Court Blocks Peek Into Small Biz Contracting Program

Earlier this month, a federal appeals court issued a ruling that dealt a blow to the causes of open government and contracting transparency. In the long run, it could also harm contracting competition and the economic viability of America’s small businesses.

On January 6, the US Court of Appeals for the 9th Circuit ruled that the Department of Defense (DoD) does not have to disclose the small business subcontracting plan of one of its largest suppliers, Sikorsky Aircraft Corporation. In 2013, the American Small Business League (ASBL), as part of its long-running campaign to document how federal small business contracts get diverted to not-so-small businesses, submitted a Freedom of Information Act (FOIA) request for Sikorsky’s most recent plan. The document identifies all subcontract amounts Sikorsky awarded to small businesses on its DoD contracts during fiscal year 2013.

Sikorsky and several other large defense contractors report this data as part of the Comprehensive Subcontracting Plan Test Program, an initiative DoD launched in 1990 to increase contracting opportunities for small firms. The public has largely been kept in the dark about the program. ASBL and other small business advocates contend that it has not lived up to its promise: according to ASBL president Lloyd Chapman, the program has “cheated American small businesses out of well over a trillion dollars in subcontracts.”

In 2014, the US District Court in San Francisco ordered DoD to release Sikorsky’s subcontracting plan. The 9th Circuit reversed the lower court, ruling that some of the data—the names of Sikorsky’s subcontractors, the type and dollar amount of the goods and services subcontracted by Sikorsky, details about the company’s subcontracting process and organizational structure—falls under FOIA Exemption 4, which shields trade secrets and commercial or financial information that is privileged or confidential. The appeals court ruled that other data in the document—the signatures of government officials and the names and work contact information of Sikorsky employees—is off-limits under FOIA Exemption 6, which covers personally identifiable information.

The ASBL, which has a long and relatively successful FOIA litigation track record, plans to appeal the case to the Supreme Court. The issue on appeal is whether DoD met its burden of proof by providing reasonably specific evidence that disclosure will, in regard to Exemption 4, “cause substantial harm to the competitive position” of Sikorsky and, in regard to Exemption 6, “constitute a clearly unwarranted invasion of personal privacy.” Two factors weighing in ASBL’s favor: 1) the trade secret data in the document will eventually become too old and outdated to harm Sikorsky if it is released, and 2) the contact information for several Sikorsky employees named in the document can be found online.

The diversion of small business contracts to large companies continues to be a serious management and performance challenge for agencies, as well as a recurring issue of concern on Capitol Hill. The Pentagon’s subcontracting plan program, in particular, has come under heightened scrutiny in Congress. Even DoD has publicly disparaged the program, admitting there is no evidence it has helped small businesses, and even that it “has led to an erosion of [DoD’s] small business industrial base.”

But Congress refuses to outright kill the program. Most recently, a provision in the 2017 National Defense Authorization Act (section 826) extended the program through 2027.