Freedom of Information Act

The Freedom of Information Act, (“FOIA”) is used by numerous groups and individuals to obtain information from the government.1 There are a few exceptions, such as classified information, and “matters that are… trade secrets and commercial or financial information obtained from a person and privileged or confidential.”2

Moreover, commercial or financial information obtained from a contractor involuntarily is confidential under the exemption if release of such information would impair the government’s ability to obtain3 necessary information in the future or cause substantial harm to the competitive position of the firm from whom the information was obtained.

In addition, the courts have long held that the Trade Secrets Act4, which prohibits government personnel from disclosing information unless unauthorized by law is co-extensive with exemption 4 of the FOIA.5 Therefore, unless authorized by a law, agencies must withhold confidential information under exemption 4 and the Trade Secrets Act.

Generally, in government contracts, the total contract price may be disclosed, but line item pricing may be withheld. The D.C. Circuit Court has held that disclosure of line item pricing could cause substantial competitive harm. The court held that the disclosure “constituted (line item) pricing information – as opposed to the bid price itself – would be squarely at odds with the protection provided under exemption 4.”6 Similarly, in a separate case, a contractor has every right to insist that its line item prices be withheld as confidential.7

This issue was discussed in another case in the appeal of Canadian Commercial Corporation, (“CCC”) v. Department of Air Force, United Sates Court of Appeals for the District of Columbia Circuit, (the “Court”), No. 06-5310, decided January 29, 2008. CCC was a three-year contract, with an option for four additional years, by the Air Force to repair overhaul and modify J85 turbojet engines. A competitor, Sabreliner, filed a FOIA request for the contract.

CCC objected to releasing the line item prices and hourly labor rates as trade secrets. The Air Force rejected the CCC objections, so CCC sought injunctive relief.

The Court affirmed its earlier decisions and held that “constituent or line-item pricing information in a government contract falls within exemption 4 of the FOIA if its disclosure would impair the government’s ability to obtain necessary information in the future or cause substantial harm to the competitive positions from whom the information was obtained.” The Court rejected the Air Force attempt to establish a “per se” rule of disclosure of pricing data and concluded that earlier decisions had not established such a rule because the contractor had not established how “A rival [could] reverse engineer competitively sensitive information.”

CCC argued that disclosure of the line-item prices would permit a competitor to undercut its prices for option work, thereby causing it competitive harm. The Air Force responded that it was likely to exercise the option to avoid high administrative costs. The Court pointed out that the Air Force ignores its obligation to evaluate the exercise of the option and only exercise the option if doing so “is the most advantageous method of fulfilling the government’s needs.”8

The Court also stated that the Federal Acquisition Regulation (“FAR”) requires “the debriefing shall not reveal any information …exempt from release under the Freedom of Information Act including… trade secrets.”9

The moral of the story here is to be alert for any effort by the government to release line-item pricing and unit labor costs, and object vigorously to any proposed release. Be sure you will suffer competitive harm in some way if the prices are released. The total contract price may be released. Do not rely on the government to protect your confidential information and possibly assume they will do so. Vigorous intervention on your part is required.

Tom Petruska, Owner
Contracts Unlimited, Incorporated

The foregoing is not a legal opinion or legal advice. Consult your attorney for legal assistance.

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