• Government Contracts Update -- The Freedom of Information Act: A Powerful Tool for Government Contractors
  • March 11, 2004 | Authors: Michael A. Hordell; Laura L. Hoffman
  • Law Firm: Pepper Hamilton LLP - Washington Office
  • The Freedom of Information Act (FOIA) is probably best known for its use by journalists to uncover information about the federal government. However, FOIA also is an effective tool for government contractors to research government programs and activities, as well as learn about competitors. Under FOIA (5 U.S.C. § 552), requests for records held by the federal government may be made by "any person," which includes foreign citizens, corporations and governments. See Stone v. Export-Import Bank of the United States, 552 F.2d 132 (5th Cir. 1977).

    Indeed, FOIA is such an important research method that we recommend assigning an individual within your company to periodically submit FOIA requests concerning a program or other contractors, and analyze the documents provided by the agency. For example, if a company is considering competing for a particular procurement in the future, it can request copies of the current contract and modifications to it, correspondence between the agency and the incumbent contractor, and the incumbent contractor's proposal. The documents the agency releases may be heavily redacted, but can still provide valuable information on the program and the current contractor. In addition, some agencies are more lenient (or less careful) than others when it comes to redacting documents released under FOIA.

    Locating an agency's FOIA office through the Internet is usually easy, and many agencies now allow FOIA requests to be sent by email. A FOIA request must "reasonably describe" the records sought -- the more detailed the description, the better. See 5 U.S.C. § 552(a)(3). Sometimes a date range also provides a good method for narrowing a search for documents. The request should mention that a reply is expected within the statutory time frame, which is 20 days. See 5 U.S.C. § 552(a)(6)(A)(i)-(ii).

    The initial reply from the agency will most probably not be the requested documents, but a "determination" of whether it will comply with the FOIA request. See 5 U.S.C. § 552(a)(6)(A)(i)-(ii). (An agency decision to not comply with a FOIA request, or to only partly comply, can be appealed through an administrative process under 5 U.S.C. § 552(a)(6)(A)(i)). Finally, the request should state that the requester will pay reasonable reproduction and search costs, which are authorized under 5 U.S.C. § 552(a)(4)(A). We recommend that you state a dollar limit you are willing to pay, and request that the agency contact you if the estimated fees to perform the records search and copying will exceed the stated amount. Requesters must be aware that they may be charged for search time even if no documents are found or released, and an agency may request payment in advance where the estimated cost exceeds $250. See 5 U.S.C. § 552(a)(4)(A)(v).

    Responses to FOIA requests take time. While not the norm, we have been involved in requests that took years to complete. You should not wait until a few weeks before a proposal is due to file a FOIA request to obtain documents you believe would be helpful to your proposal preparation. Instead, consider FOIA to be an ongoing part of your long-term marketing and information-gathering process.

    FOIA contains nine exceptions. If data falls under the exceptions, it will not be released. For example, exemption 1 covers national security information, exemption 2 covers internal agency rules and procedures, exemption 4 covers "trade secrets and commercial or financial information obtained from a person and privileged or confidential," exemption 6 pertains to personal privacy information, such as medical files, exemption 7 concerns law enforcement records, etc. See 5 U.S.C. § 552(b)(1)-(9). Exemption 4 is the focal point concerning a contractor's proposal or similar records containing business confidential information.

    While you should use FOIA to obtain as much information as possible about your competition, you must attempt to ensure that the agency does not provide your confidential business data to third parties who submit FOIA requests. First and foremost, always use the proper restrictive legends, such as those set forth at FAR 52.215-1(e), on your proposal documents. Failure to use a restrictive legend could result in your proposal being released to a competitor. Also, as directed by FAR 52.215-1(e)(2), make sure the cover page and following pages are properly marked, or you may encounter problems concerning the release of pages without a legend. Indeed, in Xerxe Group Inc. v. United States, 278 F.3d 1357 (Fed. Cir. 2002), a company alleged it had been damaged to the tune of $72 million after the government released proprietary data contained in an unsolicited proposal submitted by the company. The court, which did not award damages because only the first page had been marked with the proprietary legend, noted that contractors are required under FAR to mark each page containing proprietary data.

    In addition, a legend should be used if you are submitting proprietary business information to the agency that is not contained in a proposal, such as data provided for an audit or pursuant to contract performance. Adapt the legend at FAR 52.215-1 to the particular situation, and, once again, use a legend on the cover page and subsequent pages.

    You must guard your confidential and/or proprietary data from improper release under FOIA. For that reason, we suggest that a company should periodically "FOIA itself" through a third party to see if the agency follows proper procedures and contacts the company regarding the FOIA request. You also may request access to the FOIA logs of government agencies to determine which competitors are requesting documents (and the identity of the documents) concerning your company.

    If an agency receives a FOIA request for a document that contains your company's proprietary data, the agency should notify you and provide you with an opportunity to comment on whether it is proper to release the specific document(s), or redactions of them. If you receive such a notification, we recommend that you cooperate with the agency. Indeed, often the best course of action is to make it easy for the FOIA office by providing it with a redacted version of the documents that it can release. One small but critical caveat: make sure no one can read through the redactions -- on more than one occasion, we've received redactions where the person doing the redacting merely took a black magic marker to the page, and the underlying information was clearly visible when the page was held to the light.

    If you object to an agency's proposed release of your documents under FOIA, you must take prompt action to protect yourself. When a company receives a letter from an agency listing documents the agency intends to release under FOIA that contain proprietary data, the company must promptly object to the release of the information, and provide a detailed argument as to why the release is improper -- a "reverse FOIA" letter. As noted above, traditionally the contractor's strongest argument is that the information falls under FOIA exemption 4, i.e., privileged or confidential trade secret and commercial and financial information.

    A critical factor to determine if information is covered by exemption 4 is whether the information at issue was submitted voluntarily to the government. Proprietary business information submitted under compulsion (such as under a government contract) is the most difficult to prevent from release. Such information will be deemed confidential only if its disclosure would impair the government's ability to obtain necessary information in the future or cause substantial harm to the competitive position of the person from whom the information was obtained. See National Parks & Conservation Ass'n v. Morton, 498 F.2d 765, 770 (D.C.Cir.1974). Where such information was submitted voluntarily, however, it would fall under exemption 4 if it would customarily not be released to the public by the person from whom it was obtained. See Critical Mass Energy Project v. Nuclear Regulatory Comm'n, 975 F.2d 871, 879 (D.C.Cir.1992) (en banc); National Parks and Conservation Ass'n, 498 F.2d at 766 (quoting S.Rep.No. 813, 89th Cong., 1st Sess. 9 (1965)).

    When faced with a reverse FOIA situation, a contractor should discuss why the information was submitted (whether voluntary or compulsory) and specifically demonstrate why the data is confidential. For example, has the information never before been released outside of the company? Was the data provided to the government with a proprietary legend? Is the data only available to a few individuals in the company? Is it maintained within the company in a manner consistent with "confidential" data? The letter also should specifically describe how a competitor could use the data against the company. If a competitor would obtain a competitive advantage in an upcoming procurement, describe how the competitor can use the information, and how it would affect your company. The company should be prepared to negotiate with the agency on what information is released, in an effort to resolve the matter without resorting to litigation. However, in some cases, the company must be prepared to go to court to prevent the release of its data by the agency.