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The Department of Homeland Security is well on its way to fulfilling its responsibilities. In doing so, it is relying heavily on contractors, as is the Department of Defense. This means that contractors have moved beyond traditional activities such as logistics, transportation, lodging, and food service, to the core of the war on terror. Lately, military contracting has made national headlines — in the case of Halliburton and government auditor claims that a subsidiary overcharged on an Army contract to provide fuel for Iraqi civilians. So, today government contractors have become an integral part of deploying and maintaining many of the systems to secure the nation. Accordingly, government contractors need to become familiar with new rules and circumstances. HOMELAND SECURITY CONTRACTING On Dec. 4, 2003, the DHS issued the interim Homeland Security Acquisition Regulation to supplement the Federal Acquisition Regulation. The HSAR applies to all DHS contracting activities, except the Transportation Security Administration. The DHS interim rule covers the issues traditionally addressed in supplemental procurement regulations, such as competition requirements, acquisition procedures, and contract accounting requirements. However, given the special role that the DHS plays, the HSAR also includes provisions to maximize support for fighting terrorism. For example, where its mission otherwise would be “seriously impaired,” the agency may use a variety of streamlined procurement procedures to take advantage of a wide range of commercially available items on an expedited basis. Additionally, a notable section in the DHS regulations prohibits contracting with U.S. companies that reincorporate abroad in order to avoid paying U.S. taxes (though the DHS retains waiver authority for this provision). The HSAR requires the DHS to implement the Small Business Act’s requirements concerning small and disadvantaged business programs. It also designates the Department of Transportation Board of Contract Appeals to resolve contract disputes, including alternative dispute resolution procedures. Finally, the DHS also may use flexible “other transactions” authority for research and development projects. Some uncertainty remains. Coordination with the Transportation Security Administration’s own procurement rules, as well as further integration of the procurement practices of 22 agencies that were combined to form the DHS, will remain a challenge for the DHS and its contractors. MILITARY CONTRACTING It will be important for contractors, particularly those undertaking work in military theater operations, to anticipate the risks and obtain the maximum contractual coverage available. Contractors must be able to answer such questions as: What are the limits on what they can do when supporting the military in combat operations? Who protects contractors, and can they protect themselves by using deadly force? When, if ever, may contractor employees choose to put their own safety first and leave their work site, rather than continue to provide essential services to the military? The Army’s “Contractors Accompanying the Force Guidebook,” together with an interim rule, have been released. The Air Force general counsel also has issued its guidance document entitled “Deploying With Contractors: Contracting Considerations.” The recent information, considered with established international and contract law, provides indications of what contractors should prepare for when they set out to support the U.S. military overseas in hostile areas. LEGAL STATUS IN HOSTILITIES As a matter of international law, contractor employees accompanying the armed forces ordinarily should not be regarded as “combatants.” The Hague and Geneva Conventions provide protected prisoner of war status to civilian contractors. However, if contractor employees participate directly in the hostilities, then they may be considered to have engaged in combat activity. Because these employees are not military personnel, and therefore would not qualify as military POWs, they have only a questionable status as unlawful combatants. Anticipating increased contractor activity in Iraq, the Army and the Air Force have issued further guidance to assist contracting officers in reinforcing the difference between military personnel and contractor employees. For the first time, as cited in a newly issued section of the Defense Federal Acquisition Regulation Supplement 5125.74-9000(d), the Army’s “Contractors Accompanying the Force Guidebook” sets forth a comprehensive set of requirements for deploying contractors into combat areas. At the outset, the government’s contracting officer must contractually specify a deployment-processing site for contractor employees deployed overseas for more than 30 days. While contractors should be concerned with understanding available security measures, it will be the military that ensures contractors and contract support operations are considered in force protection and anti-terrorism plans. In the deployment process, all contractor employees will receive training and identification cards consistent with the Geneva Conventions. It is Army policy that contractors will not be issued combat uniforms. While contractors are encouraged to require a uniform appearance among their employees, the use of current armed forces uniforms is prohibited. This specifically is intended to distinguish contractor employees from combatants. At the same time, a military commander may require contractor employees to be prepared to wear equipment to protect against chemical, biological, radiological, and explosive