<DOC>
[108th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:91553.wais]
IMPLEMENTING THE SAFETY ACT: ADVANCING NEW TECHNOLOGIES FOR HOMELAND
SECURITY
=======================================================================
HEARING
before the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
OCTOBER 17, 2003
__________
Serial No. 108-96
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpo.gov/congress/house
http://www.house.gov/reform
______
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COMMITTEE ON GOVERNMENT REFORM
TOM DAVIS, Virginia, Chairman
DAN BURTON, Indiana HENRY A. WAXMAN, California
CHRISTOPHER SHAYS, Connecticut TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida PAUL E. KANJORSKI, Pennsylvania
MARK E. SOUDER, Indiana CAROLYN B. MALONEY, New York
STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland
DOUG OSE, California DENNIS J. KUCINICH, Ohio
RON LEWIS, Kentucky DANNY K. DAVIS, Illinois
JO ANN DAVIS, Virginia JOHN F. TIERNEY, Massachusetts
TODD RUSSELL PLATTS, Pennsylvania WM. LACY CLAY, Missouri
CHRIS CANNON, Utah DIANE E. WATSON, California
ADAM H. PUTNAM, Florida STEPHEN F. LYNCH, Massachusetts
EDWARD L. SCHROCK, Virginia CHRIS VAN HOLLEN, Maryland
JOHN J. DUNCAN, Jr., Tennessee LINDA T. SANCHEZ, California
JOHN SULLIVAN, Oklahoma C.A. ``DUTCH'' RUPPERSBERGER,
NATHAN DEAL, Georgia Maryland
CANDICE S. MILLER, Michigan ELEANOR HOLMES NORTON, District of
TIM MURPHY, Pennsylvania Columbia
MICHAEL R. TURNER, Ohio JIM COOPER, Tennessee
JOHN R. CARTER, Texas CHRIS BELL, Texas
WILLIAM J. JANKLOW, South Dakota ------
MARSHA BLACKBURN, Tennessee BERNARD SANDERS, Vermont
(Independent)
Peter Sirh, Staff Director
Melissa Wojciak, Deputy Staff Director
Rob Borden, Parliamentarian
Teresa Austin, Chief Clerk
Philip M. Schiliro, Minority Staff Director
C O N T E N T S
----------
Page
Hearing held on October 17, 2003................................. 1
Statement of:
Albright, Parney, Assistant Secretary for Plans, Programs and
Budgets, Department of Homeland Security................... 12
Miller, Harris N., president, Information Technology
Association of America; Stan Z. Soloway, president,
Professional Services Council; and John M. Clerici, esq.,
on behalf of the U.S. Chamber of Commerce.................. 36
Letters, statements, etc., submitted for the record by:
Albright, Parney, Assistant Secretary for Plans, Programs and
Budgets, Department of Homeland Security, prepared
statement of............................................... 15
Clerici, John M., esq., on behalf of the U.S. Chamber of
Commerce, prepared statement of............................ 69
Cummings, Hon. Elijah E., a Representative in Congress from
the State of Maryland, prepared statement of............... 122
Davis, Chairman Tom, a Representative in Congress from the
State of Virginia, prepared statement of................... 4
Maloney, Hon. Carolyn B., a Representative in Congress from
the State of New York, prepared statement of............... 30
Miller, Harris N., president, Information Technology
Association of America:
Application kit.......................................... 79
Prepared statement of.................................... 39
Ruppersberger, Hon. C.A. Dutch, a Representative in Congress
from the State of Maryland, prepared statement of.......... 22
Soloway, Stan Z., president, Professional Services Council,
prepared statement of...................................... 60
Waxman, Hon. Henry A., a Representative in Congress from the
State of California, prepared statement of................. 8
IMPLEMENTING THE SAFETY ACT: ADVANCING NEW TECHNOLOGIES FOR HOMELAND
SECURITY
----------
FRIDAY, OCTOBER 17, 2003
House of Representatives,
Committee on Government Reform,
Washington, DC.
The committee met, pursuant to notice, at 10:10 a.m., in
room 2154, Rayburn House Office Building, Hon. Tom Davis
(chairman of the committee) presiding.
Present: Representatives Tom Davis of Virginia, Ose,
Schrock, Duncan, Carter, Waxman, Maloney, Cummings,
Ruppersberger, and Bell.
Staff present: Peter Sirh, staff director; Melissa Wojciak,
deputy staff director; Keith Ausbrook, chief counsel; John
Hunter and David Young, counsels; David Marin, director of
communications; John Cuaderes, senior professional staff
member; Teresa Austin, chief clerk; Brien Beattie, deputy
clerk; Corinne Zaccagnini, chief information officer; Michelle
Ash, minority counsel; Jean Gosa, minority assistant clerk; and
Cecelia Morton, minority office manager.
Chairman Tom Davis. Good morning. A quorum being present,
the Committee on Government Reform will come to order.
I want to welcome everybody to today's hearing on the
implementation of the Support Antiterrorism by Fostering
Effective Technologies Act of 2002 [SAFETY Act]. The private
sector is an important partner in providing for the security of
our homeland. To ensure that private sellers, manufacturers and
service providers contribute to homeland security by developing
potentially life-saving technologies without having the fear of
crippling or frivolous lawsuits, the government needs to
provide litigation and risk management frameworks to adequately
prepare for terrorist attacks.
As part of the Homeland Security Act of 2002, Public Law
107-296, Congress enacted the SAFETY Act to provide incentives
for the development and deployment of antiterrorism
technologies by creating systems of risk management and
litigation management. The SAFETY Act seeks to ensure that the
threat of liability does not deter manufacturers or sellers of
antiterrorism technologies from developing and commercializing
technologies that could save lives. The act creates certain
frameworks for ``claims arising out of, relating to or
resulting from an act of terrorism'' where qualified
antiterrorism technologies are deployed. The act does not limit
liability for harms caused by antiterrorism technologies when
no acts of terrorism have occurred.
The SAFETY Act directs the Department of Homeland Security
to adopt regulations to implement the liability protections
conferred by the act for qualified antiterrorism technologies.
Under the statute, these qualified technologies would receive
several protections, including limiting lawsuits filed under
the act to the Federal courts, prohibiting a plaintiff from
recovering punitive damages, or permitting recovery of
noneconomic damages such as damages for physical or emotional
pain, and reducing any recovery from the seller by the amount
of any collateral sources such as insurance payments.
Some technologies qualified under the act may also qualify
for a rebuttable ``government contractor defense.'' The
government contractor defense could provide sellers and
manufacturers immunity from product liability altogether when
the qualified technology is deployed for the purposes of
defending against or responding to a terrorist act.
Under the act DHS can certify that the seller or
manufacturer will receive this rebuttable defense if DHS
determines that the technology will perform as intended,
conforms to the seller's specifications and is safe for the use
it's intended. But the defense will not protect sellers and
manufacturers against charges of fraud or willful misconduct.
The act requires DHS to adopt rules to implement the
protections in the act. The timely adoption and implementation
of those rules is the reason for our hearing today.
On July 11, 2003, DHS announced the draft regulations
implementing the SAFETY Act that were published in the Federal
Register for public comment. Over 40 private firms and private
sector associations submitted comments. An interim final rule
has been released to the public.
By passing the SAFETY Act, Congress acted quickly to
resolve uncertainty over liability concerns so that the full
power of the American technology could be unleashed in the war
on terrorism. We gave DHS responsibility to develop a
transparent process to accomplish these objectives. It is
imperative that DHS begin qualifying existing and new
technologies so that they can be placed in the hands of those
who need them now, especially for those high-priority homeland
security procurements that have been on hold pending the
qualification of antiterrorism technologies already selected
for use.
For its part, when DHS issued the draft regulations in
July, it stated it would begin accepting applications for
SAFETY Act protections on September 1st, but the actual form to
be used for private firms to qualify antiterrorism technologies
wasn't approved by OMB until this week. Also the interim final
rule was only issued by DHS this week. As a result of these
bureaucratic delays, private firms have waited to submit
applications until they have some finality in the application
process and implementing regulations. It's imperative that DHS
now mobilize its efforts to accomplish the critical purposes
set out in the SAFETY Act.
In so doing, DHS must identify and implement a clear
strategy for prioritizing the many applications it will receive
for the qualification of antiterrorism technologies. Congress
did not intend for the SAFETY Act to be used solely as a means
for the development of ``new'' antiterrorism technologies.
While developing new technology is essential, I believe DHS
needs to focus on qualifying ``existing'' antiterrorism
technologies that are ready to be deployed to protect our
civilian population. I urge the Department to make as its No. 1
priority the identification, prioritization and qualification
of existing antiterrorism technologies that are now being
sought by Federal and non-Federal entities. It's imperative
that we protect the highest-priority facilities and critical
infrastructures in high-risk locations.
In addition, DHS must be careful that its implementing
regulations and processes are not so complicated that they
defeat the very purpose of the SAFETY Act. They should allow
for the rapid deployment of antiterrorism technology necessary
to protect the American people rather than create burdensome
red tape and bureaucracy. Wherever possible, decisions
regarding the suitability of antiterrorism technology should
rest with those entities charged with the responsibility of
acquiring the technology. It's also imperative that DHS adheres
to a disciplined time schedule for processing applications.
Through this hearing the committee intends to learn about
the interim final rule promulgated by DHS and whether the rule
effectuates the congressional intent of the act. The committee
hopes this open discussion will result in effective
implementation of the act.
