Case No. VFA-0284, 26 DOE ¶ 80,185

May 9, 1997

DECISION AND ORDER

OF THE DEPARTMENT OF ENERGY

Appeal

Name of Petitioner: Burns Concrete, Inc.

Date of Filing: April 3, 1997

Case Number: VFA-0284

On April 3, 1997, Burns Concrete, Inc., (Burns) filed an Appeal from a determination issued on January 30, 1997, by the DOE's Pittsburgh Naval Reactors Office (PNR). The determination responded to a request for information filed under the Freedom of Information Act (FOIA), 5 U.S.C. § 552, as implemented by the Department of Energy (DOE) in 10 C.F.R. Part 1004.

The FOIA generally requires that documents held by the federal government be released to the public upon request. However, Congress has provided nine exemptions to the FOIA that set forth the types of information agencies are not required to release. Under the DOE's regulations, a document exempt from disclosure under the FOIA shall nonetheless be released to the public whenever the DOE determines that disclosure is not contrary to federal law and in the public interest. 10 C.F.R. § 1004.1.

I. Background

On December 20, 1995, Burns filed a request under the FOIA for documents submitted by Walters Ready Mix, Inc. (Walters) in connection with a purchase order for concrete supplied for the Expanded Core Facility Dry Cell Project at DOE's Bettis Atomic Power Laboratory, Naval Reactors Facility (NRF). This project was terminated in 1993 and Walters submitted the documents sought by Burns as part of a settlement proposal to recover its costs associated with the project. The project was rebid in early 1996, and Walters again filled the purchase order for concrete used in the project.

Because Burns sought information submitted by a third party, PNR sought and received comments on Burns' request from Walters. Letter from Sally B. Pfund and Robert J. Martinez, Williams & Jensen (representing Walters), to James S. Carey, Jr., PNR (April 2, 1996); see Exec. Order No. 12,600, 3 C.F.R. 235 (1988) (requiring notice to submitters). PNR issued a final determination on April 26, 1996. Letter from H.A. Cardinali, Manager, PNR, to Linda Szimhardt, Office Manager, Burns (April 26, 1996). In its determination, PNR released a number of documents in their entirety to Burns, but withheld certain responsive documents and portions of other responsive documents under FOIA Exemption 4, 5 U.S.C. § 552(b)(4). Id.

Burns filed an Appeal of PNR's determination on June 17, 1996. Letter from Linda Szimhardt, Burns, to Director, Office of Hearings and Appeals (OHA) (June 7, 1996). We granted Burns' Appeal in part and remanded the matter to PNR to issue a new determination releasing additional information to Burns. Burns Concrete, Inc., 26 DOE ¶ 80,143 (1996). PNR issued its new determination on January 30, 1997. In its present Appeal, Burns objects to the withholding of certain information in PNR's new determination and challenges the adequacy of PNR's search for responsive documents.

II. Analysis

A. Information Withheld Under Exemption 4

Exemption 4 exempts from mandatory public disclosure "trade secrets and commercial or financial information obtained from a person and privileged or confidential." 5 U.S.C. § 552(b)(4); 10 C.F.R. § 1004.10(b)(4). In order to qualify under Exemption 4, a document must contain either (a) trade secrets or (b) information that is (1) "commercial" or "financial," (2) "obtained from a person," and (3) "privileged or confidential." National Parks & Conservation Ass'n v. Morton, 498 F.2d 765 (D.C. Cir. 1974) (National Parks). The United States Court of Appeals for the District of Columbia Circuit has found that commercial or financial information submitted to the federal government under non-voluntary conditions is "confidential" for purposes of Exemption 4 if disclosure of the information is likely either (i) to impair the government's ability to obtain necessary information in the future or (ii) to cause substantial harm to the competitive position of the person from whom the information was obtained. Id. at 770; Critical Mass Energy Project v. NRC, 975 F.2d 871, 879 (D.C. Cir. 1992), cert. denied, 507 U.S. 984 (1993) (Critical Mass). By contrast, information that is provided to an agency voluntarily is considered "confidential" if "it is of a kind that the provider would not customarily make available to the public." Critical Mass, 975 F.2d at 879.

