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Bids for government contracts are subject to FOIA under Illinois and federal law. Because your competitors therefore can use FOIA requests to get access to your bid proposals, it is critical to know what proprietary information you can — and can’t — protect.
The federal Freedom of Information Act (FOIA), 5 USC § 552, became part of the federal government contract procurement process via the Federal Acquisition Regulations (FAR), 48 C.F.R. §§ 24.201-24.203 (2000): “[a] federal agency must disclose agency records unless they may be withheld pursuant to one of the nine enumerated exemptions.” As a result, while bids may be protected during a sealed bidding process, once the bids have been publicly opened, they generally become part of the government agency’s records and, therefore, subject to FOIA requests.
In Illinois, 5 ILCS 140 provides its version of the FOIA. 5 ILCS 140/7(h) specifically makes proposals and bids for government contracts, grants and agreements subject to FOIA requests in a similar fashion as the federal system.
Other companies can, and often do, use FOIA to access their competitors’ otherwise secure information. In fact, this 2015 article on Entrepreneur magazine’s website encourages readers to do just that. Records of the winning contractor’s information might help a competitor win a similar contract in the future. This makes the records extremely valuable — to both the winning contractor and its competitors — in preserving or providing a competitive edge.
As a general matter, a contractor will not be able to protect the entire document from being disclosed under an FOIA request. What a contractor can do is have the document redacted so that exempted information is protected.
To protect valuable information as much as possible, the very first thing a private entity submitting a federal proposal or a contract should do is include the protective legend. FAR 52.215-1(e) provides for the following legend to accompany documents containing proprietary information: “This proposal includes data that shall not be disclosed outside the government and shall not be duplicated, used, or disclosed — in whole or in part — for any purpose other than to evaluate this proposal.”
The agency’s agreement to protect the document from disclosure is not automatic. The legend provides a heads-up to the agency, and it is harder to convince an agency to protect information that does not bear the legend. The ultimate question of whether specific information will be released pursuant to a FOIA request is analyzed based on tests established by case law.
The most common test of confidentiality for FOIA purposes considers whether the information’s disclosure would “impair the government’s ability to obtain the necessary information in the future” or “cause substantial harm to the competitive position of the person from whom the information was obtained.” Nat’l Parks Conservation Ass’n v. Morton, 498 F.2d 765, 770 (D.C. Dir. 1974). The most successful approaches seek to protect more detailed information than simply pricing and costs. Courts usually consider even line item and unit prices to be public information. Success is more often found when seeking to protect the detailed pricing information that is used to prepare the bid, since that information could cause substantial competitive harm.
Another test is whether the information was submitted “voluntarily” and ‘‘is of a kind that would customarily not be released to the public by the person from whom it was obtained.’’ Critical Mass Energy Project v. Nuclear Regulatory Comm’n, 975 F.2d 871, 879 (D.C. Cir. 1992). Although the Critical Mass test is easier to satisfy than the National Parks test, courts vary in their application of it. Generally, courts using Critical Mass look at whether a contractor was required to submit particular information once it decided to participate. If that particular piece of information was required, then that information is not protected under Critical Mass. But if providing that information was optional, then a court will probably consider it a voluntary submission and, therefore, protected information.
Generally, in Illinois all proposals are subject to FOIA except where there is an exception. The most common exception deals with trade secrets, commercial or financial information, or other business secrets. 5 ILCS 140/7(1)(g) defines this exception:
“Trade secrets and commercial or financial information obtained from a person or business where the trade secrets or commercial or financial information are furnished under a claim that they are proprietary, privileged or confidential, and that the disclosure of the trade secret or commercial or financial information would cause competitive harm to the person or business, and only insofar as the claim directly applies to the records requested.”
The Illinois Attorney General’s Public Access Counselor (PAC) opined in a 2018 decision that the exemption must be asserted explicitly at the time the information is first submitted to the governmental entity and not at a later time. An “implied promise” that the information would be kept confidential will not suffice alone. This requirement for asserting the exemption at the time of the bid is reminiscent of including the FAR protective legend’s upon submission of a federal bid. The difference is, of course, that the Illinois statute does not provide such a legend for you. The PAC further notes that the bidder must provide evidence that disclosing the information would cause competitive harm to the bidder.
Therefore, a private entity making a proposal should include both an explicit statement indicating an intention to keep the information private and evidence demonstrating the possible competitive harm of disclosure. An explicit statement alone will not suffice to keep the information private.
When a government agency provides notice that it intends to release information from a proposal or contract documents, a contractor needs immediately notify its legal counsel so that it can determine a course of action.
If you are in need of a government procurement attorney familiar with handling privacy in the context of FOIA requests, I encourage you to contact me as early in the process as possible to discuss your options.
The information in this blog post is provided for informational purposes only and is not intended to be legal advice. You should not make a decision whether or not to contact an attorney based upon the information in this blog post. No attorney-client relationship is formed nor should any such relationship be implied. If you require legal advice, please consult with an attorney licensed to practice in your jurisdiction.
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