U.S. ENVI RONMENTA L PROTECTI ON AGENCY OFFICE OF GENERAL COUNSEL GENERAL AND I NFORMATION L AW DIVI SION

CLASS DETERMINATI ON 1-95

CONFIDENTI ALI TY OF CERTAIN BU SINESS INF ORMATION SUBMI TTED BY CONTR ACTORS AND PROSPECTI VE CONTRA CTORS
U.S. Environmental Protection Agency regulations issued under the authority of the Freedom of Inf ormation Act (“FOI A” or “the Act”), 5 U.S.C. § 552, prescribe proc edures for determining whether business information submitted to the Agency and claimed as confidential by third parties should be re leased to the public when disclosure is requested under the Ac t. See 40 C.F.R. part 2, subpart B. Section 2.207 of the regulations provides that a determination that informat ion is or is n ot entitle d to confi dential tr eatment f or reas ons of busi ness conf identiali ty may be made on a class basis if one or more characte ristics common to all items of such information necessarily will result in identical treatment under the regulations for ea ch such item of information. In accor dance with the regulation, the Associate Ge neral Counsel for General and I nformati on La w, as the Genera l Counsel’ s designee, her ein make s the req uisite determination that certain items of information submitted to the Agency by contractors and prospective cont ractors will be tr eated id enticall y a nd should b e the subj ect of c lass trea tment. On May 3, 1978, the Agency issued Class Dete rmination 2-78, concerning the confidentiality of business information conta ined in contract proposals submitted to the Agency

. The clas s determi nation wa s refine d and rei ssued in 19 79 (Class D etermina tion 2-79) and ag ain in 1994 (Class Determination 2-94) to reflect change s in applicable law and to incorporate the teaching of experience in how the disclosure of business information may aff ect the competitive position of a business. Every y ear, EPA receives numerous requests under the FOIA for r elease of information submitted t o the Ag ency by i ts contra ctors an d prospec tive cont ractors. The inf ormation i s contained in the numerous documents generate d in the selection of Agency contractors and in the administr ation of c ontract s award ed by the Age ncy
. Such doc uments inc lude cont ract pr oposals, awarded contracts and contrac t modifications, invoices, accounting and financial repor ts, and an array of other documents that trace the contracting process. In almost all cases, the busine sses that submit these doc uments to the Agen cy claim at l east por tions of the informat ion conta ined in them as confidential business information.
In a ccorda nce with 4 0 C.F.R. § 2 .207, I find that:- 2 - 1. The Agency possesses many documents submitted by contractors and prospective contractors containing information claimed to be entitled to confide ntial treatment for reasons of business c onfident iality

. The Ag ency routinely require s the submis sion of suc h documen ts by its contractors and prospective contractors a nd will continue to require such documents in the future.
2. Certain categories of information contained in doc uments submitted to the Agency by its contra ctors an d prospec tive cont ractors share c ommon cha racter istics tha t necess arily will result in identical treatment with respect to claims of business confidentiality

