Confidentiality Issues in Government Contracting: Promoting Open Government and Fair Competition
Posted in Policy

State public records acts and the federal Freedom of Information Act (FOIA) were enacted to prevent favoritism and corruption, but have had unintended consequences on competition for public projects.  As discussed in a recent article, requests for information have become a vehicle for contractors to obtain valuable information about their competitors that might not otherwise be available.

In addition, requirements to disclose information about a project to the public, including information about proposals received, whether compelled by law, political pressure, or otherwise, pose challenges for agencies running complex procurements.  The desire for greater transparency must be balanced against competing objectives as well as constraints such as federal and state laws limiting disclosure in certain cases, the risk of challenges to the procurement, and the desire to maximize the agency’s negotiating leverage to achieve the best commercial outcome.

One example is a recent public-private partnership (PPP) procurement that proceeded under enabling legislation requiring the preferred bidder’s proposal to be posted to the project website prior to contract execution.  The procuring agency adopted a conservative interpretation of the law and asked the preferred bidder to provide a redacted proposal (including financial and technical submittals), removing only those portions of the proposal that were exempt from disclosure under the public records act.  This information is now available to the bidder’s competitors without any need to submit a formal request.

Another example involves an agency that conducted a PPP procurement under laws requiring public access to all procurement meetings in which official acts are taken.  To avoid premature disclosure of proposal information, evaluation subcommittee members were required to work independently, eliminating the opportunity to use a consensus approach to scoring, and project selection committee members were precluded from learning the proposal scores, or otherwise discussing the proposals, until the public meeting where the proposer was selected.

For some PPP projects, disclosure of information to the public is affected by restrictions associated with federal funding.  Both the Federal Highway Administration (FHWA) and Federal Transit Administration (FTA) impose such restrictions.  The FHWA design-build rule (23 CFR Part 636) requires certain information about proposals to remain confidential until selection is made.  The FTA’s Best Practices Procurement Manual specifically recommends that public agencies keep proposals confidential prior to award, in order to promote more meaningful negotiations and ensure trade secret protection.  The FTA also warns against the practice of technical leveling (i.e., providing information to proposers about ideas submitted by others, and then asking for revised proposals) since proposers are unlikely to invest their resources to develop ideas that may be transferred to other firms.

In the face of competing policies and requirements, several agencies have adopted a compromise solution, asking proposers to include executive-level summaries of their proposals and making it clear that the summary is subject to public disclosure.  Others require proposers to provide detailed information about their proposals in a form suitable for posting to the agency website after selection for negotiations, but prior to contract execution.  Agencies facing political pressure to provide greater disclosure might want to look to one of these models, if permitted by applicable law.

  • Nancy C. Smith

    Co-founder of Nossaman’s Infrastructure Group, Nancy Smith is nationally known for her expertise in use of design-build, public-private partnerships (P3s) and other innovative contracting methodologies for public ...

Nossaman’s 30-plus infrastructure attorneys offer clients, colleagues, strategic partners and industry media a wealth of practical experience, insider insight and thoughtful analysis here on Infra Insight. We blog about what we know best, from industry-leading procurements to local and national policy developments that affect the market and our clients.

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