In a decision issued February 26, 2010, the U.S. District Court for the District of Columbia in Essex Electro Eng'rs, Inc. v. U.S. Sec'y of the Army, No. 09-372 (D.D.C. Feb. 26, 2010), held that the U.S. Army (Army) properly withheld unit pricing for a government contract awardee as confidential information under Exemption 4 of the Freedom of Information Act (FOIA), 5 U.S.C. § 522. The court affirmed the Army's decision to redact unit prices before releasing an Army contract in response to a FOIA request submitted by a disappointed offeror for "the award document along with the CLIN pricing."
In determining whether FOIA's confidential information exemption from disclosure applies, the court confirmed that "[a]ctual harm need not be demonstrated." Slip op. at 5 (emphasis added). Instead, the exemption applies to shield information from disclosure where "evidence support[s] the existence of potential competitive injury or economic harm." Id. (emphasis added).
The court held that revealing the requested unit pricing information would expose the awardee's business strategy and cost structure, causing substantial competitive harm. Specifically, the court reasoned that disclosing unit pricing would damage the awardee's ability to compete for similar future projects and weaken the awardee's bargaining power with its subcontractors. Slip op. at 6. Moreover, disclosure could expose any economies of scale the awardee hoped to gain through contract performance, as well as its pricing strategies and calculation of risk. Id. Finally, the court emphasized that the awardee was to be the first private entity to provide the items under the contract, meaning that these "prices were not known in the industry, further supporting the need to prevent their release." Id.
In finding sufficient evidence of potential competitive injury and affirming the Army's approach to redacting unit pricing, the court rejected the plaintiff's three main arguments for disclosure. First, the plaintiff's argument that the FAR mandates post-award release of unit pricing "is inaccurate and must fail." Slip op. at 7. In response to the suggestion that FAR 15.506 mandates disclosure of unit prices, the court noted "Not so!" and explained that the FAR explicitly outlines exceptions that track FOIA exemptions. Id. FAR 15.506(e) provides that a debriefing "shall not reveal any information . . . exempt from release under the Freedom of Information Act (5 U.S.C. § 552)," and specifically exempts from disclosure "[c]ommercial and financial information that is privileged or confidential." Id.; FAR 15.506(e)(3).
Second, contrary to the plaintiff's assertions, the Department of Defense does not regularly disclose unit pricing, but rather also recognizes a FOIA exception for confidential commercial or financial information likely to cause substantial competitive harm. Slip op. at 7. Finally, the court found "overly general" and "wholly irrelevant" the plaintiff's argument that commercial unit prices are "normally provided" because otherwise "the public would buy nothing." Id.
The court's determination that the awardee's unit pricing was protected from disclosure under Exemption 4 is consistent with principles articulated by the Court of Appeals for the District of Columbia Circuit in McDonnell Douglas v. U.S. Air Force, 375 F.3d 1182 (D.C. Cir. 2004), as well as district court precedent concerning FOIA and unit pricing. See, e.g., Gen. Elec. Co. v. Dep't of the Air Force, 648 F. Supp. 2d 95 (D.D.C. 2009) (exemption applies where disclosure of unit prices in contracts for jet engine parts would likely cause substantial competitive harm); Boeing Co. v. Dep't of the Air Force, 616 F. Supp. 2d 40 (D.D.C. 2009) (exemption does not prevent disclosure of labor rates which fluctuate year to year, preventing competitors from predicting future rates and diminishing any potential competitive harm). Additionally, although the opinion does not address whether the Army's decision to redact unit prices comports with the Obama Administration's directive that agencies administer FOIA according to a "presumption of openness," the court noted that the Army disclosed all "reasonably segregable" information in accordance with FOIA, slip op. at 6, likely rendering the Army's approach consistent with the Attorney General's directive that agencies make "partial disclosure" whenever possible. See Memorandum from the Attorney Gen. to Heads of Executive Departments and Agencies (Mar. 19, 2009).