Federal procurement is a massive industry now topping $1 trillion annually. It is also uniquely vulnerable to corruption. The temptation is obvious: companies competing for federal contracts have every incentive to curry favor with the officials who decide where those dollars go. And thanks to the Supreme Court’s gutting of campaign finance law in Citizens United and subsequent cases, it is easier than ever for companies and their billionaire owners to do that through large campaign contributions and similar types of spending.
The results are stark. Companies that donate to candidates routinely receive more, and larger, federal contracts than non-donating competitors. Indeed, one seminal study showed that giving an additional $200,000 yields, on average, over 100 extra contracts worth more than $5,000,000. In other words, a return on “investment” of 2,500 percent. Other research has consistently confirmed the link between campaign donations and federal contracting benefits.
Most of this spending is technically legal due to woefully inadequate federal rules barring contractor campaign spending. In most cases, they apply only to the specific individual or entity that holds the contract, allowing major federal contractors to spend tens, or sometimes hundreds, of millions of dollars on federal elections through their PACs and affiliated entities and individuals. The rules also do not apply to other fundraising vehicles that contractors can use to curry favor, such as presidential inaugural funds and libraries.
Pay-to-play culture causes real harm. It fuels waste and inefficiency as taxpayer dollars get siphoned to useless projects. And the appearance that donors are getting special treatment saps public confidence in government. At a time when voters rightly perceive high-level self-dealing in government to be rampant, they overwhelmingly want stronger safeguards. Congress must respond.
Specifically, Congress should:
- expand the scope of the existing contractor campaign contribution ban to cover affiliated entities, executives, and major shareholders; and
- broaden the range of political spending the ban covers to include other fundraising avenues like inaugural funds, presidential libraries and special projects under the president’s control.
This is one of a number of ambitious reforms needed to address the increasingly brazen government corruption that is undermining confidence in American democracy. Together, these changes are essential to provide Americans with a compelling alternative to the status quo.
History of the Contractor Contribution Ban
Lawmakers have long recognized the heightened corruption risk in government procurement. As government expanded in the late nineteenth and twentieth centuries, Congress and states built safeguards designed to insulate the contracting process from self-dealing, such as bidding requirements, civil service protections, and internal watchdogs like agency inspectors general. These reforms helped to stamp out much of the naked patronage and graft that had been routine at earlier times in our history, such as during the Gilded Age. But even as these forms of corruption diminished, the increasingly significant role of money in the electoral process opened new avenues for contractors to curry favor with elected officials through campaign donations. Cutting off this source of corruption was the original impetus for “pay-to-play” restrictions that place special limits on contractor political spending.
The federal contractor contribution ban, now codified at 52 U.S.C. § 30119, was enacted in 1940 as part of amendments to the Hatch Act, the landmark law that sought to crack down on patronage and eliminate political favoritism in government. The Hatch Act initially focused on shielding federal employees from political coercion. But lawmakers soon saw the need for broader safeguards as evidence of widespread contracting abuses came to light. Floor debate in the House, for example, detailed how Democratic operatives had for years conditioned federal contracts on political support, pressuring contractors who wanted to continue receiving government business to buy Democratic Party campaign materials at inflated prices “in proportion to the amount” of their contracts. Stories like these spurred support for reforms to clean up federal contracting, which one Senator called “the greatest source of corruption in American politics.”
More Loophole than Law
In its current form, the contractor contribution ban prohibits “any person” negotiating or performing a contract with the United States from “directly or indirectly” contributing to political parties, committees, candidates, or “any person for any political purpose or use.” Despite this seemingly broad language, the ban has been applied narrowly in practice. Most contractor contributions come not from the entity that holds the contract, which would be a blatant violation of the law, but from other closely affiliated individuals and entities. In almost all cases, the Federal Election Commission (FEC), the nation’s campaign finance watchdog, has said that such spending should not be attributed to the contracting entity and consequently is not covered by the ban. According to the Commission, as long as the spender and the contractor are “separate and distinct” legal entities, the contribution is legal.
This renders the ban more loophole than law, leaving ample room for companies to route their government work through one subsidiary while leaving other affiliates, the parent corporation, major shareholders, and executives free to spend on elections — including giving unlimited amounts to super PACs, which would have been illegal before Citizens United.
