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Legislative Update: Redacting Confidential Information in Government Contracts

The recent legislative session did not have the impact on the Texas Public Information Act (“TPIA”) that many people thought it would.  Specifically, efforts to overturn the Texas Supreme Court’s decisions in Boeing and Greater Houston Partnership failed.  Both Boeingand Greater Houston Partnership have helped businesses protect information under the TPIA.  Specifically, Boeing allows businesses to claim the competition or bidding exception under Section 552.104, which protects “information that, if released, would give advantage to a competitor or bidder” from disclosure.  Tex. Gov’t Code § 552.104(a).  To protect their information under this section, a business need only show that the information “would” give competitors an advantage, not that the advantage is decisive to the competition.  Moreover, the exception is not limited to an ongoing bidding process, or indeed, to a bidding process at all, but grants private parties the right to claim the exception where release of the information would give an advantage to a competitor, regardless of the context.

Likewise, Greater Houston Partnership also expanded protections for businesses.  Specifically, “governmental bodies” are subject to the TPIA.  The TPIA lists eleven specific “governmental bodies,” such as county commissioners, municipalities, and school district board trustees.  Tex. Gov’t Code § 552.003(1)(A).  The TPIA also includes a catchall provision, defining a “governmental body” as an organization “that spends or that is supported in whole or in part by public funds.”  Id.  The Court, however, limited this catchall to only those organizations with a “financially dependent relationship” on a governmental body.  Consequently, many organizations “supported in whole or in part by public funds,” once believed to be subject to the TPIA, may in fact be immune from its disclosure requirements under Greater Houston Partnership.

While these expansions were left unchanged this past legislative session, businesses should nevertheless be aware of an important development that did happen at the Texas Legislature with respect to government contracts.

In 2015, the Legislature passed Senate Bill 20 (“SB 20”).  For more information on SB20, please click here.  Through SB20, the Legislature expanded the public’s access to information related to contracts between the government and private businesses. The legislation created section 2261.253 of the Texas Government Code, which provides that state agencies must post contracts on their agency websites when the contract is for goods or services, and is equal to or greater than $15,000.  Tex. Gov’t Code § 2261.253(a).

But SB 20 did not make all government contracts public—the requirement to post government contracts applies only to “each state agency,” defined as a “(1) a department, commission, board, office, or other agency in the executive branch of state government created by the state constitution or a state statute; (2)  the supreme court, the court of criminal appeals, a court of appeals, or the Texas Judicial Council; or (3) a university system or an institution of higher education as defined by Section 61.003, Education Code, except a public junior college.” Tex. Gov’t Code §§ 2261.002(2), 2151.002.  Consequently, through SB 20, the Legislature effectively defined state agency contracts as “public information,” albeit without reference to the TPIA.  On the other hand, the TPIA—and the “competition or bidding” exception—applies broadly to all “governmental bodies,” including local and regional governments, as well as certain corporations that are sustained by governmental funding. Tex. Gov’t Code § 552.003.  Accordingly, businesses contracting with a municipality—or any other entity covered by the TPIA that is not a “state agency”—should still be able to avail themselves of the Texas Supreme Court’s expansion of the “competition or bidding” exception in Boeing to protect such contracts from disclosure.

Ultimately, while protections for confidential information have been greatly expanded by the Texas Supreme Court in recent years, during the 2015 session, the Texas Legislature implemented a requirement for state agencies to publicly post their contracts with private parties on their respective websites.  As a result, while the TPIA has been expanded by court interpretation, the Legislature—in a wholly separate statutory scheme—limited that expansion significantly.

While Texas Government Code Section 2261.253 is not part of the TPIA, it has ramifications for businesses attempting to protect public information.  For example, if a business wants to protect its trade secrets that were perhaps provided to the government as part of its contract with the government, but the government was required to publicly post that information online, protecting the information from disclosure under the TPIA would be extremely difficult.  As a result, Section 2261.253 eroded much of what Boeing gave to businesses.  This legislative session, however, subsections (e) and (f) were added to Section 2261.253, which provide that when a state agency posts a contract on its website as required by Section 2261.253, the agency “shall redact” information that is confidential under law and information the attorney general deems is excepted from public disclosure under the TPIA.

These new subsections take effect on September 1, 2017.  While the previous version of Section 2261.253 generally required a blanket posting of government contracts without regard to confidential information, these amendments curtail that blanket policy in a significant way.  Specifically, agencies can no longer post information that is “confidential under law” or “information the attorney general determines is excepted from public disclosure under Chapter 552.”  Thus, if a business believes its information is excepted from disclosure under the TPIA, it should now be afforded protection against state agencies making that information available online.  And of course, those exceptions in the TPIA include the very broad exception for “information that, if released, would give advantage to a competitor or bidder,” Tex. Gov’t Code § 552.104, trade secrets, Tex. Gov’t Code § 552.110(a), and “commercial or financial information for which it is demonstrated based on specific factual evidence that disclosure would cause substantial competitive harm to the person from whom the information was obtained,” Tex. Gov’t Code § 552.110(b).

Nevertheless, the procedural mechanisms for implementing these amendments are somewhat unclear.  That is, if a government agency is required to post a contract—and a business has identified portions that are confidential by law or excepted from disclosure under the TPIA—how does the agency determine what information to redact?  Does it simply rely on the position of the business?  Or, must it seek an Attorney General opinion on the portions in question before posting the information online?  Because of the ambiguity of how the new law will be implemented, businesses seeking to protect information in government contracts should conspicuously mark any information they deem confidential when sending the information to the relevant agency.  Then, the business would likely want to note that the information marked is “confidential under law” or “information the attorney general determines is excepted from public disclosure under Chapter 552” and can therefore, not be posted online.  And, the business should point out in a cover letter that, to the extent the agency believes it is required to post any of the information marked on the internet, it should first seek an opinion from the Attorney General.  With these steps, businesses can take full advantage of these new provisions and hopefully rely upon them until it is obvious how they will play out procedurally.  At the end of the day, these amendments to Section 2261.253 have provided further, additional protection for businesses under the TPIA. If your business seeks to do business with the State of Texas, but would like to protect your confidential information from disclosure, please give the attorneys at Cobb & Counsel a call.

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