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



 
   YEAR 2000 (Y2K) AND OTHER SOCIAL    SECURITY INFORMATION TECHNOLOGY 
                                 ISSUES

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

                                HEARING

                               before the

                    SUBCOMMITTEE ON SOCIAL SECURITY

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 29, 1999

                               __________

                             Serial 106-14

                               __________

         Printed for the use of the Committee on Ways and Means


                                


                      U.S. GOVERNMENT PRINTING OFFICE
 60-114 CC                   WASHINGTON : 1999
------------------------------------------------------------------------------
                   For sale by the U.S. Government Printing Office
 Superintendent of Documents, Congressional Sales Office, Washington, DC 20402



                      COMMITTEE ON WAYS AND MEANS

                      BILL ARCHER, Texas, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
BILL THOMAS, California              FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida           ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut        WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York               SANDER M. LEVIN, Michigan
WALLY HERGER, California             BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana               JIM McDERMOTT, Washington
DAVE CAMP, Michigan                  GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington            WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia                 JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio                    XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania      KAREN L. THURMAN, Florida
WES WATKINS, Oklahoma                LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida

                     A.L. Singleton, Chief of Staff
                  Janice Mays, Minority Chief Counsel

                                 ______

                    Subcommittee on Social Security

                  E. CLAY SHAW, Jr., Florida, Chairman

SAM JOHNSON, Texas                   ROBERT T. MATSUI, California
MAC COLLINS, Georgia                 SANDER M. LEVIN, Michigan
ROB PORTMAN, Ohio                    JOHN S. TANNER, Tennessee
J.D. HAYWORTH, Arizona               LLOYD DOGGETT, Texas
JERRY WELLER, Illinois               BENJAMIN L. CARDIN, Maryland
KENNY HULSHOF, Missouri
JIM McCRERY, Louisiana


Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
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                            C O N T E N T S

                               __________

                                                                   Page

Advisory of July 22, 1999, announcing the hearing................     2

                               WITNESSES

Social Security Administration, Hon. Kenneth S. Apfel, 
  Commissioner of Social Security; accompanied by D. Dean 
  Mesterharm, Deputy Commissioner for Systems; Kathleen M. Adams, 
  Assistant Deputy Commissioner for Systems; and Judy Chesser, 
  Deputy Commissioner for Legislation and Congressional Affairs..     6
U.S. General Accounting Office, Joel C. Willemssen, Director, 
  Civil Agencies Information Systems, Accounting and Information 
  Management Division............................................    30



YEAR 2000 (Y2K) AND OTHER SOCIAL SECURITY INFORMATION TECHNOLOGY ISSUES

                              ----------                              


                        THURSDAY, JULY 29, 1999

                  House of Representatives,
                       Committee on Ways and Means,
                           Subcommittee on Social Security,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:10 a.m., in 
room B-318, Rayburn House Office Building, Hon. E. Clay Shaw, 
Jr. (Chairman of the Subcommittee), presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS

                    SUBCOMMITTEE ON SOCIAL SECURITY

FOR IMMEDIATE RELEASE                             CONTACT: (202) 225-9263
July 22, 1999
No. SS-7

                Shaw Announces Hearing on Y2K and Other
             Social Security Information Technology Issues

    Congressman E. Clay Shaw, Jr., (R-FL), Chairman, Subcommittee on 
Social Security of the Committee on Ways and Means, today announced 
that the Subcommittee will hold a hearing on Year 2000 (Y2K) and other 
Social Security information technology issues. The hearing will take 
place on Thursday, July 29, 1999, in room B-318 of the Rayburn House 
Office Building, beginning at 10 a.m.
      
    Oral testimony at this hearing will be from invited witnesses only. 
Witnesses will include experts from the U.S. General Accounting Office 
(GAO), which has examined Social Security information technology 
systems, and the Social Security Administration (SSA). However, any 
individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    The effective use of information technology is essential to Social 
Security's mission of providing timely and accurate benefits to more 
than 44 million Americans. As with other government programs, computers 
have come to play a critical part in Social Security's ability to 
process benefit applications, screen for errors and possible fraud, and 
provide timely benefits. Given the importance of information technology 
to SSA's mission and the program challenges presented by the Baby Boom 
generation as it approaches retirement age, the Subcommittee has asked 
GAO to review SSA progress in several areas, including readiness for 
Y2K, implementation of its Intelligent Workstation/Local Area Network 
(IWS/LAN) initiative, and development of a Reengineered Disability 
System (RDS). This hearing will explore the results of that review.
      
    In announcing the hearing, Chairman Shaw stated: ``Computer systems 
are vital to ensuring that Americans receive the Social Security 
benefits they have come to expect in a timely and affordable manner. 
This hearing will be a final check to ensure that Social Security is 
fully ready for Y2K. Beyond Y2K, it is vital that we ensure that Social 
Security's computer systems are up to the task now, well before the 
Baby Boom approaches retirement age and begins drawing disability and 
retirement benefits in large numbers.''
      

FOCUS OF THE HEARING:

      
    The hearing will focus on SSA progress in implementing key 
information technology initiatives, including readiness for Y2K, 
implementation of its IWS/LAN initiative, and development of a RDS.

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Any person or organization wishing to submit a written statement 
for the printed record of the hearing should submit six (6) single-
spaced copies of their statement, along with an IBM compatible 3.5-inch 
diskette in WordPerfect 5.1 format, with their name, address, and 
hearing date noted on a label, by the close of business, Thursday, 
August 12, 1999, to A.L. Singleton, Chief of Staff, Committee on Ways 
and Means, U.S. House of Representatives, 1102 Longworth House Office 
Building, Washington, D.C. 20515. If those filing written statements 
wish to have their statements distributed to the press and interested 
public at the hearing, they may deliver 200 additional copies for this 
purpose to the Subcommittee on Social Security office, room B-316 
Rayburn House Office Building, by close of business the day before the 
hearing.
      

FORMATTING REQUIREMENTS:

      
    Each statement presented for printing to the Committee by a 
witness, any written statement or exhibit submitted for the printed 
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comments must conform to the guidelines listed below. Any statement or 
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but will be maintained in the Committee files for review and use by the 
Committee.
      
    1. All statements and any accompanying exhibits for printing must 
be submitted on an IBM compatible 3.5-inch diskette in WordPerfect 5.1 
format, typed in single space and may not exceed a total of 10 pages 
including attachments. Witnesses are advised that the Committee will 
rely on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
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    3. A witness appearing at a public hearing, or submitting a 
statement for the record of a public hearing, or submitting written 
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Committee, must include on his statement or submission a list of all 
clients, persons, or organizations on whose behalf the witness appears.
      
    4. A supplemental sheet must accompany each statement listing the 
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    The above restrictions and limitations apply only to material being 
submitted for printing. Statements and exhibits or supplementary 
material submitted solely for distribution to the Members, the press, 
and the public during the course of a public hearing may be submitted 
in other forms.

      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at ``http://www.house.gov/ways__means/''.
      

    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      

                                


    Chairman Shaw. Good morning. Right now, there is still a 
Republican conference going on, so that explains the absence of 
our Republican Members, who will be in shortly, I am sure.
    Today, the Subcommittee will explore how the Social 
Security Administration is preparing for the year 2000 and 
other information technology challenges that lie ahead.
    The effective use of information technology is essential to 
Social Security's mission of providing timely and accurate 
benefits to more than 44 million Americans today and to tens of 
millions or more in the coming years as the baby boom 
generation approaches retirement age.
    Simply put, without effective computer systems, Social 
Security will be unable to efficiently process benefit 
applications, screen for errors and possible fraud, and provide 
timely benefits. Delivering on the promise of providing world 
class service to Social Security's customers, American workers 
and retirees, would be impossible without effective information 
technology.
    Given the importance of information technology to SSA's 
mission today and especially in the future, the Subcommittee 
has asked the General Accounting Office to review SSA progress 
in several areas, including readiness for Y2K implementation of 
its intelligent workstation/local area network or IWS/LAN, for 
those of you who are into that, initiative, and development of 
a Reengineered Disability System, also called RDS.
    Can we delete these abbreviations from my statements in the 
future?
    [The opening statement follows:]

Opening Statement of Hon. E. Clay Shaw, Jr., a Representative in 
Congress from the State of Florida

    Today the Subcommittee will explore how the Social Security 
Administration is preparing for the Year 2000 and the other 
information technology challenges that lay ahead.
    The effective use of information technology is essential to 
Social Security's mission of providing timely and accurate 
benefits to more than 44 million Americans today, and to tens 
of millions more in the coming years as the Baby Boom 
generation approaches retirement age. Simply put, without 
effective computer systems Social Security would be unable to 
efficiently process benefit applications, screen for errors and 
possible fraud, and provide timely benefits.
    Delivering on the promise of providing world-class service 
to Social Security's customers--American workers and retirees--
would be impossible without effective information technology.
    Given the importance of information technology to SSA's 
mission today and especially in the future, the Subcommittee 
has asked GAO to review SSA progress in several areas, 
including readiness for Y2K, implementation of itsIntelligent 
Workstation/Local Area Network (or ``IWS/LAN'') initiative, and 
development of a Reengineered Disability System (also called 
RDS). This hearing will explore the results of that review. We 
are pleased to welcome the Commissioner of Social Security, Ken 
Apfel, and the Director of the General Accounting Office's 
Civil Agencies Information Systems group, Joel Willemssen, to 
provide their perspectives and help us answer many questions we 
have.
      

                                

    Chairman Shaw. We are pleased to welcome the Commissioner 
of Social Security, Ken Apfel, and the Director of the General 
Accounting Office's Civil Agencies Information Systems, Joel 
Willemssen, to provide their perspectives and help us answer 
the many questions that we might have. And I might say that, 
from all of the indications that I have, the Social Security 
Administration has really been a leader in getting the 
technology ready, for which I think congratulations are in 
order.
    Mr. Matsui is presently in the Capitol on the floor, and if 
he gets here, it will be later this morning. But, Mr. Levin, do 
you have an opening statement that you would like to make?
    Mr. Levin. Yes, I do.
    As you mentioned, Mr. Matsui is tied up on matters that, as 
I understand, are immense.
    Chairman Shaw. Something that has to do with water in his 
district.
    Mr. Levin. It relates to the Sacramento area.
    The Social Security Administration currently faces two 
major information technologies. One, preparation for the year 
2000, is an immediate and well-publicized challenge. The other, 
implementation of new technologies to enhance productivity and 
to improve customer service, is not as widely discussed but is 
still vitally important.
    In preparing for Y2K, the bar has been set relatively high 
for SSA, and justifiably so. With the possible exception of the 
IRS, the American people interact with SSA more than any 
Federal agency, leading to a high degree of visibility for the 
agency and to a considerable amount of attention to any Y2K 
miscue. More importantly, Social Security benefit payments are 
a lifeline for millions of Americans. Any disruption of that 
lifeline could prove disastrous.
    Nonetheless, SSA is on the verge of clearing that bar. All 
of SSA's own computers were certified as Y2K compliant in 
December of last year, while the agency has either completely 
or almost completely resolved concerns raised by GAO about Y2K 
compliance among State Disability Determination Services, data 
exchanges with noncompliant employees or vendors, and 
contingency plans to ensure benefit payments are made in time.
    Moreover, SSA has taken on a leadership role within the 
Federal Government, and many of the approaches it has used to 
prepare for Y2K have been adopted as best practices by other 
agencies. In fact, SSA has received--has consistently received 
high marks from the House Subcommittee on government 
Management, Information and Technology, chaired by Congressman 
Stephen Horn. Since August of last year, SSA has received 
straight As, as you know----
    Mr. Apfel, did you get report cards always like that?
    Mr. Apfel. No, sir. [Laughter.]
    Mr. Levin [continuing]. On the Subcommittee's Year 2000 
Progress Report Card, and the National Science Foundation is 
the only other Federal agency with that record.
    In implementing new technologies, SSA has recognized that 
the retirement of the baby boom generation will pose a 
challenge not just for the program's finances, but for the 
agency's work force as well. More and more retirees will, of 
course, mean more and more Social Security claims. To meet this 
challenge and to allow its employees to process more claims 
more quickly and more accurately, SSA has a number of 
information technology initiatives underway.
    To update its information technology infrastructure, SSA 
recently completed the installation of over 70,000 new personal 
computer workstations throughout the agency. We look forward to 
hearing the contributions SSA expects these computers to make 
to enhance productivity and lower operating costs.
    Similarly, we look forward to hearing from SSA on how it 
intends to proceed with its--Mr. Chairman, you referred to this 
Reengineered Disability System, RDS--initiative now that Booz-
Allen & Hamilton has issued its final report evaluating the 
initiative and has recommended that the agency discontinue the 
initiative. Implementing a system so that all the various 
components within that agency that participate in the 
disability claims process can share information in a timely and 
standardized fashion will be vital to the continued success of 
the disability insurance program.
    Importantly, we look forward to hearing from the SSA on how 
it intends to cope with the funding cuts that the present 
Republican budget will entail for the agency over the next 
decade. The mammoth tax cut that has been forced through the 
House last week is premised on major cuts in discretionary 
spending over the next 10 years. These cuts would include a 28-
percent cut in SSA's administrative budget in 2009, relative to 
what is needed to keep pace with inflation after 1999. We 
sincerely doubt that any amount of automation or any other 
information technology initiative would allow SSA to continue 
to manage the Social Security Program--just as the baby boom 
generation begins to retire.
    Thank you, Mr. Chairman.
    Chairman Shaw. I don't think that the bill you refer to has 
been reported out yet as to the cut in the administrative 
costs, so I am not sure that is correct, Sandy.
    Mr. Levin. These are observations.
    Chairman Shaw. Mr. Commissioner, proceed.