We have assembled an impressive group of witnesses to help
us understand the statute, the proposed rules and the private
sector concerns about the proposed rules.
I want to thank all of our witnesses for appearing before
the committee. I look forward to their testimony, and I now
yield to Mr. Waxman.
[The prepared statement of Chairman Tom Davis follows:]
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Mr. Waxman. Thank you very much, Mr. Chairman. I agree that
the private sector can and should develop new and innovative
technologies to respond to the ever-changing threats to the
American people. I support all efforts to make the people of
the United States safer, and I believe that the private sector
has a role to play. I'm glad that the representatives of the
private sector are here today to discuss their intentions to
create these new technologies.
However, the SAFETY Act, which we are discussing today, is
a disappointment and moves in the wrong direction. This law is
not about encouraging innovation, but rather its goal is to
limit the legal liability of the defense contractors and other
manufacturers of antiterrorism products and, in many
circumstances, to give them absolute immunity. Even in those
cases where there may be limited liability, the law bars access
to State courts, eliminates punitive damages, eliminates joint
liability, limits all forms of liability to the cost of,
``reasonably priced,'' insurance, and reduces judgments by the
amount of insurance or other collateral source benefits. And
while limiting or eliminating the liability of manufacturers,
the law also severely restricts the ability of claimants to
recover damages for their injuries, because it fails to provide
for any alternative form of compensation or indemnification.
This act is ironically called the SAFETY Act, when in
reality the only safety it provides is to corporate wrongdoers.
Corporations that sell defective products will now have nothing
to fear. They will either have very limited liability or no
liability at all. Let me give an example. Suppose the Homeland
Security Department approves a process designed to test the
water supply for contamination. The sellers of this service
later discover that their process is ineffective, but continue
to earn huge profits by falsely promising the safety of the
water supply. If terrorists exploit this weakness, and citizens
are poisoned by contaminated water, the sellers of the service
are totally immune from all forms of liability if the product
was certified for the government contractor defense. This is
true even though their misconduct was intentional. This makes
absolutely no sense. Why would we want to give corporations
protection for intentional, knowing misbehavior?
Mr. Chairman, as you know, I supported the Turner amendment
to the Homeland Security Act extending indemnification
protections to antiterrorism technologies. I believe Mr.
Turner's amendment would have appropriately mitigated the
seller's risk of proposal liability. Unfortunately, the Turner
amendment lost in the House by 1 vote, and thus we are left
with the SAFETY Act--immunity instead of indemnity.
Although I did not support the SAFETY Act, I will agree
that the SAFETY Act, like all laws, should be properly enforced
by the administration. Therefore, I appreciate that we are
having this oversight hearing today, and I look forward to
hearing and reading the testimony on how the administration
intends to implement this act.
Chairman Tom Davis. Well, thank you very much.
[The prepared statement of Hon. Henry A. Waxman follows:]
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Chairman Tom Davis. Mr. Ose, any opening statement? Any
other Members wish to make an opening statement?
Well, let's move to our first panel. I want to thank the
honorable Parney Albright, the Assistant Secretary for Plans,
Programs and Budgets of the Department of Homeland Security.
It's the policy of this committee to swear people in before
they testify. Would you rise and raise your right hand?
[Witness sworn.]
Chairman Tom Davis. We have your whole statement in the
record. We have a light in front of you; when it turns orange,
you'll be 4 minutes into your statement; red, 5 minutes, and if
you could sum up about that time. Thanks for being with us.
STATEMENT OF PARNEY ALBRIGHT, ASSISTANT SECRETARY FOR PLANS,
PROGRAMS AND BUDGETS, DEPARTMENT OF HOMELAND SECURITY
Mr. Albright. Thank you, Mr. Chairman, Mr. Waxman,
committee members. I'm pleased to appear before you today to
discuss the Department of Homeland Security's implementation of
the Support Antiterrorism by Fostering Effective Technologies
Act of 2002 [SAFETY Act]. As you may know, the SAFETY Act
provides incentives for the development and deployment of
qualified antiterrorism technologies by creating a system of
``risk management'' and a system of ``litigation management.''
The SAFETY Act is part of the Homeland Security Act of 2002,
which is the organic legislation of the Department of Homeland
Security.
With the creation of the Department of Homeland Security,
President Bush envisioned an organization that would engage
entrepreneurs and tap America's inventive spirit in the war on
terrorism. The Science and Technology Division of the
Department is specifically tasked with marshalling the
intellectual capital of the engineering and scientific
communities to develop fresh and effective approaches to
safeguard the American public from terrorist attacks. The
SAFETY Act is an important vehicle for removing obstacles to
the deployment of these capabilities to the field.
Now, the purpose of the SAFETY Act is to ensure that the
threat of liability does not deter potential manufacturers of
qualified antiterrorism technologies from developing and
commercializing technologies that could significantly reduce
the risks or mitigate the effects of large-scale terrorist
events. The act does create certain liability limitations for
``claims arising out of, relating to, or resulting from an act
of terrorism'' where qualified antiterrorism technologies have
been deployed. The act does not limit liability for harms
caused by antiterrorism technologies when no act of terrorism
has occurred, as was pointed out by the chairman.
Clearly, the issue Congress is addressing concerns the
uncertain risk environment born out of the threat of terrorism.
The potential risks and liabilities that stem from the
technologies deployed in our war against terrorism are very
difficult to quantify. As a result, in many cases insurance has
been largely unattainable or so costly as to leave the
technologies in question without a market. It is hardly
surprising that companies are unwilling to bet their existence
by developing and deploying services and products in this
uncertain climate. This means that key capabilities needed to
secure the homeland may not be available for deployment. The
SAFETY Act does serve to encourage the development and
deployment of antiterrorism technologies that will
significantly enhance the protection of the Nation by providing
certain liability protections to allow the vast resources of
the national research and development enterprise to be engaged
for securing the homeland.
Given the significance and complexity of this
groundbreaking statute, the Department of Homeland Security
decided to develop and publish a regulation setting forth the
Department's policies and procedures for its implementation.
The Department solicited comments on the proposed SAFETY Act
regulation this summer and published an interim final rule that
was signed by Secretary Ridge on October 10th, incorporating
suggestions from many of the thoughtful comments provided by
almost 45 organizations and individuals during the first public
comment period. Under the interim rule, we will continue to
accept and entertain comments as we begin the process of
executing the act. The Department is, under the rule,
implementing the SAFETY Act within the Science and Technology
Division and I, as Assistant Secretary, am responsible for
evaluating applications and recommending to the Under Secretary
for Science and Technology whether antiterrorism technologies
should be approved or rejected for a designation or
certification under the authority delegated to him by the
Secretary under the regulation.
Users of a technology designated as a qualified
antiterrorism technology under the SAFETY Act enjoy significant
liability protection. Specifically, liability is limited in
scope to only the seller of the technology and is limited to an
amount where the requisite insurance coverage does not
unreasonably distort the price of the technology. The statute
provides for a very broad definition of ``technology,''
including tangible products, software and services, including
support services.
The seven criteria specified in the statute for designation
of a technology seek, in essence, three kinds of information.
The first is technical. Does the technology work? Does it
provide useful levels of performance in scenarios of interest?
Is it mature? What specific threats does the technology
address? What is the level of risk exposure to the public if
the technology is not deployed? And then there are economic and
actuarial issues. How does the risk of liability affect demand
for the product toward its deployability? What are the
liability risks? There are additional criteria associated with
certification. In particular, detailed safety and hazard data
are required in the statute in order for a technology to
qualify for the government contractor defense presumption.
This presents a very complex and unusual analytic
challenge. We are striving for consistent and equitable
methodologies that implement the intent of Congress while
retaining flexibility to assess the vast array of potential
technologies within a constantly changing threat environment.
To do this we have created a SAFETY Act Office to house
permanent Federal staff to oversee the effort. We have over 100
government scientists and engineers in the Science and
Technology Directorate along with the vast resources of our
national labs to help evaluate the required data and perform
the requisite analyses.
We have, to assist us in these efforts, the support of Mr.
Joe Whitley, the DHS General Counsel. He and his staff have
played a pivotal role during the rulemaking process and are
available to address legal policy issues as they arise.
We have contracted with an FFRDC--or actually, we are in
the process of contracting with an FFRDC to provide analytic
support, and they bring a broad-capacity performing requisite,
proven objectivity and ability to access both classified and
proprietary data. They also provide a broad and deep capacity
for performing the requisite economic analyses and have
supplemented their expertise with specialists from a number of
academic institutions. We're also working with academia, in
particular Georgia State University, the University of Georgia
and others to evaluate actuarial data.
And then finally, we have contracted with Integrated Data
Systems to develop and implement a Web-based application and
evaluation tracking process. This is intended to provide an
online tracking capability so that businesses can check the
status of their applications and for the government to
efficiently evaluate, monitor and archive the application.
We've implemented a pre-application process to assist
particularly small businesses in this process so they can get
an initial read on their application without having to go
through the trouble and expense of filling the full application
out.
Recently, I and my SAFETY Act team went on the road and
held seminars and fielded questions in Dallas, Los Angeles,
Atlanta, Chicago and, just this past Tuesday, in Washington,
DC, to inform the American business community about the act and
its implementation. The interim rule is in place. The
application kit is available. The information seminars are
complete. We are now initiating implementation of the act.
