Case number: 98188
Case 98188. Tender-related records - records at issue including successful and unsuccessful tender documents - commercially sensitive information - sections 27(1)(b) and (c) - whether information given in confidence - section 26(1)(a) - whether disclosure would constitute a breach of an equitable duty of confidence - section 26(1)(b) - consideration of the public interest.
In this follow-up to Henry Ford & Sons Limited, Nissan Ireland, Motor Distributors Limited and the Office of Public Works, Case Number 98049, 2 OIC Dec. 144 (1999), the requester sought the remainder of the records relating to the tender competition for army vehicles. The Office of Public Works and the tenderers argued that the records at issue contained commercially sensitive information that was given in confidence.
The Commissioner found that the product and pricing information of both the successful and unsuccessful tenderers was commercially sensitive information that was given in confidence. However, he found that release of the successful tender documents would reveal no successful product or pricing information that was not already available from the Order Forms that had previously been released in the public interest.
The Commissioner accepted, on the other hand, that a mutual understanding of confidence existed in relation to the product and pricing information of the unsuccessful tenderers. He was satisfied that the four requirements of section 26(1)(a) were met with respect to this information. Applying the tests set out in Coco v. A. N. Clark (Engineers) Limited F.S. R. 415, he was also satisfied that disclosure would constitute a breach of an equitable duty of confidence and, subject to public interest considerations, was prohibited under section 26(1)(b). He was not satisfied that records merely identifying tenderers as unsuccessful were exempt from disclosure under either section 26 or section 27.
The Commissioner noted that, as a general rule, where the confidential or commercially sensitive information of a tenderer does not involve the expenditure of public money, the public interest lies in protecting that information from disclosure. In this case, he did not consider that disclosure of the product and pricing information of the unsuccessful tenderers would enhance the public interest in the openness and accountability of government to an extent sufficient to overcome the countervailing public interest in the proper preservation of confidences and the protection of commercially sensitive information.
The Commissioner varied the decision of the Office of Public Works and directed the release of the material in the records at issue which was not exempt under sections 26 and 27.
[1.] The background to this review is set out in my earlier decision in Henry Ford & Sons Limited, Nissan Ireland, Motor Distributors Limited and the Office of Public Works, Case Number 98049, 2 OIC Dec. 144 (1999). In brief, on 5 June 1998, Mr. Mark Henry of Policywatch made a request under the Freedom of Information Act, 1997 ("the FOI Act"), to the Office of Public Works (OPW) to view all information and documentation relating to the tender competition for army vehicles (T/0747). The tender was for the supply of fifty 3/4 ton trucks, ten trucks (troop carrying vehicles), four midibuses, and ten minibuses. Following consultation with the Defence Forces as well as the successful and unsuccessful tenderers in each of the four categories, OPW granted Mr. Henry's request in part by deciding to release two letters from the Defence Forces and the relevant Order Forms containing the name of each respective successful tenderer, the tender price, and the number and type of vehicle involved. At my suggestion, OPW later clarified that it had decided to refuse to grant access to the tender documents for both the successful and unsuccessful tenders and to any other documents or information which would identify the unsuccessful tenders or their prices. I note that, although the release of the names of the unsuccessful tenderers is an issue in this case, five of the unsuccessful tenderers (Renault, Citroen, Iveco, Mitsubishi, DAF, and Toyota) were in fact identified, without complaint, in my earlier decision.
[2.] Three of the four successful tenderers appealed to me against the OPW decision. In my earlier decision, I dealt with the three appeals together. I found that the tender prices qualified as commercially sensitive information for the purposes of sections 27(1)(b) and (c) of the FOI Act, but that the advantages in terms of openness and accountability of disclosing the tender prices outweighed the possible harm to the tenderers and the tender process. I therefore concluded the information should be released in the public interest. My decision was appealed to the High Court by Motor Distributors Limited, but the appeal was subsequently withdrawn.
[3.] Meanwhile, Mr Henry applied for a review of OPW's decision to refuse to grant full access to the tender documentation. His application for review was accepted on 7 December 1998.
[4.] In this decision, I address the question of whether OPW was justified in refusing to grant access to the remainder of the records relating to the tender competition T/0747. These records are categorised as follows, using the numbering system adopted by OPW:
OPW refused access to these records on the ground that they contained commercially sensitive information that was given in confidence and thus were exempt under sections 26 and 27 of the FOI Act.
[5.] In the course of this review, my Office wrote to all the parties to invite submissions. After the issuance of my decision in Case Number 98049, my Office wrote again to Mr. Henry and the tenderers to propose a settlement based on the partial release of records relating to the tender process and its evaluation. More specifically, it was proposed to release the names and prices of the unsuccessful tenderers, disassociated to preclude identification, as well as sufficient material to show the kind of goods offered by each tenderer and the basis on which the contracts were awarded. It was felt that this proposal would adequately address the point raised by the requester that ensuring that value for money was achieved would require an examination of records detailing the goods and services offered by all the tenderers, in order to compare the service accepted with that which was on offer from unsuccessful suppliers. However, the settlement proposal was not agreed to by the parties.
[6.] My Office also contacted OPW again to request updated information about the tender process in this case and in general. OPW's reply will be summarised below.
[7.] Initial submissions were received from the four successful tenderers, including one who was unsuccessful with respect to two of the vehicles tendered for, as well as from three of the other unsuccessful tenderers, all of whom were identified in my earlier decision. Further submissions were received from three of the parties in response to the settlement proposal: the requester, Motor Distributors Limited, and one of the unsuccessful tenderers. Although it had not been notified of the settlement proposal, OPW also made a submission subsequent to my decision in Case Number 98049. In summarising the submissions below, I have attempted to avoid unnecessary repetition of the arguments addressed in my earlier decision and have focused instead on the records at issue in this case. In addition, I have treated the arguments presented in this case by the tenderers who made initial submissions as generally representative of the position of the other tenderers in their respective categories (successful; unsuccessful). I note at the outset that both the successful and unsuccessful tenderers consistently stressed that they regard the documents and information at issue as confidential.