  STATEMENT OF HON. KENNETH S. APFEL, COMMISSIONER OF SOCIAL 
  SECURITY, SOCIAL SECURITY ADMINISTRATION; ACCOMPANIED BY D. 
 DEAN MESTERHARM, DEPUTY COMMISSIONER FOR SYSTEMS; KATHLEEN M. 
  ADAMS, ASSISTANT DEPUTY COMMISSIONER FOR SYSTEMS; AND JUDY 
CHESSER, DEPUTY COMMISSIONER FOR LEGISLATION AND CONGRESSIONAL 
                            AFFAIRS

    Mr. Apfel. Thank you, Mr. Chairman and Members of the 
Subcommittee, for inviting me to testify about Social 
Security's progress on implementing information technology, IT, 
initiatives. These initiatives are essential to managing our 
workloads now and in the future.
    Accompanying me today are Dean Mesterharm, our Deputy 
Commissioner for Systems, and Kathy Adams, our Assistant Deputy 
Commissioner for Systems, who really have been remarkable over 
the years in Social Security's endeavors. Also behind me, as 
always, is Judy Chesser, on crutches today, but with us fully.
    It is clear that technology----
    Chairman Shaw. Were you kicking people? Is that what 
happened?
    Ms. Chesser. Yes.
    Mr. Apfel. Sometimes the Commissioner.
    It is clear that technology is indispensable to SSA's 
success in achieving the goals set forth in the agency's 
strategic plan. As you yourself have noted, Mr. Chairman, 
computers will play a critical role in our ability to process 
benefit applications, pay benefits in a timely way, and guard 
against fraud.
    From 1992 through 1999, Social Security spent $4.3 billion 
on IT and systems. My testimony today will focus on how we have 
invested those resources and what benefits have been realized.
    Like everyone else, we have been preparing for the dawn of 
the new century. I am glad to report that our benefit payment 
system is year 2000 compliant. As we like to say, we are Y2K 
OK. We continue to work with the Treasury Department and the 
Federal Reserve to identify any year 2000 issues that might 
affect direct deposits. So far, we have not identified any.
    We have also developed a detailed strategy for the last 
days of 1999 and the first days of 2000, our day one strategy. 
To every extent possible, Social Security's facilities and 
systems will be fully operational on January 3, 2000, the first 
business day of the new century. However, if a problem should 
occur, the Treasury Department will immediately issue a 
replacement Social Security check, and Social Security offices 
will provide emergency payment services to people with critical 
needs. I, personally, do not consider our job done until timely 
and correct benefit payments are in the hands of all of our 
beneficiaries.
    Next, I would like to mention our customer-responsive 
service delivery system providing employees ready access to the 
information they need to serve the public. This system--our 
IWS/LAN--is one of the largest information technology 
initiatives ever undertaken in the Federal Government.
    We have successfully installed more than 75,000 
workstations and 1,742 LANs in Social Security and in our State 
DDS offices. We did this without interrupting workflow and thus 
without interrupting public service. The IWS/LAN system 
provides a standardized platform and architecture that now 
exists throughout Social Security, the State Disability 
Determination System, and our hearings and appeals offices. 
This technology already is helping us take claims more 
efficiently and provide better online service to national 800-
number callers.
    In order to improve service, in 1992 we began the 
Reengineered Disability System, known today as RDS. While we 
originally planned a single system supporting all SSA 
components involved in the disability process, we learned that 
this was not the best solution.
    Because of performance problems, we contracted with Booz-
Allen and Hamilton to independently evaluate the RDS process 
and to make recommendations. Based partly on these 
recommendations, we will build on the strengths of the existing 
software systems already in place and electronically link them 
to a new, automated field office disability system, based on 
the system we piloted in the Virginia offices.
    Roughly half of our $71 million investment continues to be 
applicable to the new strategy. Included are valuable software 
packages that will strengthen the disability application 
process and enhance its cost effectiveness.
    Like our success with IWS/LAN and Y2K, Social Security 
needs to continue applying information technology advances to 
improve our disability claims process. Right now, if you walked 
into one of our offices to file a disability claim, the Social 
Security representative would complete a detailed paper 
questionnaire documenting your disability and then mail it on, 
along with the rest of the folder, to the State Disability 
Determination System. This paper-based system is not 
appropriate for the 21st century.
    Last, we are very excited as we prepare to send out our 
newly designed, annual Social Security Statement, the largest 
customized mailing ever undertaken by the Federal Government. 
Beginning in October, we will issue approximately 10 million 
statements each month to workers 25 and older. The statements 
will provide estimates of Social Security retirement, 
disability and survivors benefits, together with a record of 
worker's earnings.
    Mr. Chairman, Social Security's ability to use technology 
and improve systems is critical to our success as an agency. 
The Ways and Means Committee developed legislation passed 
recently by the House that includes provisions for data matches 
and other program integrity provisions, and I would like to 
commend the Committee for these efforts.
    H.R. 1802 expands our ability to do computer matches for 
SSI applicants and beneficiaries. Data matches such as these 
will help SSA to use technology to continuously guard our 
program's integrity.
    I am proud to report that SSA is only one of two government 
agencies to receive an A grade in management of information 
technology from the government Performance Project at Syracuse 
University's Maxwell School of Citizenship and Public Affairs.
    Use of technology has already enabled Social Security to 
significantly improve the services it provides to the American 
people. For example, in 1992, it took 6 weeks for a person to 
receive a Social Security card. Now it takes 5 days. In 1982, 
Social Security needed 3 weeks' computer processing time to 
calculate the annual COLA, now it is done in 24 hours.
    There are other examples in my written testimony.
    I am pleased with these achievements, and I believe that 
our commitment to technology will enable us to do even better.
    Throughout our 65-year history, Social Security has made a 
vital difference in the lives of Americans. As demonstrated in 
our Agency Strategic Plan, we have ambitious goals; and I am 
proud of those computer systems achievements that will help us 
reach them.
    I look forward to working closely with you on these goals 
and would be happy to answer any questions you have.
    [The prepared statement follows:]

Statement of Hon. Kenneth S. Apfel, Commissioner of Social Security, 
Social Security Administration

    Mr. Chairman and Members of the Subcommittee:
    Thank you for inviting me to testify about the Social 
Security Administration's (SSA) progress on implementing 
information technology initiatives. These initiatives are 
critically important when we consider that our ability to 
manage our workloads now--and in the future--rests on our 
ability to use technology extensively and effectively, and I am 
proud of SSA's achievements in this area.
    It is clear technology has been, and will continue to be 
indispensable to SSA's success in achieving the goals set forth 
in the Agency Strategic Plan. The success of goals such as the 
ability to deliver customer-responsive, world class service, to 
make SSA program management the best in the business, with zero 
tolerance for fraud and abuse, and to be an employer that 
values and invests in each employee, is directly linked to 
SSA's ability to apply advances in technology. As you yourself 
have noted, Mr. Chairman, computers will play a critical role 
in our ability to process benefit applications, pay benefits 
timely, and guard against fraud.
    From 1992 through 1999, SSA has spent $4.3 billion on 
information technology to support its programs. These costs 
include funds spent from the Information Technology Systems 
budget, the automation investment fund, and salaries and 
expenses of information technology personnel. My testimony 
today will focus on how we have invested those resources and 
what benefits have been returned as a result of those 
investments. The areas I will discuss today are: SSA's 
preparedness for the Year 2000; automation of our disability 
processes; a project to provide our employees with workstations 
with the capability to process claims and respond to customer 
inquiries (also known as the Intelligent Workstation/Local Area 
Network or IWS/LAN project); and issuance of Social Security 
Statements (formerly known as Personal Earnings and Benefit 
Estimate Statements, or PEBES).

                               Year 2000

    Preparing for the change of century date--from 1999 to 
2000--is one of the biggest challenges ever to face the 
technology industry. At SSA our national computer center 
maintains and operates hundreds of mission-critical systems 
supported by over 35 million lines of in-house computer code, 
as well as hundreds of commercial off-the-shelf vendor products 
that had to be reviewed and changed where necessary to ensure 
that January 2000 payments will be made correctly and on time 
to the nearly 50 million Social Security and Supplemental 
Security Income (SSI) beneficiaries who could be affected by 
the Year 2000 (or Y2K) changeover.
    I want to thank the Subcommittee for holding this hearing 
and for your efforts in making the public aware of SSA's 
progress to make sure that we will pay benefits timely and that 
SSA's system will function as it should. As I testified before 
the Ways and Means Committee in February, SSA's benefit payment 
system is Year 2000 compliant. As we like to say, ``We are Y2K 
OK.'' We have worked closely with the Treasury Department, 
Federal Reserve, and the Postal Service to ensure that Social 
Security and Supplemental Security Income (SSI) checks and 
direct deposit payments for January will be paid on time. Since 
October 1998, payments for both Social Security and SSI 
programs have been made with Year 2000-compliant systems at 
both SSA and Treasury.
    We worked with the State Disability Determination Services 
(DDS) to make sure that the 55 State DDSs that have automated 
systems to support the disability determination process are 
Year 2000 compliant. I am happy to report that as of January 
1999 all of the State DDS systems are Year 2000 compliant, 
tested, and implemented.
    We recognize that it is not enough for SSA to be Year 2000 
compliant if our trading partners are not ready. We have worked 
very closely with all of our trading partners. I am pleased to 
report that all outgoing data exchanges are Year 2000 compliant 
and implemented. All but three of our incoming data exchanges 
are compliant and implemented. The remaining three are in 
testing and will be implemented in early August 1999.
    We have worked hard to make sure that all of our mission 
critical systems are Year 2000 compliant, and now we are taking 
steps to make sure that we do not introduce possible date 
defects into these systems. Whenever a system that has been 
Year 2000 certified is changed due to legislation or other 
requirements, we are recertifying the system to make sure it is 
still Year 2000 compliant. In addition, beginning this month we 
have instituted a moratorium on installation of commercial off-
the-shelf software and mainframe products, and we will impose a 
similar moratorium in September for discretionary changes to 
our own software. The moratoriums will be in place through 
March 2000.
    We have developed a detailed strategy that comprises the 
comprehensive set of actions that will be executed during the 
last days of 1999 and the first days of 2000. The strategy also 
includes the activities leading up to the critical century 
rollover date, such as identification of key personnel 
involved, preparation of facilities checklists, establishment 
of the Y2K command center, a schedule for testing all systems 
over the weekend, and other activities. Implementation of the 
strategy will ensure, to the extent possible, that SSA's 
facilities and systems will be fully operational on January 3, 
2000--the first business day of the new century. That is, 
service to the public and our trading partners will continue 
without interruption due to the change of century date.
    Finally, we recognize that our system depends on 
infrastructure services, such as the power grid or the 
telecommunications industry and third parties, which are beyond 
our control. In March 1998, SSA completed its Y2K Business 
Continuity and Contingency Plan, which is updated quarterly. 
The plan identifies potential risks to Agency business 
processes, ways to mitigate each risk, and strategies to ensure 
continuity of operations.
    As part of the plan, we have in place local plans for each 
of our field offices, teleservice centers, processing centers, 
hearings offices, and State DDSs. We have also developed 
contingency plans for benefit payment and delivery. We continue 
to work closely with the Treasury Department and the Federal 
Reserve to identify any Year 2000 issues that might affect 
direct deposit payments. While we have not identified any so 
far, if a problem should occur in January, the Treasury 
Department will quickly issue a replacement Social Security 
check, and SSA offices will provide emergency payment services 
to beneficiaries with critical needs. I do not consider Social 
Security's job done until timely and correct benefits are in 
the hands of all of our beneficiaries.
    I know that we are all concerned about ensuring that all 
beneficiaries are paid on time, but I want to be sure to urge 
you to resist proposals to make the January 2000 Social 
Security benefit payment in December 1999. After a thorough 
review of the pros and cons of making payments early, the 
Administration determined that such action is not necessary 
given the readiness of agency payment systems and business 
continuity and contingency plans.
    We believe that there are risks associated with making 
payments early. Such actions could easily be interpreted by the 
public as an indicator of the government's inability to make 
automated payments in January 2000. Such a signal could prove 
disastrous if citizens decide to withdraw their currency in 
anticipation of a disruption in benefits or other payments, or 
try to cancel electronic payments and revert to check payments. 
At this point, the damage that could result from public 
overreaction could be far more serious than technology risks 
resulting from potential Year 2000 problems. Moreover, 
providing early payments in December could require the 
government and industry to make additional programming changes 
to account for the payments with the requisite testing of those 
systems and would raise a number of difficult tax policy issues 
if there were a move to extend early payments of other 
transactions in the public or private sector beyond simply 
Social Security payments.

                            IWS/LAN Project

    As a part of our strategic goal of delivering customer-
responsive, world class service and our strategy for providing 
employees ready access to the information they need to serve 
the public as described in SSA's Strategic Plan, SSA initiated 
the IWS/LAN project. As you know, Mr. Chairman, the Strategic 
Plan paints a broad picture of SSA's future, as well as our 
means and strategies to achieve our long-range goals. SSA's 
business approach to providing world-class service while 
workloads grow relies on business process and information 
technology improvements, such as IWS/LAN. This technology is 
key to our business strategy because it provides employees with 
state-of-the-art tools to serve the public and it opens up 
exciting new possibilities for doing business with our 
customers in the future.
    This project establishes a national computer network 
including desktop computer workstations for all SSA and DDS 
employees supported by appropriate communications and software 
systems. This technology is critical in taking claims 
efficiently and providing online service to national 800-number 
callers. This project also reflects SSA's conviction that 
employees deserve a professional environment in which they can 
readily access information enabling them to increase 
productivity and to provide better service to the public. SSA's 
strategic goal--to be an employer that values and invests in 
each employee, relies in part on providing such tools and 
training needed for high quality performance.
    In 1995, at the time Social Security became an independent 
agency, one of our first undertakings was the implementation 
and distribution of this new computer equipment. SSA has 
accomplished what many said could not be done. I am happy to 
report that we have successfully installed more than 75,000 
workstations and 1,742 local area networks in SSA and State DDS 
offices throughout the country. To achieve this, we installed 
the new equipment in 75 offices per month, which was a major 
undertaking, as all installations had to be done on the 
weekends. I am particularly proud that these installations were 
accomplished without any disruption to our ability to serve the 
public.
    SSA is currently in the process of acquiring an additional 
6,900 workstations and 275 local area networks to complete the 
installation for all employees. This project is one of the 
largest information technology initiatives ever undertaken in 
the Federal government.
    The IWS/LAN project provides the enabling infrastructure 
for many of the technology-based initiatives that SSA is 
implementing. It provides a standardized platform and 
architecture that now exists throughout SSA and the DDSs and 
our hearings and appeals offices, which I described earlier. In 
addition, the accomplishments of IWS/LAN pave the way for our 
ability to provide service electronically and exploit emerging 
technologies to improve service to SSA's customers.
    Our redesigned title II system is a major investment that 
has enabled us to do our job more efficiently. That technology 
has allowed us to improve the services we provide, as well as 
the manner in which we provide those services. When the public 
comes in to file a claim for Social Security or Supplemental 
Security Income benefits, their claims are now processed faster 
and with greater accuracy than ever before. We are able to 
handle more than 70 million telephone calls per year to our 800 
number by using automated responses to our customers, as well 
as by using technology that allows our employees to quickly 
locate necessary information. Our streamlined process for 
reporting W-2s allows us to provide more timely and accurate 
feedback to our nation's employers. Finally, we are now making 
use of the Internet to provide our customers with a wide range 
of SSA services. And, we are in the process of converting our 
processing centers from paper-bound processing to paperless, 
electronic processing, which will make these offices more 
efficient, less costly to operate and will provide better 
services.

