[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]




 
       Y2K TECHNOLOGY CHALLENGE: WILL THE POSTAL SERVICE DELIVER?

=======================================================================

                             JOINT HEARING

                               before the

                   SUBCOMMITTEE ON THE POSTAL SERVICE

                                and the

                 SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
                      INFORMATION, AND TECHNOLOGY

                                 of the

                     COMMITTEE ON GOVERNMENT REFORM

                                and the

                       SUBCOMMITTEE ON TECHNOLOGY

                                 of the

                          COMMITTEE ON SCIENCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 23, 1999

                               __________

                     Committee on Government Reform

                           Serial No. 106-25

                          Committee on Science

                           Serial No. 106-35

                               __________

   Printed for the use of the Committee on Government Reform and the 
                          Committee on Science


     Available via the World Wide Web: http://www.house.gov/reform

                                 ______

                     U.S. GOVERNMENT PRINTING OFFICE
58-811                       WASHINGTON : 1999





                     COMMITTEE ON GOVERNMENT REFORM

                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut       ROBERT E. WISE, Jr., West Virginia
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
STEPHEN HORN, California             PAUL E. KANJORSKI, Pennsylvania
JOHN L. MICA, Florida                GARY A. CONDIT, California
THOMAS M. DAVIS, Virginia            PATSY T. MINK, Hawaii
DAVID M. McINTOSH, Indiana           CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana              ELEANOR HOLMES NORTON, Washington, 
JOE SCARBOROUGH, Florida                 DC
STEVEN C. LaTOURETTE, Ohio           CHAKA FATTAH, Pennsylvania
MARSHALL ``MARK'' SANFORD, South     ELIJAH E. CUMMINGS, Maryland
    Carolina                         DENNIS J. KUCINICH, Ohio
BOB BARR, Georgia                    ROD R. BLAGOJEVICH, Illinois
DAN MILLER, Florida                  DANNY K. DAVIS, Illinois
ASA HUTCHINSON, Arkansas             JOHN F. TIERNEY, Massachusetts
LEE TERRY, Nebraska                  JIM TURNER, Texas
JUDY BIGGERT, Illinois               THOMAS H. ALLEN, Maine
GREG WALDEN, Oregon                  HAROLD E. FORD, Jr., Tennessee
DOUG OSE, California                             ------
PAUL RYAN, Wisconsin                 BERNARD SANDERS, Vermont 
JOHN T. DOOLITTLE, California            (Independent)
HELEN CHENOWETH, Idaho


                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
           David A. Kass, Deputy Counsel and Parliamentarian
                      Carla J. Martin, Chief Clerk
                 Phil Schiliro, Minority Staff Director
                                 ------                                

                   Subcommittee on the Postal Service

                   JOHN M. McHUGH, New York, Chairman
MARSHALL ``MARK'' SANFORD, South     CHAKA FATTAH, Pennsylvania
    Carolina                         MAJOR R. OWENS, New York
BENJAMIN A. GILMAN, New York         DANNY K. DAVIS, Illinois
STEVEN C. LaTOURETTE, Ohio
DAN MILLER, Florida

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
                      Robert Taub, Staff Director
                      Heea Vazirani-Fales, Counsel
                       Abigail D. Hurowitz, Clerk
           Denise Wilson, Minority Professional Staff Member

   Subcommittee on Government Management, Information, and Technology

                   STEPHEN HORN, California, Chairman
JUDY BIGGERT, Illinois               JIM TURNER, Texas
THOMAS M. DAVIS, Virginia            PAUL E. KANJORSKI, Pennsylvania
GREG WALDEN, Oregon                  MAJOR R. OWENS, New York
DOUG OSE, California                 PATSY T. MINK, Hawaii
PAUL RYAN, Wisconsin                 CAROLYN B. MALONEY, New York

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
          J. Russell George, Staff Director and Chief Counsel
                   Matt Ryan, Senior Policy Director
                          Mason Alinger, Clerk
                     Faith Weiss, Minority Counsel

                          COMMITTEE ON SCIENCE

       HON. F. JAMES SENSENBRENNER, Jr., (R-Wisconsin), Chairman
SHERWOOD L. BOEHLERT, New York       GEORGE E. BROWN, Jr., California, 
LAMAR SMITH, Texas                       RMM**
CONSTANCE A. MORELLA, Maryland       RALPH M. HALL, Texas
CURT WELDON, Pennsylvania            BART GORDON, Tennessee
DANA ROHRABACHER, California         JERRY F. COSTELLO, Illinois
JOE BARTON, Texas                    TIM ROEMER, Indiana
KEN CALVERT, California              JAMES A. BARCIA, Michigan
NICK SMITH, Michigan                 EDDIE BERNICE JOHNSON, Texas
ROSCOE G. BARTLETT, Maryland         LYNN C. WOOLSEY, California
VERNON J. EHLERS, Michigan*          ALCEE L. HASTINGS, Florida
DAVE WELDON, Florida                 LYNN N. RIVERS, Michigan
GIL GUTKNECHT, Minnesota             ZOE LOFGREN, California
THOMAS W. EWING, Illinois            MICHAEL F. DOYLE, Pennsylvania
CHRIS CANNON, Utah                   SHEILA JACKSON-LEE, Texas
KEVIN BRADY, Texas                   DEBBIE STABENOW, Michigan
MERRILL COOK, Utah                   BOB ETHERIDGE, North Carolina
GEORGE R. NETHERCUTT, Jr.,           NICK LAMPSON, Texas
    Washington                       JOHN B. LARSON, Connecticut
FRANK D. LUCAS, Oklahoma             MARK UDALL, Colorado
MARK GREEN, Wisconsin                DAVID WU, Oregon
STEVEN T. KUYKENDALL, California     ANTHONY D. WEINER, New York
GARY G. MILLER, California           MICHAEL E. CAPUANO, Massachusetts
JUDY BIGGERT, Illinois               VACANCY
MARSHALL ``MARK'' SANFORD, South     VACANCY
    Carolina
JACK METCALF, Washington


                       Subcommittee on Technology

               CONSTANCE A. MORELLA, Maryland, Chairwoman
CURT WELDON, Pennsylvania            JAMES A. BARCIA, Michigan**
ROSCOE G. BARTLETT, Maryland         LYNN N. RIVERS, Michigan
GIL GUTKNECHT, Minnesota*            DEBBIE STABENOW, Michigan
THOMAS W. EWING, Illinois            MARK UDALL, Colorado
CHRIS CANNON, Utah                   DAVID WU, Oregon
KEVIN BRADY, Texas                   ANTHONY D. WEINER, New York
MERRILL COOK, Utah                   MICHAEL E. CAPUANO, Massachusetts
MARK GREEN, Wisconsin                BART GORDON, Tennessee
STEVEN T. KUYKENDALL, California     TIM ROEMER, Indiana
GARY G. MILLER, California

                               Ex Officio

F. JAMES SENSENBRENNER, Jr.,         GEORGE E. BROWN, Jr., California+
    Wisconsin+




                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on February 23, 1999................................     1
Statement of:
    Corcoran, Karla W., Inspector General, U.S. Postal Service, 
      accompanied by Richard F. Chambers, Deputy Assistant 
      Inspector General for Audit, Office of the Inspector 
      General, U.S. Postal Service; Jack L. Brock, Director, 
      Governmentwide and Defense Information Systems, Accounting 
      and Information Management Division, U.S. General 
      Accounting Office; Carl M. Urie, Assistant Director, 
      Governmentwide and Defense Information Systems, Accounting 
      and Information Management Division, U.S. General 
      Accounting Office; Norman E. Lorentz, senior vice 
      president, chief technology officer, U.S. Postal Service; 
      Nicholas F. Barranca, vice president, operations planning, 
      U.S. Postal Service; and Richard D. Weirich, vice 
      president, information systems, U.S. Postal Service........    20
Letters, statements, etc., submitted for the record by:
    Barranca, Nicholas F., vice president, operations planning, 
      U.S. Postal Service, followup questions and responses......   158
    Brock, Jack L., Director, Governmentwide and Defense 
      Information Systems, Accounting and Information Management 
      Division, U.S. General Accounting Office, prepared 
      statement of...............................................   121
    Corcoran, Karla W., Inspector General, U.S. Postal Service:
        Management advisory report...............................   162
        Prepared statement of....................................    23
    Fattah, Hon. Chaka, a Representative in Congress from the 
      State of Pennsylvania, prepared statement of...............   217
    Horn, Hon. Stephen, a Representative in Congress from the 
      State of California, prepared statement of.................     8
    Lorentz, Norman E., senior vice president, chief technology 
      officer, U.S. Postal Service:
        Information concerning the master calendar...............   213
        Prepared statement of....................................   141
    McHugh, Hon. John M., a Representative in Congress from the 
      State of New York, prepared statement of...................     4
    Morella, Hon. Constance A., a Representative in Congress from 
      the State of Maryland, prepared statement of...............    11
    Turner, Hon. Jim, a Representative in Congress from the State 
      of Texas, prepared statement of............................    16


       Y2K TECHNOLOGY CHALLENGE: WILL THE POSTAL SERVICE DELIVER?

                              ----------                              


                       TUESDAY, FEBRUARY 23, 1999

        House of Representatives, Subcommittee on the 
            Postal Service, joint with the Subcommittee on 
            Government Management, Information, and 
            Technology, Committee on Government Reform; and 
            the Subcommittee on Technology, Committee on 
            Science,
                                                    Washington, DC.
    The subcommittees met, pursuant to notice, at 10 a.m., in 
room 2154, Rayburn House Office Building, Hon. John McHugh 
(chairman of the Subcommittee on the Postal Service), Hon. 
Stephen Horn (chairman of the Subcommittee on Government 
Management, Information, and Technology), Committee on 
Government Reform; and Hon. Constance Morella (chairwoman of 
the Subcommittee on Technology), Committee on Science 
presiding.
    Present: Representatives McHugh, Horn, Morella, Miller, 
Bartlett, Gilman, Biggert, Gutknecht, Turner, Stabenow, Gordon, 
Wu, and Rivers.
    Staff present from the Subcommittee on the Postal Service: 
Robert Taub, staff director; Heea Vazirani-Fales, counsel; Jane 
Hatcherson, office and systems administrator/legislative 
assistant; Abigail D. Hurowitz, clerk; Denise Wilson, minority 
professional staff member, Committee on Government Reform; and 
Jean Gosa, minority administrative staff assistant, Committee 
on Government Reform.
    Staff present from the Subcommittee on Government 
Management, Information, and Technology: J. Russell George, 
staff director; Bonnie Heald, communications director and 
professional staff member; Matt Ryan, policy director; Mason 
Aliger, clerk; and Faith Weiss, minority professional staff 
member, Committee on Government Reform.
    Staff present from the Subcommittee on Technology: Richard 
Russell, staff director; Ben Wu, professional staff member; Joe 
Sullivan, staff assistant; Mike Quear, minority professional 
staff member; and Marty Ralston, minority staff assistant.
    Mr. McHugh [presiding]. Let me call the meeting to order 
and wish everyone, ``Good morning'' and my personal words of 
welcome.
    This is somewhat of a unique meeting today, in that we are 
joining not just another but, in fact, two other subcommittees, 
for a total of three. Two of which have been designated as the, 
``experts,'' on the year 2000 problems. My good friend on my 
left--only figuratively speaking--from California, Mr. Horn, 
fresh from a starring engagement on the ``Today'' show, and his 
role as the chairman of the Subcommittee on Government 
Management, Information, and Technology. And my other good 
friend, Mrs. Morella--Connie, how are you--and her chairmanship 
over the Subcommittee on Science and Technology. Rather than a 
joint hearing, I suppose we could consider this a ``trifecta'' 
of sorts--[laughter]--and I certainly welcome the opportunity 
to join my distinguished colleagues in this hearing today. I 
know we all look forward to having the benefit of the testimony 
and input of our very distinguished witnesses.
    This is certainly a serious matter that must be addressed 
fully--and I want to emphasize the word ``fully''--and must be 
addressed within the next 311 days for those of us who are 
counting.
    The Postal Service has stated that it is assigning a high 
priority to addressing the Y2K problem and is spending a 
significant amount of money on that effort. The Service has 
estimated that the total cost of fixing its Y2K problem could 
be one-half to three-quarters of a billion dollars. Given the 
importance of the Postal Service's mission to all Americans, 
whether at home or at their place of business, we must ensure 
that this problem is and, of course, stays on track.
    The Postal Service faces a major challenge in updating its 
computer system to correctly identify dates beginning in the 
year 2000 and, thus, avoid malfunctions that could 
significantly, even disastrously, disrupt mail delivery. The 
Postal Service has a special responsibility in this regard 
because it is likely that a number of private-sector and 
Government groups may need to utilize the agency as a backup 
delivery system if their computers malfunction, raising 
concerns about the prospect of a mail surge in January of next 
year.
    An early assessment by the Inspector General showed that 
the Service was slow to recognize the scope of this problem and 
failed to take the necessary actions early on to ensure that 
its computer systems were indeed Y2K compliant.
    More recently, the Postal system's November 19, 1998, 
quarterly report to the Office of Management and Budget, on its 
efforts in this matter, indicated progress in its meeting the 
challenge. The Service's remaining tasks include completing the 
adjustment of its computers so that they are all completely 
compliant, fully testing computer systems, and, of course, 
preparing contingency plans to help ensure continuity of core 
business operations.
    Our witnesses today include the Postal Service's Inspector 
General, the General Accounting Office, and the Postal Service, 
itself. The Inspector General has been working closely to 
assess and monitor the Service's progress, and we certainly 
look forward to her insights and recommendations.
    The GAO has also been evaluating the postal situation, and 
that office, I believe, can provide some context given its 
assessments of the Y2K problems encountered in other Federal 
agencies of similar size and scope such as the Department of 
Defense. And, of course, we are anxious to hear firsthand from 
the Postal Service on the progress it has made in overcoming 
its early difficulties as identified last year by the Inspector 
General.
    As I stated at the outset, given the importance of the 
Postal Service's mission to the American public, close 
oversight will be needed to ensure that its year 2000 program 
stays on track, and today's hearing, we all hope, is one step 
in that very important process.
    And with that, before we go to our witnesses, I would be 
happy to yield to my good friend, Mr. Horn, who actually came 
to me with the idea of this hearing. So I am really relying 
upon him to make us all look smarter than I think I am. But 
with that, I would be happy to yield to the gentleman from 
California.
    [The prepared statement of Hon. John M. McHugh follows:]
    [GRAPHIC] [TIFF OMITTED] T8811.001
    
    [GRAPHIC] [TIFF OMITTED] T8811.002
    
    [GRAPHIC] [TIFF OMITTED] T8811.003
    
    Mr. Horn. Well, I thank you. As chairman, you have done a 
wonderful job over the last few years we have been colleagues 
in reviewing the Post Office. Thank you for calling this 
hearing.
    If I might, I am going to only read one or two sentences 
from my opening statement. Mr. Chairman, I would like to have 
the statement put in the record as if read at this point.
    Mr. McHugh. Without objection, so ordered.
    [The prepared statement of Hon. Stephen Horn follows:]
    [GRAPHIC] [TIFF OMITTED] T8811.004
    