[8.] The requester considers the disassociated lists proposed by my Office to be inadequate to address his concerns in relation to the evaluative process. He indicates that in response to similar requests he has made to other public bodies, he has been supplied with associated lists of the names and prices of unsuccessful tenderers. Therefore, in the requester's view, to accept the settlement proposal "would be clearly regressive in terms of freedom of information". The requester also emphasises that it is important that I make a formal decision in this matter.
[9.] The successful tenderers oppose the release of their tender documents on the ground that the documents would reveal commercially sensitive information relating to the method of calculating their prices. It is also argued that the release of their tender documents would not further the public interest in preventing the waste and misuse of public funds.
[10.] Additional public interest arguments were presented by Motor Distributors Limited following the settlement proposal. It stated, in passing, that "it is somewhat unreal and arbitrary to draw a distinction between successful and unsuccessful tenders." While it is unclear what it meant by this statement, I construe it as an argument that, if information about successful tenderers is released, equity requires the release of similar information about the unsuccessful tenderers. On the other hand, the company continued to argue, as it did in Case Number 98049, that the systematic release of confidential information after a tender competition would irreparably damage the tendering process, because suppliers would be unwilling to subject their information to "unnecessary dissemination." In an apparent follow-up to the argument it made in Case Number 98049 regarding the adequacy of existing safeguards, the company noted that the disclosure of confidential information is not considered necessary under European Union (EU) Directive 92/50/EEC to ensure "appropriate levels of competition" in the area of public procurement. It also pointed out that Contracting Authorities are expressly permitted to refuse to agree to publication of such information under Article 16 of the Directive. Moreover, the company indicated that consideration by this Office of the requester's alleged concerns over ensuring value for money was inappropriate under section 8(4) of the FOI Act, which mandates that the reasons for a request be disregarded.
[11.] The unsuccessful tenderers stated the release of their tenders would reveal the following information, which in one case is purportedly regarded as a trade secret: preferential pricing, which would possibly disclose the cost base and competitiveness of the companies; details of available specifications and enhancements; and special conditions such as the ability to provide the required modifications. They contended that the disclosure of such information would put them at a competitive disadvantage that would outweigh the benefits to be gained from tendering. It is even suggested that a decision in favour of disclosure would result in a "massive volume of requests" for information from companies seeking a commercial advantage over their competitors. Accordingly, companies would be deterred from tendering effectively or at all, which would result in a less competitive tendering process. The unsuccessful tenderer who made a further submission also argued that the practice in other jurisdictions, which I enquired into in Case Number 98049, does not present a good model for Ireland, where "the market is smaller, the number of participants less, conditions of competition more extreme and the possibility of adverse consequences from disclosure all the greater."
[12.] The unsuccessful tenderer who responded to the settlement proposal did not argue against the release of its name as a tenderer, in and of itself, but contended that any efforts to disassociate other information from identity would not be effective. "Even if extensive measures are taken to disassociate certain information from the identity of the tenderer, competitors and third parties may be able to 'fill in the gaps' and identify the tenderers to which the information relates." The company also stated:
"In no case, will information be truly historic. Tenders are made on the basis of a combination of circumstances including the cost base of the tenderer, its financial position and other considerations. Perhaps the most effective insight into a company's competitiveness and financial performance is its approach to tendering. Although it can be argued that the information relates to only a single transaction, i.e. being the specific contract, the subject matter of the tender, the reality is that any single tender will give significant information concerning the tender policy of a particular company and its basis of arriving at quoted prices. It is true that disclosure of such information might not necessarily be as directly and immediately prejudicial as the disclosure of a secret process, but this does not deny that commercial loss and damage will arise as a result of disclosure."
[13.] It is also argued, in essence, that there is no public interest in the disclosure of commercially sensitive information relating to the unsuccessful tenderers that would offset the harm that would result. In the further submission, the company expanded on this point, arguing that the public interest I found in Case Number 98049 in ensuring maximum openness in relation to the use of public funds has no application to a tenderer who has been unsuccessful. The company noted:
"If or when the terms of the successful tender have been disclosed either in response to a Freedom of Information Notice or otherwise, the unsuccessful tenderer will have the option of comparing its own tender and would then be in a position to highlight any apparent unfairness or lack of balance in the assessment. For example, if the terms of the tenderer were substantially more competitive than those of the successful tenderer then this would invite enquiry."
[14.] The company also took issue with my finding in Case Number 98049 that there is a public interest in requesters availing of their rights under the FOI Act. According to the company, "the requester must first establish its rights under the Act before such rights can be regarded as being 'in the public interest'." The position I took in Case Number 98049 is described as being "fundamentally flawed", because "the conclusion of the public interest in the requester availing of its rights assumes the answer to the question that is being posed." In the company's view, Mr. Henry has failed to support his request with any "legitimate public interest argument in favour of disclosure", which leads to the conclusion that the request is "based on pure commercial curiosity."
[15.] OPW initially maintained that the names and prices of the unsuccessful tenderers and other details contained in the documents at issue were obtained in confidence and are commercially sensitive. OPW explained that the Government Supplies Agency (GSA), which is the Division of OPW with responsibility for managing the procurement of consumable supplies and services, has a policy of upholding the confidentiality of the tendering process at all times. OPW argued that violating this policy with respect to the unsuccessful tenderers and any of the tender documents would ultimately be harmful to the public policy because of the manner in which it would adversely affect its ability to conduct future tenders.