                    Automation of Disability Process

    In 1992, SSA began an ambitious software development 
project, the Reengineered Disability System (RDS), to provide 
an automated disability case processing system. The primary 
goal of RDS was to improve service to our disability clients, 
by reducing processing time and providing a framework for more 
consistent and uniform disability decisions.
    Our initial plan was to develop a single system that would 
support all the SSA components involved in the disability 
process. That includes our nationwide network of field offices, 
the 55 State DDSs and our hearings and appeals offices. We 
developed a prototype system and implemented it in the pilot 
SSA field offices in Virginia and the Federal DDS in our 
Baltimore headquarters. While we achieved some success in the 
pilot, we ran into significant performance problems.
    Because of these performance problems, we felt it would be 
prudent to obtain an independent evaluation of our pilot 
system. We delayed further pilot implementation and contracted 
with Booz-Allen and Hamilton to evaluate the RDS process and 
recommend options for proceeding.
    Based on the contractor's recommendations, we are changing 
the way we will deploy automation to the disability process. 
Rather than replace all of the existing DDS systems with one 
central system, we will build on the strengths of the existing 
software systems in the DDSs, and link them electronically to 
an automated field office disability system, based on the RDS 
system we piloted in the Virginia offices. We are now calling 
this approach eDIB.
    RDS was a very large initiative that required a substantial 
early investment to build the hardware and software 
infrastructure needed to support the prototype system. From 
1992 through 1999, SSA invested a total of $4.3 billion in 
information technology investments; we spent a little over $71 
million on this project. Roughly, one half of this $71 million 
investment continues to be applicable to the new strategy 
recommended by the independent review. Included in this is the 
automated system which will be used in SSA field offices to 
strengthen the disability application process and enhance its 
cost effectiveness. The remaining half is the price we have 
paid to learn a number of valuable lessons in how to manage the 
risks associated with deploying this type of technology 
throughout SSA and the 55 DDSs.
    Our new strategy will focus on working with the DDSs to 
build on their systems, providing more flexibility in the 
process and recognizing differences in case processing among 
the States. As with our successes with IWS/LAN and Y2K, SSA 
needs to continue to strive to apply advances in information 
technology to improve our disability claims process. and to do 
so in a way that manages the risk inherent in any technology 
improvements.
    Mr. Chairman, let me illustrate the reason why we must 
automate the current disability claims process. If you were to 
walk into one of our offices today to file a disability claim, 
the SSA representative would complete a paper questionnaire to 
document information about your disability. The form includes 
doctors' names and addresses, medications you take, tests you 
have had performed, documentation of your daily activities, and 
other detailed medical information. Depending on your 
individual circumstances, the form might need to be 
supplemented by additional information concerning your 
vocational history. Once this was completed, we would need to 
assemble the folder and mail the information to the State DDS.
    Compare that with the improvements an automated process 
would provide us and which will be facilitated by the software 
I mentioned earlier in my testimony. All of the information 
needed for the claims application will be entered 
electronically by the SSA interviewer using the work station 
and transmitted electronically to the State DDS. We will 
eliminate the mailing time delays. We will reduce the need to 
recontact the disability applicant because the system would 
assure that all questions are answered and readable. 
Information technology will give us a quicker, more efficient 
process and provide much better customer service.
    An important facet of the new disability process revolves 
around our efforts in working with the medical community to use 
advanced technology to efficiently obtain an exchange of 
medical evidence. As you know, difficulties in obtaining 
medical records have a critical impact on our ability to make 
timely and accurate decisions on disability claims. Our efforts 
in this area are focused on enabling providers to 
electronically transmit medical evidence quickly and securely. 
The ability to receive this evidence electronically will 
facilitate a number of steps during the disability process 
resulting in significant customer service improvements.
    Technology improvements will also be invaluable as we work 
to improve the hearings process, which is a key performance 
indicator of our strategic plan goal to provide customer-
responsive, world-class service. Our hearings office 
improvements initiative relies on enhanced automation and 
management data collection and analysis. This will facilitate 
the monitoring and tracking of case processing and development 
steps; facilitate the transfer of case-related information; 
help ensure the completeness of case development and analysis; 
and increase the efficiency of highly variable labor-intensive 
functions such as scheduling.
    SSA and its State partners remain committed to the common 
goal of providing automation to improve the processing of 
disability claims. We plan to follow a strategy that will 
manage the risks involved in this initiative. By making 
incremental changes, by carefully developing and evaluating our 
prototypes before they are put into production, and by making 
modest investments that build on our existing infrastructure, I 
am confident we will be able to significantly improve the way 
we manage the disability claims process.

                       Social Security Statements

    One of SSA's basic responsibilities to the public is to help 
Americans understand Social Security and its importance to them and 
their families. As part of our public education efforts, SSA has been 
issuing earnings and benefit estimate statements to the public since 
1988. And, as I mentioned at the beginning of my testimony, our 
Strategic Plan identifies strengthening public understanding of our 
Social Security programs as one of our five Agency Strategic goals.
    So far, more than 37 million people have requested and received 
earnings and benefit statements--formerly known as Personal Earnings 
and Benefit Estimate Statements (PEBES). In amendments to the Social 
Security Act in 1989 and 1990, Congress provided that SSA was to phase-
in issuing PEBES by issuing them to all workers aged 60 or over in FY 
1995; in FY 1996 through FY 1999 to individuals who reach age 60 in 
those years; and annually to all covered workers aged 25 and older 
beginning in FY 2000. In addition to the PEBES mailing required by law, 
SSA sent PEBES to increasingly younger individuals in advance of the 
schedule in the law. SSA sent a PEBES to workers aged 40 and older--
about 73 million people--between September 1995 and March 1999.
    The statements we will begin to mail in October--the largest 
customized mailing ever undertaken by the federal government--will be 
our newly-designed Social Security Statement which, like its PEBES 
predecessor, provides estimates of Social Security retirement, 
disability, and survivors benefits that workers and their families 
could be eligible to receive now and in the future. The automatic 
mailings will take place at a rate of about half a million Statements 
per business day, with about 10 million issued each month. Workers can 
expect to receive their Statement each year about three months before 
their birthday.
    SSA's computer based recordkeeping and information technology 
improvements will allow us to produce and mail the statements for about 
56 cents each This is a considerable achievement when we consider that, 
when we began issuing PEBES in 1988, there were private vendors 
producing their own version of benefit estimate statements for 
individuals and charging them a fee of $10 or more.
    SSA redesigned the PEBES format and language to make it easier to 
read and understand. We tested four prototypes with focus groups in 
three different age groups (ages 25-35, 36-50, and over 50). Additional 
public input was obtained through a mail survey of 16,000 randomly 
selected individuals from the same age groups. Focus group and mail 
survey participants alike overwhelmingly found the redesigned statement 
an improvement over PEBES.
    I am pleased to report that the results of a recent Gallup survey, 
undertaken at SSA's request, revealed that individuals who had received 
a statement had a significantly increased basic understanding of Social 
Security. The survey also found that the individuals responding had an 
increased understanding of some important basic features of Social 
Security. This relationship validates the performance measures we use 
to track our progress in meeting our ``Public Understanding'' strategic 
goal: we track both the increasing number of PEBES we send to the 
public and the increasing public knowledge about our programs.
    The information in the Statement provides workers with an easy way 
to determine whether their earnings (or self-employment income) are 
accurately posted on their Social Security record. This is important 
because the amount of a worker's future benefits will be based on his 
or her earnings record. The Statement tells how to correct inaccurately 
posted earnings.
    We encourage workers to use the Statement to plan for their 
financial future. Workers can use the Statement to better plan for 
their financial needs when they retire, or if they become disabled or 
die and leave survivors.

                               Conclusion

    As I said at the beginning, Mr. Chairman, SSA's ability to 
use technology and make systems improvements will be critical 
to our success as an Agency, given the workloads we will face. 
I am proud to report that SSA was one of only two Government 
agencies to receive an A grade in management of information 
technology from the Government Performance Project from the 
Alan K. Campbell Public Affairs Institute of Syracuse 
University's Maxwell School of Citizenship and Public Affairs.
      

                                

    Use of technology has already enabled SSA to improve 
significantly the service it provides to the American people, 
and I would like to cite a few examples to illustrate this 
point:
     In 1982, it took 6 weeks for a person to receive a 
Social Security card from SSA. Now it takes 5 days.
     In 1982, it took 39 months to post annual wage 
reports to workers' earnings records. Now, this task is 
completed in 6 months.
     In 1982, it took four years to perform annual 
recomputations for beneficiaries entitled to higher benefits. 
Now this is done in 6 months.
     In 1982, SSA needed three weeks of computer 
processing time to calculate annual cost-of-living increases. 
Now, this done in 24 hours.
     In 1982, it took 15 days to issue an emergency 
replacement payment. This is done now in 5 days.
    I am pleased with these achievements, but I believe that 
SSA can do better. In time, we believe the investments in 
automation technology that SSA has made in recent years will be 
vitally important in enabling SSA to manage the increasing 
workloads it will experience in coming years.
    As we look to the future, access to data will be vitally 
important to SSA's future plans to improve program integrity. 
For this purpose, the Administration supports the House-passed 
bipartisan ``Foster Care Independence Act of 1999'' (H.R. 
1802), which includes provisions for data matches, and I would 
like to commend the Committee, Mr. Chairman, for your efforts 
on this bill. H.R. 1802 expands the pool of data available for 
making SSI eligibility and payment determinations by requiring 
frequent SSA matches with the Health Care Financing 
Administration and by facilitating electronic exchanges of 
information from financial institutions about financial assets 
owned by SSI applicants and beneficiaries. It is data matches, 
such as these, that will help SSA continuously guard the 
integrity of our programs.
    Throughout its almost 65-year history, Social Security has 
made a difference in the lives of Americans, and we have a 
responsibility to be careful stewards of our programs both now 
and as we move into the 21st century. As demonstrated in our 
Agency Strategic Plan, we have ambitious goals, and I am proud 
of those computer systems achievements which will provide the 
framework for us to achieve them. I look forward to working 
closely with the members of this Subcommittee in that spirit on 
these important endeavors, and would be happy to answer any 
questions you might have.
      

                                