Clearly, documents submitted by a company to the DOE in connection with a proposal for reimbursement of costs it incurred are "commercial" within the meaning of Exemption 4 because of the vendor's commercial interest in receiving compensation. Public Citizen Health Research Group v. FDA, 704 F.2d 1280, 1290 (D.C. Cir. 1983) (citing Washington Post Co. v. HHS, 690 F.2d 252, 266 (D.C. Cir. 1982)) (records are commercial so long as the submitter has a "commercial interest" in them). In addition, the information was obtained from a "person," as required by Exemption 4, since corporations are deemed "persons" for purposes of that Exemption. See Allnet Communications Servs. v. FCC, 800 F. Supp. 984, 988 (D.D.C. 1992) ("person" under Exemption 4 "refers to a wide range of entities including corporations"), aff'd, No. 92-5351 (D.C. Cir. May 27, 1994); see also Ronson Management Corp., 19 DOE ¶ 80,117 (1989).

Regarding whether the documents at issue are "confidential," we have held consistently that information submitted in connection with a Request for Proposal is not submitted voluntarily and is therefore to be considered confidential only if it meets the test set out in National Parks. E.g., Glen M. Jameson, 25 DOE ¶ 80,191 (1996). The federal courts have reasoned that even though such submissions are voluntary in the sense that no company is forced to do business with the government, information required by the terms of a Request for Proposal must be submitted if "contractors want to win lucrative government contracts . . . ." McDonnell Douglas Corp v. NASA, No. 91-3134, slip op. at 4 (D.D.C. June 30, 1995).

Similarly in the present case, the documents submitted by Walters were required to be submitted in order for the company to do business in connection with a government project, and specifically in order to receive reimbursement once that project was terminated. Indeed, Walters did not argue, nor did PNR conclude, that the documents at issue were submitted voluntarily. Accordingly, we will find the information at issue to be "confidential" only to the extent that its disclosure is likely either to impair the government's ability to obtain necessary information in the future or to cause substantial harm to the competitive position of the submitter, Walters.

1. Concrete Mix Design Test Data

Some of the information withheld from Burns in PNR's April 26, 1996 determination concerned a mix design, High Density Concrete Mix Design 3500 psi (Trial Batch NX145-1), submitted by Walters for concrete that was to be used in the Dry Cell Project. Burns was provided with the mix design for this concrete, but six pages of testing data were withheld in their entirety and portions of one page of test results were released with certain information redacted. In our decision on Burns' Appeal of PNR's first determination, we concluded that PNR should release to Burns any non-exempt material contained in the documents withheld in their entirety, and should also release additional information from the page partially withheld because this information had been revealed in the mix design already provided to Burns. 26 DOE ¶ 80,143 at 80,600-01.

In its January 30, 1997 determination, PNR released information from each of the seven pages at issue, but withheld certain information from each page under Exemption 4. The information withheld consisted of the results of the laboratory testing of the concrete mix designed by Walters and the results of Walters' measurement of the properties of the blend of aggregate that was used in the mix. Walters contends that this data should be withheld because (1) "Burns intends to use the information to try to affect a recompetition of the project for which the special mix was developed" or could "approach the prime contractor which received the award and underbid Walters for the concrete requirement;" (2) the information "would give Burns an improved position in future competitions . . . in any similar procurements;" and (3) the information was developed at Walters' expense,(1) and releasing this information would allow competitors access to this information without incurring the same expense. Letter from Sally B. Pfund and Robert J. Martinez, Williams & Jensen (representing Walters), to James S. Carey, Jr. (April 2, 1996) at 3-4.

In our previous Appeal decision, we rejected Walters' first argument because we found that the prospect of a rebid of the project or concrete requirement was "extremely unlikely," based on the fact that "the project has now proceeded to the point where it would likely be economically impractical to terminate it." 26 DOE ¶ 80,143 at 80,601. We reject this argument here for the same reason.

