UPDATE 1-Obama order on US campaign donations feared stalled
* Obama's executive order circulated in April
* Critics, including some Democrats, could stall effort
* White House says still reviewing draft order (Adds White House comment, paragraphs 7-8)
WASHINGTON, June 14 (Reuters) - The White House is under pressure from consumer activists to proceed with plans to force government contractors to disclose their political donations -- rules that companies warn will politicize awards of government business.
Consumer group Public Citizen said on Tuesday it is among those worried that the White House attempt to throw more light on campaign spending will be put on the shelf after harsh criticism from the business community.
President Barack Obama is working on an order to compel bidders for federal contracts to disclose two years worth of political contributions.
"We are concerned that the administration is hesitating on issuing this key order, as the public deserves to know who's spending what to elect members of Congress," said Lisa Gilbert, deputy director of Public Citizen's Congress Watch. "Only those who have something to hide prefer the dark."
An administration spokesman said the order is still under review.
In addition to donations above $5,000 to candidates, the order would also require disclosure of contributions to third parties that fund political advertisements.
"The draft executive order is still in draft form and undergoing review. But broadly speaking, the president is committed to improving our federal contracting system, making it more transparent and more accountable," White House spokesman Eric Schultz said.
"He believes that American taxpayers deserve that, and that is why he has asked Congress to pass a full disclosure law," he said. U.S. Senate Republicans last year blocked a bill backed by the Democratic president that would have required public disclosure of who pays for political campaign advertising.
Public Citizen pressed Obama in a letter sent on Tuesday to sign the order. It said that before recent court decisions and regulatory rulings, contractors routinely disclosed such information.
Outside groups spent tens of millions of dollars in the last election without disclosing their donors, and activists say that figure could reach the billion-dollar level or more in the 2012 campaign season.
The order has been hit by withering criticism from business groups, which say it would politicize contracting at a time when the administration faces Republican charges that its policies are hostile to business and inhibit hiring.
"The executive order injects a very real chance that prospective contractors that fund political causes unpopular with the government or the current administration may find that they don't get a contract award due to political discrimination," said Chamber of Commerce spokeswoman Blair Latoff.
But even some top Democrats such as Assistant House Minority Leader Steny Hoyer have expressed doubts.
"If Obama doesn't think he is going to get a lot of support for it, I'm not sure he will continue with it," said Melanie Sloan, executive director of the watchdog group Citizens for Responsibility and Ethics in Washington.
The proposal was circulated in April but has not been acted on since, worrying groups that defend campaign finance law.
A landmark 2010 Supreme Court ruling in the Citizens United case said independent expenditures by corporations do not give rise to the appearance of corruption and are constitutional.
Political action committees of FedEx Corp (FDX.N), Lockheed Martin Corp.(LMT.N) and General Electric (GE.N) gave the most cash to politicians in 2010 among government contractors, an analysis by Public Citizen using campaign finance and procurement data found.
Another campaign finance reform group said they did not have high hopes the order would go anywhere any time soon.
"Does the phrase 'slowly twisting in the wind' mean anything?" Meredith McGehee, policy director at the Campaign Legal Center in Washington, which works on campaign finance and government ethics. (Editing by Jackie Frank and David Lawder)
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