[16.] According to OPW, potential bidders would be discouraged from participating in the tendering process if their commercially sensitive information on prices and pricing strategies, such as the composition of overall bids and innovative solutions to customer needs, could be disclosed without even the benefit of being awarded the contract. In addition, suppliers would be unwilling to risk the adverse publicity which would be incurred in the frequent cases in which the lowest tender is rejected. Consequently, the tendering process would become less competitive, which would lead to higher public expenditure.
[17.] With respect to this particular competition, OPW stated:
The type of vehicles tendered for in this case are ones which we purchase regularly for a number of clients and the specifications supplied with the tender documents are in line with standard specifications for these classes of vehicles. At present companies feel free to offer our clients such things as optional extras at no extra cost, extended warranty periods, basic prices significantly lower than those available to the general public, etc., in the knowledge that their competitors will not obtain such data and, therefore, have an unfair advantage in any future competitions.
OPW accepted, nevertheless, that it was in the public interest to disclose a limited amount of information, i.e. the name of the successful tenderer and the contract price.
[18.] More recently, OPW confirmed that it has no objection to the release of the blank tender documents, including the vehicle specifications, which were available at the time of the competition to anyone requesting them. OPW also explained that it is now standard practice to give a statement of reasons to unsuccessful tenderers as to why their tender was not successful and to provide an opportunity for further de-briefing if desired, but that no such statements were given in this case. Lastly, OPW advised that in dealing with recent tender-related FOI requests, it has provided disassociated lists of tenderers and prices, but no formal policy on the matter has been promulgated.
[19.] Section 26(1) states that "Subject to the provisions of this section, a head shall refuse to grant a request under section 7 if-
(a) the record concerned contains information given to the public body concerned in confidence and on the understanding that it would be treated by it as confidential (including such information as aforesaid that a person was required by law, or could have been required by the body pursuant to law, to give to the body) and, in the opinion of the head, its disclosure would be likely to prejudice the giving to the body of further similar information from the same person or other persons and it is of importance to the body that such further similar information as aforesaid should continue to be given to the body, or (b) disclosure of the information concerned would constitute a breach of a duty of confidence provided for by a provision of an agreement or enactment (other than a provision specified in column (3) of the Third Schedule of an enactment specified in that Schedule) or otherwise by law".
[20.] In my earlier decision, I outlined the requirements of section 26(1) of the FOI Act. With respect to section 26(1)(b), I found no evidence that disclosure would breach a duty of confidence imposed by an agreement or enactment. I accepted that a breach of an equitable duty of confidence is comprehended by section 26(1)(b) and that the correct tests to apply are set out in the case of Coco v. A. N. Clark (Engineers) Limited F.S. R. 415. The tests require that: (1) the information has the necessary quality of confidence about it; (2) the information was imparted in circumstances imposing an obligation of confidence; (3) there is an unauthorised use of that information to the detriment of the party communicating it. Applying these tests, I accepted that the tender price had the necessary quality of confidence about it at the time the tender was entered. I noted, however, that once the contracts were awarded, the relationship between the parties became that of vendor/purchaser in which there is no general expectation that prices will be kept secret. I therefore did not accept that the price, as opposed to the method of computing the price, was imparted in circumstances imposing an obligation of confidence. It followed that the question of unauthorised use of the information did not arise.
[21.] In considering the provisions of section 26(1)(a), I found that while the tender prices were given to the OPW in confidence, no evidence had been presented of a mutual understanding that the information would be treated as confidential. With respect to the third requirement of section 26(1)(a), I looked to the practice in other jurisdictions, where tender systems which involve price disclosure have been found practicable. I therefore was not persuaded that price disclosure would be likely to result in commercial enterprises refusing to tender in this country. Although not mentioned in my earlier decision, I should also add that the Order Forms released in Case Number 98049 were created and completed by OPW, not the tenderers; therefore, the exemption at section 26(1)(a) was inapplicable in the first instance (section 26(2) refers).
[22.] Since my decision, it has come to my attention that Government guidelines on the award of public sector contracts were published in a document entitled Guidelines on Public Procurement (1994 Edition), otherwise known as the "Green Book". Paragraph 5.9 of the Guidelines provides:
"5.9 Confidentiality of all Tenders Tenders and all information relating to the processing of them should be treated as strictly confidential, subject to the particular procedures of the Contracting Authority. They remain confidential even after the contract is awarded."
[23.] I view paragraph 5.9 of the Guidelines as providing a general statement of the policy of confidentiality which existed in the area of public procurement prior to the enactment of the FOI Act. Even then, it did not amount to a total or absolute prohibition on the disclosure of information. For instance, contracts over certain specified financial thresholds are governed by EU Directives, which have been implemented into Irish law through statutory instruments. The relevant Directive in this case is 93/36/EEC, which governs the supply of goods. Directive 92/50/EEC, which is cited by Motor Distributors Limited in its submission, governs public service contracts. Article 9(3) of Directive 93/36/EEC:
"Contracting authorities who have awarded a contract shall make known the result by means of a notice. However, certain information on the contract award may, in certain cases, not be published where release of such information would impede law enforcement or otherwise be contrary to the public interest, or would prejudice the legitimate commercial interests of particular enterprises, public or private, or might prejudice fair competition between suppliers."
[24.] In addition, Article 9(4) of the Directive states, "The notices shall be drawn up in accordance with the models given in Annex IV and shall specify the information requested in those models." Annex IV, in turns, provides that a contract award notice should include the following information:
The Directive also specifies at Article 6 that the contract award notice "shall be published in full in the Official Journal of the European Communities and in the TED [Tenders Electronic Daily] data bank in the official languages of the Communities, the text in the original language alone being authentic."