    Chairman Shaw. Thank you, Commissioner.
    Mr. Levin.
    Mr. Levin. Well, Mr. Chairman, I do not have any glaring 
questions.
    It is a pleasure to hear this testimony, Mr. Apfel, and 
from your colleagues, and for us to congratulate you on your 
accomplishments; and we know, knowing you, that you don't rest 
for 1 minute on your laurels.
    Let me ask you, I remember a number of years ago there was 
discussion at this Subcommittee about what happens when people 
call in and the delays that were incurred. And this isn't 
directly germane, perhaps, but all of this technology is to try 
to make sure that communication with human beings, including 
dispatch of their checks, but also handling their complaints, 
all of it goes well. How does it go these days when somebody 
calls the Social Security Administration? We don't hear very 
many complaints anymore, so I take it it is better.
    Mr. Apfel. It is better, Mr. Levin.
    A number of years ago, a number of people, when calling, 
received a busy signal or were not able to get through. We 
established formal strategic goals and objectives in a 
timeline. These service delivery goals are known throughout the 
organization.
    We manage those goals. Our resources are devoted to meet 
those goals. I think that one of the keys in any large 
organization is defining, getting agreement on, and then 
communicating as to what our service delivery goal should be. 
Thereafter, all of our activities are devoted to managing to 
meet those goals.
    In the area of the 800 number, over 95 percent of callers 
get in, and clearly we have had a significant improvement in 
the area over the course of the last 5 years. Technology helps 
you go to the 800 number office right now, and there sits an 
IWS/LAN on that person's desk to be able to immediately access 
for the individual who is calling, their claim, their 
information, information that they have had in the past.
    I would also point out that we now have a new system that 
is a major technology improvement. When that call comes in, now 
for the first time, we can pull up what the person has 
received, in terms of correspondence, in the immediate past.
    This is a tremendous improvement. Rather than a person 
saying, ``I got a letter from Social Security'' and our people 
are saying, ``Can you read it to me so I can figure out what 
the problem is?'' With the click of a button, we can now access 
what those letters are, giving our employees tremendous 
efficiencies.
    That is just one example of how technology has helped us in 
meeting what are going to be continual workload demands in the 
future with the remarkable staff that we have.
    Mr. Levin. Last, let me ask you a question on behalf of my 
94-year-old mother-in-law. It is about her Social Security 
checks. She receives these mailings about Y2K, and it frightens 
her. So you are ready for the year 2000 for January. You have 
been working with the Federal Reserve Board. I can tell my 
mother-in-law, I mean this seriously, she will receive her 
check on time?
    Mr. Apfel. Yes. And I think that is a very serious issue. 
You absolutely can tell her that.
    We have been certified as 100-percent compliant through the 
entire network, from Social Security to the Department of 
Treasury, through the Federal system. The Federal system is 
entirely Y2K compliant.
    We have also established contingency plans which are really 
at the leading edge of the Federal level. If there are 
localized problems, the plan indicates how to work around those 
problems to assure that people will receive accurate and 
appropriate services as rapidly as possible.
    We are very proud of the fact that we are Y2K OK; and we 
are, within the week, I hope, sending to the Committee our 
public education strategy for Y2K, which we think is an 
important step in this process. We need to communicate to the 
American public that we are ready for the millennium.
    That, I believe, is a very high priority. We can't just 
figure it out and then sit on our laurels. That is why we need 
to, one, fix the systems; two, contingency plans; and three, 
develop a public education strategy for communicating to the 
public that we are ready. And we have done all of those things, 
and I believe we are absolutely ready for the new millennium.
    Mr. Levin. Good going, thanks.
    Chairman Shaw. Mr. Portman.
    Mr. Portman. Thank you, Mr. Chairman.
    Commissioner, thanks for being here. I think SSA deserves 
to be commended for taking the lead on Y2K.
    And I never got straight As. I don't know about the 
Chairman. But Steve Horn is a tough grader.
    But I also think that the notion that Mr. Levin just said 
about not resting on the laurels is important, and contingency 
plans are very important.
    What happens if there are external factors such as mail 
service is not in place to be able to deliver the checks? Do 
you have some alternatives that you are thinking about?
    Mr. Apfel. We certainly do.
    First of all, the Postal Service is in very good shape for 
Y2K, and they have their own contingency plans as well. The 
first step in any localized problem, Mr. Portman, would be to 
move people to work and to move work to people. That is true 
for the Postal Service. That would be true for us as well 
within Social Security.
    If there is--even today there can be a problem with a 
certain mailing address not receiving checks. We have systems 
in place to work around that problem, to be able to get 
information and get checks to people as soon as possible. 
Number one is people to work and work to people.
    Number two, if a check has not arrived, say, to a bank, the 
electronic transaction cannot be transacted with one particular 
bank someplace, we have established contingency plans where, on 
that Monday, we would determine with the Treasury Department 
and the Federal system whether the bank will be in a position 
within the next 24 to 48 hours to be able to make that 
transaction.
    If that is not possible, we will immediately contact the 
Treasury to issue a check. That check will be issued through 
the mail. So that will take 5 days roughly, maybe 7 days, by 
the time the check is received. But if there is an emergency, 
if someone said, ``I really need this money,'' they can come 
into our field office and we will automatically and immediately 
cut a check for that individual. That will be available.
    We also have these localized plans in every one of our 
field offices, and included in that is a connection to each one 
of your offices. You will be getting a mailing from me sometime 
I would hope within the next month with contact names, within 
every one of our field offices. If you experience a problem, 
you will know who your office should call, and who will be 
calling your office if any problem is identified anywhere in 
your congressional district.
    Mr. Portman. There will be some sort of emergency for 
people who need a check badly. There will be--local offices at 
their discretion, and they will cut the check?
    Mr. Apfel. Absolutely.
    Mr. Portman. Let me back up for a second. I don't want to 
spend a whole bunch of time on this.
    Assuming the mail service does not work, literally does not 
work during that period of time after the 1st, you are saying 
your contingency would be to get the checks somehow to the 
workplace. And also on the electronic side we have to assume 
that that is another area where there is some external 
vulnerability. And so in terms of electronic transfers or, as 
you say, transfers with financial institutions, one would have 
to prepare for that.
    Mr. Apfel. This year, given the particular circumstances, 
we are going to have the actual checks delivered to the Postal 
Service on the 29th, which is ahead of schedule, to give 
advance time to the Postal Service.
    Mr. Portman. They are in place locally?
    Mr. Apfel. We are in very good shape for those.
    Mr. Portman. OK. Let me talk for a second about RDS. 
Unfortunately, this reminds me a lot of the IRS work we did 
over the last few years. What was the total budget of the RDS 
process from 1992 on?
    Mr. Apfel. From 1992 on, we have expended somewhere in the 
vicinity of $70 million. I can give you----
    Mr. Portman. That was a budget. Was it budgeted to be $70 
million?
    Mr. Apfel. You mean to date?
    Mr. Portman. Yes.
    Mr. Apfel. Well, each year a decision was made as to the 
amount needed--there was never a decision in 1992, let's spend 
$70 million.
    Mr. Portman. Each year since 1992 there has been additional 
money spent up to $70 million.
    Mr. Apfel. $70 million to date.
    Mr. Portman. And you pulled the plug on the project when, 
after spending $70 million?
    Mr. Apfel. I think it is important to clarify to ``pull the 
plugs.'' Clearly, we have changed directions significantly, and 
we should have. And it was the right thing to do. We--I made 
the decision last March, in our disability management plan, 
that we needed to set up a new direction in this area.
    To provide the history here, about 2 years ago----
    Mr. Portman. Let me just say, Ken, unfortunately, my time 
is almost up. I guess if you could--maybe others have other 
questions about this--but I think that the questions I would 
have when we get them answered, what was budgeted? What was 
actually spent? Why did it take us so long to pull the plug? 
And what did we learn from it?
    I would like to know whether the Booz-Allen study is part 
of this $71 million, because it seems to me that was a major 
expense that needed to be included in it. And you say roughly 
half of the money, the funding that was used, is going to be 
used in other ways.
    Again, at the IRS, we saw that $3 to $4 billion of that 
bubget was literally wasted. It wasn't able to be used in terms 
of the reengineering of the software and hardware, information 
technology generally. I think we need some answers on that. 
And, more importantly, what did we learn from this? The Social 
Security recipient who is out there is hearing that $70 million 
was wasted on something? Should we have had a mechanism in 
place to monitor this so we knew early on what was going wrong 
and to be able to pull the plug sooner?
    I see my time is up, but if the Chairman will indulge me to 
some answers of that.
    Chairman Shaw. Go ahead.
    Mr. Apfel. I think it is appropriate to try to put the 
whole issue in context.
    The project was initially started back in the early 
nineties. The design was established 2 years ago. The pilot 
prototype was established.
    Now the original RDS model was for a very comprehensive 
system that would replace every system within our State DDS. So 
every State would replace their system. One comprehensive 
system that would be throughout our hearing offices, our field 
offices, as well as the State DDS partners, that prototype was 
established 2 years ago.
    When I became Commissioner, during the very first week I 
received a briefing that there were some operational problems 
at that point in time, so it went live, the pilot, the 
prototype about 2 years ago. There were some problems that 
developed. And my Chief Information Officer brought up the need 
for what I think made sense, a significant analysis of the cost 
effectiveness of the model and the implications of it.
    Really, it was an investment review of the model. We 
directed the contract within a very short timeline for an 
independent review of our model, and we received the draft of 
that report last February. It indicated that it was a very high 
risk and a very large system with significant risks involved. I 
made the decision that it made sense to redirect the investment 
to a much more focused design. Rather than replacing systems 
within the Disability Determination Systems, to modify those 
systems to establish an electronic folder in our field offices 
with applicability to the State computer systems, and with 
applicability to our hearing offices.
    So the differences are incremental rather than a 
comprehensive prototype. It would be an incremental model with 
incremental releases, much less investment in the short term 
and less risk.
    We think it is the right model for electronic commerce in 
the disability area. It is a low-risk strategy. It is building 
on the $70 million that was expended, and about half of it is 
directly applicable to the endeavors that we are involved in to 
date. That needs to be put in the context of the $3 to $4 
billion that was spent over that period of time on information 
technology. So the RDS activity was a fairly small one in terms 
of investments, compared to our overall IT budget.
    But I believe it was the right decision to redirect away 
from the comprehensive prototype which does have higher risks, 
to a more incremental product. And we will be moving forward 
with modifications, which I think are appropriate. I don't know 
whether Dean or Kathy would want to add anything to that. But 
it seems to me we have made the right decision earlier to 
redefine the scope of the project to assure full cost benefit 
for every step that we take in this process in the future.
    Chairman Shaw. Mr. Doggett.
    Mr. Doggett. Thank you.
    I would like to continue that discussion, because I am 
sure, as are you, I hate to see $10 wasted, much less $70 
million. However, many millions of dollars is alleged to have 
been wasted, and I would like to focus on that number. Is it 
correct to say that $71 million has been wasted, or is there 
some portion of this money that represents hard work costs that 
has other application?
    Mr. Apfel. Well, we would disagree strongly with the notion 
that $70 million was wasted. Roughly half of the endeavors are 
directly applicable to our new endeavors that we are involved 
with. Now, that is only half. The issue here is that we are 
dealing with managing risk. Whenever one tries to move forward 
on new major investments in technology, there is risk involved 
in any one of those steps.
    Indeed, if we look at IWS/LAN, I think that many would have 
said, many would have been skeptical of the plan that we had 
for IWS/LAN, to do the rollout as quickly as we did throughout 
the country. It was a very aggressive schedule. A lot of 
resources were invested in that area. That worked flawlessly 
and now is applauded, I believe, throughout the country, as an 
excellent model of a national rollout, really one of the 
largest technology changes throughout the country. The success 
of this rollout was recently outlined in the Letters to the 
Editor section of the May 3, 1999, ``Government Computer 
News.'' I would like to submit the letter for the record.
    [The information follows:]

GOVERNMENT COMPUTER NEWS, May 3, 1999, Volume 18, Number 11

                         LETTERS TO THE EDITOR

SSA gets IT done

    Thank you for the article, ``LAN project forces agency, 
vendor to meet in middle'' [GCN, March 8, Page 8]. It draws 
attention to the massive, successful technology transformation 
that the Social Security Administration is undertaking as part 
of the Intelligent Workstation/LAN contract.
    Your story, like past articles you have run on IWS/LAN, 
focused on PC pricing. While this is interesting, you're 
missing the big picture: IWS/LAN is one of the largest, most 
ambitious information technology modernization efforts ever 
undertaken in the federal government, and it will have a 
tremendous impact on SSA's ability to continue providing cost-
effective and efficient services to citizens.
    In 1995, SSA faced the pending issue of increased 
beneficiaries, applicants and workload demands caused in part 
by the future retirement of the baby boom generation.
    However, the agency's ability to provide expanded services 
was limited by outdated information technology and declining 
staff resources.
    The following year, SSA embarked on the IWS/LAN program. It 
involves the integration of 56,500 PCs running Microsoft 
Windows NT and 1,742 LANs in state Disability Determination 
Services offices and 1,300 SSA field offices. Added to that is 
extensive training for all users, many of whom previously were 
using dumb terminals.
    Today, thanks to a very aggressive schedule that involved 
the installation of 75 LANs per week, that program is on cost 
and on track to be completed in mid-May.
    All this was accomplished without interrupting the 
operations of 65,000 SSA employees who every day handle 250,000 
phone calls, process 20 million real-time transactions and 
transfer some 3 billion bytes of data.
    The team at SSA has accomplished in three years what many 
people in government said couldn't be done--an on-budget, on 
schedule, major IT overhaul that was completed without 
disrupting services to the citizens.
                                                T.J. Miller
                                 Vice president and general manager
                                   Information Technology Solutions
                                             Unisys Federal Systems
                                                        McLean, Va.
      

                                

