Government contractors shielding the proprietary information in their contracts from competitors will be pleased to learn about the Department of Justice (“DOJ”) recently issuing new guidance regarding Freedom of Information Act (“FOIA”) Exemption 4. Generally, the FOIA is used to require federal agencies to disclose information to the public, unless an exemption applies. This new guidance follows the Supreme Court’s decision in Food Marketing Institute v. Argus Leader Media, 139 S. Ct. 2535 (2019), in which the Supreme Court rejected the longstanding “substantial competitive harm” test. In its decision, the Supreme Court stated the inquiry is simply whether the documents are considered “confidential,” which will likely make it easier for contractors to prevent their information from being disclosed to the public. The DOJ guidance provides a step-by-step guide for contractors in analyzing whether their confidential information included in a competitor’s FOIA request is confidential and should not be released to the public.
FOIA Exemption 4, one of nine FOIA exemptions, permits agencies to withhold documents that would have otherwise been included in response to a FOIA request if the documents contain “trade secrets and commercial or financial information obtained from a person which is privileged or confidential.” Generally, contractors seek to use Exemption 4 to prevent the Government from disclosing information in their proposal that has been made part of their contract with the Government. FAR 24.202(a).
In Argus Leader, the Supreme Court described the previous “substantial competitive harm” test as being not in line with statutory language, leading the Court to establish a new “ordinary meaning” test. Under the ordinary meaning test, contractors need only show that information at issue is (1) both customarily and actually kept private or confidential by the contractor, or (2) provided to the Government under an assurance of confidentiality. Previously, contractors were required to prove that they would suffer “substantial competitive harm” if information they submitted to the Government in response to a solicitation were disclosed in response to a FOIA request. While the Supreme Court did not state that Government assurances were a prerequisite, the DOJ guidance states that Exemption 4 would protect information revealed to the Government under implied or express assurances. While express assurances can be found in direct communications, implied assurances depend circumstances surrounding a communication that support an inference of confidentiality, such as ongoing relationships between the submitter and the Government.
The DOJ guidance also provides a step-by-step analysis for agencies to use to determine whether information is “confidential.” In addition to the ordinary meaning, agencies will be evaluating how contractors customarily treat the information at issue, such as the contractor’s internal practices or records. Further, if the information has historically been disclosed by the contractor or the Government, the contractor should not have an expectation of confidentiality for this information. Second, agencies will review whether there have been explicit or implied assurances of confidentiality from the Government when the information was shared with the Government. Lastly, agencies will determine if there were express of implied indications at the time the information was submitted that the Government would publicly disclose the information.
Overall, the DOJ guidance is intended to assist agencies in evaluating information as confidential, but the guidance also provides contractors with the necessary information for protecting information from being released pursuant to a FOIA request. Going forward, contractors responding to an agency’s request to release contract information should describe the steps they have taken to treat the information as private or confidential, while also stating the Government provided assurances, if applicable, when preparing submissions in response to FOIA requests that involve their confidential information.
Berenzweig Leonard is teaming up with Red Team Consulting for a monthly newsletter featuring reports on recent contract decisions, recent upcoming contracts, key protest decisions, events, and more. This post was published in the November 2019 newsletter. To sign up for our govcon newsletters, please email [email protected].