. It is therefore appropriate to treat such information on a class basis for purpose s of determining whether the informat ion is entit led to confidentia l treatme nt. 3. A class determination that such information is or is not entitled to confidential treatment would streamline the Agency ’s response to requests for information under the Act and would further the purposes of the Act by assuring the American public timely access to requested information, consistent with the rights of affected businesses to be prote cted from improper disclosure of confidential information. Information Submitted by Agency Contractors and Prospective Contractors
Contract proposal s are usu ally require d to be subm itted to the Agenc y in two parts : a technical proposal and a business proposal. The technica l proposal commonly sets forth the offeror's understanding of the requirements of the procurement, the way in which the offeror would do the work required, the resources that the of feror would devote to the work, and informat ion conce rning the offer or's expe rience and exper tise in the field. Th e busines s or cost proposal specifies the price for which the off eror is willing to do the work under a fixed price con tra ct o r th e es ti mat ed c ost and fee for doi ng t he w ork und er a cos t re im bur sem ent con tra ct. It commonly includes information about the off eror's financial status, the anticipated costs of performing the contract work, a pr oposed fee, information regarding the past performance of other contracts, and other gener al financial information a bout the of feror. Such infor mation is commonly also contained in re visions to the offeror’s proposal, in negotiation documents, and various other documents generated pr ior to selection of a contractor and awar d of the contract. The infor mation g enerat ed in the pre-awa rd procu rement p rocess may also be in corpora ted into th e c on tr ac t a wa rd ed by t he Ag en cy. After a contrac t is awar ded, dur ing its pe rforman ce, a contractor is common ly r equired to submit many documents reporting the status of the contract. These documents may describe the progress of contract work, the c osts incurred, the use of resources and personnel, the degree of success in achie ving contract o bjective s, and str ategie s for futu re acc omplishmen ts. This information is contained in such documents as work plans, progress reports, contractor selfevaluations, and various other documents. I n addition, information submitted to the Agency by the contr actor ma y be incorpor ated into Agenc y g enerat ed docume nts such a s audit re ports, performance evaluations, work plan appr ovals, and other documents.- 3 - This class determination applies to information required to be submitted to the Agency by its contractors and prospective contractors. B ecause it applies to information, its scope is not limited to a ny p articula r docume nt or docu ments des cribed i n this clas s determi nation. I t also applies to informat ion that is i ncorpor ated into Agenc y- gener ated doc uments. This class determination sets forth certain classes of information that will and will not be released pursuant to FOI A requests. It is premised on a cla ss-wide determination that the in for mat io n i s or is not rel eas abl e un der Ex emp ti on 4 to th e FO IA. E xe mp ti on 4 of F OIA exempts fr om disclosu re "tra de secr ets and c ommercia l or finan cial information obtained f rom a person and privileged or confidential." 5 U.S.C. § 552(b)(4). In order f or information to meet the requirements of Exemption 4, the Agency must find that the information either is a trade secret, or is 1) obtained from a person, 2) commer cial or financial information, and 3) privileged or confi dential.
The def inition of t rade se cret und er FOI A is limited to "a se cret, c ommercia lly valuable plan, formula, process or device that is used for the making , preparing, compounding, or processing of trade commodities," wher e there is a "direct relationship" be tween the trade secret and the productive process. Public Citizen Health Research Group v. FDA , 704 F.2d 1280, 1288 (D.C. Cir. 1983). B ecause the infor mation sub ject to thi s class de terminat ion is not us ed to make, prepare, compound, or process a trade commodity, such infor mation does not constitute a trade se cret. The term “person ” has bee n constru ed broad ly to encompa ss a wide r ange o f entitie s, including corporations, state governments, and f oreign governments. See , e.g ., Stone v. ExportImport Bank , 552 F.2d 132 (5th Cir. 1977). Agency contractors and prospective contractors a re thus “persons” within the meaning of FOI A Exemption 4. Information developed by the Agency is not obta ined from a person and is not entitled t o confide ntial tre atment. Certain i nformati on contai ned in con tract pr oposals, c ontract s, and re lated doc uments is clearly c ommercial or financial information. Contract proposals are wr itten as commercial documents designed to sell the offeror' s services to the Agency

. Contracts and related document s are inc idents of a commer cial tra nsaction and may disclose informat ion perta ining to the administration or cost of a Government contract. Such documents may contain detailed information about the financial structure, personnel, and mana gement of the contractors or prospective cont ractor s. Since the information submitted to the Agency by contrac tors and prospective contractors is commer cial information obtained f rom a person, the r emaining question i s- 4 - whether the infor mation is pr ivilege d or conf idential. No reco gnized pr ivilege is applica ble to the comme rcial inf ormation s ubmitted by contractors and prospect ive contr actors, thus the so le remainin g inquir y is whether the infor mation is pr operly charac terized a s confide ntial.
The Fed eral co urts have enuncia ted the r elevant criteri a by which the Agenc y is to determine whether commercial information that is not voluntarily submitted to the Government 1 is to be characterized as confidential within the meaning of Exemption 4 of the FOIA. I n the landmark case National Parks & Conservation Association v. Morton , 498 F.2d 765, 770 (D.C. Cir. 1974), the court determined that such information is entitled to confidentiality under Exemption 4 if disclosure of the information could cause substantial harm to the competitive position of the person from whom the information was obtained. This is the central question the Agency must ask each time it receives a request for disclosure of information that has been claimed as confidential by an Agency contractor or prospective contractor submitter. Experience over the y ears has demonstrated that contractors and prospe ctive contractors are abl e routine ly to demonstr ate that t he disclo sure of c ertain ty pes of inf ormation c ould caus e substantia l harm to the compet itive posit ion of the submitter