    In the RDS area, some of that resource will be applicable 
to our new model, but not all of it. So our estimate is 
somewhere in the vicinity of half of that $70 million would be 
used for this future electronic commerce and our electronic 
folder that we are going to be establishing.
    Mr. Doggett. In what year did the RDS Program begin?
    Mr. Apfel. The model first was developed in 1992, and the 
prototype was established 2 years ago this month. Isn't that 
right, Dean?
    Mr. Mesterharm. Yes.
    Mr. Apfel. Two years ago this month. And the problems that 
started to emerge, dealing both with our concerns of our State 
partners as well as the actual technical problems in our 
Federal DDS, started to emerge very quickly at that point in 
time. And so, basically, by March, within roughly 6 months of 
the time of the start of the prototype, we did the Booz-Allen 
study to try to get an independent sense of whether there 
should be a change.
    Again, I wouldn't use the word terminate. I would say the 
word would be redirected significantly. It is a much less 
comprehensive model. It is a more workable model. It is one, I 
believe, that will lead to significant cost-benefit 
improvements, and that has been shown in the Booz-Allen study. 
But I must say that it will not be as comprehensive a system, 
so it won't be able to do as much as our original model. But I 
think we are biting the right bite of the apple in terms of 
technology in this area.
    Mr. Doggett. And when would you anticipate that would be 
completed, and is it impacted to any degree by the Y2K issues?
    Mr. Apfel. It is not impacted at all by the Y2K issues. We 
are going to be establishing proof of concept right now and 
then incremental releases, and that will be starting in our 
field offices. We would expect by the end of 2000 to have one 
State up and rolling at this point in time, one State and field 
offices in that State. We will also be doing a cost-benefit 
analysis at that time on the experience to date.
    Mr. Doggett. That will be, in essence, a demonstration 
project in that area.
    Mr. Apfel. It is not a demonstration. It is really a proof 
of concept that through that one State we can do a cost-benefit 
analysis to determine exactly what the cost-benefit ratios 
would be for moving forward on a national level. The long-term 
plan right now is for a national rollout by the year 2004.
    But this way is, we think, a much more prudent response, 
and it gives us incremental steps along the way to be able to 
determine cost and benefit analysis.
    Mr. Doggett. This may be more appropriate to do after the 
next presentation, I am not sure how you are contemplating 
handling that, but do you have any response to the findings of 
the General Accounting Office that are presented here this 
morning?
    Mr. Apfel. I think that the General Accounting Office--I 
looked at their materials briefly, and I don't know whether 
either of my colleagues would want to comment, but I think they 
provide a very accurate assessment of where we are on Y2K, 
where we are on our IWS/LAN, and where we are on the RDS. And 
our new modifications, which now we call eDIB, electronic 
Disability Insurance Benefit--we have a new acronym, a new term 
for you for our redirected disability design. I think that it 
is a pretty fair assessment of where we are.
    And we are proud of what we have done in the technology 
areas. I think one of the things that has got to be 
reemphasized is that technology investments are always about 
managing risk, and change is about managing risk. If we want to 
expect specific productivity improvements, we have got to be 
able to invest in a series of activities. Some may not work as 
originally envisioned.
    I think we got the right design for incremental 
improvements in the disability arena. And if I could say, Mr. 
Chairman, if we look at the increases in disability that are 
projected over the course of the next 10 years, given the aging 
of the baby boom generation, if we are left a decade from now 
with a paper-based system, we will drown.
    We need to continue to invest in technology to handle 
increasing workloads in the disability arena, just as we have 
in the retirement and other areas. Given the onset of 
disability in the fifties and given the aging of the baby boom 
generation, we do project specific increases in cases. We have 
got to continue to invest in technology to do this. That may 
need some changes, and I think the change we made in terms of 
the RDS model was an absolutely appropriate one, but we have 
got to keep our eye on the ball, and that ball is to continue 
to invest in technology to meet emerging needs.
    Mr. Doggett. Thank you.
    Chairman Shaw. Commissioner, to follow up on some of Mr. 
Doggett's questions early on, focusing on the IWS/LAN 
installation project, which was I believe $1 billion--that is 
with a B--for the first phase, do we have any way of qualifying 
the benefits from this investment? I understand that a 
performance review has not been conducted. The General 
Accounting Office reports that it has not been done. It is 
required by law. Can you tell us when we might expect such a 
review?
    Mr. Apfel. We conducted a review early on in the 
implementation of IWS/LAN to determine both cost-benefit 
analysis as well as workload savings. That was done, I think, 
on the first 100 offices.
    Chairman Shaw. Does the General Accounting Office have 
that?
    Mr. Apfel. I am sure that they do.
    Mr. Mesterharm. Yes.
    Mr. Apfel. The issue now is whether, after the fact, it is 
possible to do a complete cost-benefit analysis of every 
variable that could have changed. It is hard to do that.
    I would like to try to explain this in some detail. Many 
things changed over the course of the last 3 years, processes 
changed as well as automation. To try to figure out after the 
fact, 3 and 4 years after the implementation, how much of the 
input is due to specifically this activity, is hard.
    One of the things we could explore with the General 
Accounting Office is whether we could get some recommendations 
from them about how to conduct an after-the-fact investment in 
these endeavors to be able to factor out how much of it is from 
the technology and how much of it is from the changes in 
process that took place over the course of the last 3 and 4 
years, actually.
    We believe that our original assessment of the first 100 
offices provided a very solid justification in cost benefit----
    Chairman Shaw. How were these chosen?
    Mr. Apfel. I think it is the first 100 offices.
    Ms. Adams. It was a stratified sample throughout the 
country so we could take that data and then extrapolate it out 
to our whole enterprise.
    Chairman Shaw. How were they chosen, the first 100 offices? 
How many offices are there?
    Ms. Adams. They were chosen to be a representative sample.
    Chairman Shaw. Was it a random sample?
    Ms. Adams. No, it was not random. A lot of discussion and 
thought went into the choice of the 100 pilot offices.
    Mr. Apfel. That is because, again, the way that IWS/LAN was 
rolled out was not starting slowly in each office. It was going 
in office by office and over a weekend doing a major 
installation. The staged rollout over the last 2 and 3 years 
was not a slow upgrade throughout all of our 1,300 field 
offices and our hearings offices. It was every weekend tearing 
apart one particular office, installing a whole new system. So 
these 100 were some of our first offices that were installed.
    Chairman Shaw. Well, you mentioned in your testimony, I 
believe I am quoting you correctly, ``this has been a huge 
success.'' And I do acknowledge the law that does require a 
determination as to the effectiveness. I would hope that you 
would get with the folks over at the General Accounting Office 
and set up the parameters of that review in a manner that would 
be satisfactory to both you and to them and have this completed 
at an early date. If the law is incorrect in requiring this, 
then we should change the law, but I doubt if that is the case. 
I think this type of accountability is needed and is a good 
thing to have.
    Mr. Apfel. We will have conversations with the GAO on how 
to do that.
    Chairman Shaw. Thank you.
    Mr. McCrery.
    Mr. McCrery. Mr. Commissioner, the $71 million figure that 
was the cost of RDS, did that include the cost of the Booz-
Allen study?
    Mr. Apfel.  Yes, it did.
    Mr. McCrery. How much was the Booz-Allen study?
    Ms. Adams. About $1 million.
    Mr. McCrery. How much?
    Mr. Apfel.  About $1 million.
    Mr. McCrery. OK. Can you explain in terms that I can 
understand, I know you can't know that, but try, the change 
between the original concept of RDS and what you have gone to 
now with electronic folders? What did you hope to gain from RDS 
that you are not going to gain with electronic folders and what 
are you going to gain from electronic folders?
    Mr. Apfel.  I will try to do that, Mr. McCrery.
    The original model was a fully automated single 
comprehensive system for all of our organization, both our 
field offices, our State Disability Determination Services 
partners, of which there are over 50, needless to say, and our 
hearing offices, so that there would be one data system that 
would be used; one system, a very comprehensive model, that 
would provide the ability ultimately to move information back 
and forth absolutely readily, as we do with our IWS/LAN and 
many of our other cases.
    That was the original design, and that meant new computer 
systems in our field structure and replacing computer systems 
in every one of the 50 States, because we have the State 
partners.
    The Booz-Allen study pointed up that that kind of change, 
particularly to the State systems, was going to be high risk, 
potentially very high benefit, but very high risk. The new 
model is for an electronic folder so there is new automation in 
our field offices, modifications to the State systems, so that 
now in our field office a person takes the information with the 
computer, as opposed to on paper, and the data elements will be 
changed within the State computer systems to make them 
consistent.
    We still get the information in all three of our pieces, 
our field offices, our States, and our hearings offices, but we 
haven't established one comprehensive system. We have an 
electronic folder of information for the individual, that is 
the new model, and it is a smaller model. It is a much less 
comprehensive system change.
    But it is an appropriate one, because changing those State 
systems, given the fact that so many State systems have their 
own unique systems, would have been a significant hurdle to 
overcome. We have lost some of our comprehensiveness in terms 
of the design and the ability to move information, all 
information across all of our components, but we have gained 
some improvement. I think this goes really to what we see in 
many of our other areas. We have got to be able to do an 
investment and show a payoff immediately, in incremental 
improvements.
    The electronic folder is an incremental improvement. It 
is--ultimately, I would have preferred--I think everyone would 
prefer--one comprehensive system, but that is just too big a 
bite of the apple, and moving in the direction of the 
electronic folder is an incremental step that can be tested as 
it goes forward in ways that I think are very productive for 
the organization.
    Mr. McCrery. Let me ask--I am still not really clear--are 
you just saying that the electronic folder means we are going 
to go from paper to computer? That seems to be your big 
advance.
    Mr. Mesterharm. Let me try to simplify, if I can.
    To talk about the previous strategy that we had, the 
original strategy was based on one set of software. As we said, 
we rolled out the IWS/LAN. That means that each individual 
personal computer out there would have this one piece of 
software. It would be the same software that would run in every 
field office. It would run on everybody's desk in the DDS. It 
would run every place in the OHA. That would give us 
standardization so that we wouldn't have to worry about 
supporting different versions. That was the goal that we had.
    The size of that system was too large. It made it complex. 
So instead of focusing on this one big common system, we now 
are, number one, taking what we already coded for the field 
office portion of it, we are taking the DDS part out, and we 
are having a system that is only focused on the field office. 
That will go in the field office. Rather than building new 
systems for the DDSs, which already have automation, we are 
taking the current system that they have, and we are having 
that system interface with a database, which we are calling an 
electronic folder.
    It is a common storage for information. The field offices 
will move the disability information to that common storage 
area. The current DDSs systems will pick up that information 
off of that storage area and be able to process it.
    Where we get savings in both cases is the fact that, number 
one, currently, it is a paper process that is manual and 
intensive. We can cut about 20--anywhere from 10 to 20 percent 
off of a case time in the field office and in the DDSs because 
we pick that information up and send it over to them. They can 
save time because we have already picked up the information. 
They don't have to rekey it again.
    We save time in the DDSs. We don't have to redo all of 
their software. They are going to interface with that database.
    OHA will be a similar situation. It will interface with 
that database. So the new approach is to tackle each section at 
a time, not redo the DDS code.
    Mr. Apfel. If I could add, Mr. Chairman, you walk into one 
of our hearing offices for a hearing with a very large stack of 
paper. The first step is to open it up and to start copying 
some of the information down on a new form. The potential for 
productivity improvements are significant by being able to have 
common data elements, so that we don't have individuals 
recopying down on a third piece of paper what has been in 
separate pieces of paper in the past.
    Is it a dramatic redesign of the process? The answer is no. 
This electronic folder ultimately will help get larger 
productivity enhancements by automating the process. This is 
less of a streamlining process than an automating process. I 
think that is a fair statement. Still significant 
improvements--to do the latter is a more comprehensive and 
higher risk strategy. I think it is where we will be 3 and 4 
and 5 years from now, how to take the automated systems and now 
build in more redesign structure to it.
    But, ultimately, it is a saver, but it is not as bold. It 
is not as high risk a strategy.
    Mr. McCrery. Thank you, Mr. Chairman. I have some other 
questions, but I will wait until the second round.
    Chairman Shaw. Mr. Cardin.
    Mr. Cardin. Thank you, Mr. Chairman.
    Just to maybe complete this part on the disability claims 
process. You were very specific as to what you were able to 
accomplish on getting a Social Security card out, what you were 
able to do in getting the COLA calculation. What will my 
constituents experience as a result of the new disability 
claims technology? We have had far fewer complaints recently 
than we did in the past. There is no question that you have 
made tremendous progress in dealing with constituent contact 
with SSA.
    The disability claim process is still one of the most 
difficult ones for my constituents. They have difficulty 
getting determinations, and the appeal process is cumbersome. 
Once this is implemented, what type of improvement will our 
people see in the disability claim process?
    Mr. Apfel.  We view the automation endeavors as one of the 
keys to improving processing times. In the very near future, we 
will be unveiling our plan for hearings process improvement. We 
have already unveiled and are working toward the prototypes on 
the disability improvements at the front end of the process in 
the State structures. Inherent in both of those designs are the 
technology improvements that we are talking about here.
    It will mean less time, it will mean, given current 
resources, a speedup of that process. So that the decreases in 
backlogs that we have seen will come through this improvement. 
Part of it will also be through the other management steps that 
we will be unveiling in the next month or so.
    Mr. Cardin. Let me just use Mr. Portman's analogy for one 
moment for IRS in a different area, and that is one of the 
problems we had with the Internal Revenue Service in IT 
improvements was the inconsistency of Congress in providing 
support for the administrative budget. This Subcommittee on a 
bipartisan basis has always supported resources for SSA, 
administrative resources in order to get your job done and to 
deal with some of the backlog problems.
    We are threatened now by the overall budget that could 
require reductions in your budget. I just really want you to go 
on record as to how important it is for us to continue to 
provide the resources necessary if we are going to be able to 
hold you accountable to make the type of progress that you 
expect is reasonable.
    Mr. Apfel.  Well, I will go on record that our 
administrative budget is a central part of both our service to 
the public as well as the program integrity to maintain the 
confidence of the taxpayers. Our request is for level staffing 
from 1999 into the year 2000 to hold the line and to utilize 
technology to help us deal with emerging workloads. We will 
need investments in the future, there is no doubt about it, 
within Social Security. The workload increases, the retirement 
of the baby boom generation, which is a decade away, the 
increases in disability cases that will come from the aging of 
the baby boomers will place great strains on us.
    It is clear that we will need significant resources in the 
future to be able to meet our customer service goals, given 
increased workloads.
    I do thank this Subcommittee enormously for the support 
over the years for your endeavors in keeping a strong Social 
Security and the support for our automation activities. And we 
are going to need that support in the future, I believe, if we 
are going to continue to provide quality service to the 
American public.
    Mr. Cardin. And last, let me--as we started this hearing on 
Y2K and the purpose of it, let me also congratulate you for the 
progress that you have made on information technology generally 
and particularly Y2K. And I hope that you will express--it has 
been pretty uniform here in Congress how pleased we are with 
what SSA has been able to accomplish. I hope that message will 
get to the employees at SSA, because a lot of times they hear 
from us in an unfriendly way. I think they should know they 
have done a very good job, and we appreciate that on the Hill.
    Mr. Apfel.  Thank you. And I will pass that along, sir.
    Chairman Shaw. The Subcommittee will stand in recess. There 
is one vote on the floor, and then I understand there will be a 
couple of hours before we get another vote, so we should be 
able to conclude the hearing.
    So we will recess for approximately 15 minutes, and then we 
will come back and complete the hearing.
    [Recess.]
    Chairman Shaw. I think we are about ready to wrap this up. 
Mr. McCrery had some additional questions I believe he wanted 
to pose to the Commissioner.
    Mr. McCrery. Thank you, Mr. Chairman.
    Mr. Apfel, I am interested in an assessment of productivity 
gains as a result of all of the expenditures we are making for 
computerization of your work, this electronic folders project 
that we are now about to undertake, and I understand that you 
are estimating this project to cost about $200 million over the 
next 10 years.
    Mr. Apfel. About 300 million.
    Mr. McCrery. About $300 million over the next 10 years, 
that is a fairly substantial investment in a process that we 
would hope would allow productivity increases. What gains are 
you estimating for the taxpayer as a result of these 
expenditures that we are making?
    Mr. Apfel. We specifically wanted that information to 
justify the expenditure, and that is clearly what a cost-
benefit analysis is to do. We talked to Booz-Allen about that, 
and there was a range--a minimum return of about 1.28 to 1 up 
to well over 2 to 1 in terms of productivity enhancements.
    Now, in the private sector, ``a star to steer by'' is 
somewhere in the 2 to 1 range. At the lower end of productivity 
enhancements, that would be lower than the star to steer by 
that many in the private sector use, but at the higher end, it 
will be considerably higher than that.
    We can provide for the record the breakout of the various 
cost-benefit analyses that were done based on various 
assumptions for productivity enhancements that were included in 
the Booz-Allen report that I think will make the point here. I 
believe we will see from this investment somewhat on the higher 
end of the scale of productivity enhancements, because it is 
going to take less time, less time per case in our field 
offices and in our DDSs, and that is really what the cost-
benefit analysis shows for the various options.
    As we move forward, we are going to be expending somewhere 
in the $10 million range. Over the 2 or 3 years in this 
endeavor, we will be continuing to do cost-benefit analysis so 
that we will find 2 years from now what the costs and the 
benefits are for the endeavor that we have done.
    If we find that somehow we are very bottom end, we are down 
at 1 to 1, then we should be reassessing that model. I think 
what you are going to find, and I think what we will find 2 
years from now when we sit before this Subcommittee, is that 
the cost-benefit work on the incremental improvements that have 
been done are going to show a significant payoff.
    But what I will provide for the record is the various 
alternative cost-benefit analyses that were included in the 
Booz-Allen report, which are all positive and I think will not 
be at the lower end of that range but at the higher end of that 
range.
    [The information follows:]

