Chicago Transit Authority improperly withheld Bombardier component percentages in Buy America audit

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Dear Mr. Kahn, Mr. D'Alba, Ms. Angelucci, Ms. Bevan, and Ms. Dumont:

BACKGROUND

On July 19, 2010, CTA contracted with PB Americas, Inc. ( Consultant) to conduct a post -delivery Buy America audit on railcars that CTA purchased from Bombardier.' On November 2, 2010, Bombardier and Consultant entered into a non -disclosure agreement that prohibited Consultant from disclosing " Confidential Information to any person other than CTA and its permitted personnel that needs to know for the purpose of the above mentioned Audit." 2 Confidential Information" means "[ Bombardier' s] financial records and books relating to the railcar] Contract[,] * * * the records concerning [ Bombardier' s] suppliers for said Contract[,]

and * * * any other documents or information, disclosed to the Consultant orally or in writing[.] i3 Consultant submitted the Post -Delivery Audit to CTA on January 12, 2011.

On May 16, 2013, Mr. Saucedo, on behalf of the Los Angeles Alliance for a New Economy ( LAANE), submitted a FOIA request to the CTA seeking, among other records, the Post Award/Delivery Buy America Compliance Certification." 4 Subsequently, Mr. Saucedo clarified that his request included the Post -Delivery Audit and Certificates, which are the records at issue here. 5 On August 12, 2014, CTA provided Mr. Saucedo with the Post -Delivery Audit and Certificates but redacted certain information under section 7( 1)( g) of FOIA ( 5 ILCS 140/ 7( 1)( g) ( West 2012)). On October 6, 2014, attorneys for the Jobs to Move America Coalition ( Coalition) submitted this Request for Review disputing the applicability of that Post -Delivery Audit and Certificates. In addition, Ms. Sandrine Dumont, Legal Advisor to Bombardier Transportation Americas, submitted a response letter asserting that the redacted sections are exempt from disclosure pursuant to section 7( 1)( g) of FOIA because disclosure may cause competitive harm to Bombardier or some of its affiliates. On January 12, 2015, the Coalition replied by disputing that disclosure of the redacted information could cause competitive harm.

Buy America Audits In accordance with the requirements of section 669 of title 49 of the Code of Federal Regulations ( 49 C. F. R. § 661), when purchasing railcars with Federal Transit Administration ( FTA) funds, final assembly of the railcars must occur in the United States and the cost of the components and subcomponents produced in the United States must be at least sixty percent of the cost of all components. 49 C. F. R. § 661. 11. To ensure compliance, FTA requires that the purchasing authority ( here CTA) conduct a pre -award audit of a supplier' s likely compliance and a post -delivery audit of a supplier' s ( here Bombardier' s) compliance. 49 C. F. R. 663. The pre -award audit is required before the entity receiving FTA funding may enter into a business, and only insofar as the claim directly applies to the records requested.

The term trade secret in the context of the FOIA has been interpreted to include information that ( 1) would either inflict substantial competitive harm or ( 2) make it more difficult for the agency to induce people to submit similar information in the future." ( Emphasis in original.)

BlueStar Energy Services, Inc. v. Illinois Commerce Comm' n, 374 I11. App. 3d 990, 995 ( 1st Dist. 2007). Under the first prong, which is at issue here, "[ p] arties opposing disclosure need not demonstrate actual competitive harm; instead, they need only show actual competition and a likelihood of substantial competitive injury in order to 'bring [ that] commercial information within the realm of confidentiality."' New Hampshire Right to Life v. U.S. Department ofHealth Human Services, 778 F. 3d 43, 50 ( 1st Cir. 2015) ( quoting Public Citizen Health Research Group v. Food & Drug Administration, 704 F.2d 1280, 1291 ( D.C. Cir. 1983)).