. Prior to it s first cl ass determination, the Agency routinely denied re questors access to such information, but only after an individ ual dete rmination that the information was ent itled to confidentia l treatme nt. This repetitive analy sis of confidentiality claims y ielded consistent findings and demonstrated no value ad ded to the process of impleme nting the Act. Acc ordingl y, t he Age ncy ’s first c lass determination concerning prospective c ontractor’s business information, Class Determination 2- 78, artic ulated on a class b asis the a naly sis that ha d theret ofore be en repe atedly reitera ted in individual confidentiality determinations. Experience sinc e the issuance of Class Determination 2-78 has d emonstra ted that c ontract ors and pr ospectiv e contra ctors continue to c laim cer tain informat ion as confidentia l. Reana lys is of such claims re inforce s the Ag ency ’s view that there is substantia l value to handling certain confide ntiality determinations on a class ba sis. Class Determination 2-78 and its successors applied only to information submitted to the Government prior to the award of a contra ct. This limitation reflected the Agency ’s cautious approac h to trea ting inf ormation on a class basis. I t has, how ever, le d to the an omalous r esult th at p rec is ely t he s ame type s of in for mat io n m ay be tre ate d di ffe ren tl y wit hi n t he A gen cy’s FOIA process es. By way of example , the Ag ency has since 1978 prote cted fr om disclosu re on a c lass

1 . Th e sub m i ssi on o f t he i n f o r m a t i on su b j ect t o t h i s cl ass det e r m i nat i on i s r equi r ed by t he G over n m ent

. Feder al procur em ent st a t u t es, r egu l a t i ons, and contr act t e r m s com pel t he subm i ssi on of t h i s i n f o r m a t i on by al l w ho choose t o seek or t o e n t e r i n t o c ont r a c t s w i t h t he Gove r n m ent

. C hem i cal W ast e M a n a g e m ent, I nc. v. O ’ Lear y , N o . 94

- 2 2 3 0 ( D

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. Feb. 28 , 1995)

. Bec aus e t h i s i n f o r m a t i on i s no t vo l unt a r i l y s ubm i t t ed, t he great e r prot ect i on af f o r ded by C r i t i cal M ass E nergy P r o j ect v. N ucl ear Regu l a t o r y Com m i ssi o n , 975 F. 2d 871 ( D

