WASHINGTON—Most large corporations are prepared for Year 2000-related computer problems, a newly released congressional report states. But smaller businesses, international organizations and even some U.S. government agencies are at risk from Y2K.
``If you haven't started yet on Y2K compliance, you're already too late, and you'd better develop a contingency plan,'' said Sen. Christopher Dodd, D-Conn., ranking Democrat on the Senate Special Committee on the Year 2000 Technology Problem.
The committee—which released its report, Investigating the Impact of the Year 2000 Problem, March 2—estimates potential liability in litigation arising from Y2K computer failures could exceed $1 trillion.
Concern has led various senators and congressmen to sponsor bills to alleviate Y2K liability.
The Senate and House of Representatives unanimously passed one of these bills—S. 314, which requires the Small Business Administration to guarantee loans to small businesses for Y2K remediation—and President Clinton signed it into law April 2.
Another bill—S. 96, which requires Y2K plaintiffs to give defendants a chance to rectify Y2K-related problems before they litigate—passed the Senate Commerce Committee March 3 by a 11-9, strict party-line vote. Committee Democrats expressed grave reservations about its provisions.
Since then, House and Senate Democrats have introduced their own Y2K bills which, like S. 96, establish a waiting period before lawsuits can be filed to allow alternate dispute resolution. Unlike S. 96, however, the Democratic bills don't allow punitive damage caps.
The 163-page report from the Senate special committee covers the Y2K question from the viewpoint of various sectors, including government, utilities, health care, transportation, international preparedness and general business. While most of these sectors have the problem in hand, there are several in which problems persist, such as:
Small and medium-sized businesses, more than 40 percent of which say they have no plans to institute a Y2K preparedness plan, according to a National Federation of Independent Business survey;
Health care, where approximately 64 percent of U.S. hospitals are not prepared for Y2K; and
Transportation, where shipping, public transit and aircraft are at risk.
``Planes will not fall out of the sky, but disruption of flights and global trade between some areas and countries may occur,'' the report stated. ``The situation with international air traffic control and airports is much more severe.''
Similarly, many smaller government agencies, such as the Small Business Administration and the Environmental Protection Agency, are Y2K-prepared. But some of the larger ones, such as the departments of Transportation, Justice, Labor, and Health and Human Services, still have a way to go, Mr. Dodd said.
While many countries—such as Canada and the United Kingdom—match the U.S. for Y2K preparedness, many others—such as Russia, China, India, such important rubber producers as Thailand and providers of oil and petrochemical feedstocks including Saudi Arabia and Venezuela—lag far behind, noted committee Chairman Robert Bennett, R-Utah.
``There is a medium probability of economic disruption that will lead to civil unrest where economies and politics are fragile,'' he said. ``There is a high probability of economic interruption in Latin and South America, Africa and Asia, with the consequences still unclear.''
In the U.S., despite the unpreparedness of some sectors, ``it will be a bump in the road, but it won't be crippling,'' he said. Nevertheless, the general estimate of costs to repair the Y2K problem in the U.S. alone is $50 billion, an estimate which he believes to be low.
With such expense staring U.S. business in the face, the SBA loan guarantee bill was an easy sell to the Senate. But S. 96, sponsored by Senate Commerce Committee Chairman John McCain, R-Ariz., faces a harder fight, to judge from the March 3 vote.
That bill gives defendants 90 days from first notification by plaintiffs to rectify Y2K-related problems. It also gives them a ``good faith defense,'' meaning they can limit their liability by demonstrating how they tried to solve Y2K problems.
It limits economic damages to $250,000 or triple economic losses; for businesses with 25 or fewer employees, liability is cut to $50,000. It forbids punitive damages, unless plaintiffs can prove flagrant disregard for Y2K remediation on the defendants' part.
Sen. Ernest Hollings of South Carolina, ranking Democrat on the Commerce Committee and a leading opponent of product liability reform, called the McCain legislation ``a bad, bad bill'' that gives laggard small businesses too easy an out.
Sen. John Kerry, D-Mass., said the bill could end up hurting small businesses more than helping, because the delays it throws up against damage payments could cause small businesses hurt by larger businesses' non-compliance to fold.
Mr. McCain acknowledged ``there are still a number of refinements which need to be made to the bill, and a number of concerns to be addressed.'' He said he hoped he could work with his Democratic colleagues on the legislation, and added he was ``disappointed'' that they had made no specific recommendations.