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





THE YEAR 2000 PROBLEM: STATUS REPORT ON THE FEDERAL, STATE, LOCAL, AND 
                          FOREIGN GOVERNMENTS

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

                             JOINT HEARING

                               before the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                                and the

                          COMMITTEE ON SCIENCE

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                            JANUARY 20, 1999

                               __________

              Committee on Government Reform and Oversight

                           Serial No. 106-40

                          Committee on Science

                           Serial No. 106-42

                               __________

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


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

                                 ______
                   U.S. GOVERNMENT PRINTING OFFICE
60-491                     WASHINGTON : 1999



                     COMMITTEE ON GOVERNMENT REFORM

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


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

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


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on January 20, 1999.................................     1
Statement of:
    Gershwin, Lawrence K., Ph.D., National Intelligence Officer 
      for Science, Accompanied by Norman Green, Deputy National 
      Intelligence Officer for Science and Technology, National 
      Intelligence Council; Michael Harrington, Ph.D., principal 
      technical staff, MITRE Corp.; Mary Walsh, Year 2000 Issues 
      Manager, Directorate of Intelligence, Central Intelligence 
      Agency; and Joel Willemssen, Director of Civil Agencies 
      Information Systems, Accounting and Information Management 
      Division, General Accounting Office........................    55
    Koskinen, John, chairman, President's Council on the Year 
      2000 Conversion............................................    15
Letters, statements, etc., submitted for the record by:
    Gershwin, Lawrence K., Ph.D., National Intelligence Officer 
      for Science:
        Information concerning international litigation..........   115
        Information concerning reactors..........................   117
        Prepared statement of....................................    59
    Horn, Hon. Stephen, a Representative in Congress from the 
      State of California, prepared statement of.................     4
    Koskinen, John, chairman, President's Council on the Year 
      2000 Conversion:
        Information concerning the Senior Advisors Group.........    17
        Prepared statement of....................................    22
    Morella, Hon. Constance A., a Representative in Congress from 
      the State of Maryland, prepared statement of...............     8
    Ose, Hon. Doug, a Representative in Congress from the State 
      of California, prepared statement of.......................    14
    Willemssen, Joel, Director of Civil Agencies Information 
      Systems, Accounting and Information Management Division, 
      General Accounting Office, prepared statement of...........    72

