Obama Administration Considering ‘Non Disclosure Agreements’ to Protect Contractor Data

5/8/2012
By Sandra I. Erwin

By Sandra I. Erwin
It ranks among the top grievances of military contractors: Uncle Sam does not protect their intellectual property. The Pentagon, many vendors contend, makes intrusive demands for technical and proprietary data with no guarantees that such data will not be given to competitors.
A source of heartburn for industry for decades, the protection of company-sensitive data finally has gotten the attention of the Obama administration. A May 7 memo from Acting Administrator for Federal Procurement Policy Lesley A. Field acknowledges that it might be time for the government to be held more accountable for safeguarding industry secrets.
Field’s memo, titled, “Myth-Busting 2: Addressing Misconceptions and Further Improving Communication During the Acquisition Process,” is the sequel to a February 2011 “Myth-Busting” memo from former Administrator Daniel I. Gordon.
Contractors have been pleasantly surprised by Field’s tackling of the intellectual-property issue, and by the suggestion that the government might consider the use of legally binding non-disclosure agreements as a means to protect corporate data.
This is the first time industry has seen official acknowledgment by the administration that non-disclosure agreements are being considered, said a defense executive.
The memo, however, insists that government procurement officials do not knowingly share a bidding contractor’s proprietary data with other competitors.
“Agency personnel have a responsibility to protect proprietary information from disclosure outside the government and will not share it with other companies,” Field says.
During source selection, the Procurement Integrity Act prohibits federal procurement officials from disclosing proposal information to unauthorized individuals before a contract award. “Procurement officials take this prohibition very seriously; if a violation occurs, there may be criminal and civil penalties,” says Field.
Other protections include the Trade Secrets Act that prohibits federal employees from divulging protected information, including confidential commercial or financial data and trade secrets. The Freedom of Information Act also allows agencies to protect commercial or financial records that are privileged or confidential.
But Field recognizes that there might be cases when a vendor is concerned that existing protections are insufficient. As a result, “agencies should consider the use of appropriate non-disclosure agreements (NDAs) to ensure that proprietary information will be kept from potential competitors,” the memo says.
Field, nevertheless, cautions that it is a myth that government agencies have an obligation not to share information with other agencies, particularly when it comes to cost and prices.
“There are no general limitations on the disclosure of information regarding existing contracts between agencies within the government,” she says. Agencies in fact are encouraged to communicate pricing information to other agencies to deter vendors from overcharging. “Such sharing among and between agencies can enable the federal government to root out wasteful duplication and negotiate better deals for the taxpayer,” the memo says.
Field warns that NDAs may not always be appropriate. “While there might be occasional circumstances where an agency could benefit from signing an NDA that would restrict its sharing of information with another agency, agencies should generally avoid NDAs that prohibit sharing of information – particularly pricing information – within the government.”

Topics: Business Trends, Doing Business with the Government, Procurement

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