Millions in Campaign Spending
In every election cycle, major government contractors across a variety of industries, including defense, healthcare, and management consulting, give tens of millions of dollars to both parties through their affiliated entities and related PACs.
Individuals connected to major contractors have also become prolific donors, with Elon Musk providing the starkest illustration. He is the owner and public face of companies like Tesla and SpaceX that have received tens of billions of dollars in federal contracts and subsidies. Yet he also spent over $291 million backing Donald Trump and other Republicans in the 2024 election, by far the most of any political donor that cycle. He is spending even more in the 2026 midterms, reportedly a record-breaking $366 million to support Republican candidates for the U.S. House and Senate. According to the FEC’s interpretation of the law, none of this spending implicates the contractor ban because it came from Musk as an individual, not SpaceX or Tesla. Musk is one of several Trump megadonors with stakes in contracts worth billions. Similarly, Michael Bloomberg, who gave $49 million supporting Democrats in 2024, is majority owner of companies that have received hundreds of millions in federal contracts.
This is just the spending we know about. Contractors also have the option to spend anonymously by funneling money through nonprofits and shell companies that don’t have to disclose their donors. These dark money groups pumped more than $1.9 billion into federal races in the 2024 election, nearly double the prior record set in 2020. While some dark money occasionally gets exposed, that is the exception rather than the rule. The lack of transparency means there is no way of knowing how much contractors and related entities actually spend.
Non-Election Spending
Increasingly, major federal contractors also have other avenues to curry favor with the president and other powerful officials.
Two that have exploded under the current administration are donations to presidential inaugurations and library foundations. Trump’s second inaugural committee shattered fundraising records, bringing in $245 million (double his prior record-setting first-term haul and four times President Biden’s inauguration), including massive amounts from contractors that have since received new or significantly increased awards — such as the $1 billion increase in tech giant Palantir’s contract to provide AI technologies to the Department of Defense. This mirrors Trump’s first term, when dozens of companies that donated to his inauguration fund subsequently received multi-million-dollar contracts.
Presidential library fundraising is largely a black box that is not subject to required disclosure, but public reporting confirms that Trump has also raised tens of millions of dollars for his library. This practice is not new. Despite objections from both sides of the aisle, most recent presidents have solicited library funds while in office, including Bill Clinton and George W. Bush. But none of them raised as aggressively as Trump. Noteworthy contributors to Trump’s presidential library include companies like Elon Musk’s X; Meta, which is deeply invested in an AI company that recently won a $500 million Defense Department contract; and SoftBank, which recently paid $50 million as it prepares to build a massive data center on leased federal land.
The administration has also opened new avenues for companies to curry favor through novel arrangements to fund President Trump’s pet projects. These include a new White House ballroom, architectural changes around Washington, D.C., and the partisan Freedom 250 organization, which competed with America250, the bipartisan group Congress created to organize the nation’s semiquincentennial celebrations.
An analysis of the known White House ballroom donors, for instance, found that most are major federal contractors, and half received new or increased contracts worth tens of billions of dollars in the months just before or after they made their donations. These contractors include Lockheed Martin, Palantir, and Amazon. Meanwhile, contractors like Boeing are paying to sponsor events championed by the agencies that regulate them, such as Transportation Secretary Sean Duffy’s Great American Road Trip and IndyCar’s Freedom 250 Grand Prix in downtown Washington, D.C.
Contractor Spending Restrictions Are Still Constitutional
Despite decades of judicial skepticism toward campaign finance regulation generally, courts have consistently upheld contractor restrictions, recognizing that government contracting falls in the “heartland” of legitimate corruption concerns. The impressive, if dismaying, factual record of pay-to-play scandals leaves little doubt about the need for such bans. In the leading case on the subject, Wagner v. FEC, the en banc D.C. Circuit unanimously rejected a First Amendment and equal protection challenge brought by individual federal contractors. The court held not only that the ban was justified to prevent the reality or appearance of corruption but also predicted that “if the dam barring contributions were broken, more money in exchange for contracts would flow through the same channels already on display.” The Supreme Court declined to review the decision, leaving it in place as the final word. Courts have also upheld similar state laws, including those more expansive than the federal ban.
