Comdisco, Inc. v. General Services Admin.

• Decision Date: 11 October 1994
• Docket Number: Civ. A. No. 94-604-A.
• Parties: COMDISCO, INC., Plaintiff, v. GENERAL SERVICES ADMINISTRATION, Defendant.
• Court: U.S. District Court — Eastern District of Virginia

864 F. Supp. 510

COMDISCO, INC., Plaintiff, v. GENERAL SERVICES ADMINISTRATION, Defendant.

Civ. A. No. 94-604-A.

United States District Court, E.D. Virginia, Alexandria Division.

October 11, 1994.

Scott Alan Ford, Doyle & Bachman, Washington, DC, for plaintiff.

Rebeca O. Hidalgo, U.S. Atty., Alexandria, VA, for defendant.

MEMORANDUM OPINION

ELLIS, District Judge.

I.

At issue in this reverse Freedom of Information Act¹ ("FOIA" or "the Act") case is whether certain unit price information contained in a government contract is "confidential" within the meaning of 5 U.S.C. § 552(b)(4) ("exemption 4") and therefore exempt from public disclosure. Defendant, General Services Administration ("GSA"), contends that one segment of the unit price information contained in Plaintiff Comdisco, Inc.'s ("Comdisco") contract bid is not confidential under exemption 4 of the Act and, thus, should be disclosed to the public pursuant to § 552's general disclosure mandates. In support of its position, GSA relies primarily on the two-part test outlined in National Parks & Conservation Association v. Morton, 498 F.2d 765 (D.C.Cir.1974) and later adopted by the Fourth Circuit in Acumenics Research & Technology v. United States Department of Justice, 843 F.2d 800 (4th Cir. 1988).

Comdisco, on the other hand, claims that the disputed price information is confidential and appropriately subject to exemption 4 protection. In so arguing, Comdisco urges the Court to follow the D.C. Circuit's recent refinement of the National Parks test as announced in Critical Mass Energy Project v. Nuclear Regulatory Commission, 975 F.2d 871 (D.C.Cir.1992) (en banc), cert. denied, ___ U.S. ___, 113 S.Ct. 1579, 123 L.Ed.2d 147 (1993). On these opposing legal grounds, both parties have moved for summary judgment.

II.

Comdisco, a company located in Arlington, Virginia, is in the business of providing computers and computer-related services. On October 20, 1992, it submitted a proposal in response to a GSA solicitation for computers and computer-related services to be provided to various federal agencies in the event that a natural or man-made disaster rendered the agencies unable to meet their data processing needs with their own equipment and staff. To be eligible for the contract, Comdisco was required to include in its proposal a breakdown of unit prices for two categories of equipment and services. First, GSA requested specific pricing information for 18 "Core Systems," the fundamental computing and communications equipment and services that would be necessary to sustain the various agencies' needs in the event of a disaster. Second, GSA requested the contract bidders' unit prices for the "Additional System Resources" that would be provided under the contract. This second category comprised fees for specific optional items of hardware, software and related services that an agency subscribing to a Core System could order to customize or augment the equipment and services provided in the Core System. Following review of all the proposals submitted, GSA awarded the disaster recovery services contract to Comdisco in June, 1993. Incorporated in section B of the contract is the pricing information contained in Comdisco's contract proposal for both the Core Systems and the Additional System Resources.

In August 1993, GSA received a FOIA request for a copy of the disaster recovery services contract. As is customary, GSA notified Comdisco of the FOIA request and provided Comdisco with the opportunity to oppose disclosure of any portion of the contract and to submit details, if any, regarding why disclosure would cause the company substantial competitive harm. In response, Comdisco wrote a letter to GSA voicing its objections to public disclosure of, among other things, the pricing information contained in section B of the contract. Comdisco claimed that allowing its competitors access to Comdisco's unit pricing and overall pricing strategies would be detrimental to its ability to remain competitive in the governmental and commercial marketplaces. The record does not disclose what ultimately occurred with respect to the August 1993 FOIA request, and this specific request is not at issue in this case.

