Lobbyists-for-Hire Are Losing Market Share

Over the past decade, many corporations, unions and other groups spent more money on in-house teams of lobbyists, shifting away from hiring outside firms to do their advocacy.

As a result, K Street firms’ share of total lobbying spending has fallen from nearly 60 percent at the end of 2005 to just more than 42 percent last quarter, according to a CQ MoneyLine study of lobbying reports.

The shift to in-house instead of contract lobbyists, coupled with the recent financial downturn, has led to a six-year low in revenue for contract lobbying firms. Lobbying firms disclosed billing less than $356 million during the first three months of 2011 — an amount not seen since the beginning of President George W. Bush’s second term.

“With the combination of a reduced legislative Congressional agenda and a change in control of the House, I would expect the first folks to be cut would be outside lobbyists,” said Jan Baran, a senior partner at Wiley Rein. “If I need fewer lobbyists [as a company], I am not going to necessarily fire my employees. I am going to terminate the contracts with my outside lobbyists.” 

From 2009 to 2010, more than a dozen major lobbying firms saw decreases in their annual lobbying revenue of a million dollars or more. Leading the way was Ogilvy Government Relations, which lost some lobbyists along with almost $4.3 million as their 2009 revenues of nearly $21.9 million shrank to $17.6 million in 2010. During the same period, the Dutko Group lost about $2.5 million as their billings fell from $19.9 million to $17.4 million, and Hogan Lovells lost almost $1.3 million as their 2010 reports decreased from $18.7 million in 2009 to $17.4 million last year.

In economics, a recession is defined as two consecutive quarters of negative gross domestic product. On K Street, the amount spent on lobbying has declined during four of the past five quarters. In the first quarter of 2011, clients spent $150 million less per quarter to lobby Congress and the Obama administration than they did during the last quarter of 2009 — a drop of 15 percent.

Baran said while the recession is a factor in less money being spent on lobbying overall, the bigger reason is that  the major lobbying issues — including health care and banking reforms ­— were dealt with in the previous Congress.

“I would take a look at how much was on Congress’ plate in 2009 and how much of that was eaten by 2010,” he said.

But as overall lobbying spending continued to fall during the first quarter of 2011, the amount spent on in-house lobbying actually went up more than $32 million. One thing pushing this trend is a recent move by several companies to open their own Washington offices or expand their in-house lobbying teams.

For instance, a few organizations that registered new in-house lobbying teams in 2010 included small private aviation company NetJets, the Pew Charitable Trusts and CenterPoint Energy. These three companies spent a total of nearly $900,000 for the first time last year on in-house lobbyists. At the same time, they cut more than $800,000 from their 2009 payments to outside lobbying firms.

“It’s because firms are opening offices,” said C. Randall Nuckolls, a lobbyist for the firm McKenna Long & Aldridge. One of his clients, IntercontinentalExchange Inc., an agricultural and energy markets exchange, registered to lobby and spent $440,000 on a new in-house lobbying team, while cutting its spending on outside firms by more than $300,000 from 2009 to 2010. Nuckolls still does work for IntercontinentalExchange, including filing the disclosure forms for the company.

“We often tell our clients that the most efficient use of their dollars in the long run is to have an office here (in Washington), if they have a major governmental affairs presence or believe they need to,” Nuckolls said.

Nuckolls said the increase in in-house lobbying spending is not surprising and shows a natural progression for companies.

Craig Holman, a government affairs lobbyist for Public Citizen, said the data “does suggest to me that a lot of companies are viewing lobbying as a more permanent, long-term part of their mission.”

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