[25.] The EU requirements on post-award notices are referenced in the Green Book at paragraph 6.11:
"6.11 Post-award Notices Information on the award of a contract must be notified to the Commission not more than 48 calendar days after the award of the contract in question. These Notices must be set out in accordance with the models in the Directives.
Unsuccessful candidates, if they seek the reason for their non-acceptance, must be given that information."
Thus, even prior to FOI, pricing information was subject to disclosure pursuant to EU law.
[26.] Following the enactment of the FOI Act, the Central Policy Unit (CPU) of the Department of Finance published its Notice No. 9 on FOI & Public Procurement, which advises that, "With the advent of the Freedom of Information Act, public bodies will not be able to give guarantees of confidentiality which have previously featured in public procurement." In relation to the question of disclosure of successful tender prices, the notice advises that "[t]his is a matter for each [public body] to determine in relation to each individual product or service, having regard to the requirements of the FOI Act." It points out, however, that "[p]ractice abroad favours release of the successful tender price in most cases."
[27.] In its Freedom of Information, 1997 Guide, which was first published in April 1998, OPW states that it "undertakes to continue to treat confidentially all commercially sensitive information supplied by a person or company." The Guide also advises providers of information to identify any other information "which should not be disclosed because of its sensitivity". However, the Guide does not explain what OPW considers to be commercially sensitive information or what other classes of information could be "sensitive". In any event, as I stated in my earlier decision, "one would have to question, having regard to the coming into force of the Freedom of Information Act, how any public body could have an understanding that the details of its expenditure of public money would be kept confidential."
[28.] In the circumstances, I do not regard paragraph 5.9 of the Guidelines as a basis for reconsidering my earlier decision with respect to the successful tender prices. Nevertheless, I find that, while subject to the provisions of the FOI Act, it supports the claim that there is an obligation or mutual understanding of confidence in relation to certain tender documents which would reveal more than the price or prices paid for goods or services. For instance, information about such matters as a tenderer's pricing strategy has more to do with the company's own business than with the expenditure of public money. Moreover, while there may be no general expectation that a purchaser will keep secret the price paid for goods or services, a purchaser does not ordinarily have access to the type of detailed information about the vendor's business, or possibly even the goods or services supplied, that may be given to a public body in the course of a tender competition.
[29.] Section 27 of the FOI Act provides protection for three different classes of commercially sensitive information as follows:
"27.-(1) Subject to subsection (2), a head shall refuse to grant a request under section 7 if the record concerned contains-
a) trade secrets of a person other than the requester concerned,
b) financial commercial, scientific or technical or other information whose disclosure could reasonably be expected to result in a material financial loss or gain to the person to whom the information relates, or could prejudice the competitive position of that person in the conduct of his or her profession or business or otherwise in his or her occupation, or
c) information whose disclosure could prejudice the conduct or outcome of contractual or other negotiations of the person to whom the information relates."
[30.] In Case Number 98049, I explained my approach to determining whether information qualifies as a trade secret of a person within the meaning of section 27(1)(a) of the FOI Act. I considered the following factors relevant to the determination: (1) the extent to which the information is known outside of the business concerned; (2) the extent to which it is known by employees and others involved in the business; (3) the extent of measures taken by the business to guard the secrecy of the information; (4) the value of the information to the business and to its competitors; (5) the amount of effort or money expended by the business in developing the information; (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. I also accepted that a trade secret is information used in the trade or business which, if disclosed to a competitor, would be liable to cause real (or significant) harm to the owner of the secret and that the owner must limit the dissemination of it or at least not encourage or permit widespread publication.
[31.] Applying these principles, I found that a strong case could be made that tender prices were trade secrets during the currency of a tender competition, but that only in exceptional circumstances would historic prices remain trade secrets. Accordingly, I concluded that the successful tender prices at issue did not qualify for exemption under section 27(1)(a). For the sake of clarity, however, I should add that I accept, as a general proposition, that tender documents which would reveal detailed information about a company's current pricing strategy or otherwise unavailable product information could fall within the scope of section 27(1)(a) even following the conclusion of a tender competition.
[32.] As noted at the outset of this decision, I found in Case Number 98049 that the successful tender prices did qualify as commercially sensitive information for the purposes of sections 27(1)(b) and (c) of the FOI Act. I accepted that, insofar as the prices were preferential to the Government, their disclosure could disrupt business relationships with other customers and thus prejudice the competitive position of the successful tenderers. I also accepted that the disclosure of such preferential prices could prejudice the conduct and outcome of negotiations.
[33.] Although not discussed in my earlier decision, I further note that it is possible for a company's pricing strategy to be deduced through price disclosure alone in exceptional circumstances. For example, in the case of Raytheon Company v. Department of the Navy, No. 89-2481, 1989 U.S. Dist. LEXIS 18281 (D.D.C. Dec. 22, 1989), the United States District Court for the District of Columbia found that the bottom-line prices of an unsuccessful tenderer fell within the scope of the exemption under the United States Freedom of Information Act (FOIA) which corresponds to section 27(1)(b) of the Irish FOI Act, and that the disclosure of this pricing information would also violate the United States Trade Secrets Act. The facts of the case, however, were unusual. The tender was for a contract to develop a missile system and included four years' worth of contract options. The parties did not dispute that the release of pricing strategies would cause substantial harm to a firm's competitive position by enabling competitors to underbid in future competitions, but the issue was whether the release of Raytheon's bottom-line prices "would be tantamount to revealing its pricing strategy."