Regarding Walters' second and third arguments, we note at the outset that the issue of competitive harm must be resolved on a case-by-case basis. Nonetheless, in interpreting Exemption 4, the federal courts have set forth certain guidelines that can be helpful when carefully applied to the facts of a specific case. For example, a case quite analogous to the present was decided by the United States Court of Appeals for the District of Columbia Circuit in Worthington Compressors, Inc. v. Costle, 662 F.2d 45 (D.C. Cir. 1981). Underlying the dispute in Worthington was an Environmental Protection Agency requirement that manufacturers of air compressors provide to the government "test results and design specifications of their products in ?production verification' reports." Id. at 48. One compressor manufacturer requested the data submitted by four competing compressor manufacturers. The court outlined the following analysis necessary to determine the extent of competitive harm caused to a submitter:

The substantial competitive harm test is rather simple to apply in the typical reverse- FOIA case where Government disclosure is the sole means by which competitors can gain access to the requested information. The court considers how valuable the information will be to the requesting competitors and how much this gain will damage the submitter. In this case, however, we have the additional wrinkle that the requested information is available, at some cost, from an additional source. In our view, this requires that the inquiry be expanded to include two considerations: (1) the commercial value of the requested information, and (2) the cost of acquiring the information through other means.

The first consideration is based on the obvious fact that a submitter can suffer competitive harm only if the requested information has commercial value to competitors. When the information does have commercial value, the second consideration comes into play. If the information is freely or cheaply available from other sources, such as reverse engineering, it can hardly be called confidential and agency disclosure is unlikely to cause competitive harm to the submitter. If, on the other hand, competitors can acquire the information only at considerable cost, agency disclosure may well benefit the competitors at the expense of the submitter.

. . . .

The dimensions of the windfall can be measured by evaluating the commercial practicability of private acquisition of the commercially valuable information. If private reproduction of the information would be so expensive or arcane as to be impracticable, disclosure of that information through the FOIA conduit could damage the competitive position of the submitters, to the advantage of FOIA requesters.

Id. at 51.

Thus, where there is competition in a given industry, the courts have reasoned that release of "proprietary technical information ?would seriously undermine a company's competitive advantage by allowing competitors to have access to ideas and design details that they would not have had or would have had to spend considerable funds to develop on their own.'" SMS Data Prods. Group, Inc. v. Department of the Air Force, No. 88-0481-LFO, slip op. at 3 (D.D.C. March 31, 1989) (citation omitted). We do find that there is competition among concrete companies in Walters' market area, as demonstrated by the fact that Burns competed with Walters on the Dry Cell Project. However, Walters must also demonstrate that there is a "likelihood of substantial competitive harm" in order for the information to be exempt from release. Id. at 530. We cannot find that Walters has made such a showing with respect to the testing results that have been withheld from the appellant.

Applying the method of analysis used by the D.C. Circuit in Worthington, we first must determine whether the "requested information has commercial value to competitors." The appellant contends that the data from tests performed on the mix

indicates whether the mix design was reproduced per the values as calculated in the mix design. Consequently, the test results should fall within the same ranges of values as already revealed in the mix design. . . . This test data is always required to be submitted with concrete mix designs to verify the calculated values on the mix design.

Appeal at 2.

We found in our previous Appeal decision that the information contained in the test results can be withheld under Exemption 4 only if that information reveals "properties and characteristics of the special mix beyond that which is revealed by the mix design," the mix design already having been released to the appellant. 26 DOE ¶ 80,143 at 80,601. Based on our review of the specific data withheld from Burns, it is clear that releasing this data would reveal information not provided in the mix design. For example, the mix design alone does not reveal whether the mix, as tested, met the design specifications. The test results do reveal that fact, and more. The testing data indicate the extent to which the mix surpassed or fell short of the specifications. Where data was expected to fall within specified ranges, the test results show precisely where, within or outside of the ranges, the data fall.