A second request was made in December 1993. At that time, an organization named FOIA Group, Inc. ("FOIA Group") made the FOIA request that forms the basis of the current dispute. This request specifically asked for a copy of Section B of the disaster recovery services contract. Because GSA had already sought and received Comdisco's input regarding the disclosure of Section B of the contract, GSA did not at this point notify Comdisco of the FOIA Group request or ask for repetition of its objections. In response to the FOIA Group request, GSA initially refused to grant access to any portion of the pricing information contained in section B of the contract, citing exemption 4. FOIA Group lodged an administrative appeal of this decision within GSA, at which time GSA orally requested Comdisco to present additional support for its position that all of the pricing information contained in Section B of the contract should remain sheltered from public view. Having received and reviewed another letter from Comdisco objecting to any disclosure of Section B, and after several telephone conferences with Comdisco, GSA ultimately determined that the Core System pricing information is confidential under exemption 4, but that, despite Comdisco's continued protests to the contrary, the Additional System Resource fees are not.

In concluding that the Core System prices are confidential under exemption 4, GSA reasoned that those prices reflect in part Comdisco's risk assessments for the contract, that is, (i) the likelihood of a disaster occurring, (ii) the intensity of, and destruction resulting from, such an occurrence, and (iii) the nature and quantity of equipment and services that an agency would need in the event of such a disaster. Thus, GSA concluded, public disclosure of the Core System pricing information would place Comdisco at a competitive disadvantage, permitting its competitors to "free ride" off of Comdisco's substantial investment in formulating risk assessments and calculating appropriate fees. Since Comdisco and GSA are in agreement to this extent, GSA's decision to exempt the Core System unit prices from FOIA's disclosure requirements is not at issue here.

But GSA did not reach the same conclusion with respect to the Additional System Resource prices. Instead, GSA determined that these prices, unlike the Core System prices, are not confidential under exemption 4 and should be disclosed pursuant to § 552's general disclosure command. Applying National Parks' two-part test, as adopted by the Fourth Circuit in Acumenics, GSA concluded that release of the Additional System Resources unit prices would neither impair the government's ability to obtain similar information in the future, nor cause substantial competitive harm to Comdisco. First, GSA reasoned that there are sufficient financial incentives for companies to compete for government contracts to ensure continued competitive bidding despite the release of pricing information. Second, GSA concluded that, unlike the Core System prices, release of the Additional System Resource unit prices would not cause Comdisco competitive harm since they did not reflect Comdisco's risk assessments or pricing strategy. Furthermore, GSA noted the similarity between the Additional System Resource prices and the unit prices for multiple award schedule contracts, which are routinely available for public inspection.

In its letters and oral communications with GSA, Comdisco opposed GSA's decision to release the Additional System Resource prices, claiming that their submission to the government was voluntary, and, thus, the more lenient test announced by the D.C.Circuit in Critical Mass should apply. Because it would not customarily release its pricing information to the public, Comdisco argued that it met § 552(b)(4)'s confidentiality exemption. Moreover, Comdisco contended that even under the traditional National Parks test, its unit prices for the Additional System Resources are confidential since they constitute the "building blocks" for the Core System prices. As a result, Comdisco insisted, a resourceful competitor could simply reverse engineer from the Additional System Resource unit prices to derive the confidential Core System prices.

As noted, GSA rejected Comdisco's protests, stating that they were merely conclusory allegations of confidentiality that lacked factual support for the claimed correlation between the Core System prices and the Additional System Resources fees. Observing that, as a general matter, the prices the government pays for its goods and services "are a matter of public record," GSA concluded that disclosure in this instance was simply "a price of doing business with the Government." (Letter from Persinger to Garstka of 8/8/94 at 1). From this decision, Comdisco appeals.²

III.

The threshold question is the proper scope and standard of review. The Supreme Court has noted that a party seeking to prevent an agency's disclosure of records under FOIA has no private right of action to prevent the disclosure. Chrysler Corp. v. Brown, 441 U.S. 281, 99 S.Ct. 1705, 60 L.Ed.2d 208 (1979). Rather, the party's sole recourse is to seek review of the agency's disclosure decision under the Administrative Procedure Act ("APA"), 5 U.S.C. §§ 701-06 (1994). Under the APA, judicial review of agency decisions must ordinarily be made on the record, and de novo review is permitted only when (i) "the action is adjudicatory in nature and the agency factfinding procedures are inadequate," or (ii) "issues that were not before the agency are raised in a proceeding to enforce nonadjudicatory agency action." Acumenics, 843 F.2d at 804 (quoting Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415, 91 S.Ct....