Using Freedom of Information Act Requests to Gain an Edge
By James C. Fontana
Picture this: You labor day and night on a complex IT proposal. Hundreds of hours are spent compiling sensitive data for a winning bid. The finished product eventually moves from the safe confines of your office to the government's secretive source-selection process. Your company later gets the contract. Then a major competitor asks the customer for a copy of your proposal, or the contract's pricing schedule, or other competitive information. It sounds absurd, but it's a reality in today's fierce world of federal procurement.
Once the exclusive domain of journalists and social activists, the Freedom of Information Act is increasingly used by government contractors as a tool to legally obtain, or at least try to obtain, competitively sensitive information that could ultimately mean the difference between winning and losing the next contract.
Less than a year ago, Congress attempted to clarify the application of the FOIA by enacting a law declaring that government contract proposals are specifically exempt from public disclosure unless the proposal is incorporated into the contract. Yet, this law is of little use in the case of incorporated proposals.
The new law also doesn't apply to a myriad of post-award submissions such as certain line-item pricing data, operating and financial documents, and parts of affirmative action plans containing information on staffing levels and hiring practices. For this information, contractors must resort to traditional FOIA concepts to prevent its public disclosure.
The FOIA basically provides that any person has a right of access to federal agency records, except where such records are covered by one of nine exemptions set forth in the statute. When someone uses the FOIA to request government-generated documents, federal agencies can be quite adept at applying any one of these exemptions to prevent disclosure of information relating to, for example, an agency's deliberative process, an ongoing criminal investigation or an individual's personal background. When a FOIA request seeks disclosure of contractor-generated information in the government's possession, the agency often depends on the contractor itself to justify the application of an exemption.
The FOIA exemption most applicable to a government contractor's information is the so-called Exemption 4, which covers trade secrets and commercial or financial information. Whether this exemption applies depends on the application of a complex, two-pronged test to determine if disclosure would likely: (1) impair the government's ability to obtain necessary information in the future; or (2) cause substantial harm to the competitive position of the person from whom the information was obtained.
An agency is required to provide notice to a contractor that a FOIA request for its information was received, as well as a description of any information that the agency intends to disclose. The contractor then has an opportunity to respond and oppose the requested disclosure in a so-called reverse-FOIA procedure.
However, although it is a criminal offense for a government employee to publicly reveal nondisclosable information, there have been a few reported instances of inadvertent releases, especially in cases where the contractor never opposes the disclosure in the first place. And in gray areas, the conspicuous absence of a response could be perceived by the agency as tacit approval of, or at least indifference to, the disclosure.
For the most part, agencies have, thanks to the efforts of the contractors themselves, refused to disclose information contained in government contract proposals, although the contracts themselves (less any incorporated proposal information) are subject to FOIA disclosure. Other information that industry insiders would consider competitively sensitive may, however, still be disclosable under Exemption 4.
In one case, for example, a federal court held that Exemption 4 did not apply to the requested disclosure of a contract's unit pricing information where it concluded that the disclosure would not likely afford competitors any special insight into the contractor's confidential pricing strategies.
In another case, an appeals court upheld a lower court ruling that obtaining another company's post-award operations plan did not cause substantial competitive harm, and that public disclosure of the plan would not deter the contractor from submitting future proposals.
Contractors looking to prevent the release of their proprietary data should not passively resist a competitor's attempt to use the FOIA. Instead, the proper action in the face of an agency's notice of the FOIA request is the timely submission of a letter strongly opposing the disclosure.
It should be noted that deadlines are established to respond to such notices (usually 10 days), and opposition letters must be both factually detailed and provide adequate legal authorities in support of nondisclosure. Failure to timely oppose, or an inadequate opposition effort, may result in the public disclosure of proprietary information that is otherwise FOIA-exempt.
James C. Fontana is vice president and corporate counsel of Wang Government Services Inc. in McLean, Va.
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