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FOIA Update: New Statute Protects Contractor Proposals

FOIA Update
Vol. XVIII, No. 1

New Statute Protects Contractor Proposals

Congress has passed a new statute that contains provisions prohibiting agencies from releasing certain contractor proposals under the Freedom of Information Act. Signed into law on September 23, 1996, and effective as of that date, these new statutory provisions serve as Exemption 3 statutes under the FOIA and promise to considerably alleviate the administrative burden experienced by agencies in the processing of FOIA requests for contractor proposals.

The new provisions are contained in the National Defense Authorization Act for Fiscal Year 1997, Pub. L. No. 104-201, § 821, 110 Stat. 2422. Although enacted as part of a statute that authorizes funding for the Department of Defense, they consist of two parallel measures -- one that directly amends the statute governing armed services acquisitions (to be codified at 10 U.S.C. § 2305(g)) and another identical provision that amends the statute governing certain civilian agency acquisitions (to be codified at 41 U.S.C. § 253b(m)). Thus, despite the title of the particular authorization statute through which they were enacted, these prohibitions on FOIA disclosure of certain contractor proposals apply respectively to both civilian and defense agencies.

Exemption 3 Coverage for Contractor Proposals

These new Exemption 3 statutes prohibit agencies from releasing under the FOIA any proposal "submitted by a contractor in response to the requirements of a solicitation for a competitive proposal," unless that proposal "is set forth or incorporated by reference in a contract entered into between the agency and the contractor that submitted the proposal." The effect of this prohibition is two-fold. First, it provides blanket protection for the proposals submitted by unsuccessful offerors in response to a solicitation. Those proposals, by definition, would not be "set forth or incorporated by reference in a contract entered into between the agency" and that offeror.

Second, the new statutes provide protection even for proposals submitted by a successful offeror, provided that such a proposal is not actually "set forth or incorporated by reference in" the ensuing contract. For such proposals that are not part of the contract, the statutes' broad prohibition against FOIA disclosure of proposals would apply and the proposal could not be released. Thus, the key determinant of exempt status is whether the particular proposal was actually set forth in or incorporated into the contract.

Underlying Legislative History

The brief legislative history concerning these new statutory provisions makes clear that it was Congress' intent to alleviate the administrative burden imposed on agencies faced with the task of processing FOIA requests for contractor proposals. Specifically, the House Report states:

. . . .

H.R. Rep. No. 104-563, at 327 (1996). Thus, in enacting these statutory provisions, Congress was concerned with eliminating the "significant administrative burden" imposed on agencies when they process requests for proposals -- especially in light of the fact that, as Congress characterized it, "most if not all of the information" would be exempt.

Agencies with experience in processing proposals are well aware of the enormous expenditure of time and effort required to review a proposal "line-by-line." Because such a review often results in a "non-disclosure determination," Congress relieved agencies of the burden of conducting that review at all. Instead, for any proposal falling within the scope of these new statutory provisions, agencies "may not" make them available under the FOIA. As a result, agencies should rely on Exemption 3 of the FOIA, in conjunction with the applicable new statute, to withhold such contractor proposals -- and no Exemption 4 analysis, with its accompanying submitter-notice obligation, need be undertaken.

These statutes contain a definition of the term "proposal" that specifies that it "means any proposal, including a technical, management, or cost proposal, submitted by a contractor in response to the requirements of a solicitation for a competitive proposal." Some questions, though, have arisen concerning the statutes' intended coverage. One such question involves NASA and the Coast Guard, whose proposals are currently not covered by either statutory provision because they are civilian agencies yet conduct their contracting under the armed services acquisition statute. Due to this and other questions, the possibility of technical amendments to these statutory provisions is being explored.

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Updated August 13, 2014