[34.] The court observed that where pricing information is not very specific or detailed, it generally has not been found to qualify for exemption under FOIA because, for instance, of the numerous "'unascertainable variables'" involved. However, Raytheon submitted a sworn affidavit setting forth a detailed description of how a competitor could use its contract and option prices to derive "substantially valid", albeit "imperfect" estimations of the underlying components and thus its pricing strategy. The court found this evidence persuasive and rejected the Navy's arguments regarding potential changes in the components. The court stated:
"Changes in variables are expected and predicted as part of the estimation process. Those within the defence contracting industry know industry practice and costs where these variables are concerned. With these five figures in hand, Raytheon's competitors could deduce damaging information about Raytheon's pricing strategy and other confidential information essential to maintaining a competitive position in the market for missile contracts."
[35.] While I accept the possibility that tender prices could be used to derive damaging information about a company's pricing strategy, I would expect any person objecting to price disclosure on this basis to explain exactly how this could occur.
[36.] As in the United States, in tender-related cases in other jurisdictions, it is usually more detailed information that is found to be exempt from disclosure under provisions corresponding to section 27(1)(b) of the FOI Act. For instance, in Maddock, Lonie & Chisholm and Department of State Services, Re  WAICmr 15 (2 June 1995), the Western Australian Information Commissioner decided on a request for tender documents that had been submitted by two unsuccessful tenderers. The requested documents were described as including the following information: "the names of the unsuccessful tenderers, the prices quoted by the unsuccessful tenderers, detailed analyses of the manner in which the tender prices were calculated, detailed analyses of the systems and equipment proposed by the unsuccessful tenderers and the specific proposals and processes of how that equipment would be used." Neither of the unsuccessful tenderers objected to the release of its name, but the remainder of the information was in dispute. With respect to the pricing information, one of the tenderers submitted that its "prices and pricing structure convey critical information about the company's margins, costs and approach to tendering." The Commissioner did not accept that the names of and the prices offered by the unsuccessful tenderers were exempt from release. However, she was satisfied that the remainder of the information, including "the detailed descriptions of the manner in which the tender prices were calculated, the detailed descriptions of the systems and equipment proposed by the unsuccessful tenderers and the specific proposals and processes of how that equipment would be used", if disclosed, "could reasonably be expected to have an adverse effect on the business, commercial and financial affairs of [the tenderers] by reducing their competitiveness in any future tender process."
[37.] I also note that in the case of Ontario Hydro, Information and Privacy Commissioner, Ontario, Order P-367, Nov. 16, 1992, evidence was submitted to show that the tender documents at issue, which included the units costs, would provide detailed information about the pricing structures of the tenderers. In addition, one of the companies submitted that its proposal was "basically a 'how-to' manual for the design and successful implementation of a contract." In light of the evidence submitted, the Information and Privacy Commissioner was satisfied that the disclosure of the tender documents could reasonably be expected to significantly prejudice the competitive position of the companies still in existence.
[38.] On the other hand, in Byrne v. Swan Hill Rural City Council  VCAT 666 (31 March 2000), the Victorian Civil and Administrative Tribunal rejected a claim by a successful tenderer that the company's tender in its entirety was exempt from disclosure, including the cover letter that accompanied the tender. M.F. Macnamara, Deputy President, who delivered the opinion of the Tribunal, described the cover letter as "innocuous". Deputy President Macnamara further observed:
"In so far as the presentation describes the virtues of [the tenderer] in a general sense, it is self-serving marketing material. Whilst I acknowledge that I may not be fully attuned to the detection of a marketing strategy underlying such material, I detect nothing which is so arcane that its revelation to the world would disadvantage [the tenderer]."
[39.] The Tribunal decided that the remainder of the successful tender should also be released. It should be noted, however, that the relevant exemption in the Victoria FOI Act applies where "the disclosure of the information would be likely to expose the undertaking unreasonably to disadvantage." In the particular circumstances of the case, the Tribunal found that the successful tenderer would be disadvantaged by the release of its tender in full, but was not satisfied that the disadvantage would be unreasonable.
[40.] Notwithstanding my general comments above, I must emphasise that each record relating to a tender competition must be examined on its own merits. For instance, while a cover letter may generally serve as a marketing tool, it may in some cases also reveal strategic information about the company's approach to tendering or, as in Ontario Hydro, represent a "how-to" manual for the design and implementation of a contract. In determining whether the particular records at issue before me in this case, or any parts thereof, have been correctly exempted under the FOI Act, I am mindful that OPW's decision to refuse Mr. Henry's request is presumed not to have been justified unless it is shown otherwise to my satisfaction (section 34(12)(b) refers).
[41.] The essence of the arguments put to me by OPW and the tenderers is that the records at issue contain commercially sensitive information that was given in confidence. In other words, as reflected by OPW's statement of policy with regard to confidentiality and FOI, which is quoted above, the reason why the information is accorded confidential treatment is because it is, or at least is perceived to be, commercially sensitive information. As the claimed exemptions are thus intertwined in this case, I do not consider it meaningful to analyse each record at issue in relation to the specific provisions of section 26 and 27 in isolation. I will instead discuss the records generally under the category into which they fall.
[42.] Blank tender forms were issued to the tenderers by OPW. As issued, the forms consisted of an invitation to tender, a schedule listing the items tendered for, and the general specifications required. To complete the forms, the tenderers needed only to fill in the relevant prices and the actual date at which the quotations would expire, the country of manufacture, the period of delivery, and to indicate any deviation from the specifications. Three of the successful tenders were accompanied by letters. The fourth successful tender indicated a deviation from the specifications on the schedule and also offered an optional extra that was declined by OPW.
[43.] As stated above, the Order Forms released pursuant to my decision in Case Number 98049 disclosed not only the tender prices, but also the numbers and the types of vehicles involved. From my examination of the related tender documents, I do not see, but for two exceptions, that their release would disclose any further information of the kind which any of the parties contend is either confidential or commercially sensitive. The first exception is record number 61, which identifies one of the successful tenderers as an unsuccessful tenderer with respect to two of the vehicles tendered for. The second is record number 145, which provides the description and price of the optional extra that OPW declined to purchase. The tender documents otherwise include product information, a cover letter giving information about the business of one of the tenderers, and pricing information.