    Mr. Horn. I think I can say this about the Post Office 
Department. Based on my experience, 30 years of living in Long 
Beach, CA, I have never had one single complaint about the Post 
Office Department. You have a marvelous group of people out 
there. Mr. Good, I think a lot of you know, who headed the Long 
Beach operation and was moved around the country in a couple of 
cases to salvage those operations. They run a fine system. I 
have been in every single branch post office in that district 
at least four times over the last 6 years. And, again, both 
clerks, letter carriers have done things with a smile.
    So, I don't come at this from being ``dogged'' after the 
Post Office Department. But I come at it because, as the 
chairman said in his opening remarks, everybody else's 
contingency plan, if their electronics and computers don't 
work, all of them are depending on the post office. We have 
enough trouble with the ones that have computers, and we hope 
they will work, and not just in the Federal Government, but in 
the society, in general. But, again, we are going to be really 
``up a creek'' or ``down a creek,'' whatever the phrase is, in 
needing your help, because January 1, 2000, is right in the 
midst of your major rush of the year. If everybody is mailing 
43 million checks or 10,000 checks in a small business, 
whatever it is, they are going to need your help.
    So, one of the things I hope will come out of this hearing 
is some understanding of how you can be the contingency person 
of the American society.
    If we can hold the rest for questions--I am going to have 
to step out at 10:45 for about a half an hour, Mr. Chairman, 
but I will be back.
    Mr. McHugh. I thank the gentleman.
    There really is no order of seniority. Well, there is, of 
course--[laughter]--but we are not adhering to any kind of rank 
here. We have, as I said, three subcommittees, and of course a 
lot of Members, I know, will be coming in and out and the fact 
that we are going to our third Chair this morning, as the third 
spot has absolutely no relevance to anything other than that 
seems to be the way it worked out.
    But with that, I would be delighted to yield to Chairwoman 
Connie Morella for any comments she might like to make.
    Mrs. Morella. Thank you, Mr. Chairman.
    I appreciate your holding this hearing, with the three 
subcommittees coming together, because we recognize what an 
important issue this is and how important the Postal system is 
to all Americans and to all people who are in the United States 
and, as a matter of fact, throughout the world.
    So, I am pleased to be here. We talk about three Chairs; 
maybe we need to look at the table here that we have before us.
    Delivery of the mail, of course, is so fundamental to our 
Nation that it would be unthinkable for us to not have it. And 
yet, just as in virtually every large business, and the Postal 
Service is a quasi independent agency, is arguably the largest 
business in the Federal Government with over 700,000 employees 
handling over 185 million pieces of mail annually, the Postal 
Service is also being bitten by this millennium bug. So, the 
Postal Service must take every available necessary action to 
correct the Y2K computer glitch, especially in this age of 
highly automated mail delivery.
    The problem is that, due to initial inadequate leadership 
and lack of management priorities, the Postal Service only 
began to dedicate sufficient resources, personnel, and funding 
to the issue much too late. And as a result, there are 
justifiable concerns about the Postal Service's ability to be 
fully Y2K compliant before January 1, 2000. And that deadline 
is like 311 days away.
    I have been assured that, despite these concerns, the 
Postal Service is determined that in the new millennium anyone 
who drops off mail at the post office should remain absolutely 
confident that their letter or package will arrive at its 
intended destination, even if it has to be manually sorted or 
even if it needs to be delivered by Pony Express.
    I have no doubt that getting the mail there will not be a 
problem, but the Y2K challenge may ultimately give a stark, 
grim truth to the old excuse, ``the check is in the mail.'' The 
possibility of significant business interruptions exist if the 
Postal Service isn't able to operate in the same manner as it 
does now. And these business interruptions could potentially 
affect our Nation's economic stability. If there is no 
confidence that the Postal Service can deliver the mail in a 
timely manner, then businesses and others will turn elsewhere 
when a letter or a package absolutely, positively needs to get 
there.
    These concerns about the Postal Service are especially 
pronounced because, in many cases, the Postal Service is the 
contingency plan for organizations and individuals that conduct 
business electronically.
    Assuring the American public that the Postal Service will 
have, at worst, minimal Y2K disruptions is vital. It is vital 
to maintaining the trust and confidence that the institutional 
has held for over 200 years.
    To help us achieve that goal, we have a distinguished panel 
of witnesses from the Postal Service, the Postal Service 
Inspector General, and the General Accounting Office. Both the 
Inspector General and the GAO have issued a series of specific 
recommendations to guide the Postal Service in its operations 
and we appreciate that.
    I am looking forward to reviewing the recommendations with 
the Postal Service, determining the current status. I expect 
this hearing will be very helpful in guiding the Postal Service 
toward making the necessary changes in the short time remaining 
so that we can be confident that, ``through rain, snow, sleet, 
hail, or Y2K,'' our Nation's mail will be delivered in a timely 
manner.
    And, Mr. Chairman, I just want to announce that young 
people are interested in this hearing, too. There is a class 
here of information technology students from a high school in 
Maryland. It is not in my district, but it is Springbrook High 
School, and I am pleased they are here because they wanted to 
come and to listen and to learn from this hearing.
    I yield back.
    [The prepared statement of Hon. Constance A. Morella 
follows:]
[GRAPHIC] [TIFF OMITTED] T8811.005

[GRAPHIC] [TIFF OMITTED] T8811.006

[GRAPHIC] [TIFF OMITTED] T8811.007

[GRAPHIC] [TIFF OMITTED] T8811.008

    Mr. McHugh. Well, thank you, Connie. We appreciate your 
kind comments and your leadership on this issue.
    And, we certainly welcome the high school students who have 
joined us, as we welcome all of our guests.
    One of the positive things about having three Chairs is you 
also have three ranking members who are associated, and we have 
been joined with one already, the ranking member on the 
Government Management, Information, and Technology Subcommittee 
who serves faithfully with Mr. Horn, and Mr. Horn tells me does 
a terrific job as well, Mr. Turner, the gentleman from Texas. I 
would be happy to yield to him at this time.
    Mr. Turner. Thank you, Mr. Chairman.
    I would like to thank Chairman McHugh, Chairman Horn and 
Chairwoman Morella for holding this hearing today on the status 
of the Postal Service Y2K conversion efforts.
    It is hard to imagine that we have 640 million pieces of 
mail flowing in this country every day and 38,000 postal 
facilities. You certainly have a challenge ahead of you to be 
sure that you are Y2K compliant. It is my understanding that a 
concentrated effort is being made, and I commend you for doing 
that.
    They tell me much work remains to be done. I am told that 
there are 148 of the 156 most-critical systems that have been 
repaired and in service and ready for Y2K, but only 40 of those 
systems have actually had their respective repairs tested and 
verified. I am also told that you have much work to be done in 
the area of contingency planning. If there is anything that I 
would think the American people would expect from the Federal 
Government is to be sure that their mail is delivered on time 
on January 2, 2000.
    So, I commend all of you for your efforts, and we look 
forward to hearing your report to us today.
    Thank you, Mr. Chairman.
    [The prepared statement of Hon. Jim Turner follows:]
    [GRAPHIC] [TIFF OMITTED] T8811.009
    
    [GRAPHIC] [TIFF OMITTED] T8811.010
    
    [GRAPHIC] [TIFF OMITTED] T8811.011
    
    Mr. McHugh. I thank the gentleman.
    We have something of a logistics challenge here this 
morning for the three subcommittees, because we will have 
Members coming and going. We are joined already by Judy 
Biggert, the gentlelady from Illinois who serves as the vice 
chair of the Government Management, Information, and Technology 
Subcommittee; Gary Miller, the gentleman from California who 
serves on the Technology Subcommittee; Roscoe Bartlett, another 
fine Member of the House from Maryland. I would be happy to 
yield to any or all of you if you would care to make any 
opening comments.
    Mr. Miller. Thank you, Mr. Chair----
    Mr. McHugh. Mr. Miller.
    Mr. Miller [continuing]. For conducting this hearing today 
on the status of the year 2000 challenge at the U.S. Postal 
Service. I think it is important that we draw attention to the 
vital role the U.S. Postal Service will play at the start of 
the new millennium. As we discussed in the January 11th joint 
hearing which addressed the Y2K problem at the Federal, State, 
local, and foreign governments, failure to identify and prepare 
for both the probable and worst-case scenarios could result in 
consequences ranging from mere inconvenience to long-term 
impairment of the economy.
    It was ironic; I met with my local bankers last week, and 
the amount of concern generated at that level was rather 
alarming. You have to hand it to the technology companies when 
they sold stock and created the concern over this problem. They 
did a very, very effective job. I think our job today is to 
create a more calm environment that this issue is really going 
to be dealt with.
    I am hopeful that the testimony and the questions brought 
forth today will help us prepare for the year 2000.
    Once again, Mr. Chairman, thank you for holding this 
hearing.
    Mr. McHugh. I thank the gentleman for his comments.
    Any other Members wish to--Mr. Bartlett.
    Mr. Bartlett. Mr. Chairman, when I talk to our 
constituents, I find more variability, less consensus, about 
what the Y2K problem will do to us and about any future event. 
So I am here today to listen with great interest to the 
preparations of the Postal Service and their prognostications 
of what will happen to this vital part of our society in the 
year 2000.
    Thank you very much for convening this hearing.
    Mr. McHugh. I thank the gentleman.
    The gentlelady from Illinois.
    Mrs. Biggert. Thank you, Mr. Chairman.
    I, too, look forward to hearing from the witnesses today on 
this Y2K challenge, and I know that certainly the year 2000 
will come at the Postal Service's busiest time. And so I know 
that the American public and the Congress will be assured that 
the mail will be delivered on time and look forward to hearing 
those assurances.
    Thank you very much.
    Mr. McHugh. I thank the gentlelady.
    With that, that brings us to the substantive part, we hope, 
of today's hearing and that would be, of course, testimony.
    As some of you who have appeared before the full committee 
and/or some of its subcommittees in the past know, it is 
committee rules that all witnesses must be sworn. If you would 
please rise. I would also note, for the record, that although 
not seated at the head table, Mr. Carl Urie, who is Assistant 
Director of Governmentwide Defense Systems of GAO, will also be 
sworn from some place in the audience. So, if all of the 
aforementioned would rise.
    [Witnesses sworn.]
    Mr. McHugh. The record will show that all of the 
participants affirmed and acknowledged the oath in the 
affirmative.
    And with that, we welcome you here this morning. Thank you 
for your patience. As you have heard from all of the Members 
here today, this is a--generically and specifically--to the 
Postal Service, a very pressing problem, one that concerns us 
all deeply, as I know it does you. We are looking forward to 
your testimony. We will begin, as the hearing notice indicated, 
with Ms. Corcoran, the Inspector General of the U.S. Postal 
Service.
    Karla, welcome. It is good to see you again. Thank you for 
being here, and our attention and our time is yours.

STATEMENTS OF KARLA W. CORCORAN, INSPECTOR GENERAL, U.S. POSTAL 
 SERVICE, ACCOMPANIED BY RICHARD F. CHAMBERS, DEPUTY ASSISTANT 
 INSPECTOR GENERAL FOR AUDIT, OFFICE OF THE INSPECTOR GENERAL, 
 U.S. POSTAL SERVICE; JACK L. BROCK, DIRECTOR, GOVERNMENTWIDE 
  AND DEFENSE INFORMATION SYSTEMS, ACCOUNTING AND INFORMATION 
 MANAGEMENT DIVISION, U.S. GENERAL ACCOUNTING OFFICE; CARL M. 
     URIE, ASSISTANT DIRECTOR, GOVERNMENTWIDE AND DEFENSE 
  INFORMATION SYSTEMS, ACCOUNTING AND INFORMATION MANAGEMENT 
 DIVISION, U.S. GENERAL ACCOUNTING OFFICE; NORMAN E. LORENTZ, 
 SENIOR VICE PRESIDENT, CHIEF TECHNOLOGY OFFICER, U.S. POSTAL 
   SERVICE; NICHOLAS F. BARRANCA, VICE PRESIDENT, OPERATIONS 
  PLANNING, U.S. POSTAL SERVICE, AND RICHARD D. WEIRICH, VICE 
      PRESIDENT, INFORMATION SYSTEMS, U.S. POSTAL SERVICE