Thank you for the opportunity to address this important
issue with you today, and I look forward to your questions.
Chairman Tom Davis. Thank you.
[The prepared statement of Mr. Albright follows:]
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Chairman Tom Davis. Mr. Ruppersberger, I know you had to
make----
Mr. Ruppersberger. Thank you for letting me go, Mr.
Chairman. First I applaud the committee and you, Mr. Chairman,
for holding this hearing today on implementing the SAFETY Act.
It is refreshing to be assessing the progress of implementation
as that process is underway. It seems these issues often occur
and come to our attention after a problem arises. As one who
was not a Member of Congress when this legislation passed--and
I understand the liabilities debate that took place--I think
this oversight hearing is extremely important at this point in
the process.
I'm encouraged that Congress is working with the Department
of Homeland Security and the other stakeholders to acquire the
technology and tools we need so desperately to protect our
country. Technology is an integral part of our world today. It
is a critical tool to solve both business and government
problems. Never has the need for advanced technology solutions
been more important than in the war on terror.
I agree with the research incentives the SAFETY Act
provided to encourage the private sector to find the best tools
available to help us achieve this victory but, as we all know,
technology is not perfect, and there are inherent difficulties.
Balancing the good with the problematic is the difficult
challenge the Department of Homeland Security faces today.
Balancing the realities of indemnity versus immunity is a
difficult challenge for Congress. I commend the Department for
making the rule process so open and public, and I hope that the
comments offered will be carefully reviewed and incorporated
into the final rule. Thank you.
Chairman Tom Davis. Thank you very much.
[The prepared statement of Hon. C.A. Dutch Ruppersberger
follows:]
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Chairman Tom Davis. Let me ask, what has taken so long to
get this thing up?
Mr. Albright. Well, Mr. Chairman, we--as you know, the
Department--the SAFETY Act in principle was signed into law on
January 24th. The departmental resources became available on
March 1st, and we published a draft rule, as you pointed out,
this summer. As you well know, this is normally an 18-month
process to get----
Chairman Tom Davis. But we're fighting a war on terrorism,
and we want to get these products in there. If it's business as
usual in terms of moving things through, we're not going to
accomplish the mission.
Now, we had a huge fight on the Hill whether to take Mr.
Turner's indemnification or to take this. The administration
wanted this. I actually prefer Mr. Turner's, but I gave
deference to the administration in terms of the way we do this.
This act was passed so that we could encourage companies who
have products that can help us fight the war on terrorism to
participate in the government procurement process. These are
companies that traditionally don't do it. That is the goal of
this legislation, and we have companies out there screaming and
not knowing what is going on. And, you know, the faster we get
these products up and running, the safer we are. And I think
that has been the purpose of it. I mean, Mr. Waxman talked
about--his example really I don't think is correct under the
law. My understanding is a SAFETY Act designation isn't valid
if the technology doesn't perform as it's stated when it's
approved by DHS. DHS will put the criteria around each approved
designation. If the criteria aren't met, then there's
liability. If the criteria are met, then you obviously don't
have the same vulnerability. That was the purpose of this.
Mr. Albright. Mr. Chairman, I would agree with you. This is
not a situation where we want to perform business as usual. As
I started to say, what we've done is we have taken a process
that normally takes 18 to 24 months, and we've compressed it to
7. This is an extraordinarily complex piece of legislation.
It's short in the act, but it's very complex, and the
complexities of the implementation are what led us to, in fact,
publish a rule--have the desire to publish a regulation in the
first place. And then as I pointed out in my opening comments,
we've got a lot of very thoughtful responses from industry and
from individuals about the draft rule that we felt it important
to carefully consider and include where relevant in the draft
interim rule. So actually I'm actually very proud of the fact
that this Department has managed to get, as I said, a very
lengthy regulatory process compressed to an extraordinarily
short period of time.
I do agree with your point. Let me just add that
technologies that don't work, we intend, for example, to fully
look at the set of technical data that is available for
technologies and the test and evaluation data that's available,
and look at the scenarios that are relevant to those
technologies, and assess whether or not it, in fact, is
effective. And if it turns out that it is not effective, then I
would agree with you. I think that would then cause the
technology to fall outside the contours of the designation----
Chairman Tom Davis. Let me ask you this. Since this process
is so complicated, since it's highly interactive, it's specific
to each individual application, do we have any internal appeal
process of the decision by the Secretary? Then it makes sense
to provide some review process within DHS rather than subject
applicants in the Department to a court review, which is what
you get otherwise.
Mr. Albright. I think actually the way you stated the
question, that actually is a rationale for why we have not
included a formal appeal process in this. This is, as you said,
an extraordinarily complex and nuanced process with a great
deal of interaction that occurs between the applicant fix and
the reviewers. To put in an appeals process by someone who
really hasn't been exposed to that very complex review of
technical and financial and actuarial data would leave us open,
frankly, to capriciousness, we think, and second-guessing. Or
the person who would be conducting the appeal would be in a
situation where they would just simply ask the Under Secretary
for their opinion again, and they would get it again. So it
either would fall into the category of a pro forma appeal or, I
think, lead us down the path toward a capricious implementation
of the act.
Chairman Tom Davis. Well, let me ask you this. Do you think
you're taking into account the users of the technology and
their needs as opposed to what you think they need? I mean, do
you have any conversations----
Mr. Albright. Absolutely. Of course we're going to consider
and provide considerable weight to the needs of the user
community when considering the efficacy of the technology in
question. There's a wide variety of such needs, and very
different threat environments, large differences in the
availability of existing countermeasures, and all of those
things drove the need to maximize the flexibility of the
implementation of the act and to avoid a one-size-fits-all
implementation, as you're implying in your statement--in your
question.
It's important to know, however, that translating a user's
effectiveness needs into measurable technical performance
parameters is a complex and often difficult process, and as I
would expect very close interaction between the scientists and
engineers who must review the technical performance data and
the user community, which, of course, is--they just want
something that works.
Chairman Tom Davis. Thank you.
Mr. Bell.
Mr. Bell. Thank you, Mr. Chairman. And thank you for your
testimony here today.
Since the Department is now seeking further comment on the
interim rule, I'm curious as to when we could expect any new
regulations from the Department coming forward.
Mr. Albright. Let's see. The comment period is open for an
additional 60 days, and at that time we would have to assess
and review the comments and determine what changes are
necessary in the finalization of the rule, if any, and then we
would begin the process of finalizing the rule at that time.
Mr. Bell. How long do you think the review process of the
comments will take?
Mr. Albright. It clearly depends on the complexity of the
comments, but I would expect--in the last case it took a few
weeks--so I would expect that to be the case this time around
as well.
Mr. Bell. As far as a timeline goal, do you have one as
we----
Mr. Albright. Let's see. You know, I always hesitate to
nail myself down to a date, but let's say that--as I said, a
comment period closes in 60 days; that's mid-December. So
there's no reason why after the holidays you wouldn't see a
final rule, say mid-January, something like that.
Mr. Bell. As the Chair pointed out, it is a rather complex
process, and I'm curious as to what is in place to protect the
proprietary information throughout the entire process.
Mr. Albright. It is our belief and the belief of our
general counsel that current FOIA exemptions protect the
proprietary nature of the information that would be provided in
the application. And then, of course, there's also the Federal
Trade Secrets Act which provides for criminal penalties for
those who unlawfully disclose proprietary information to the
public. So that is our belief at this time. We are, of course,
continuing to review that. As you know, that is a comment we
have received. We've received quite a few comments on that
issue, and so we're continuing to review that, and should we
find that, in fact, there is a need for additional protection
of proprietary information, we will certainly work with
Congress to make that happen.
Having said that, I should point out that a Federal
regulation can't trump FOIA, and so that's a statute. So if
there is, in fact, a need for a change in law, then we would
have to work with you to make that happen. But otherwise, it is
our belief at this time that the current regulations, in fact,
do provide adequate protection.
Mr. Bell. What are some of the additional protections that
have been discussed as possibilities?
Mr. Albright. Well, the exemptions that exist today within
FOIA, there's two of them. I think it's Exemption 4, which is
disclosure of proprietary information, and then there's
Exemption 1, which has to do with national security
information. And as I pointed out, there's the Federal Trade
Secrets Act. As I said, at this time we don't believe we need
additional statutory relief in order to further protect the
data. However, if, in fact, additional legal analysis indicates
that there may, in fact, be an issue there, then we would have
to come back to you with some specific proposals, I would
suspect. We don't have those right now, though.
Mr. Bell. And would that be after the comment period if
that kind of recommendation----
Mr. Albright. Actually, we are looking at this issue now as
we speak.
Mr. Bell. How did the Department determine that liability
should only be against the seller?
Mr. Albright. That was in the statute.
Mr. Bell. And how does the Department decide that the
designation should only be valid for a term of 5 to 8 years?
Mr. Albright. OK. Good question. There is no magic to the
5- to 8-year period. That was a judgment that we came to based
on our understanding of the technology, the technological cycle
and the potential changes in the threat environment.
It's important to understand, though, that the period of
designation just tells you that period over which you can sell
technologies that, in fact, have these kinds of protections. A
technology that is sold during the period over which the
designation is applicable, those protections exist in
perpetuity. I mean, we are rendering certain the protections
granted to the seller for a particular technology. However,
every 5 to 8 years, depending on the technology, they've got to
come back and ask us if they can continue to sell that
technology and continue to get that kind of protection.
