The House Oversight and Reform Committee on Wednesday approved H.R. 7185, the Federal Contracting for Peace and Security Act, by voice vote. The bill would bar federal agencies from entering into or extending any contract with companies that conduct business in Russia as long as its war against Ukraine continues.
"Today the committee sent a clear message to [Russian President] Vladimir Putin: no more American tax dollars will go towards aiding and abetting your inhumane war against Ukraine," committee Chairwoman Carolyn Maloney, D-N.Y., said in a statement Wednesday.
When she introduced the bill March 21, Maloney said it was intended to make sure "that the purchasing power of the United States government does not undermine the efforts of the Ukrainians fighting so courageously to defend their country or the international partners that support them."
The government had awarded billions of dollars in fiscal 2021 to "companies that have refused to suspend their business operations in Russia or have only partially scaled back operations or investments," she said without naming any specific companies.
As well as barring agencies from entering into new contracts, the bill would require the termination of existing contracts and any "major" subcontracts held by companies that continue to do business in Russia — although there would be exceptions for companies whose operations in Russia benefit Ukraine or serve humanitarian purposes.
Amendments introduced in committee also allow exceptions for "journalistic activities" and operations related to maintaining compliance with legal and reporting standards of countries other than Russia.
Agency heads would also be able to issue waivers for contractors or contracts if they determine a waiver is "in the public interest." The amended bill would also allow agencies to put off terminating existing contracts in 30-day stretches for contractors making a "good faith effort" to comply with the legislation.
The bill — which had originally applied retroactively to Feb. 21, covering companies doing business in Russia when it invaded Ukraine — would apply to anyone still doing business in Russia 60 days after the legislation is enacted.
Kea Matory, director of legislative policy at the National Defense Industrial Association, told Law360 on Thursday that while the group believes the version of the bill approved by the oversight committee addressed some concerns recently raised by contractors' groups, the NDIA still wants further tweaks and clarifications as it goes through the legislative and rulemaking process.
The NDIA "stands with Ukraine" and is supportive of the Biden administration's broader efforts to "ratchet up economic pressure in a strategic manner," including through steadily increasing sanctions against Russia, which have served to minimize "as much as possible the impact to the U.S. economy," Matory said.
But the committee's bill, even with its good faith compliance provisions, doesn't fully address the potential complications U.S. companies face in extricating themselves from Russia and could have unintended consequences, according to Matory.
Those complications include how to address real estate ownership and divestiture within Russia and companies that are trying not to leave intellectual property behind that could be used against the United States, as well as the cost to agencies — and ultimately taxpayers — from a potential wave of contractual terminations, Matory said.
"We're worried that some of the administrative actions of the bill could be weaponized through Russian executive action against the U.S. government and the defense industrial base," she said. "We are 100 percent behind the intent [of the bill]; we just want to make sure that it's done thoughtfully so that it's not U.S. companies that are the ones who are harmed in the process."
--Editing by Kristen Becker.
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