 
THE YEAR 2000 PROBLEM: STATUS REPORT ON THE FEDERAL, STATE, LOCAL, AND 
                          FOREIGN GOVERNMENTS

                              ----------                              


                      WEDNESDAY, JANUARY 20, 1999

        House of Representatives, Committee on Government 
            Reform, joint with the Committee on Science,
                                                    Washington, DC.
    The committees met, pursuant to notice, at 11:15 a.m., in 
room 2154, Rayburn House Office Building, Hon. Dan Burton 
(chairman of the Committee on Government Reform) presiding.
    Present from the Subcommittee on Government Management, 
Information, and Technology of the Committee on Government 
Reform: Representatives Horn, Biggert, Ose, Miller, Maloney, 
Norton, and Turner.
    Present from the Subcommittee on Technology of the 
Committee on Science: Representatives Morella, Gutknecht, and 
Jackson Lee.
    Staff present from the Subcommittee on Government 
Management, Information, and Technology: J. Russell George, 
staff director and chief counsel; Matt Ryan, senior policy 
director; Bonnie Heald, director of information and 
professional staff member; Matthew Ebert, clerk; Mason Alinger, 
staff assistant; Paul Wicker and Kacey Baker, interns; Faith 
Weiss, minority professional staff member, Committee on 
Government Reform; and Earley Green, minority staff assistant, 
Committee on Government Reform.
    Staff present from the Subcommittee on Technology: Richard 
Russell, staff director; Ben Wu, professional staff member; and 
Joe Sullivan, clerk.
    Mr. Horn. A quorum being present, the joint hearing of the 
Committee on Government Reform and the Committee on Science 
will come to order. We are here to receive a status report on 
the effort to overcome the so-called ``Millennium Bug,'' Y2K, 
year 2000. Whatever you want to call it, it has got the same 
problem. During today's hearing, administration officials will 
report on the efforts of the government at the Federal, State 
and local levels, as well as at the international community to 
remedy the year 2000 problem.
    The year 2000 problem is the result of decisions made in 
the 1960's and the 1970's when many computer systems were 
developed. At that time, computers had limited storage 
capacity. In an effort to conserve memory, programmers 
designated the year by the two digits; in other words, instead 
of 1967, they put in a 6 and a 7.
    Now, until recently that worked. However, when confronted 
by the zero-zero of the year 2000, these computer systems and 
microchips may not know if the year 2000 is up or we are back 
to the year 1900.
    This confusion could result in the transmission of 
corrupted data, computer malfunctions, system breakdowns.
    There are only 345 days left to assure the public that the 
computer systems which are critical to our lives and getting 
the job done, whether in business or in government, are year 
2000 compliant. Unfortunately, even today, many private 
organizations and governmental entities are only beginning to 
recognize the potential impact of this problem. Some are just 
starting to fix their system. Some are leaving little, if any, 
time for one of the most important aspects of the remediation 
effort, which is adequate testing.
    The problem is real; the consequences are serious; and the 
deadline is unmovable.
    The House Subcommittee on Government Management, 
Information, and Technology, which I chair, has focused on the 
potential problem since early 1996. In April of that year we 
conducted the first congressional hearing. In July 1996, the 
subcommittee issued its first report card grading the 24 major 
Federal agencies on the status of their efforts to address the 
year 2000 problem.
    Since then, the Subcommittee on Government Management, 
Information, and Technology along with Congresswoman Morella's 
Subcommittee on Technology of the Committee on Science has held 
numerous hearings, both in Washington and across the country, 
on Y2K.
    On November 23, 1998, the Government Management 
Subcommittee issued its sixth report assessing the executive 
branch's year 2000 status. Unfortunately, the overall grade 
received was a ``D.'' We hope that changes. Most Federal 
departments and independent agencies have responded much too 
slowly to this problem.
    However, there are two notable exceptions: the Small 
Business Administration and, as the President again noted in 
his State of the Union Address last night, the Social Security 
Administration. Both agencies report that their mission-
critical systems are 100 percent year 2000 compliant.
    It is noteworthy that the Social Security Administration 
spent 10 years achieving that goal. Even with that effort, the 
agency has yet to perform comprehensive end-to-end testing of 
its system. Although Social Security calculates benefit 
payments, it relies on the Treasury Department and the banking 
system to distribute them.
    No Federal entity is an island and no Federal entity can be 
complacent, regardless of its Y2K status, until its partner 
organizations are also adequately prepared for the new 
millennium.
    I also remain deeply concerned about the Department of 
Defense. The Department reported last week that it was making 
great progress on the year 2000 problem, despite the ``D-
minus'' it earned on the subcommittee's recent report card. I 
look forward to today's testimony which will allow for 
elaboration on the Department of Defense's progress.
    Much of our focus has been and will remain on the Federal 
Government's year 2000 readiness. Mrs. Morella's subcommittee 
will go beyond that into many of the private areas in this 
country. But Federal agencies do share information with State, 
local and international governmental agencies as well as many 
organizations in the private sector.
    We are unsure of the consequences on Y2K compliant Federal 
systems if this shared information is corrupted by a 
noncompliant system.
    On December 11, 1998, the United Nations held its first 
conference on the international ramifications of the year 2000 
problem. Over 120 nations sent representatives to discuss their 
countries' approach to the problem. According to U.N. 
officials, many nations had not started their efforts until 
this conference was announced.
    In today's hearing we will receive testimony on these and 
other important Y2K issues from three key witnesses. First, 
John Koskinen, chairman of the President's Council on the Year 
2000 Conversion, and Assistant to the President, will present 
the status of public and private sector efforts to address the 
year 2000 problem. He will be followed by Dr. Lawrence K. 
Gershwin, National Intelligence Officer for Science and 
Technology at the National Intelligence Council, who will 
report on the status of foreign efforts to deal with the Y2K 
problem.
    We are unsure of the consequences which exist abroad and 
one of our perennial expert witnesses will be finally Mr. Joel 
Willemssen, Director of Civil Agencies Information Systems at 
the General Accounting Office, and he will provide the General 
Accounting Office's assessment of the readiness of key public 
infrastructure and economic sectors.
    So we welcome all of these expert individuals, and we 
particularly are delighted to see Mr. Koskinen, who has brought 
a lot of order to this effort within the executive branch since 
he assumed the problem in February 1998.
    I now yield to the chair of the Subcommittee on Technology 
of the Committee on Science, and the co-chair of this task 
force, Mrs. Morella.
    [The prepared statement of Hon. Stephen Horn follows:]