    Ms. Corcoran. Thank you. Good morning, Chairman McHugh, 
Chairman Horn, Chairwoman Morella, and members of the 
subcommittees.
    I am pleased to be here today to discuss the Y2K challenge 
facing the Postal Service. Joining me is Richard Chambers, 
Deputy Assistant Inspector General for Audit.
    With your permission, I would like to submit my full 
statement for the record.
    Mr. McHugh. For the record, so ordered, without objection, 
as all of the witnesses statements will be entered in their 
entirety.
    And, please, all of you feel free to summarize your 
comments and make those points you feel are most important for 
the moment. Thank you.
    Ms. Corcoran. Since beginning my office in 1997, we have 
been performing work in the Y2K area. In addition, the Postal 
Governors have been very concerned about the Y2K issue. They 
have monitored the progress through periodic briefings by 
management and my office.
    The Postal Service Y2K issues can be examined by answering 
four key questions.
    One, why is it critical for the Postal Service to address 
the Y2K issue?
    Two, will the Postal Service be able to deliver mail after 
January 1, 2000?
    Three, what is the current status of the Postal Service's 
Y2K effort?
    And, four, what can Postal Service do to minimize the Y2K 
risk?
    Turning to question No. 1, why is it critical for the 
Postal Service to address the Y2K issue? The Postal Service is 
an important part of the Nation's communication and commercial 
infrastructure. The Postal Service is heavily reliant on 
technology, automation, and thousands of critical, external 
suppliers of goods and services who also face Y2K challenges. 
The Postal Service uses Y2K-vulnerable equipment systems and 
processes to deliver 650 million pieces of mail per day, 
maintain 38,000 facilities, and pay over 800,000 employees. In 
addition, numerous private and Government agencies have 
included the Postal Service in their contingency plans if their 
electronic systems fail.
    Question 2, will the Postal Service be able to deliver the 
mail after January 1, 2000? There are too many variables that 
currently exist to answer that question. The answer to this 
question depends, in large part, on the Postal Service--how 
well the Postal Service executes its Y2K plans over the coming 
months. The Postal Service has made progress, but much remains 
to be done in the remaining 10 months.
    We have provided the Postal Service with five reports that 
outline opportunities for improvement. Generally, the Postal 
Service has taken action on these reports, but with so little 
time remaining, ``beating the clock'' will be challenging.
    Question 3, what is the current status of Postal Service's 
Y2K effort? To answer this question, I would like to look 
briefly at eight comprehensive areas.
    The first area is external suppliers. Postal Service 
estimates it has about 8,000 critical suppliers of goods and 
services for areas such as air, rail, and fuel that are needed 
to move the mail and maintain its facilities. The Postal 
Service has 661 critical national suppliers; it only knows the 
Y2K readiness status of 1 out of 7 of these national suppliers. 
The Postal Service also knows very little about the 7,000 field 
suppliers and their Y2K readiness. Postal operations may be 
disrupted if their suppliers' services are not Y2K compliant or 
if the Postal Service does not develop alternatives to these 
suppliers.
    The second area is data exchanges. This is the way that the 
Postal Service transfers data with other Government agencies, 
businesses, industries, and customers. Only 6 percent of the 
2,000 known critical exchanges are Y2K ready.
    The third area is technology-dependent facilities. These 
are the controls for heating, cooling, fire suppression, and 
the numerous other systems that support the 38,000 facilities. 
Postal Service is still assessing these controls to determine 
what needs to be done to assure the facilities do not shut down 
or cause problems on January 1, 2000.
    The fourth area is mail-processing equipment. These are the 
major automated systems for moving the mail. They consist of 
thousands of pieces of equipment. This area is on its way to 
being Y2K compliant. Our main concern is whether the Postal 
Service will adequately deploy and test its solutions.
    The fifth and sixth areas are information systems and the 
information technology infrastructure. These are mainframes, 
PC's, and information systems that process data. A majority of 
these have had solutions developed; however, independent 
verification to assure systems' compliance and deployment of 
solutions to the actual infrastructure could be a challenge.
    The seventh area is readiness testing. Readiness testing 
gives Postal Service assurance that their systems will be 
reliable on January 1, 2000. The Postal Service has not made a 
final determination as to what extent readiness testing will be 
performed.
    The final area I would like to discuss within this third 
question about Postal Service's current Y2K status is their 
continuity plans. You can consider continuity plans to be the 
Postal Service's insurance plan. If failures occur in any of 
their equipment, systems, or processes, alternatives or ways to 
assure their operations are not affected must be developed, 
implemented, and tested for all core business processes to 
ensure movement of the mail, payment of its bills, protection 
of its revenue, and protection of the life and safety of its 
employees and customers.
    The Postal Service plans to complete the continuity plan by 
July and test it by August. This is a tremendous challenge 
within the given timeframes. But not meeting these timeframes 
is not really an option for the Postal Service if they are 
going to be ready for January 1, 2000.
    In summary, for these eight areas, the Postal Service has 
done much, but much remains to be done.
    Question 4, what can the Postal Service do to minimize Y2K 
risk? There are three things that we believe the Postal Service 
needs to do to minimize their risk. First, the Postal Service 
should reevaluate its initial assessments to identify only 
those most critical business operation systems. Second, the 
Postal Service should focus its work on correcting, first, 
those systems, equipment, and processes that are absolutely 
necessary to ensure core business processes work. Third, the 
Postal Service must develop, implement, and test business 
continuity plans for core business processes.
    In summary, it is critical for the Postal Service to 
address the Y2K issue. There are too many variables to 
determine what impact Y2K will have on the Postal Service's 
ability to deliver mail after January 1, 2000.
    The Postal Service recognizes its Y2K challenge, is taking 
action, and has made progress. However, with 10 months 
remaining before year 2000, much remains to be done. The Postal 
Service should focus resources on the most critical core 
business processes and develop, implement, and test their 
continuity plan to minimize Y2K risk.
    My office will continue to work with the Postal Service to 
identify challenges and to help the Postal Service minimize the 
Y2K risk.
    The concludes my statement. Thank you for interest, and I 
will be pleased to answer any questions.
    [The prepared statement of Ms. Corcoran follows:]
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    Mr. McHugh. Thank you very much, Ms. Corcoran. We 
appreciate your comments and observations.
    As we had decided earlier, and as your presence all at the 
same table at the same time suggests, our plan is to go forward 
and to have all three presentations and then return for the 
questions and answers.
    So, in keeping with that, hearing no outcry of outrage--
[laughter]--I would now be pleased to recognize Mr. Jack Brock, 
who serves as Director of the General Accounting Office's 
Governmentwide and Defense Information System, under the 
Accounting and Information Management Division.
    Mr. Brock, good morning, sir. Thank you for being with us.
    Mr. Brock. Thank you very much, Mr. McHugh, and I 
appreciate being here.
    I was here on Friday before another one of your 
subcommittees on the District of Columbia. I will be here next 
Tuesday on the Department of Defense before Mr. Horn.
    So, the problems and the issues that the Postal Service is 
facing are not unique. I mean every agency, every private-
sector company, all face Y2K concerns. So, they are not unique.
    Mr. McHugh. Are you renting a room in the back? [Laughter.]
    Or, are you just commuting? [Laughter.]
    Mr. Brock. Well, we are being kept busy, but it is nice to 
be employed.
    Every morning when I get up, I turn on the lights, and I 
expect the light to turn on. I usually call into my office and 
check my voice mail, and I expect the phone to work. In a very 
similar fashion, every afternoon when I come in from work, I go 
to my mailbox, and the mail is always there. I cannot recall 
ever having a misplaced letter. I have never had a call from a 
creditor saying, ``Your check, I guess, is in the mail, but we 
haven't received it.'' I mean I have come to expect really--as 
Mr. Horn has discussed in his opening remarks--first-class 
service from the post office.
    Over 100 million Americans every day have this level of 
expected service. The logistical operations that the post 
office has to go through to deliver this 650 million pieces of 
mail and to provide the ubiquitous service they provide across 
the Nation is incredibly complex.
    Of all the agencies that I have responsibility for 
reviewing, I think that only the Department of Defense has a 
more complex set of operations that have to be ready on January 
1st.
    In many respects, the post office, the Postal Service, is a 
public utility. It provides a public service that is absolutely 
necessary, and it has to perform at a high level. There are too 
many people, too many businesses, that depend on the Postal 
Service for their livelihood. For example, people getting 
prescription drugs through the mail are dependent on the Postal 
Service; others are dependent for delivery of checks. There are 
other benefit payments, for businesses that depend upon timely 
receipt and transmission of packages and bulk mail; everything 
has to work, and it has to work at a high level.
    So, just as on January 1st, if you can't turn on your light 
switch, if you can't pick up the phone and get a dial tone, I 
think the Postal Service is in a similar situation. If it 
doesn't deliver mail reasonably effectively, then we are going 
to have the same kinds of problems. So it is very important the 
Postal Service work.
    I think for that reason, regardless of their status, that 
it is important to have these hearings and this oversight to 
provide a great assurance that things will work next year. So, 
I commend you on having these hearings and providing that level 
of oversight.
    As the Inspector General indicated in her remarks--and I 
will try not to duplicate it--it is a complex environment that 
they have. A third of the Federal work force works for the 
Postal Service. As I mentioned, the 650 million pieces of mail 
a day that are delivered, thousands of local facilities, over 
30,000 individual post offices, a couple of hundred mail 
facilities that sort mail, deliver, do the set-up that is 
necessary for mail delivery--all of this is supported by a very 
rich, complex environment that relies on automation, that 
relies on computers to make it work.
    So, the Postal Service has identified 152 critical systems 
that have to work in order for the mail to be delivered. They 
have identified 349 important systems that need to work in 
order to make life bearable for them. They have identified a 
number of facilities that must work in order for the mail to be 
stored, to be delivered. They have identified hundreds and 
thousands of interfaces that must be in place. They have 
identified 43 types of mail-processing equipment that are 
installed in several hundred locations that have to work, and 
they have identified a number of interfaces, not only within 
the Postal Service, but with their customers and their 
suppliers, that also have to work. So, it is not just a 
question of 152 mission-critical systems working; it is a 
question of an entire operating environment working. If that 
does not work, the Postal Service will have problems.
    In terms of their status, I think the IG covered that very 
well. But they are running somewhat behind the OMB guidance for 
implementation, and, as a result, they are going to be facing 
some time compressions.
    One of the things that I would like to comment briefly on, 
though, is on what I believe is the strength of the Postal 
Service and that is their new management structure. Until 
recently, the burden of ensuring the year 2000 readiness 
largely resided in the Program Management Office under the 
general director of the vice president of information systems. 
The program focus here was more directed at systems and 
processes that supported business operations, rather than on 
the readiness of business processes, which typically involve a 
lot of activities that are more complex than just individual 
systems.
    In December 1998, the Service reorganized its program 
management to better reflect year 2000 efforts in terms of 
these business operations. The new organizational structure 
represents a matrix approach to managing ongoing efforts. 
Senior vice presidents that have responsibility within 
functional areas like mail operations or finance or marketing, 
are now required to ensure that individual business processes 
will, in fact, be decomposed, and that each process will work.
    Those processes are responsible for developing individual 
contingency plans and for conducting the simulation of what we 
would call ``end-to-end'' testing that is required to make sure 
that processes work, not just systems.
    The vice president for Information Systems still has the 
responsibility for system remediation across these business 
areas. And then across all of the areas, the Service's chief 
operating officer has the responsibility for developing a 
comprehensive business continuity plan to allow for a certain 
level of business to be conducted in the event of failures.
    We are very supportive of this management approach. The 
problem with it is--we would have been even more pleased if it 
had been put in place a couple of years ago. So, it is new; it 
hasn't been tested; it is just getting off the ground. But, 
nevertheless, if implemented appropriately, we think it will go 
a long ways toward serving the Postal Service.
    However, even with this process in place, we believe the 
Postal Service has two big, big challenges, and the first one 
is time. They are running out of it; they have until the end of 
the year. However, that deadline is further compressed by their 
business cycle which picks up considerably in September with 
holiday mailing and further compresses the availability and the 
attention of top management to devote themselves to Y2K.
    Second, they still have a large number of unknowns that 
they are working toward. They have no complete inventory on the 
IT infrastructure, on the internal and external interfaces, and 
on field equipment and systems. They don't know yet whether the 
majority of the critical vendors they have will, in fact, be 
ready, themselves, to supply them with goods and services that 
are necessary for the mail to be delivered. They don't have 
assurances yet on the public infrastructure--
telecommunications, electrical power, things like that, that 
all businesses, that all Government operations have to depend 
on. Until they complete their simulation testing, they have no 
real assurance yet that the internal business processes will 
work.
    So they have a large number of challenges that they must 
successfully address over the next few months in order to 
maximize assurance and to minimize risk that, in fact, they 
will be ready on January 1st.
    For that reason, our recommendations are pretty 
straightforward--is that they, in fact, have sustained 
attention by the management stakeholders that the plan is 
followed. They need to develop a comprehensive plan; that is in 
the stage of being developed, but not yet developed. They need 
to make sure the plan is followed. They need to make sure that 
all key decisions are really bought into and made by the key 
stakeholders, not by the technology guys, but the business guys 
need to make the decisions about any tradeoffs that will occur 
on the priorities that the Inspector General said had to be 
made. They need to ensure that adequate support is being 
provided throughout the process, and they need to make sure 
that all the components in the individual business areas really 
support the whole--that is the mail delivery--that you don't 
suboptimize individual process in lieu of making the
overall process as good as it can be.
    Mr. Chairman, that completes my statement, and when the 
other gentlemen are through, I would be pleased to address any 
questions that you might have.
    [The prepared statement of Mr. Brock follows:]
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    Mr. McHugh. Thank you very much, Mr. Brock. We appreciate 
your comments.
    Our last presenter this morning is Mr. Norman Lorentz, who 
is senior vice president and Chief Technology Officer for the 
U.S. Postal Service.
    Good morning, Mr. Lorentz. Thank you for being here. As you 
may have gathered, you and your department are the focus of our 
attention here this morning. So, we are very anxiously awaiting 
your comments.
    And with that, our attention is yours.
    Mr. Lorentz. Good morning, Chairman McHugh, Chairman Horn, 
Chairwoman Morella, and subcommittee members.
    On behalf of the U.S. Postal Service, I welcome the 
opportunity to speak to you today about the Postal Service's 
efforts to address the year 2000 computer problem.
    With me today are Nicholas Barranca, the vice president of 
operations planning, and Richard Weirich, vice president of 
information systems.
    It is gratifying, not only to myself but to the Postal 
Service employees in thousands of communities across the 
Nation, to be reminded of the trust and confidence the American 
people have in the mail system.
    While years of predictions suggest that there is no place 
for paper-based communications in this digital world, the fact 
that we are sitting here today demonstrates that is not the 
case.
    As Postmaster General William Henderson said in this very 
room less than 2 weeks ago, ``The health of the Postal Service 
is important to the American people. It is a measure of how 
much American companies and consumers depend on reliable, 
reasonably priced postal services to communicate and conduct 
business.''
    We have taken this obligation seriously for the last two 
