The e-mail contract problem

Much attention over the past decade has been focused on e-commerce at the federal level. Laws have been enacted and rules passed to encourage the use of elec-tronic media in awarding contracts. Despite this, serious obstacles still hinder the adop-tion of pure e-contracting.

The most important step toward adopting an electronic data interchange (EDI) in contracting was a 1991 General Accounting Office opinion letter to the National Institute of Standards and Technology. The letter addressed the question of whether EDI technologies meet the requirement that a U.S. contract can be enforced only when supported by documented evidence of a binding agreement between an agency and another person.

According to GAO, agencies could create valid obligations using EDI, provided that their systems comply with NIST standards for security and privacy.

Congress adopted GAO's view in 1998 as part of the Government Paperwork Elimination Act. The act requires agencies to encourage the use of EDI technologies, provided a system is used to ensure that each e-document "was signed by the person whose digital signature appears to be attached to the message; and has not been altered since the digital signature was attached." A similar approach was taken last year when Congress passed the Electronic Signatures in Global and National Commerce Act.

The Federal Acquisition Regulation Council has also revised the FAR to more easily employ EDIs in contracting. One revision, for example, states that the use in other FAR sections "of terms commonly associated with paper transactions shall not be interpreted to restrict the use of electronic commerce."

Clearly, the government has heavily promoted EDI techniques in contracting. Yet despite all the attention, contracting remains largely a paper-based process.

The very laws and regulations supposedly intended to promote e-commerce are among the greatest impediments to using EDIs in contracting. As pointed out in a 1999 trade journal article by Thomas Smedinghoff and Ruth Bro, the centuries-old legal requirements that certain contracts be written and signed by the contracting parties were always flexible.

Thus, courts have said that the requirement of a "writing" is not limited to ink on paper but can encompass practically any communication reduced to tangible form. Moreover, the "signing" requirement in most circumstances can be met through the use of any symbol that signifies an assent.

This raises an interesting question: When almost any contract can be accomplished by marking "X" on a paper and transmitting it via fax, why invent an entire public-key infrastructure to do the same thing via e-mail?

If Congress wants to encourage EDIs in government contracting, it should consider adopting a "back-to-the-future" strategy to build more flexibility into the process instead of imposing ever the higher levels of authentication, security and third-party verification included in recent laws.

Peckinpaugh is corporate counsel for DynCorp in Reston, Va. This column represents his personal views.


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