attacks. Finally, apart from avoiding direct participation in hostilities, a contractor should verify the legal status of its employees, including whether they are U.S. citizens, the country they are operating in, and whether there is a Status of Forces Agreement applicable to that country. For all employees, including those who are U.S. citizens, local nationals, or third-country nationals, there are also the questions of how and under what visa or other immigration conditions they can enter other countries to perform their work. ESSENTIAL MILITARY SERVICES DOD Instruction 3020.37, “Continuation of Essential DOD Contractor Services During Crisis,” requires military theater and other commanders to identify contractor services so essential that they must continue to be performed during crises. A draft policy, still under review, will provide further detailed coverage, but at a minimum, the Defense Department will require essential contractors to remain in place, with the contractor using “all means at its disposal” to continue working. The contractor’s duty to perform is tied to the terms and conditions of its contract. For example, if the U.S. State Department directs all Americans to leave the country, contractor employees must stay only if the contract requires. The contract’s statement of work thus will be extraordinarily important in these circumstances, defining when and under what circumstances a contractor is to use “all means at its disposal” to continue with employees in place, or to replace those employees who are not “prepared to meet the intended mission.” The Air Force has promulgated a contract clause that obligates contractors to specifically name and identify the employees who will perform “mission essential” services. Among other preparations, the Air Force has used this clause to have contractor employees vaccinated against anthrax and smallpox. The contractor must have supporting arrangements with its own employees, including employment contract provisions, medical coverage, and contingency plans. What if in a given crisis a contractor employee declines to perform mission essential contract services? On the one hand, this is a contract issue governed by the otherwise routine changes, war risks, delays, and default provisions. The government is not free, as a matter of contract law, to impose “penalties” for defaults resulting from a failure to continue performance. Rather, the government’s remedies in contract are for damages, including the possibility of stipulated or liquidated damages, as well as the excess costs of reprocurement after a default. On the other hand, the eventual resolution of contract administration issues will be far less important than ensuring that essential services are immediately available when needed. Under draft DOD guidance, and as suggested by the Air Force Office of Legal Counsel, a military commander and the contracting officer will need to require contractors to train military personnel well in advance, so that the government can exercise contract rights to take over performance when a contractor cannot or will not perform. LIABILITY TO THIRD PARTIES Contractors also may be concerned about the potential for liability to third parties for injury, death, or loss or damage of property. FAR 52.228-7 requires contractors to carry at least minimum amounts of general liability insurance. But for the greater magnitudes of risk arising in areas of terrorist or hostile enemy activity, insurance may be difficult or impossible to obtain. For this exposure, there is potential indemnification under Public Law 85-804, provided the contractor and contracting officer can reach agreement on this coverage. Additionally, contractors may be able to raise the “government contractor defense” in court proceedings involving injury, death, or property loss of third persons as a result of contract performance. The Support Anti-Terrorism by Fostering Effective Technologies Act of 2002 provides similar coverage for DHS contractors. Based on interim regulations issued on Oct. 16, 2003, to implement the SAFETY Act, anti-terrorism technology certified and placed on the DHS qualified product list is entitled to a rebuttable presumption that the “government contractor defense” applies to claims resulting from terrorist attacks. PREPARING CONTRACTORS Contractor employees increasingly will be “on the front lines” in performing security and anti-terrorism contracts within the United States, and in actually accompanying the armed forces during deployments. Contractors and contracting officers alike must carefully plan for the dangers of contracting while in the midst of anti-terrorism and military operations. The “asymmetrical warfare” engaged in by international terrorist groups recognize few if any rules. Therefore, U.S. laws and regulations must be reviewed, modified, and adapted to meet these risks, and to ensure that the government and its military forces have adequate support at all times in all places. John D. Altenburg Jr. is of counsel in the governmental affairs department in the D.C. office of Greenberg Traurig. He previously served as a major general in the Army Judge Advocate General Corps. Dorn C. McGrath III is a shareholder in Greenberg Traurig’s government contracts department, in McLean, Va. Gary M. Shiffman (who is not a lawyer) is director of governmental affairs in the firm’s D.C. office. Altenburg began writing this article before being named appointing authority for military commissions by the Defense Department, and completed work on it before taking a leave of absence from Greenberg Traurig.

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