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Public Access to Government Contracts in Texas: High-Stakes Rock-Paper-Scissors?

As the Texas Supreme Court Was Limiting Public Access to Government Contracts in Boeing, the Texas Legislature Was Expanding It Through SB 20.

Private businesses want to keep their proprietary information largely private, while the government wants to make its information mostly public. When those interests collide, the result can be messy and contentious—especially in Texas—where each branch of government is authorized to decide whether information related to government contracting is public or private.

The Texas Attorney General is legally required to maintain uniformity in the government’s treatment of the Texas Public Information Act (“TPIA”). If a member of the public asks for government documents, the Attorney General initially decides whether the TPIA requires the documents to be disclosed or not. Courts give deference to the Attorney General’s interpretation of state law, but may nevertheless overrule an Attorney General decision. Both the courts and the Attorney General base their decisions on the public information laws that the Texas Legislature writes and enacts. When all three branches of Texas government try to decide what to do with the same kind of public-private documents, the branches play an extremely high-stakes game of rock-paper-scissors. Usually, the process starts with the Attorney General (the rock), who can be beaten by the courts (paper), which, in the end, can be beaten by the Legislature (scissors). In practice, however, the process does not always proceed in exactly that way. The courts might overrule only certain parts of the Attorney General’s ruling, the Legislature might enact a law that has the effect of reversing one court’s holding while leaving others alone, and both the Legislature and the courts might reaffirm the Attorney General’s primary authority in maintaining uniformity of public information laws—all in the same case. The overlapping jurisdictions and variant interpretations can have enormous consequences for businesses that contract with the government.

For example, in the 1990s, Boeing Aerospace decided to move its commercial-refit operation to a facility that is now owned by the San Antonio Port Authority. A former Boeing employee asked the Port to release documents related to its lease contract with Boeing. Under the TPIA, a contract with the government is public information that must be disclosed upon request. Tex. Gov’t Code § 552.022(a)(3). But, the TPIA contains a “competition or bidding” provision, which allows the government to refuse disclosure of information that would give a competitive advantage to the competitors of the private business with which the governmental body is contracting. Tex. Gov’t Code § 552.104(a). Boeing did not want the Port to disclose the contract and documents related to it, so Boeing invoked the competition or bidding exception.

As we previously discussed, the Attorney General ruled that only a governmental body, like the Port, could invoke the competition or bidding exception. The trial court and appeals court agreed, but the Texas Supreme Court reversed those rulings, holding that the “exception applies to both the government and private parties and may be invoked by either to protect the privacy and property interests of a private party in accordance with its terms.” Boeing et al. v. Paxton, 466 S.W.3d 831, 839 (Tex. 2015). The Supreme Court also held that a private party invoking the competition and bidding exception need only show that the information “would” give competitors an advantage, not that the advantage is decisive to the competition.

Perhaps most significantly, the Supreme Court’s opinion did not limit the exception’s application 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.  Private parties seeking to protect information provided to the State could always invoke the “trade secret” and “commercial or financial information” exceptions of Government Code section 552.110, which require a demonstration that a party’s information was “secret” and valuable or would cause “substantial competitive harm.”  Now, private parties simply need to demonstrate that disclosure of their information would provide a competitor “some advantage,” which presupposes competitive harm.

But just 18 days before the Supreme Court issued its decision in Boeing, the Texas Legislature passed a bill that expands the public’s access to information related to contracts between the government and private businesses. The new bill, known as SB 20, created section 2261.253 of the Texas Government Code, which provides that state agencies must post the following on their agency websites when they purchase goods or services from a private vendor:

  1. each contract for the purchase of goods and services that the agency enters into, including contracts entered into without inviting, advertising for, or otherwise requiring competitive bidding before selection of the contractor, until the contract expires or is completed, if that contract is equal to or greater than $15,000;
  2. if the contract is not competitively bid, the statutory authority under which the contract was entered into without competitive bidding compliance; and
  3. the request for proposals related to the posted contracts until the contract expires or is completed.

Thus, while the Texas Supreme Court was concluding that contract information giving advantage to a competitor was not subject to disclosure under the TPIA, the Texas Legislature was implementing 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.

Texas businesses that want to protect government contracts with state agencies from disclosure, notwithstanding SB 20, face an uphill battle. For example, to prove that section 2261.253 of the Government Code is an unconstitutional taking that deprives a business of its property right in a trade secret by making the secret public, the State may argue that a business would have to prove that the statute gave express assurances that the government would not disclose the secret. Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1003-04 (1984). Here, section 2261.253 of the Texas Government Code warns that the contract will be made public, so businesses are on notice of that public disclosure after the statute’s effective date.

But SB 20 does 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.  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, however, for businesses seeking to contract with a state agency, it is important to anticipate that the executed contract with any state agency will be in the public domain.  Consequently, if it is possible to execute a government contract without including business trade secrets or other confidential information, it would be advisable to do so.  On the flip side, without even utilizing the procedures of the TPIA, market participants can now look to state agency websites to discern the winning bid on any particular contract in an attempt to better compete in the future.

As businesses review agency websites and consider the possible consequences of new legislation and court opinions, they should keep in mind that the Legislature did not amend the TPIA in SB 20, and the Supreme Court issued its Boeing opinion after SB 20. Consequently, in this instance at least, the Legislature did not beat the courts or the Attorney General in a high-stakes game of government rock-paper-scissors; there was, in fact, no contest among the branches at all. Instead, the Legislature, courts, and Attorney General were more like ships passing in the night, and businesses entering into contracts with the government should be prepared to know exactly where each one is headed, and why. If businesses are not adequately advised on the sometimes overlapping, and other times parallel, requirements of the TPIA, SB 20, Boeing, and related Attorney General decisions, they may miss the boat entirely.

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