    [GRAPHIC] [TIFF OMITTED] T0114.001
    
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    Mr. McCrery. Well, thank you.
    Mr. Chairman, I hope that this Subcommittee will continue 
to provide oversight of what is going on with productivity 
improvements or enhancements. I think it is absolutely 
necessary that we invest in these technologies to avert an 
explosion of needs in terms of personnel and time as the Social 
Security Administration has to cover more and more people in 
the not-too-distant future.
    I am hopeful that we are doing all of this with the thought 
that in the end we are going to save taxpayer dollars by these 
early expenditures.
    Just one more question on the electronic folders. And just 
tell me if this has not been determined yet or if you don't 
know. I am completely understanding of that. But--and I am just 
curious, do you anticipate that there will be some technology 
that will be provided that will take a software, say, a floppy 
disk that comes from the Federal SSA and is converted to 
software that is usable by the States? Or is it going to be 
necessary for the State to take the floppy, print it out and 
then hand input into their own software--into their own? Do you 
know?
    Mr. Apfel.  The answer is no. But I would like very much 
for Dean or Kathy to go through the specifics on that. If we 
had our original model, it had to be the same exact software.
    Mr. McCrery. I understand that.
    Mr. Apfel.  The idea is to have common elements of 
information that can flow to the two and which provide changes 
to the computer system but do not replace their system. But I 
would like Kathy or Dean to explain it.
    Mr. Mesterharm. If I understand your question correctly, 
you are talking about the claim information. That claim 
information will be transmitted over telecommunication wires 
and they will not have to print anything out. They will be 
working with that on their computers. So that is not going to 
be paper-printed out a second time. That information will be 
moved electronically. It will come up on their screens 
electronically. They will work with it.
    No paper is involved. We are trying to eliminate paper, if 
that is the question you are asking.
    Mr. McCrery. Yes, I was just curious to know.
    Mr. Mesterharm. There aren't any floppy disks involved in 
this. It is all handled electronically. It is submitted from 
their computer over telephone wires to the other computer, all 
electronic, no floppy disks or anything else involved.
    Mr. McCrery. You can't do that now?
    Mr. Mesterharm. No. We can do that for a minimal amount of 
information that we send back and forth right now. But they 
still key in some of that information. We are trying to make it 
all electronic.
    Mr. McCrery. This will eliminate the need for them to key 
in?
    Mr. Mesterharm. Yes.
    Mr. McCrery. OK, great. Thank you.
    Chairman Shaw. Just one area I want to cover, and you 
covered it pretty good on your answer--in your statement and 
also to answers to other questions. But I want to be a little 
bit more specifically geared toward an idea that Mr. Manzullo 
had which I sent to you which you replied to. I wish you would 
comment on that. This is the question of, as an added caution, 
of putting the checks out early at the end of this year to 
avert any possible foul-up in the Y2K problem.
    Mr. Apfel.  Mr. Chairman, I must tell you, when I first 
heard about this notion as a possibility, I was intrigued 
myself about whether to send out early payment checks. And we 
spent a lot of time looking at the potential benefits. The 
potential benefit is that this would be a check that would be 
there early and, therefore, that check would not be potentially 
affected.
    The more we looked into this and the more that we talked 
about it throughout the government, it became very, very clear 
to me--I changed my opinion very significantly on this. I no 
longer think this is anything like the right thing to do. The 
risks are just too high with such an approach.
    I believe John Koskinen has testified on this accordingly 
and I agree with him fully, that that kind of an action would 
be interpreted as our inability to be able to deliver service 
to the American public. And the risks just get too high from 
that. Given the readiness of the Federal structure, which is, 
in our case, entirely complete; given the readiness of the 
banking industry, which John Koskinen has testified is one of 
the leading areas. I heard, but I haven't had this documented, 
that Alan Greenspan recently said that money is safer in the 
year 2000 in the bank than it is if you bring it home and put 
it under your mattress.
    Given the readiness of the banking community, the Postal 
Service and the Social Security Administration, for Federal 
transactions, an action of moving that check up I think could 
be interpreted as an inability to be able to get out payments, 
which I think could produce disastrous results. People might 
withdraw large amounts of currency beforehand. People may want 
to rush to eliminate electronic transactions that are 
automatically provided to the banks.
    I think it goes exactly counter to what our public 
education endeavors are aimed at right now. Our public 
education plan, which we will be submitting to you and to the 
American public, is to send the message that we are ready for 
Y2K. We will identify the audiences that we are looking at, the 
public, the business community, the banks, where we are ready, 
what the potential contingencies would be if there are any 
problems in any localized areas and the vehicles for how we are 
going to be doing that.
    We are going to be doing a mailing this October to every 
Social Security beneficiary saying that we are Y2K OK. Our goal 
right now is to move to tell the American public that we are 
prepared to deal with all eventualities, that we are Y2K OK and 
that we do have contingency plans if there are other minor 
problems in different areas.
    Sending out those checks early could send a disastrous 
countermessage that we are not ready. I think it would run 
counter very much to the entire Federal effort to assure people 
that appropriate steps have been taken.
    So where I was originally intrigued by the notion, I must 
say I am not now. I believe it is the right thing, to stay with 
our current system.
    Chairman Shaw. Do you do electronic transfers into foreign 
banks?
    Mr. Apfel. Yes, we do.
    Chairman Shaw. And what is their readiness?
    Mr. Apfel.  This is still one of the areas that has 
potential vulnerabilities. About two-thirds of our foreign 
checks go electronically, is that right? One-third. This is one 
of the areas that I know that Mr. Koskinen, John Koskinen, has 
been doing a lot, working with the international bank arena. 
But I would like to ask either Dean or probably Kathy to 
respond on the international banking situation.
    Ms. Adams. We have 300,000 payments that go outside of the 
country; 100,000 of them are direct deposited. The other 
200,000 are checks. We obviously do know less about the 
international banking scene than we know about the domestic.
    We do send the majority to Canada and Mexico of the direct 
deposits. There are only a couple of countries that we actually 
do direct deposit with, and they tend to be the more advanced 
technology countries, that is why we do it with them, and the 
ones that tend to be in better shape.
    But there is no question that we have less information, 
obviously, because we don't regulate those banks as we regulate 
American banks. But Mr. Koskinen has spent a lot of time at the 
UN. In fact, he just had a meeting, the largest meeting that 
was ever attended by the UN. There were 170 nations there. And 
he is working very closely with the foreign scene.
    And Bruce McConnell, who used to be over at OMB, is 
focusing on that full time for John, and they are trying to get 
as much information as they can about the foreign banks. But 
there potentially would be 100,000 folks that would be 
affected, and we do have contingency plans to get payments for 
them if there is an issue.
    Chairman Shaw. OK. Thank you. Thank you all very much for 
being with us.
    And, Commissioner, could you have somebody stay behind for 
the next witness so if any questions come up that they will be 
able to respond to it?
    Mr. Apfel.  Yes. Good.
    Chairman Shaw. Thank you.
    The next witness, from the U.S. General Accounting Office, 
Joel Willemssen. He is Director of Civil Agencies Informations 
Systems, Accounting and Information Management Division.
    I believe, sir, that you were here during the testimony of 
the previous witness.
    Mr. Willemssen. Yes.
    Chairman Shaw. We have a copy of your full statement, which 
will be made a part of the record; and you may proceed as you 
sit.

   STATEMENT OF JOEL C. WILLEMSSEN, DIRECTOR, CIVIL AGENCIES 
  INFORMATION SYSTEMS, ACCOUNTING AND INFORMATION MANAGEMENT 
            DIVISION, U.S. GENERAL ACCOUNTING OFFICE

    Mr. Willemssen. Thank you, Congressman. Thank you for 
inviting GAO to testify today; and, as requested, I will 
briefly summarize our statement.
    Achieving Y2K readiness has been SSA's top information 
technology priority, and the agency continues to make excellent 
progress in this area. SSA remains a Y2K leader among Federal 
agencies and has initiated a number of government-wide best 
practices to help ensure preparedness for the turn of the 
century.
    Among those best practices are development of a framework 
for business continuity and contingency planning, working with 
the Department of the Treasury and Federal Reserve to test the 
delivery of benefit payments, development of a detailed day 1 
strategy for the rollover period of late December and early 
January, and implementation of a change management process to 
further reduce the risk of Y2K-induced disruptions.
    While it has been a leader on Y2K, SSA's job is not done. 
It must still complete several tasks. These include making sure 
that all critical data exchanges with other organizations are 
made compliant. Second, SSA must still complete steps in its 
contingency plans, including testing of those plans. Third, SSA 
still has one mission--critical system, used for scanning and 
converting W-2 forms that it must certify as compliant. And, 
fourth, SSA must correct a number of errors recently identified 
using a quality assurance tool.
    Next, let me turn to SSA's workstation modernization, an 
effort that to date has involved the installation of about 
70,000 computers and over 1,700 local area networks. Last year, 
we expressed concern about SSA lacking a process for 
determining whether this investment was yielding expected 
improvements in service to the public. Although SSA agreed with 
the need for such measures, no such reviews of what actual 
benefits are accruing from the modernization have occurred yet, 
and this becomes increasing important, since SSA now plans to 
acquire more workstations and networks at additional cost.
    And the last information technology initiative that I will 
touch on is SSA's development of its Reengineered Disability 
System. As noted earlier, SSA has experienced numerous problems 
and delays with this particular system, and, in particular, the 
software for this system. For example, in 1996, we reported on 
these problems and discussed the 2-year delay that was 
appearing at that time.
    Now, in response to these problems, as noted earlier, SSA 
has contracted for an independent assessment of the initiative; 
and based on that assessment and the recommendation that the 
system be discontinued, SSA has decided to terminate the 
original strategy after 7 years of effort and, as noted 
earlier, the reported expenditure of about $71 million.
    SSA now plans to proceed with a revised strategy to address 
the needs of that determination process. In doing so, we think 
it is especially important that SSA link the initiative with 
the other steps SSA is taking to improve its software 
development capability. Without such a linkage, we think SSA 
risks another failed initiative; and, therefore, we think it is 
very important that that linkage occur.
    That concludes a summary of my statement, and I will be 
pleased to address any questions you might have.
    [The prepared statement follows:]

Statement of Joel C. Willemssen, Director, Civil Agencies Information 
Systems, Accounting and Information Management Division, U.S. General 
Accounting Office

    Mr. Chairman and Members of the Committee:
    We are pleased to be here today to discuss the Social 
Security Administration's (SSA) progress in implementing key 
information technology initiatives critical to its ability to 
effectively serve the public. Achieving Year 2000 (Y2K) 
readiness is SSA's top information technology priority. 
Consistent with our prior reports,\1\ SSA continues to make 
excellent progress on Y2K and has taken important steps to 
implement our recommendations for mitigating risks. Further, it 
has initiated a number of governmentwide best practices to help 
ensure its preparedness for the change of century. Nonetheless, 
SSA's work is not yet complete; certain tasks integral to 
ensuring its overall readiness for the year 2000 must still be 
accomplished.
---------------------------------------------------------------------------
    \1\ Social Security Administration: Significant Progress Made in 
Year 2000 Effort, But Key Risks Remain (GAO/AIMD-98-6, October 22, 
1997); Year 2000 Computing Crisis: Continuing Risks of Disruption to 
Social Security, Medicare, and Treasury Programs (GAO/T-AIMD-98-161, 
May 7, 1998); and Year 2000 Computing Crisis: Update on the Readiness 
of the Social Security Administration (GAO/T-AIMD-99-90, February 
24,1999).
---------------------------------------------------------------------------
    Another major focus of SSA's information technology 
activities is implementation of its Intelligent Workstation/
Local Area Network (IWS/LAN), which SSA expects will provide 
the agency with the basic automation infrastructure to support 
redesigned work processes and improve its service delivery. SSA 
continues to implement IWS/LAN and reports that it has now 
installed intelligent workstations and LANs in most of the 
approximately 2,000 SSA and state Disability Determination 
Service (DDS) sites included in the initiative. However, it has 
not yet implemented key processes that are essential to 
measuring the benefits derived from this investment.
    The third initiative that I will discuss today is SSA's 
development of its Reengineered Disability System (RDS). RDS 
was intended to support SSA's modernized disability claims 
process and was to be the first major programmatic software 
application to operate on IWS/LAN. However, SSA experienced 
numerous problems and delays in developing this software. Based 
on a contractor's recent assessment of the initiative, SSA has 
now decided to terminate the original RDS strategy after 7 
years of effort and about $71 million in reported costs. SSA 
now plans to proceed with a new strategy to address the needs 
of its disability determination process.

       YEAR 2000: CONTINUING PROGRESS, BUT CRITICAL TASKS REMAIN

    SSA first recognized the potential impact of the Y2K 
problem in 1989, and in so doing, was able to launch an early 
response to this challenge. SSA initiated early awareness 
activities and made significant progress in assessing and 
renovating mission-critical mainframe software that enables it 
to provide Social Security benefits and other assistance to the 
public. Because of the knowledge and experience gained through 
its Y2K efforts, SSA has been a recognized federal leader in 
addressing this issue.
    Despite its accomplishments, however, our 1997 report on 
SSA's Y2K program identified, and recommended actions for 
addressing three key risk areas: \2\
---------------------------------------------------------------------------
    \2\ GAO/AIMD-98-6, October 22, 1997.
---------------------------------------------------------------------------
     SSA had not ensured Y2K compliance of mission-
critical systems used by the 54 state DDSs that provide vital 
support in administering SSA's disability programs. 
Specifically, SSA had not included these DDS systems in its 
initial assessment of systems that it considered a priority for 
correction. Without a complete agencywide assessment that 
included the DDS systems, SSA could not fully evaluate the 
extent of its Y2K problem or the level of effort that would be 
required to correct it. We therefore recommended that SSA 
strengthen its monitoring and oversight of state DDS Y2K 
activities, expeditiously complete the assessment of mission-
critical systems at DDS offices, and discuss the status of DDS 
Y2K activities in SSA's quarterly reports to the Office of 
Management and Budget (OMB).
     SSA had not ensured the compliance of its data 
exchanges with outside sources, such as other federal agencies, 
state agencies, and private businesses. Unless SSA can ensure 
that data received from these organizations is Y2K complaint, 
program benefits and eligibility computations that are derived 
from the data provided through these exchanges may be 
compromised and SSA's databases corrupted. Accordingly, we 
recommended that SSA quickly complete its Y2K compliance 
coordination with all data exchange partners.
     SSA lacked contingency plans to ensure business 
continuity in the event of systems failure. Business continuity 
and contingency plans are essential to ensuring that agencies 
will have well-defined responses and sufficient time to develop 
and test alternatives when unpredicted failures occur. At the 
time of our October 1997 review, SSA officials acknowledged the 
importance of contingency planning, but had not developed 
specific plans to address how the agency would continue to 
support its core business processes if its Y2K conversion 
activities experienced unforeseen disruptions. We therefore 
recommended that SSA develop specific contingency plans that 
articulate clear strategies for ensuring the continuity of core 
business functions.
    SSA agreed with all of our recommendations and efforts to 
implement them have either been taken or are underway. 
Regarding state DDSs, SSA enhanced its monitoring and oversight 
by establishing a full-time project team, designating project 
managers and coordinators, and requesting biweekly status 
reports. It also obtained from each DDS a plan identifying the 
specific milestones, resources, and schedules for completing 
Y2K conversion tasks. In its most recent (May 1999) quarterly 
report to OMB, SSA stated that all DDS claims processing 
software had been renovated, tested, implemented, and certified 
Y2K compliant by January 31, 1999.
    To address data exchanges, SSA identified all of its 
external data exchanges and coordinated with all of its 
partners on the schedule and format for making exchanges Y2K 
compliant. As of June 27, 1999, according to the agency, over 
99 percent of SSA's 1,954 reported external data exchanges had 
been made compliant.
    Among SSA's most critical data exchanges are those with the 
Department of the Treasury's Financial Management Service (FMS) 
and the Federal Reserve System for the disbursement of Title II 
(Old Age, Survivors, and Disability Insurance program) and 
Title XVI (Supplemental Security Income program) benefits 
checks and direct deposit payments. SSA began working with FMS 
in March 1998 to ensure the compliance of these exchanges, and 
reported earlier this year that the joint testing of check 
payment files and testing from SSA through FMS and the Federal 
Reserve for direct deposit payments had been successfully 
completed. Further, SSA stated, it began generating and issuing 
Title II and Title XVI benefits payments using the Y2K 
compliant software at SSA and FMS in October 1998.
    Regarding its contingency planning, SSA has instituted a 
number of key elements, in accordance with our business 
continuity and contingency planning guidance.\3\ In addition to 
developing its overall strategy for Y2K business continuity, 
SSA has completed local contingency plans to support its core 
business operations and has received contingency plans for all 
state DDSs. Also included among its plans is SSA's Benefits 
Payment Delivery Y2K Contingency Plan, developed in conjunction 
with Treasury and the Federal Reserve to ensure the 
continuation of operations supporting Title II and Title XVI 
benefits payments.
---------------------------------------------------------------------------
    \3\ Year 2000 Computing Crisis: Business Continuity and Contingency 
Planning (GAO/AIMD-10.1.19, March 1998 [exposure draft], August 1998 
[final]).
---------------------------------------------------------------------------
    Another key element of business continuity and contingency 
planning, as noted in our guide, is the development of a zero-
day or day-one risk reduction strategy, and procedures for the 
period between late December 1999 and early January 2000. SSA, 
as a recognized leader in addressing Y2K contingency planning 
issues, has developed such a strategy. For example, the agency 
plans for select SSA and DDS sites to process late December 
1999 data during the first 2 days of January 2000 as a means of 
testing the accuracy of the systems prior to the start of 
business on Monday, January 3. Other features of the strategy 
include implementation of (1) an integrated control center with 
responsibility for the internal dissemination of critical data 
and problem management, (2) a timeline detailing the hours 
during which certain events will occur (such as when workloads 
will be placed in the queue and backup generators started) 
during this rollover period, and (3) a personnel strategy and 
leave policy which includes commitments from key staff to be 
available during the rollover period. Such a strategy should 
help SSA manage the risks associated with the actual rollover 
and better position it to address any disruptions that occur.
    SSA has taken other vital steps to help ensure its 
preparedness for the year 2000. For example, it has used a Y2K 
test facility to test operating systems, vendor products, and 
mission-critical systems. SSA's test and certification 
procedures included (1) baseline testing to establish current-
year data for comparison, (2) forward year testing of 
applications with business and systems dates set in 2000 and 
beyond, (3) comparisons of aged baseline results with forward 
year test results, (4) forward date integration testing of 
entire business functions (i.e., all interrelated 
applications), and (5) independent reviews of test outputs to 
certify Y2K compliance.
    To ensure the delivery of benefits payments, SSA worked 
jointly with FMS and the Federal Reserve to test the transfer 
of approximately 7,500 electronic payments from Treasury to the 
Richmond, Virginia Federal Reserve Board through the Automated 
Clearing House network. SSA reported that it began generating 
and issuing Title II and Title XVI benefits payments using the 
compliant software at SSA and FMS in October 1998.