The same logic from Wagner and related cases applies to the gaps described above, providing a strong legal foundation for reforms to expand the existing ban.
Lessons from Other Jurisdictions
Many other countries address pay-to-play concerns through blanket bans on corporate political spending. Given the Supreme Court’s current campaign finance jurisprudence, however, that approach is not currently viable in the United States.
Still, examples from several U.S. states show that broader contractor bans are effective, administrable, and legally viable. New Jersey offers one of the most developed domestic models. Its pay-to-play laws extend well beyond contracting entities to cover their principal owners, officers and directors, and even spouses. Subsequent executive orders have defined “business entity” to include officers, partners, members, and persons controlling 10 percent or more of stock. New Jersey also employs a complementary disclosure regime, which requires any contractor that receives $50,000 or more in state and local payments to make annual reports, including obligations that reach subsidiaries, PACs, officers, partners, principals, directors, and spouses. Connecticut is another strong model, with contribution and solicitation bans that apply broadly beyond the contracting entity, including any shareholder that has a 5 percent or greater ownership stake.
Expanding the Ban
Congress should close the gaps in the current contractor spending ban by expanding it to cover related corporate entities, their PACs, and affiliated individuals, as well as other payment vehicles that contractors use to curry favor with those in power.
To address affiliated entities within a corporate structure, Congress can look to models that already exist within federal law. One option is to import the FEC’s rules for assessing whether political committees are affiliated, which focus on common ownership and common control, and apply the ban to the entire corporate family any time an affiliated entity holds a federal contract. This approach could prove too restrictive in some circumstances — for example, where a subsidiary of a large, diversified conglomerate holds a relatively small contract. But Congress could address overreach concerns in such cases by including a materiality threshold, an approach common in corporate and securities law, such that the affiliate ban triggers only if the contract exceeds a specified dollar value or represents a non-trivial portion of the affiliated group’s total revenue.
Congress should also place special limits on how much certain natural persons affiliated with contractors — corporate officers, board members, and major shareholders — can contribute. This would require defining an ownership stake above which an individual shareholder qualifies as a “major shareholder” covered by the ban. For example, New Jersey sets its threshold at 10 percent and Connecticut sets it at 5 percent, both of which mirror the Securities and Exchange Commission’s thresholds for beneficial ownership disclosures. Because the concern is control rather than mere ownership, these thresholds help to sweep in shareholders whose financial stake is functionally equivalent to the contracting entity’s, while exempting passive institutional investors who lack operational control.
Finally, Congress should expand the ban beyond campaign contributions to cover other channels contractors use to curry favor. The prohibition should apply to known vehicles for giving, such as contributions to presidential library foundations and inaugural funds, as well as any other special government initiative controlled directly by the president, such as the White House ballroom.
Beyond Political Spending Limits
Of course, procurement abuses are not limited to pay-to-play. Congress should simultaneously work to improve the broader integrity of the contracting process. Avenues to pursue include restoring the system of strong inspectors general, who routinely identify tens of billions of dollars in potential savings per year; revamping the rules governing sole-source awards, which have increasingly been used to bypass competitive bidding safeguards; and developing new accountability mechanisms, including more robust congressional oversight, for situations in which competitors are unwilling to lodge bid protests because they fear political retaliation.
Conclusion
Americans are furious about government corruption. Even when an action isn’t outright illegal, just the appearance of pay-to-play arrangements, influence peddling, and other forms of legalized corruption undermines confidence in government. It fuels the perception that the wealthy and well-connected get special treatment at the public’s expense. According to Brennan Center polling from earlier this year, it’s clear that overwhelming majorities across the political spectrum understand this as a form of corruption and want it to end.
Expanding the federal contractor contribution ban is a key part of the solution. The existing ban rests on a sound and judicially validated premise: money flowing between government contractors and the officials who control their contracts poses an unacceptable risk of corruption. But the current law does little to address this risk because it allows payments to pass unimpeded through corporate subsidiaries, individual executives and shareholders, and non-election vehicles. By closing these gaps, alongside other urgent reforms, Congress can help stamp out corruption and begin the much-needed process of restoring public trust in government.
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