[44.] The tender documents provide some detailed information regarding the specifications of the vehicles supplied. I accept that this type of product information can qualify as commercially sensitive information under section 27(1)(b) in certain circumstances. Where a tender competition is held regularly, a competitor could gain commercial advantage from the disclosure of the product information provided by a tenderer in one competition by using that information to outbid the tenderer in other similar competitions, for instance, by offering higher specifications or better optional extras.
[45.] According to OPW, a tender competition for the kind of vehicles involved in this case is held almost annually. However, the vehicle models of the successful tenderers have already been disclosed through the release of the Order Forms in Case Number 98049. None of the parties argued in that case that the vehicle models should be exempt from disclosure, nor could such an argument reasonably have been made. Only in extraordinary circumstances involving, for instance, a matter of security or defence, is it likely that secrecy would attach to the type of product purchased from a vendor. The EU Directive recognises this in Annex IV by providing that a contract award notice should include the "nature and quantity of goods supplied, where applicable, by supplier". Moreover, it is self-evident that the public interest in openness and accountability in relation to the expenditure of public money requires the disclosure of information as to what the money was spent on.
[46.] Neither OPW nor any of the successful tenderers has shown that once the vehicle models are known, the information on the specifications could not be obtained simply by contacting a registered dealer or any other purchaser of the same type of vehicle. OPW admitted during the review in Case Number 98049 that the vehicles were not manufactured especially for the Army. Therefore, in light of the disclosure of the vehicle models, I am not satisfied that the information on the specifications is exempt under section 26 or section 27 of the FOI Act.
[47.] The cover letter with one of the tenders gives the name of a local sub-contractor and details about such matters as the tenderer's market share, experience, and number of employees. However, as in the Byrne case, this letter appears simply to be in the nature of a self-serving marketing pitch. While the tenderer made an initial submission in which it raised a general objection to "the release of any further material relating to [its] tender", no specific arguments have been presented to show how the release of the cover letter would result in the disclosure of confidential or commercially sensitive information.
[48.] The focus of the submissions regarding the successful tender documents is on the pricing information that would be disclosed in the event of release. However, unlike the case of Maddock, Lonie & Chisholm, discussed above, no case has been made that this pricing information would disclose the respective tenderer's margins, costs, or approach to tendering. In fact, with the exception of the price of the optional extra that OPW declined to purchase, the tender documents provide no pricing information that is not available from the Order Forms already released. The tender documents simply specify the price of each vehicle, the VAT and VRT content, and the total delivered price inclusive of VAT and VRT. Accordingly, I find that records number 60, 66-67, 75-82, 137-144, 146-148, 151-153 should be released in full.
[49.] The information about the optional extra, on the other hand, needs further consideration. Like the identification of one of the successful tenderers as an unsuccessful tenderer, the offer of the optional extra is in a sense an unsuccessful aspect of an otherwise successful tender. I will therefore address the question of the release of records number 61 and 145 below.
[50.] As with the successful tender documents, release of the unsuccessful tender documents would disclose information as to identity and the prices and details of the products offered. I will first address the unsuccessful pricing and product information.
Unsuccessful Pricing and Product Information
[51.] Only one of the unsuccessful tenderers has argued that its tender documents would reveal a trade secret. However, the unsuccessful tenderer has made no effort to show how any of the information would qualify as a trade secret in light of the principles enunciated in Case Number 98049. I therefore am not satisfied that section 27(1)(a) is applicable.
[52.] However, my reasons for finding in Case Number 98049 that the prices of the successful tenderers qualified as commercially sensitive information for the purposes of sections 27(1)(b) and (c) of the FOI Act apply equally to the prices of the unsuccessful tenderers and also to the price tendered for the unpurchased optional extra offered by one of the successful tenderers. The product information of the unsuccessful tenderers, i.e. vehicle models, details of the specifications, and any optional extras or special conditions offered, is also commercially sensitive for the reasons discussed above. Thus, I accept that disclosure of pricing and product information could be detrimental to the successful and unsuccessful tenderers alike.
[53.] There are two crucial differences between successful and unsuccessful tenderers, however. The first difference is in relation to their expectations of confidentiality. The second relates to the benefits that are gained from tendering.
[54.] Where an offer has been rejected, no vendor/purchaser relationship exists, and no public funds are involved. Having regard to the terms of paragraph 5.9 of the Guidelines, as discussed above, I find that it is reasonable in this situation for a tenderer to expect that the terms of the offer will remain confidential. In other words, I accept that there is a mutual understanding of confidence that OPW is obliged to observe.
[55.] I should note that I do not accept that a tender system which involves price disclosure even with respect to unsuccessful tenders would necessarily collapse. For instance, it is apparent from the policy document of the Queensland Administrative Services which I referred to in my decision in Case Number 98049 that the names and total prices of all tenderers are subject to disclosure after opening even when the tenders are not opened publicly. In addition, the case of Maddock, Lonie & Chisholm shows that the names and the prices of unsuccessful tenderers are not generally considered exempt in Western Australia. Moreover, in the case of City of Oshawa, Information and Privacy Commissioner, Ontario, Order M-531, May 18, 1995, the Information and Privacy Commissioner noted that a City by-law allowed for the disclosure of the total prices of public tenders. As price disclosure has apparently been found practicable in localities in Australia and Canada, I do not see why a similar system would be unworkable in Ireland. However, this is not to say that a change in the system would not cause some prejudice to the supply of information to public bodies such as OPW.
