February 8, 2012
IRAN CONTRACTING MODEL LEGISLATION
By: Kristin Sullivan, Principal Analyst
You asked for a brief summary of the model legislation that United Against Nuclear Iran (UANI) drafted regarding state procurement policy for businesses engaging in Iranian investment activities.
UANI—a nonprofit, nonpartisan, advocacy group whose mission is to prevent Iran from obtaining nuclear weapons—drafted model legislation concerning states' contracting policies for people and entities investing in Iran. Generally, the legislation (1) requires companies to sever ties in certain Iranian business sectors to be eligible for state contracts and (2) subjects them to debarment from state contracts if they continue to do business in Iran or with certain Iranian entities.
California, Florida, and New York have enacted versions of the model legislation. The Indiana General Assembly is currently considering it.
The model legislation requires the state procurement agency for goods and services (in Connecticut, the Department of Administrative Services (DAS)) to use credible public information to develop a list of people or entities that it determines engage in investment activities in Iran.
Under the legislation, a “person or entity” generally means a natural person; nongovernmental entity or organization (e.g., corporation, business association, partnership); governmental entity or instrumentality; international financial institution, other than the International Monetary Fund; or any parent, subsidiary, or affiliate of these entities.
A person or entity engages in “investment activities” if it:
1. provides goods or services in or to Iranian energy, finance, or construction sectors;
2. provides oil or liquefied natural gas tankers, or products used to construct or maintain pipelines used to transport oil or liquefied natural gas for Iran's energy sector;
3. purchases crude oil, refined petroleum products, or natural gas from Iran;
4. provides goods or services, or payment for goods or services, to a person or entity on the U.S. Office of Foreign Assets Control (OFAC) Specially Designated Nationals List (SDN) for Iran, or to a non-country specific person or entity placed on the SDN for violation of OFAC Iran Sanctions;
5. (a) transfers, or facilitates the transfer of, certain goods or technologies to Iran, including firearms, ammunition, sensitive technology, or goods or technologies that the Iranian government uses or may use to commit human rights abuses against its people or (b) provides services to Iran related to these goods or technologies; or
6. is a financial institution that extends credit to a person or entity that (a) engages in the Iranian investment activities listed above and (2) is on the state debarment list.
The procurement agency must update this debarment list every 90 days and make every effort to avoid erroneous inclusions. Prior to finalizing the initial or an updated list, the procurement agency must provide 30 days written notice informing the person or entity that it intends to include it on the debarment list and that doing so would make it ineligible to bid on, submit a proposal for, or enter into or renew a
state goods and services contract. The agency must allow the person or entity to submit a written comment indicating that it is not engaged in investment activities in Iran. If the written comment demonstrates that the person or entity is not engaged in investment activities, the procurement agency cannot include it on the list.
Under the legislation, a person or entity seeking to contract with the state must certify that it is not included on the debarment list. If the person or entity is unable to make such certification because it or one of its parents, subsidiaries, or affiliates is engaged in Iranian investment activities, it must provide the procurement agency with a detailed description of these activities, under penalty of perjury. The certifications and detailed descriptions are public documents.
If the procurement agency determines that a person or entity has submitted a false certification, and the person or entity cannot demonstrate within 30 days after the determination that it has ceased engaging in the investment activities, then the:
1. attorney general may bring a civil action for $1 million or twice the amount of the contract, whichever is greater;
2. procurement agency terminates the existing contract; and
3. person or entity is prohibited from bidding on a state contract for three years.
The model legislation specifies that it preempts any local law, ordinance, rule or regulation involving goods or services contracts with a person or entity engaged in Iranian investment activities.