Do Competitors Have a Right to Your Bid Documents?

Kaleb Walker, Attorney, Allensworth & Porter Construction Law

The Texas Legislature is wrestling with potential legislative changes that, if passed, would substantially erode contractors’ ability to prevent disclosure of bidding information on public projects.

By: Kaleb Walker

Those changes, which consist of amendments to the Texas Public Information Act (“TPIA”), would override the Texas Supreme Court’s somewhat recent Boeing Co. v. Paxton decision.[1] In Boeing, the Court ­held that under section 552.104 of the Texas Government Code[2] a private party may challenge a governmental body’s disclosure of a contractor’s bid information where such disclosure would give an advantage to a competitor or bidder.[3]

Prior to Boeing, courts had interpreted the exception as (1) protecting only governmental interests (i.e. not the interests of private parties, such as bidders) and (2) granting only the governmental body (i.e. not a private party) the ability to assert the exception to disclosure.[4] The trial court and the Austin court of appeals adhered to this interpretation and denied Boeing standing to challenge a competitor’s request that the Port Authority of San Antonio disclose various information related to Boeing, including Boeing’s lease with the Port.[5]

The Texas Supreme Court, however, reversed the Austin Court of Appeals and allowed Boeing to prevent disclosure, holding that “section 552.104’s exception applies to both government and private parties and may be invoked by either [party] to protect the privacy and proprietary interests of a private party in accordance with its terms.”[6] The Boeing test for whether bid information is excepted from disclosure is simply “whether knowing another bidder’s [information] would be an advantage, not whether it would be a decisive advantage.”[7] As the Supreme Court later noted, this has been a low threshold.[8]

In practice, the Boeing decision represented a significant victory for contractors bidding on public projects. Namely, Boeing greatly expanded contractors’ ability to protect proprietary information submitted on public projects from competitors.[9] This protection has been especially useful for contractors that are experienced in bidding on public projects and have spent significant time, money, and resources developing responses to specific standard forms (e.g., a public university’s Request for Qualifications).

The Boeing effect may be temporary, however, depending on the outcome of this year’s legislative session. Prompted by greater interest in governmental transparency, the Texas legislature is currently considering several proposed bills that would effectively override the Boeing holding.  The most wide-ranging proposals are S.B. 407 and H.B. 792, companion bills which would prevent public disclosure only where the release of a bidder’s information would harm the governmental entity itself in a specific competitive scenario. The bill would also mandate that once the governmental entity enters into a contract, the bids or proposals relating to the contract would automatically become subject to disclosure, irrespective of harm. In other words, the bill would (1) make it much more difficult for bidders to prevent the disclosure of bidding information, and (2) make it impossible to withhold the finalized contract and related documents.

The offices of both Senator Kirk Watson and House Representative Giovanni Capriglione—the sources of  S.B. 407 and H.B. 792, respectively—maintain that the intent of the bills is to ensure governmental transparency by making ‘basic information,’ like contract values, available to the public. Both proponents and opponents of the legislation largely agree that final contracts, including contract values and scope of work, should be publicly available. But opponents view the scope of the bills—which encompasses all bid documents—as excessive. This broad scope is a concern for bidders because sensitive bidding information, such as experienced bidders’ innovative business practices and strategies, would be readily available to competitors resulting in a competitive advantage. The legislators’ response to this concern is that alternative TPIA exceptions, such as the trade secrets exception, serve as protections for certain categories of bidders’ information.

While other exceptions under the Government Code may provide a bidder with alternative means of protection, those exceptions typically provide much narrower protection and are more difficult to invoke. For example, the trade secrets exception requires bidders to demonstrate based on “specific factual evidence” that disclosure would cause “substantial” competitive harm to the bidder if the information were released. [10] This is a significant contrast with the Boeing standard, which simply requires the bidder to show that a competitor would have some advantage if given access to the bid documents.[11] Given the lack of other Boeing-caliber exceptions, the reversal of the case would introduce more risk to public project bidding practices.

Passage of the proposed bills[12] and the reversal of Boeing may provide more governmental transparency. But it would also provide more private bidder transparency. Accordingly, if the legislation passes, private bidders would be prudent to evaluate their bidding practices for public projects, strategically select the information to submit to a governmental entity, and internalize the risks of making such information publicly available.

 

True to his engineering training, Kaleb Walker brings a rational and analytical style to his legal practice, which focuses on construction transactions and defect litigation. He represents owners, developers, general contractors, EPC contractors, subcontractors, architects, and engineers, representing his clients through contract drafting and negotiation and through dispute resolution. For more information on S.B. 407 or H.B. 792, please e-mail Kaleb or call (512) 708-1250.


[1] See 466 S.W.3d 831 (Tex. 2015).

[2] Tex. Gov’t. Code Ann. § 552.104 (West) (protecting information “that if released, would give advantage to a competitor or bidder”).

[3] Boeing, 466 S.W.3d at 839.

[4] See Boeing, 466 S.W. 3d at 831.

[5] Id. at 833-34.

[6] Id. at 839.

[7] Id. at 841.

[8] See Greater Houston P’ship v. Paxton, 468 S.W.3d 51, 93 (Tex. 2015) (“[T]he Act excepts the information if its release would even just ‘give advantage to a competitor.’”) (quoting Boeing, 466 S.W.3d at 841).

[9] See, e.g., Op. Tex. Att’y Gen. No. OR2015-22815 (2015) (citing Boeing andconcluding that city may withhold private party’s bid submission); Op. Tex. Att’y Gen. No. OR2015-23596 (2015) (citing Boeing and concluding that county may withhold information submitted by private party as part of a bid).

[10] Tex. Gov’t Code Ann. § 552.110 (West) (emphasis added).

[11] See Boeing, 466 S.W.3d at 841.

[12] S.B. 407 passed the Senate and will be assigned to a committee in the House.