[56.] Whereas it can be argued that any harm or detriment which may result from the disclosure of pricing or product information in the event of a successful tender would be counterbalanced by the benefits of being awarded the contract, this is not true with respect to an unsuccessful tender. Unlike a successful tenderer, a tenderer whose offer has been rejected gains little or nothing in return for the costs involved in making the offer, which include the time and effort it takes to prepare the offer. I therefore accept that a tender system which would potentially add to those costs by disclosing commercially sensitive information regardless of success would be likely to deter at least some companies from tendering for particular contracts.
[57.] I also accept that it is important to OPW that participation in the tendering process be maximised, not only with respect to the number of tenderers but also the types of offers that are made. OPW awarded the contracts in this case applying the principle of the most economically advantageous tender (MEAT) rather than the lowest suitable tender (LST). As explained in paragraph 5.14 of the Guidelines, the MEAT principle means that "factors such as period for completion, maintenance costs, technical merit, cost effectiveness etc., may be taken into account if particular circumstances warrant it". Thus, even an optional extra that was not requested in the invitation to tender may be significant in terms of one or more of the MEAT criteria.
[58.] In the circumstances, I am satisfied that the four requirements of section 26(1)(a) of the FOI Act are met with respect to the unsuccessful pricing and product information of the tenderers. Applying the tests set out in Coco v. A. N. Clark (Engineers) Limited F.S. R. 415, which are outlined above, I am also satisfied that disclosure of the unsuccessful pricing and product information of the tenderers would constitute a breach of an equitable duty of confidence and, subject to public interest considerations, is prohibited under section 26(1)(b) of the FOI Act.
[59.] I consider the names of the unsuccessful tenderers disassociated from their prices to be a different matter. In my view, none of the parties has adequately explained how the mere identification of a tenderer as having been unsuccessful in a tender competition of this kind would be likely to deter a company from participating in the tendering process or could be detrimental to the company. I note that it is not difficult to establish the detriment required under the third Coco test. As the Queensland Information Commissioner observed in the case of "B" and the Brisbane North Regional Health Authority (1994) 1 QAR 279, at paragraph 111:
"[I]t is not necessary to establish that threatened disclosure will cause detriment in a pecuniary sense: 'detriment can be as ephemeral as embarrassment ... a loss of privacy or fear ... and indirect detriment, for example, the confidential information may gravely injure some relation or friend.'"
[60.] I further note that the standard of proof necessary to establish the requisite prejudice under section 27(1)(b) or (c) with respect to a company's competitive position or the conduct or outcome of its negotiations is low. The test is not whether the harm is certain to materialise, but whether it might do so.
[61.] Nevertheless, for either section 26 or section 27 to apply, I must be satisfied of at least the possibility of some tangible form of detriment or harm occurring as a result of the disclosure. The only argument put to me regarding the disclosure of the names of the unsuccessful tenderers is that a company would be the subject of adverse publicity in cases where its tender was the lowest but was nevertheless rejected. The possibility of such harm occurring is conceivable in a situation in which the main criterion for the award of the contract was lowest price. The rejection of the lowest tender in a competition applying the LST principle would suggest that the tenderer was unsuitable with respect to "such items as capacity, organisation, experience, performance on previous contracts, financial standing relative to the contract and compliance with any specifications or quality standards laid down for the contract" (paragraph 5.14 of the Guidelines refers).
[62.] However, OPW has indicated that the lowest tender is frequently rejected, which indicates that the MEAT principle is more commonly applied. Where, as in this case, the MEAT principle is applied, the rejection of the lowest tender may simply indicate that the tender was not considered to be the most economically advantageous when all of the award criteria were taken into account. In any event, in light of its recent practice with respect to tender-related FOI requests, OPW itself seems to acknowledge that the danger of adverse publicity could generally be avoided by simply disassociating the names from the prices.
[63.] In short, I am not satisfied that records merely identifying the tenderers as unsuccessful are exempt from disclosure. Accordingly, records number 58-59, 61, 83, 87-90, 93-96, 98, 101-105, 107-110, 112, 116, 121-122, 125-128 should be released in full. These records include the general specifications issued by OPW and resubmitted by the tenderers.
The Public Interest
[64.] As I find that the release of the remainder of the unsuccessful tender documents is prohibited under section 26(1)(b), it is not necessary for me to consider section 26(3), which provides for a public interest test in relation to section 26(1)(a). I have noted in other cases, however, that the existence of an equitable duty of confidence is still subject to consideration of the public interest. In that context, I note that, as a general rule, where the confidential or commercially sensitive information of a tenderer does not involve the expenditure of public money, the public interest lies in protecting that information from disclosure. As the court in the case of Raytheon stated:
"The public interest in having access to [bid prices for unawarded contracts] is slight [in that it] reveals little about government operations or expenditures. Policy considerations favoring disclosure do not apply in these circumstances."
In addition, Deputy President Macnamara was unable to find any "convincing public interest" to override the exemptions he upheld with respect to the unsuccessful tender documents at issue in the Byrne case despite evidence of public disquiet about the manner in which the tender process had been conducted.
[65.] In Dalrymple Shire Council and Department of Main Roads (1998) 4 QAR 474, the Queensland Information Commissioner found that even the disclosure of the unit rates of the successful tenderer would not, on balance, be in the public interest. The Commissioner explained that the issue to be determined was the extent to which disclosure would enhance the public interest in accountability. As the total price tendered was the key determinant in the evaluation of the tenders, the Commissioner was not satisfied that there were any public interest considerations that would outweigh the potential harm of disclosure.