. C . Ci r
. 1992) ( en banc ) f o r such su bm i ssi ons i s not appl i cabl e.- 5 - basis the indirect cost rates of its contractors where tha t indirect cost rate was included in the contractor’s pre -contra ct propos al. None theless, where the same c ontract or’s indir ect cost rate was adjusted during performance of the contract, the adjusted rate did not fall within the scope of the class determination and the Agency was forced to issue a repetitive individual determination of confidentiality. This cre ated a substantial impediment to the Agency ’s desire to respond in a timely manner to reque sts for the release of information. Finding no re ason to maintain the artificial distinction between information that is submitted prior to award and that submitted after award of a Government contract, the Agency today deletes the pr evious limitation of its prior class determination.
Informat ion Entitle d to Confident ial Treat ment I have determined tha t the following types of information are entitled to confidential treatment where the information is not otherwise publicly available and disclosure of the information is not otherwise required by statute or regulation:
1. Information that would disclose the submitter’s proposed appr oach to performing contract work.
2. Information that would disclose the submitter’s plan to manag e the contract, including plans to subcontract for performance of c ontract work.
3. Information concer ning the submitter’s relevant experience and expertise, except for gener al information re gardin g the submitter’s G overnme nt-sponsored cont racts or grants that is public information.
4. Information c oncerni ng the id entities or qualifi cations o f specif ic employ ees, con sultants, subcontr actors, and subc ontract or's em ployees that the submitt er propo ses to use in performing the contract work. I nformation that would disclose the identities of key employees, subcontra ctors and consultants utilized in performing contract work. Information that would a ssociate the ident ities of sp ecific e mploy ees with t he amount s, nature, and costs of work performed by them.
5. Information concer ning the submitter’s proprietary processes, devices, software, organization of reports, and analy ses, etc. 6. Information concer ning the submitter’s financial structure.
7. Information c oncerni ng the su bmitter’ s accoun ting meth ods.
8. Information that would disclose a submitter’s labor ra tes, salaries, overhead costs, gene ral & administrative costs, or fee or profit.. [Unit prices are not included in this ca tegory .]- 6 - Substantia l competi tive harm
Disclosur e of information c ontained in categories 1 th rough 8 above wo uld be like ly to cause substantial harm to the competitive position of the submitter. The kinds of competitive harm tha t would be likely to result a re as fo llows:

- Release of information concerning how the submitter would undertake the specific work required might allow a competitor to improve its performance by taking a dvantage of the skills, expe rience , and tec hniques de veloped by the submitte r. If the compe titor coul d improve its skills, experience, and techniques, it would be in a position to compete more effectively with the su bmitter in future procure ment acti ons. Also, a compet itor could discover weaknesses in an submitter's work and ta ke advantage of them in subsequent competitions. This would put the submitter at a competitive disadvantage in a future procure ment acti on beca use the su bmitter wo uld not nec essarily have ac cess to th e same information about the competitor.

- Release of information concerning the submitter' s management structure and techniques supplements the information in the technical approach by showing a competitor how the submitter would organize for performance, a llocate resources, assign personne l, and control costs and time. This might enable the competitor to improve or chang e its own management techniques to the detriment of the submitter.

- Information c oncerni ng the su bmitter' s experie nce with n on-gov ernment contracts would show a competitor the market in which the submitter competes. Disclosure might ca use a competitor to move into those same markets and take business away from the submitter.

- Release of infor mation concernin g the submitter' s personnel might a llow a com petitor to raid the submitter's personnel and hire away key employ ees. This could enhance the competitor's posi tion and mig ht hurt the submitter 's positi on, espe cially where the quality of technical or management personnel is important in performing the work. The identitie s of key personne l are we ll recog nized as ha ving co mmercia l value to competitors, see , e.g ., Audio Tec hnical Se rvices v . Army , 487 F.Su pp. 779 (D .D.C. 1979), and the identities of employe es in general are entitled to confide ntiality where they are found in such a context as to make the employ ees attractive and vulnerable to raiding by competitors. See , e.g ., Burroughs v. Brown , 501 F.Supp. 375, 381 (E.D. Va. 1980).

- Release of information concerning the submitter' s processes, devices, proprietary software, proprietary organization of reports and analy ses, accounting methods, etc. might give a competitor access to information develope d by the submitter at some expense and allow the competitor to use the information without the same expenditure of time and resources in its development. This might allow a competitor to propose a lower c ontract price in a subsequent competition, because the competitor would not have to include the development costs for such items in determining the price for its work w hile the- 7 - submitter might stil l be rec overing its develo pment cos ts. All of these fac tors would enable a competitor to compete more effe ctively with the offe r in future government and private procure ment acti ons.

