretation and application of the registration requirements of subsection (a)(3).1 First, the question is presented as to involvement in matters that may have some relationship to procurement activities, but which may not involve influencing the procurement. In the first client situation presented by the Requestor, she indicates that she has assisted the Provider as to payment issues and other implementation aspects of the Provider's agreements with the DDA. As to her second client, the Requestor has advised of her assistance to the Distributor in meeting regulatory requirements under the Brownfields program. We have considered in a general information memorandum relating to the 1994 legislation the question of what constitutes influencing executive action in a procurement for purposes of the subsection (a)(3) criteria, advising that
generally, these are efforts that are not insignificant aimed at influencing State purchasing primarily by attempting to impact on the specifications or the choice of a vendor. Although various fact situations can require close analysis, there generally is a distinction between the provision of limited information at the request of the procuring agency and the affirmative action of trying to influence executive procurement action.
The memorandum also indicates that influencing the details of an ongoing contract is not generally influencing executive procurement, but that it could be if the activity leads to a significant change in the terms or conditions of the contract.
In our view this preliminary guidance continues to be valid and to define the framework for consideration of issues such as those presented by the Requestor's facts. Particularly, we believe that this requirement is intended to deal with circumstances involving the definition of specifications, identification of a vendor/contractor, and creation of the terms and conditions of an agreement between the State and a contractor in a given situation. We therefore believe, for example, that the Requestor's assistance to the Provider as to contract implementation, such as in regard to payment issues as stated here, does not constitute influencing executive action in a procurement. Nor would her involvement with an agency on behalf of the Distributor as to clearly separate regulatory matters that need to be resolved prior to his becoming a potential vendor bring her activities within the registration requirements of subsection (a)(3).
A second question presented by the Requestor's situation, particularly as to the Provider activities, results from the Ethics Law's reference to the definition of "procurement" in the Government Finance and Procurement Article. While in some provisions of the Ethics Law the concept of a procurement is interpreted as having a broader application than the specific legal definition of the State's procurement law, we believe this specific reference in connection with procurement lobbying registration provisions requires reliance on the application of the procurement law. In view of the Attorney General's expertise and authority as to this law, a request was presented to the Attorney General for an opinion regarding the interpretation of the term "procurement " under the State's procurement law.
In response, we received an Opinion of the Attorney General (No. 00-007 (March 10, 2000), cited as 85 OAG(2000)) regarding application of the procurement provisions of the Government Finance and Procurement Article to human services contracts such as those involved in the Requestor's relationship with the Provider. The Opinion states that
as a general rule, State agency purchases of human services fall within the definition of "procurement contract." However, particular transactions may be exempt from that definition as "Medicaid, Judicare, or similar reimbursement contract[s]" for which the law sets eligibility standards and price. Because it is often not immediately apparent whether that exemption applies to a particular transaction, the nature of each type of purchase must be examined, together with any law and regulations governing the program under which the purchase is made.
Noting that statutory and regulatory requirements relating to purchase of human services continue to require use of the noncompetitive negotiated procurement method for these types of services, including various residential and group home services, the Opinion specifically addresses the application of the definition's exemption to reimbursement contracts for which law sets eligibility standards and price. Concluding that the reference to "law" in this language includes agency regulations, the Opinion reviews COMAR provisions 10.09.26, 10.22.17 and 10.22.18 issued by the Department of Health and Mental Hygiene relating to reimbursement of private providers of housing services for the developmentally disabled. The Opinion concludes that given the effect of these regulations in defining eligibility and setting prices for such services, a contract for these residential services "plainly falls within the [procurement contract definition] exemption."
Based on this advice from the Attorney General, we would conclude and advise the Requestor that her basic involvement in assisting the Provider to acquire clients pursuant to the regulatory requirements for provision of residential services would not involve influencing a procurement contract for purposes of the registration requirements of §15-701(a)(3). We have, however, in follow up of the Attorney General Opinion, discussed this program with agency representatives and been advised that augmentation contracts as well as other arrangements for payment of funds required to allow for provider staffing to meet special medical and behavioral needs of clients, are not covered by these regulations. According to agency counsel, these types of agreements are treated as noncompetitive negotiated procurements, and would therefore under the advice provided in the Opinion, be viewed as procurement contracts under the procurement law and also under the Ethics Law, subject to registration requirements if they meet the monetary threshold of the lobbying provisions of the Ethics Law.
