- D.C. Circuit Finds Option-Year Pricing Not Releasable Under FOIA
- December 13, 2004 | Author: Charles H. Carpenter
- Law Firm: Pepper Hamilton LLP - Washington Office
In June 1998, the U.S. Air Force awarded a contract to McDonnell Douglas (McDonnell) for maintenance and repair work on Air Force aircraft. In July 1998, under the Freedom of Information Act (FOIA), Lockheed Martin requested the Air Force-McDonnell contract, which incorporated the pricing information for the base year and option years as bid by McDonnell.
Despite McDonnell's position that the option year pricing and prices listed in certain contract line items (CLINs) fell under Exemption 4 of the FOIA, the Air Force ultimately decided to release the contract pricing data to Lockheed.
McDonnell promptly brought legal action against the Air Force, alleging, among other things, that the Air Force's decision was arbitrary and capricious and violated the Administrative Procedures Act. The district court found for the Air Force, and McDonnell appealed to the U.S. Court of Appeals for the District of Columbia Circuit.
On appeal, McDonnell asserted that the release of the option year pricing data was improper because competitors could use that data to underbid it if the Air Force decided to rebid the contract instead of exercising an option. The Air Force countered, among other things, that price would be only one of several evaluation factors for award if the contract was rebid. The court rejected the Air Force's argument, stating that release of the option prices would likely cause McDonnell substantial competitive harm because it would significantly increase the probability that its competitors would underbid it in the event the Air Force rebids the contract. Therefore, the option year pricing would fall under FOIA Exemption 4.
McDonnell also appealed the Air Force decision to release vendor pricing CLINs on the basis that competitors would be able to determine McDonnell's mark-up on subcontractor bids. The Air Force asserted that it was "not uncommon" for subcontractors to quote different prices to different vendors, so a competitor would not be able to deduct the mark-up percentage. The court rejected this argument, in light of a lack of confirming support from the Air Force, and assumed that subcontractors provide similar prices to similar potential prime contractors, permitting a competitor to determine McDonnell's mark-up. Consequently, the vendor pricing CLINs were also found to be exempt from release under FOIA.
Ultimately, the court reversed the lower court on these two issues, but affirmed the Air Force's decision to release a CLIN containing the hourly labor rates McDonnell proposed for "Over and Above Work." The court noted that Lockheed's request for the contract "has little to do with the core purpose of the FOIA" and did not "''contribut[e] significantly to public understanding of the operations of activities of the government,'" as the data requested "reveals the internal workings of the contractor, not those of the [g]overnment . . .". It, however, declined to impose a per se rule exempting all such documents from disclosure under FOIA. This case can be found at McDonnell Douglas Corp. v. Air Force, 375 F.3d 1182 (D.D.C. 2004), 2004 U.S. App. LEXIS 15426.