Blog Post
FOIA Post (2002): New McDonnell Douglas Opinion Aids Unit Price Decisionmaking
New McDonnell
Douglas Opinion Aids
Unit Price Decisionmaking
A significant "reverse"
Freedom of Information Act decision addressing the long-controversial issue
of the treatment of unit prices (or similar contract pricing information) in
government contracts under Exemption 4 of the Freedom of Information Act has been handed down by the District
Court for the District of Columbia.
That court has
upheld a Department of the Air Force determination that release of Contract
Line Item Number (CLIN) prices for the current and option years of an awarded
government contract would not be likely to cause substantial competitive harm
to McDonnell Douglas Corporation, which is now a wholly owned subsidiary of The Boeing
Company (Boeing). See McDonnell Douglas Corp. v. United States Dep't of
the Air Force, 215 F. Supp. 2d 200, 205-09 (D.D.C. 2002). This is the first
decision to rule squarely on the disclosure of unit prices in awarded government
contracts since the D.C. Circuit's controversial decision on this issue three
years ago. See McDonnell Douglas Corp. v. NASA, 180 F.3d 303 (D.C.
Cir. 1999), reh'g en banc denied, No. 98-5251 (D.C. Cir. Oct. 6, 1999);
see also Freedom of Information
Act Guide & Privacy Act Overview (May 2002), at 250-54 (analyzing
D.C. Circuit's McDonnell Douglas opinion, together with opinion issued
by its author upon denial of rehearing, to make clear its limitations).
In reaching its
decision, the D.C. District Court first ruled that the Air Force had properly
determined that the submission of the pricing information at issue "was not
voluntary," because "Boeing was required to provide its cost and pricing information"
in order to be "considered for the contract" in the first place. 215 F. Supp.
2d at 205. Thus, the court found, the conventional tests for confidentiality
set forth in National Parks & Conservation Ass'n v. Morton, 498
F.2d 765, 770 (D.C. Cir. 1974), applied. See 215 F. Supp. 2d at 205.
The court next
ruled on Boeing's argument that release of its pricing information would harm
the government's ability to obtain such information in the future -- and it
soundly rejected that argument. The court declared that although Boeing's articulation
of such a novel argument was "catchy," the government itself was in the "best
position to determine whether an action will impair its information gathering
in the future." 215 F. Supp. 2d at 206.
Then the court
addressed the issue of possible competitive harm. It ruled that in "reverse"
FOIA cases, an agency "is not required to prove that its predictions of the
effect of disclosure are superior." 215 F. Supp. 2d at 205. Rather, the court
reasoned that the "harm from disclosure is a matter of speculation, and when
a reviewing court finds that an agency has supplied an equally reasonable and
thorough prognosis, it is for the agency to choose between the contesting party's
prognosis and its own." Id.
In this case, the
court found that in its fulsome, twelve-page letter addressing "each point of
fact and law made by Boeing in its comments," 215 F. Supp. 2d at 203, the Air
Force had "presented reasoned accounts of the effect of disclosure based on
its experiences with government contracting," id. at 209. Therefore,
the Air Force's decision to disclose the pricing information was not arbitrary
or capricious in any respect. See id.
Most significantly,
in issuing this ruling the D.C. District Court specifically found that the D.C.
Circuit's McDonnell Douglas decision did not require a different result.
Rather, the court found that the arguments that were made by the Air Force in
this case, based upon its administrative record, "differ[ed] markedly" from
those put forth by NASA in that earlier D.C. Circuit case. 215 F. Supp. 2d at
208.
First, whereas
NASA had argued in its case that "'underbidding due to the disclosure would
not occur because price is only one of the many factors used by the government
in awarding contracts,'" 215 F. Supp. 2d at 207-08 (quoting McDonnell Douglas
v. NASA, 180 F.3d at 306), the Air Force by contrast reached the conclusion
that "even if underbidding were to occur, the fact that price is just one of
many factors means that the effect of the underbidding would be diluted by the
other factors, and subsequently, the likelihood of competitive harm resulting
from disclosure would be greatly reduced," 215 F. Supp. 2d at 208. Secondly,
the Air Force "also concluded that economic uncertainty about the future, coupled
with all of the variables that are not in the contract that one would need in
order to deduce sensitive information, cast serious doubt on the likelihood
that any of the disputed information would be likely to cause substantial harm."
Id. Thus, the D.C. District Court found that the Air Force did not
make the "types of conclusory claims" that had been made by NASA in that case.
Id. at 208 n.9. "[I]nstead," it found, the Air Force "offered a reasoned
account for its position." Id.
This new precedent
thus recognizes that the D.C. Circuit's McDonnell Douglas decision
did not create any per se rule that unit prices always are protected by Exemption
4. Accord Freedom of
Information Act Guide & Privacy Act Overview (May 2002), at 251-52
(citing McDonnell Douglas Corp. v. NASA, No. 98-5251, slip op. at 2
(D.C. Cir. Oct. 6, 1999) (Silberman, J., concurring in denial of rehearing en
banc by stressing that panel opinion authored by him should be taken to "hold
. . . only that [NASA's] explanation of its position" in that case was insufficient)).
With this new McDonnell Douglas decision, it now is even more readily
apparent that agency determinations to disclose pricing information, made on
a case-by-case basis, may be upheld as long as agencies adequately justify them
in the administrative records that are compiled in the course of their
decisionmaking.
Accordingly, agencies should
continue to notify their submitters whenever FOIA requests are made for pricing
information in awarded contracts and conduct a thorough competitive harm analysis
of any objection that is made to disclosure of that information. Once that analysis
is completed, and if a submitter's objections are not upheld, agencies then
must clearly set forth their analysis and their rationale for disclosure.
See FOIA Post, "Treatment of
Unit Prices Under Exemption 4" (posted 5/29/02) (advising that the clear
focus of the D.C. Circuit's opinion in McDonnell Douglas was on the
"explanation of the agency's position," making it imperative that agencies create
administrative records that thoroughly explain their rationale for any decision
to disclose unit prices). In doing so, they can be confident that they have
sufficient administrative records upon which to base and support their disclosure
decisions if challenged in "reverse" FOIA cases.
(This case was
litigated by Office of Information and Privacy Senior Attorney Tricia S. Wellman,
as principal counsel, together with OIP Deputy Director Melanie Ann Pustay.)
(posted 10/4/02)
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