Government Contract NDA: Essential Information for Contractors

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BCTW regularly advises government contractors on the importance of NDA in government contracting, particularly when negotiating, drafting, and enforcing nondisclosure agreements for government contractors in connection with teaming agreements, subcontracts, joint ventures, and proposal development. We help clients strike the right balance: protecting sensitive information and competitive advantage while ensuring that key provisions of NDAs keep agreements practical enough to support fast-moving business development timelines. If you have questions about an NDA you've been asked to sign, need one drafted for an upcoming teaming arrangement, or are dealing with a dispute over confidential information, contact our office to discuss your situation.

Nondisclosure agreements (NDAs) play a crucial role in government contracting, often overlooked in their significance. Whether you are teaming with another contractor to pursue a bid, engaging a subcontractor, or sharing proprietary technical data with a federal agency, the importance of NDA in government contracting cannot be overstated. These agreements outline key provisions of NDAs that dictate how confidential information is shared, utilized, and safeguarded. By getting the terms right, you can protect years of investment in proprietary methods, pricing strategies, and sensitive technical data. Conversely, failing to adhere to the key provisions can expose your business to expensive disputes or even risk the loss of a contract award, making nondisclosure agreements for government contractors essential for successful operations.

An NDA, or nondisclosure agreement, is a contract where one or both parties agree to keep specific shared information confidential and restrict its use. The importance of NDA in government contracting cannot be overstated, as these agreements ensure sensitive information is protected during collaboration. NDAs typically fall into two categories: 

Unilateral (one-way) NDAs — In this type, only one party reveals confidential information, and the other party is obligated to protect it. These are frequently used when a contractor shares proprietary data with a prospective teaming partner or subcontractor who isn't providing comparable information in return. 

Mutual (two-way) NDAs — In this arrangement, both parties are disclosing and receiving confidential information, and both are bound by the same obligations. This type is common in teaming agreements, joint ventures, and merger or acquisition discussions where both sides require insight into each other's proprietary information. Understanding the key provisions of NDAs is essential for government contractors to navigate these relationships safely.

Government contractors encounter several challenges that emphasize the importance of NDA in government contracting, making nondisclosure agreements especially crucial yet complex to draft.  

Teaming and proposal development play a significant role, as contractors often need to exchange technical approaches, past performance data, pricing strategies, and staffing plans with potential teaming partners or subcontractors before submitting a proposal. An NDA helps safeguard this sensitive information should the teaming arrangement fall through or if the deal does not advance.  

Protecting trade secrets and proprietary data is another critical aspect. Contractors frequently invest significantly in proprietary processes, software, or technical data. Therefore, the key provisions of NDAs serve as a vital layer of protection, complementing restrictive legends, markings under FAR and DFARS data rights clauses, and trade secret laws.  

Interaction with government disclosure obligations further complicates matters, as confidential information shared with or through a government agency may not retain its confidentiality in the same manner a private commercial NDA would guarantee. Relevant laws like the Freedom of Information Act (FOIA), the Trade Secrets Act, and specific agency procurement regulations can influence the protection of information submitted to the government from disclosure to third parties, including competitors. It is essential to note that an NDA between contractors does not bind the government, and contractors should avoid assuming that it does.  

Organizational conflicts of interest (OCI) can arise from the sharing of confidential information during teaming discussions. These issues could manifest if a teaming relationship dissolves, especially if one party subsequently competes against the other or supports the government's evaluation of a competitor's proposal. Hence, NDAs should often be considered alongside OCI mitigation provisions.  

Finally, confidentiality obligations may need to flow down through subcontract tiers, particularly involving classified, export-controlled, or Controlled Unclassified Information (CUI), emphasizing the necessity of nondisclosure agreements for government contractors.

While every NDA should be tailored to the specific relationship and information at stake, understanding the importance of NDA in government contracting is crucial. Most well-drafted nondisclosure agreements for government contractors address the following key provisions of NDAs: 

1. Definition of confidential information: The definition should be precise and not boilerplate. Vague definitions like "any information disclosed" can be difficult to enforce and may include information that should not be restricted.

2. How to designate information: Clearly set forth the method for how information becomes subject to the NDA, ensuring employees understand this process. For instance, does a document have to be marked in a specific way at the time of disclosure? How can verbally disclosed information be adequately covered?

3. Exclusions from confidentiality: Standard carve-outs typically include information that is already public, independently developed, rightfully known before disclosure, or later obtained from a third party without restriction.

4. Permitted use and permitted recipients: Outline what the receiving party may do with the information (e.g., evaluate a potential teaming arrangement) and specify who within the organization may have access to it.

5. Term and duration: Detail how long confidentiality obligations last, both during and after the relationship ends. Trade secrets may warrant indefinite protection, while other data may only need protection for a defined period.

6. Return or destruction of information: Include obligations to return or destroy confidential materials at the end of the relationship or upon request.

7. Remedies: Address provisions for injunctive relief, as monetary damages alone often cannot undo the harm caused by a disclosed trade secret or leaked bid strategy.

8. Government and third-party disclosure carve-outs: Incorporate language that explains how the NDA interacts with FOIA requests, subpoenas, or mandatory disclosures to a government agency.

9. Flow-down and assignment: Clarify whether obligations extend to subcontractors, affiliates, or successors, and whether the agreement can be assigned.

10. Governing law and dispute resolution: Specify which state's law applies and how disputes will be resolved, particularly important in multi-state or multi-tier contracting relationships.

Assuming an NDA protects information submitted to a government agency in the same way it safeguards data shared with a private party does not imply automatic coverage. Contractors must recognize the importance of NDAs in government contracting by properly marking and labeling proprietary information and understanding the applicable procurement regulations. Using a generic, one-size-fits-all template for every teaming arrangement, irrespective of the sensitivity of the information or the nature of the relationship, overlooks key provisions of NDAs that are crucial for compliance. Additionally, it's essential to consider the interplay between the NDA and any subsequent teaming agreement or subcontract. Confidentiality terms negotiated early in a teaming discussion should be consistent with, or expressly incorporated into, later agreements. Furthermore, addressing what happens if the teaming relationship or bid doesn't move forward is vital, including timelines for returning or destroying information. Lastly, do not overlook the export control and CUI marking requirements that may apply independently of, or in addition to, the nondisclosure agreements for government contractors.