Mr. Bell. Thank you very much.
Thank you, Mr. Chairman.
Chairman Tom Davis. Thank you very much.
The gentleman from Tennessee.
Mr. Duncan. Thank you, Mr. Chairman.
Mr. Secretary, I'm curious about how much interest there is
in this so far. Do you have any idea, a rough guess, as to how
many applications or any indications as to how many
applications you might be receiving on this?
Mr. Albright. Sir, that's an excellent question. So far
we've received a very small number of applications. We hear
anecdotally there is pent-up demand, but I couldn't tell you if
we're going to get 50, 500 or 5,000.
Mr. Duncan. How many people from the private sector have
been showing up at these seminars or meetings that you've been
holding?
Mr. Albright. The one we had in Washington, DC, for
example, had over 200 people present.
Mr. Duncan. What about outside of Washington?
Mr. Albright. Outside of Washington it ranged from 50 to 75
typically.
Mr. Duncan. And how many comments have you received thus
far roughly?
Mr. Albright. During the rulemaking process we received
comments from 45 organizations. The total number of comments I
don't have off the top of my head. It was----
Mr. Duncan. And have almost all of these comments been
favorable or supportive, or have some of the comments pointed
out problems or questions about the law thus far?
Mr. Albright. You're referring to the comments we got when
we were out on the road in places around the country? I would
say that the vast majority of comments we got were
extraordinarily favorable. In fact, a uniform comment we got
was they couldn't believe the Federal Government was doing
this, going out and reaching out to the community in the way we
were. But still this is a very complex rule, and it is
something that needed to be explained. No, I don't recall any
direct negative comments on the rule.
Mr. Duncan. All right. Thank you very much.
Chairman Tom Davis. Thank you very much.
Mr. Schrock, questions?
Mr. Schrock. Thank you, Mr. Chairman.
Mr. Secretary, in putting forth the rules to implement this
act, has DHS found specific statutory limitations that in your
estimation hinder the full realization of the act, and if so,
what recommendations do you have to the committee for potential
changes to this act?
Mr. Albright. That's an----
Mr. Schrock. Is it going to be substantive enough for
people to say, ``OK, we trust the government?'' Because as you
said, whenever the government shows up with a briefcase and
says, ``I'm here to help,'' people are automatically
suspicious.
Mr. Albright. Well, we've done everything we can to try to
change that attitude with the private sector. I would say that
I think it's premature to discuss any potential changes to the
act. I think, as with anything that's as groundbreaking as this
legislation is, I would not be at all surprised that as we get
into the implementation process and start to execute the act,
we're going to find a lot of issues that we may at some point
come back to you and ask for some statutory relief. But right
now I think it would be premature for me to say that there's
anything that leaps out at us as being problematic.
Mr. Schrock. I can certainly understand why the private
sector would be hesitant to produce anything that might be put
in place that they could get sued over. You know, suing is a
national pastime in this country. Until last night we thought
baseball was. I think that worries me, because we've got some
wonderful technology out there, and I'm afraid we're going to
stymie those folks who would come up with the technology,
because they're scared to death they will get sued. I really
worry about that.
Mr. Albright. We couldn't agree with you more. We've heard
anecdotally that contractors are having riders attached to
their insurance forms that don't apply to--I mean, you're
absolutely right. So we are obviously on board with this
landmark legislation, and our job is to implement it as
efficiently as we possibly can.
Mr. Schrock. Thank you.
Chairman Tom Davis. Thank you very much.
Mr. Carter, any questions?
Mr. Carter. Thank you, Mr. Chairman.
Mr. Secretary, will the DHS utilize an expedited renewal
process for applications?
Mr. Albright. A renewal process for applications? Yeah. I
think the answer is yes.
Mr. Carter. Expedited?
Mr. Albright. Sure. If the technology hasn't substantially
changed, if the insurance regime that they are operating in
hasn't substantially changed, and the threat environment hasn't
substantially changed, then I would imagine it would be fairly
straightforward.
Mr. Carter. And how do you intend to deal with new
developments to a particular antiterrorism technology that
occur after it has received the designation to ensure that
these developments are covered and can be deployed
expeditiously?
Mr. Albright. Well, there's two answers to that. Let me
first start by saying that the SAFETY Act doesn't alter the
competitive environment that the private industry operates in.
So, for example, if you have a particular technology, and you
have received SAFETY Act designation, and I have a technology
that performs more or less the same function but can do it
better, then I ought to be encouraged by the fact that you
have, in fact, already received SAFETY Act designation and will
go out and develop that product and apply for SAFETY Act
designation and will compete with you in the marketplace.
Mr. Carter. That is not what I really intended. What I
intended was, let's say I have a product that's been approved,
and because my company does--continues, we come up with a
better mouse trap, we've got a better idea, a way to improve
what we've already had approved by you. Can you--is that going
to be the--redo the whole process, or will there be a method
where you can shorten the process to add the technology?
Mr. Albright. No. In fact, we have in the rule in our
implementation process--what we have done is we have set the
system whereby any substantial change, a significant change or
modification to the device--actually, we are requiring, much
like the FDA does, that people who make substantial changes to
a device or a technology come to us and tell us about it, and
then we will issue a certificate that says that, in fact, this
is OK, that you can do this. And so we see that there's a
significant benefit to that, which is what you just
articulated, and that is that it prevents the developer or the
seller from having to go through the process all over again.
They can just simply come in and say, ``Hey, look, I've decided
to quit making this out of plastic, I'm going to make it out of
steel now,'' and we'll do a quick review of it to make sure
there aren't any other changes and just simply issue them a
certificate that allows them to keep their designation.
Mr. Carter. Thank you. That answered my question.
Thank you, Mr. Chairman.
Chairman Tom Davis. Thank you very much.
Mrs. Maloney, any questions?
Mrs. Maloney. Thank you for having the hearing, and if I
could place my opening comments in the record.
Chairman Tom Davis. Absolutely. Without objection.
[The prepared statement of Hon. Carolyn B. Maloney
follows:]
[GRAPHIC] [TIFF OMITTED] T1553.011
Mrs. Maloney. I think this is a very serious issue and one
that needs balance. Just from New York City, we're still
reeling from some of the aftermath of really being supportive
to the contractors who rushed to the scene to save the lives of
others, and now they're facing certain liability issues, when
all they were trying to do was save the lives of others
selflessly. So it's a very important area and one that needs
review, and I am glad that we're having it.
I'm interested in the new technologies you're seeing. In
New York the telephones didn't work, the radios didn't work,
and to this day they still don't work. Are you seeing new
technologies on radios that could be implemented around the
country for homeland security?
Being a New Yorker, I'm concerned about the power grid. We
just had a power grid shortage, and fortunately it was in the
middle of the summer so we didn't lose any lives. If it had
happened in the middle of the winter, people would have frozen
to death. And I'm wondering, are you seeing new technologies
for a power grid, and how we can protect this?
Actually, Mr. Chairman, I think it might be interesting new
technologies that we're seeing for homeland security, that you
may be reviewing or seeing in the application process; it might
be something that we might want to look at that we could take
to our districts. And I would just like some comments on what
new technologies are you seeing that you think would really be
helpful to the country?
Chairman Tom Davis. Mrs. Maloney, I think one of the
problems is a lot of these technologies are hesitant to come
forward until we get these regulations nailed down in a way the
companies are willing to come forward and not incur a lot of
liability. I mean, that is the issue. There are a lot of them
out there. I'm sure you've seen a part of it, but there are----
Mr. Albright. We've seen an enormous flood of people with
excellent ideas, and they come from not just the people you'd
expect them to come from, the big companies, the Lockheed
Martins, those sorts of people. We see them from people--
inventors in garage shops, and there's been a flood of
technology that has been coming at us over the past year and a
half. I was at the Office of Homeland Security prior to my
current position, and I saw a lot then, and I'm seeing a lot
now.
With regard to communications, I'd be happy to arrange to
have a briefing with this committee on Project SAFECOM, which
is managed by the Science and Technology Directorate in the
Department. It is focused entirely on developing and
implementing new technologies and standards for those
technologies, not just for interoperable communications, which,
of course, was one of the big issues that you had in New York
right after September 11. We're all familiar, for example, with
the story that the police department couldn't warn the fire
department to get out of the second building.
But also robust communications, your point is very well
taken that when we talk to the user community, which we do
spend a lot of time doing, their No. 1 priority is--obviously
they're interested in interoperable communications, but they
also want the communications that they have just within their
own particular organization to work and continue to work in a
robust fashion.
So, yes, the answer is there's lots of ideas out there. We
have programs in place to develop them, and I would be happy at
some point to brief you on them.
Mrs. Maloney. I'd like to say that during September 11, not
only could they not talk--the police talk to the fire, but the
fire couldn't even talk to each other.
Mr. Albright. Exactly.
Mrs. Maloney. So they couldn't even warn people that they
were getting calls in from people in the buildings that had
phones or cells or Blackberries or whatever, and they couldn't
communicate to the people on the site where to go.
And I want to share with my colleagues, when I went to the
police station, they said the No. 1 thing they needed was
radios. And so I thought, ``Who's got radios?'' The Defense
Department. So I called Bill Young, and Bill Young organized a
shipment of radios from the Defense Department to come into the
fire and police so that they could communicate at Ground Zero.
So that's one thing that this Congress organized the day after
September 11.
