amended to make clear that the National Parks construction of the Exemption is not consistent with congressional intent and to provide comprehensive protection of private business documents from public disclosure. Finally, I urge this Committee to confirm the rights of submitters to the fair agency procedures suggested above and to de novo judicial review of adverse agency disclosure decisions. These recommendations, I believe, will serve to protect the important private interests which Congress sought to safeguard through Exemption 4 without impairing or obscuring the basic purpose of the Freedom of Information Act to open government processes to greater scrutiny. [Exhibit 12] STATEMENT OF I. AUSTIN LYONS, JR., I am J. Austin Lyons, Jr., Senior Vice-President, General Counsel and Secretary of Metropolitan Life Insurance Company. This subcommittee is considering the procedural problems posed by reverse Freedom of Information Act (FOIA) cases, suits brought by submitters of information to prevent disclosure by agencies to third parties, and considering whether the intent of the FOIA is being subversed by the extensive use of the Act for commercial purposes. I ask that this subcommittee consider the statement presented herein in making its determinations on the future of the FOIA. My statement is supported by considerable experience in dealing not only with the FOIA but also in dealing with the general problem of protecting business information form disclosure to competitors. Although I have represented and advised Metropolitan Life Insurance Company in regard to many aspects of its business information practices, the views presented herein are my own. This subcommittee has stated that its purpose in conducting formal oversight hearings on the Freedom of Information Act is to continue "Congressional vigilence of implementation of the Freedom of Information Act"1 in order to continue to open up government information to the public I enthusiastically endorse this purpose but wish to remind this subcommittee of the important distinction between advocating abolition of secrecy in government and advocating elimination of the protection due confidential information filed with the government. Information determined to be disclosable under the FOIA is disclosable to anyone regardless of the motive of the requester, be it competitive, predatory, or idly curious. I examined the Statement of Burt A. Braverman, before the Government Information and Individual Rights Subcommittee of the Committee on General Operations, which recommends certain changes in and clarification of the FOIA, and endorse the views expressed and analysis contained therein and recommend this statement to this subcommittee for careful consideration. In addition, I wish to express my views concerning the relationship of the Trade Secrets Act, to exemption (b) (3) of the FOIA.* 6 The Trade Secrets Act." Congress in enacting the Sunshine Act passed a "conforming amendment"" to exemption (b) (3) of the Freedom of Information Act, 1 Opening Statement, Freedom of Information Act Hearings, September 15, 1977. See p. 1 of the hearing text. 2 It is my belief that Mr. Braverman's statement has been furnished to this subcommittee. See p. 293 of the appendix. 318 U.S.C. § 1905. 45 U.S.C. § 552 (b) (3). 518 U.S.C. § 1905 provides in pertinent part: "Whoever, being an officer or employee of the United States or of any department or agency thereof, publishes, divulges, discloses, or makes known in any manner or to any extent not authorized by law any information which . . concerns or relates to the trade secrets, processes, operations, style of work, or apparatus, or to the identify, confidential statistical data, amount or source of any income, profits, losses, or expenditures of any person, firm, partnership, corporation, or association; *** shall be fined not more than $1,000, or imprisoned not more than one year, or both; and shall be removed from office or employment." (italic added) 6 P.L. 94-409, 90 Stat. 1241, approved September 13, 1976, codified as 5 U.S.C. § 552b. 7 This amendment did not become effective until 180 days after September 13, 1976 (on or about March 13, 1977). which provides that the FOIA does not apply to matters that are: "(3) specifically exempted from disclosure by statute (other than section 552b of this title), provided that such statute (A) requires that the matters be withheld from the public in such a manner as to leave no discretion on the issue, or (B) establishes particular criteria for withholding or refers to particular types of matters to be withheld." The clear language of this amendment includes statutes such as the Trade Secrets Act which does not provide any discretion to disclose documents which fall within its scope. Moreover, since qualification for exemption (b) (3) is phrased in the disjunctive, the Trade Secrets Act also qualifies as a (b) (3) statute in that it refers to particular types of matters to be withheld, for example, trade secrets, amount or sources of any income, profits, or losses. Despite the plain language of exemption (b) (3), confusion has arisen concerning the legislative history of the Sunshine