Can contract proposals be released under the Freedom of Information Act?

A reader asked the following question: To what extent is an agency allowed to release an offeror's proposal under the Freedom of Information Act (FOIA)?

This is another of those seemingly simple questions to which the answer is surprisingly complex.

As set forth in FOIA Exemption 4 the act does not allow an agency to release information that applies to "trade secrets and commercial or financial information obtained from a person and [that is] is privileged or confidential." Defining what this information is however can be complicated.

In the context of a FOIA request the courts generally have limited the term "trade secret" to "a secret commercially valuable plan formula process or device that is used for the making preparing compounding or processing of trade commodities and that can be said to be the end product of either innovation or substantial effort." [Public Citizen Health Research Group v. FDA 704 F.2d 1280 1288 (D.C. Cir. 1983.)]

This is a relatively narrow definition.

By contrast the courts consistently have held that the terms "commercial" and "financial" are to be given their "ordinary" meanings. See for example Public Citizen [704 F.2d at 1290] or Board of Trade v. Commodity Futures Trading Commission [627 F.2d 392 403 (D.C. Cir. 1980)].

Accordingly "information is commercial if it relates to commerce " as found in American Airlines Inc. v. National Mediation Board[588 F.2d 863 870 (2d Cir. 1978)] or "it has been compiled in pursuit of profit." [Public Citizen 704 F.2d at 1290.]

Information is financial if it relates to money or capital. Thus commercial or financial information includes information such as business sales statistics research data technical designs overhead and operating costs and information on financial conditions. See Washington Post Co. v. HHS [690 F.2d 252 266 (D.C. Cir. 1982)].

Information is obtained from a person if it originates outside the government. Thus the term "person" includes corporations as well as natural persons. See for example Comstock International v. Export-Import Bank of the United States [464 F. Supp. 804 D.D.C. 1979].

The terms "privileged" and "confidential" are not synonymous. See Washington Post Co. [690 F.2d at 268 n.50] . In general the courts look to traditional discovery privileges as applied in litigation to determine whether a document is privileged. See Washington Post Co. [690 F.2d at 268] . The question of whether a document is privileged usually is straightforward.

However the question of whether a document is confidential can be more complicated. Before 1992 the generally accepted test of whether a document was confidential was set forth in National Parks and Conservation Association v. Morton [498 F.2d 765 770 D.C. Cir. 1974]. In that decision information is confidential "if disclosure of the information is likely to have either of the following effects: to impair the government's ability to obtain the necessary information in the future or to cause substantial harm to the competitive position of the person from whom the information was obtained."

However in Critical Mass Energy Project v. NRC [975 F.2d 871 (D.C. Cir 1992) (en banc)] the court held that the proper test for confidentiality depended on whether the original provision of the information to the government had been compelled or was voluntary. If the information was compelled the traditional test set forth in National Parks would be applicable.

But if the information was submitted voluntarily it should be considered exempt on a simple showing that the submitter does not customarily release the information to the public which is a much easier standard to meet.The case law since the Critical Mass decision is not sufficiently developed to determine definitively which test for confidentiality should be applied to proposals for government contracts. But this is relatively unimportant because the courts generally have found proposal information to be exempt from disclosure even under the narrower National Parks test.

In Environmental Technology Inc. v. EPA [822 F.Supp. 1226 (E.D. Va. 1993)] the District Court for the Eastern District of Virginia applied Critical Mass to find that unit price information in a contract was exempt from disclosure because it was submitted voluntarily to the government and is not information that is released to the public.

In another opinion in the same case the court rejected an argument that the pricing information was releasable under the rules for debriefing disappointed offerors. According to the court detailed pricing information that is exempt under FOIA may not be released in a debriefing.

But in Chemical Waste Management Inc. v. O'Leary [No. 94-2230(NHJ) 40 Cont. Cas. Fed. (CCH) (E.D. Va. Feb. 28 1995)] the same district court found that National Parks rather than Critical Mass was the correct test of whether to release contract price information. Even under the more stringent test of the National Parks decision however the court held that an agency decision to release unit pricing information was "arbitrary capricious and otherwise contrary to law."

Indeed there is a large body of case law applying the National Parks test to find that pricing information is exempt from disclosure when its release is likely to cause substantial harm to the competitive position of the person from whom it was obtained.

Obviously the body of interpretations under FOIA continues to evolve. Under any reasonable interpretation however an agency should not be allowed to release a company's proprietary information even when it is submitted as part of a proposal for a government contract.

-- Peckinpaugh is a member of the government contracts section of the law firm of Winston & Strawn Washington D.C.


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