Monday, March 23, 2009, 3/23/2009 09:17:00 AM

Trade Secrets and Army Contracts


An interesting story from the Fulton County Daily Report about a case pending in the Northern District of Georgia, Southern Coach v. Dep't of the Army, concerning the Freedom of Information Act (FOIA), trade secrets, and the general issue of transparency in government contracting.

Southern Coach lost a long-time Army vehicle leasing contract and wanted to find out why. It made a FOIA request to see the winning bid.

The Army provided a copy of the contract, but with all the individual vehicle rental rates redacted. When Southern Coach asked for an unredacted copy, the Army waited for fourteen months and then said "no."

Southern Coach filed suit in federal court claiming that the Army failed to act promptly and then improperly continued to withhold the material.

Not surprisingly, the Army is claiming that the redacted information is proprietary and the story has a good precis of how trade secrets work under FOIA:


FOIA does contain an exemption for "trade secrets," such as customer lists,
secret formulas and financial data, according to the guide. That exemption is
intended to shield "sensitive internal commercial information" about a company
that could cause it "substantial competitive harm."

But a "trade secret" under FOIA should be given a "fairly limited
meaning" to include only information generally not known in the trade that is
commercially valuable, secretly maintained or used in making, preparing,
compounding or processing a commodity, according to the guide.

In order to exempt documents containing commercial or financial information
from a FOIA request, the government must prove the information is confidential
and would cause "substantial harm to the competitive position" of the individual
or company from which the information was obtained.

"Substantial harm" means more than just a likelihood that a business might
suffer some embarrassment or commercial loss, according to the guide. Instead,
it must include data pertaining to assets, profits, losses and market shares as
well as detailed information filed to qualify for loans and government
contracts."


Sadly, as a rule, many agencies tend to over-designate to the detriment of transparency and taxpayers.

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