Myth No. 7: Our business information is safe with the government

by Thompson Coburn LLP
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There are a myriad of ways that doing business with the Federal Government differs from the commercial sector, and protection of a company’s sensitive business information is one of them. The most important thing for you to understand is that everything that you submit to the Federal Government is subject to a statute called the Freedom of Information Act (FOIA). This statute was enacted in 1967 based in part on the philosophy, to paraphrase Justice Brandeis, that “sunlight is the best disinfectant.” In other words, the more open and transparent our Government is, the less likely it is that improper conduct can occur. This does not happen in the commercial sector; if someone wrote to General Motors asking for a copy of your recent steel quote, there is no law or regulation that requires GM to respond.

Millions of people and entities submit information to the U.S. Government every day, and much of it is sensitive. If it were released to a third party, severe damage could result. For example, imagine what would happen if the Social Security Administration released your Social Security number to an unscrupulous person. For that very reason, the FOIA has protections built into it that serve to prevent the release of such information. Now consider what a company puts into a proposal it submits to a Government agency. It might include a description of its unique technical approach, its entire cost structure, a unique technical concept, a list of key personnel — all of those things constitute sensitive and proprietary business information, the release of which would inflict severe competitive harm on that company.

Under the FOIA and the decisions that courts have issued interpreting and applying it, such information would probably not be releasable if the company could persuade the agency, or perhaps a court, that such release would create the potential for economic injury or competitive harm. That one sentence makes it sound like a fairly easy process, but like almost anything involved with Government contracting, the process presents challenges. Experienced Government contractors are well aware that their competitors are constantly seeking their information through FOIA requests and other means. That is why they take very basic steps in order to protect the sensitive information they submit to the Government.

First, it is important to educate your employees about the rules for protecting information that is submitted to the Government. For instance, your employees must be taught to mark all proposal information, and anything else that is submitted to the Government, appropriately. In order to do this correctly, you must mark your information in accordance with the directive at Federal Acquisition Regulation 52.215-1(e), “Restrictions on Disclosure and Use of Data.” Any marking that differs from the legend prescribed in that regulation will increase your risk. This very basic question (“Did they mark it?”) will be the starting point for the analysis that either the agency or a court, or both, will conduct if someone files a FOIA request for your information. Your failure to appropriately mark your data could prove fatal to your position.

Second, if a U.S. Government agency ever asks you to comment on a FOIA request that is aimed at your data, as agencies are required to do, you must treat that request seriously and promptly. In responding to the agency, you must make a compelling case, if the facts support you, that the release of the requested data will cause your company competitive harm or economic injury. (In doing so, be realistic. Don’t try to protect harmless information — that affects your credibility and could hurt your chances of success). Your response should be a clear statement of your position, and it should cite to case law supporting it. Also, as part of this response, I strongly recommend having the letter signed by a very senior company official, underscoring the importance of the matter. If the letter is going to be submitted by your outside counsel, it should be accompanied by a sworn affidavit or declaration, signed by a senior officer, describing the potential harm. Why should you consider this? Because you are building a record; if the agency should disagree with you in any material way and decide to release the information at issue, any court challenge will be limited to reviewing the record that was before the agency. In other words, don’t save your ammunition for a later stage — you want it on the record now.

Don’t expect agencies to roll over simply because your letter has cited some recent legal decisions favorable to contractors. The agencies have experienced personnel handling FOIA requests. They know the law, and it is rare that they will see an argument for the first time. They also know that the FOIA and the courts favor disclosure, so your burden is heavy.

Third, over-marking your data could serve to undercut your position if a competitor files a FOIA request seeking it. To make a credible argument to an agency or a court, it will help if you can show that you were judicious in marking your data. That puts you in a much better position to challenge the release of data you did mark. (The same approach holds true for marking your technical data, a separate topic but one that is also critical to a Government contractor’s survival. Over-marking such data can cause major problems down the road.)

In addition to protecting information submitted to the Government, and with the major role that social media and electronic filing now play in both our personal and our business lives, we need to be careful about what we put out there. For example, if two parties are in litigation in a federal court, their filings are available to the public online through a service called PACER (Public Access to Court Electronic Records). You might be surprised at what you can learn about a competitor from reading these filings. The FOIA is not going to protect you if sensitive information is available on Pacer, so experienced contractors coordinate closely with their outside counsel in determining what information can be included in their court filings.

As for social media, a prudent business will educate its employees about what types of things should not be posted. Technical papers, derogatory e-mails, blog comments about Government officials, rants about a prime contractor’s practices, and venting about a recent contract loss might make you feel good in the short run but can have negative long-term consequences. Once again, the FOIA is not there to protect you.

(This article is part of a series for the Public Contracting Institute called “10 myths of government contracting.”)

If you are new to the series, we welcome you to check out Myths One, Two, Three, FourFive and Six.

 

 

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