centuries, and we take it just as seriously as we move into the 
next. The coming of the year 2000 presents a host of 
challenges. The coming year is both anticipated and never 
before experienced, by either the Postal Service or any other 
business or Government agency.
    The Postmaster General and senior Postal Service management 
are giving this subject significant attention, with weekly 
meetings of the Management Committee serving as a forum for 
reports and discussion about the status of our year 2000 
program. This is one of the most important public policy issues 
we are facing this year.
    It is a challenge of vast magnitude with a deadline--as was 
mentioned--311 days away, that cannot be changed. And it is a 
challenge that has engaged the men and women of the Postal 
Service for a number of years.
    Like any forward-thinking organization, the Postal Service 
is doing everything possible to minimize and eliminate the 
potential for disruption that could arise from the year 2000 
computer problem. But, unlike many of those organizations, only 
the Postal Service is in the position of saying, ``The buck 
stops here!''
    The fact is, the Postal Service is part of the year 2000 
contingency plans for many organizations that rely on 
electronic communications, whether benefit payments by Federal 
agencies, electronic payments in the private sector, or simple 
data transmission from person to person. This means that our 
readiness efforts must focus on maintaining the ability to 
process and deliver normal mail volumes as we enter the new 
year, and to absorb additional volumes that could be diverted 
from the electronic message stream.
    I want to state clearly and unequivocally that we are ready 
in the U.S. Postal Service to take on this challenge.
    Our mail system is no stranger to operating successfully 
through national and regional disruptions. We delivered 2 years 
ago when a strike all but shut down the United Parcel Service, 
just as we delivered through two recent airline strikes. Since 
the first days of the national postal system, we have found 
ways to deliver through war, floods, earthquakes, and other 
natural disasters.
    Even with this experience, we want to be sure that we are 
doing the right things to prepare for the potential year 2000 
disruptions. This is why our planning for the year 2000 problem 
has been extremely thorough, establishing a step-by-step 
program that takes us in to a new century with a reasonable 
level of assurance that the Postal Service will continue to 
deliver.
    We began our efforts with an inventory of all components 
and all systems that can be affected. The next step was the 
assessment of the criticality of each of these systems. One 
question was, ``Is this system necessary to our core mission of 
delivering the mail?'' Then we began remediation efforts on our 
mission-critical systems. If we found a problem, we fixed it. 
It is not sufficient that our own people tell us that something 
is fixed. We also require independent verification that our key 
components and systems have been fully remediated.
    With remediation efforts on schedule, we are expanding our 
focus this year to the next logical steps--business continuity 
planning and recovery management.
    Simulation testing, in an actual operating environment, 
helps add further confirmation to the status of remediation. 
Knowing what individual elements of our systems and processes 
will be available provides us with a firm foundation for 
business continuity planning.
    We began testing our critical mail-processing systems last 
August at a mail-processing plant in Tampa and a bulk mail 
center in Atlanta. The results of these tests and others that 
are being conducted are very, very encouraging. They 
demonstrate that, following remediation of our basic mail-
processing equipment, mail is being sorted correctly as it 
moves through our system.
    Despite our best efforts to fix all of the vulnerable 
systems and components, and testing them to make sure they 
work, being prepared means that we also have to anticipate that 
there may be some year 2000 problems.
    In our own systems, we are looking at 100 million lines of 
computer code. On top of that, we rely on commercial air and 
surface transportation to move mail both locally and across the 
country. We also power our facilities from the same utilities 
as other customers. As you can see, some of the key elements 
that are necessary to support a national postal system are not 
within our direct control.
    Through business continuity planning, we are exploring 
``what if'' scenarios that anticipate specific disruptions, 
internal or external, that might arise. The ``work arounds'' we 
are developing will help us to minimize the potential problems. 
All of our senior officers are actively engaged in the process. 
But business continuity plans cannot be successful by 
themselves. They go hand-in-hand with recovery management.
    Recovery management gives our people a structured way to 
report problems and implement the plans that have been designed 
to address them. Some decisions will be based on specific plans 
that have been developed to meet a particular contingency. 
Other decisions will be dynamic, based on the unique confluence 
of events that may occur at any point in time. Either way, 
recovery management is one of the most important tools we will 
have to continue moving the mail.
    Throughout each of these key processes--remediation, 
business continuity planning, and recovery management--our 
actions have been consistent with the approach taken by other 
Government and private-sector organizations. We have contracted 
with the help of over 1,300 technical support people to 
implement and manage many of the technical elements of this 
critical program. The entire effort is being supported by a 
level of financial resources necessary to address this once-in-
a-lifetime issue. Unlike other Government agencies, the U.S. 
Postal Service is receiving no appropriations for the year 2000 
readiness.
    While we at the Postal Service are confident that we are 
doing the right things to protect universal service, we also 
recognize that we do not have all of the answers--and nobody 
does.
    In this respect, we welcome the positive contribution of 
those who have reviewed our activities and offered us 
constructive suggestions and proposals. Both the U.S. Postal 
Service's Inspector General and the General Accounting Office, 
who also reported to you today, have been actively engaged in 
helping us to meet this challenge.
    In closing, I can't promise that there will be no problems, 
but we remain confident that with the continued hard work of 
everyone involved in this effort, we will achieve our goals of 
delivering the mail, protecting our employees, and protecting 
our finances.
    Thank you.
    [The prepared statement of Mr. Lorentz follows:]
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    Mr. McHugh. Thank you, Mr. Lorentz.
    Before we proceed to questioning, I just want to 
acknowledge we have been joined by three members of the 
Technology Subcommit- 
tee which, at the moment, is leading for the well-attended 
prize-- 
Mrs. Morella, great job. In the order in which they came into 
the 
room; the gentlelady from Michigan, Ms. Stabenow--Debbie, wel- 
come--Bart Gordon, gentleman from Tennessee--Bart--and David 
Wu, gentleman from Oregon. We thank you all for being here with 
us. Oh, also, gee, a fellow-New Yorker and the dean of the New 
York delegation--I will really get in trouble. [Laughter.]
    We have been joined by my dear friend, Ben Gilman, chairman 
of the International Relations Committee, as well. Mr. 
Chairman, good morning.
    Mr. Gilman. Good morning. Thank you for conducting this 
hear- ing, and I was very much concerned with Y2K.
    We have just met with a number of our European 
parliamentar- ians and they, too, are very much concerned 
around the world of how this will affect all services, all 
governmental services, as well as the industry. We are all very 
much concerned about this sensitive program, and certainly the 
Postal Service which affects so many of our citizenry all over 
the country. It plays an important part in what we are going to 
be doing.
    So, I regret I wasn't here at the start of this hearing, 
but I will look over the testimony, and we are hopeful that our 
Postal Service will be able to do whatever has to be done to be 
prepared for the year 2000.
    Thank you, Mr. Chairman.
    Mr. McHugh. I thank the gentleman. Again, I thank him for 
being here.
    If the old adage, ``a little knowledge is a dangerous 
thing,'' is true, I am a very dangerous man, because this is an 
incredibly complex situation, as all of you know so very well.
    I just want to start with a couple of general questions 
and, then, move to those who have been working on those 
subcommittees that are far more conversant with the specifics 
of the problems than I am.
    But one of the things--as I took time out over the weekend 
to read your statements--I couldn't help but being impressed 
by, was the enormity of this situation facing the Postal 
Service. Mr. Lo- rentz spoke of just about 100 million lines of 
computer code; both the IG and Mr. Brock spoke about the 
thousands upon thousands of suppliers, both critical and less 
so, and the interfacing of the Postal Service with corporations 
and companies that are so essential--be they airline or 
otherwise--and yet, by most measures, are beyond their direct 
control. Fifty-three percent of the suppliers responded in all, 
to a survey the Postal Service very correctly tried to conduct 
to try to assess their Y2K compliancing.
    The thing that seems to strike me as I look at what we see 
the numbers to be and what has to be achieved in the next 311 
days, and less an hour that we have been here this morning, is 
the enormity of the task. And I am not convinced that, even if 
everything went perfectly and everything humanly possible was 
done, that we could meet this challenge. I would be interested 
to see what your assessment of that is.
    Are we in a process where we are attempting to minimize the 
likelihood of disaster or, do we really--and ``disaster'' is an 
overstatement, the likelihood of significant interference and 
interruption--or are we truly in a position, still, to fix this 
problem to the highest possible extent?
    I will just begin with the order in which you testified and 
sit back and listen.
    Ms. Corcoran. I believe that the Postal Service has a 
challenge, as I mentioned earlier. What we recommended, as we 
were going through our testimony, is that they need to refocus 
their resources to make sure that they are dealing with those 
processes that are most important to moving the mail, paying 
their bills, protecting revenue, and protecting the life and 
safety of their employees and customers.
    Postal is now moving in that direction, and they are 
continuing to decrease the number of systems and equipment that 
they have to fix.
    As long as they stay focused on really making sure they get 
to those that are critical, hopefully, there is a chance. But, 
again, they need to have contingency plans and all these other 
things done to make sure that if something doesn't work, that 
they have an alternative.
    Mr. McHugh. Mr. Brock, you mentioned in your testimony 
that, with the possible exception of the Defense Department, no 
Government agency faces a Y2K problem as complex as the Postal 
Service. I guess if DOD is not prepared, we lose the war. If 
the Postal Service isn't prepared, the Social Security checks 
don't go out. As an elected official, I am not sure which I 
would prefer. [Laughter.]
    So, how do you assess their ability to get to the end 
successfully? And just an added twist for you, how might you 
compare the Postal Service's progress to a DOD, for example?
    Mr. Brock. That is a difficult question because it is an 
``apples'' and ``oranges'' kind of question. Nevertheless, I 
will answer it. [Laughter.]
    One of the reasons that I personally want to make sure that 
the Department of Defense is ready, it is like an insurance 
policy. Even if we are not engaged in a war, hostilities--as 
you want that insurance policy, you don't want it to lapse; you 
want it in place.
    The Postal Service, as I mentioned earlier, is a utility; 
it has to work. So, I want it to work as well. So it is 
important that both work.
    One of the challenges at many agencies is that their 
primary objectives are carried out through transaction 
processing. You know, you write checks; you distribute checks; 
you either mail them or you send them electronically. But with 
both the Postal Service and DOD, you have a whole series of 
logistical operations that you have to carry out as well, as 
well as making sure that thousands and thousands and thousands 
of facilities are going to be ready. So, it is pretty complex.
    The issue that we would have with the Postal Service--to 
get back to your original question--in terms of increasing 
assurances, that they will be able to provide an acceptable 
level of service, is to not only focus on remediating the 
systems, but increase focus on the contingency plans and to 
really scrub those down. A contingency plan, or a business 
continuity plan, should be more than a piece of paper. It 
really needs to define what an acceptable level of process is, 
and that may be delivering mail at the same level, or it may 
be, in fact, changing your standards for a period of time and 
saying, ``This is the level of service we would be willing to 
accept.'' It means taking a look at all of those processes--
systems and suppliers and things--that support that business 
operation and doing a sort of a risk analysis, ``And what are 
the risks that this will fail?''--and then, funding it. I will 
just give you sort of an extreme example.
    If you, in fact, assume that first-class mail delivery had 
to meet the current standards, and you had no certainty that 
some of your key suppliers or some of the key infrastructures, 
such as telecommunications or electrical power, would be ready; 
you would, in fact, have to develop a very expensive 
contingency plan to make sure that was funded.
    So, these are business decisions where a lot of pros and 
cons need to be weighed. I think this is where the crunch is 
going to come this summer with the Postal Service. And really 
scrubbing these plans and having a level of assurance that is 
shared by their stakeholders--and I would include the Oversight 
Committee as a stakeholder, as representing the American 
public--that, in fact, these are acceptable levels of service 
and that, in fact, the provisions are made to supply that level 
of service are acceptable.
    Mr. McHugh. Thank you.
    Mr. Lorentz, no pressure. [Laughter.]
    Are you going to make it? [Laughter.]
    Mr. Lorentz. We are very confident with the amount of 
planning and the process approach that we are taking, and the 
use of some of the best resources money can buy, that we will 
be in position on January 1, 2000, to move the mail.
    We are focusing, specifically--getting back to the 
Inspector General's point--we are focusing, specifically, on 
the processes that are directly involved with moving the mail, 
with collecting revenue, with paying bills, and most 
importantly, with protecting the safety of our employees. So, 
when you compare the other processes relative to those, those 
are the ones we are focusing on, moving into the year 2000.
    Mr. McHugh. Thank you.
    We have, as I said, other members here far more conversant 
in these things than I am.
    I have a number of other questions, but, at this time, I am 
happy to yield to the gentlelady from Maryland, Mrs. Morella, 
for any questions she might have.
    Connie.
    Mrs. Morella. Thank you, Mr. Chairman.
    I think you have been asking great questions, and I 
appreciate hearing from our parties here who are very much 
involved in the postal system.
    One of the questions I wanted to ask has to do with the 
international operation of the mails. I was recently in 
Indonesia, but I don't think they know what Y2K is. And then 
even in Tokyo, members of the Diet didn't seem cognizant of the 
impact of it. Now we are going to want to communicate, by 
virtue of the mails, also to our international partners and 
countries, and I just didn't see anything really in your 
statements that gave me any lead in terms of how you are going 
to be handling that. I wondered if you would address that.
    All three of you, or anyone who wants to.
    Mr. Lorentz. OK. I guess I will start first, seeing as we 
are the ones doing the interfacing, and I would like my friends 
here to participate as well.
    There are really three classifications of international 
players here. There are the large industrial nations like 
Canada, the UK, France, and Germany, that are probably as 
prepared as we are. There is a group of large nations like 
Brazil and China that are less automated, less mechanized, and 
while they--it is a double-edged sword--while they may have 
less mitigation or remediation issues, they have another set of 
problems. Then there is the less industrialized nations. And we 
do participate in forums in the Universal Postal Union. There 
are 200 postal administrations that actually participate in 
looking at, and trying to share information from the common 
interest and the member readiness.
    And, Nick, you might want to speak on any other issues.
    Mr. Barranca. If you look at the international mail volume 
that we originate and we process from the rest of the world, 
our systems are being remediated and plans are being developed 
so that we will deal with the originating international mail in 
this country in the same way that we will deal with our 
originating domestic mail.
    We will also be prepared to process incoming international 
mail in the same way that we will process and deliver our own 
originating mail for this country.
    As Norm indicated, there are two international 
organizations that are dealing with the Y2K problem from an 
international standpoint. It is the UPU, the 200 countries that 
participate in that forum. It is an issue on their agenda. 
There is also the International Postal Corp., which is 21 
industrial postal administrations around the country that has 
the Y2K issue on their agenda. We are participating in those 
discussions.
    From a country standpoint, as Norm indicated, those 
countries that rely on automated systems, which are those 
handful of large, industrialized countries, are dealing with 
the issues in the same way we are. Those countries that 
actually depend more on manual systems to process and deliver 
their mail, the problem is not as significant--I don't want to 
minimize it. It is not as significant as those that rely on 
automated systems, because the world doesn't change to a great 
