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Warranty: It's one thing to warrant an item; it's another thing to affirm that commercial items "are merchantable and fit for use for the particular purpose described in this contract," as the government wants.
"Merchantability" is problematic for technology vendors. It requires items to conform with trade standards and be fit for the purpose for which they are ordinarily used. But which trade standards? As for fitness for a particular purpose, interactions with technology created by other vendors may cause your product to encounter problems beyond your control.
You should not be held responsible for things over which you have no control. For most technology sales this clause should be eliminated or very precisely defined in the contract. Don't just strike it out; it must be expressly disclaimed.
Damages: The boilerplate damages clause in FAR 52.212-4 seems sound at first glance. It says that "except as otherwise provided by an express warranty, the contractor will not be liable to the government for consequential damages resulting from any defect or deficiencies in accepted items."
Unfortunately, "consequential damages" covers indirect damages only. Most businesses want to limit their direct liability, too -- which in government contracting means convincing the contracting officer to agree to your standard "commercial limitation of direct damages" clause.
SAFETY Act: For a tiny corner of the technology market, the government extends immunity to sellers of "qualified anti-terrorism technology" if a civil lawsuit arises in connection with a terrorist act.
The Support Anti-terrorism by Fostering Effective Technologies (SAFETY) Act of 2002 allows sellers of Homeland Security Department-certified technology and anti-terrorism services to claim the "government contractor defense" in a civil lawsuit. Under certain conditions, this defense immunizes certified sellers from tort liability because they've acted on behalf of the government.
To qualify for the government contractor defense, companies must receive precise government specifications, manufacture to that specification, and warn the government about any dangers they discover. And yet, only government military systems have specifications precise enough for the government contractor defense.
Gaining SAFETY Act "certification" is different from getting a "designation." Designation is an intermediary and less robust protection that merely limits, not eliminates, tort liability. Designation is a prerequisite to certification, though companies can (and probably should) apply for both simultaneously. And remember that SAFETY Act immunity is only good in lawsuits arising from a terrorist act.
The preceding information was adapted and digested from the book "The Inside Guide to the Federal IT Market," published by Management Concepts Press. For more information, visit www.insideguidetofederalit.com.
Steve Charles is a co-founder and executive vice president of immixGroup, which helps technology companies do business with the government. He is a frequent speaker and lecturer on technology and the federal procurement process. He can be reached at Steve_Charles@immixGroup.com