Protecting The Keys To The Castle: Obama Administration's New FOIA Policies Cause Agencies To Aggressively Seek Disclosure Of Contractor Proprietary Commercial Information

Monday, June 1, 2009 - 01:00

In an attempt to make good on his campaign pledge to "usher in a new era of open government," President Obama has enacted several reforms in recent months to increase the transparency, openness and accountability of government agencies. Of special concern to government contractors are the significant changes that have been made to the government's Freedom of Information Act (FOIA) policy, which now provides for a "presumption in favor of disclosure" and strongly encourages agencies to process FOIA requests swiftly and release government records to the public. In response, agency FOIA offices have begun to take increasingly aggressive stances in favor of disclosing information submitted by Government contractors. Contractors would be wise to pay close attention to the government's new FOIA polices and to be prepared to protect against an agency's proposed release of its proprietary commercial information into the public domain.

Recent Policy Changes EstablishA "Presumption In FavorOf Disclosure"

Within days of taking office, President Obama issued a presidential memorandum calling for increased openness in the handling of Freedom of Information Act (FOIA) requests by government agencies. In a marked change from the policy of the prior administration, the memorandum directed all agencies to adopt "a presumption in the favor of disclosure" and to take affirmative steps to release information publicly without waiting for specific requests from the public.

On March 19, 2009, Attorney General Eric Holder issued new FOIA guidelines for executive agencies in response to President Obama's memorandum. Adopting the President's call for a "presumption in favor of disclosure," the Attorney General's memorandum established three key policies for the administration of FOIA requests by government agencies. First, agencies were instructed that they were not to "withhold information simply because [they] may do so legally" or "merely because [they] can demonstrate, as a technical matter, that the records fall within the scope of a FOIA exemption." To the contrary, agencies were "strongly encourage[d]" to make discretionary disclosures of information. Second, the memorandum requires agencies, whenever they determine that they cannot make a full disclosure of a requested record, to consider making partial disclosures. Finally, the memorandum rescinds the Attorney General's FOIA Memorandum of October 12, 2001, which stated that the Department of Justice (DOJ) would defend agency decisions to withhold records "unless they lack a sound legal basis or present an unwarranted risk of adverse impact on the ability of other agencies to protect other important records." Instead, the memorandum advises agencies that the DOJ will defend an agency's denial of a FOIA request only if the agency reasonably foresees that disclosure would harm an interest protected by one of the statutory exemptions or disclosure is otherwise prohibited by law.

The Obama administration's recent FOIA policy changes come on the heels of similar efforts by Congress in the Openness Promotes Effectiveness in our National Government Act of 2007 (OPEN Government Act or Act), Pub. L. 110-175, passed in December 2007. The OPEN Government Act made several changes to FOIA that similarly encourage executive agencies to favor disclosure of government records in response to FOIA requests. For example, the Act revised FOIA to allow FOIA plaintiffs to recover attorney fees and litigation costs not only when they successfully obtain a court-ordered release of the requested documents, but also when the agency makes a voluntary or unilateral change in position and releases the documents. The Act also provides that any attorney's fees or litigation costs assessed against the agency must be paid by the agency itself, rather than the U.S. Judgment Fund. In addition, the Act requires agencies to process all FOIA requests filed after December 30, 2008, within 20 days, or else to assign a tracking number to the request to allow requesters to inquire about the status of the request online or by phone.

How Contractors Can Protect Their Proprietary Commercial Information From Aggressive Agency FOIA Offices

In just the past few weeks, we have already begun to see several noticeable changes in the way agency FOIA offices administer FOIA requests as a result of the Obama administration's new guidelines. Among other things, the new FOIA policies have caused agencies to take increasingly aggressive positions with respect to the type of information they propose for release and to provide contractors surprisingly little time to object to the proposed disclosure of their proprietary commercial information. Indeed, in recent weeks some contractors have received letters from agency FOIA offices proposing to release hundreds of unredacted pages of their technical and price proposals and been given as little as five days to respond.

This new policy of "aggressive disclosure" is plainly a cause for concern among government contractors. There are three simple steps contractors can take, however, to protect against the disclosure of their proprietary commercial information in response to FOIA requests:

• Act immediately upon receiving notice from an agency that a FOIA request has been received . Agencies are required by Executive Order 12600 to notify contractors before releasing their confidential commercial information pursuant to a FOIA request and must afford them a reasonable time to object to the disclosure. If a contractor receives notice from an agency that its proprietary commercial information has been proposed for release, the contractor should immediately notify the agency that it intends to submit a formal objection and confirm the date by which the objection must be received by the agency. The contractor should request an extension of time from the agency if necessary.

• Explain in detail the basis for the objection. In light of the direction provided in the Attorney General's March 19, 2009, memorandum, it is likely that agencies will increasingly seek to release portions of records if they are unable to release a record in its entirety. As a result, contractors should avoid relying in their objections on blanket statements that they will "suffer irreparable competitive harm" if the record is released. To the extent possible, the contractor should seek to provide a proposed redacted version of the record with a detailed factual and legal analysis of the specific competitive harm the contractor would suffer if the redacted information were released publicly.

• Be prepared to seek an injunction in federal court. If, notwithstanding a contractor's objection, an agency decides to disclose the requested record (or portions thereof), the agency must provide the contractor a final written notice explaining why its objections were not sustained and the anticipated date of release. At this stage, the only way a contractor can stop the disclosure of the information is to file an action in federal district court seeking to enjoin the agency from releasing the record. Although agencies typically provide contractors final written notice ten days prior to releasing the record, it would not be surprising in light of the new FOIA policies to see agencies attempt to do so sooner. As such, it would be prudent for a contractor seeking to stop an agency from releasing its proprietary commercial information to be prepared to file an action in federal court at the time it submits its objection to the agency.

Conclusion

For better or worse, the "era of open government" is upon us. Contractors that wish to keep their proprietary commercial information from being released into the public domain would be wise to pay close attention to the government's new FOIA policies and to timely and thoroughly respond to any proposed release of their information by an agency.

Rand L. Allen is the Chair of Wiley Rein's Government Contracts Practice.Mr. Allen represents clients, ranging from "middle market" IT and professional services firms to the nation's largest aerospace and defense contractors, in every aspect of government contracting, including bid protests, disputes, commercial litigation, terminations, mergers and acquisitions, "procurement fraud"/False Claims Act investigations, suspension/debarment and regulatory issues. John R. Prairie is an Associate in the Government Contracts Practice. Mr. Prairie counsels and represents government contractors and subcontractors on a broad range of government contracts matters, including contract claims and disputes, bid protests, teaming and subcontracting issues, government investigations and audits, compliance with ethics and procurement integrity laws, suspension/ debarment proceedings and small business issues.

Please email the authors at rallen@wileyrein.com or jprairie@wileyrein.com with questions about this article.