Case No. VFA-0345, 26 DOE ¶ 80,236

December 2, 1997

DECISION AND ORDER

OF THE DEPARTMENT OF ENERGY

Appeal

Name of Petitioner: Glen M. Jameson

Date of Filing: November 4, 1997

Case Number: VFA-0345

On November 4, 1997, Glen M. Jameson filed an Appeal from a determination that the Office of Headquarters Procurement Services (PS) of the Department of Energy (DOE) issued to him on September 17, 1997. In that determination, PS denied in part a request for information Mr. Jameson filed under the Freedom of Information Act (FOIA), 5 U.S.C. § 552, as implemented by the DOE in 10 C.F.R. Part 1004. This Appeal, if granted, would require PS to release the information that Mr. Jameson requested.

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 is in the public interest. 10 C.F.R. § 1004.1.

I. Background

On October 21, 1996, Mr. Jameson filed a Request for Information with the Eastern Region Defense Contract Audit Agency. A portion of that request was referred to PS. That portion of the request sought a copy of a DCAA audit report number 1211-91Q28000856, “Application of Agreed-Upon Procedures For Review of Proposed Direct Labor and Indirect Expense Rate” for PAI Corporation.

PS issued a determination on September 17, 1997, in which it identified a responsive document, but concluded that portions of this document were exempt from mandatory disclosure pursuant to Exemption 4 of the FOIA, 5 U.S.C. § 552(b)(4). The withheld portions included proposed and audit- adjusted rates, proposed labor overhead rates, percentage increase in officers’ salaries, amount of relocation expense, contractor’s historical relocation expense, 1992 proposed labor overhead rate, proposed full or part-time fringe and tax rates, general and administrative (G&A) rates and employee names. According to PS, a release of the information relating to costs or fees would “disclose the submitter’s plan for renumeration of its employees, its methods of allocating costs, its indirect rate

structures, its allocation of resources and insight into its approach to the proposed work.” See Determination Letter at 1.

On November 4, 1997, Mr. Jameson filed the present Appeal with the Office of Hearings and Appeals (OHA) contending that the disclosure of the requested DCAA audit report is not likely to impair the Government’s ability to obtain similar information in the future and also that its disclosure is not likely to cause substantial harm to the competitive position of PAI Corporation. See Appeal Letter at 1-5.

II. Analysis

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 which is “commercial” or “financial,” “obtained from a person,” and “privileged or confidential.” National Parks & Conservation Ass’n v. Morton, 498 F.2d 765 (D.C. Cir. 1974) (National Parks). In National Parks, the United States Court of Appeals for the District of Columbia Circuit found that commercial or financial information submitted to the federal government involuntarily 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, 113 S. Ct. 1579 (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. In choosing between these two tests, we have held consistently that information submitted in response to a request for proposal is submitted involuntarily and therefore is “confidential” if it meets the test set out in National Parks. See Hanford Education Action League, 23 DOE ¶ 80,143 (1993).

DOE regulations further outline the criteria for determining the applicability of Exemption 4. Such criteria include whether (1) the information has been held in confidence by the person to whom it pertains, (2) the information is customarily [and reasonably] held in confidence by the person to whom it pertains, (3) the information was transmitted to and received by the DOE in confidence, (4) the information is available from public sources, (5) the disclosure of the information is likely to impair the [g]overnment’s ability to obtain similar information and (6) the disclosure of the information is likely to cause substantial harm to the competitive position of the person from whom the information was obtained. 10 C.F.R. § 1004.11(f)(1)-(6). The DOE regulations further provide that the DOE must solicit the submitter’s views regarding the impact of release of the information if the DOE is considering release. 10 C.F.R. § 1004.11(c). The submitter’s view of the impact of the release of the information is only one factor to be evaluated and weighed in the analysis, which must involve a balancing of the objective standards set forth in 10 C.F.R. § 1004.11(f). PS obtained comments from PAI Corporation in this case. PAI Corporation claims that all of the redacted information is proprietary and that its release would competitively harm PAI Corporation.

Regarding whether portions of the document at issue are “confidential,” we have consistently held 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 (D.D.C. June 30, 1995).

Similarly in the present case, the information submitted by PAI Corporation was required to be submitted in order for the company to do business with a government project, and specifically in order to receive reimbursement once that project was terminated. Indeed, PAI Corporation did not argue, nor did PS conclude, that information in the document at issue was 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, PAI Corporation.

PS’s decision to withhold portions of the DCAA audit report is based upon its assertion that PAI Corporation would be placed at a competitive disadvantage in the marketplace. Specifically, it asserts that release of the withheld cost and fee information would provide PAI Corporation’s competitors with an advantage in anticipating contractors’ responses in future competitions and would aid in attempting to hire away contractors’ employees. Determination Letter at 2. We agree with PS that release of this information is likely to cause competitive harm to PAI Corporation.

The United States Court of Appeals for the District of Columbia has held that, in a competitive market, information that would reveal the profit rates, general and administrative rates, and overhead 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). Courts have further recognized this information as “competitively sensitive information” which is protected under Exemption 4. General Dynamics Corp., Space Sys. Div. v. Department of the Air Force, 822 F. Supp. 804 at 806 (D.D.C. 1992); Braintree Elec. Light Dep’t v. Department of Energy, 494 F. Supp. 287 (D.D.C. 1980) (profit and overhead protected under Exemption 4). Similarly in the present case, the withheld employee cost and fee information is the kind of information that is typically withheld under Exemption 4. Release of this information could enable rival companies to learn detailed information about the submitter’s profit margins and to adopt a strategy to undercut the submitter and eliminate it from effective competition. Although we agree that release of this information could cause competitive harm to PAI Corporation, we shall consider whether more responsive information could be segregated from the requested document and released without competitive harm.

The Appellant has indicated that he is particularly interested in the pension cost component of the overhead and G&A rates of PAI Corporation’s employees. See Memorandum of Telephone Conversation between Mr. Glen M. Jameson and Kimberly Jenkins-Chapman, OHA (November 21, 1997). In light of this fact, PS has informed us that it may be possible to release this specific information to Mr. Jameson. Therefore, we will remand this matter to PS for further segregation and release of possibly non-exempt material. We believe that PS is in the best position to make a determination as to whether the release of the information that Mr. Jameson has described would cause substantial harm to the competitive position of PAI Corporation.

The DOE regulations provide that material exempt from mandatory disclosure under the FOIA shall nonetheless be released to the public if the DOE determines that disclosure is permitted by federal law and is in the public interest. 10 C.F.R. § 1004.1. However, in cases involving material determined to be exempt from mandatory disclosure under Exemption 4, we do not make the usual inquiry into whether release of the material would be in the public interest. Disclosure of confidential information that can be withheld pursuant to Exemption 4 would constitute a violation of the Trade Secrets Act, 18 U.S.C. § 1905, and is therefore prohibited. See e.g. Painters District Council No. 55, 24 DOE ¶ 80,149 (1994). Accordingly, we may not consider whether the public interest warrants discretionary release of the information in this case.

III. Conclusion

For the reasons explained above, we will remand this case to PS, which shall promptly issue a new determination releasing non-exempt information to the Appellant in accordance with this decision, or shall explain in detail its reasons for withholding any of the information at issue. In all other respects, the present appeal should be denied.

It Is Therefore Ordered That:

(1) The Appeal filed by Glen M. Jameson, OHA Case No. VFA-0345, on November 4, 1997, is hereby granted in part as set forth in Paragraph (2) and denied in all other respects.

(2) This matter is remanded to the Department of Energy’s Office of Headquarters Procurement Services for further consideration 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 the provisions of 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: December 2, 1997