But I'm told they still can't communicate, and I would like
to ask if the chairman could arrange that for Members that
might be interested in it. I feel that if you can't communicate
with each other, how can you solve a problem, a crisis? And
regrettably, that is the world we live in now, and I look
forward to working with you and with the other members of the
committee on coming forward with a balanced solution that
protects the individuals and protects the companies. So I thank
you for your work.
Chairman Tom Davis. Thank you very much.
Let me just ask one last question. Once a company's product
or service receives SAFETY Act designation certification, it's
conceivable that this company could then have a very
competitive advantage in the marketplace. As you adopt the
rules, how do you view that? Is that a concern? Is it just the
way it happens? Are there any specific provisions you've
included in the interim rule to guard against a potential
competitive advantage?
Mr. Albright. No. Well, we certainly have thought about
that, but, again, the SAFETY Act is not designed--we're not
going to try to necessarily level the playing field among
various technologies. In other words, if you have a contractor
that sells a particular technology for a particular threat
environment fix, and they happen to hustle up there and apply
for SAFETY Act designation and get SAFETY Act designation, and
then another competitor who chose--who sells perhaps
substantially the same technology in the same threat
environment, they may be--but doesn't hustle to get that
application, then they may be a bit behind the power curve.
However, having said that, we also in the regulation talked
about the fact that we'll give great weight to what are called
``substantially equivalent technologies.'' So if you have a
technology that is basically the same as one that has already
been approved, you will almost certainly get an expedited
review.
Chairman Tom Davis. Mr. Schrock.
Mr. Schrock. Mr. Chairman, let me just ask one more thing.
Can technology that already exists be designated as a qualified
antiterrorism technology under the interim final rule? And can
you explain the difference between technology that has been
previously sold versus technology that has been previously
deployed? I think the commercial folks are asking that and want
to know the answer to that.
Mr. Albright. The term ``deployment'' in the SAFETY Act is
a purely technical matter, and what it means, in effect, is
that something that has been fielded proximate to an act of
terrorism, either--so technologies that have been--technologies
that receive anti--the SAFETY Act designation will only get
that designation if they have been deployed prior to the term
over which the designation applies, and there's an important
reason for that. We do not want to go backward in time and
unravel causes of action that may have already accrued, you
know, due to a prior event, for example.
But having said that, we also understand that there are
technologies that have been sold and fielded that pass all the
technical criteria and meet all the various criteria associated
with the SAFETY Act. And so the Under Secretary can, in fact,
designate technologies that have been sold past a point, past a
date of sale that is prior to when the designation is actually
granted. And what that does is that relieves you of--let me
give you an example of the situation where you could get an
absurd result if you didn't do that. You may have technologies,
for example, that are not widely deployed, they're extremely
expensive, and the reason they're so expensive is because the
cost of risk mitigation for them is very, very high. So you may
have a jurisdiction, like, for example, Fairfax County, that
can afford those technologies, and you may have other
jurisdictions that cannot. And the Department of Homeland
Security may decide that it's in the best interest of the
Nation to assure a more wide deployment of that technology. OK.
So that would then make that technology eligible for SAFETY Act
protection. That would be if it passes all the other criteria.
And we would so designate it. Having done that, the
technologies that were sold in my example in Fairfax would fall
into that category and would also receive the designation.
Mr. Schrock. So people who have technology already before
the next attack comes, are you saying they need to get to DHS
to get the DHS stamp of approval?
Mr. Albright. You've got to be a little bit careful,
because, for example, the purpose of the SAFETY Act, as the
chairman, for example, pointed out, is to assure that the
technologies that would not otherwise be deployed to the extent
that they need to be deployed are deployed.
If we have technologies that are out there, and they are
deployed to the extent they want to be deployed, and the
insurance regime is acceptable to them, then it's hard to
imagine that it was the intent of Congress to somehow indemnify
them when, in fact, the purposes of the act have already been
achieved, they have, in fact, been deployed.
Now, of course, insurance environments change. There's a
lot of stuff that was out there before September 11 that now
can't get insurance. They've had riders attached to their
policies, for example, and so, yeah, under those circumstances
we would have to go back in and look carefully at the
technology, review it and see if it should, in fact, receive
the designation.
Mr. Schrock. The premiums on these things, the insurance
has to be out of sight.
Mr. Albright. That's right. And so, again, prior deployment
doesn't necessarily preclude designation. However, it doesn't
form the decision.
Mr. Schrock. Thanks. Thank you.
Chairman Tom Davis. Mr. Carter, any additional questions?
Mr. Carter. Thank you, Mr. Chairman.
You've indicated that the application process will be
interactive between DHS and the applicant. What assurances can
you give us that the applicants will not be faced with
information requests that are burdensome and will delay the
certification of the product?
Mr. Albright. We have an application. It's available on the
Web today. We don't think it's burdensome. It's been through
the regulatory process at OMB. They don't think it's
particularly burdensome.
I guess what I would say is that we have a set of criteria
the statute requires us to evaluate, and that's our job to do
what Congress told us to do in this case. We have asked for
what was, in our view, the minimal amount of information needed
in order to do what Congress told us to do. As I said in my
opening statement, we are asking for whatever available data
there may be to show that the technology is technically
effective. We're asking contractors to tell us what the
liability regime--what their risks are, what they feel their
risks are, what the scenarios are that they think that this
technology is going to be applicable for. And we're asking them
to tell us something about what it takes to produce--what is
the actual basis for the cost of the technology. After all, we
are supposed to set the price of the liability risk--the risk
insurance to be at a level that doesn't unnecessarily distort
the price of the technology. To do that, we have to know the
price of the technology, and so--and know the basis for that
price.
As I said, we have a heavy burden here to bear. I mean,
after all, at the end of the day we are granting designation
and, in effect, limiting the liability for people who might
want to recover damages at some point. That's a burden that
we're bearing, and we have to, I think, be very diligent in our
review of the data to--and our request for data to assure that
we have the information we need to have to evaluate the
criteria.
Mr. Carter. Well, I understand that, and that's talking
about your application. It's been estimated by someone that it
would take about 108 hours to fill out that application, but in
an interactive situation where the developer or applicant is
dealing interactively with a member of your organization, which
means that other requests could be made of him, we need
additional information, I'm just asking that could easily
become burdensome, especially if someone had just got up on the
wrong side of the bed some morning. They can make that very
burdensome.
Is there going to be some kind of criteria that keep that
from being burdensome? And I can tell you from personal
experience that I've dealt with Federal bureaucrats that if
they got up on the wrong side of the bed could make life
burdensome.
Mr. Albright. Let me try and answer the question--maybe I
can answer the question this way. Did you say someone told you
it was 100 hours or days to fill out the application?
Mr. Carter. They said hours. If it's days, that's pretty
rough. Hours is rough.
Mr. Albright. 100 hours is rough, but it's not overly
rough, I would say. The way I would put it is that the
Department of Homeland Security wants this legislation to
succeed. We want this to work. As I've said, we've been very
open. We've published this regulation with a comment period. We
have, in fact, delayed release of the act from the date we
originally said we would in order to assess those comments. We
have an interim final rule where we are meeting for open
comment. We've gone out on the road all over the country. I
personally have done that with all of my staff to get input
from the private sector, and we will continue to do that,
because we really want this to work. And so if, in fact, it
turns out to be the case that the balance between the burden on
the seller and our ability to perform due diligence in the
review of the application has gotten out of whack, then we will
be the first people to try to go and fix that.
Mr. Carter. And on the previous question, just out of
curiosity for me, I'm making some assumptions, but I want to
see if I've got them right. On a situation where there's
existing technology that is deployed, the previous question
that was asked, and they apply for the SAFETY Act, and the
SAFETY Act assurances are granted, do you see that as
grandfathering in all the previous implementation or not
grandfathering it in?
Mr. Albright. No, not grandfathering in all the previous
implementation. For example, a lot of technologies have been
deployed for purposes that have nothing to do with
counterterrorism. Military technology is a perfect example of
that. And the requirements threat, the set environment is very,
very different. So, no, we're not going to grandfather things
in.
However, having said that, you know, if the insurance
regime has--if you have a bunch of technology that is already
out there and has been deployed, it's even been deployed for
counterterrorism purposes, and the insurance regime that they
are operating in has changed dramatically, so now they're
literally taking the technology off the street, for example, in
order to protect themselves, then you can bet we're going to
look at that and expeditiously review those applications and
make sure that doesn't happen.
Mr. Carter. Thank you, Mr. Chairman.
Chairman Tom Davis. Thank you very much. I don't see any
other questions at this point. Thank you very much for being
with us. We'll continue the dialog. We will take just a 2-
minute break while we get our next panel up here.
[Recess.]
Chairman Tom Davis. We are ready to start our second panel.
We've got Harris Miller, the president of the Information
Technology Association of America; Stan Soloway, the president
of the Professional Services Council; and John Clerici,
representing the U.S. Chamber.
It's the policy of the committee that we swear you in
before you testify, so if you would rise with me and raise your
hands.
[Witnesses sworn.]
Chairman Tom Davis. Thank you very much.
Harris, we will start with you; then Mr. Soloway; and then,
John, you will be able to clean that up. Thank you all for
being with us.