Act. However, careful analysis of this history demonstrates that because the language and meaning of the exemption were changed at several points in the legislative process, the only reliable indication of congressional intent is the Conference Report.8 Reference to early versions of the Act and explanation of these rejected versions are misleading. I believe that this subcommittee should endorse the consensus of both Houses as expressed in the Conference Report which states: "Section 5(b) of the conference substitute amends the third exemption in 5 U.S.C. 552(b) to include information specifically exempted from disclosure by statute (other than new section 552b), if the statute either (a) requires that the information be withheld from the public in such a manner as to leave no discretion on the issue, or (b) establishes particular criteria for withholding or refers to particular types of information to be withheld. The conferees intend this language to overrule the decision of the Supreme Court in Administrator, FAA v. Robertson, 422 U.S. 255 (1975), which dealt with section 1104 of the Federal Aviation Act of 1958 (59 U.S.C. 1504). Another example of a statute whose terms do not bring it within this exemption is section 1106 of the Social Security Act (42 U.S.C. 1306)." Sen. Conf. R. No. 94-1178, 94th Cong., 2d Sess. 24-25 (1976). Endorsement by this subcommittee of the consensus of both Houses will demonstrate, beyond further discussion, that the House Report,' which appears to limit the availability of the protection of the Trade Secrets Act, obviously refers only to the revision of the (b) (3) amendment then before the committee and, as a reference to an early effort at drafting a complicated law, clearly is not authoritative. 10 [Exhibit 13] STATEMENT OF NATIONAL COUNCIL OF TECHNICAL SERVICE INDUSTRIES, NATIONAL COUNCIL OF TECHNICAL SERVICE INDUSTRIES, Hon. JAMES ABOUREZK, DEAR MR. CHAIRMAN: Pursuant to your staff's request, the National Council of Technical Service Industries (NCTSI) is pleased to offer its views on the Subcommittee's pending inquiry into the Freedom of Information Act. NCTSI is a non-profit organization, consisting of 17 members directly involved in support service contracting for the United States. Since NCTSI member companies have extensive experience in the Federal Procurement area and are in virtually daily contact with Federal agencies, we believe that we are in a unique position to offer views on the experience of Government contractors See Note, The Effect of the 1976 Amendment to Exemption Three of the Freedom of Information Act. 76 Colum L. Rev. 1029, 1042, and nn. 76-78 (1976) which endorses as authoritative the Conference Report and the congressional debates that preceded each House's approval of the Conference Committee's version of the bill. H.R. Rep. No. 880 94th Cong., 2d Sess., Part I, 10 (1976). 10(3) required to be withheld from the public by any statute establishing particular criteria or referring to particular types of information.. under the Freedom of Information Act and particularly under Exemption 4 to the Freedom of Information Act. In NCTSI's view, there are a number of serious problems which exist in the interpretation and administration of Exemption 4. This Exemption, which ostensibly protects against the disclosure of "trade secrets and commercial or financial information obtained (by Government) from a person and privileged or confidential" has not, in our view, been applied in a manner sufficient to protect the interests of those providing legitimately confidential information to the Government. We note that, on September 15, 1977, Mr. Charles W. Stewart, President of the Machinery and Allied Products Institute (MAPI), testified before the Subcommittee as to the views of the Institute and its members on this important question. NCTSI fully endorses and supports the views and positions taken by MAPI in its testimony. We believe that the Institute has identified a number of significant issues which the Subcommittee should consider in its review of the Act. In this regard, we wish to call the Subcommittee's attention specifically to the following: First, as indicated by MAPI, one of most serious shortcomings in the present Freedom of Information Act is that a private party submitting confidential information to the Government is not assured of advance notice when the Government makes a determination to release that information. NCTSI believes that such notice is essential. Quite frequently, if given notice, a party providing confidential information may be able to persuade Government officials that the information in question should not properly be disclosed. In any event, such notice allows a party providing information to the Government to exercise its legal remedies before information is actually disclosed. For these reasons, NCTSI believes that the Act should be amended to require such advance notice in all cases where a party has submitted information covered by Exemption 4 to a Government agency. Second, NCTSI supports MAPI's position that documents submitted by a private party in confidence to a Government agency should retain their private