extent, in that their systems are basically manual now. So----
    Mrs. Morella. Are we offering any assistance to any of 
these countries through these two international organizations 
or individually?
    Mr. Barranca. We are an active participant in these two 
organizations and their committees. Our international business 
unit is involved in those discussions. I can't tell you exactly 
what the nature
of their involvement or their details are. I would be happy to 
make that available for the record in the future.
    Mrs. Morella. That would be great.
    And do you have contingency plans for the international 
mail?
    [The information referred to follows:]
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    Mr. Barranca. Our contingency plans for collecting, 
processing, and transporting mail that originates in this 
country are the same, regardless of whether the destination of 
that mail is here in this country or international 
destinations. We will be prepared to collect, process, 
transport, and move it to the international destination.
    For international mail originating outside of this country 
to be delivered here, we have contingency plans to deal with 
that volume in the same way that we deal with our originating 
domestic mail.
    Mrs. Morella. If I send a letter to Korea and then a letter 
is sent to me from Korea, which will reach its destination?
    Mr. Barranca. If you send a piece of mail to Korea, we will 
get it to Korea.
    Mrs. Morella. You will get it there.
    Mr. Barranca. To the extent that the Korean postal 
administration will get it to the address in Korea is what the 
UPU and--not in Korea's case--the ICP is dealing with.
    Mrs. Morella. And Kim wants to send something to us, and we 
will get it?
    Mr. Barranca. As long as it gets----
    Mrs. Morella. Through the mail?
    Mr. Barranca [continuing]. To this country, we will get it 
delivered; yes.
    Mrs. Morella. Could I just ask you--I know that the end-to-
end stuff is very difficult, and I won't spend much time on it, 
but I hope you will look to addressing that because of your 
many connections, your many contractors that are all involved. 
On March 9th, we are going to have a hearing on liability. I am 
curious about whether the postal system could be subject to any 
liability suits or issues.
    Mr. Lorentz. I am not aware of that issue. I do know there 
were some contractual issues that we had relative to supplier 
liability.
    Rick, you may want to address that.
    Mr. Weirich. We have continued to look at this emerging 
issue of everyone managing their potential liability in year 
2000. We are having difficulty getting some of our supplier 
data, although some of the changes that you all have made 
certainly have helped in that regard.
    I am not an expert on whether we might be liable under the 
statutes. I would have to bring our General Counsel to answer 
those questions though.
    Mrs. Morella. But I think you are also saying, though, that 
with suppliers you find that there is sort of a chilling effect 
for fear that there could be liability suits. And, of course, 
there are those who speculate that that cottage industry of 
lawyers could end up costing more than remediation of the Y2K 
problem. It is something we need to look at, not to give any 
waivers, but to look at, in terms of what we can do, to make it 
be a more encouraging information and data exchange and working 
together.
    I like the idea that we have got the Inspector General and 
GAO working with the Postal Service. I think that is the kind 
of union that there should be.
    And I think you wanted to make a comment, Ms. Corcoran.
    Ms. Corcoran. Madam Chairman, we have done an audit report, 
or an advisory report, where we did look at some contractual 
issues. We would be happy to share these with you.
    [The information referred to follows:]
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    Mrs. Morella. Very good, thank you; thank you.
    I have taken up enough time. Thanks, Mr. Chairman.
    Mr. McHugh. I thank the gentlelady. The gentleman from 
Texas, Mr. Turner.
    Mr. Turner. Thank you, Mr. Chairman.
    Mr. Lorentz, you said in your statement that the Postal 
Service is the only organization that is in a position to say, 
``the buck stops here.'' As I look at this panel, it is pretty 
clear that in the totality of those gathered here, you are the 
one that has to say, ``the buck stops here,'' because if things 
don't work out, I am sure that you are the one that is really 
going to be looked to for the explanations.
    Part of the purpose, I think, of our hearing here today is 
to try to reassure the American public that their mail is going 
to be delivered on time. There is a lot of--as you know, and as 
all of us know--a lot of hysteria surrounding the Y2K problem. 
It is somewhat amazing, as we have gone through many of these 
hearings with other agencies, to realize that we are all 
gathered here because of a problem that some computer folks 
from the past did not take care of.
    Perhaps, there are some comments you could make that could 
be reassuring, and let me direct the question to you this way.
    One of the concerns I have was when I noticed that so far 
you have spent $200 million addressing the Y2K problem. Yet, I 
also read that, in the next 300 days, you are going to spend 
$400 million more, which suggest to me that there is a whole 
lot left to be done, and maybe we are behind if we have to 
spend $400 million at the Postal Service in 300 days.
    Maybe it would help if you could specifically tell us of 
the efforts you have made for that first $200 million. What 
problems did you find that you fixed, and if you hadn't fixed, 
would have resulted in some disastrous consequence for the 
American postal customers?
    Second, of the $400 million you are going to spend in the 
next 300 days, what do you think you are going to fix, that if 
you don't, will be problem?
    Mr. Lorentz. In answering the first question about the $200 
million; we have over 500 important systems of which 152 have 
been identified as either ``severe'' or ``critical.'' And 
``severe'' means that it affects moving the mail; it affects 
those four areas: moving the mail, collecting revenues, making 
payments, and the safety of our people. And of those severe 
systems--the difference between ``severe'' and ``critical'' is 
that there is no work around for a severe system; you have to 
fix it. And the criticals, there is an identifiable work 
around.
    Of those 152 systems, we have completed what we call 
``remediation.'' In other words, that is a euphemism for 
``fixed.'' We fixed 131 of the technical problems in those 152 
systems, and we have actually implemented 108. In addition, we 
have 55 that have been actually externally verified.
    We are also looking at the balance of the 359 that are less 
than critical. The 152 has been a major investment. It is very 
expensive to go into 100 million lines of code, to actually do 
an external verification.
    We also have completed some simulation testing on the 
automation that we have in our plants, both P and DC's and bulk 
mail centers.
    So what we have gotten up to this point is the ``lion's 
share'' of the, ``technical fixes.''
    The balance of the $400 million that you addressed, I think 
we are going to end up--we are currently for the year at about 
$99 million. I think we have spent about $197 million up to 
this point. We plan on spending about $340 million for the year 
to look at the balance of those 349 systems. And we have also 
got the continuity planning and contingency planning, the 
``what ifs,'' where we cannot remediate something, where we 
have to build a contingency, that is what the investment 
resources are for.
    Mr. Turner. Well, give me just one concrete example of 
something you did fix that if you hadn't, it would have 
resulted in some specific consequence. Maybe in the area of 
delivery of the mail would be the more interesting example, and 
if you hadn't fixed it, what would have happened----
    Mr. Lorentz. We have----
    Mr. Turner [continuing]. On January 1st?
    Mr. Lorentz. We have systems that delivery sequence letter 
mail. And, basically it varies how much that we literally have 
there, depending on the location--between 80 and 90 percent of 
the mail is in delivery sequence mode. That is a tremendous 
amount of the letter mail that is in delivery sequence. That 
would be something that would be very difficult to replace with 
manual sortation.
    Another example is----
    Mr. Turner. You know that that would not have happened if 
you hadn't gone in and fixed this problem?
    Mr. Lorentz. Absolutely. We believe that to be true.
    Mr. Turner. It wouldn't have been sorted?
    Mr. Lorentz. Well, it would have been much more difficult 
to sort. I guess I can refer Nick to part of this question. But 
over the last few years, we have invested a tremendous amount 
of money in letter mail automation to remove manual 
intervention in that mail stream. And so, basically, that is 
what those systems do.
    Mr. Turner. I know you have a lot of people looking over 
your shoulder, and they are never going to tell you that you 
have done enough. That is a risk they won't want to accept. 
What is your greatest fear of what might happen if you don't 
move forward in the things you are going to spend the next $400 
million on? What is your greatest fear that you now need to 
address?
    Mr. Lorentz. Well, I really appreciate--[laughter]--having 
the ability to answer that question, because this is an area 
where I think we need your help, and I think this hearing can 
be helpful.
    We have a very significant issue with getting the attention 
of suppliers.
    And you have brought up the issue, Mrs. Morella, of the 
fact that there are liability issues and so forth and so on, 
but we are making an earnest effort to contact our suppliers 
and determine their situation relative to Y2K.
    So, if there is an area of concern, it is being able to 
fully engage with our suppliers and get the information about 
where they are.
    Mr. Turner. As a percentage of your total annual Postal 
Service budget, how much are we spending on remediating Y2K?
    Mr. Lorentz. The total projected cost, at this point, is 
$607 million.
    Mr. Turner. As a percentage of what your operating expenses 
at the Postal Service, what would that be?
    Mr. Lorentz. It is----
    Mr. Turner. On an annual----
    Mr. Lorentz. It is less than 1 percent. In our terms, it is 
the equivalent of about six ``rounding errors.''
    Mr. Turner. Of what?
    Mr. Lorentz. Six ``rounding errors.'' A ``rounding error'' 
is $100 million in a $63-billion company.
    Mr. Turner. About 1 percent?
    Mr. Lorentz. One percent.
    Mr. Turner. Additional operating costs?
    Mr. Lorentz. Yes.
    Mr. Turner. Thank you, Mr. Chairman.
    Mr. McHugh. Thank you.
    The gentleman from Maryland, Mr. Bartlett.
    Mr. Bartlett. Thank you very much.
    In trying to understand the potential implications of the 
Y2K problem, I have taken a very simplistic look at the 
exponential function involved here.
    If there are just seven process or services that are 
essential for the delivery of mail; like power, and 
communications, and suppliers, and sorting equipment, and 
information systems, data exchanges, information technology 
infrastructure, and so forth--there may be a whole lot more 
than that. But, if there were only seven, and we look at the 
probability that we are going to be able to deliver the mail, 
if we have a 90 percent probability that each of those seven is 
going to work. Then, you multiply 0.9 times 0.9 times 0.9, 
seven times, and you come out with a total system probability 
of success of less than 42 percent.
    If you make the assumption that maybe the future is not 
quite that rosy, that there is a 60 percent probability that 
each of these seven systems--services, whatever--need to work 
before we can deliver the mail; then, 0.6 times 0.6 times 0.6, 
seven times. The exponential function is really quite 
fascinating, because now we come to a 1.6 probability that we 
are going to be able to deliver the mail.
    Mr. Brock indicated you have the second most complex system 
in our country--the most complex being the Defense 
establishment--have you looked at the probability of what will 
happen and what contingency planning you need to put in effect 
from this exponential analysis viewpoint?
    Mr. Lorentz. I guess an understatement would be that it is, 
obviously, a very complex situation. I think where we gain 
confidence that we are approaching it in an effective way is 
that we have used common approaches in industry where we have 
done unit remediation; we have done string testing. I think the 
most significant area that we are getting into now--we have 
started on it, our critical operational processes--is something 
called, ``simulation testing,'' where we fit all of the 
processes together and make sure all of it works. And to me, I 
think, that is a key for us.
    By the same token, being a systems person, you know that 
once you put something live, what you have come in the front-
end could be a different circumstance than maybe you even 
tested for. And I believe that is where we have to be very 
effective at looking at what our contingencies need to be.
    But our approach, we believe, puts us in the position to 
have an effective outcome.
    And, Nick, and, Rick.
    Mr. Barranca. Yes, I understand, the premise that you laid 
out for us, and it can result in that type of cumulative 
probability. And as part of our continuity planning and our 
contingency planning, what we are trying to do, and what we 
have done initially, was to look at the appropriate levels of 
planning at the national, the area, and the local level. 
Because I think as things do not work--and some things won't 
work; I mean we all realize as we get into this, something is 
going to fail at some place in time. I think one of the facts 
will be that it won't fail every place at the same time.
    So our continuity planning and contingency planning is 
looking at what happens at the local level for local issues 
that need to be addressed.
    To a certain extent--and I don't want to minimize the 
problem--but to a certain extent, I think it is like a weather 
issue, in that there will be hurricanes on January 1st in some 
parts of the country that we will have to react to, like we 
have in the past. But I don't think there will be a hurricane 
for the entire country.
    Our continuity planning and our ``recovery management,'' 
which is another term for ``command, control, and 
communications,'' which we will have in place before and after 
January 1, will focus on: what are the appropriate issues that 
need to be addressed at the local level, and what are the 
issues that need to be addressed at the area level? What are 
the issues that need to be addressed at the headquarters level? 
And we will have the command, control, and communications in 
place at all those levels. And the contingency plans are ready 
to be implemented, depending on if it is a local situation, a 
broader geographic issue to be dealt with in the area, or a 
national situation that we have to deal with here at the 
national level.
    So, while what you lay out likely could happen, I hope it 
doesn't happen in the entire country. It might be one area that 
we really have to focus our attention on. But our plans are 
structured in a way that they are layered based on the level of 
the organization that has to respond to the situation that 
presents itself.
    Mr. Bartlett. Of necessity, of course, you address the 
problems one-by-one. If you are looking at each of the problems 
separately, one can have reasonable confidence that there is a 
reasonable level of expectation that we are going to be 
successful in solving that problem.
    But my concern was, since this is a very complex system, 
relying on a number of things happening, sequentially--
successfully happening sequentially--that it is interesting to 
look at the probability that the mail is really going to get 
through by this of simply multiplying one probability by 
another probability by another.
    Of course, there are some of these things, that if they 
don't work, you are not going to deliver the mail at all. If we 
don't have a power grid, for instance, the mail is not going to 
be delivered at all. So that is a 100 percent shutdown if that 
one doesn't work.
    I wonder if the other two organizations that have looked to 
this have looked at the exponential complication here?
    Mr. Brock. Not precisely in the way you have addressed it, 
but we have recognized that when you are doing the overall end-
to-end testing, the simulation testing, that as you introduce 
more complexities into it, it certainly increases the risk that 
you will have failures that will affect the ability of the 
overall process to function properly.
    And that, second, as you develop the contingency plans, 
since you are developing them now for something more than just 
a single system or a single element of that process, that it 
also increases the complexity and, ultimately, the expense of 
those plans.
    There is something to be gained from that, though, by going 
through processes like this. Organizations that have not done 
it before can develop an inherently better understanding of 
their business processes and the key flow through those 
processes and what may, in fact, be ``fat'' and what is of 
necessity, ``muscle.''
    Ms. Corcoran. We haven't looked at that issue either, from 
an exponential aspect. However, in our very first report, we 
talked to the Postal Service about their need for continuity 
plans from the standpoint that things are going to go wrong, 
and they need to understand exactly how these things all fit 
together. And it does paint a very bleak picture when you look 
at it in the manner in which you did.
    Mr. Bartlett. Mr. Chairman, I wonder if maybe our enormous 
success might ultimately be the basis of our undoing. We have 
been so successful in automation and in high tech. And we now 
become, because we have been so successful there, we become 
more vulnerable to the Y2K bug.
    Thank you very much.
    Mr. McHugh. I thank the gentleman.
    The gentleman has been very successful in his first 
question, reminding me why I majored in political science. 
[Laughter.]
    The gentleman from New York, Mr. Gilman.
    Mr. Gilman. Thank you, Mr. Chairman.
    I do have several questions.
    I think it was Mr. Lorentz that said that 152 severe 
systems still were part of the 500 systems. Of those remediated 
were 131, but only 55 have been verified for Y2K compliance. 
How long will it take to verify the balance of those severe 
systems?
    Mr. Lorentz. The balance of those systems will be 
externally verified by the June timeframe. And we have just 
three of those specific systems that will be verified after 
