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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 23, 2003 Decided July 27, 2004
No. 02-5342
MCDONNELL DOUGLAS CORPORATION,
APPELLANT
v.
UNITED STATES DEPARTMENT OF THE AIR FORCE AND
F. WHITTEN PETERS, SECRETARY OF THE AIR FORCE,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 00cv01693)
Stephen S. Kaye argued the cause and filed the briefs for
appellant.
Tricia S. Wellman, Senior Attorney, U.S. Department of
Justice, argued the cause for appellee. With her on the brief
were Roscoe C. Howard, Jr., U.S. Attorney, and R. Craig
Lawrence, Assistant U.S. Attorney.
Bills of costs must be filed within 14 days after entry of judgment.
The court looks with disfavor upon motions to file bills of costs out
of time.
2
Before: GINSBURG, Chief Judge, and EDWARDS and GARLAND,
Circuit Judges.
Opinion for the Court filed by Chief Judge GINSBURG.
Opinion concurring in part and dissenting in part filed by
Circuit Judge GARLAND.
GINSBURG, Chief Judge: McDonnell Douglas, a wholly
owned subsidiary of Boeing, appeals from a judgment in favor
of the Air Force in this ‘‘reverse’’ Freedom of Information
Act case. McDonnell Douglas challenges as arbitrary and
capricious and otherwise contrary to law the decision of the
Air Force to release to Lockheed Martin Aircraft Center
pricing information contained in the contract the Air Force
awarded to McDonnell Douglas for the maintenance and
repair of KC–10 and KDC–10 aircraft. We affirm the judg-
ment of the district court insofar as it upheld the decision of
the Air Force to release the Over and Above Work Contrac-
tor Line-items (CLINs); we reverse that judgment insofar as
it approved release of option year prices and Vendor Pricing
CLINs.
I. Background
In 1997 the Air Force issued a request for proposals (RFP)
to perform maintenance and repair work on its fleet of KC–10
and KDC–10 aircraft. McDonnell Douglas submitted a bid
which, in compliance with the requirements of the RFP,
contained detailed pricing information both for the base year
of the proposed contract and for subsequent years in which
the Air Force would have the option to renew the contract.
In June 1998 the Air Force awarded the contract to McDon-
nell Douglas. The contract, which provided for a base year
and eight option years, incorporated the pricing information
McDonnell Douglas had submitted in its bid.
In July 1998 Lockheed asked the Air Force, pursuant to
the FOIA, 5 U.S.C. §§ 551 et seq., for a copy of the contract.
The Air Force duly notified McDonnell Douglas of Lock-
heed’s request, and McDonnell Douglas promptly objected.
3
Although McDonnell Douglas agreed some of the requested
information must be disclosed, including the bottom-line price
for the base year of the contract, the Company maintained
the option year prices and the prices listed in certain of the
CLINs came within Exemption 4 of the FOIA, which exempts
from disclosure ‘‘trade secrets and commercial or financial
information obtained from a person and privileged or confi-
dential.’’ 5 U.S.C. § 552(b)(4). Exemption 4 does not itself
prohibit an agency from disclosing commercial or financial
information; it provides only that an agency is not compelled
to disclose such information. The Trade Secrets Act, 18
U.S.C. § 1905, however, the scope of which is ‘‘at least
coextensive with Exemption 4,’’ CNA Financial Corp. v.
Donovan, 830 F.2d 1132, 1151 (D.C. Cir. 1987), effectively
prohibits an agency from releasing information subject to the
exemption. See McDonnell Douglas Corp. v. Widnall, 57
F.3d 1162, 1164 (D.C. Cir. 1995) (‘‘whenever a party succeeds
in demonstrating that its materials fall within Exemption 4,
the government is precluded from releasing the information
by virtue of the Trade Secrets Act’’).1
Over a period of two years McDonnell Douglas sent the Air
Force 11 submissions advancing its argument that option year
prices, Vendor Pricing CLINs, and Over and Above Work
1 The Trade Secrets Act provides a criminal penalty for anyone
who
publishes, divulges, discloses, or makes known in any manner
or extent not authorized by law any information coming to him
in the course of his employment or official duties TTT which
information concerns or relates to the trade secrets, processes,
operations, style of work, or apparatus, or to the identity,
confidential statistical data, amount, or source of any income,
profits, losses, or expenditures of any person, firm, partnership,
corporation or association.
18 U.S.C. § 1905. Although the proprietor of commercial informa-
tion does not have a private right of action to enforce § 1905, it may
seek review of an agency action that violates the Trade Secrets Act
on the ground it is ‘‘contrary to law,’’ per § 10 of the Administrative
Procedure Act, 5 U.S.C. § 702. Chrysler Corp. v. Brown, 441 U.S.
281, 317 (1979); Widnall, 57 F.3d at 1164.
4
CLINs are exempt from disclosure. Unpersuaded, the Air
Force issued a Final Administrative Decision Letter in June
2000 concluding Exemption 4 was inapplicable and stating it
would release the contract pricing information to Lockheed.
McDonnell Douglas then filed in district court a two-count
complaint alleging the Final Decision (1) was arbitrary and
capricious and contrary to law, in violation of the Administra-
tive Procedure Act, 5 U.S.C. § 706(2)(A), and (2) violated the
Trade Secrets Act. Upon cross-motions for summary judg-
ment the district court held the decision of the Air Force to
release the option year prices and the disputed CLINs ‘‘was
not arbitrary or capricious,’’ and hence did not violate the
APA. McDonnell Douglas Corp. v. U.S. Dep’t of the Air
Force, 215 F. Supp. 2d 200, 203 (D.D.C. 2002). The court also
granted summary judgment to the Air Force on McDonnell
Douglas’s claim under the Trade Secrets Act on the ground
the Act ‘‘does not afford ‘a private right of action to enjoin
disclosure in violation of the statute.’ ’’ Id. at 204 n.2 (quoting
Chrysler, 441 U.S. at 316–17). McDonnell Douglas now ap-
peals, advancing only its APA claim.
II. Analysis
As an initial matter McDonnell Douglas contends the Air
Force misapplied the governing legal standard in determining
that the option year prices, the Vendor Pricing CLINs, and
the Over and Above Work CLINs are not exempt from
disclosure pursuant to Exemption 4. McDonnell Douglas also
argues the decision of the Air Force to disclose those data
was arbitrary and capricious and contrary to law.
A. Standard of Review
We review de novo the district court’s grant of summary
judgment. See LaCedra v. Executive Office for United States
Attorneys, 317 F.3d 345, 347 (D.C. Cir. 2003). In determining
whether the decision of the Air Force was arbitrary and
capricious, we do not ‘‘substitute [our] judgment for that of
the agency.’’ Motor Vehicle Mfrs. Ass’n of United States,
Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).
5
On the other hand, we do not defer to the agency’s conclusory
or unsupported suppositions. Id.
B. The National Parks Standard
That McDonnell Douglas was required to provide to the Air
Force the option year prices and the information in the
CLINs in order to compete for the contract is undisputed.
That is no doubt why the parties agree the standard set out
in National Parks & Conservation Association v. Morton,
498 F.2d 765 (D.C. Cir. 1974) (National Parks I), governs
whether the contested information falls within the scope of
Exemption 4. In National Parks I, we held financial infor-
mation is ‘‘confidential’’ and therefore within the scope of
Exemption 4 if it is required to be submitted to the Govern-
ment and if its disclosure is ‘‘likely TTT to cause substantial
harm to the competitive position of the person from whom the
information was obtained.’’ Id. at 770.
McDonnell Douglas argues the Air Force misapplied the
test of National Parks I because it required McDonnell
Douglas to demonstrate ‘‘with certainty’’ release of the con-
tested information would cause the Company substantial com-
petitive harm. Indeed, according to McDonnell Douglas the
Final Administrative Decision Letter is ‘‘riddled with de-
mands for certainty.’’ National Parks I, of course, does not
require the party invoking Exemption 4 to prove disclosure
certainly would cause it substantial competitive harm, but
only that disclosure would ‘‘likely’’ do so. See id.; Gulf & W.
Indus. v. United States, 615 F.2d 527, 530 (D.C. Cir. 1979).
As we read the Final Administrative Decision Letter, the
Air Force did not misinterpret or misapply the test of Na-
tional Parks I. On the contrary, it expressly concluded
‘‘release of the requested information will not likely cause
substantial competitive harm to [McDonnell Douglas].’’
(Emphasis in original). Although the Air Force did not use
the word ‘‘likely’’ at every opportunity in the course of its
analysis of whether disclosure would cause substantial com-
petitive harm, it is quite clear the agency knew what was
required to meet the National Parks I standard and sought
to apply that standard accordingly.
