Balancing secrecy with transparency in public contracts

Business

Newsday

2 Days Ago

RISHI MAHARAJ

Non-disclosure agreements (NDAs) and clauses are a common part of public procurement, contracts and settlements. They allow companies to work together, individuals to trust each other with valuable information, and judicial systems to manage information without broadcasting business secrets or personal information. However, they also can limit free speech and keep serious and dangerous situations from reaching a resolution.

Transparency concerns for NDAs are as relevant in the public sector as they are in the private sector. In fact, in the public sector, where the expectations of transparency are higher, the use of NDAs should be almost non-existent. Yet, there are recent examples of such agreements and protections creating problems for the public. Even in situations where non-disclosure might seem harmless, it can work directly against existing laws and the public’s right to information.

Why, then, is there need for NDAs in the first place and secondly, can the existence of NDAs prevent public scrutiny of the process and terms of the contract once the procurement process has been completed.

Essentially, an NDA is a legal contract between two or more parties that signifies a confidential relationship exists between the parties involved. The confidential relationship often refers to information that is to be shared between the parties but should not be disclosed to the public. There exists the belief that such NDAs or confidentiality instruments can prohibit public authorities from disclosing contractual or other documents following the completion of the procurement process. That is a myth.

As noted by the Open Contracting Partnership (OGP), confidentiality clauses do not prohibit the disclosure of contracting documents:

• they can only protect information that is legitimately sensitive;

• it’s unlikely that all elements of a contracting document are legitimately sensitive;

• governments must disclose contracting information if required by legislation such as Freedom of Information even if the contract contains a confidentiality clause aimed at ‘protecting’ the information;

• confidentiality clauses can be overridden where parties agree to disclosure.

Further they noted that documents containing commercially sensitive information can be disclosed:

• if information is legitimately sensitive, a clear case should be made as to how and why disclosure would cause harm and any redactions should be minimal;

• most commercially sensitive information is not legitimately sensitive forever;

• commercial information cannot be legitimately sensitive if it’s already known to competitors;

• in some jurisdictions, even commercially sensitive information may be disclosed based on a public interest test;

• the “commercially sensitive information” argument is over-used. Some countries publish their contracts by default without apparent harm.

In most international best practice as it relates to government procurement and contracts, public authorities are strongly advised to refuse to include contractual terms which purport to restrict the disclosure of information held by the authority and relating to the contract beyond the restrictions permitted by the legislation. It is therefore highly recommended that public authorities should reject confidentiality clauses wherever possible.

Ultimately, it is the public authority’s decision as to what should be disclosed. Where it is necessary to include non-disclosure provisions in a contract, they could agree with the contractor a schedule of the contract which clearly identifies information that should not be disclosed. What may be confidential today may not necessarily be confidential tomorrow. It is critical to note that acceptance of any confidentiality provisions must be for good reasons and capable of being justified.

On balancing confidentiality against the public interest, the task may not be to weigh the impact upon the company/bidder against the good of society, but rather the good of society against the importance of preserving confidences. So, for example, would releasing confidential information about a company tendering for public sector contracts do more harm than good to the public?

Contractors should be aware that the specific terms of their agreements with public authorities may not be able to escape public scrutiny, even where there is a clear contractual obligation for the authority to keep the terms “secret and confidential”. When contracting with a public authority, the authority’s obligations under the Freedom of Information Act (FOIA) will supersede its confidentiality obligations under the agreement unless an exemption can be relied upon.

Public authorities should ensure that their agreements with contractors always contain a confidentiality clause which permits disclosure required by law (often referred to as ‘mandatory disclosure’). It would be prudent to remind contractors of the authority’s FOIA disclosure obligations from the outset, particularly where it may not be immediately obvious to a contractor that the other party falls within the “public authority” definition.

While it is true to say that the object of the FOIA allows for “limited exceptions and exemptions necessary for …. the private and business affairs of persons in respect of whom information is collected and held by public authorities,” as noted by Justice Frank Seepersad in the case of the JCC vs The Ministry of Planning and Development: “It must always be in the public interest to ensure that the activities and projects undertaken by Government are transparent and all attempts should be made so as to dispel any perception of the misappropriation of public funds and/or financial impropriety.”

Rishi Maharaj is the executive director of the EquiGov Institute.