Citing section 7( 1)( g), CTA, at the request of Bombardier, redacted from the Post - Delivery Audit and Certificates the following information at issue here:

1) The percentages set forth in the percentage columns of the Post - Delivery Audit on the pages entitled " Buy America Delivery Audit On Rail Vehicle Procurement For CTA Rail Car A" and " Buy America Delivery Audit On Rail Vehicle Procurement For CTA Rail Car B[.]" 8 2) Fifteen Buy America Compliance Certificates in their entireties. However, in its response to this office, Bombardier agreed that the exempt from disclosure. 9 Bombardier has since stated that it would disclose the information in the " Source -Domestic or Foreign", " Currency of the PO", and the " Complete Address of location..." columns, if the " Subcomponent Name", " US %", and Foreign %" columns can be withheld. 10 3) The Description of Work in its entirety. However, Bombardier has agreed to provide this description except for the majority of the second paragraph ( all but the first 13 words), the entire third paragraph, and the entire last paragraph."

As mentioned above, Bombardier has provided this office with documentation demonstrating that the Post -Delivery Audit and Certificates were supplied to Consultant under claims of privilege and confidentiality. 12 It is undisputed that there is actual competition in the railcar market. The parties, however, disagree regarding whether disclosure of the records in question would cause competitive harm to Bombardier.

The Percentages Listed in the Post -Delivery Audit Bombardier argues that releasing the percentages redacted from the Post -Delivery Audit would cause it competitive harm by enabling competitors preparing bids for railcars to focus on using Bombardier' s suppliers that provide the most U. S. content. Bombardier asserts that:

The percentage of US vs. foreign content for each supplier is often the result of some extensive commercial negotiations and discussions between Bombardier and its suppliers and in certain manufacturing print of some of its suppliers ( including sometimes using Bombardier' s other suppliers) in order to achieve a higher US content. Consequently, disclosing such percentages would cause competitive harm to Bombardier as it would reveal its manufacturing and US content strategy. 1131 The Coalition argues that the percentages are not confidential or proprietary because it has elsewhere obtained percentage information in several pre -award audits ( including one in which Bombardier was audited), an interim audit, and at least one post -delivery audit. The Coalition' s contention is unpersuasive, however, because: ( 1) those audits were not obtained under the Illinois FOIA; and ( 2) one public body' s decision to disclose a record does not compel other public bodies to do the same.

The Coalition also provided two declarations supporting its position that the percentages are not proprietary. Mr. Larry E. Salci, an independent consultant serving clients in the rail industry and former president of Bombardier Corporation ( US), declared that: ( 1) " the information contained in the [ Post -Delivery Audit] of Bombardier is generally not proprietary information, excluding the detailed price information from suppliers or any defined proprietary technical information owned and utilized by suppliers and the car builder that is documented and used in bid proposals[;]" and ( 2) "[ t]he percentage calculations for all major components and the verification of assembly cost percentages by the car builder relative to total vehicle cost are not useful information to competitors and should not be considered proprietary information or disadvantageous to Bombardier * * * if provided." 14 Additionally, Ms. Linda Nguyen - Perez, a senior research/ policy analyst for the Coalition, declared that " the overall percentage of domestic sourcing is not something agency officials outside California have in the past appeared to give any weight to in their decision making so long as it exceeds the 60% minimum, and hence the underlying percentage connected to_a particular supplier to a bidder [ sic] is even more irrelevant in competition between bidders[.]" 1' However, whether officials awarding contracts to railcar suppliers give any weight to percentages that exceed 60% and whether Bombardier would be disadvantaged in its own procurement activities are irrelevant to the essential question of whether competitors could use the final cost percentages from the Post -Delivery Audit to target Bombardier' s suppliers providing the most U. S. content in order to formulate their own more competitive bids to public entities in the future, to Bombardier's disadvantage.