status even though they are in the hands of the Government and should not be considered Government documents for purposes of the Freedom of Information Act. What this means, in our view, is that the presumptions in the Act favoring the disclosure of Government information-an objective which NCTSI supports—should not apply to such private documents in the Govern ment's hands. Third, NCTSI agrees with MAPI's conclusion that the courts and the Justice Department appear to have deviated from the intent of Congress with respect to Exemption 4. While Congress intended that Exemption 4 would act to prevent the disclosure of information not customarily made public by the person who has submitted it to a Government agency, the legal analysis in MAPI's testimony makes clear that this Congressional intent has not been followed. Instead, as MAPI has described, the legal standard governing the release of confidential information has been changed to one in which disclosure is precluded only if the party submitting the information or the Government agency can prove that competitive harm would result from such disclosure. NCTSI believes, as does MAPI, that this new standard governing the release of confidential information places an impossible burden of proof on a party submittting information to the Government. In our view, the original intent of Congress as to when disclosure of such information is inappropriate should be restored. For the foregoing reasons, NCTSI urges the Subcommittee to examine the present operations of Exemption 4 to the Freedom of Information Act. NCTSI member companies submit confidential information to the Government constantly. Obviously, in order to perform its business, the Government requires the disclosure of this confidential information. NCTSI believes that appropriate steps must be taken to ensure that the confidential nature of this information is preserved while in the hands of the Government. NCTSI is grateful for the opportunity to present these views to the Subcommittee. Sincerely, EDWARD C. LEESON, Executive Director. [Exhibit 14] STATEMENT OF GOVERNMENT SALES CONSULTANTS., INC., ANNANDALE, VA. Government Sales Consultants is engaged in the business of interpreting the federal procurement system to government agencies and prospective vendors to the government. As such, we are heavily engaged in assisting with writing solicitation documents and in responding to such documents. In most cases, the evaluation methods are complex. After award, we find, in many instances, the winning vendor and the losing vendors attempt to prohibit the agencies from releasing any information relative to why the winner won or why the losers lost. In some instances, the outside viewer is unable to ascertain whether the winner deserved to win. We would like to take this opportunity to offer the following: One of the clear purposes of the present procurement system is to make certain that the government spends appropriated monies in a fair manner. Indeed, the Comptroller General has stated in defining the purpose of the advertising requirements of the procurement system as follows: "The clear purpose of the law (93709 R.S.) in this regard is to restrict the uses of appropriations to the acquiring of actual government needs; to secure such needs at the lowest cost; and to guard against injustice, favoritism, collusion, graft, etc., in the transacting of the public business." 13 Comp. Gen. 284 (1934), at page 286. As can be seen from the above quote, when an agency or vendor hides behind exemption 4 or 5 in prohibiting the release of prices and terms contained in a government contract, several things occur. One, an unbiased party cannot then determine, in an independent manner, if errors occurred in award of the contract. This is not a mere intellectual exercise. Our firm is aware of many instances in the last few years, involving millions of dollars, where the government made such errors. They are as follows: 1. GSA awarded a contract for ADP equipment to a company as a result of an error in evaluation of the firms bid whereby the cost was incorrectly computed and, thereby, the winner was thought to be the low offeror but in fact was second low. 2. The Army at Aberdeen, Maryland, in a contract for ADP maintenance, forgot to subtract the prompt payment discount from a vendor and incorrectly awarded to the apparent low offeror as a result of the error. 