[66.] Similarly, in this case, I do not believe that the release of the remainder of the unsuccessful tender documents would enhance the public interest in the openness and accountability of government to an extent sufficient to overcome the countervailing public interest in the proper preservation of confidences and the protection of commercially sensitive information. Unlike records number 156, 158, 160, 162, 168-168 of the evaluative documents discussed below, the unsuccessful tender documents do not necessarily provide the rationale for the selections made by OPW, particularly with respect to the MEAT criteria. Therefore, the remainder of the unsuccessful tender documents are exempt from disclosure, i.e. records number 62-65, 68-74, 84-86, 91-92, 97, 99-100, 106, 111, 113-115, 117-120, 123-124. Moreover, only partial access should be granted to record number 145, the successful tender record with unsuccessful tender information, i.e. with the deletion of the information regarding the optional extra that OPW declined to purchase.
[67.] The evaluative documents at issue in this case consist of a tender schedule (record number 154), a cover letter referring to attached analysis sheets and recommendations (record number 155); the analysis sheets comparing the tenders in terms of the prices offered and the specification details (records number 157, 159, 161, 163); the recommendations (records number 156, 158, 160, 162); and a report justifying the selection of MAN Importers Ireland to supply the troop-carrying vehicles despite the fact that its tender was not the lowest (records number 168-69). The tender schedule and analysis sheets contain much of the confidential and commercially sensitive information regarding the unsuccessful tenders which I have already found to be exempt from release. Accordingly, the parts of those records which would disclose this information are likewise exempt from disclosure. Moreover, the names of the tenderers should be released in a different order from which they appear on records number 157,159, 163, because they are ranked according to their tender prices, from lowest to highest. This could be achieved by granting access to the records in another form or manner, as permitted under section 12(1)(g) of the FOI Act.
[68.] The same ranking system is used in record number 161, which relates to the midibuses, but there were only two tenders for these vehicles. As the tender of Motor Distributors Limited was the lowest, it follows that the other tender was higher, but no other comparative information would be disclosed through the release of this record, provided the confidential and commercially sensitive information referred to above is deleted.
[69.] I consider it appropriate that the remainder of the evaluative records be released in full. Record number 158 names one of the unsuccessful tenderers for the troop-carrying vehicles, but does not disclose the prices, vehicle models, details of the specifications, or any other detailed information regarding the tenders. Records number 168-169, on the other hand, give some pricing information regarding the second lowest tender for these vehicles, but do not name the tenderer or give any other information that would lead to the identification of the tenderer with the price. None of the other evaluative documents includes any information regarding the unsuccessful tenders, apart from indirectly stating that they were higher than the tenders selected.
[70.] Records number 3-17, 28-34 , 46-57 were created before 21 April 1998, the commencement date of the FOI Act. By virtue of sections 6(4) and (5) of the Act, a right of access to these records only exists provided that access is necessary or expedient in order to understand records created after that date or that the records relate to personal information about the requester.
[71.] In Mr. ABE and the Department of the Marine and Natural Resources, Case Number 98117, 2 OIC Dec. 73 (1999), I explained my approach to interpreting the phrase "necessary or expedient in order to understand". I stated that the section is directed not at the question of whether a record can be understood in a literal sense without reference to earlier records but at whether its substance (or gist or subject matter) can be understood. I made it clear that the fact that a document does not contain all the information that a reader might wish to have does not mean that the substance of a document cannot be understood. I also defined the word "expedient" as "fit, proper or suitable to the circumstances of the case". I concluded that the release of a pre-commencement record is justified only to the extent that such access is a suitable means to achieving the end of understanding the substance of the post-commencement record.
[72.] In this case, I have not been able to identify any item of information in the post-commencement records which is not comprehensible either in meaning or significance without access to the pre-commencement records. Moreover, as the records relate to a tender competition in which the requester was not involved, I am satisfied that they do not relate to "personal information" about him within the meaning of the FOI Act (section 2 refers). Therefore, I find that a right of access does not apply to the pre-commencement records.
[73.] Of the remaining records (number 149-150, 171-182), only records number 150 and 171 are even remotely contentious in that they include the names of the unsuccessful tenderers. For the reasons stated above under the section discussing the unsuccessful tender documents, I am not satisfied that these records qualify for exemption under the FOI Act.
[74.] Before concluding, I feel it would be helpful to provide a general summary of my views to date regarding records relating to a tender competition. First, public bodies are obliged to treat all tenders as confidential at least until the time that the contract is awarded. Second, tender prices may be trade secrets during the currency of a tender competition, but only in exceptional circumstances would historic prices remain trade secrets. As a general proposition, however, I accept that tender documents which would reveal detailed information about a company's current pricing strategy or about otherwise unavailable product information could fall within the scope of section 27(1)(a) of the FOI Act even following the conclusion of a tender competition. Third, tender prices generally qualify as commercially sensitive information for the purposes of sections 27(1)(b) and (c) of the FOI Act. Depending upon the circumstances, product information can also be considered commercially sensitive under section 27(1)(b). Fourth, when a contract is awarded, successful tender information loses confidentiality with respect to price and the type and quantity of the goods supplied. The public interest also favours the release of such information, but exceptions may arise (seeTelecom Eireann and Mr Mark Henry, Case Number 98114, To Be Published (13 Jan. 2000)). Fifth, other successful tender information which is commercially sensitive (for example, details of the internal organisation of a tenderer's business, analyses of the requirements of the public body, or detailed explanations as to how the tenderer proposed to meet these requirements) may remain confidential. Disclosure in the public interest ordinarily would not be required, unless it were necessary to explain the nature of the goods or services purchased by the public body. Sixth, unsuccessful tender information which is commercially sensitive generally remains confidential after the award of a contract, and the public interest lies in protecting that information from disclosure. I must stress, however, that no tender-related records are subject to either release or exemption as a class; therefore, each record must be examined on its own merits in light of the relevant circumstances.
[75.] Having carried out a review under section 34(2) of the FOI Act, I hereby vary the decision of the Office of Public Works in this case as follows: