InfoTech and the Law

As the president and Congress work toward a consolidated approach to homeland security ? including a massive new federal agency to supervise and coordinate protection of American citizens and strategic national assets ? it has become abundantly clear that the government's success depends on the active participation of U.S. industry.The Department of Homeland Security and other federal agencies need new and different products and services to combat a wide range of terrorist threats. From detection of explosives and biological agents to development of advanced security techniques and vaccines, the public will rely on U.S. companies to provide ideas and sophisticated technologies.The administration, however, may find U.S. businesses reluctant to participate in critical efforts, given the potentially enormous legal liability for government contractors.In the event of a terrorist attack by a suicide bomber, for example, an explosive detection contractor could face lawsuits from injured citizens complaining that the company failed to adequately protect the public. Similarly, a vaccine manufacturer could be sued by victims of a biological attack if the vaccine is ineffective or causes an adverse medical reaction.A company must carefully weigh the threat of litigation when considering homeland security contracts.To make matters worse, since Sept. 11, U.S. businesses can no longer count on insurance companies to provide affordable coverage for terrorist attacks or related liabilities. In many instances, insurance is simply unavailable.As a result, agencies may find few contractors are willing to perform homeland security work without additional legal protection. Even a patriotic business executive cannot be expected to expose his or her company to financial ruin.The good news is many agencies are authorized to indemnify government contractors against risks associated with unusually hazardous activities for which commercial insurance is unavailable. Military departments may indemnify contractors performing research and development from unusually hazardous risks not compensated by insurance. The Department of Health and Human Services has similar indemnification authority for research contracts related to mental and physical diseases and impairments.Government indemnification of research and development contractors is well known and commonly used in the research community. Little known within the contracting community, however, is a much broader indemnification authority with direct applicability to production contracts for homeland security programs.Under Public Law 85-804 and related executive orders, certain agencies are authorized to indemnify prime contractors and subcontractors against unusually hazardous activities for which commercial insurance is unavailable, in order to facilitate national defense. Pursuant to this legal authority with its roots in the World War II era, the military services traditionally have included indemnification clauses in production contracts involving nuclear power, highly volatile fuels for missiles and similar unusually hazardous activities.Authorized agencies now should employ this same legal authority to provide indemnification protection to homeland security contractors, the efforts of which are critical to our national defense.Along with the Defense Department and the military services, however, only NASA, the Federal Emergency Management Agency, the General Services Administration, the Transportation Department and a handful of other agencies have indemnification authority. To get full industry participation in homeland security initiatives, the president can, and should, delegate indemnification authority to additional agencies.This can be done by executive order pursuant to Public Law 85-804 without congressional involvement. The new Department of Homeland Security, as well as many other agencies, could use indemnification protection to attract the best U.S. companies for vital government programs. Without it, homeland security could be undermined by a lack of industry interest. The administration should not overlook this opportunity to fully arm federal agencies and government contractors in our fight for a safer, more secure nation.