            SSA Implemented a Y2K Change Management Process

    To further reduce the risk of disruptions, in the fall of 
1998 SSA instituted a Y2K change management process. We 
previously testified that this effort represented a best 
practice governmentwide that should be adopted by other 
agencies.\4\ SSA's process is comprised of three key 
components: (1) a quality assurance process, (2) Y2K system re-
certifications, and (3) a moratorium on discretionary software 
modifications.
---------------------------------------------------------------------------
    \4\ Year 2000 Computing Crisis: Readiness Improving, But Much Work 
Remains to Avoid Major Disruptions (GAO/T-AIMD-99-50, January 20, 
1999).
---------------------------------------------------------------------------
    A key feature of SSA's quality assurance process is its use 
of a validation tool to assess the quality of its previously 
renovated mission-critical applications. SSA began piloting the 
tool in November 1998 and expanded its use full-scale in 
December. The tool searches application programs to identify 
any date field or date logic that may fail as a result of any 
inadvertent modifications.
    The second key component of SSA's change management process 
involves its plans to re-certify previously renovated 
applications where date errors had been identified and Y2K 
compliant software was then modified. The re-certification 
process includes performing forward date testing of the 
modified software and re-evaluating the software using the 
quality assurance validation tool. In addition, business 
function experts perform independent reviews of all test 
outputs before re-certifying the software's compliance.
    Also, SSA plans to enforce a moratorium on discretionary 
software changes between September 1, 1999, and March 31, 2000. 
This moratorium is intended to help mitigate the risks 
associated with changing its certified systems by reducing the 
number of software modifications made. In those instances in 
which software changes are necessary--such as when compliant 
software must be modified due to legal or other agency 
requirements--SSA plans to re-certify the software's 
compliance. Examples of software that will be modified include 
applications impacted by Title II benefits rate increases and 
Title XVI cost-of-living adjustments that are to take effect in 
November, and certain cyclical software modifications that are 
to occur after September.

    SSA Still Needs to Complete Critical Tasks To Ensure Year 2000 
                               Readiness

    While SSA has been a Y2K leader, it must still complete 
several critical tasks to ensure its readiness for the year 
2000. These tasks include:
     ensuring the compliance of all external data 
exchanges,
     completing tasks outlined in its contingency 
plans,
     certifying the compliance of one remaining 
mission-critical system,
     completing hardware and software upgrades in the 
Office of Telecommunications and Systems Operations, and
     correcting date field errors identified through 
the quality assurance process.
    SSA reported as of mid-July that six of its external data 
exchanges were still in the process of being made Y2K 
compliant. In each instance, these include files that have been 
addressed by SSA but which need further action on the part of 
SSA's business partners to achieve Y2K compliance. For example, 
SSA transmits one file on cost-of-living adjustments to the 
Department of Veterans Affairs (VA). While SSA has made the 
file compliant, VA must still complete its testing in order to 
receive the file in a Y2K compliant format. VA is scheduled to 
complete its testing in August. In addition, SSA is waiting to 
verify the successful transmission of three compliant files 
from Treasury regarding information on tax refund actions. SSA 
expects to verify the compliance of the Treasury files during 
the first week of August. SSA also still needs to verify the 
successful transmission of two Massachusetts death data files. 
SSA expects to complete this activity by the end of this week.
    Completing tasks in its contingency plans and coordinating 
with its own staff and its business partners to ensure the 
timely functioning of its core business operations is likewise 
critical. This includes coordinating with its benefit delivery 
partners on contingency actions for ensuring timely benefits 
payments. For example, SSA plans to assist Treasury in 
developing alternative disbursement processes for problematic 
financial institutions. SSA is also now in the process of 
testing all of its contingency plans, with expected completion 
in September. In addition, SSA must implement its day-one 
strategy, comprising actions to be executed during the last 
days of 1999 and the first few days of 2000.
    SSA also has one remaining mission-critical stand-alone 
system--the Integrated Image-Based Data Capture System--which 
must still be certified as Y2K compliant. This system is used 
to scan and convert W-2 forms to electronic format for entry 
into the Annual Wage Reporting System. According to officials 
in SSA's Office of Systems, the SSA-developed application 
software has been renovated, tested, and implemented into 
production; however, SSA cannot certify the system's compliance 
until it has completed testing of the system's upgraded 
commercial off-the-shelf software used for tracking W-2 form 
data from the point of receipt to image scanning. This testing 
is not scheduled to conclude until late August.
    The installation of software and hardware upgrades in SSA's 
Office of Telecommunications and Systems Operations must also 
be completed. For example, SSA must install Internet browser 
patches for the IWS/LAN software by August.
    Finally, SSA must correct a number of date-field errors 
recently identified using its QA tool. SSA reported that as of 
July 23, 1999, it had assessed 92 percent (283 of 308) of its 
mission-critical applications (having a total of about 40 
million lines of code),\5\ and that it had identified 1,565 
date field errors. SSA is in the process of correcting these 
identified date problems. As of mid-July, it reported that 44 
of the 283 applications had been corrected, recertified, and 
returned to production. SSA plans to correct, recertify, and 
implement all of its remaining applications by November, when 
it is scheduled to modify some mission-critical applications to 
reflect Title II benefit rate increases and Title XVI cost-of-
living adjustments.
---------------------------------------------------------------------------
    \5\ Thirteen applications were not tested because they are no 
longer in use (e.g., obsolete, retired, replaced); 10 because they were 
incompatible with the QA tool; and 1 because it was no longer part of 
SSA's inventory. One application remained to be tested.
---------------------------------------------------------------------------

 IWS/LAN: INSTALLATIONS CONTINUE BUT CONTRIBUTIONS TO IMPROVED MISSION 
                      PERFORMANCE REMAIN UNCLEAR 

    The second major information technology initiative that I 
will discuss today is SSA's IWS/LAN modernization effort. SSA 
expects IWS/LAN to play a critical role by providing the basic 
automation infrastructure to support redesigned work processes 
and to improve the availability and timeliness of information. 
Under this initiative, SSA planned to replace approximately 
40,000 ``dumb'' terminals \6\ and other computer equipment used 
in about 2000 SSA and state DDS sites with an infrastructure 
consisting of networks of intelligent workstations connected to 
each other and to SSA's mainframe computers.
---------------------------------------------------------------------------
    \6\ SSA's ``dumb'' terminals are connected to its mainframe 
computers through its data network and are controlled by software 
executed on the mainframes.
---------------------------------------------------------------------------
    The resources that SSA plans to invest in acquiring IWS/LAN 
are enormous. The first phase of the planned project that 
started in 1996, was to be a 7-year, approximately $1 billion 
effort to acquire, install, and maintain 56,500 intelligent 
workstations and 1,742 local area networks, 2,567 notebook 
computers, systems furniture, and other peripheral devices.\7\
---------------------------------------------------------------------------
    \7\ The national IWS/LAN initiative consisted of two phases. During 
phase I, SSA planned to acquire workstations, LANs, notebook computers, 
systems furniture, and other peripheral devices as the basic, 
standardized infrastructure to which additional applications and 
functionality can later be added. Phase II was intended to build upon 
the IWS/LAN infrastructure provided through the phase I effort.
---------------------------------------------------------------------------
    The basic intelligent workstation that SSA planned to 
procure included a 100-megahertz Pentium personal computer with 
32 megabytes of random access memory and a 1.2-gigabyte hard 
(fixed) disk drive. We reported in 1998,\8\ however, that the 
IWS/LAN contractor--Unisys Corporation--had raised concerns 
about the availability of the intelligent workstations being 
acquired, noting that the 100-megahertz workstations specified 
in the contract were increasingly difficult to obtain. At that 
time, SSA's Deputy Commissioner for Systems did not believe it 
was necessary to upgrade to a faster processor because the 100-
megahertz workstation met the agency's needs.
---------------------------------------------------------------------------
    \8\ Social Security Administration: Technical and Performance 
Challenges Threaten Progress of Modernization (GAO/AIMD-98-136, June 
19, 1998).
---------------------------------------------------------------------------
    Over the past year, SSA has continued its aggressive 
implementation of IWS/LAN. The agency reported as of mid-July 
1999, that it had completed the installation of 70,518 
workstations and 1,742 LANs at 1,565 SSA sites and 177 DDS 
sites. As the agency has proceeded with the initiative, 
however, it has revised its requirements several times based on 
the need for additional workstations. Specifically, between 
June 1998 and April 1999, SSA modified its contract with the 
Unisys Corporation three times to purchase additional 
workstations and related hardware. These modifications 
increased from 56,500 to 70,624, the total number of 
intelligent workstations acquired under the Unisys contract.\9\ 
In addition, because Unisys faced difficulty in obtaining the 
100-megahertz workstations specified in the initial contract, 
the additional workstations acquired through the modifications 
were configured with processor speeds ranging from 266 
megahertz to 350 megahertz.
---------------------------------------------------------------------------
    \9\ SSA also used another procurement vehicle to procure 1,767 
additional workstations that are also part of the IWS/LAN architecture.
---------------------------------------------------------------------------
    According to SSA officials overseeing the initiative, SSA's 
initial estimates of its IWS/LAN requirements had not fully 
considered the needs of all SSA and state DDS sites. As a 
result, additional workstations were necessary to (1) ensure 
Y2K hardware compliance at all DDS sites, (2) complete 
installations in some of SSA's larger sites, and (3) support 
training needs. SSA reported that the contract modifications 
cost about $32 million and that it had completed the 
installations of all but 106 workstations acquired via the 
modifications by July 11, 1999.\10\
---------------------------------------------------------------------------
    \10\ According to SSA, the remaining workstations are to be 
installed by October 1999.
---------------------------------------------------------------------------
    Beyond these modifications, however, SSA has continued to 
increase its requirements and is currently in the process of 
acquiring additional workstations to support the national IWS/
LAN initiative. In particular, SSA's Office of Systems 
concluded during fiscal year 1999 that the workstations 
acquired via the Unisys contract and its subsequent 
modifications were not sufficient to fulfill the IWS/LAN 
requirements of all SSA and DDS sites. As a result, the Chief 
Information Officer (CIO), in November 1998, approved a request 
for a $45 million, 5-year follow-on contract to acquire, 
install, and maintain at least 6,900 additional workstations 
and about 275 additional LANs.
    According to a Systems official, the intelligent 
workstation that SSA has specified for the follow-on contract 
is, at a minimum, a 333-megahertz Pentium II processor with 64 
megabytes of random access memory and a 4-gigabyte hard (fixed) 
disk drive. SSA is currently evaluating vendors' proposals and 
expects to award the contract by the end of July.
    Although the CIO approved the Unisys contract modifications 
and the follow-on contract, SSA's Deputy Commissioner for 
Finance, Assessment and Management had previously expressed 
concerns about SSA's need for the additional workstations and 
their expected benefits. In particular, in letters to the CIO 
in November 1998 and April 1999, the Deputy Commissioner 
recommended that the CIO approve the additional workstations 
from Unisys and the follow-on contract award on the condition 
that SSA would, respectively, (1) reassess the total number of 
work year savings for IWS/LAN and (2) reconcile the number of 
workstations against staffing levels. The CIO agreed to these 
conditions and requested that relevant agency components 
determine the reasons for the additional workstations and 
identify the benefits expected to be achieved from them. 
Although this effort has been ongoing for about 8 months, as of 
July 22, the study had not been finalized.

  IWS/LAN's Actual Contribution To Improved Productivity and Mission 
                      Performance Remains Unclear

    Last June we expressed concern that SSA lacked target goals 
and a defined process for measuring IWS/LAN performance--
essential to determining whether its investment in IWS/LAN was 
yielding expected improvements in service to the public.\11\ 
According to the Clinger-Cohen Act and OMB guidance, effective 
technology investment decision-making requires that processes 
be implemented and data collected to ensure that (1) project 
proposals are funded on the basis of management evaluations of 
costs, risks, and expected benefits to mission performance and 
(2) once funded, projects are controlled by examining costs, 
the development schedule, and actual versus expected results. 
We therefore recommended that SSA establish a formal oversight 
process for measuring the actual performance of IWS/LAN, 
including identifying the impact that each phase of this 
initiative has on mission performance and conducting post-
implementation reviews of the project.
---------------------------------------------------------------------------
    \11\ GAO/AIMD-98-136, June 19, 1998.
---------------------------------------------------------------------------
    Although SSA agreed with the need for performance goals and 
measures, its Information Technology Systems Review Staff had 
neither completed nor established plans for performing in-
process reviews of IWS/LAN to (1) compare the estimated cost 
levels to actual cost data, (2) compare the estimated and 
actual schedules, (3) compare expected and actual benefits 
realized, and (4) assess risks. In addition, while the Clinger-
Cohen Act and OMB guidelines call for post-implementation 
evaluations to determine the actual project cost, benefits, 
risks, and returns, SSA has not scheduled a post-implementation 
review to validate the IWS/LAN phase I projected savings and to 
apply lessons learned to make other information technology 
investment decisions. According to the Director of the 
Information Technology Systems Review Staff, the agency has no 
plans to perform either in-process or post-implementation 
reviews unless problems are identified that warrant such an 
effort.
    As expressed in our earlier report, it is essential that 
SSA conduct in-process and post-implementation reviews for the 
IWS/LAN initiative. Since 1994, we have expressed concerns 
regarding SSA's need to measure the actual benefits achieved 
from its implementation.\12\ Moreover, as the agency continues 
to expand IWS/LAN via its follow-on workstation acquisitions, 
it is critical for the agency to know how well it has achieved 
the savings projected in its initial assessments supporting 
this initiative. Without such reviews, the agency will be 
unable to make informed decisions concerning (1) whether it 
should continue, modify, or terminate its investment in a 
particular initiative, or (2) how it can improve and refine its 
information technology investment decision-making process.
---------------------------------------------------------------------------
    \12\ Social Security Administration: Risks Associated With 
Information Technology Investment Continue (GAO/AIMD-94-143, September 
19, 1994).
---------------------------------------------------------------------------

  SSA Will Need to Continue to Address DDS Network Management Concerns

    Our 1998 report also noted concerns among state DDSs about 
the loss of network management and control over IWS/LAN 
operations in their offices and dissatisfaction with the 
service and technical support received from the IWS/LAN 
contractor.\13\ Accordingly, we recommended that SSA work 
closely with the DDSs to identify and resolve the network 
management concerns.
---------------------------------------------------------------------------
    \13\ GAO/AIMD-98-136, June 19, 1998.
---------------------------------------------------------------------------
    SSA has worked with the DDSs to address these issues. For 
example, it is providing additional servers to give the DDSs 
certain administrative rights capabilities, such as access to 
specific login scripts and full control over DDS applications. 
SSA has also worked with the DDSs to streamline the maintenance 
process and establish agreements that would allow the DDSs to 
perform their own IWS/LAN maintenance. Under such agreements, 
according to SSA, states could rely on their in-house technical 
staff--rather than the services of the IWS/LAN contractor, 
Unisys Corporation--to address maintenance problems. At the 
conclusion of our review, SSA had entered into a maintenance 
agreement with one state DDS--Wisconsin--and was considering 
the requests of four other DDSs.
    Other issues also continue to concern the DDSs. For 
example, representatives of the National Council of Disability 
Determination Directors, which represents the state DDSs, 
stated that they remain concerned about SSA's attempts to 
implement a standard print solution. In addition, they stated 
that SSA has not ensured that the workstations implemented 
adhere to a standard configuration that provides all DDS system 
administrators with the same rights. SSA has acknowledged these 
issues and plans to work with the states to address them.