6
McDonnell Douglas seizes upon the Air Force’s statement
that a competitor could not reverse-engineer the Company’s
commercially sensitive information ‘‘with certainty,’’ but it
does not follow that the Air Force required McDonnell Doug-
las to demonstrate substantial competitive harm would cer-
tainly occur. The issues are distinct: even if a competitor
could determine the pricing strategy and markups McDonnell
Douglas used in bidding for the present contract, the question
would remain whether as a result McDonnell Douglas would
likely suffer substantial competitive harm, with respect either
to the option years in this contract or to future contracts.
Therefore, we can not agree with McDonnell Douglas that the
Air Force committed a wholesale error in applying the stan-
dard laid down in National Parks I, although we disagree
with certain of the agency’s more particularized conclusions,
to which we now turn.
C. Option Year Prices
McDonnell Douglas argues release of the option year prices
in the contract would likely cause it substantial competitive
harm for two reasons. First, McDonnell Douglas anticipates
its competitors would use their knowledge of those prices in
an effort to convince the Air Force to rebid the contract
rather than exercise its option annually to renew it. As the
Air Force points out, however, McDonnell Douglas failed to
make this argument before the agency. Whether the Final
Decision of the Air Force was arbitrary and capricious must
be determined solely upon the basis of the arguments and
information before the agency at the time. See Walter O.
Boswell Mem’l Hosp. v. Heckler, 749 F.2d 788, 792 (D.C. Cir.
1984) (‘‘If a court is to review an agency’s action fairly, it
should have before it neither more nor less information than
did the agency when it made its decision’’). McDonnell
Douglas’s argument that only the agency — and not the party
challenging the agency’s decision — is prohibited from ad-
vancing a post hoc argument is simply incorrect. See Mili-
tary Toxics Project v. EPA, 146 F.3d 948, 957 (D.C. Cir. 1998)
(by failing to raise argument to agency appellant forfeited the
argument and ‘‘may not raise it for the first time upon
appeal’’).
7
Second, McDonnell Douglas argues disclosure of the option
prices in the contract likely will cause it substantial competi-
tive harm because, in the event the Air Force does decide to
rebid the contract, its competitors will be able to use that
information to underbid it. The Air Force responds with two
reasons for which rebidding is unlikely. First, ‘‘option years
of contracts are usually exercised,’’ and a contract to service
military aircraft is ‘‘even less susceptible to a new competition
on the basis of price than most [contracts].’’ Second, ‘‘under
the standards mandated by the [Federal Acquisition Regula-
tions], the option years of the contract will be exercised
unless the market changes considerably,’’ in which event
McDonnell Douglas would also ‘‘necessarily change [its] pric-
ing strategy’’ and thereby ‘‘greatly diminish any potential
competitive value’’ of knowing the option year prices. Now it
is McDonnell Douglas’s turn to point out that neither of these
considerations played any role in the decision here under
review: the Air Force never suggested McDonnell Douglas
would not likely be harmed because the contract would not
likely be rebid. We do not rely upon counsel’s post hoc
rationale for upholding an agency’s action. See Bowen v.
American Hosp. Ass’n, 476 U.S. 610, 626–27 (1986); Yukon-
Kuskokwim Health Corp. v. NLRB, 234 F.3d 714, 718 (D.C.
Cir. 2000).2
The Air Force also suggests three reasons even a rival
bidder that did know McDonnell Douglas’s option year prices
would not know what it would take to underbid McDonnell
Douglas. First, the Air Force claims a rival would never
know the exact ‘‘price to beat’’ because McDonnell Douglas’s
nominal option prices are subject to revision pursuant to the
2 Although we will remand a matter to an agency where the
agency’s initial explanation of its decision was inadequate, e.g.,
Northeast Md. Waste & Disposal Auth. v. EPA, 358 F.3d 936, 949–
50 (D.C. Cir. 2004), we do not typically remand to permit the
agency an opportunity to adopt an entirely new explanation first
suggested on appeal. The Air Force had numerous opportunities to
argue that ‘‘rebidding is not likely,’’ Dissent at 9, and to offer the
detailed analysis Judge Garland presents in his dissent; it never did
so. We see no reason to give the Air Force yet another chance.
8
Economic Price Adjustment Clause in the contract. As
McDonnell Douglas points out, however, the index used to
determine the final option price in each option year is identi-
fied on the face of the Adjustment Clause and is publicly
available. If the option year prices in the contract were
released, then it would be a matter of simple arithmetic to
calculate the adjusted option year prices. See Greenberg v.
FDA, 803 F.2d 1213, 1218 (D.C. Cir. 1986) (combination of
allegedly confidential information and publicly available infor-
mation sufficient evidence of competitive harm to defeat
summary judgment motion).
Second, the Air Force contends a rival’s price, to be
attractive, would have to be lower than McDonnell Douglas’s
bid by enough to offset the ‘‘costs of disrupting operations.’’
This transaction cost argument, however, did not figure in the
agency’s decision that McDonnell Douglas would not likely be
harmed by release of its option year prices, and hence can
play no part in our review.
Finally, the Air Force argues that, even if it does rebid the
contract, McDonnell Douglas is unlikely to suffer competitive
harm because the new bid price ‘‘would be only one of several
evaluation factors for award’’ of the new contract. The RFP
for the existing contract listed the six criteria for evaluating
bids — logistics, maintenance/repair/modifications, manage-
ment, safety/fire protection, quality, and cost/price — which
were ‘‘to be weighted equally’’ in selecting the winning bid.
The Air Force contends, therefore, any rebid contract would
be awarded to the bidder that offered the ‘‘best value’’ based
upon all six factors and not necessarily to the bidder with the
lowest price.
As Boeing correctly points out, we considered and rejected
this argument in McDonnell Douglas Corp. v. NASA, 180
F.3d 303 (1999). In that case the agency argued disclosure of
the contested information would not cause McDonnell Doug-
las to be underbid ‘‘because price is only one of many factors
used by the government in awarding contracts.’’ Id. at 306.
We thought the argument ‘‘too silly to do other than to state
it, and pass on,’’ id., but the argument’s resurrection here
9
suggests we should take greater pains to explicate the prob-
lem with the Air Force’s position.
Simply put, release of the option year prices in the present
contract would likely cause McDonnell Douglas substantial
competitive harm because it would significantly increase the
probability McDonnell Douglas’s competitors would underbid
it in the event the Air Force rebids the contract. See Gulf &
W. Indus., 615 F.2d at 530 (substantial competitive harm
likely where disclosure ‘‘would allow competitors to estimate,
and undercut, its bids’’). Because price is the only objective,
or at least readily quantified, criterion among the six criteria
for awarding government contracts, submitting the lowest
price is surely the most straightforward way for a competitor
to show its bid is superior. Indeed, price is by statute the
only factor that ‘‘must be considered in the evaluation of a
proposal.’’ 10 U.S.C. § 2305(a)(3)(A)(ii) (emphasis added).
Whether price will be but one of several factors to be
weighted equally in any future RFP, therefore, is necessarily
somewhat speculative.
The Air Force nonetheless presses the view, which the
district court accepted, that its present argument ‘‘differs
markedly’’ from the argument we rejected in NASA.
McDonnell Douglas, 215 F. Supp. 2d at 208. The district
court restated the Air Force’s present argument as follows:
‘‘even if underbidding were to occur, the fact that price is just
one of many factors means that the effect of the underbidding
would be diluted by other factors.’’ Id. The district court
reasoned that unlike the NASA, which had argued competi-
tors would not underbid McDonnell Douglas, the Air Force
acknowledged that competitors might underbid McDonnell
Douglas but argued the Company would not be harmed
because the Air Force would consider nonprice factors in
awarding the contract. Id. The district court clearly used
the term ‘‘underbid’’ to mean ‘‘bid a lower price,’’ but that is
not how we used the term in NASA; there ‘‘underbidding’’
refers to making a bid more attractive overall, not with
respect only to price, so it will be chosen by the Government.
See NASA, 180 F.3d at 303 (‘‘[T]he agency ‘reasoned’ that
underbidding due to the disclosure would not occur because
10
price is only one of the many factors used by the government
in awarding contracts’’). Obviously, any competitor would try
to bid a lower price than McDonnell Douglas; the NASA was
not so foolish as to deny that. Instead, the agency there
made the same argument as does the Air Force here, viz.,
that the NASA would not accept a bid merely because it
offered a lower price but instead would consider nonprice
factors in selecting the winning bid. We rejected this argu-
ment summarily in NASA, and we reject it again here for the
reason given in the preceding paragraph.
