competitors frce, or even limited, access to this material and Equally as important here is the point that, by allowing the FOIA to be used for the purpose of "industrial espionage" by our competitors, substantial harm is inflicted upon the Government. If all competitors have access to each other's proposals, this indispensable competitive discriminator will be substantially reduced, if not eliminated, thus impairing the Government's ability to distinguish between the proposal of a competent contractor and that of a clever plagiarist. Such arbitrary access will also, ng recognized in OFPP Policy Letter 78-3, impair the Government's ability to obtain such information voluntarily in the future. The prevailing sentiment among many service contractors today is to furnish the Government as little information as possible unloes they can be assured that the confidentiality authorized by DAR 3-507.1 will be strictly maintained. We believe that such an attitude is detrimental to the legitimate needs of the Government, but find it difficult to maintain our policy of thorough disclosure in light of present circumstances. Maintaining the confidentiality of our proposals is of such groat importance that we will protect them with the full resources that are at our command. We strongly believe that the Government has an equally compelling vested interest in nut breaching this confidentiality. I would greatly appreciate the opportunity to discuss this matter with you and, if you would like additional information, please do not hesitate to call me. Very truly yours, Peter M. Dugre 541 4-19-78 Special Rules • Regulations Office of Federal Procurement Policy Roquests for Disclosure of [1960] (Policy Letter No. 78-3, March 30, 1978.) The Freedom of Information Act 5 U. S. C. § 552, is intended to better inform the public by opening the processes of Government to public scrutiny by establishing a general policy of disclosure of infornation in Government files upon request. The Act recognizes, however, that while the general policy is one of public disclosure, it is also in the public interest to protect certain types of material from disclosure, The purpose of this Policy Letter is to prescribe a uniform policy and approach toward laudling requests filed under the Freedom of Information Act for information that may fall within exemption 4 of the Act, S U. S. C. § 552(b)(4), obtained from Government contractors or potential Government contractors in the course of a procurement. That provision provides a discretionary exemption from disclosure for •⚫ trade secrets and commercial or financial information obtained from a persun and privileged or confidential." In the procurement process, such information usually comes into the possession of the Govern imait through a proposal or similar document. A recent court decision has held that commercial or financial information is withhuldable under exemption 4 if disclosure would satisfy either of two tests. Broadly speaking, these tests are satisfied if disclosure would: 1. unpair the Government's ability to oblain necessary information through purdy voluntary cooperation in the future; or 2. cause substantial harm to the conpetitive position of the submitter of the requested information, The same court has held, in applying and clarifying the "competitive haran" test, that (1) it is "virtually axiomatic" that disclosure of certain types of contractor infomation would cause substantial harm, (2) actual harm need not be demonstrated • National Parks and Conscivolion Association v. Murtun, 498 ♪o. 29 763 (D. C. Cir. 1974). Goverment Contracts Reports 1705 to warrant non-disclosure, and (3) in a competitive context, a showing that com petitors (or others) would gain "valuable insights" into a contractor's operations is an important consideration in satisfying the "competitive harm" test. The balancing of competing interests often involved in Freedom of Information re. quests merits special attention in the procurement process. Procurement is one of the principal means whereby our Govern ment effectuates national policles, as to both domestic and international concerns, and therefore the public has a strong interest in how it is conducted. The public's right to scrutinize the process must be recognized, particularly with regard to the terms and conditions of awarded contracts, which represent Government action, and with regard to contract deliverables. At the same time, the Government's need to obtain accurate and complete information necessary to procure goods and services for public use of a nature and at the cost most beneficial to the public is critical Therefore, unless and until new court decisions or legislation require changes, in order to achieve a uniform approach to the competing interests, and to protect the integrity of the procurement process as well as the public's right to disclosure, you are requested, on receipt of a Freedom of Information request for information, subtnitted by a contractor or potential con tractor, that may fall within exemption 4 to: (1) Immediately notify the submitter of the information of the request and afford the submilter an opportunity to present its views on whether disclosure should be made; and (2) give careful consideration to the facts that! (a) commercial and financial informa tion submitted in connection with a procurement frequently is submitted more or • National Parks and Conseruntion Antockillon v. Kleyve, S47 F. 24 673 (D. C. Cr. 196), T 960 Senate Bill 774, inter alia, would amend Subsection (b) (4) of the FOIA to clarify the type of information the release of which should be restricted. We believe that a more comprehensive wording would benefit both requestors and contractors. We propose the following wording for Subsection (b) (4): Commercial or financial information received in MACHINERY and ALLIED PRODUCTS INSTITUTE 1200 EIGHTEENTH STREET, N.W. WASHINGTON, D.C. 20036 202-331-8430 The Honorable Orrin G. Hatch Chairman, Subcommittee on the Constitution 108 Russell Senate Office Building Dear Mr. Chairman: May 10, 1983 The Proposed Freedom of Information Reform Act We appreciate the opportunity to offer the views of the Machinery and Allied Products Institute (MAPI) on S. 774, the proposed Freedom of Information Reform Act which you, Senator Thurmond, and Senator DeConcini have cosponsored. This bill, of course, is identical to the bill, S. 1730, which the full Judiciary Committee approved without dissent last year prior to the adjournment of the 97th Congress. As you know, the Machinery and Allied Products Institute is the national organization and spokesman for manufacturers of capital goods and allied products. Our interest in this subject dates from the original consideration and adoption of the Act. We have always supported the basic concept underlying FOIA, but we believe that the Act has created serious problems for both government and business to which S. 774 is addressed. We have been concerned over the cost and burden that has resulted for government departments and agencies in their efforts to comply with the Act's information-disclosure requirements. The extent of this cost and burden was grossly underestimated at the time FOIA was originally enacted into law. However, our principal concern in this area has been the complete lack of protection in the Act for information submitters as distinguished from information requesters. Subsection (b)(4) of FOIA states that the Act's compulsory disclosure requirements do not apply to "trade secrets and commercial or financial information obtained from a person and privileged or confidential." As you know, this exemption has been construed to be permissive rather than mandatory in application, and its scope has been judicially qualified by the U.S. Court of Appeals for the District of Columbia Circuit in the National Parks case by what is referred to as the "substantial competitive harm" test./1 In addition, agencies are not required to notify information submitters of FOIA requests for the information furnished to the agency, nor does the statute accord such information submitters a "reverse-FOLA" cause of action in the courts for improper disclosure of their information. 1 National Parks and Conservation Association v. Morton, 498 F.2d 765 (D.C. Cir. 1974). MACHINERY & ALLIED PRODUCTS INSTITUTE AND ITS AFFILIATED ORGANIZATION COUNCIL FOR |