Infotech and the Law: Now, why can't foreigners work on fed IT deals?

Richard Rector

The Homeland Security Department issued interim rules Dec. 4, 2003, that established its own acquisition regulation, known as HSAR. The rules supplement the Federal Acquisition Regulation and establish a uniform acquisition process for the entire agency, except the Transportation Security Administration.

For IT contractors, DHS' new rules are important because they establish several requirements beyond the FAR. The most important among them is a provision that precludes foreign nationals from working on certain DHS service contracts.

Specifically, HSAR 3037.110-70(a) requires that a restrictive clause, entitled "Qualifications of Contractor Employees" (HSAR 3052.237-70), be included in any solicitation or contract for services that requires contractor employees to have access to government facilities or sensitive information.

"Sensitive information" includes unclassified information that if lost, modified, misused or subjected to unauthorized access could adversely affect national interest, the conduct of federal programs or the privacy of individuals.

Although the clause is aimed at IT contractors with access to sensitive data, it can be construed to apply to an extraordinarily wide range of DHS service providers.

For example, the clause arguably would apply to a janitorial services contractor with access to a government facility. DHS security experts need to address this in the final rule.

The clause also requires that contractor employees must be either U.S. citizens or permanent resident aliens, regardless of whether they're working on the contract.

Thus, under the interim rule, a company that employs non-U.S. citizens or foreign nationals in any capacity or location -- which would include most large, multinational corporations -- can't meet the requirements. DHS also must clarify this in the final rule.

Even if the clause is revised, however, to apply only to contractor employees working on DHS contracts involving sensitive IT applications, it's still a significant departure from the FAR because it bans foreign nationals from working on such contracts.

This could be a problem for IT contractors. Many companies hired foreign nationals over the past five years because of a shortage in the domestic IT work force. Congress increased the number of temporary visas for foreign nationals from 65,000 in 1997 to 195,000 in 2003. Although these visas have been scaled back to 65,000 for 2004, there are significant numbers of foreign nationals working in the IT industry.

Therefore, companies involved in DHS contracting for IT services will have to evaluate their work forces to ensure compliance with the new clause.

The departments of Justice and Treasury have adopted similar prohibitions on foreign nationals over the past few years.

In July 2001, the Justice Department established a policy that foreign nationals "shall not be authorized access to assist in the development, operation, management or maintenance of department IT systems" unless waived by the department's chief information officer.

The HSAR clause, unlike the Justice provision, does not expressly permit the agency to waive the ban on a case-by-case basis. Service contractors need to be aware of this significant restriction, and may wish to negotiate greater clarity and flexibility into the clause, before they enter into a contract with DHS. And DHS should consider adding such flexibility to its process.

Richard Rector is a partner in the Government Contracts Group of Piper Marbury Rudnick & Wolfe LLP in Washington. His e-mail address is richard.rector@piperrudnick.com.

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