  RDS: DEVELOPMENT PROBLEMS HAVE LED SSA TO DISCONTINUE THE INITIATIVE

    SSA's work toward developing RDS has been ongoing for many 
years. The initiative began in 1992 as the Modernized 
Disability System and was redesignated as RDS in 1994 to 
coincide with the agency's efforts to reengineer the disability 
claims process. As shown in Figure 1, SSA had planned to 
implement the RDS software starting November 1996 and to 
complete the national roll-out by May 2001.

[GRAPHIC] [TIFF OMITTED] T0114.003

    When completed, RDS was to be the first major programmatic 
software application to operate on SSA's IWS/LAN infrastructure 
and be part of the enabling platform for SSA's modernized 
disability claims process. Specifically, RDS was to automate 
the Title II and Title XVI disability claims processes--from 
the initial claims-taking in the field office to the gathering 
and evaluation of medical evidence in the state DDSs, to 
payment execution in the field office or processing center, and 
include the handling of appeals in hearing offices. SSA 
anticipated that this automation would contribute to increased 
productivity, decreased disability claims processing times, and 
more consistent and uniform disability decisions. However, 
after approximately 7 years and more than $71 million \14\ 
reportedly spent on the initiative, SSA has not succeeded in 
developing RDS and no longer plans to continue the effort.
---------------------------------------------------------------------------
    \14\ The reported costs were for RDS software design and 
development, pilot tests, and contractor support.
---------------------------------------------------------------------------
    As Figure 2 shows, between 1993 and 1999, SSA took various 
steps toward developing the RDS software.

[GRAPHIC] [TIFF OMITTED] T0114.004

    However, even in its earliest stages, this effort proved 
problematic and was plagued with delays. For example, in 
September 1996, we reported that software development problems 
had delayed the scheduled implementation of RDS by more than 2 
years.\15\ An assessment of the development effort revealed a 
number of factors as having contributed to that delay, 
including (1) using programmers with insufficient experience, 
(2) using software development tools that did not perform 
effectively, and (3) establishing initial software development 
schedules that were too optimistic.
---------------------------------------------------------------------------
    \15\ Social Security Administration: Effective Leadership Needed to 
Meet Daunting Challenges (GAO/HEHS-96-196, September 12, 1996).
---------------------------------------------------------------------------
    SSA proceeded with the initiative, nonetheless, and in 
August 1997, began pilot testing the first release of the RDS 
software in its Alexandria, Virginia field office and the 
federal DDS \16\ for the specific purposes of (1) assessing the 
performance, cost, and benefits of the software and (2) 
determining IWS/LAN phase II equipment requirements. However, 
as we previously reported, SSA encountered performance problems 
during the pilot tests.\17\ For example, Systems officials 
stated that, using RDS, the reported productivity of claims 
representatives in the SSA field office dropped due to the 
system's slow response time. Specifically, the officials stated 
that before the installation of RDS, each field office claims 
representative processed approximately 5 case interviews per 
day. After RDS was installed, each claims representative could 
process only about 3 cases per day.
---------------------------------------------------------------------------
    \16\ The federal DDS provides back-up services to state DDSs when 
the state offices cannot process their workloads and serves as a model 
office for testing new technologies and work processes.
    \17\ GAO/AIMD-98-136, June 19, 1998.
---------------------------------------------------------------------------
    In response to the RDS performance problems, SSA delayed 
its plans for expanding the pilot to other offices and in March 
1998, contracted with Booz-Allen and Hamilton to independently 
evaluate and recommend options for proceeding with the 
initiative. According to the statement of work, Booz-Allen and 
Hamilton was tasked to provide SSA with a comparative cost, 
benefit, risk, and schedule assessment for RDS, and to propose 
alternative strategies for achieving its underlying objectives. 
The contractor was originally scheduled to deliver its report 
to SSA in September 1998, at which time SSA planned to select 
an option for proceeding to achieve objectives intended for the 
initiative. However, SSA later extended this milestone, with 
the draft report being delivered in February 1999. The agency 
subsequently required the contractor to address additional 
comments and concerns put forth by SSA, resulting in additional 
delays. SSA provided the report to us on July 26.
    According to the Booz-Allen and Hamilton report, the RDS 
software had defects that would diminish the current case-
processing rate at DDS sites. In addition, SSA had not been 
timely in addressing the software defects. For example, 90 
software problems identified by SSA staff remained unresolved 
after more than 120 days. As a result, the Booz-Allen and 
Hamilton report recommended that SSA discontinue the RDS 
initiative and focus on an alternative solution involving the 
use of an electronic folder to replace the paper-based case 
folder in the disability determination process. Further, to 
reduce development risks, the contractor recommended that the 
electronic folder project be segmented into manageable 
sections.

                 SSA Plans to Launch a New Initiative 

    Based on the assessment it received from Booz-Allen and Hamilton, 
SSA has discontinued the development of RDS and has begun to pursue a 
new strategy for addressing the needs of its disability determination 
process. According to the RDS project manager, the strategy that SSA is 
now considering will be multi-faceted, incorporating three components: 
(1) an electronic disability intake process--which will include a 
subset of the existing RDS software, (2) the existing DDS claims 
process, and (3) a new system for the Office of Hearings and Appeals. 
In addition, we were told the strategy will rely on the use of an 
electronic folder to transmit data from one processing location to 
another. The electronic folder is to be a data repository, storing 
documents that are keyed-in, scanned, or faxed, and will essentially 
replace the current process of moving a paper folder from one location 
to another. SSA began pilot testing its new strategy on July 26.
    However, as SSA is beginning to move forward with this new 
initiative, it needs to take advantage of opportunities to apply 
improved software development processes. In January 1998, we reported 
that SSA had begun taking steps to improve its software development 
capability.\18\ Significant actions that SSA initiated include (1) 
launching a formal software process improvement program, (2) acquiring 
assistance from a nationally recognized research and development center 
in assessing its strengths and weaknesses and in assisting with 
improvements,\19\ and (3) establishing management groups to oversee 
software process improvement activities. SSA has developed and is 
currently applying the improved software development processes to 11 
projects.
---------------------------------------------------------------------------
    \18\ Social Security Administration: Software Development Process 
Improvements Started But Work Remains (GAO/AIMD-98-39, January 28, 
1998).
    \19\ The Software Engineering Institute at Carnegie Mellon 
University, in Pittsburgh, Pennsylvania.
---------------------------------------------------------------------------
    Given the failure of RDS, it is imperative that any future software 
initiatives adhere to the improved processes and methods. Without such 
linkage, SSA again risks spending millions on a project that will not 
succeed. On July 27, SSA officials told us that the new post-RDS 
initiative will be linked to the agency's software development 
improvement efforts.
    In summary, SSA has encountered mixed success in implementing its 
key information technology initiatives. The agency has clearly been a 
leader on Y2K and has demonstrated a commitment to addressing the 
challenges of the century date change. Further, the agency has worked 
aggressively to implement IWS/LAN as its basic automation 
infrastructure. However, the benefits of the IWS/LAN investment remain 
uncertain because SSA has not yet assessed its actual contribution to 
improved mission performance. In addition, after years of problems, SSA 
discontinued RDS, which will delay expected improvements in the 
processing of disability claims. To avoid repeating past mistakes on 
its future information technology efforts, SSA will need to, at a 
minimum, apply disciplined information technology investment management 
practices and adhere to improved software development processes.
    Mr. Chairman, this concludes my statement. I would be happy to 
respond to any questions that you or other members of the Subcommittee 
may have at this time.

                      Contact and Acknowledgements

    For information about this testimony, please contact Joel 
Willemssen at (202) 512-6253. Individuals making key 
contributions to this testimony included Michael A. Alexander, 
Yvette R. Banks, Nabajyoti Barkakati, Valerie C. Melvin, 
Kenneth A. Johnson, and Sonal Vashi.
      

                                

    Chairman Shaw. Have you discussed that linkage with SSA?
    Mr. Willemssen. Yes, we have. We have discussed it with SSA 
this week. And I was informed 2 days ago that SSA now plans to 
make that linkage, and the projects that they have underway in 
their software improvement initiatives are planned to tie in 
with the new redesign system.
    Chairman Shaw. In your review, I know that the Commissioner 
said, and I think I am quoting him exactly, we have been 
certified as 100-percent compliant through the entire system. 
Do you agree with that statement?
    Mr. Willemssen. In terms of the software that SSA itself 
has developed, that would be accurate. However, we are aware 
that one system, which includes some commercial off-the-shelf 
software, has not been certified as compliant and is planned to 
be certified later this summer or early fall.
    Chairman Shaw. Where does that come into play?
    Mr. Willemssen.  That involves scanning in W-2 forms, so it 
is not an unimportant system, and it is deemed mission 
critical, but it is something outside of SSA's direct control. 
Since they didn't develop the software, they have to rely on a 
vendor to provide an upgrade.
    Chairman Shaw. That is with the IRS, isn't it?
    Mr. Willemssen. Yes, that is information that then will be 
put in the earnings records.
    Chairman Shaw. That is completely on the side of receipts 
rather than disbursements?
    Mr. Willemssen.  I believe so, yes, Mr. Chairman.
    Chairman Shaw. Mr. McCrery.
    Mr. McCrery. Mr. Willemssen, I understand that Social 
Security Administration had planned to procure 100 megahertz 
pentium workstations? Are you familiar with that?
    Mr. Willemssen.  Yes, sir, I am.
    Mr. McCrery. Is that still the plan?
    Mr. Willemssen.  No, sir. At this point, they have gone to 
higher speed, up to the 350 range. That was what SSA was doing 
up until the last year or so. They worked out some contractual 
arrangements with the contractor UNISYS and eventually revised 
that. That was an issue in the past; it is not a current issue 
in terms of what they are currently procuring. It may turn out 
to be an issue from the standpoint of those machines being out 
in offices which are at that speed.
    Mr. McCrery. You say they worked out some contractual 
arrangements with UNISYS?
    Mr. Willemssen. Yes.
    Mr. McCrery. Can you describe those?
    Mr. Willemssen.  Yes. What happened is UNISYS, as you might 
expect, was finding it increasingly difficult to locate any 100 
megahertz anywhere and came to SSA and said we want--we need to 
redo the contract a little bit, because we can't find these 100 
megahertz. I think, to SSA's credit, they didn't just, say, OK 
let's modify it. Because one thing to keep in mind is the kind 
of cost for that machine. I think in the third year of the 
contract it was a little over $300 a machine. So I think SSA in 
that negotiation wanted to make sure that there was some cost 
tradeoff by going with a higher megahertz rating.
    Mr. McCrery. Yeah. With as many computers as the Social 
Security Administration has to have, it seems to me we would 
have quite a few companies out there really wanting to do 
business with Social Security Administration. And with the 
advancement in technology that we are experiencing these days, 
do we have a contract now that provides for upgrading every so 
often?
    Mr. Willemssen. One of the issues that we have discussed 
with SSA is looking at periodic refreshment clauses so that you 
don't have to go in and modify, but it is done in more of a 
standardized fashion. As our hardware capability gradually 
escalates, the procurement system allows for that.
    Mr. McCrery. Do we have in the Federal Government some kind 
of a standard procedure for evaluating these contracts? Does 
OMB get involved?
    Mr. Willemssen.  GSA runs a schedule system where it has 
already worked out the contractual arrangements with various 
vendors; and Federal agencies then can use that schedule for 
standard buys. I don't believe this was the situation with IWS/
LAN. But I think this was bit more of a customized situation, 
so that SSA contracted directly with UNISYS. But I can follow 
up and check on that.
    Mr. McCrery. That is right?
    Ms. Adams. Yes.
    Mr. McCrery. All right. Thanks very much.
    Thank you, Mr. Chairman.
    Chairman Shaw. One area that I would like to touch on. 
Regarding the SSA attempts to develop the RDS, does SSA have 
the right skills and training to plan for and develop the 
future systems? Should they be giving some thought to 
contracting out or do they have the skills in-house?
    Mr. Willemssen. I think there is some level of concern 
about whether they would have the skills to develop the 
software for this environment, and that is why it is especially 
important to tie this initiative in with those software 
improvement efforts that I had mentioned earlier. As SSA 
embarks on this new strategy and the new software, they should 
take those process improvements and collate them within the 
effort, so that they do not repeat the mistakes with the 
initial redesign effort.
    So I think there is some question about the capability. I 
think SSA acknowledges that and is willing to try and improve 
it.
    One thing I would point out, also, though is if SSA decided 
to contract out the development, you also need the capability 
to manage the contractor. So it is not as if you are just 
handing it off. You still have to have some capability in-house 
to know what that contractor is doing.
    Chairman Shaw. What is the pay scale of people who are 
charged with that responsibility at SSA compared to what it is 
in the private sector?
    Mr. Willemssen. I don't have precise figures, but somewhat 
lower. But, on the other hand, there is a bit more security 
involved. My experience in the private sector with programmers 
is movement is a little bit more frequent. So I think there are 
tradeoffs as in anything.
    Chairman Shaw. Thank you.
    Jim, do you have anything else?
    Mr. McCrery. No, that is it.
    Chairman Shaw. Thank you, sir.
    Mr. Willemssen.  Thank you, Mr. Chairman.
    Chairman Shaw. I think I mispronounced your name. I think 
it is Willemssen.
    Mr. Willemssen.  Absolutely correct.
    Chairman Shaw. OK.
    Mr. Willemssen.  Thanks.
    Chairman Shaw. I bet you are called Mr. Williamson a lot--
Willemssen.
    Thank you.
    Thank you all for being here.
    This hearing is adjourned.
    [Whereupon, at 12 noon, the hearing was adjourned.]

                                   
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