This obviously does not end our analysis, however, since we must determine the value of this additional information in the hands of Walters' competitors. Walters argues that the information would bolster Burns' competitive position in future similar procurements by providing "insight into Walters' development process." Letter from Sally B. Pfund and Robert J. Martinez, Williams & Jensen (representing Walters), to James S. Carey, Jr. (April 2, 1996) at 3. However, Walters does not explain how the results of tests on a product already developed, and for which the design specifications have already been released, would provide Burns or any other competitor such insight, nor does the submitter explain how this information "would give Burns an improved position in future competitions . . . in any similar procurements." Conclusory allegations of harm do not suffice to protect information from disclosure under Exemption 4. See Lykes Bros. S.S. Co. v. Pena, No. 92- 2780, slip op. at 13 (D.D.C. Sept. 2, 1993) (Westlaw, DCT database) (submitters "required to make assertions with some level of detail as to the likelihood and the specific nature of the competitive harm they predict"). Without a more detailed explanation of the connection between release of the particular information being withheld and a resulting competitive harm to Walters, we cannot conclude that this information would be valuable to Walters' competitors.

Even if we were to find that the information was of great value, we would then need to determine

the cost to Walters' competitors of acquiring the same information through other means. Worthington, 662 F.2d at 51. If the information were "freely or cheaply available from other sources," then we would have to conclude that its release is unlikely to cause Walters substantial competitive harm. Id. If, on the other hand, the information could only be acquired at "considerable cost," or "private reproduction of the information would be so expensive or arcane as to be impracticable, disclosure of that information through the FOIA conduit could damage the competitive position" of Walters. Id. Walters' third argument, that release of the information would allow Burns to produce supporting data "without incurring the cost which Walters has already borne," addresses this issue, but provides us no detail as to the extent of that cost. Thus, we have no way to determine how difficult it would be for Burns or another competitor to acquire this information by running its own tests on the mix design or the aggregate used in that mix.

Because Walter's has not provided a sufficient basis for withholding the information described above, we will remand the testing data portion (pages 187, 188, 189, 191, 192, and 193)(2) of the determination to PNR, with directions to issue a new determination to the appellant. This determination should start with the presumption that the testing data that has been withheld is not exempt from disclosure, absent additional evidence from Walters regarding the substantial competitive harm likely to result from its release. Because Walters provided its comments on this issue to PNR over one year ago, and because at that time Walters was asked to address the release of a larger number of documents, we believe that Walters should now be given an opportunity to provide additional information to PNR to justify withholding the particular information at issue here. However, Walters' comments must specifically address the particular items of information that have been withheld (i.e. slump, % air, wet/dry weights, dry rodded weights, % voids, and bulk specific gravity), and explain in some detail how its competitors would use this particular information in a way that would likely result in substantial competitive harm to Walters. In addition, Walters should provide information as to the cost of running these tests, so that PNR can determine the cost to Walters' competitors of acquiring the testing data from other sources. Finally, we have found that there was information withheld from Burns on one page (page 194) that Burns has demonstrated it has already received. Therefore, this page should be released to the appellant in its entirety.

2. Cost, Profit, and Overhead Data

The vast majority of the data withheld from Burns in PNR's first determination concerned costs incurred by Walters prior to the termination of the Dry Cell Project in 1993. This information was submitted by Walters as part of a settlement proposal to recover its costs associated with the project. When Burns filed its June 1996 Appeal with this office, we reviewed the documents and ordered, inter alia, that on remand non-exempt information contained in three pages that had been withheld in their entirety should be released to Burns. In its January 30, 1997 determination, PNR released these three pages with certain information redacted and withheld from Burns under Exemption 4. In its present Appeal, Burns contends that some of the information withheld should be released.