STATEMENTS OF HARRIS N. MILLER, PRESIDENT, INFORMATION
TECHNOLOGY ASSOCIATION OF AMERICA; STAN Z. SOLOWAY, PRESIDENT,
PROFESSIONAL SERVICES COUNCIL; AND JOHN M. CLERICI, ESQ., ON
BEHALF OF THE U.S. CHAMBER OF COMMERCE
Mr. Miller. Mr. Chairman, members of the committee, many
thanks for having me here today to allow ITAA to testify on the
implementation of the SAFETY Act. This important legislation,
as you noted, Mr. Chairman, is intended to facilitate the rapid
development and deployment of technologies and services that
offer remarkable potential to improve homeland security.
I'm the ITAA president. ITAA is the Nation's leading and
oldest trade association focusing on the diverse IT industry.
It provides global public policy and national leadership to
promote its continued rapid growth. We represent virtually
every major Federal contractor and count among our membership a
wide range of companies from the largest enterprise solutions
providers to the smallest IT startups. We also serve as the co-
sector coordinator for the ICT sector as designated by DHS. I
submitted my program statement for the record, Mr. Chairman,
and I assume it will be included in the hearing record. I would
like to extend my appreciation, Mr. Chairman, for your holding
this important hearing today, one that was postponed while DC
grappled with something even the SAFETY Act could not prevent
during Hurricane Isabel.
Let's be clear what this legislation is about. The citizens
of this country look to government to protect our homeland.
Government, in turn, wants to partner with industry to find the
best technologies to fight terrorism. Effective implementation
of the act is absolutely essential; on the other hand, poor
implementation would inhibit access to great technologies.
In Spring 2002, soon after September 11, I began to hear
extremely serious concerns from member companies, large and
small, about some Federal agencies wanting successful bidders
on key contracts to indemnify the government against the risk
of loss if an unforeseen problem arose on an antiterrorism
technology solution under consideration by DHS. Insurers did
not know what to make of such requests and were not prepared to
insure against such requests. These requests for
indemnification made CEOs and our member companies stop in
their tracks and ask themselves whether they were willing to
literally bet the company on a decision to obtain a Federal
contract. There had to be a better solution than having the
private sector self-insure and indemnify the government against
loss. Your leadership and that of Congressman Turner were
instrumental in focusing attention on this important issue, and
eventually led to implementation and passage of the SAFETY Act,
which, as you've correctly pointed out, is meant to limit, but
not eliminate, the insurance risk and litigation costs to
companies that do have qualifying technologies.
ITAA has been very involved in the regulatory process to
implement the SAFETY Act. We were one of the organizations that
Dr. Albright referred to that provided extensive comments on
the proposed rule, and we have been participating in the
various parts of the road show that he described. We filed
comments back in August. Frankly, we were pretty pleased with
where DHS was heading, and we are still pleased with the
overall positive approach. However, I would slightly disagree
with something Dr. Albright said during his comments.
I think industry is pleased that DHS is doing it. I think
the concerns we have are how DHS is doing it, and that's what
we're going to focus on today. For example, we are concerned
with how DHS is going to go about prioritizing the application
process. Congressman Duncan asked about how many applications
they are likely to receive. I agree with Dr. Albright, no one
really knows. But we have seen a tremendous amount of interest
among membership. Programs that ITAA has done, including the
program with you, Mr. Chairman, and Congresswoman Maloney in
New York City recently, a program I did as recently as
yesterday, in which I, explaining opportunities at DHS, time
and time again questions came up about liability concerns. So,
certainly, there are a lot of companies out there, technology
companies, that are concerned about how this act is going to be
implemented. So, I suspect it's going to be very important that
the DHS come up with a clear policy to prioritize the
application process.
A second concern we have is that at times in the interim
final rule, it suggests that the only group to benefit from
this rule are going to be government contractors, rather than
the American people. That is not true. Yes, it is true that
getting the designation is a privilege, but the whole point of
the act, as you pointed out, Mr. Chairman, and as DHS itself
says, is to encourage a partnership; but you're not going to
have a partnership if the partners do not start from the same
premises.
Let me give you an example. The Department's proposed rule
says that the insurance of critical technologies to aid the war
on terrorism could end up actually coming full circle. We
started down this legislative road because the government was
asking private companies to indemnify and, if necessary, to
self-insure to sell to the government. The SAFETY Act, as you
pointed out, is meant to solve this problem, but what happens
if insurance cannot be obtained for technology at any cost that
does not distort the price of the technology in ways the act
protects against? What happens if that uninsurable technology
is still needed by the government? As outlined in the interim
final rule, DHS still wants the company to self-insure, so it
seems we are back to the same place.
A third concern has to do with the volume and kind of
information that would be required. Congressmen in the last
panel were asking about the number of hours that go into an
application. DHS is estimating 180 hours, Congressman. Our
companies looking at these applications think they may be
closer to 1,000 hours. Now, that's an extremely heavy burden
for a large company. It's a virtually impossible burden for a
small to medium-sized company. We think we need to cut down
this application process and make it much more manageable if we
are really going to get the kind of applications we need to
help protect the American people against terrorist attacks.
The last issue I want to mention, Mr. Chairman, is the
issue of confidentiality. We respectfully disagreed with the
assessment of DHS that the current FOIA legislation gives
adequate protection to the extremely sensitive data companies
are going to have to share, and we have devised specific
suggestions to DHS as to how to provide adequate protection,
including using the FOIA exemption that you helped to pass
through the Congress last year, or 2 years ago rather, as part
of the DHS legislation, so we think that this issue of
providing information and giving adequate protection needs to
be tightened.
Final point, Mr. Chairman: We don't think that DHS would
further delay the implementation process, but the application
kit which just became available yesterday is daunting. So
basically what we are saying, Mr. Chairman, is, we hope DHS, on
the one hand, will move ahead right away and begin accepting
applications, but should it turn out that this application is
too difficult to use, as we believe it is, we hope that DHS
would quickly modify it down the road and not be locked into
the application kit which was published yesterday.
Thank you very much, Mr. Chairman. I look forward to
questions from you and your colleagues.
Chairman Tom Davis. Thank you very much.
[The prepared statement of Mr. Miller follows:]
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Chairman Tom Davis. Stan, welcome.
Mr. Soloway. Thank you, Mr. Chairman.
The professional Services Council is pleased to respond to
your invitation to testify this morning on the SAFETY Act. PSC
is the leading national trade association representing the
professional and technical services companies doing business
with the Federal Government, and our members are among the
leaders in the provision of homeland security and national
security technologies and related services.
As we know, effective prosecution of the war on terror
requires that the U.S. Government and others have access to the
full range of technologies and technology-based solutions. For
many of these solutions, the potential for aiding in this
crucial battle are quite significant, but so too are the
liabilities. As such, providing an appropriate degree of
protection against those liabilities is vital.
Such liability protection for other technology areas is
both common and accepted; for example, the Defense Department
has long had the authority to address extraordinary risks in
its contracts. The security provided is essential to both
contracting parties. These and related liability protections
are not designed to protect companies from their day-to-day
responsibility for performance. Rather, they exist to provide a
reasonable degree of protection in the event of an occurrence
that is anything but routine.
Our ability as a Nation to capture and utilize needed
technology for homeland security requires us to understand and
address this fundamental reality. As such, PSC and others have
been actively involved in the discussions over the acquisition
policy and liability protection provisions of the legislation
creating the Department of Homeland Security and under the
SAFETY Act.
Mr. Chairman, you and others on this committee immediately
recognized the importance of this issue and proposed
legislation to extend indemnification protections to
antiterrorism technologies, similar to the ``extraordinary
relief'' provisions afforded to defense technologies. We
supported that proposal and continue to believe it is an
important part of the solution. Others proposed a tort reform
approach to strictly limit the liabilities that any one
technology developer-owner would face. Each of these approaches
has merit. Most importantly, Congress recognized the importance
of providing such protections and, in the end, decided to enact
a tort reform regime through the SAFETY Act. PSC strongly
supports the act and compliments the Department for issuing its
interim final rules this week.
The SAFETY Act represents an important step toward ensuring
the government's ability to access the full scope of
antiterrorism technologies and capabilities. However, from the
perspective of the technology services base, PSC remains
concerned that the regulations do not adequately address the
critically important specifics relating to the act's
application to services in particular. Since services will
account for a substantial portion of the procurements of the
antiterrorism technologies and solutions, this is an issue of
significant importance.
The very nature of technology means that the provision of
services differs in many critical respects from the provision
of goods. It is important, for instance, to recognize that the
services provider might require qualification eligibility for a
broad business area, rather than for a discrete technology use.
The interim rule narrowly prescribes the scope of coverage by
focusing on a deployed technology.
Similarly, the review and approval process must be
sufficiently flexible to address the special characteristics of
these services offerings. For example, many solutions evolve
and cannot be completely defined or fixed in advance. It is
therefore important to provide coverage when systems design,
for instance, is part of the contract performance. The
regulations seem to assume the opposite. In the absence of such
protections, sellers may be unwilling to bring technologies to
market.
On the positive side, we compliment the Department for
outlining in the notice accompanying the proposed interim rules
the Department's regulatory philosophy and interpretations. To
add further clarity, we recommend that the Department
incorporate these statements and views into the final
regulations themselves. That way, all participants will have
ready access to the information and be able to use that
information directly in the application and interpretation of
the specific provisions of the regulations.
We also support the strong statutory and regulatory
statements of coverage regarding services. The law is also,
properly, technology-neutral with respect to the scope of
coverage and the protections offered. In our view, the
regulations must be written in a neatly technology-neutral
manner to the maximum extent practicable.