After reviewing the Post -Delivery Audit, the declarations provided by the Coalition, and the arguments of the Coalition and Bombardier, we conclude that CTA met its burden of establishing a likelihood of substantial competitive injury to Bombardier if the percentages redacted from the Post -Delivery Audit as to Bombardier' s outside suppliers were disclosed. In particular, competitors could exploit information about the parts and percentages of U. S. content costs that Bombardier' s suppliers provide to reach agreements with those suppliers to the detriment of Bombardier. See generally BlueStar Energy Services, Inc., 374 Ill. App. 3d at 995- 96 ( settlement agreement provided in confidence to government agency from an entity the agency regulates exempt from disclosure); New Hampshire Right to Life, 778 F. 3d at 51 ( where potential future competitor could take advantage of institutional knowledge contained in a manual and letter describing the manual, manual and letter exempt commercial information); United Technologies Corp. v. US. Dept. of Defense, 601 F. 3d 557, 564 ( D.C. Cir. 2010) ( audit and documents regarding the audit containing proprietary information about manufacturing and quality control exempt from disclosure). However, CTA has not met its burden of establishing a likelihood of substantial competitive injury to Bombardier if the percentages redacted from the Post -Delivery Audit of the material Bombardier itselfsupplies, as Bombardier Transportation, were to be released. In contrast to information concerning outside suppliers that Bombardier' s competitors may be able to use to reach agreements with those suppliers and ultimately submit more competitive bids, it is unclear how such information about Bombardier could be exploited by its competitors. This office also notes that because LAANE is no longer seeking the redacted price information, competitors could not potentially discern from the other portions of the records the per-unit cost that Bombardier is paying for each part. Accordingly, this office concludes that the percentages redacted from the Post -Delivery Audit with respect to Bombardier' s suppliers may be withheld under section 7( 1)( g) of FOIA, but that the percentages redacted from the Post -Delivery Audit as to the material Bombardier itself supplies are not exempt from disclosure. Therefore, we ask CTA to provide the Coalition with a copy of the Post -Delivery Audit without redacting the percentages relating to Bombardier Transportation.

The Buy America Compliance Certificates CTA originally withheld the Certificates in full. In its response to this office, Bombardier agreed that the " name, address and subcomponents names of the supplier" are not exempt from disclosure. 16 Bombardier has since informed this office that it would disclose the Source -Domestic or Foreign," " Currency of the PO," and the " Complete address of location..."

withheld.' 7 Based on the reasoning outlined above — that competitors may focus on using Bombardier' s suppliers and the components they supply to maximize the amount of U. S. content for their own bids — this office concludes that the information redacted from the " US %," Foreign %," and corresponding " Subcomponent Name" columns is exempt from disclosure under section 7( 1)( g) of FOIA. Accordingly, we ask CTA to provide the Certificates to the Coalition, subject only to redaction of the information in the " US %," " Foreign %," and Subcomponent Name" columns.

The Description of Work Final Assembly Requirements Lastly, CTA has not demonstrated that most of the redactions to the Description of Work are within the scope of section 7( 1)( g). The majority of the redacted information is generic and does not appear to provide unique details of assembly or proprietary technical information that could reasonably be expected to cause Bombardier competitive harm if disclosed. It is no more descriptive than the minimum requirements for final assembly of railcars set forth in Appendix D of section 611. 11 of title 49 of the Code of Federal Regulations ( 49 C. F. R. § 611. 11, App. D). However, CTA may redact the cost of final assembly, excluding the cost of materials, from the final paragraph because disclosure of such information could cause competitive harm by enabling competitors to undercut Bombardier in future bids. Accordingly, this office asks CTA to provide the entire Description of Work to the Coalition, except for the cost provided in the final paragraph.

In summary, this office requests that CTA provide to the Coalition a copy of the Post -Delivery Audit, including the Post -Delivery Purchaser' s Requirements Certification, Post - Delivery Buy America Compliance Certification, and the entire Description of Work, except for the cost provided in the final paragraph: provided, however, that CTA may redact the percentages column for all suppliers except Bombardier Transportation and the costs from the Post -Delivery Audit. We also ask CTA to provide the Coalition with a copy of the Certificates The Public Access Counselor has determined that resolution of this matter does not require the issuance of a binding opinion. This letter closes this file. Please contact me at 312) 814- 5201 or the Chicago address listed on the first page of this letter if you have questions.

Very tr lyyours,

EDIE ST INBERG

Assistant Attorney General Public Access Bureau 31664 f 71g proper improper reg auth