As we noted in our decision on Burns' previous Appeal, information that, in a competitive market, would reveal the profit rates, general and administrative rates, and actual costs of a competitor company is exempt from release under the FOIA. Gulf & W. Indus., Inc. v. United States, 615 F. 2d 527 (D.C. Cir. 1979) (Gulf & Western). In Gulf & Western, the court found that with such information, the company's "competitors would be able to accurately calculate [the company's] future bids and its pricing structure from the withheld information. The deleted information, if released, would likely cause substantial harm to [the company's] competitive position in that it would allow competitors to estimate, and undercut, its bids." Id. at 530. For this same reason, we upheld in our prior decision PNR's withholding of a great deal of data that, for example, would have revealed Walters' actual costs, profit, and overhead.(3) However, we cannot find that such competitively sensitive information would be revealed by release of the pages at issue in the present case.

One of the three pages is a list of prices prepared by Walters for a number of products and services.(4) The other two pages contain the prices for which three trucks were sold by an affiliate of Walters to another concrete company. Walters argues generally that the information withheld from the appellant would, if released, "give Burns detailed knowledge of Walters' various costs and strategies, which Burns could use to its competitive advantage in a number of ways." Letter from Sally B. Pfund and Robert J. Martinez, Williams & Jensen (representing Walters), to James S. Carey, Jr. (April 2, 1996) at 7. However, we cannot see how the release of any of the information in these pages would cause the types of competitive harm cited by Walters (e.g., allowing Burns to bargain with Walters' suppliers, divert future business from Walters, or gain enough knowledge of "Walters' financial information to be able to know where Burns might best be able to undercut Walters' prices"). Id.

We believe that two federal court cases cited by Burns, General Dynamics Corp., Space Sys. Div. v. Department of the Air Force, 822 F. Supp. 804 (D.D.C. 1992), and Acumenics Research & Technology v. Department of Justice, 843 F.2d 800 (4th Cir. 1988), support the release of the information in the pages at issue. Key to the courts' decisions in those cases to uphold the release of information was the fact that "competitively sensitive information such as cost, overhead, or profit identifiers would not be revealed." General Dynamics, 822 F. Supp. at 807; see Acumenics, 843 F.2d at 802, 806 (release of unit prices would not reveal Acumenics' "profit multiplier," the "product of a company's overhead, general and administrative costs (G & A), and profit, (overhead rate x G & A rate x profit)"). Other court cases dealing with the withholding of pricing information support the proposition that, "[t]o justify protection under exemption 4, a submitter must present persuasive evidence that disclosure of the unit prices would reveal some confidential piece of information, such as a profit multiplier or risk assessment, that would place the submitter at a competitive disadvantage." Comdisco, Inc., v. General Servs. Admin., 864 F. Supp. 510, 516 (E.D. Va. 1994); see also CC Distribs., Inc., v. Kinzinger, No. 94-1330, slip op. at 5 (D.D.C. 1995) ("Defendants [agency] repeatedly asked plaintiff to explain how its competitors could reverse-engineer its pricing methods and deduce its concessions from suppliers. In response, the record amply demonstrates that plaintiff merely restated its conclusions. On such a showing, defendants were unable to assess plaintiff's claims with any specificity, . . .")

In the present case, we find that Walters has not provided sufficient justification for withholding the information contained in the pages at issue. Again, we note that it has been over one year since Walters' most recent opportunity to present its position, and that Walters was asked to address the release of a large volume of information. We found the justification presented by Walters at that time sufficient to support the withholding of much of the information at issue in Burns' previous Appeal. Although Walters' arguments do not justify withholding the information contained in the three pages recently withheld from the appellant, we believe, as we stated in Section II.A above, that Walters should be given another opportunity to provide a basis for withholding this information. We will therefore also remand this portion of PNR's determination (withholding information from pages 203, 204 and 205). Absent an adequate basis for withholding, PNR should issue a new determination releasing the information in question to the appellant.

B. Adequacy of PNR's Search for Responsive Documents

Burns also asserts that there should be additional responsive documents in the possession of the DOE that have not been released. Appeal at 6. In the event we were to agree, we would order an additional search. However, we already reviewed PNR's search for responsive documents in our prior Appeal decision and found that the search was reasonably calculated to uncover responsive documents and was therefore adequate. The OHA procedural regulations allow for our reconsideration of a prior Decision and Order under certain limited circumstances, none of which apply in the present case.(5) Therefore, to the extent that the present Appeal requests that we reconsider our previous decision as to the adequacy of PNR's search for responsive documents, the Appeal will be denied.