We support the broad definition of the term ``qualified
antiterrorism technologies'' under the law and regulations. The
categories of technologies that are available for designation
must continue to be viewed broadly. This is particularly
important in the services sector.
However, the interim rule states that a designation will
only be valid for being 5 to 8 years. In our view, absent the
change in circumstances initiated by the seller after the
Department's approval of the designation, there is no public
policy reason to impose any fixed period of time on the useful
life of the designation period. Further, under the interim
rule, a designation will terminate automatically and have no
further force or effect if the solution is significantly
changed or modified. We strongly oppose the automatic
termination of the designation. We believe each case will have
its own circumstances and should be treated as such,
particularly in the services realm where the focus is on
evolving solutions, rather than on static devices.
With respect to the certification of an application of a
government contractor, we encourage the Department to use its
rulemaking authority to recognize that some of the information
to support applications for certification may be available and
applicable to products but not for services.
With respect to the issue of proprietary information, the
interim rule, while appropriately recognizing the importance of
such protection, regrettably does not define the procedures
that applicants should follow to ensure that their proprietary
data and trade secrets are protected. We strongly recommended
before and continue to recommend that the Department develop a
proprietary data-marking or other application notice by which
applicants highlight or disclose those portions of the
application that are proprietary.
Finally, with respect to the relationship between the
SAFETY Act and Public Law 85-804, ``Extraordinary Relief,'' we
compliment the Department for acknowledging the
interrelationship between these two important government
contracting statutes and for recognizing that there are
circumstances under which 85-804 relief will be appropriate.
However, because there are some intrinsic and potentially
unsolvable tensions associated with the SAFETY Act's
effectiveness in the services sector, we continue to believe it
important that the 85-804 authorities be clear and
appropriately available. We recommend, therefore, that the
Department create a new section in the regulations to
specifically address this important matter.
Mr. Chairman, PSC supports the SAFETY Act and encourages
the Department to move expeditiously with finalizing
regulations, processing applications, and addressing the issues
that we and others have raised. This law, in its implementing
regulations, is designed to create an incentive for the
deployment and development of technologies that will enhance
our domestic security; and we hope these technologies work so
well the United States never again faces a terrorist attack,
but we must be prepared.
PSC would welcome the opportunity to work with you and the
committee, the House Select Committee, and the Department on
the further development of the regulations and in monitoring
the implementation of the SAFETY Act. Thank you for the
opportunity to testify today. I would be happy to answer any
questions.
Chairman Tom Davis. Thank you very much.
[The prepared statement of Mr. Soloway follows:]
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Chairman Tom Davis. Mr. Clerici, welcome.
Mr. Clerici. Thank you, Mr. Chairman, and members of this
committee. It's an honor for me to testify before you today
regarding the SAFETY Act and its impact on deploying safe and
effective antiterrorism technologies in the United States and
abroad. I applaud the leadership that you, Mr. Chairman, and
this committee have shown in the areas, of Federal procurement
policy, national security and homeland security.
I appear before you today representing the Chamber of
Commerce of the United States of America. The Chamber is the
world's largest business federation, representing more than 3
million businesses and organizations of every size, sector and
region. My testimony is based on over 24 months of direct
experience advising large government contractors,
pharmaceutical companies, biotech companies, and small
businesses throughout America and, indeed, throughout the
world, on how to bring the best possible homeland security and
antiterrorism solutions to both government and private markets.
Let me begin by saying that the Chamber applauds the
Department of Homeland Security in its effort to ensure that
the SAFETY Act provides the full protections intended by
Congress. Clearly, the interim regulations' dual goals of
certainty and flexibility are in keeping with the spirit of the
SAFETY Act. Most significantly, the Chamber wholly endorses the
Department's proper interpretation of both the jurisdictional
consequences of the statute--namely, that only the seller of
designated and qualified antiterrorism technologies is a proper
defendant in any action arising out of an act of terrorism--and
the impact of the statutory ``government contract or defense''
as providing early dismissal from any tort suit involving a
certified qualified antiterrorism technology following an act
of terrorism.
The Chamber appreciates the Department's and this
committee's recognition here today that there exist a number of
antiterrorism technologies that have not and cannot be deployed
by sellers unless and until they receive designation and/or
certification under the SAFETY Act. The Chamber applauds this
recognition and the Department's efforts to stimulate
applications, including its innovative preapplication process.
The Department also acknowledges that several technologies
already have been deployed without protections of the SAFETY
Act. However, while the interim rules attempt to address the
issue of retroactive application of the protections of the
SAFETY Act to such technologies, as we heard earlier today in
response to Congressman Schrock's question, the Department
appears to have too narrowly limited the possibility of such
retroactive application. Clearly, Congress did not intend to
limit the scope of the SAFETY Act only to newly developed
technologies.
With respect to the retroactive application of the SAFETY
Act, in the Chamber's view, so long as no cause of action has
been accrued--that is, there has been no terrorist incident
involving an antiterror technology resulting in a lawsuit
against a seller--the Department may provide SAFETY Act
protection retroactively to previously deployed technologies
that are substantially identical to a qualified antiterrorism
technology. Nothing in the statute limits such an action. The
Chamber intends to provide additional comments to urge
clarification of this point and changes to the interim rule.
With respect to the precise types of technologies meriting
protection of the SAFETY Act, Section 865(l) of the act notes
that qualified antiterrorism technologies may include
technologies deployed for the purpose of, ``limiting the harm
such acts [of terrorism] might otherwise cause.'' The ``harm''
that might be caused by an act of terrorism clearly goes beyond
the immediate effects of the act itself. An act of terrorism
such as the attacks of September 11 or the October 2001,
anthrax attacks triggers a number of immediate remedial and
emergency responses to limit the resulting harm and deter
followup attacks. For example, immediately following the
detection of anthrax in the offices of Senator Tom Daschle and
Senator Patrick Leahy, Members of Congress and their staffs
were treated with antibiotics and other prophylactic measures
with the specific goal of limiting the harm that this act of
terrorism could cause. Clearly, any injuries that might have
been caused by the administration of these treatments, even
though direct results of the act of terrorism itself, could be
directly traced to the act and the objective of limiting the
resulting harm. Moreover, any claims brought as a result of
such injuries would clearly be arising out of, relating to, or
resulting from an act of terrorism.
Congress recently acknowledged that technologies designed
to limit the harm from an act of terrorism that may result in
harm not directly caused by the act of terrorism are protected
by the SAFETY Act. In the legislative history of the ``Project
Bioshield Act of 2002,'' Congress stated that the Secretary of
Homeland Security is ``encouraged to designate [biodefense]
countermeasures as 'qualified antiterrorism technologies'.''
The Department should affirm this congressional statement that
technologies deployed after a terrorist attack with the hope of
limiting harm may receive such designation.
The Chamber appreciates that the Department has taken
positive steps to more narrowly define the, ``substantial
modification'' as one that significantly reduces safety and
effectiveness and its willingness to promptly review notices of
modification.
Unless the Department informs the seller otherwise,
however, these designations should remain in force. Only upon a
showing and a determination by the Department that there has
been a significant change or modification should the Secretary
be able to affirmatively terminate a designation. It should
only take effect upon written notice to the seller.
The Chamber appreciates the opportunity to offer testimony
on this very important statute. Achieving the objectives of
certainty and flexibility in implementing the SAFETY Act are of
the utmost importance to ensuring the homeland's protection and
the protection of national security. We applaud your efforts
and the efforts of the Department and look forward to the
implementation of the act.
Thank you, Mr. Chairman.
Chairman Tom Davis. Thank you very much.
[The prepared statement of Mr. Clerici follows:]
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Chairman Tom Davis. Let me ask each of you: Do you have
suggestions for DHS to expedite the review process so that it
is responsive to the need to deploy antiterrorist technologies?
Mr. Miller. I think the first suggestion is prioritization,
and we go back to work with DHS, but certainly some things they
should look to are procurements that are actively under way;
that would be one priority. They should look to prioritize
applications related to procurement already under way.
The second principle they could look to for prioritization
would be technologies that they've advanced as being
priorities, and that's what Science and Technology does to some
extent. They list out there for public consumption or, if not
appropriate, for internal consumption, the types of
technologies they believe are priorities. So if, as we expect,
they get a flood of applications, we think it's going to be
absolutely necessary that they come up with some way of
prioritizing these applications; otherwise, some of the key
technologies may fall into the bottom of the pile and not get
designations early enough in meeting the needs of the American
people so many will incorporate.
Another area that we touched on is the clarity of the
regulations themselves. The process is going to be driven, by
and large, by the degree the parties understand what the
philosophy and interpretations of the Department are going to
be and how it's going to work in critical areas, particularly
when it comes to services and discrete products. That in itself
will drive timelines for the application process and the
discussions back and forth and trying to figure it all out.
Mr. Clerici. Mr. Chairman, I think the proof is in the
pudding how they interpret the responses to their application.
If Dr. Albright's testimony of 100 hours is to be correct in
the preparation, then hopefully DHS will not drill down to the
extent that Congressman Carter mentioned and get these
applications approved. The framework is there for them to do it
expeditiously. It's just a question of whether they are going
to be willing to do so.
Mr. Miller. I don't mean to be cute, Mr. Chairman, but if
they shorten the application, they shorten the review process,
too.
