Congress is moving closer to limiting the liability of IT vendors that sell to federal, state and local governments by allowing Uncle Sam to insure systems that fail to stop terrorists from causing havoc.

The latest effort to limit vendor liability came in legislation introduced last week by two top Republicans, offered as an amendment to the Senate's version of a bill authorizing the creation of a federal Department of Homeland Security.

If approved, the amendment would pave the way for the federal government to pay liability damages beyond what private insurance covers for companies that the president designates as makers of products related to national security. The House is taking another approach to liability in its version of the homeland security bill, and the differences would have to be reconciled in the final measure.

But critics of the Senate amendment warned that if the liability protections are too broad and include commercial software that's in wide use, corporate users may ultimately pay a price in the form of lower-quality products and tougher contract negotiations.

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