Lobby Growth Slowed in ’06

Posted February 19, 2007 at 1:46pm

Ethics jitters and the distraction of campaign season hit K Street with a one-two punch last year, as the top lobbying firms posted negligible growth.

Revenues for the top 25 shops inched north of the $400 million mark for the first time ever, but earnings across the board climbed just 2 percent for the period. That’s compared to 2005, when the biggest firms grew by 9 percent.

Lobbyists chalked up the relatively weak performance to the fact that prospective clients hugged the sidelines for the first half of the year as lobbying-related scandals prompted Congressional debate over ethics reform. By summer, lawmakers were turning their attention toward a heated midterm campaign, shelving work on big-ticket legislative items that could have been a boon to lobbying coffers.

“It was more than just the election year,” said Cassidy & Associates Chief Operating Officer Gregg Hartley, who also pointed to lobbying reform and concerns over a Congressional power switch as conspiring to depress growth. “All of those factors together convinced potential clients to wait until the dust cleared.”

Posting a 13 percent dip in earnings, his firm continued its slide down the rankings from the top of the heap in 2002 into fourth place for 2006.

Cassidy was not alone. Several top shops saw their revenue slide compared to their numbers in 2005. Patton Boggs held onto its title as king of K Street despite seeing revenue drop by 5 percent. Akin Gump Strauss Hauer & Feld was down 9 percent; Dutko Worldwide, 2 percent; and Williams & Jensen, 3 percent.

Even in the face of lean times, some firms managed to expand. Van Scoyoc Associates posted 6 percent growth — a modest total for most years, when firms expect to boost earnings by at least 10 percent — but enough to vault it into the No. 2 slot for 2006. Firm president H. Stewart Van Scoyoc said the diversity of his practice helps “smooth out the big swings one way or another” and keep it on track with steady growth. “It’s a very difficult market, and it’s difficult for us just like it’s difficult for everybody else,” he said.

Barbour Griffith & Rogers, an all-Republican firm, added five senior lobbyists last year, and with them, a host of new business. For the first time, the shop broke into the top five on Roll Call’s rankings by posting an impressive 19 percent growth. “Our [Lobbyist Disclosure Act] revenues are reflective of the fact that clients have confidence the BGR team can help accomplish their legislative and regulatory goals,” said COO Loren Monroe.

Hogan & Hartson also bucked the trend, boosting its take by 9 percent. “If you look at the other firms, we’re pretty pleased with that,” said partner Mike House.

But for most of K Street’s heaviest hitters, the environment was dismal enough that last year proved even worse than in 2004, when focus on the presidential election meant most legislative work ground to a halt. That year, the top 25 firms eked out 3 percent growth.

To assemble the data for the rankings, Roll Call obtained year-end total revenue figures reported by each firm under the Lobbying Disclosure Act. The figures were obtained directly from the firms after they filed year-end reports but before all those reports were tallied and made available by the House or Senate. Roll Call solicited figures from the top 50 firms for the first half of 2006, as reported by CQ PoliticalMoneyLine. Figures for firms 26 through 50 are not reported in the final rankings.

Some firms in the bottom half of the sample declined to provide their numbers or did not respond to requests for them. The Washington Group, a perennial in the top 25, did not respond to requests for their total.

Not all lobbyists blamed their middling performances last year on the larger factors slowing K Street growth. Washington Council Ernst & Young dropped some dollars last year, but lobbyist Bruce Gates said the firm has not aggressively pursued a growth strategy. “We had our excitement in our first four or five years, and that was great,” he said. “But unless and until we decide to make some decisions internally … I wouldn’t expect to see dramatic growth here.”

Others said they are taking their focus off of Capitol Hill to focus on other practice areas. Akin Gump’s Smith Davis said, “There has been a conscious effort on the part of the firm to return to a lot of its regulatory roots and house that next to and in coordination with a lot of the policy work we do.”

To the extent 2006 was a disappointment, many downtown said they already have seen a significant pickup in business this year. New Democratic majorities eager to put their stamp on Congress are unveiling ambitious legislative agendas, and corporate players are noticing.

“There’s a demand and opportunity to move on a lot of pent-up issues,” said Brian Hale, a spokesman for Patton Boggs.

For bipartisan firms with diverse policy practices, there is plenty to celebrate with the new Congress: five-day workweeks, an aggressive legislative schedule and a new focus on oversight and investigations.

But some lobbyists with shops leaning heavily on appropriations work said they are stuck in limbo. Democratic leaders knocked most earmarks out of a massive spending bill to fund operations this year. And reforms meant to add transparency to the appropriations process are not yet complete. “They need to get that done so people can get back to the legitimate work of public advocacy,” Cassidy’s Hartley said.

Meanwhile, as all-Democratic firms — which have rarely cracked Roll Call’s top 25 list — report they are swimming in new clients, the outlook for all-GOP shops is less clear. Nevertheless, Barbour Griffith’s Monroe said his shop will continue to thrive.

“Washington has increasingly become a town of what you know, not just who you know,” he said. “We are not just ‘door openers’ — we are zealous advocates for our clients. The growth of BGR remains predicated on the confidence our clients have that we provide sound counsel and deliver results.”