- Information c oncerni ng the su bmitter' s financ ial structure, spe cific co sts, and f ees coul d be used by a pote ntial competitor to anticipate the submitter's costs and fees in future procurement actions and allow the competitor to underbid the submitter. Since price or cost is an important factor in deciding who will be awarde d a contract, the ability of a competitor to underbid the submitter could mean loss of future contracts. Unit prices ar e not susceptible to generalizations concerning conf identiality because it must be determined on an individual basis whether they provide information applicable to future procure ments. Informat ion Not Enti tled to Co nfidential Tr eatme nt Competitive harm resulting from release of the information is conting ent on the informat ion not alr eady having been mad e public. The following inf ormation i s publicly availab le, and is theref ore not e ntitled to c onfident ial trea tment: A. Information concer ning the identity and sc ope of work of other government contr acts or grants performed by the submitter. This information is available to the public through the Commerce Busines s Daily and from specific gover nment ag encies.
B. Information of a g eneral nature about the submitter that the submitter routinely publishes or disclo ses to the public as part of it s regul ar busine ss activit ies.
C. Information reproduce d from documents that are already public, such as the request for proposal s, other EPA docume nts, or pub lished mat erials.
The following inf ormation, althoug h not nece ssarily publicly availab le, is not e ntitled to confidential treatment after contract award2 because it does not satisfy the criteria for confidentiality discussed in National Parks

. Nonethe less, this i nformati on will not b e disclos ed if it could be used to ascertain information that is entitled to confidential treatment. including information in categories 1 through 8, above

. D. The aggreg ate cost (total of all costs and fees) of the contra ct to the government. The aggrega te cost of contract options to the government. Totals of labor ef fort expended, invoiced, or paid at any point during contract performance f or work performed under the contract or for any discrete segment of such contract work. Totals of costs incurred,

2 . Pr i o r t o c ont r a c t aw a r d , t he di s c l o s u r e o f ce r t a i n of t h i s i n f o r m a t i on i s pr ohi b i t ed by s t a t u t e a nd r egul a t i on. See , e . g . , 4 1 U

. S . C . § 423; 48 C

. F . R . § 3. 104

- 1 ( a )

.- 8 - invoiced, or paid at any point during contract performance f or work performed under the contract or for any discrete segment of such contract work. The aggregate of labor hours worked by a ll subcontractors and consultants and the agg regate of all costs incurred by them at any point during contract performance or for any discre te segment of such contract work.
E. Information that is developed by the Government, regardless of whe ther the information is subsequently contained in a doc ument submitted to the Government by a c ontractor or prospective contractor.
F. Information concer ning the identity of the submitter a nd the aggreg ate cost of the submitter’s proposal. Each of the total costs contained in Category D above is an amalgam of fluctuating variables that can not realistically be dis-aggreg ated by a c ompetitor so as to reveal meaningful competitive data. Disclosure of the total amounts, therefore, is not likely to cause substantial competitive harm to the submitter. Category E simply reflects the f act that contractors and prospective contractor’s have no individual claim to confidentiality in Government generated information. Category F treats an unsuccessful offeror the same as the contract awardee ; neither will suffe r compet itive har m from disc losure of the firm’ s public id entity or the ag greg ate cost proposed for the governme nt contra ct. Implementation To implement this class determination, the office responding to a reque st for Agency records containing information submitted to the Agenc y by its contractor or prospective contractors must first review Agency records. If the of fice determines that information contained in these r ecords has been c laimed as confide ntial, the office must deny the requ est with r espect t o those ca tegori es of inf ormation d escribe d in 1 throu gh 8 above, base d upon this c lass determination. If information descr ibed in categories A through F above, has been claimed as confidential, the office must 1) provide the submitter with a copy of this class determination, 2) inform the submitter that the confidentiality cla im is denied pursuant to this class determination, and 3) provide notice to the submitter that it has ten working day s in which to seek judicial intervention prior to release of the information (unless such notice ha d previously been provided), pursuant to procedures at 40 C.F.R. § 2.204(d)(2) a nd § 2.205(f). Information not covered by categories 1 through 8 or A throug h F above will require- 9 - substantiation of the claim by the submitter and a se parate final confidentiality determination by the appropriate EPA legal office.

/s/ 7/10/95 Andrew J. Moran Date Associate General Counsel for

General and I nformation Law