Chairman Tom Davis. Absolutely. When we passed the bill, it
was a matter of some urgency. The American people said it in
the election. And the longer the bureaucratic process--and
ultimately I can give my opinion, DHS can give their opinion--
ultimately, the result is going to be the companies coming in
and offering their services or their products--or not if
they're deterred from doing it. That's why what industry thinks
is far more important than what happens ordinarily, because if
we can't get these products in the government marketplace, we
are not going to be able to make use of the newest
technologies.
We have a vote on. I am going to try to get our questions
in, because we have about five votes, and let you all go. So
I'm going to move quickly to Mr. Bell.
Mr. Bell. Thank you very much, Mr. Chairman.
Mr. Miller, I was fascinated by your testimony regarding
the application process. The thousand hours, how do you
calculate that?
Mr. Miller. We did it informally, an unscientific poll with
many of our member companies by e-mail, and we asked them the
estimates that they would fill out the application, based on
the various drafts that are floating around even before they
were published, and we got ranges. The lowest range we got was
about 500 hours. We got some that estimated it would be 1,500,
and we just averaged it out as 1,000 hours. This was based on
asking government contractors who are used to filling out these
kinds of applications.
What they particularly found daunting, Mr. Bell, was the
incredibly extensive financial information, much of it
extremely confidential and sensitive. But we don't really feel
it's necessary for DHS to make the kind of judgments they need
to make as to whether or not this technology does or does not
have a place in the marketplace. We think we understand what
DHS is trying to achieve. They're trying to understand whether
this technology would otherwise go in the marketplace if they
did not get the designation by DHS. We understand that, but the
kind of information they requested would take a brilliant
econometrician months to analyze, and it seems to me to be too
academic an exercise.
Dr. Albright, to his credit, during his presentation to
this committee, gave a couple simple rules of thumb. Why are
they deployed already? Is there insurance in the marketplace?
Those should be simple questions DHS should ask, not an
incredible amount of financial information and then make some
kind of a guess about whether this product will actually show
in the marketplace in the absence of this designation.
Mr. Bell. Well, certainly the individuals who came up with
an application that would take 1,000 hours would be up for some
kind of bureaucratic award or high honor, I would think. It's
an extraordinary accomplishment.
Chairman Tom Davis. The lawyers love it, don't they?
Mr. Miller. That's why we poll our members and not our
lawyer members.
Mr. Bell. What else can be changed about it, if any of the
others would like to weigh in on this? The financial
information, but what else would you recommend?
Mr. Miller. From what we can tell, the scientific
information we are requesting seems to be reasonable. I don't
think our company would have objections to that, because
obviously that's the information on which the Science and
Technology Director is going to make his decisions. Most that
we objected to was incredibly detailed and, as we saw it,
basically irrelevant financial information.
Mr. Soloway. I would also add that, in the area of
protecting proprietary data and trade secrets, although I think
the Department's intentions are correct there's a very unclear
process as to how you get the protections you need; and as you
can imagine, in the technology industry, that is something in
terms of a company's capital. And so a clear process in the
applications and in the regulations for getting that adequate
protection is critical.
Mr. Clerici. Congressman Bell, I think much of the
information that's requested, safety and efficacy data, whether
you've got the proper amount of insurance with the market, is
something a responsible corporation has to do for its
shareholders every day. The Department should rely,
particularly with respect to public companies, on what is being
done internally to mitigate risks, rather than trying to invent
a separate scheme that is somehow codified in the regulations.
The parameters of the statute are quite clear, and you can
round these bases not easily, but with a little bit of thought,
in gathering the information that is usually already at the
disposal of the company.
Mr. Miller. This is the application, so just to give you
some idea.
Chairman Tom Davis. We will put the application in the
record.
Mr. Miller. It's the form and the background material; 40-
some pages, I believe.
[The information referred to follows:]
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Mr. Bell. What is the normal response?
Mr. Miller. Well, you're talking about people supplying
notebooks of financial and scientific information to back up
their application and response. That's why we came up with the
estimate of approximately 1,000 hours, which goes to the
Congressman's earlier question.
Mr. Bell. On the liability, I will be clear on that from
where you all are. Is there a misunderstanding in the industry
about the limitations on liability, or is it your suggestion to
suggest we go further in limiting the liability?
Mr. Miller. We didn't respond to this hearing in terms of
suggested changes to the legislation. We were just commenting
specifically on the regulations.
Mr. Bell. You mention in your testimony that the liability
questions are causing a lot of problems.
Mr. Miller. Oh, just generally because the SAFETY Act has
not been implemented. I think I was trying to make the point,
Mr. Bell, maybe not eloquently, that exactly as Chairman Davis
said, I've rarely had an occurrence where CEOs and member
companies call me at night because a regulation was published.
But I can tell you that, looking back to March 2002 when
one of the first requests for proposal came out that had this
self-insurance requirement, I literally had CEOs finding me at
home at night saying, ``ITAA has to make this their No. 1
priority; we cannot bid in good conscience on these Department
of Homeland Security contracts, when we're literally betting
the company.'' And these were company CEOs of, in some cases,
multibillion-dollar companies. That's how negative the initial
reaction was and why the legislation that was enacted was so
important and how the implementation of it was critically
important.
Mr. Soloway. Let me just second Harris' comments, that
we've had dozens of company executives talking to us about this
issue, even before the passage of the legislation. It's not a
question of the extension or extent of liability. It's a
question of how you can obtain appropriate protection and the
interplay between this act, Public Law 85-804 for extraordinary
relief, and the different tools that are available to make sure
the government can get what it needs and provides the
protections. So it's really a question of bringing it together
in a clear way, and I think there is a lot of work to do in
that area.
Mr. Clerici. And I can say in my personal experience in the
past few years, there has been an entire division of a company
depending on whether risk mitigation could be accomplished. In
one instance, the division suffered because the SAFETY Act was
not in place and those jobs were lost; in the next one,
hopefully we'll have the SAFETY Act up and running.
Mr. Bell. Thanks a lot.
Thanks, Mr. Chairman.
Chairman Tom Davis. Mr. Schrock.
Mr. Schrock. I'll be very brief because we have six votes,
and we're not professors, so you're not required to stay in
class past 20 minutes.
Mr. Miller, you talked about Isabel. I represent Virginia
Beach and Norfolk where there's massive amounts of military,
maybe 125 ships in a massive commercial port. What a perfect
opportunity for the terrorists to get in there, and to get in
here too.
You talked about protecting the IT companies. Is it a
``hold harmless'' agreement? We used to have people sign ``hold
harmless'' things, so that if something happened to them the
Navy couldn't be held accountable. Is that an answer to this?
The lawyers wouldn't like it; and the chairman is right, he is
one, so he knows what he talks about. Is that an answer?
Mr. Miller. Industry is not saying there should not be
liability whatsoever. There is an industry that will offer
certain-level protections.
The world has changed since September 11. As Mr. Soloway
pointed out in his testimony, the idea between the Congress and
the government saying to government contractors, ``In extreme
situations when insurance is not available in the marketplace,
we are going to offer you some protections,'' is not new. It
goes back almost 50 years, Mr. Schrock, in the Department of
Defense. It's used in the nuclear industry; it's used in the
space launch industry. It was used at the time of development
of Cipro in order to respond to the anthrax scare in this
country. Those were situations where they said, ``We can't deal
with this situation. There were no actuarial tables that gave
us the ability to insure, so that's why the SAFETY Act is so
critical.
Not to say that the companies have zero liability, not to
say they should be able to commit fraud, but in these extreme
situations, if they don't have some limitation of liability,
particularly when DHS reviews and approves their technology and
services as Mr. Soloway pointed out, that's the only way to get
these products to the public and ultimately to protect the
American people.
Chairman Tom Davis. There's got to be some limit somewhere,
some reasonable limits.
Mr. Schrock. It seems like there's a real disconnect
between what the three of you say and what our previous person
who testified said. It's like you're worlds apart. Have you all
sat down with the DHS? You all have done that?
Mr. Miller. We've had extensive discussions with DHS,
collectively and independently. I think each of us,
independently and collectively. In fact, ITAA and PSC worked
very closely together on comments on the rule and so forth, so
we've worked very closely with the Department and actually
think the Department has made significant progress here. We
don't want to be overly negative.
What we're concerned about is, if there's a perception that
the job is now completed and executed and we've got significant
hurdles to overcome in bringing these products and services to
the market, there are some realities that have to be addressed,
issues of clarity, as I said earlier; and I don't want to harp
on it again.
There is a vast difference in buying a product or device
and buying an evolving service which could be developed over
time and constantly upgraded. A lot of discussion around the
rule seems to focus more on the presumption of product than a
service, and there are big differences that have to be
overcome.
Chairman Tom Davis. We want to make the vote and I don't
want to keep you. We will be probably close to an hour over
there voting.
I want to allow you to supplement over the next 5 days,
anything you want to add on this. We've had other questions,
but we've been obviously in constant dialog. I appreciate your
being here, and I hope that the Department understands this
continues to be an ongoing discussion, that the interim
regulations are really not where we need to be.
At the end of this--I think you've articulated this--at the
end of the day, the question is, ``are we getting the products
in or aren't we?'' And there are still a lot of concerns, but I
appreciate your being here and I'm going to adjourn the
meeting. Thank you.
[Whereupon, at 11:30 a.m., the committee was adjourned.]
[The prepared statement of Hon. Elijah E. Cummings and
additional information submitted for the hearing record
follows:]
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