June. So, 149 will be verified by June, and then three after 
that, but all before the end of year.
    Mr. Gilman. Some agencies have discovered that some of 
their system which they had considered to be Y2K compliant 
needed additional work to be fixed. Does this mean that the 
Postal Service doesn't really know today whether the systems it 
has worked on to make them Y2K-ready will actually work on 
January 1, 2000?
    Mr. Weirich. Well, like everyone else, we haven't been 
there yet; we have only tested. Certainly, there is some risk 
that there could be a deficiency in our testing that we will 
discover when the time comes.
    Mr. Gilman. But when will you put a deadline on getting all 
of that testing done?
    Mr. Weirich. The deadline is the one Mr. Lorentz 
communicated. We have tested each of these systems as we have 
done the work. We have been giving each system to an 
independent team; basically, set up a ``tiger team'' structure 
where we have a complete independent review of the testing that 
was done, whether all the test cases were, indeed----
    Mr. Gilman. Is that an in-house testing group?
    Mr. Weirich. This is done by an external supplier who is 
providing a check and balance against our own folks.
    Mr. Gilman. Will they be able to do all of that check and 
balance by your deadline?
    Mr. Weirich. Yes, they will.
    Mr. Gilman. The Service uses computer networks to conduct 
financial transactions with the Treasury Department and 
financial institutions. How could the Service's operations be 
disrupted if it has Y2K-related problems in the electronic data 
exchanges? And, what is the risk of that happening?
    Mr. Lorentz. That is one of our most significant portfolio 
systems, the financial systems, and that is being overseen by 
the chief financial officer. We have very specific plans in 
place for all of those interchanges, and there are specific 
test plans that have been developed.
    Mr. Gilman. So what is the----
    Mr. Lorentz. So we have been----
    Mr. Gilman. So what is the progress of all of those?
    Mr. Lorentz. Rick, do you want to speak on the progress 
issue?
    Mr. Weirich. Those are proceeding on plan. We are working 
with Treasury, specifically, and doing joint testing. That is 
one of the areas where we recognized the need to test together, 
so end-to-end, we know that our processes both work.
    Mr. Gilman. Well, how many electronic data interchanges 
have been identified as having Y2K problems? And of those, how 
many have been renovated, tested, and validated?
    Mr. Lorentz. I have some statistics if I find the right 
sheet. The statistics that we have relate to the electronic 
interfaces with some of our suppliers of the equipment that 
generates postage. I can get you that specific information. We 
don't have it with us.
    Mr. Gilman. Would you supply that to the committee----
    Mr. Lorentz. Absolutely, I will.
    Mr. Gilman [continuing]. At your earliest convenience.
    Mr. Lorentz. Thank you.
    Mr. Gilman. I would like to make that part of our record 
today.
    The General Accounting Office, while not issuing a formal 
report, has been conducting ongoing audits of the Postal 
Service. And among the GAO's many concerns, the fact that the 
Postal Service serves as a primary backup system for our 
Federal agencies in the event of Y2K failures in their 
organizations, potentially creating a multitude of problems in 
mail handling caused by the steep spike in mail volume. GAO 
found that the USPS lacked a detailed project plan for any 
system that would contain target dates for remaining tasks and 
necessary resources. It does not have a good picture of system 
conversion status because the progress reports are inaccurate 
and that you were late in implementing your post-implementation 
validation plan and have not prepared the contingency plans. 
Have those problems been resolved?
    Is our GAO representative--Mr. Brock, can you respond to 
that? Have they resolved those questions?
    Mr. Brock. They are working on resolving those questions. 
There are still unknowns--as I mentioned in my statement, Mr. 
Gilman--that they need to resolve to provide the certainty.
    I would like to add something to my statement, though. When 
you were talking about the Postal Service, in fact, acts as a 
contingency plan for many organizations who rely on electronic 
commerce. I think a couple of things could well happen here is, 
first of all, that some organizations not wanting to risk 
triggering their own contingency plan may, in fact, start to 
mail more later in the year, therefore, increasing the burden 
on the Postal Service.
    Second, if----
    Mr. Gilman. Are they prepared for that?
    Mr. Brock. This is something they should be examining in 
their contingency plans.
    Mr. Gilman. Have they been examining them?
    Mr. Lorentz. Yes, we have.
    Mr. Brock. The second issue--and the one that is, frankly, 
a little more troublesome--that if, in fact, the trigger events 
that would cause someone engaged in electronic commerce to have 
to rely on the Postal Service, and some of those trigger events 
might be a break down in electrical power, or things like that, 
would also be trigger events that would have a negative impact 
on the Postal Service and would, in fact, impact their ability 
to act as a contingency plan for another organization.
    So, it is sort of a vicious circle there.
    Mr. Gilman. Well, how do we address that? How is that being 
addressed?
    Mr. Brock. I think that, at this point, we are now talking 
about contingency plans that need to be elevated to the 
national level. These are things that the Y2K Conversion 
Council, under John Koskinen, should be considering, I believe, 
starting in the April through June timeframe, when they begin 
to look at national contingency plans.
    Mr. Gilman. Are they looking at that now?
    Mr. Brock. They are preparing for that now.
    Mr. Gilman. What does ``preparing'' mean? Are they going to 
address the problem----
    Mr. Brock. Yes.
    Mr. Gilman [continuing]. Or not address it?
    Mr. Brock. Yes; they have hired contractors to help develop 
what they call ``tabletop exercises,'' that will allow them to 
examine a number of contingencies, and contingencies such as 
this are some of the ones that they would be examining.
    Mr. Gilman. Just one or two other questions, Mr. Chairman.
    The Postal Service, I have been informed, is using outside 
contractors to help deal with Y2K, as you have indicated. These 
contractors employ many foreign workers. How has the Postal 
Service dealt with this from a security perspective? Has there 
been any security arrangements?
    Mr. Weirich. Yes, we have rather strong requirements for 
security screening of personnel who work on our sensitive 
activities.
    What we have done in the case of foreign nationals is 
target them at work areas that were not sensitive. We have not 
been using foreign nationals, for example, to modify our code, 
itself. But we have been using foreign nationals to assist in 
some of our project management and oversight activities.
    Mr. Gilman. How has the Postal Service ensured that the 
external suppliers, who have self-reported readiness, will not 
run into unforeseen problems come January 1, 2000? How do you 
check up on the readiness reports?
    Do you do any checking up on readiness reports?
    Mr. Weirich. Yes, we are. In addition to talking to our 
suppliers, we are monitoring all the information that is 
publicly available. We are looking to sources like industry 
groups and trade groups. We do sit on several of the different 
Federal groups that monitor areas like transportation, so that 
we get a perspective of what is going on in an industry and 
what other information is available about the likely 
performance of the suppliers we depend on in that area.
    Mr. Gilman. Well, do you have reliable way of checking on a 
specific contractor that says, ``Yes, we are ready?'' How do 
you know they are ready?
    Mr. Lorentz. I guess I would say that is where we rely on 
the three-tiered testing approach, where we have a supplier 
that is helping us to remediate and, basically, fix the code, 
et cetera. We have a different supplier that is doing an 
external verification. And then, last, in the very critical 
processes, we are doing simulation testing, which is an 
entirely different process for exercising all of the systems at 
once.
    So, in terms of process, that would be our approach to 
making sure we are not kidding ourselves.
    Mr. Gilman. So all of your contractors, then, will be 
tested?
    Mr. Lorentz. In their----
    Mr. Gilman. Is that what you are telling me?
    Mr. Lorentz. In their various roles.
    Mr. Gilman. The Inspector General recited a number of 
recommendations for top management.
    Can I ask the Inspector General, has this list been 
complied with?
    Ms. Corcoran. The Postal Service has been very good about 
working with us and accepting our recommendations and working 
to implement them. These are not things that can be done 
overnight. It is the direction that they are moving. As I had 
mentioned earlier, one of the first things we had recommended--
--
    Mr. Gilman. Could you put that mic a little closer to you?
    Ms. Corcoran. One of the first things we recommended, in 
March 1998, was that they start working on their continuity 
plans. They just have recently, since last fall, started 
working on it. We would have liked to have seen them get on 
that one a little faster. But, generally, they have been 
working with our recommendations.
    Mr. Gilman. Have there been any shortcomings so far?
    Ms. Corcoran. In terms of dealing with our recommendations?
    Mr. Gilman. Of complying with your recommendations.
    You made 17 recommendations, as I understand it. Have they 
all been complied with?
    Ms. Corcoran. We follow up as we are doing additional work. 
At this point in time, I believe they have all been dealt with. 
As I said, the one that was really concerning us was the one on 
continuity plans.
    Mr. Gilman. So everything else has been complied with 
except----
    Ms. Corcoran. The last report, we just issued last Friday.
    Mr. Gilman. And did you find any shortcomings in your 
report?
    Ms. Corcoran. Yes. This is the one that we believed that 
the Postal Service needed to put together better data, use a 
more consistent format, and assure, when managers were making 
decisions, that they really knew what they had, instead of 
shifting definitions and numbers. The Postal Service has agreed 
to do that. But to my knowledge, they have not complied with 
that report yet.
    Mr. Gilman. And how will you followup with regard to your 
recommendation?
    Ms. Corcoran. We are constantly in the Postal Service 
looking at the Y2K area. At this point in time, we have about 
25 percent of our evaluator resources looking at the Y2K issue, 
and so it will be something that we will be monitoring on an 
almost daily basis.
    Mr. Gilman. Have you submitted your latest report to this 
committee?
    Ms. Corcoran. Yes, sir. It was attached to the testimony.
    Mr. Gilman. Thank you.
    Mr. McHugh. I thank the gentleman.
    Mr. Gilman. Thank you, Mr. Chairman.
    Mr. McHugh. Thank you, Mr. Gilman.
    Mr. Turner.
    Mr. Turner. Thank you, Mr. Chairman.
    Mr. Lorentz, earlier, in response to my question, you gave 
me a specific example of something that you had discovered to 
be non-Y2K compliant that had been fixed, and you referred to 
the computer systems that sort the mail, that replace the 
manual sorting of the mail.
    Mr. Lorentz. I would like to clarify what my response was 
on that. The issue that my understanding of your question was, 
``Could you give me an example of a system that, if it was not 
fixed,'' and that was the context in which I answered that 
question. So----
    Mr. Turner. So, that sorting system----
    Mr. Lorentz. That was just purely an example of a severe 
system that, if it was broke, we would have a difficult time 
replacing it.
    Mr. Turner. And I take it that----
    Mr. Lorentz. That is, by the way, one of the systems that 
is fixed so--[laughter.]
    Mr. Turner. So, if it hadn't been fixed, we would have----
    Mr. Lorentz. Yes, that is correct.
    Mr. Turner [continuing]. Had a problem sorting the mail.
    As I understand it, over the last several years, you have 
installed across the country a lot of these computerized mail-
sorting systems?
    Mr. Lorentz. That is correct.
    Mr. Turner. Over what period of time has that been done by 
the Postal Service?
    Mr. Lorentz. Do you want to address that?
    Mr. Barranca. The letter automation and flat automation 
programs started in 1987.
    Mr. Turner. And have continued up to when?
    Mr. Barranca. The bulk of the equipment is currently in 
place and being used. We are making refinements to the system 
on an ongoing basis, and we are still deploying some pieces of 
equipment to sort the larger-size envelopes which we call 
``flats.''
    Mr. Turner. Of the systems that you fixed, how old were 
they?
    Mr. Barranca. How old were they?
    Mr. Turner. How old were they?
    Mr. Barranca. The original systems went in 1987, but the 
computer and the software components of those systems are 
updated on an ongoing basis. So, I mean we don't have systems 
out there that date back to 1987. We have some frames and some 
mechanical aspects of the equipment that date back to 1987, but 
the software is updated on a continuing basis, because one of 
our objectives is to make it better so it reads more mail, so 
we can finalize more mail in the automated system.
    Mr. Turner. So it was the software that had the problem 
that you fixed?
    Mr. Barranca. That is correct. Well, all of our systems 
were--software was tested to make sure that it was Y2K 
compliant, so that we had assurances that, internally, mail 
that we are processing today, on equipment we are using today, 
will still function in the same manner it functions today, 
after the year 2000.
    Mr. Turner. Is there only one supplier of this software, or 
are there several companies that supply this software?
    Mr. Barranca. The equipment has been supplied by a number 
of suppliers. The software changes to that equipment is 
developed and provided to field sites from a centralized 
location that we manage at our Engineering Development Center. 
We have a Process Control Unit that controls the software for 
all of our automated sorting equipment.
    Mr. Turner. So it is fair to say that the problem you found 
and corrected was a software problem, not a hardware problem?
    Mr. Barranca. That is correct.
    Mr. Turner. And, private companies supply this software to 
the Postal Service?
    Mr. Barranca. They have supplied it as part of the original 
equipment deployments. As I said, we have a unit out at our 
Engineering Development Center, which is a Postal Service 
unit--that is our Process Control Unit--that provides all the 
new software and updates to all of our existing software.
    And so, when we stamp out a piece of equipment for an OCR, 
it is developed in our Engineering Development Center. It is 
tested in a number of sites, and then it is sent out to all of 
our sites so that we have some control over what processes we 
are using at all our facilities.
    We make sure that we are using the most efficient software 
in all of our plants, so that we can keep as much of the mail 
processed in automation to take advantage of the advancements 
we have made in sorting software.
    Mr. Turner. It would be fair to say that, when you 
discovered that your software had a problem that had to be 
fixed to be Y2K compliant, that the problem you found was one 
created by the Postal Service because you engage in the 
function of producing the software for the Postal Service?
    Mr. Barranca. Yes, whether or not we had a problem in the 
example that Norm used, I would have to go back and check. What 
he basically said was that, ``If we have a problem in this 
software application, it would create a big problem.'' I can't 
sit here and tell you that we had a problem in that software. I 
would have to check on that.
    Mr. Turner. Well that----
    Mr. Barranca. But we did check it all to make sure it 
worked in the year 2000.
    Mr. Turner. All right.
    In my original--and maybe I wasn't clear with Mr. Lorentz--
but what I was looking for is an example of something you had 
discovered to be non-Y2K compliant, in the course of your 
testing and your evaluation.
    Mr. Barranca. Right.
    Mr. Turner. And you have fixed it.
    Mr. Barranca. Yes, I can----
    Mr. Turner. If you hadn't have fixed it----
    Mr. Barranca [continuing]. Give you an example along those 
lines.
    Mr. Turner [continuing]. There would have been a problem.
    Mr. Barranca. I can give you an example of that.
    Mr. Turner. All right. That is what I was looking for.
    Mr. Barranca. OK. One of the systems that we did test where 
we found we had a problem was the system we use to bill or 
assign mail to our commercial air carriers. When mail is 
assigned to carriers--when mail is billed to a carrier, we 
assign it to a particular flight in order to make a planned 
arrival time so our service standards would be accomplished. 
And what we did find in that system was that it would not 
function in a Y2K environment, thus we had to go and make 
adjustments to that system so it still would assign mail to 
commercial air carriers in the year 2000.
    That is a problem we found as a part of the testing, and 
that is a problem that we have fixed.
    Now there were ``work arounds'' if the system failed, which 
is we could go back to the way we did it prior to ``CAB 
sunset,'' which was manual assignment to air carriers and 
pulling out the ledgers and the pencils and doing bulk 
assignments.
    Mr. Turner. That was a software problem that you fixed?
    Mr. Barranca. That was a software problem.
    Mr. Turner. And were you the supplier of the software, or 
was that a private supplier?
    Mr. Barranca. I think we probably supplied that software. 
That system goes back probably 10 or 15 years. But our testing 
led us to that problem which, in turn, led us to a ``fix,'' 
which is not a problem now.
    Mr. Turner. But of all the testing and verification that 
you have done thus far, do I take it that that is the only 
concrete example that you can cite me of something you found 
that would have been a problem had it not been fixed?
    Mr. Barranca. Well, I am sure there are others. I was 
trying to identify one that, from an operation standpoint, 
would have been a significant problem if we hadn't found it.
    Mr. Turner. I mean, I am asking this question, primarily 
because, as you know, the Postal Service is like any large 
corporation, and I am trying to get a feel for the scope of the 
kind of Y2K problems that we are running into. I know we are 
