Tech firms could get homeland coverage

A House panel approved a proposal July 11 that would require the federal government to step in and provide liability insurance for information technology companies working on homeland security contracts.

The provision, drafted by Rep. Tom Davis (R-Va.), chairman of the House Government Reform Committee's Technology and Procurement Policy Subcommittee, would guarantee that IT companies have sufficient liability coverage in the event of a catastrophe.

The committee tacked the provision on to the Homeland Security Act (H.R. 5005), which is making its way through congressional committees.

The pitch is simple: Contractors are arguing that companies developing new anti-terrorism technologies with life-or-death consequences could be driven out of business if they are sued because of a product failure.

Although private companies are able to purchase their own insurance plans, many fear they would not be able to get enough coverage to protect them against lawsuits that could force them into bankruptcy.

"The potential liabilities associated with homeland security-related activities can be enterprise-threatening and may well cause many cutting-edge firms not to compete for homeland security contracts without adequate protections," Davis said in a statement. Davis' amendment would require companies, on a case-by-case basis, to shop around for the best insurance and would provide additional guaranteed coverage from the government.

David Marin, Davis' spokesman, said there is one law that protects companies from risks in the event of a disaster relating to national defense.

But the law covers contractors working at specific agencies, not the proposed Homeland Security Department, the CIA, the Justice Department or the U.S. Postal Service, a quasi-governmental agency. And it does not cover claims when technology is sold to commercial establishments or state and local governments.

The legislation is "based on the premise that Congress should ensure the availability of technologies that could make people and facilities across the nation less vulnerable to terrorist threats," Marin said.

Many companies have already hesitated to bid on homeland security contracts because of the liability problem, according to David Colton, vice president of strategic initiatives at the Information Technology Association of America.

"The blue-chip technology and integration companies have elected not to participate because of the fear that they would be exposing the entire corporation by participation," Colton said. "This legislation is designed to make sure the very best technology companies and contractors are able at least to submit bids for homeland security."

Nevertheless, consumer groups see the proposal as another way to protect corporate America's pocketbooks.

"Being liable to the public is important," said Bob Hunter, director of insurance for the Consumer Federation of America. "Suppose you are grossly negligent — you're supposed to put in something that monitors for bombs, and you put in something that monitors for pizza. Why should the taxpayer be liable for gross negligence?"

The legislation now goes to the House Permanent Select Intelligence Committee's Terrorism and Homeland Security Subcommittee, which will merge various parts of the legislation requested by the Bush administration to overhaul government and protect America.

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Homeland security action

Highlights of amendments in the Homeland Security Act of 2002 (H.R. 5005) made by the House Government Reform Committee include:

* An amendment, based on H.R. 2435, that promotes voluntary information sharing about threats to the nation's critical infrastructure.

* Language that mirrors H.R. 3844, the Federal Information Security Management Act of 2002, which permanently reauthorizes and strengthens the Government Information Security Reform Act.

* A new section based on H.R. 4629 that will help the government evaluate homeland security technologies and reward private-sector innovation.

* An amendment that expands and clarifies the proposed Homeland Security Department's authority to manage its real property holdings.

* Procurement reform language similar to H.R. 4694 that gives the proposed department the tools and flexibility it needs to acquire critical goods and services quickly and efficiently, while maintaining important safeguards.