3. The Navy, in a remote computing services proposal, made mathematical errors in computation of life cycle cost in an RFP issued by the Naval Regional Procurement Office in Washington, D.C. 4. GSA, in another action, lost a vendors proposal, never opened the proposal, and incorrectly awarded to another vendor. If a vendor or agency is allowed to conceal the method of award in a negotiated procurement and the reasons for award and, more importantly, the reasons why the losers lost it is contrary to the entire spirit of the federal procurement system and paves the way for concealment of errors forever and, even worse, increases the propensity for fraud and graft. Thus, in your committee considerations you should make clear that nothing in exemption 4 or 5 is intended to prevent the open intent of the current federal procurement system. SUMMARY It is our opinion that the Congressional intent of the Freedom of Information Act to allow an open government and to stifle secrecy and, thereby, pass on the benefits of citizen participation in the administrative process is very well served when the government must reveal the voluntary business information received from the business community in hopes of obtaining a government contract. In government procurement, Congress has stressed that the primary method of contracting be the Invitation For Bid (advertised procurement) which completely opens the process to the public and through this eliminates the ability to conceal fraud, corruption, or just plain ignorant procurement. The negotiated process is allowed for several reasons and is a secret process during the actual acquisition cycle. However, once the contract is signed the reason for negotiating disappears and the Act should allow openness at this time for the protection of the citizens to ensure that during the brief negotiated secret process that it was justly and accurately accomplished. The long run advantage of this should be obvious in that it will increase competition and, thereby, gain the benefits we receive from full and open competition under the free enterprise system. We would be more than happy to sit and discuss all of the above or provide additional information to this committee when deliberating exemption 4 and 5 now under considertion in relationship to government procurement. [Exhibit 15] STATEMENT OF COMPUTER & BUSINESS EQUIPMENT MANUFACTURERS ASSOCIATION, WASHINGTON, D.C. Hon. JAMES ABOUREZK, NOVEMBER 4, 1977. Chairman, Administrative Practice and Procedure Subcommittee, Russell Senate Office Building, Washington, D.C. DEAR CHAIRMAN ABOUREZK: As Chairman of the Administrative Practice and Procedure Subcommittee you conducted hearings the first week of October, 1977, the subject being the Freedom of Information Act (FOIA). At the conclusion of the hearings you announced the record would be held open for submission of additional comments by other interested parties. The Computer and Business Equipment Manufacturers Association (CBEMA) greatly appreciates the opportunity to submit these remarks. CBEMA is the trade association of the manufacturers of computer and business equipment. This Association has been most concerned over recent FOIA developments. with particular focus on (1) the law's fourth exemption "trade secrets and commercial or financial information obtained from a person and privileged or confidential", (2) the administrative practices utilized by Executive branch agencies in addressing exemption 4, and (3) the unreasonable burden placed on its member companies (and industry generally) when seeking to protect its data from public disclosure. CBEMA recognizes that exemption 4 is permissive, not mandatory, in its application. Since the bulk of the data supplied by the private sector to various government agencies must be protected if at all-under this exemption, it necessarily follows that permissiveness raises three basic questions: (1) what are the applicable criteria for determining release, or withholding, of the data? (2) are the criteria reasonable and do they conform to the legislative intent?; (3) are the disclosing private party's substantive and procedural interests appropriately taken into account? No doubt your Subcommittee and its staff has received through testimony, or written communication, many of the points we will enumerate below. Operating on this assumption we will attempt to be brief and succinct. 1. Considerable confusion has developed over the criteria for release, when addressing an FOIA request involving the fourth exemption. It is our view that the reasonable protection Congress sought to accord "trade secrets" and other confidential commercial and financial information has been eroded by subsequent court decisions and administrative practices. In particular the two National Parks decisions (498 F.2d 765 and 547 F.2d 673) have placed a greater burden on the agency-requiring it to show that release of the requested data would either (1) impair the Government's ability to obtain such data in the future or (2) cause substantial harm to the competitive position of the disclosing party. This "competitive harm" test clearly reflects a stricter standard than Congress envisioned would be applied. Moreover, it places an unreasonable burden on the agency, since the agency is not privy to many of the facts from which a conclusion of "competitive harm" from disclosure could be drawn. 2. The difficulty associated with the "competitive harm" test must now be examined in consort with the recent Attorney General's 5 May 1977 letter to the "Heads of All Federal Departments and Agencies". Clearly this letter will further tilt the administrative process toward release, when Attorney General Bell advises that: "The government should not withhold documents unless it is important to the public interest to do so, even if there is some arguable legal basis for the withholding. In order to implement this view, the Justice Depart |