spending millions, billions of dollars in the public and 
private sector to test to be sure we are compliant, and I was 
just curious as to what your experiences have been, what you 
have discovered that was really a problem. And that, obviously, 
is the primary example that comes to your mind.
    Mr. Barranca. That is one that I can state now. There are 
probably others that others might be aware of.
    Mr. Weirich. As an example of what happens, yes, we just 
had our first failure case that we were able to document.
    At the first of the year, we had a problem in one of our 
payable systems, and there was an edit in there that looked a 
year ahead. And when we looked and projected failure dates, 
that had not been noticed, and we did not realize the system 
was due to fail on the first of 1999. We had thought it would 
fail later. In fact, we had created a remediated version that 
was still in testing but had not put it into production.
    So, indeed, the old version did ``rear up'' and fail on us. 
We had to call some programmers in, and we spent 3 hours in the 
middle of the night taking the patch and putting it on the old 
thing so it would work correctly. But, frankly, we would not 
have been able to pay the bills until we patched that program 
so that it would handle transaction.
    In the case of the information systems, that is a lot of 
what we find in the repairs. A particular transaction would not 
process if the system were not fixed to correctly handle dates 
that have traveled the centuries.
    In other cases, we have certainly--the system would 
incorrectly calculate intervals and would not be able to 
determine, for example, whether I had adequate years of service 
to collect an annuity. So people trying to retire would have 
problems proving their eligibility.
    We have certainly identified a host of things in the 
systems where the calculations would have been incorrect, had 
we not gone through and changed them. And, indeed, in well over 
half of the systems that we have worked on, we can point to 
specific errors that would have occurred--they run the gamut--
had we not made the changes to the code.
    Mr. Turner. I might just followup with Inspector General.
    You have heard their responses. I get the impression that 
of all the efforts that have been made in testing and 
verification, that the number of discovered problems seems to 
be fairly minimal. It gives me some assurance that, perhaps, 
what remains to be done may not reveal any significant 
problems.
    I know that is not a very scientific way to approach this, 
but it does seem to me that the number of problems that they 
have found and fixed is relatively small, compared to the scope 
of the testing that they have done.
    Is that an accurate assessment, or am I somewhat off 
target?
    Ms. Corcoran. I am going to let Mr. Chambers answer that 
question.
    Mr. Chambers. Well, I think if I understood Mr. Weirich 
correctly, he just indicated that they had found problems in 
about 50 percent of their systems.
    I think the important concern that we have about what 
remains this year is not necessarily in the information 
systems, because they appear to be on track to get the bulk of 
those fixed.
    Our biggest concerns, as Ms. Corcoran indicated earlier, 
are in a lot of the more traditional non-information systems 
areas, such as facilities and these other non-suppliers and 
some of the other non-traditional areas. But to the extent that 
they have been reviewing the systems, these severe and critical 
systems, if they have been finding about 50 percent of them 
with some degree of problems, then I think it was probably an 
exercise well worth it.
    Mr. Turner. Thank you.
    Thank you, Mr. Chairman.
    Mr. McHugh. I thank the gentleman.
    We have been joined off and on, as I indicated earlier--we 
knew we would--by various Members, and I want to recognize and 
thank them. The gentlelady from Michigan, Ms. Rivers, was here 
for a time.
    And from those of us who dabble in computers talk about 
``spam,'' we think about one thing, but when those of us who 
were raised in the 1950's think about ``spam,'' we think of 
something else and--[laughter]--we have been joined by a 
gentleman who represents the great ``spam'' industry, a 
gentleman, Mr. Gutknecht, Gil Gutknecht. We welcome him, and I 
would be happy to yield to him at this time.
    Mr. Gutknecht. Thank you, Mr. Chairman.
    Actually, part of the reason I was late for the meeting, we 
were meeting with a delegation of members of parliament from 
Canada. We were talking, among other things about hogs and 
``spam,'' and it did come up. [Laughter.]
    I hope that this question hasn't been answered, and I 
apologize, but, you know, I understand the first real test that 
we are going to face, according to some of the experts that 
have testified previously, is on September 9, 1999.
    I am just curious, have you run any tests, or anybody want 
to comment on what is going to happen on September 9, 1999? Do 
we have some handle on what that is going to reflect?
    Mr. Weirich. We would certainly agree with you. I think 
that is our first critical date. We are treating it as such. We 
have included this in the cases that we test for those systems 
that do operate on a month and fiscal year, for example. That 
will not affect a number of our systems, because not all of our 
systems use that forum. But for those where it does occur, yes; 
that will be the first we will be alert to.
    Mr. Gutknecht. I take it that you are comfortable that you 
will meet that test on September 9th?
    Mr. Weirich. As comfortable as we are about anything else 
in this program.
    Mr. Gutknecht. That is an honest answer.
    Let me just--one of the other issues that has come up in 
some of our other hearings is the issue of embedded chips. And 
how vulnerable are you to the problem of embedded chips? And do 
you have an inventory of how many you have?
    I raise that issue because, not only do we have a little 
company that makes that wonderful pork product that was talked 
about earlier, but we also have in my district, a relatively 
small company that is a chip broker. They buy and sell chips 
all over the world. They have told me that there are a lot of 
companies who may not even realize that there are chips built 
into their all kinds of equipment that may or may not be Y2K 
compliant. I am just curious, in terms of the Postal Service or 
any other Federal agencies, have they done the inventory?
    For example, one of the utilities in our State, they found 
that they had over 300,000 embedded chips in their system, most 
of which were not a problem, but at least they had an inventory 
and a better idea. Have you done the same?
    Mr. Weirich. No, we have not done that per se. We have been 
pouring over our mail processing equipment primarily in this 
area, looking for whether we can identify any embedded chip 
weaknesses in those systems. To date, we have not. We have 
tested the systems.
    Mr. Gutknecht. Do you plan to do that inventory?
    Mr. Weirich. No, we don't plan an exhaustive inventory of 
all the chips.
    Mr. Gutknecht. Thank you, Mr. Chairman.
    Mr. McHugh. I thank the gentleman.
    Mrs. Morella.
    Mrs. Morella. I guess to followup, why? Why are you not 
doing any inventory on the embedded chips?
    Mr. Weirich. We are looking for a case where they would 
have a date function that potentially could cause a machine to 
fail. The way we see them used in the machines, we have not 
identified cases where we believe they will cause a problem. We 
are continuing to review that, however.
    Mrs. Morella. Would the Inspector General and the GAO 
representative agree?
    Ms. Corcoran. We are certainly following and monitoring 
what they are doing. One of the places I think you might find 
embedded chips are in some of the facilities and some of the 
controls for the various equipment and things. That is one of 
areas I spoke about earlier, where Postal still has work to do 
to determine exactly where this is leading.
    We believe that Postal has done a fairly good inventory of 
known systems at this time, in terms of knowing where things 
are. So, we will continue to monitor that, but, at this point 
in time, we wouldn't be doing any additional work on embedded 
chips either, other than just monitoring it.
    Mr. Brock. The question of embedded chips is, I think, very 
difficult for many agencies to answer because it is difficult 
sometimes to determine the inventory. I think that, with 
respect to the mail process equipment that the Postal Service 
was discussing, that there is probably not as great a concern. 
And they have looked at that, and it is easier to look at.
    One of the issues, though, sometimes with chips, is that 
even with the same model of equipment, that the manufacturer 
can substitute a different chip. So when you test one piece of 
equipment, in fact, you can have a problem in another piece 
because of a change in the chip.
    In terms of where most embedded chips would be, I would 
agree with the Inspector General that they are probably located 
at the facilities. One of the things that the Postal Service 
needs to do is to, as they are going through some of the 
facilities, make a determination about where chips might occur, 
and what effect chip failure might have on postal operations at 
particular facilities. They need to weigh that against the time 
and the cost that it would take to do an exhaustive inventory, 
and whether or not doing such an inventory might, in fact, 
divert them from some other mission critical activities. This 
is something they have to put in the balance in the coming 
months.
    Mrs. Morella. And the balance is probably necessary, but it 
is a tremendous concern. And I think that we kind of have 
blinders on. You have got to be able to try to identify where 
you can for remediation.
    I would like to pick up on a report that GAO did rather 
recently, and it dealt with the fact that the Postal Service 
had had some difficulty holding onto some qualified staff and 
had been using some contractors. I am wondering if the use of 
contractors has exacerbated the cost of this remediation, and 
if it is a trend? And if we are saying that we are now using 
more and more contractual staff, is this making some kind of a 
statement with regard to the Postal system?
    Mr. Brock. We did a survey of all Government agencies about 
a year ago or so, and it was self-reported by the Postal 
Service that personnel issues were a concern to them. They have 
largely supplemented their staff with a large number of 
contract employees, I believe 1,200--that sticks in my mind. We 
are finding that most agencies, or at least the agencies I deal 
with, extensively rely on contractors because, in many cases, 
the specific skills are simply not in-house to run the business 
as usual, and then take on Y2K as well.
    I think this is true in the Postal Service, that it was 
forced to rely on contractors in order to do the remediation 
that was required, that they simply did not have the staff on 
board, nor was it feasible in the short time remaining to hire 
them and bring them up to speed in order to do the vast amount 
of work that had to be done.
    Ms. Corcoran. The OIG is currently looking at the issue of 
contractors and how well these moneys are being spent, what 
contractors are doing. We hope to have a report out probably 
within the next month looking at this issue.
    Mrs. Morella. That would be great if you would share the 
report with the three subcommittees who are here represented. I 
think it says something about the Postal Service and cost and 
efficiency.
    I just have one final question, really, and it deals with--
again, I think, Mr. Brock, I jotted down, I think you said it 
at some point during your testimony, that the business guys 
must make the decisions and not the ``techies.'' Right?
    Mr. Brock. That is correct.
    Mrs. Morella. Can you explain that?
    Mr. Brock. Sure. One of the reasons we are in this problem, 
some technical decisions were made about how to conserve space, 
and, you know, instead of using a four-digit date, a two-digit 
date was made. I am not quite sure that business owners ever 
really understood the long-term ramifications of that decision, 
even though I believe the technical people did understand that 
long-term ramification.
    One of the major problems that I find across Government, 
when we are looking at information management, is the failure 
of business process owners to actually own the information 
technology and to make the hard decisions that have to be made 
in terms of ``are we making the best investment?'' ``Are we 
making the right decision; are we spending wisely?''
    As crunch time comes, and it will come, and decisions and 
tradeoffs are going to have to be made about, ``Well, do we 
remediate this first, this first, or this first?'' That needs 
to be done within the context of the business operations that 
those decisions support. And they are most appropriately made 
by the business process owners, not by the technology people 
that support the processes.
    Mrs. Morella. It just seems to me that there has got to be 
sort of a partnership when you talk about balance.
    Mr. Brock. Oh, yes.
    Mrs. Morella. Are you blaming the late Admiral Grace 
Hopper, who is the one who devised COBOL?
    Mr. Brock. I would never do that. [Laughter.]
    Mrs. Morella. Is now looking----
    Mr. Brock. No. [Laughter.]
    Mrs. Morella. I frankly think everybody knew. People have 
asked me, ``Why didn't anybody know this early on?'' And I 
said, ``Of course they knew it.'' They just felt, either they 
wouldn't be around, or there would be some way to remediate it. 
But, at the moment, I think the business people were probably 
involved in terms of saving the space and, therefore, saving 
the money. I don't know.
    But very interesting response, and I appreciate it. Thank 
you.
    Thank you, Mr. Chairman.
    Mr. McHugh. I thank the gentlelady.
    This hearing is going to continue; I will leave it to you 
if that is the good news or the bad news.
    The good news certainly is for you, I have a meeting with 
our Governor, and I deeply apologize, but I am going to yield 
the Chair to the gentleman from California, Mr. Horn.
    But, before I do, I want to thank all of you for being 
here--Mr. Lorentz, Mr. Brock, and, of course, Ms. Corcoran.
    This is obviously a very serious problem, one that we are 
deeply concerned about, and I know that the Postal Service 
understands the ramifications--real and perhaps somewhat 
imagined, but po- 
tentially real, as well.
    We are looking forward to working with you, in hopes that 
this challenge can be met successfully and we appreciate GAO 
and the IG's office assistance in this matter.
    Let me thank, last, all of my colleagues, but particularly 
my co- 
chairs, Mr. Horn and Mrs. Morella, for their interest and their 
support and their leadership. So, thank you.
    And with that, I turn the Chair over to Mr. Horn.
    And Mr. Turner, too, as the ranking member, who has been 
here faithfully, and Mr. Wu--everybody, thank you. [Laughter.]
    Mr. Horn [presiding]. I thank the gentleman, and we 
appreciate the patience of all of you when you are in one of 
these sessions.
    I believe Mr. Wu has not had an opportunity to ask a few 
ques- 
tions. The gentleman from Oregon, we are delighted to have you 
here.
    Mr. Wu. Thank you very much, Mr. Chairman.
    I have only one question, and that is assuming that all of 
your efforts to become Y2K compliant are successful within the 
con- tinental United States, and that we have a seamless 
transition. Will we have significant problems develop in Europe 
or Asia or Canada or Mexico? Besides the obvious problems with 
the inter- national mail, what is the potential for foreign 
computer problems in their mail systems, or elsewhere, becoming 
our problems in the USPS?
    Mr. Weirich. The biggest concern would be that it would, 
obvi- ously, it would be a change in the flow of the mail. 
Every time that we have met with different mailer groups and 
looked at the things that could go wrong, our big fear for 
anybody--also includes people mailing things in the United 
States--is if they have problems, will those ripple down to us? 
Will we see a difference in their ability to prepare mail 
correctly or get us the mail on time to deliver it? It would be 
the same coming in from the foreign administrations. It would 
also present some challenges for us outbound.
    Nick could probably address; we have had problems before. 
If a receiving administration is unable to handle what we give 
them, we have various processes to shut off that flow of mail 
until they are able to recover. I believe that is what we would 
get into.
    Mr. Barranca. Yes. I understood your question to be more 
along the lines that, could there be a problem in a computer 
system off- shore that could create a problem in one of our 
resident systems?
    Mr. Wu. And, also, given the number of vendors that you 
have, some of your vendors may be domestic, and some of your 
vendors may be foreign entities.
    Mr. Barranca. Yes. I guess, you know, we are focusing our 
ef- forts on making sure that the physical piece can move from 
where it originates to where it ``destinates,'' for those 
pieces that originate in this country. We feel we will be 
capable of continuing to deliver mail like we do it today in 
the year 2000.
    We are also confident that mail that arrives in this 
country, we will be able to deliver to its destination the same 
as we do today.
    So, when we are doing testing, doing remediation of our 
originating processing systems and our destinating processing 
systems, we are doing that for domestic and international mail.
    I really can't address the concern of--if I understand your 
question, ``What is the possibility of a computer problem in a 
foreign country creating a computer problem in this country 
that we haven't really anticipated?'' That is not something 
that I would be able to address. I don't know if----
    Mr. Wu. Coming out of this industry sector in the relative 
recent past, I have a--let's just say I have a higher level of 
confidence in what we are doing in this country.
    I am deeply concerned about what is happening in other 
countries, whether they are making the same type of efforts and 
having the same kind of progress.
    And we are having difficulties with our schedules; I 
imagine that is a much greater problem in certain foreign 
countries, and that is where, you know, my personal focus is on 
trouble in any Y2K trouble scenario.
    Mr. Barranca. Yes, as we addressed earlier, there are two 
international organizations that are focusing on those issues. 
That is the UPU, and, this is an item on their agenda. They 
represent 200 postal administrations around the world. And then 
there is the International Postal Corp., which represents 21 