We conclude disclosure of McDonnell Douglas’s option year
prices would likely cause McDonnell Douglas substantial com-
petitive harm by informing the bids of its rivals in the event
the contract is rebid.3 Consequently, the option year prices
fall within the scope of Exemption 4, and the decision of the
Air Force to release them was contrary to law.
D. Vendor Pricing CLINs
McDonnell Douglas argues the release of prices for certain
CLINs composed predominantly of the costs of materials and
services it procures from other vendors would enable its
competitors to derive the percentage (called the ‘‘Vendor
Pricing Factor’’) by which McDonnell Douglas marks up the
bids it receives from subcontractors. McDonnell Douglas
argues release of the disputed CLINs would likely harm its
competitive position because Lockheed ‘‘most likely obtained
quotations from the same vendors,’’ with ‘‘the same or nearly
the same pric[es].’’
3 The dissent faults the court for not resolving McDonnell
Douglas’s additional claim that disclosure of the option year prices
in the contract was also likely to cause it competitive harm because
its competitors could reverse-engineer certain sensitive pricing fac-
tors from the option prices. See Dissent at 11–12. Because we
conclude that disclosure of the option year prices would likely cause
McDonnell Douglas competitive harm by enabling competitors to
undercut its prices, the court has no occasion to continue on in dicta
to decide whether McDonnell Douglas would also suffer competitive
harm from reverse-engineering of its sensitive pricing factors.
11
In explaining its decision to release those CLINs the Air
Force stated it is ‘‘entirely possible,’’ indeed ‘‘not uncommon,’’
for a subcontractor to ‘‘quote different prices TTT to different
prime contractors.’’ Therefore, the Air Force reasoned,
McDonnell Douglas’s competitors could not ‘‘with any degree
of certainty’’ derive its Vendor Pricing Factor from disclosure
of the Vendor Pricing CLINs and hence McDonnell Douglas
is unlikely to suffer substantial competitive harm.
The problem with this line of reasoning is its premise,
namely, the mere supposition that McDonnell Douglas and
Lockheed received — or may well have received — signifi-
cantly different prices from the same vendors bidding for the
same subcontract. The Air Force provided no actual evi-
dence, nor did it claim special knowledge based upon its
experience, to support this proposition, apart from the rather
casual observations that it was ‘‘entirely possible’’ and ‘‘not
uncommon.’’ This is tantamount to the Air Force saying it
would ‘‘not be surprised’’ if the rival bidders had received
different prices from subcontractors, but it is far short of
asserting (let alone substantiating) that it was ‘‘likely’’ they
did so.4 Nor does it seem probable as a matter of economic
theory. In a competitive market for subcontracted work, a
rational subcontractor would quote each prime contractor the
lowest price consistent with covering its costs. Any differ-
ence in the prices it quotes different prime contractors
should, in theory, reflect differences in the costs of supplying
them. Therefore, it is reasonable to presume, as McDonnell
Douglas did in its submissions to the Air Force, that its
‘‘competitors obtained similar pricing from various vendors to
4 The Air Force’s conclusory statement that ‘‘it is not uncom-
mon’’ for subcontractors to quote different prices to different
primes is not a ‘‘prediction’’ or a ‘‘forecast’’ regarding ‘‘the repercus-
sions of disclosure,’’ to which we ordinarily defer; it is a ‘‘declara-
tion of empirical fact.’’ CNA Fin. Corp., 830 F.2d at 1155. Al-
though we may defer to the ‘‘predictive judgment’’ of an agency
absent record evidence, id., we will not defer to a declaration of fact
that is ‘‘capable of exact proof’’ but is unsupported by any evidence.
Cf. id.
12
support those tasks.’’5
Perhaps the Air Force, which we recognize has ‘‘knowledge
of the government contracting industry,’’ McDonnell Doug-
las, 215 F. Supp. 2d at 208, has reason to believe the markets
in which its prime contractors purchase goods and services
are not effectively competitive.6 Having failed to explain how
5 The presumption is reasonable because McDonnell Douglas
can not be faulted for failing to produce evidence of the prices its
subcontractors charged to other primes, such as Lockheed. See
Maj. Francis Dymond, DoD Contractor Collaborations, 172 MILI-
TARY LAW REVIEW 96, 139 (noting ‘‘the secretive nature of collabora-
tions and their complexity’’). Because only the Air Force received
information from both primes, the burden of producing such evi-
dence should lie, if anywhere, with it. Cf. Occidental Petroleum v.
SEC, 873 F.2d 325, 342 (D.C. Cir. 1989) (‘‘It is far more efficient,
and obviously fairer, to place the burden of production on the party
who claims that the information is publicly available’’).
6 Relying upon analyses contending that the market for weap-
ons systems is not competitive, Dissent at 6 n.5, 7 n.6, Judge
Garland says it is ‘‘plausible’’ for the Air Force to speculate that the
market for servicing aircraft is not competitive either, because
‘‘[o]ngoing relationships between the vendor and different primes
TTT could affect the vendor’s decision of the price to charge.’’
Setting aside whether the teaming arrangements and joint ventures
characteristic of weapons manufacturing are pro- or anti-
competitive, we have no basis for assuming the market for servicing
the DC/KC/KDC–10 family of aircraft — which aircraft are used in
both civil and military aviation and, hence, have multiple civilian and
military customers and suppliers — is characterized by the same
alleged failures as the oligopolistic market for weapons systems. In
any event, if the Air Force had offered some explanation or
evidence of the sub/prime contractor market at issue here along the
lines of that now supplied by Judge Garland, then perhaps its
argument would be persuasive. To be sure, the Air Force need not
provide ‘‘the kinds of evidence more usually associated with elabo-
rate antitrust proceedings,’’ National Parks & Conservation Ass’n
v. Kleppe, 547 F.2d 673, 681 (D.C. Cir. 1976), but its assertion
regarding subcontractor pricing is not a prediction; it is an asser-
tion capable of, but entirely lacking in, substantiation. Cf. CNA
Fin., 830 F.2d at 1155.
13
its knowledge or experience supports that understanding,
however, the decision of the Air Force is neither ‘‘at least as
compelling as McDonnell Douglas’s,’’ McDonnell Douglas,
215 F. Supp. 2d at 209, nor ‘‘well-reasoned, logical[,] and
consistent,’’ CNA Financial, 830 F.2d at 1155; it is, in short,
arbitrary and capricious.
E. Over and Above Work CLINs
Finally, McDonnell Douglas challenges as arbitrary and
capricious the decision of the Air Force to disclose CLINs
containing the hourly labor rates McDonnell Douglas charges
the Air Force for ‘‘Over and Above Work,’’ that is, mainte-
nance and repair work not required under the contract, which
the Air Force is not required to direct to McDonnell Douglas.
The Company first complains a competitor with knowledge of
these rates would be able to underbid it for Over and Above
Work. Because McDonnell Douglas did not make this specif-
ic argument to the Air Force prior to its issuance of the Final
Decision, we shall not consider it. McDonnell Douglas also
complains, however, that knowledge of these CLINs ‘‘would
clearly place such a competitor at a distinct advantage over
[McDonnell Douglas] in any contract (commercial or military)
awarded on the basis of a price comparison.’’ Specifically,
McDonnell Douglas claims it was ‘‘no secret’’ — based upon
local newspaper articles published in 1996 — the Company
paid the ‘‘going wage’’ at its new Boeing Aerospace Support
Center (BASC), located at the former Kelly Air Force Base in
San Antonio; releasing the labor rates it charges for Over
and Above Work, therefore, would enable its competitors to
calculate the ‘‘overall markup (or labor pricing factor)’’
McDonnell Douglas uses, to its detriment in bidding on future
contracts.
In an effort both to make sense of and to refute this claim,
the Air Force responds that a competitor could not ‘‘safely
assume’’ McDonnell Douglas either pays its blue collar em-
ployees the ‘‘prevailing wage’’ or meets the ‘‘standard for
fringe benefits’’ in the area, both as determined by the
Department of Labor. Moreover, the Air Force found
McDonnell Douglas submitted ‘‘significantly different’’ rates
14
for Over and Above Work in the present contract and in a
contract to service KC–135 aircraft at the BASC; a competi-
tor therefore could not reasonably infer the Over and Above
Work CLINs in the present contract accurately reflect the
Labor Pricing Factor McDonnell Douglas will use in bidding
on some future contract.
McDonnell Douglas presents neither a viable theory nor
any evidence to support its claim that release of the Over and
Above Work CLINs would enable a competitor to derive its
Labor Pricing Factor. The 1996 newspaper articles McDon-
nell Douglas submitted to the Air Force to prove its competi-
tors know how much the Company pays its mechanics are not
persuasive. For example, a newspaper report that the ‘‘aver-
age blue collar worker’’ at Kelly AFB earned $28,352 per
year two years before the BASC was established there,
see http://www.boeing.com/defensespace/aerospace/maintenan
ce/basc.html, does not reveal anything about the prevailing
wage for McDonnell Douglas employees performing work
under the contract at the BASC — then or now. Nor does
McDonnell Douglas present any evidence that the cost of the
benefits it currently provides to mechanics is publicly known;
the average salary at Kelly AFB reported in 1996 specifically
‘‘exclud[ed] benefits,’’ and incoming contractors (such as
McDonnell Douglas) had announced that ‘‘retirement and
vacation [benefits] would differ from what civil servants [were
then receiving].’’
Based upon the publicly available information the Company
submitted to the Air Force, the agency reasonably concluded
McDonnell Douglas failed to carry its burden of showing
release of the Over and Above CLINs was likely to cause it
substantial competitive harm. Therefore, the decision of the
Air Force to release the CLINs was not arbitrary and
capricious. See CNA Fin. Corp., 830 F.2d at 1155–56.
F. Business Judgment and Risk Assessment
In a coda to its brief, the Air Force argues disclosure of
‘‘the type of pricing information that is at issue’’ in this case is
unlikely to cause substantial competitive harm to McDonnell
Douglas because a rival company can never understand fully
15
or model precisely the ‘‘business judgment and risk assess-
ment’’ that go into another firm’s pricing decisions.
We recoil, as does McDonnell Douglas, from the implication
of this argument, namely, a per se rule (or at least a strong
presumption) that all constituent pricing information — as
opposed to the bid price itself — is to be disclosed; such a
rule would be squarely at odds with the protection we have
always understood Exemption 4 to provide for such pricing
information. See, e.g., NASA, 180 F.3d at 306; Widnall, 57
F.3d at 1164; Gulf & W. Indus., 615 F.2d at 530. To be sure,
there may be, as the Air Force suggests, too many ‘‘unascer-
tainable,’’ Acumenics Research & Technology v. Department
of Justice, 843 F.2d 800, 808 (4th Cir. 1988), or ‘‘fluctuating,’’
Martin Marietta Corp. v. Dalton, 974 F. Supp. 37, 40 (D.D.C.
1997), variables for a firm to model exactly or to pinpoint
precisely a rival’s pricing strategy, but pinpoint precision is
not required to inflict substantial competitive harm.
* * *
Before concluding, we respond to two claims made by our
dissenting colleague. First, our analysis in Parts II.C. and
II.D does not come ‘‘close to a per se rule’’ that contract line-
item prices ‘‘may never be revealed to the public through the
[FOIA].’’ Dissent at 1, 15. McDonnell Douglas has not
urged such a rule, and we have not considered one. Our
decision that disclosure of such pricing information is not
required in this case turns upon the particular facts that
make disclosure here ‘‘likely TTT to cause substantial harm to
the competitive position of the person from whom the infor-
mation was obtained.’’ National Parks I, 498 F.2d at 770.
In any event, Judge Garland’s suggestion that disclosure of
the vendor prices implicates ‘‘the core purpose of FOIA,’’
Dissent at 2, is doubtful. The decision of the Air Force ‘‘to
expend a specified amount of public funds,’’ id. at 18, has
already been disclosed to the public; indeed, the total con-
tract price paid by the Government ‘‘is routinely made pub-
lic,’’ JAMES T. REILLY, 1 FEDERAL INFORMATION DISCLOSURE
§ 14.84 (3d ed. 2004), because that disclosure informs citizens
16
about ‘‘what their government is up to.’’ Dep’t of Justice v.
Reporters Comm. For Freedom of Press, 489 U.S. 749, 773
(1989). The pricing information Lockheed seeks, however,
has little to do with the core purpose of the FOIA, namely,
‘‘ ‘contributing significantly to public understanding of the
operations or activities of the government.’ ’’ Dep’t of De-
fense v. FLRA, 510 U.S. 487, 495 (1994) (quoting Reporters
Comm., 489 U.S. at 775). On the contrary, the information
now in suit reveals the internal workings of the contractor,
not those of the Government, and would seem to shed little if
any light upon the ‘‘agency’s performance of its statutory
duties.’’ Bibles v. Or. Natural Desert Ass’n, 519 U.S. 355,
356 (1997) (per curiam). Cf. Reporters Comm., 489 U.S. at
773 (purpose of FOIA ‘‘is not fostered by disclosure of
information about private citizens TTT that reveals little or
nothing about an agency’s own conduct’’). For all the Gov-
ernment tells us, the contractor’s margin on particular line
items should be a matter of indifference to the purpose of the
FOIA. The decision made by the Air Force was whether to
accept McDonnell Douglas’s or Lockheed’s overall bid;
whether the lower bidder marked up one cost element by a
large margin and another by a small margin, in the course of
making its bid competitive overall, is not self-evidently rele-
vant to the question what the ‘‘government is up to.’’
That the vendor prices at issue here do not seem to concern
the core purpose of the FOIA does not mean, however, that
line-item pricing information is per se protected from disclo-
sure. As noted above, McDonnell Douglas did not argue for
a per se rule, and we do not endorse such a rule in deciding
certain prices are protected from disclosure in this case.
III. Conclusion
For the foregoing reasons, we reverse the judgment of the
district court insofar as it upholds the decision of the Air
Force to release the option year prices and the Vendor
Pricing CLINs in McDonnell Douglas’s KC–10 and KDC–10
contract. We affirm the judgment of the district court inso-
17
far as it authorizes the Air Force to release the Over and
Above Work CLINs.
So ordered.
1
GARLAND, Circuit Judge, concurring in Parts II.B and II.E.,
and dissenting in Parts II.C and II.D: This court has twice
thought it ‘‘passing strange’’ that ‘‘the prices charged to the
government for specific goods could be confidential’’ commer-
cial information or ‘‘trade secrets’’ under the Freedom of
Information and Trade Secrets Acts. McDonnell Douglas
Corp. v. NASA, 180 F.3d 303, 306 (D.C. Cir. 1999); see
McDonnell Douglas Corp. v. Widnall, 57 F.3d 1162, 1167
(D.C. Cir. 1995). We have never decided that fundamental
question, however, because the government has never litigat-
ed whether such prices are subject to those statutes — and
hence to the National Parks test — in the first place.1 For
the same reason, we do not do so in this case. Nonetheless,
the analysis adopted and result reached in Parts II.C and
II.D of the court’s opinion come perilously close to a per se
rule that line-item prices — prices the government agrees to
pay out of appropriated funds for goods or services provided
by private contractors — may never be revealed to the public
through a Freedom of Information Act (FOIA) request. Be-
cause, if such prices are covered by the statutes at all, a bar
on their disclosure should be the exception rather than the
rule, I respectfully dissent.
I. Vendor Pricing Contractor Line Item Numbers (CLINs)
In Part II.D of its opinion, the court denies the Air Force
authority to disclose prices for certain line items in its
contract with appellant McDonnell Douglas (referred to in the
record by the name of its parent company, Boeing). These
are not mere offer or bid prices; they are prices that the
government agreed to pay, and that it did pay, for specified
services that it purchased from the company. Disclosure of
such information permits the public to evaluate whether the
government is receiving value for taxpayer funds, or whether
1
See Widnall, 57 F.3d at 1167 (‘‘Although the idea that a price
charged to the government for specific goods or services could be a
‘trade secret’ appears passing strange to us, we agree with the
government that it is not open to us to attempt to decide that issue
at this stageTTTT [T]he Air Force has never stated its position on
McDonnell Douglas’ claim that even exercised option prices are
trade secrets.’’).
2
the contract is instead an instance of waste, fraud, or abuse of
the public trust. (I hasten to add that no such allegations are
even hinted at here.) Such disclosure thus comes within the
core purpose of FOIA: to inform citizens about ‘‘what their
government is up to.’’ United States Dep’t of Justice v.
Reporters Comm. for Freedom of the Press, 489 U.S. 749, 773
(1989); see NLRB v. Robbins Tire & Rubber Co., 437 U.S.
214, 242 (1978) (‘‘The basic purpose of FOIA is to ensure an
informed citizenry, vital to the functioning of a democratic
society, needed to check against corruption and to hold the
governors accountable to the governed.’’).
It is therefore not surprising that, even applying the Na-
tional Parks test, the vast majority of courts have permitted
the release of agreed-upon contract prices, including line-item
prices. See Gregory H. McClure, The Treatment of Contract
Prices Under the Trade Secrets Act and Freedom of Informa-
tion Act Exemption 4: Are Contract Prices Really Trade
Secrets, 31 PUB. CONT. L.J. 185, 196–97 (2002). That is
overwhelmingly the result in the district courts of this circuit.
See Center for Public Integrity v. United States Dep’t of
Energy, 191 F. Supp. 2d 187, 194–95 (D.D.C. 2002) (collecting
cases). It is also the result reached by the only other circuits
that have decided FOIA cases regarding such prices. See
Pacific Architects & Eng’rs Inc. v. United States Dep’t of
State, 906 F.2d, 1345, 1347–48 (9th Cir. 1990); Acumenics
Research & Tech. v. United States Dep’t of Justice, 843 F.2d
800, 808 (4th Cir. 1988). This circuit has ruled on the
releasability of line-item prices on only one previous occasion,
and in that case decided that the prices could not be dis-
closed. See NASA, 180 F.3d at 307.2 As discussed in Part II
2 The other two cases cited by my colleagues, Op. at 15, are not
apropos. Because of the ‘‘unusual posture’’ in which the Widnall
case came to this court, we declined to rule on whether the prices at
issue could be disclosed and instead remanded to the Air Force for
clarification of its own position regarding release. 57 F.3d at 1167.
In Gulf & Western Industries, Inc. v. United States, the requested
disclosure was not of line-item contract prices, but rather of a
government audit containing the objector’s ‘‘profit rate’’ and ‘‘actual
costs for units produced.’’ 615 F.2d 527, 529–30 (D.C. Cir. 1979).
3
below, however, that case did not consider facts and argu-
ments like those raised by the Air Force here.
The dispositions reached by the majority of courts are
unsurprising, not only in light of the core purpose of FOIA,
but also because of the nature of the National Parks test and
of the way we review its application. As the court correctly
recites, disclosure of information of the kind at issue here is
barred only if it is ‘‘likely TTT to cause substantial harm to the
competitive position of the person from whom the information
was obtained.’’ National Parks & Conservation Ass’n v.
Morton, 498 F.2d 765, 770 (D.C. Cir. 1974). In the case of
line-item prices, such harm will result only if a competitor is
able to ‘‘reverse-engineer’’ from the winning bidder’s price to
the sensitive strategic information upon which it is based,
such as the contractor’s profit margin and cost data.3 The
ability to ‘‘pinpoint precisely a rival’s pricing strategy’’ is
obviously not required to satisfy this test, Op. at 15, but the
objector must demonstrate that a rival will be able to derive
strategic information that is ‘‘likely’’ to cause it ‘‘substantial’’
competitive harm. National Parks, 498 F.2d at 770.
3 See Pacific Architects, 906 F.2d at 1347–48 (affirming disclosure
because a competitor would not be able to calculate the contractor’s
profit margin from its unit prices since there were too many
‘‘fluctuating variables’’); Acumenics, 843 F.2d at 808 (affirming
agency decision to disclose awarded unit prices because ‘‘there are
too many unascertainable variables in the unit price calculation for
a competitor to derive accurately [the contractor’s profit] multipli-
er’’); North Carolina Network for Animals, Inc. v. United States
Dep’t of Agric., 924 F.2d 1052, 1991 WL 10757, at *3 (4th Cir. Feb.
5, 1991) (unpublished table decision) (holding that release of sales
and price information is required where it ‘‘reveals nothing useful
about the dealer’s pricing structure,’’ such as ‘‘the dealer’s sources
and costs of acquisition, customer information, [or] profit margin’’);
see also 1 JAMES T. O’REILLY, FEDERAL INFORMATION DISCLOSURE
§ 14:83, at 705 (3d ed. 2000) (‘‘Where disclosure of contractor bid
price details is at issue, the existence of variable factors that make
it difficult to disaggregate a price figure would tend to support an
agency denial of confidentiality for aggregate bid amount.’’).
4
Moreover, the objector must accomplish this demonstration
within the constraints of our scope of review. First, it is the
opponent of disclosure — not the requester — who bears the
burden of proving whether substantial competitive harm is
likely to result. See Occidental Petroleum Corp. v. SEC, 873
F.2d 325, 342 (D.C. Cir. 1989); National Parks & Conserva-
tion Ass’n v. Kleppe, 547 F.2d 673, 679 n.20 (D.C. Cir. 1976)
(National Parks II). Second, in evaluating whether the
objector has met that burden, we defer to the judgments of
the agency, and may overturn them only if they are arbitrary
or capricious. See CNA Fin. Corp. v. Donovan, 830 F.2d
1132, 1153–55 (D.C. Cir. 1987). In particular, we must defer
to the agency’s expert prediction regarding the likely impact
of disclosure upon the marketplace. See id. at 1155–56
(holding that an agency’s forecast of ‘‘what likely would ensue
upon release of information’’ is the type of judgment that
‘‘courts traditionally leave largely to agency expertise’’ and
‘‘need not be supported by record evidence’’).
Applying National Parks and the appropriate standard of
review, it is plain that the line-item prices at issue here do not
qualify for protection from disclosure. The sole reason my
colleagues offer for reaching the opposite conclusion is their
acceptance of appellant’s argument that, because the disputed
prices are ‘‘composed predominantly of the costs of materials
and services it procures from other vendors,’’ disclosure of
those prices would permit derivation of the percentage ‘‘by
which McDonnell Douglas marks up the bids it receives from
subcontractors.’’ Op. at 10. That argument, in turn, rests on
the validity of McDonnell Douglas’ assertion, in its appellate
brief, that its competitor ‘‘most likely obtained quotations
from the same vendors’’ with ‘‘the same or nearly the same
prices’’ and could thus derive McDonnell Douglas’ mark-up
simply by subtracting those known vendor prices from the
line-item prices contained in the contract. Op. at 10 (quoting
McDonnell Douglas Br. at 20).
But McDonnell Douglas’ assumption that its competitor
‘‘likely’’ obtained the same price quotations from the same
vendors is simply not sufficient to carry its burden of proof on
the issue. The contractor’s letter to the Air Force makes
5
clear that this is indeed nothing more than an assumption:
‘‘It is reasonable to assume,’’ McDonnell Douglas said, ‘‘that
our competitors obtained similar pricing from various vendors
to support these tasks.’’ McDonnell Douglas Letter to Air
Force, Aug. 3, 1998, at J.A. 20 (emphasis added). That is the
entirety of the contractor’s submission on this point. Id.
The Air Force, however, directly contradicted that assump-
tion, declaring that ‘‘it is not uncommon for a vendor to quote
different prices for the same basic effort to different prime
contractors.’’ Air Force Final Administrative Decision Let-
ter, June 23, 2000, at J.A. 74 (hereinafter Final Decision
Letter). Although my colleagues disparage this declara-
tion — contending that the Air Force ‘‘provided no actual
evidence, nor did it claim special knowledge based upon its
experience, to support this proposition,’’ Op. at 11 — such
disparagement is unfair for two reasons.
First, in context, the Air Force’s declaration appears to be
precisely the ‘‘actual evidence’’ based on considerable ‘‘experi-
ence’’ with such procurement contracts that my colleagues
require. In contrast to McDonnell Douglas’ acknowledgment
that its assertion was based on nothing more than a ‘‘reason-
able assum[ption],’’ the Air Force’s statement that ‘‘it is not
uncommon’’ for vendors to quote different prices reads as a
declaration of empirical fact. Cf. CNA, 830 F.2d at 1155
(upholding agency response to objector’s affidavits, despite
the agency’s lack of ‘‘independent evidence’’ to support its
determination).
Second, and equally important, my colleagues’ approach
stands the burden of proof on its head. Because identical
vendor pricing is the premise of McDonnell Douglas’ argu-
ment that it will be harmed by disclosure, it is the contrac-
tor’s burden to prove that such pricing is a fact — not the
government’s burden to disprove it. See National Parks II,
547 F.2d at 679 n.20. There is no such evidence in McDon-
nell Douglas’ submissions below; instead, the company offers
precisely the type of ‘‘conclusory and generalized allegations’’
of harm that we have previously found ‘‘unacceptable.’’ Pub-
lic Citizen Health Research Group v. FDA, 704 F.2d 1280,
1291 (D.C. Cir. 1983). Yet it is the Air Force that my
6
colleagues upbraid for this lacuna, not the party that bears
the burden and responsibility for filling it.4
Lacking empirical support in the record, the opinion of the
court turns to economic theory to support its conclusion: ‘‘In
a competitive market for subcontracted work, a rational sub-
contractor would quote each prime contractor the lowest price
consistent with covering its costs.’’ Op. at 11. This is a
theory of the court’s own invention: McDonnell Douglas did
not make the argument in its submissions to either the Air
Force or this court. Nor is there any basis for my colleagues’
assumption that there is, in fact, ‘‘a competitive market for
subcontracted’’ military procurements. Indeed, all indica-
tions are to the contrary.5 The market at issue here is hardly
one in which a myriad of buyers face a myriad of sellers.
After all, the line-item prices we are considering are not for
supplying widgets, but for overhauling landing gear and
maintaining auxiliary power units and engine thrust reversers
on military aircraft whose ‘‘primary mission TTT is aerial
refueling of other military aircraft.’’ Air Force Br. at 2 n.2;
4 I agree with the court that the Air Force’s declaration regard-
ing subcontractor pricing is one of ‘‘empirical fact.’’ Op. at 11 n.4.
What I disagree with is the court’s refusal, in the absence of further
evidence, to accord that declaration any deference — notwithstand-
ing the Air Force’s considerable experience with such matters and
the fact that the burden lies on the opponent of disclosure. CNA,
830 F.2d at 1155, does not hold that such a declaration is unworthy
of deference. Compare Op. at 11 n.4. Nor does Occidental Petro-
leum, 873 F.2d at 342, support the proposition that the Air Force
should bear the burden of production, or that the Air Force’s
declaration would be insufficient to satisfy that burden even if it
should. Compare Op. at 12 n.5.
5 See Sherri Wasserman Goodman, Legal Dilemmas in the Weap-
ons Acquisition Process: The Procurement of the SSN–688 Attack
Submarine, 6 YALE L. & POL’Y REV. 393, 395–96 (1988) (noting
multiple reasons why defense procurements do not conform to the
‘‘classical economic model of a competitive market’’); see also
William E. Kovacic, Antitrust Analysis of Joint Ventures and
Teaming Arrangements Involving Government Contractors, 58 AN-
TITRUST L.J. 1059, 1091–97 (1989).
7
see Final Decision Letter, at J.A. 73–74. We know that there
were only two competitors for the prime contract, id. at J.A.
72, and McDonnell Douglas advised the district court that
there are only ‘‘a limited number of subcontractors who can
perform the work required in these types of contracts,’’
McDonnell Douglas Corp. v. United States Dep’t of Air
Force, 215 F. Supp. 2d 200, 208 (D.D.C. 2002). Indeed, that
was the basis for the company’s assertion that ‘‘competitors
will have likely gone to the same subcontractors’’ and ob-
tained the same prices. Id. In short, competitors for the
prime contract did not obtain their prices from a faceless
market, but rather from the same, relatively few vendors.
In this kind of imperfect, oligopolistic/oligopsonistic market,
we cannot assume that the court’s ‘‘rational subcontractor’’
theory of identical prices would hold. In fact, unlike McDon-
nell Douglas, the Air Force did address the theoretical ques-
tion and explain why differential rather than identical pricing
was not uncommon: ‘‘Ongoing relationships between the ven-
dor and different primes for other business,’’ the government
said in its Final Decision Letter, ‘‘could affect the vendor’s
decision on the price to charge.’’ J.A. 74. This opinion
regarding the nature of the market — one in which subcon-
tractors align with and provide better prices to their pre-
ferred primes to ensure other subcontracts — is surely
plausible.6 And in light of the Air Force’s expertise and
6 See, e.g., Robert Strauss & Joseph J. Dyer, Enforcement of
Teaming Agreements, PROCUREMENT LAWYER, Fall 2001, at 5 (‘‘Sub-
contractors TTT are leery of devoting significant resources (includ-
ing key engineering talent, intellectual property, and bid and pro-
posal costs) without a formal relationship being established with
prime contractors through teaming agreements.’’); U.S. Gen. Ac-
counting Office, Report to the Subcommittee on Acquisition and
Technology, Committee on Armed Services, U.S. Senate, Best Prac-
tices: DOD Can Help Suppliers Contribute More to Weapon Sys-
tems Programs (Mar. 1998) (encouraging the trend among defense
prime contractors to select preferred suppliers for subcontracting
work based on criteria other than lowest price, such as quality and
past performance); see also Kovacic, 58 ANTITRUST L.J. at 1095–97
(describing the anticompetitive effect of the proliferation of prime
8
experience in this area, it is one to which we must defer. See
CNA, 830 F.2d at 1155 (citing Federal Power Comm’n v.
Transcontinental Gas Pipe Line Corp., 365 U.S. 1 (1961), and
FCC v. National Citizens Comm. for Broad., 436 U.S. 775
(1978)).
In short, unless we reverse the burden of proof and deny
the Air Force the deference it is owed, there is no basis for
overturning its conclusion that disclosure of the prices it paid
for McDonnell Douglas’ services is unlikely to cause substan-
tial harm to the contractor’s competitive position.
II. Option Year Prices
Today’s opinion also bars the Air Force from disclosing
line-item prices for option years contained in the contract
with McDonnell Douglas. Op. at Part II.C. It does so based
solely upon McDonnell Douglas’ argument that: ‘‘[I]n the
event the Air Force does decide to rebid the contract, its
competitors will be able to use that information to underbid
it.’’ Id. at 7 (emphasis added). But McDonnell Douglas’
contention that it will be hurt ‘‘in the event’’ the Air Force
decides to put the contract out for rebid is insufficient to meet
appellant’s burden of showing that disclosure is ‘‘likely’’ to
cause ‘‘substantial harm’’ to its competitive position. Nation-
al Parks, 498 F.2d at 770. Since McDonnell Douglas does
not contend that it will be injured if the contract is not
rebid — i.e., if the government exercises the options — to
prevail the contractor must establish that it is at least likely
that there will be a rebid. This is just another way of
restating the threshold requirement of our National Parks
test: that the contractor must ‘‘actually face competition.’’
National Parks II, 547 F.2d at 679; accord Niagara Mohawk
Power Corp. v. United States Dep’t of Energy, 169 F.3d 16,
18–19 (D.C. Cir. 1999).7
and subcontractor cooperative relationships in the defense indus-
try).
7In National Parks II, this court held that, to establish that their
commercial or financial information fell within Exemption Four, the
9
McDonnell Douglas has wholly failed to satisfy that thresh-
old requirement. The appellant proffered no evidence what-
soever regarding the probability of a rebid. Indeed, it did
not even assert that rebidding was likely. Rather, its submis-
sion to the Air Force said nothing more than: ‘‘Should a
recompetition occur, Boeing’s competitors, armed with its
pricing for unexercised options[,] would be in a position to
undercut Boeing’s prices.’’ McDonnell Douglas Letter to Air
Force, Aug. 3, 1998, at J.A. 20–21 (emphasis added).
The government, by contrast, contends that rebidding is
not likely. ‘‘[O]ption years of contracts,’’ the Air Force
explains, ‘‘are usually exercised.’’ Air Force Br. at 19. And
that is particularly so for contracts ‘‘to service military air-
craft which are critical to USAF’s core mission.’’ Id. The
Air Force’s contention is backed by its regulations, which
instruct it to ‘‘take into account the Government’s need for
continuity of operations and potential costs of disrupting
operations’’ in deciding whether or not to exercise an option.
48 C.F.R. § 17.207(e); see also id. § 17.202(d) (providing that
options may be included in service contracts in ‘‘recognition of
(1) the Government’s need in certain service contracts for
continuity of operations and (2) the potential cost of disrupted
support’’).8 And it is further backed by the facts of this very
case, as the Air Force ‘‘has exercised the past four option
years for this contract each time they have come up.’’ Air
Force Br. at 20.
appellant National Park concessioners would have ‘‘to prove that:
(1) they actually face competition, and (2) substantial competitive
injury would likely result from disclosure.’’ 547 F.2d at 679. The
court found that the concessioners did not face meaningful competi-
tion for the renewal of their park concessions because denials of
renewal were rare, although they did face day-to-day competition
from businesses located outside the park. Id. at 681–82.
8 A contract solicitation may not even contain an option clause
unless the ‘‘contracting officer has determined that there is a
reasonable likelihood that the option will be exercised.’’ 48 C.F.R.
§ 17.208(c)(4).
10
Notwithstanding the logic and evidence supporting the
government’s claim that McDonnell Douglas has failed to
satisfy the threshold requirement for application of National
Parks, my colleagues rightly conclude that we cannot resolve
this appeal on that basis because, although the Air Force
vigorously advances the claim here, it did not rely on it below.
But while we cannot affirm the agency’s determination on
that ground, we need not reverse it. When the government
asserts a basis for decision that might well prevail if it were
raised by the agency rather than its lawyers, we may remand
to permit the agency an opportunity to reconsider its ratio-
nale. See, e.g., Northeast Maryland Waste Disposal Auth. v.
EPA, 358 F.3d 936, 949–50 (D.C. Cir. 2004); Yukon-
Kuskokwim Health Corp. v. NLRB, 234 F.3d 714, 718 (D.C.
Cir. 2000). Hence, even if the government’s entire argument
rested on the limited likelihood of a rebid, nothing more than
a remand for further consideration would be in order.
The Air Force’s rationale for permitting disclosure does
not, however, rest only on McDonnell Douglas’ failure to
establish that rebidding is likely to occur. It also rests on
appellant’s failure to prove it likely that it will suffer substan-
tial competitive harm even if the contract were rebid. As
noted, McDonnell Douglas’ theory is that it will be harmed
because, ‘‘in the event the Air Force does decide to rebid the
contract, its competitors will be able to use [the options]
information to underbid it.’’ Op. at 7. The Air Force persua-
sively counters this theory by explicating its two significant
flaws.
First, McDonnell Douglas has not demonstrated the likeli-
hood that competitors would be able to use its option prices to
underbid it. As McDonnell Douglas notes, if the Air Force
were to decide not to exercise an option, it would conduct a
new competition for the work. McDonnell Douglas Br. at 15.
This would free McDonnell Douglas from the option agree-
ments, and permit it to price the work differently. Recogniz-
ing this, appellant does not contend that its option prices
would themselves enable competitors to underbid it, but
rather that competitors would be able to use that ‘‘pricing
information to ‘deduce support hours, overhead factors, and
11
profit factors for the options’ ’’ — that is, they could use the
option prices to reverse-engineer the factors that McDonnell
Douglas would employ in pricing a new bid. Id. (quoting
McDonnell Douglas Letter to Air Force, Sept. 3, 1998, at J.A.
27).
In response to McDonnell Douglas’ reverse-engineering
argument, the Air Force offered a detailed exposition — on a
line-item by line-item basis — explaining why ‘‘[i]t does not
appear that release of the CLIN prices and the CLIN Option
Year Matrix would reveal any confidential piece of informa-
tion, such as a risk assessment or profit multiplier, that would
place Boeing at a competitive disadvantage.’’ Final Decision
Letter, at J.A. 71; see id. at J.A. 72–76 (CLIN by CLIN
analysis); id. at 76 (concluding that ‘‘many of the basic
assumptions underlying Boeing’s arguments that a competitor
can derive competitively sensitive rates and factors from
Boeing’s CLIN prices are TTT equally unfounded for the base
year and the option years’’).9 Moreover, the Air Force noted,
‘‘in a contract which contains options extending far into the
future, in this case a total of nine years, the value of the
option prices as a predictive tool for Boeing future pricing is
significantly diminished since such option prices almost cer-
tainly include significant adjustments for risks of unknown
contingencies.’’ Id.
The government’s explanation for rejecting McDonnell
Douglas’ reverse-engineering claim is more than reasonable.
Indeed, it is particularly powerful because, while McDonnell
Douglas objects to disclosure of the option-year line items, it
has withdrawn its objection to disclosure of many of the same
line items in the contract’s base year. Air Force Br. at 18
9 For example, the Air Force rejected McDonnell Douglas’ claim
that a competitor could derive its hourly rate to perform cyclical
(C–Check) inspections by dividing the line-item price by the known
standard hours to perform the tasks, because (inter alia) there are
no standard hours for such inspections — a point demonstrated by
the ‘‘significant variance, from task to task, in the number of C–
Check hours proposed by the two competitors.’’ Final Decision
Letter, at J.A. 72.
12
n.8. This leaves unexplained how a competitor’s knowledge
of McDonnell Douglas’ option-year prices could materially
improve its competitive position when the competitor already
knows the prices appellant agreed to for the base year.
Given the reasonableness of the government’s rationale,
and the fact that the burden of proof rests on McDonnell
Douglas, we cannot overturn the Air Force’s decision without
engaging in the same kind of line-item by line-item analysis
that the Air Force did. The opinion of the court, however,
does not undertake that task. Indeed, it does not address the
Air Force’s reverse-engineering argument at all.10 Unless we
are going to take the unprecedented step of adopting a per se
rule that the release of line-item prices is always harmful and
hence never permitted,11 the failure to rebut the government’s
arguments requires affirmance of its decision.
The government’s decision letter also exposes a second flaw
in McDonnell Douglas’ competitive injury theory. Even if
disclosure of option prices would significantly increase the
probability that a competitor could submit a lower bid,
McDonnell Douglas would not be substantially harmed by
such a bid unless it were sufficiently attractive to win the
contract away from the incumbent contractor. And in the
circumstances of this case, the Air Force contends that such a
10 There is one exception: The court affirms the Air Force’s
rejection of McDonnell Douglas’ claim that a competitor could
derive its labor mark-up factors for ‘‘over and above work’’ with
respect to the base year. Op. at Part II.E. Yet, the court does not
explain why that determination should be any different with respect
to the option years.
11 As noted above, such a rule would be contrary to that adopted
by other courts of appeals. See cases cited supra note 3. Gulf &
Western, cited by my colleagues, is not to the contrary. In that
case, a competitor would not have had to reverse-engineer anything:
the sought-after information was not line-item contract prices, but
rather government audits and annual financial statements that
directly revealed the objector’s ‘‘profit rate,’’ along with its ‘‘actual
costs for units produced, actual scrap rates, break-even point calcu-
lations and actual cost data.’’ 615 F.2d at 529–30 (internal quota-
tion marks omitted).
13
possibility is unlikely because price ‘‘would be only one of the
evaluation factors for award’’ of the new contract:
[I]t is important to remember that any Air Force recom-
petition for performance of KC–10 CLS for the option
years would be conducted as a best value source selec-
tion, where price/cost would be only one of the evaluation
factors for award, together with technical excellence and
past performance. Based on the procedures followed in
most of the other recent best value source selections
conducted TTT for [contractor logistical support] require-
ments, price/cost likely would be no more important an
evaluation factor than both technical excellence and past
performance. The fact that price/cost would not be the
controlling evaluation factor or even the most significant
evaluation factor in any such recompetition greatly re-
duces any potential competitive advantage a competitor
could gain through release of Boeing’s option year CLIN
prices and renders Boeing’s allegations of substantial
competitive harm in this regard largely unfounded.
Final Decision Letter, at J.A. 76. In response to the govern-
ment’s argument, McDonnell Douglas failed to show — or
even to try to show — that disclosure of its option prices
would enable competitors to submit bids at prices sufficiently
low as to offset the advantages appellant gains from the other
evaluation criteria.
My colleagues nonetheless dismiss the government’s argu-
ment on the ground that, because we previously rejected it in
McDonnell Douglas v. NASA as ‘‘too silly to do other than to
state it,’’ 180 F.3d at 306, we are bound to reject it again.
Op. at 8. But this is not the argument that we rejected in
NASA. And it is not silly at all.
The argument that we rejected in NASA was the agency’s
claim ‘‘that underbidding due to the disclosure would not
occur because price is only one of the many factors used by
the government in awarding contracts.’’ NASA, 180 F.3d at
372. It is indeed foolish to argue that, just because non-price
factors are also relevant, a competitor would not try to bid a
lower price than McDonnell Douglas. But the Air Force does
14
not make NASA’s argument here. The Air Force’s argument
is not that ‘‘underbidding TTT would not occur,’’ but that
underbidding is not likely to cause substantial harm — be-
cause competitors are not likely to be able to bid sufficiently
below McDonnell Douglas’ price to overcome appellant’s non-
price advantages. My colleagues render the two arguments
the same only by assuming that the NASA court did not
intend the word ‘‘underbidding’’ to have its ordinary meaning:
‘‘to bid less than (a competing bidder).’’ MERRIAM-WEBSTER’S
COLLEGIATE DICTIONARY 1287 (10th ed. 1996). Instead, they
insist that NASA intended the word to mean: ‘‘making a bid
more attractive overall, not with respect only to price, so it
will be chosen by the Government.’’ Op. at 9. Nothing in
NASA, however, supports this embellishment of the dic-
tionary definition.
Nor is there anything silly about the argument that non-
price factors make it unlikely that disclosure of McDonnell
Douglas’ option prices will permit competitors to defeat it in a
recompetition. As the opinion for the court acknowledges,
the Air Force’s Request for Proposals (RFP) lists six criteria
against which the government will evaluate bids — logistics,
maintenance/repair/modifications, management, safety/fire
protection, quality, and cost/price — and states that each ‘‘will
be weighted equally.’’ J.A. 179.12 The court’s opinion goes
on to discount the significance of this ‘‘best value’’ method of
contractor selection on the ground that, ‘‘[b]ecause price is
the only objective, or at least readily quantified, criterion
among the six criteria for awarding government contracts,
submitting the lowest price is surely the most straightforward
way for a competitor to show its bid is superior.’’ Op. at 9.
But whether or not low price is the most ‘‘straightforward’’
way to show superiority, the RFP makes clear that it will not
be enough. So, too, does the entity that will make the final
determination of superiority: The Air Force states in no
12 By contrast, there is no indication that the RFP at issue in
NASA contained such a provision, without which ‘‘equal’’ consider-
ation of non-price factors would not have been authorized. See 10
U.S.C. § 2305(a)(3)(A)(iii)(I)-(II).
15
uncertain terms — both as a matter of policy and of its
experience with ‘‘most of the other recent best value source
selections conducted’’ — that ‘‘price/cost would not be the
controlling evaluation factor or even the most significant
evaluation factor in any such recompetition.’’ Final Decision
Letter, at J.A. 76. And while the governing statute requires
the Air Force to consider price, 10 U.S.C. § 2305(a)(3)(A)(ii),
it also expressly authorizes the Air Force to do just what the
RFP and Final Decision Letter say it will do: consider non-
price factors as ‘‘approximately equal in importance to cost or
price.’’ Id. § 2305(a)(3)(A)(iii)(II).
That the Air Force would prefer other factors over price is
hardly surprising. The contract at issue here is not to supply
cafeteria food, but to service planes that ‘‘will be flown by
American military personnel on highly dangerous missions.’’
Air Force Br. at 23. One would hope that for such a contract,
considerations of safety, quality, and confidence in an incum-
bent contractor would at least be the equal of price. And as
we have just seen, one need not simply hope that were the
case: It says so right in the RFP. My colleagues are
therefore wrong to suggest that ‘‘[w]hether price will be but
one of several factors to be weighted equally in any future
RFP TTT is necessarily somewhat speculative.’’ Op. at 9.
The Air Force has made clear — in both its RFP and Final
Decision Letter — that price will be just such a factor, and
that is a determination we should not second-guess. See
CNA, 830 F.2d at 1155. Indeed, the only thing that is
speculative is whether, in light of the announced evaluation
criteria, a competitor would be likely to displace McDonnell
Douglas as the prime contractor even if it had the advantage
of seeing appellant’s option prices. In the absence of even a
proffer of evidence to support that conclusion, such specula-
tion is plainly insufficient to satisfy McDonnell Douglas’ bur-
den of proof. See Public Citizen, 704 F.2d at 1291.
In dismissing the government’s non-price factors argument
and failing to address its reverse-engineering contention, my
colleagues come perilously close to treating a contractor’s
claim of ‘‘underbidding’’ as a talisman that bars disclosure of
any line-item price — whether related to an option year or to
16
a base year. But as the author of NASA made clear, that is
an ‘‘overreading of our opinion,’’ which ‘‘did not’’ hold ‘‘that
government disclosure of line item pricing would invariably
violate the Trade Secrets Act.’’ McDonnell Douglas Corp. v.
NASA, No. 98–5251, slip op. at 2 (D.C. Cir. Oct. 6, 1999)
(Silberman, J., concurring in denial of rehearing en banc).
Because McDonnell Douglas has failed to show that disclo-
sure of option-year prices would violate the Act in this case, I
would affirm the decision of the Air Force.
III. Conclusion
For the foregoing reasons, I conclude that McDonnell
Douglas’ line-item and option-year prices fail to pass the
National Parks test for nondisclosure, and that we therefore
should respect the Air Force’s determination to release that
information. To return to the point I made at the start,
however, there remains the underlying question of whether
the National Parks test is properly applied to agreed-upon
prices (and at least exercised options) at all. That is an
important question because — although reverse-engineering
analysis applied under that test will often, as it does here,
permit disclosure of agreed-upon prices — application of
National Parks may bar disclosure of such prices in the very
situation in which the public interest in disclosure is at its
apogee.13
The archetypal case is that of the toilet seats that the Navy
purchased for $640 apiece in the early 1980s.14 Whether the
13 Although the FOIA requester in this case is a competitor of
McDonnell Douglas, the same test — and the same result — applies
when the requester is a watchdog organization dedicated to elimi-
nating government waste. See National Archives & Records Ad-
min. v. Favish, 124 S. Ct. 1570, 1580 (2004) (noting that the decision
to disclose ‘‘does not depend on the identity of the requester’’).
14See Mike Ward, It’s Your Information: How a Federal Law
Has Turned Citizens into Giant Slayers, AUSTIN AMERICAN–STATES-
MAN, Oct. 6, 1996, at H1 (noting that a FOIA request ‘‘uncovered the
now-famous case’’ of the Pentagon’s ‘‘buying of gilt-priced toilet
seats’’). Such examples are not limited to military procurements.
17
story is apocryphal or not,15 it serves to make the point:
assuming that a low wholesale price for such seats is well-
known, the only explanation for the high price paid by the
government is the company’s profit margin. And notwith-
standing that there would be a great public interest in
determining ‘‘what the[ ] government is up to’’ in paying such
a profit margin, Reporters Comm., 489 U.S. at 773,16 that is
precisely the case in which a ‘‘hard to reverse-engineer’’
argument would fail and disclosure would be barred under
National Parks.
This counter-intuitive result should cause us to think hard
about whether it makes sense to regard prices actually paid
by the government as trade secrets ‘‘of any person’’ under the
Trade Secrets Act, 18 U.S.C. § 1905, or as confidential com-
mercial or financial information ‘‘obtained from a person’’
under Exemption Four of FOIA, 5 U.S.C. § 552(b)(4). Cf.
RESTATEMENT OF TORTS § 757 cmt. b (1939) (excluding ‘‘the
amount or other terms of a secret bid for a contract’’ from the
definition of ‘‘trade secret’’); Public Citizen, 704 F.2d at 1291
n.30 (noting that ‘‘competitive harm in the FOIA context’’ is
limited to ‘‘harm flowing from the affirmative use of proprie-
tary information’’ by competitors) (emphasis added; internal
quotation marks omitted). It is indeed ‘‘passing strange’’ to
See, e.g., Justin Blum, Energy Contract Used to Repair D.C.
Schools; No–Bid Agreement Pays Utility Millions, WASH. POST,
Apr. 23, 2001, at A1 (noting that a FOIA request by the newspaper
revealed that the D.C. public school system was charged exorbitant
fees for cost-plus maintenance contracts).
15 See Lawrence J. Korb, Editorial, Toilet Seats: Defense Replies,
WASH. POST, Apr. 20, 1985, at A22 (stating that the $640 was for a
‘‘molded plastic cover for the entire lavatory,’’ not for each seat).
16 See Michael Weisskopf, Radical Retooling to Be Urged For
Pentagon Buying Machine: Commission Will Recommend Off-the-
Shelf Shopping, WASH. POST, Feb. 22, 1986, at A2 (reporting that
discovery of the $640 toilet seats led to recommendations for
significant reform of the procurement process); Wayne Biddle,
Price of Toilet Seat is Cut for Navy, N.Y. TIMES, Feb. 6, 1985, at
D15 (detailing the contractor’s decision to cut prices in response to
the controversy).
18
regard an agency’s agreement to expend a specified amount
of public funds as a corporate secret rather than a govern-
mental decision — a category that is not encompassed by
either statutory provision. National Parks, itself, did not
concern disclosure of prices agreed to by the government, but
rather of a firm’s internal financial information obtained in a
government audit. 498 F.2d at 770. And it is not at all
obvious that a test designed to evaluate the latter is appropri-
ate for the former. See Reporters Comm., 489 U.S. at 773
(holding that disclosure of ‘‘[o]fficial information that sheds
light on an agency’s performance of its statutory duties falls
squarely within [FOIA’s] statutory purpose’’). Moreover,
even if agreed-upon prices do fall within Exemption Four,
they may represent a case in which that exemption and the
Trade Secrets Act should not be regarded as coextensive —
and hence a case in which the government would have
discretion to permit disclosure.17
But these are questions for another day. The only ques-
tion for today, because it is the only question that the parties
have litigated, is whether McDonnell Douglas has satisfied its
burden of proving that the requested disclosures are likely to
cause substantial harm to its competitive position. Because I
conclude that appellant has failed to make that case for any of
the information that the government has decided to release, I
concur in my colleagues’ decision that the ‘‘over and above
work’’ prices may be disclosed, but respectfully dissent from
their determination that the vendor-pricing and option-year
line items may not.
17 Cf. Widnall, 57 F.3d at 1165 n.2 (noting that, although there
may be reasons to reconsider the circuit’s view that the two statutes
are coextensive, the Air Force did not seek reconsideration); cf.
also Chrysler Corp. v. Brown, 441 U.S. 281, 292–93 (1979) (explain-
ing that the ‘‘congressional concern’’ for the privacy interests of
government contractors and other private entities ‘‘was with the
agency’s need for confidentiality,’’ and that ‘‘FOIA by itself protects
the submitters’ interest in confidentiality only to the extent that this
interest is endorsed by the agency’’).