A third issue presented by the Requestor's two fact situations has to do with application of the $100,000 monetary threshold included in §15-701(a)(3) of the lobbying title of the Law. The Law covers influencing "executive action on a procurement contract that exceeds $100,000." The language addresses action on a procurement, and we believe that this suggests the application of the $100,000 threshold to a particular procurement or contract arrangement. As to the Requestor's services to the Provider, for example, it would apply to the contract for reimbursement for augmentation services for several residents in one group home if, as has been the case in the past, the services are reimbursed as an aggregate for a particular residence. If, however, the reimbursement for augmentation services is clearly by individual resident, then the determination under the threshold requirements of subsection (a)(3) would be based on the amount for the individual, even if the total payments for the residents of a particular facility exceeds the $100,000 threshold.
We believe, however, that even where the augmentation contracts relate to individuals there is a real likelihood that Requestor's assistance to the Provider could come within the (a)(3) threshold requirements. First, we understand that there are situations, depending on the individual needs, where these contracts can involve substantial sums, even on an annual basis. Moreover, we believe that the approach suggested in the definition of "doing business" in the Ethics Law should be applied here, even though that term is not specifically at issue. In this provision (§15-102(j)(3)(ii)), the threshold contract value is to "include, as of the award or execution of a contract or lease, the total consideration committed to be paid under the contract or lease, to the extent ascertainable when awarded or executed, regardless of the period over which payments are to be made." A multi-year augmentation contract anticipating annual payments of $30,000 per year for four years would under this approach exceed the $100,000 threshold.
We believe the same principle would apply to Requestor's activities in assisting the Distributor in sales efforts, even if the contract is a supply contract envisioning particular purchase orders or payments that would be under the $100,000 threshold. Assistance in negotiating a three- year supply agreement, anticipating total payments in excess of $100,000 over the three-year contract period, would thus in our view involve influencing executive action in a procurement over $100,000 and would trigger the lobbying requirements for the Requestor.
In summary, we believe that the procurement action lobbying registration criteria of §15-701(a)(3) of the Ethics Law: 1) apply, as a general matter, to actions involving specifications development, vendor identification, and negotiation of a contract, rather than to regulatory actions preliminary to a procurement or to implementation issues or matters under an existing contract; 2) rely on the specific legal definition of the term procurement contract as it appears in the Government Finance and Procurement Article; and 3) as to the $100,000 threshold criteria, apply to individual contracts even though there may be a series of agreements covering related transactions or clients, but are based on the total ascertainable/expected value of the contract without regard to the timing of payments.
For the Requestor's purposes as to these two particular situations, she would not be required to register if her only activity, as described, for the Provider relates to assistance in payment and related implementation issues. She would also not have to register if negotiation of provider client agreements relates only to basic residential services covered by DHMH regulations as cited, or if an augmentation agreement anticipates total payments of less than $100,000. She would have to register on behalf of the Provider, however, if she assists her in acquiring augmentation agreements even for individual clients, if the total expected payments over the period of the agreement exceeds $100,000. As to her activities with the Distributor, we do not believe that her work for him relating to regulatory actions under the Brownfields program as described would trigger the registration requirements. Nor would general office assistance to him in connection with implementation of any contracts he undertakes with State agencies. However, if she has any role in assisting him to acquire such contracts, then the registration requirements apply, even if the contract is an open-ended sales contract envisioning multiple transactions, if the total anticipated payments anticipated under the contract exceed $100,000.2
Charles O. Monk, II, Chair
Dorothy R. Fait
Michael L. May
D. Bruce Poole
April E. Sepulveda
Date: August 24, 2000
1 We want to make clear that this discussion is based on the facts presented, and the Requestor's statement that she does not anticipate involvement in legislative action or expenditures for meals, beverages and other gifts for officials that would bring her within the other registration criteria of §15-701. We also assume, based on her description of her activities, that she cannot be considered as a "bona fide salesperson or commercial selling agency" for purposes of exemption from subsection (a)(3) pursuant to §15-701(b)(3).
2 Requestor should be aware that if registration on behalf of the Distributor is required then §15-706 of the Law would bar her engaging in these activities for contingent compensation and thus restrict her ability to be paid a percentage of the contract value. Similarly, fees for any registration activity as to the DDA could not be contingent.