VIRGINIA FREEDOM OF INFORMATION ADVISORY COUNCIL COMMONWEALTH OF VIRGINIA

July 13, 2005, Richmond

The Public Private Education Facilities and Infrastructure Act (PPEA) Subcommittee¹ held its second meeting on July 13, 2005. Chairman Axselle began the meeting by reminding those gathered that it was the consensus of the subcommittee that when government is doing the public's business, the public should have access to the records. He noted further that sometimes the public's right of access may be limited where there is a legitimate interest in protecting proprietary records and trade secrets of the private sector involved in the procurement transaction. He reiterated that the goal of the subcommittee was in finding the balance to facilitate competition while ensuring the public confidence in the decisions of government, especially when expending substantial public funds.

Guided by an issue matrix to facilitate organized discussion of the issues identified by the subcommittee as warranting further study, the subcommittee invited and received comment from representatives of state and local governments, the media, and representatives of the private sector involved with PPEA projects.

The first issue discussed by the subcommittee was the nature of "confidential proprietary records" and "trade secrets." While "confidential proprietary records" are not defined in FOIA or elsewhere in the Code of Virginia, the Uniform Trade Secrets Act (§ 59.1-336 et seq.) does define "trade secrets" as information, including but not limited to, a formula, pattern, compilation, program, device, method, technique, or process, that: (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. There was agreement that trade secrets and financial statements and other financial information related to privately held companies should be held confidential at all times and not be open to public inspection.

Turning to what may be considered confidential proprietary information, it was suggested that confidential proprietary information may include the method of design or construction and the cost of a proposal, in addition to other types of information held exclusively by a private entity. However, it was clear that confidential proprietary information meant different things to different people. For example, if one proposer for the construction of Building X comes in with a cheaper offer because he is using a construction method that is different from standard construction (i.e. not a block foundation, but a foundation prefabricated offsite and brought in), does the method of design or construction qualify as a confidential proprietary record? Clearly, the method of this design and/or construction gives the proposer a competitive advantage. It was suggested that there is a difference between proposing a specific process or method and holding certain information in confidence at all times. In light of public access, it was argued that proposals containing a specific process or method should be withheld only until the contract is awarded to protect the competitive advantage as against other proposers, while trade secrets, financial statements and balance sheets would remain confidential.

There was a peripheral discussion of whether the design and construction approaches proposed by an architect or professional engineer are the intellectual property of such professionals and could be released by a public body as part of a procurement transaction, under either the Virginia Public Procurement Act (VPPA) or the PPEA. A private sector representative suggested that the intellectual property of the architect or engineer should remain confidential until the proposal is accepted by the public body. The subcommittee was cautioned that the term "intellectual property" is term of art inapplicable to the discussion at hand and therefore should not be used.

As a result of these discussions, the subcommittee agreed to continue its deliberations on proposing a definition for "confidential proprietary records," whether confidential proprietary information should be protected, and if so, for how long. A representative of the Department of General Services (DGS) acknowledged that DGS posts all accepted unsolicited proposals and notice of same in the Virginia Business Opportunities publication and by posting on the Commonwealth's electronic procurement website (eVA). The subcommittee suggested the all public entities be required to follow the DGS posting procedures. The local government representative indicated that adopting the DGS approach of posting the actual proposals, in addition to the required notices, would be acceptable to localities.²

The subcommittee next discussed whether a public body should be required to make an affirmative, written declaration that certain agreed upon records, properly earmarked as proprietary submitted by a private entity in connection with a PPEA project would be considered proprietary and thus protected from public disclosure. A more formalized process was discussed, based on the DGS model, where there is discussion between the public and private entities concerning which records will be deemed confidential proprietary records and that identification of those records so deemed are reduced to a written agreement. DGS indicated that they require a formal request from a proposer for confidentiality and DGS responds as to which records will be considered proprietary.

It was the consensus of the subcommittee that the DGS procedure be required for all public entities, which would include a formal request for protection by the private entity and a written declaration by the public entity of what records will be deemed confidential proprietary records and why. The subcommittee suggested that, at this time, only the FOIA record exemption for PPEA and PPTA projects be amended to require the private entity's written request for protection and the affirmative declaration discussed above. Whether such an affirmative declaration should be proposed for the VPPA, PPEA and PPTA will be discussed at the next meeting of the subcommittee.

The next issue discussed was the development of a timeline for release of PPEA proposals. Again, the subcommittee felt that trade secrets and financial records, and those confidential proprietary records as agreed to by the public body would remain confidential and thus not accessible by the public. The subcommittee by consensus agreed that at the end of required notice period for unsolicited proposals, the public body should post all conceptual phase proposals received, minus trade secrets, financial records, and confidential proprietary records (hereinafter referred to as proprietary records) within five working days of the close of the notice period. In addition, the public body may, in its discretion, elect to post records generated by the public body in response to the proposals.

If the proposals are solicited (i.e., a request for proposal, RFP, is issued by the public body), the process required for competitive negotiation under the VPPA would be followed. Under competitive negotiation, when the contract is awarded all procurement records, minus proprietary records, would be open to public inspection.

On the issue of public comment on proposals, the subcommittee suggested that, within 30 days of the end of the applicable notice period required by the PPEA, a public body be required to provide a process for public comment which may include a public hearing for projects involving state general funds, local funds, any taxable debt of any responsible public entity³, or involving the full faith and credit of state or local government. The subcommittee was advised to keep in mind that the PPEA also is applicable to projects such as outsourcing of services and not limited to construction projects, which has been the focus of subcommittee discussion to date. There was concern that adding a public hearing or public comment period could lengthen the process if the public comment period did not run concurrently with the review process by the public body.

The subcommittee was told that the conceptual phase and detail phase of PPEA projects usually meld together into a negotiating phase with the end result being a contract. The subcommittee asked individual participants to indicate, as a practical matter, when they post PPEA records. The Virginia Information Technologies Agency (VITA) and DGS indicated that they post proposal records after the conceptual phase but do not post any records of the detail phase. VDOT reported that it posts both conceptual and detail phase records. Local governments generally do not post either. The subcommittee felt that if a responsible public entity asked for detailed proposals, following the conceptual phase, the detailed proposals would not be posted.

On the issue of interim versus comprehensive agreements under the PPEA and the public disclosure that should be required, the subcommittee reiterated its belief that once an agreement, whether interim or comprehensive, becomes binding on the parties and public funds are committed to a project, the agreement should be available for public inspection. It was noted that with an interim or comprehensive agreement, the agreement itself incorporates the successful proposal and specifies the terms and conditions for performance of the agreement. Additionally, those records of the public body that directly relate to the agreement would be available for public inspection.

On the final issue discussed--disclosure by school boards to the local governing bodies responsible for approving funding for school construction--the subcommittee decided not to make any recommendation at this time.

Tentative recommendations discussed at this meeting will be posted to the Council website. The next meeting of the subcommittee has been set for Friday, August 26, 2005 in the Speakers Conference Room on the sixth floor of the General Assembly Building.

¹ All members of the subcommittee were in attendance, namely, Mssrs. Axselle, Edwards, and Hallock.
² § 56-575.16 4b of the PPEA currently requires "advertising the public notice in the Virginia Business Opportunities publication and posting a notice on the Commonwealth's electronic procurement website."
³ As defined in the PPEA, a "responsible public entity" means a public entity that has the power to develop or operate the applicable qualifying project. "Public entity" means the Commonwealth and any agency or authority thereof, any county, city or town and any other political subdivision of the Commonwealth, any public body politic and corporate, or any regional entity that serves a public purpose.