McDonnell Douglas Corp. v. United States Department of the Air Force

Notice: This opinion is subject to formal revision before publication in the

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before the bound volumes go to press.

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’’).