Companies gain new edge

Washington lawyer Raymond Biagini wrote the main liability provision of the Safety Act and helped two of the first four companies apply for their coverage. The companies were granted protection for their products and services. Biagini has 40 more applications in the works.

Safety Act gives limited liability to four contractors

The four companies that have received limited legal liability protection from the Homeland Security Department for an anti-terrorism product or service have an advantage that their competitors don't: assurance that they won't be sued for unlimited damages if a terrorist attack causes their technologies to fail.

The protection, made available under the Safety Act and granted June 18 by the Homeland Security Department, has given the four companies a new marketing tool.

The message to potential buyers is: "Why would you buy any other technology?" said Raymond Biagini, a Washington lawyer who wrote the core Safety Act provision that became law. He also helped two of the four firms apply for Safety Act coverage.

The four companies that got protection are Lockheed Martin Corp. of Bethesda, Md., Northrop Grumman Corp. of Los Angeles, both large firms; Teledyne Brown Engineering Inc. of Huntsville, Ala., a midsize company; and Michael Stapleton Associates of New York, a small company.

For Teledyne Brown Engineering, the threat of unlimited liability was enough to keep its WaterSabre off the market until now. WaterSabre is a remotely operated, high-pressure water jet that can cut through metal containers to let technicians see inside a container or potential explosive device without getting hurt.

The product has been demonstrated in several cities, including Houston, Phoenix and Ottawa, and loaned to a New York training facility, but Teledyne Brown has not sold it, said Mike Scherer, vice president of business development.

"We've held off making it commercially available pending Safety Act approval," Scherer said. "If we had to buy [insurance] coverage for terrorist attacks, we wouldn't eat that cost. It would be folded into the government's costs, so [the Safety Act protection is] a smart move on the part of the department."

The Safety Act is part of the Homeland Security Act of 2002. It limits the liability of sellers of qualified anti-terrorism technologies if a terrorist attack occurs and causes the sellers' products or services to fail through no fault of their own.

Some industry executives said that without the limited liability provided by the Safety Act, their companies could face financial ruin if their technologies failed because of a terrorist attack.

When companies apply for protection under the Safety Act, Homeland Security officials determine if their technologies merit liability protection and what level of insurance the companies should be required to carry.

"It was critically important for us and for the department to get approval [for protection] so the technology can be used to help save lives," said Terry Kees, vice president of homeland security systems at Lockheed Martin. "Without it, we would have to consider the liability implications of its use."

Lockheed Martin got coverage for its automated, threat-based risk assessment platform, a computer system that provides near real-time terrorism threat analysis. It is used in Capps II, the Computer-Assisted Passenger Prescreening System that identifies potentially dangerous airline travelers.

Northrop Grumman got protection for its biohazard detection system, which the U.S. Postal Service uses to detect trace levels of DNA from anthrax spores and other biological agents as mail is processed.

Michael Stapleton Associates got protection for its SmartTech system and explosion detection services. SmartTech is a high-speed video and audio system that lets offsite bomb technicians view suspicious items during X-ray screenings and offer guidance in handling those items.

The additional of dogs trained in explosive detection, training programs and radiation detection equipment increases employee security, according to the Homeland Security Department.

For Michael Stapleton Associates, the protection "legitimizes our position in the marketplace," said Michael Stapleton, chief executive officer. "Faced with two companies of equal stature, price and quality, as a potential buyer, you'd have to look at the designation as giving us a leg up on another company."

He said the U.S. Marshals Service, U.S. Park Police and several state and city agencies use the company's system and services.

DHS officials said they hope the approvals, and planned changes to the application process, will encourage more companies to apply for protection.

"We welcome people to apply. We are making every attempt to make the application process as easy as possible," said Wendy Howe, acting director of the DHS Office of Safety Act Implementation.

Penrose "Parney" Albright, assistant secretary for science and technology at DHS, said 19 Safety Act applications and 91 pre-applications are being reviewed. Companies that submit pre-applications get feedback from the department that could identify shortfalls in the information the company supplies early in the process.

Department officials said they are responding to complaints that the Safety Act application process takes too long and requires companies to provide too much financial information. They said they are working on a revised application that reduces the amount of required financial data and provides more guidance on filling out the application.

Howe said she hopes the new application will be ready this fall along with a final procurement rule implementing the Safety Act.

According to the department, the application takes 60 to 110 hours to finish. When the application was published in October, industry executives complained it could take hundreds or even thousands of hours to do.

Kees said it took about 500 hours to fill out Lockheed Martin's application, and that the entire process took about six months.

Department officials also said they are working to align the procurement process with the Safety Act application process.

"We are working with our procurement shop and Office of General Counsel to develop a means of facilitating that, so people who are applying for Safety Act protection can also use it with respect to the procurement," Howe said.

Industry officials called for this alignment, saying that companies will be reluctant to enter into government contracts before they get Safety Act protection.

"We'd like to see if we can construct provisions that indicate ? the winning bidder will be eligible for Safety Act protection," said Brendan Peter, senior director in the enterprise solutions division at the Information Technology Association of America in Arlington, Va. "There are some procurements where a company might be able to move forward in a pilot phase without protection, but when you move to full-scale implementation, the liability concerns are much greater."

While there is no way of guaranteeing Safety Act protection before a DHS review, companies can get an expedited review if a procurement is pending, Howe said.

"We move ahead in the queue applications that indicate there is a procurement pending," she said. "We have additional resources to bring to bear, so that non-expedited reviews do not fall by the wayside."

Another way to marry the Safety Act and procurement processes is for agencies to make bidders show they're applying for coverage, said Biagini, a partner at McKenna Long & Aldridge LLP. He said the Health and Human Services Department and New York City police department have done so.

"I think that's smart," he said. "I think that's the way it's going to work."

Staff Writer Gail Repsher Emery can be reached at gemery@postnewsweektech.com.

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