Infotech and the Law: If the FOIA exemption fits, wear it

Imagine you've just begun working on a federal government contract that you won in a hard-fought competition with some of your fiercest rivals. You priced your solution aggressively and creatively, and your proposal was incorporated into your contract.

Now, imagine your agency customer calls and says, "We've received a Freedom of Information Act request for a copy of your contract. We will comply with that request unless you explain to us why we shouldn't."

Would you know how to respond? Unless you're familiar with the operation of the Freedom of Information Act in this context, as well as the recent application of FOIA by federal courts in the District of Columbia Circuit, you probably wouldn't.

FOIA (5 USC, Section 552) generally requires federal agencies to make their records available to any person who submits a proper request for them. Your contract, unless a FOIA exemption applies, is one of those records.

Fortunately, FOIA's "Exemption 4" can help you protect sensitive information in your contract. That exemption, as applied by the U.S. Court of Appeals for the D.C. Circuit, requires the agency to withhold from disclosure any information that is "commercial or financial, obtained from a person and privileged or confidential."
Your response to the agency, therefore, should identify the information in your contract that fits this description, and explain to the agency in detail the basis for your position.

Contractors facing a FOIA request often find it most difficult to show that the information is privileged or confidential. This difficulty arises from the burden of proof most often applied by the federal courts in the D.C. Circuit when resolving this issue.

To prevail under that burden, a contractor must prove that if the information is disclosed, it is likely to impair the government's future ability to get necessary information and cause substantial harm to the contractor's competitive position.
The key to satisfying this burden is specificity, both in identifying the information to be protected and in explaining the substantial harm that likely would result from disclosure of each type of information.

A recent case in the U.S. District Court for the District of Columbia reinforces this point. In Canadian Commercial Corp., et al. v. Dept. of the Air Force, a disappointed offerer in an Air Force procurement requested a complete copy of an awardee's contract. In response, the awardee sought to protect essentially all information related to its line-item pricing in the option years, as well as the fixed hourly rates for "over and above" work and cost and pricing information in its subcontracting plan. The Air Force disagreed with the awardee's arguments and, in a lengthy decision, explained why all of the awardee's information should be disclosed.

In the litigation that followed, the court disagreed with both parties, noting that the awardee and the Air Force argued for a broad rule that the D.C. Circuit has rejected. Instead, the court concluded that FOIA Exemption 4 protects the awardee's information related to option-year pricing, but not the fixed hourly rates for over and above work.

Regarding the latter category of information, the court emphasized that the awardee had demonstrated only a possibility of substantial competitive harm, which is insufficient to protect the information from disclosure.

FOIA cases such as Canadian Commercial Corp. turn on their own unique facts, but they teach contractors the same lesson: When dealing with a FOIA request, identify your sensitive information precisely, know what you need to prove to the agency and explain in as much detail as possible the substantial harm that disclosure of your information will cause. Failure to learn this lesson or to apply it in practice can have dire consequences for your competitive position.

David Fletcher is an associate in the government contracts practice of DLA Piper Rudnick Gray Cary US LLP in Washington. He can be reached by e-mail at david.fletcher@dlapiper.com.