July 19, 2019

By: Douglas L. Tabeling, Partner, Smith, Currie & Hancock LLP

Public owners sometimes require contractors to submit financial statements or other sensitive financial data or proprietary information as part of the contractors’ responses to requests for qualifications, requests for proposals, or invitations for bids. When financial or proprietary information is submitted to a state or local government agency, it becomes subject to the laws governing access to public records in that state or locality. If a contractor wants to try to prevent a public agency’s disclosure of that financial data in response to a third party’s request for public records, then the contractor must understand its own obligations to act to protect that information.

A contractor’s duty to act to protect its financial information from release varies from state to state. In some states no action is required in certain circumstances, as the law presumes the confidentiality of that information and excepts it from disclosure. Florida’s Public Records Law, for example, exempts “any financial statement that an agency requires a prospective bidder to submit in order to prequalify for bidding or for responding to a proposal for a road or any other public works project.” But contractors should not presume that every state’s public-records law will treat contractors’ financial data as confidential by default. The following examples demonstrate just some of the different ways that states handle contractors’ financial information under their public records laws.

The Arizona Public Records Law, by its own terms, does not exempt from disclosure any proprietary information submitted by a contractor to a public owner. Exceptions instead exist in several different statutes and regulations governing procurement of various public works contracts. The exceptions state that to the extent (1) that the bidder or offeror designates information as a trade secret or proprietary data and (2) that the state, department, or agency concurs, trade secrets and other proprietary data contained in bid documents or a proposal will remain confidential.

The public owner’s concurrence in the designation is out of the contractor’s control, but, at a minimum, the contractor must affirmatively designate the information as proprietary to qualify for the exception. Similarly, if procurement or bid records become part of an administrative record of the state judicial department, then records designated by the bidder or offeror as containing trade secrets or other proprietary data “will remain closed to the public only when the judicial branch unit concurs in the designation.”

Arizona’s procurement regulations require a contractor asserting confidentiality of information as a trade secret or other proprietary data to include—with the submission of the information—a written statement supporting that assertion. The contractor also must “clearly designate” any trade secret and other proprietary information using the term “confidential.” The agency’s chief procurement officer will determine whether the designated information is confidential, and a contractor can request that the state procurement administrator review an adverse determination. Pricing data is expressly excluded from being considered confidential.

The Georgia Open Records Act requires a contractor that submits sensitive financial data to a state or local public owner to submit a separate affidavit meeting certain statutory requirements to protect that data from public disclosure. If the affidavit is not submitted contemporaneously with the financial information, then the public agency can release the financial records without notifying the contractor. A public owner might warn the contractor about the pending possible disclosure and allow or even ask it to submit a later affidavit on which the agency might be willing to rely, but the owner is under no obligation to do so.

If a contractor attaches an appropriate affidavit, then, before producing the identified financial records in response to an Open Records Act request, the public owner must notify the contractor of the owner’s intention to disclose that financial information unless the owner is prohibited from doing so by an appropriate court order. If the contractor wants to prevent disclosure of the requested records in that event, then the company can file an action in state court seeking a protective order exempting the requested records from disclosure. If the affidavit is provided and the public owner determines that the specifically identified information is indeed a trade secret, then the requester may file an action in court seeking an order stating that the requested records are subject to disclosure.

Maryland’s Public Information Act governs the public’s right to inspect the records of the state government and its political subdivisions. The Act broadly denies the public access to inspection of part of a public record that contains a trade secret, confidential commercial information, or confidential financial information. The Maryland State Procurement Regulations controlling state contracts, however, impose affirmative obligations on contractors to act to protect that information.

The Maryland procurement regulations require state agencies to include a Public Information Act Notice as a mandatory provision in all requests for proposals. The regulations suggest the following “preferred” notice: “Offerors should give specific attention to the identification of those portions of their proposals that they deem to be confidential, proprietary information or trade secrets and provide any justification why such materials, upon request, should not be disclosed by the State” under the Public Information Act.

The state procurement regulations further require bidders designating trade secrets or other proprietary data as confidential to do so in writing and to mark and make that material “readily separable from the bid in order to facilitate public inspection of the nonconfidential portion of the bid.” The agency’s procurement officer determines the validity of any requests for nondisclosure, which is permissible only if approved by the state Office of the Attorney General.

South Carolina
The South Carolina Consolidated Procurement Code applies to contracts entered by any state body or by certain school districts within the state. The Code provides a conditional exception to the state’s Freedom of Information Act for “commercial or financial information obtained in response to a request for proposals or any type of bid solicitation that is privileged and confidential.” Privileged and confidential information is defined as “information in specific detail not customarily released to the general public, the release of which might cause harm to the competitive position of the party supplying the information.”

The condition to this exception is that a contractor submitting that information in response to any solicitation must “comply with instructions provided in the solicitation for marking information exempt from public disclosure.” South Carolina law provides that information not marked as required by the solicitation’s instructions may be disclosed to the public. Instructions can vary among solicitations, and so contractors must be careful to identify and follow the instructions for that particular solicitation.

Contractors wanting to protect confidential financial information submitted to a state or local public entity during the course of pursuing a public contract should be mindful of their rights and responsibilities in three areas.

First, understand whether and to what extent the state’s or locality’s laws and regulations governing access to public records prevent disclosure of that information. Be aware that certain provisions of a state’s public records law and the exceptions to it might not apply equally to all local governments or certain state agencies. The rules that apply to the state university system, a local school district, the state department of transportation, and a local transit authority might all differ.

Second, understand the conditions that contractors must satisfy to protect their proprietary information. These duties come in many forms, including physically labeling and separating documents and providing written justifications or sworn affidavits. They also often require action at the time the information is submitted; otherwise, the protection is waived. These obligations can also be specific or unique to a particular solicitation and might change from one solicitation to another.

Third, understand the administrative and, if necessary, legal process and timelines for determining what will remain confidential. Rarely will information be deemed confidential and not to be disclosed simply because the contractor says it is, and governments often give themselves wide latitude to make these determinations without the contractor’s involvement. A contractor’s ultimate protective remedies are often only available in court, and understanding the evaluation process in advance is critical to prepare the contractor to timely assert its rights.

The author thanks Madisyn Kellough, a Summer Associate with Smith Currie and a rising third-year law student at Georgetown University, for her research assistance for this article.

The views expressed in this article are not necessarily those of ConsensusDocs. Readers should not take or refrain from taking any action based on any information without first seeking legal advice.