III. Conclusion

For the reasons explained above, we will remand this case to PNR, to promptly issue a new determination releasing the non-exempt information to the appellant in accordance with this decision, or explain in detail its reasons for withholding any of this information.(6) In all other respects, the present Appeal should be denied.

It Is Therefore Ordered That:

(1) The Freedom of Information Act Appeal filed by Burns Concrete, Inc., Case No. VFA-0284, is hereby granted as specified in Paragraph (2) below, and is denied in all other respects.

(2) This matter is hereby remanded to the DOE's Pittsburgh Naval Reactors Office, which shall promptly issue a new determination in accordance with the instructions set forth in the above Decision and Order.

(3) This is a final order of the Department of Energy from which any aggrieved party may seek judicial review pursuant to 5 U.S.C. § 552(a)(4)(B). Judicial review may be sought in the district in which the requester resides or has a principal place of business, or in which the agency records are situated, or in the District of Columbia.

George B. Breznay

Director

Office of Hearings and Appeals

Date: May 9, 1997

(1) As we noted in our decision on Burns' previous Appeal, the Appellant disputes Walters' contention that Walters was not reimbursed by the government for the costs incurred in running tests on the concrete mix design. Although it appears from our review of the relevant documents that Walters was in fact reimbursed for the cost of testing, PNR assures us that Walters was reimbursed for the costs incurred in preparing the test results for submittal, but not for the costs of running the tests. Memorandum of telephone conversation between James Carey, PNR, and Steve Goering, OHA (October 24, 1996).

(2) In this Decision we will refer to pages by the page number assigned by the appellant in its Appeal.

(3) See 26 DOE ¶ 80,143 at 80,603, and cases cited therein (profit, general and administrative expenses, and overhead have been recognized by the courts as protected under Exemption 4).

(4) Burns speculates that the title of the price list, "Call in Prices," "indicate[s] that this list would be quoted by Walters over the telephone. This is also the information that anyone, including Burns Concrete or any other competitor, could easily obtain by simply calling Walters on the telephone. Therefore this list does not reflect information that the provider would not make available to the public." Appeal at 5. However, Walters informed PNR that the information on this list had not been made available to the public, and was for in-house use only. Memorandum of telephone conversation between James Carey, PNR, and Steven Goering, OHA (Apr. 11, 1997). In any event, as we explain in our discussion of the D.C. Circuit's decision in Critical Mass above, the mere fact that information is not customarily made available to the public exempts that information from disclosure under Exemption 4 only if that information was submitted to the government voluntarily, which is not the case here.

(5) The regulations state in pertinent part:

(b) (1) An application for modification or rescission of an order shall be processed only if--

(i) the application demonstrates that it is based on significantly changed circumstances; and

(ii) the period within which a person may file an appeal has lapsed or, if an appeal has been filed, a final order has been issued.

(2) For purposes of this subpart, the term "significantly changed circumstances" shall mean--

(i) the discovery of material facts that were not known or could not have been known at the time of the proceeding and action upon which the application is based;

(ii) the discovery of a law, rule, regulation, order or decision on appeal or exception that was in effect at the time of the proceeding upon which the application is based and which, if such had been made known to the OHA, would have been relevant to the proceeding and would have substantially altered the outcome; or

(iii) there has been a substantial change in the facts or circumstances upon which an outstanding and continuing order of the OHA affecting the applicant was issued, which change has occurred during the interval between issuance of such order and the date of the application and was caused by forces or circumstances beyond the control of the applicant.

10 C.F.R. § 1003.55(b).

(6) PNR has also agreed to release to the appellant information it inadvertently withheld from page 207, labeled "Remaining project to complete," and to attempt to provide the appellant a more legible copy of page 192, as requested in Burns' Appeal. Memorandum of telephone conversation between James Carey, PNR, and Steven Goering, OHA (Apr. 11, 1997); Appeal at 4, 5.