Infotech and the Law: DOD should update FOIA policy for releasing contractor info

Last summer, the federal court of appeals ruled that vendor line item prices and a contractor's option-year pricing were confidential information and that they could be withheld under the Freedom of Information Act, because their release was likely to cause substantial harm to a contractor's competitive position. Notwithstanding this ruling, the Department of Defense still has not changed its FOIA practice with respect to withholding line item and option-year prices. Likewise, the department has not changed the standards it uses to decide whether such information should be withheld when responding to FOIA requests for copies of contracts.For the past 20 years, government agencies, including the Defense Department, have withheld from disclosure under FOIA confidential commercial information submitted by a contractor if doing so would impair the government's ability to obtain such information in the future or would cause substantial harm to the competitive position of the contractor. Before responding to a FOIA request for a copy of a contract, the department has provided the contractor with an opportunity to submit suggested redactions and a rationale for withholding information from the response. The Pentagon's policy for agreeing to the contractor's proposed redactions has been that it will release pricing information unless the contractor can demonstrate that doing so will harm the contractor competitively. The department denies requests to withhold prices unless the contractor can show how the release of pricing alone will let the contractor's competitors ascertain such confidential commercial information as profit margin or overhead expenses. Last summer's federal court decision concluded that both option-year pricing in a contract and prices submitted by the contractor for line items that are predominately goods and services that it procures from its subcontractors could be withheld, because their release likely would cause substantial competitive harm to the contractor in future procurements.The decision did not rule that option-year prices or vendor line items would be confidential in every case, but it clearly changed the weight of the argument. The ruling endorsed the view of many contractors that disclosure of its option-year prices simply gives competitors a pricing guide for bidding against the contractor in either a follow-on procurement for the same agency or in procurements for similar products or services by other agencies. Vendor pricing is a critical component in many IT procurements, and the court recognized that disclosure of vendor prices to competitors hurts the contractor.The court of appeals also made it clear that although this case concerned option-year and subcontractor pricing, the principles the court used to withhold those prices also would apply to all contractor pricing information except the bid price itself. Despite this ruling, however, the Pentagon's FOIA policy remains unchanged. Its notice to contractors when a request is made under FOIA for a copy of a current contract still states that the agency's policy is to disclose prices under the same standards that applied 20 years ago -- that all prices should be disclosed unless the contractor can establish specifically how doing so will let competitors ascertain the contractors profit margins or overhead costs. DOD's failure to adapt its policy to the changed legal landscape should not discourage contractors from challenging release of option-year and vendor pricing in responding to agency notices that a contract has been requested under FOIA. Jonathan Cain is a member of the law firm Mintz Levin Cohn Ferris Glovsky & Popeo PC in Reston, Va. The opinions expressed in this article are his. He can be reached by e-mail at jcain@mintz.com.