industrialized nations, and this is also an item for discussion 
on their agenda.
    So, we are talking together about the potential issues. 
And, as Norm answered earlier, if you sort the countries into, 
say, three categories--those that are highly automated like we 
are, they are dealing with their Y2K problem in a similar 
manner as we are, looking at their systems, making sure they 
can work. Then there are other countries that don't rely as 
heavily on automated processing, and they rely more on a mix of 
automated and manual processing; to a lesser extent, the 
problems are as severe. And then the other countries that rely 
mainly on manual processing, to a great extent, the world won't 
change a whole lot as a result of the year 2000.
    But there are two international organizations that are 
trying to address the problems jointly to see if they can learn 
from what the members are doing. We are an international unit 
as part of those discussions. And, as I volunteered earlier, we 
can make available more information for the record, as we have 
it.
    Mr. Wu. Thank you for an opportunity to get the issue on 
the table.
    Mr. Horn. Thank you very much.
    The gentleman from Maryland, Mr. Bartlett.
    Mr. Bartlett. Thank you.
    I would like to return for a moment to the potential 
problem of embedded chips. It is my understanding that many of 
these chips are generic chips; that is, they are made with a 
variety of capabilities and the application to which you put 
them may use only one or a few of those capabilities.
    The question has been raised that if you have a generic 
chip that has a date code, even though you are using it in a 
situation where the date is of no relevance like sorting mail--
that sorting machine couldn't care what day of the week or year 
or millennium it was sorting mail in. What kind of confidence 
do we have that if an embedded chip contains a date code, that 
when we go past the year 2000, that, in fact, that chip is 
going to continue to work for the purposes for which you are 
using it?
    It has been suggested that if there is a date code in the 
chip, even though you have no interest in the date, that that 
chip may possibly not work after the year 2000. Have you looked 
at that? And how many of your chips are generic chips, and what 
is the potential extent of this problem?
    Mr. Lorentz. I guess a general answer to the question is, 
if we are testing the specific equipment as one of our critical 
or severe, or even the 500 systems, and we are testing it for 
the date issue, that if it does have an embedded chip, we 
believe that that would properly exercise that chip.
    As far as the more technical aspect of that, we can 
certainly address that, but we believe that the remediation of 
the overall system should take that into account.
    Mr. Bartlett. I have trouble understanding how we check to 
see if a generic chip with a date code capability, which we 
aren't assessing and, therefore, can't exercise how we are 
going to be sure that that chip is going to continue to perform 
the functions that we need of it in the year 2000 if we don't 
know whether or not it is going to continue to function if it 
has a built-in date code.
    I don't understand how we can test for that.
    Mr. Lorentz. I think we have two issues here: No. 1, we are 
testing the equipment capability; we are doing that.
    Mr. Bartlett. But, you are testing it today, not in the 
year 2000.
    Mr. Lorentz. And then the other issue that we need to 
address, as the previous conversation, is the issue of 
individual chips, managing the individual chip issue, and we 
accept that.
    Yes, we are simulating; when we go through simulation 
testing, we are taking all of the automation equipment in the 
systems into year 2000. So, we are exercising those chips as 
part of simulation.
    Mr. Bartlett. But, ``how do we advance the clock in the 
chip if the date code in the chip is not something we are 
interested in and not something we are accessing?'' is the 
question that has been raised to me.
    Mr. Lorentz. By advancing the clock in the rest of the 
system.
    Mr. Bartlett. I still am less than sanguine about our 
knowledge of embedded chips and how much of a problem they are 
going to be in the year 2000.
    I thank you very much.
    Mr. Horn. I thank the gentleman.
    Let me just ask a few closing questions, do a little bit of 
administrative bit, and then do a short closing statement.
    Just for the record at this point, how many systems have 
you defined as ``mission critical'' systems within the U.S. 
Postal Service? What is the number of those?
    Mr. Lorentz. 152 systems.
    Mr. Horn. OK.
    How about ones that are not ``mission critical?'' What 
other systems do you have?
    Mr. Lorentz. 349.
    Mr. Horn. 349.
    And does then when you add them up, that is essentially 501 
or so?
    Mr. Lorentz. That is correct. Yes, sir.
    Mr. Horn. Yes.
    Do you find as you go along that maybe some of those that 
weren't defined originally as ``mission critical'' are 
``mission critical,'' when you put the whole context together?
    Mr. Lorentz. We actually, as we have worked through our 
three-step process, we have actually both included or excluded 
systems as we have gone along, so the number, for instance, 
could increase to 153 or could decrease to 151. So there has 
been that kind of a situation that has occurred; yes.
    Mr. Horn. Seems to me, as we go through this experience, 
which is once in a millennium, hopefully, that we also learn 
that you want to avoid ``garbage in'' and ``garbage out'' by 
saying, ``Do we really need this system? Could we merge it with 
something else?''
    Is that going on within the Postal Department, just as a 
matter of organization?
    Mr. Lorentz. Absolutely, and we have actually retired--
specifically, retired--some of the systems.
    Mr. Horn. Let me ask a few questions. I hope you haven't 
covered it when I had to be unavoidably detained.
    Do we have a master schedule? Is fixing your computer 
systems under that schedule?
    Mr. Lorentz. Yes.
    Mr. Horn. Well, if so, does the schedule have certain 
provisions for business continuity and contingencies?
    Mr. Lorentz. We specifically have constructed an approach 
around three specific process areas--business continuity and 
recovery or contingency, the systems' remediation, as well as 
doing communication.
    We have--just to kind of give you an idea as to how that 
fits into the management structure--in every management 
committee meeting that the Postmaster General holds, there is a 
standing agenda item on Y2K mitigation.
    There is a subgroup called the Executive Council Y2K that 
is chaired by the Deputy Postmaster General, Mike Coughlin, on 
the PMG's behalf, where those specific process owners, as well 
as the what we call ``portfolio owners,'' which are senior vice 
presidents, the business process owners, come in and 
specifically review in a very structured, consistent way 
exactly what the current situation is with those systems. And 
that is consistent with the suggestions and findings from the 
Inspector General's office. So those are in progress, as well 
as, we are explicitly creating for our own usage a ``war 
room,'' if you will, where we have a very consistent graphic 
representation for anybody at any time. They can walk in and 
see what the current state of the Y2K approach is.
    Mr. Horn. What is the view of the General Accounting Office 
on this, Mr. Brock? Have you seen the master schedule?
    Mr. Brock. It is my understanding, Mr. Horn, that the 
master schedule had not been developed at the time of our final 
exit last week, that they were working on that, that many of 
the individual business processes had detailed schedules. Our 
concern by not having an overall master schedule is that it is 
easier to suboptimize and that you can't look at the 
relationship of one schedule versus another to make sure that 
things are coming together.
    Again, it was my understanding that the master schedule was 
being worked on and that it was near completion, but we think 
that something like that needs to be ready as soon possible so 
that it can be managed against.
    Mr. Horn. How about the Inspector General, Ms. Corcoran, 
have you seen the master schedule?
    Ms. Corcoran. No, sir; we have not.
    Mr. Horn. You have not. Is that because it has been done in 
the last week, maybe in preparation for the hearing, or what?
    Ms. Corcoran. I can't really say. I knew they were working 
on it, but I have not seen a copy of it, nor have my people.
    Mr. Horn. Did they send any drafts around to either GAO or 
the Inspector General?
    Ms. Corcoran. No, sir.
    Mr. Horn. OK.
    Well, it seems to me when you go about, as I have said, 
from day one of April 1996 when I got into this, this is a 
management problem. It is not a bunch of ``techies'' running 
loose. If it is a bunch of ``techies'' running loose, that is 
part of the problem.
    That is why IRS failed years ago with $4 billion down the 
drain. That is why FAA failed 5 years ago when I was a freshman 
in this Congress and $4 billion went down the drain. And you 
could walk into the room, and I knew at 10 seconds that there 
was no management to that operation. And everybody had a new 
idea every morning, ``so let's try the new idea''--never 
closure, never getting one thing related to the next.
    It seems to me, before you even start in this thing, you 
have got to have some schedule of what is most important. What 
is the limiting factor in relation to all other systems that 
you have got to worry about? Is there a few real trunk systems 
that everything else depends on, and if they go out, you can 
forget all the peripheral business?
    So, how long have we been working on that master schedule?
    Mr. Lorentz. I would say that, specifically, we have gone 
through an evolution, and I certainly think it is as my 
colleagues here portray it. Initially, we underestimated the 
complexity. We did approach this from a systems perspective 
initially. We have evolved that approach. We now, in a very--
and I mean the Postmaster General makes it clear every time he 
talks about this--this is a business problem. So, Mr. Chairman, 
I absolutely--we absolutely share your perspective on that.
    Are the plans that we have in place perfect? No. Are they 
under construction?
    Are they going to be continuously improved as we deal with 
this business problem? Absolutely, yes.
    And I would say that we are comfortable we are headed in 
the right direction, but we are not done.
    Mr. Horn. How many pages is there in the current draft of 
the master schedule?
    Mr. Lorentz. I do not know the answer to that question.
    Mr. Horn. Does anybody with you know it?
    Mr. Lorentz. No.
    Mr. Horn. All right.
    Mr. Lorentz. We can provide that.
    Mr. Horn. I am saving a big space in the records for, 
within a week, getting that copy of the master schedule, 
without objection, and insert it in the record at this point.
    My next question is this--and maybe it has been covered, 
but just give me a brief answer--who is the contingency for the 
Postal Service?
    You are the contingency for everybody else we review with 
our staff, known as the executive branch of the Federal 
Government. They have sort of got you as No. 1. And a lot of 
them don't know what to do anyhow. But those that say, ``Yes; 
we can check it off.''--you get a plus; you at least have an 
idea that if everything fails in the computers, you can mail 
the stuff.
    What happens to you?
    Mr. Lorentz. We really----
    Mr. Horn. Who is your contingency?
    Mr. Lorentz. We believe that the ``buck stops here.''
    Mr. Horn. So that is it? There is no contingency? Or, is 
there another alternative way around?
    Mr. Lorentz. Word of mouth. I mean we do not----
    Mr. Horn. Smoke signals on hills, or what are we down to?
    Mr. Lorentz [continuing]. We believe we are the ultimate 
contingency; yes.
    We certainly are accepting that responsibility. [Laughter.]
    Mr. Horn. Well, yes. One of my colleagues mentioned the 
Pony Express, and 30 years ago, I was living in this city and a 
good friend of mine, Jim Boren, president of the International 
Association of Professional Bureaucrats, challenged the post 
office on mailing that he would put in Baltimore and 
Philadelphia to Washington, and he did it by horseback, and 
they did it the regular way. He won. That did hit every paper 
in America. And Mr. Boren is teaching students how to do those 
things, I am sure, wherever he is posted in Oklahoma or Texas.
    But that is one contingency, maybe, that might be possible, 
if everything else happens.
    Now, what assurances do we have that the mail will be going 
through? I mean you have got all this tremendous thing that I 
mentioned earlier, known as the ``backlog'' at Christmas and 
all the rest of the third class mail and second class mail and 
all that. Have we got some assurance here that the mail will go 
through?
    Mr. Lorentz. We believe that the plans and the resources 
that we have in place, we have a high degree of confidence that 
we can deliver the mail. As well as our experience has been 
articulated by Mr. Barranca, we are, some can say, an expert at 
contingency planning to weather elements and other disruptions. 
So we do have experience at dealing with those issues as well.
    [The information referred to follows:]
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    Mr. Horn. OK. Well, we wish you well on that.
    Let me just say what I think I have learned in looking at 
the papers, as well as hearing the testimony.
    We have learned that you are making progress in solving the 
year 2000 technology challenges, yet you still have a long way 
to go, and it is in a very short period. We are talking about 
311 days from now is the real test, and I am glad you are 
simulating.
    In response to the gentleman from Maryland, that is the 
only way you are going to know in advance if you have got a 
real serious problem on microchips that people don't even know 
about, whether it is the elevators in your building or your 
others buildings around the country. They are often by 
microchips.
    And some of the programming and some of the firms have gone 
out of business in the older buildings when you phone up, but 
the medical profession is doing a pretty good job in this area. 
They have a website, and they started with the emergency rooms. 
And when we had a field hearing in Cleveland with the Cleveland 
Clinic, one of the outstanding medical facilities and programs 
in the country, that they are checking all the design numbers 
and everything else, calling the manufacturers so people don't 
have to trip over everybody in this. They do it once and if 
they have got data tested against it and put it in if it is new 
and don't worry about it; just use the other fellows that we 
had in 2 months ago.
    So I think that is certainly one thing that would be well 
to do, to look at either a website with other industrial 
groups, that I know Mr. Koskinen has. Are you involved with Mr. 
Koskinen's operation?
    Mr. Lorentz. Yes, we are.
    Mr. Horn. Is it in a separate team that you are there, or 
is the post office just standing alone on here?
    Mr. Lorentz. We are involved at two levels. The Postmaster 
General is involved in the CIO Council. Mr. Weirich represents 
us on the President's Council. So we are involved at both 
levels. And there are other industry representatives involved.
    Mr. Horn. Good.
    Well, what leads me to that concern in the short period of 
time, is the obvious. You have got many systems, more than 
almost any place but the Department of Defense and perhaps HHS, 
Health and Human Services. But you have got 8,000 suppliers 
that have to relate to your computing, I would think, in terms 
of their inventory control and the Japanese method of 
inventory, so you don't have to build many storage sheds 
everywhere, but keep it moving. Do you feel there is a problem 
there on trying to make sure that they are converted, so when 
they interact with your system--if they do interact with it--
that they don't pollute the system because they haven't done 
their job?
    Mr. Lorentz. We do have a very significant issue with the 
suppliers' side that we are aggressively pursuing with plan, 
but it is an area of concern.
    Mr. Horn. Good.
    Any last comments any member might want to make now that 
you have heard everybody else's comments?
    Inspector General, do you have any thoughts on this?
    Ms. Corcoran. We are going to continue to monitor----
    Mr. Horn. OK.
    Ms. Corcoran [continuing]. And provide you information----
    Mr. Horn. Good.
    General Accounting Office have any other comments?
    Mr. Brock. We will continue as always, Mr. Chairman, to 
monitor, not only the Postal Service but the other agencies 
that we have a responsibility for, and reporting back to you on 
the progress of agencies all across the Government.
    Mr. Horn. Very good.
    Let me just thank the staff on both sides of the aisle that 
put the hearing together: J. Russell George, the staff director 
and chief counsel for the Subcommittee on Government 
Management, Information, and Technology. He has given up on us, 
I think, and headed to the next hearing. Mr. Ryan is to my 
left, the senior policy director on my subcommittee. He came to 
us from the General Accounting Office. Bonnie Heald, director 
of communication, professional staff member, sitting way in 
back, so she has a decent seat and doesn't have to have us 
tripping over her and vice versa. Mason Alinger, our reliable 
clerk is here that arranges all these hearings. And then we 
have got a lot of free labor and help with college interns, 
Paul Wicker, Kacey Baker, and Richard Lukas; we thank you, 
ladies and gentlemen.
    And for the minority, we have Faith Weiss and Jean Gosa, 
and we thank you all for your usual professional help.
    And from the Postal Service Subcommittee, we have Robert 
Taub, the Postal Subcommittee staff director; Heea Vazirani-
Fales, the Postal professional staff member; and Abby Hurowitz, 
the Postal clerk.
    From the Technology Subcommittee of the Committee on 
Science, we have Richard Russell, the staff director of the 
Technology Subcommittee; Ben Wu, the member of the professional 
staff there; and then, Joe Sullivan is the clerk to the 
committee.
    And I have here Denise Wilson for the minority staff, 
professional staff member.
    And last but not least, our brave court reporter, Sarah 
Swanson. And when you have all that many people on a panel, I 
don't know how you keep track of them. [Laughter.]
    And thank you all.
    And with that, this hearing is adjourned.
    [Whereupon, at 12:22 p.m., the subcommittees adjourned.]
    [The prepared statement of Hon. Chaka Fattah follows:]
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