    [GRAPHIC] [TIFF OMITTED] T0491.001
    
    [GRAPHIC] [TIFF OMITTED] T0491.002
    
    Mrs. Morella. Thank you, Mr. Chairman and co-chair of the 
task force. I am pleased to welcome everyone to the latest in a 
series of ongoing year 2000 hearings held jointly with the 
Science Committee's Technology Subcommittee, that I chair, and 
the Government Management, Information, and Technology's 
Subcommittee chaired by my distinguished colleague from 
California, Congressman Horn.
    It was, as you probably all know, well over 2\1/2\ years 
ago when our two subcommittees, which last Congress was 
designated by the Speaker as the House Y2K Task Force, first 
began joint hearings on the year 2000 computer problem, and 
that was back in the 104th Congress.
    In the past, our oversight activities and legislative 
initiatives have pushed for the creation of a national Y2K 
strategy, greater governmental management, legal protection for 
Y2K information that is exchanged in good faith within 
industry, and the establishment of a high-level senior 
administration official to lead our Nation's Y2K efforts.
    Now, as we begin the 106th Congress, facing just 345 days 
before the immovable January 1, 2000 deadline, there is a 
greater sense of urgency to ensure that our Nation's public and 
private sectors will be ready for the beginning of the new 
millennium.
    It is clear that we cannot move forward to meet the 
priorities and challenges of the next century if our Nation's 
computers are moving backward.
    We intend to vigilantly continue our congressional 
oversight responsibilities, press wayward Federal agencies that 
are behind schedule, and work collaboratively with the 
administration on industry initiatives so that we can provide 
the American public with full confidence that our Nation will 
not suffer from any lasting catastrophic Y2K failures.
    Earlier this month, the bipartisan chairs of the House Y2K 
Task Force wrote the President urging him to use his bully 
pulpit and to personally play a significant role in leading 
this effort. We asked the President to use his State of the 
Union Address to emphasize the importance of fixing the problem 
in order to ensure that our Nation will take direct, effective, 
and timely action.
    And that is why I was frankly delighted when the President 
said last night that we need every State and local government, 
every business, large and small, to work to make sure that this 
Y2K computer bug will be remembered as the last headache of the 
20th century and not the first crisis of the 21st.
    It seems appropriate, then, that we continue our Y2K 
hearings by reviewing today the Y2K impact on State, local and 
foreign governments, and we have before us today a very strong 
panel, and I am looking forward to hearing their testimony.
    I want to welcome back to our subcommittees the chair of 
the Year 2000 Conversion Council, John Koskinen, who has 
accomplished a great deal since he was named the Y2K Czar less 
than a year ago.
    I also want to welcome back Joel Willemssen from the 
General Accounting Office, who has worked diligently and kept 
us informed since we began our Y2K efforts.
    I am especially interested in the issue of how American 
industry in this global marketplace may be affected by the year 
2000 efforts, or the lack thereof, of our international trading 
partners.
    I am deeply troubled by the potential for Y2K disasters in 
a number of foreign countries. I am concerned that any 
potential Y2K economic and social instability across the globe 
will ripple through to the United States, so I very much 
anticipate the testimony of both the National Intelligence 
Council and the Central Intelligence Agency and their 
declassified assessment of the status of year 2000 efforts 
among foreign governments.
    I have looked at the testimony. It does indicate that we do 
have some major international problems. And, frankly, I just 
returned yesterday from Korea, Indonesia, Hong Kong, and Tokyo, 
and in all instances I mentioned the year 2000 computer problem 
and asked what was being done. There were times when eyes 
glazed over and times when they said, ``Oh it's being taken 
care of.'' There were times when they didn't understand what it 
was, and then I got an honest appraisal in Hong Kong where they 
said that it was definitely going to affect the economy.
    The economy. Indonesia is sort of a basket case. Korea is 
trying, but not very well. And members of the Japanese Diet 
didn't even know what Y2K was. So they promised they would come 
up with a resolution. That is just a sampling of the immensity 
of the problem, particularly because of the interoperability 
and connective-ness.
    So we know the end of the millennium knows no international 
boundaries and, indeed, Y2K is a global problem and as such it 
requires global coordination. America can lead the way on Y2K 
but we must make sure the rest of the world follows.
    So, Mr. Chairman, I yield back. I did want to mention that 
we do have--and maybe they will have an opportunity to say 
something--Judy Biggert, who is a new member, who is here and I 
think is going to be on the Science Committee. We have not 
totally organized yet. And Gary Miller, who is also going to be 
on the Science Committee. I welcome them. And Doug Ose, who I 
believe is going to be on the Government Reform Committee.
    I yield back, Mr. Chairman.
    [The prepared statement of Hon. Constance A. Morella 
follows:]

[GRAPHIC] [TIFF OMITTED] T0491.003

[GRAPHIC] [TIFF OMITTED] T0491.004

[GRAPHIC] [TIFF OMITTED] T0491.005

[GRAPHIC] [TIFF OMITTED] T0491.006

    Mr. Horn. I thank you for introducing those three fine 
individuals. They are all coming into Congress for the first 
time, and we are delighted to have them because they bring to 
this committee and your subcommittee a very strong background 
in organization and management and caring about some of these 
problems. So we welcome them all.
    Now we have a new ranking member, I am delighted to say, 
who we have worked with before on the full committee, and that 
is Jim Turner of Texas. Mr. Turner, would you want to make some 
opening remarks?
    Mr. Turner. Thank you, Mr. Chairman. First I want to thank 
you and Chairwoman Morella for your leadership in the 
technological issues that are facing us in this country, and I 
am honored to be the ranking member of your subcommittee, Mr. 
Chairman. You have always been known to have one of the 
hardest-working subcommittees in the Congress, and I look 
forward to that challenge. You are also noted for running your 
committee in a very bipartisan way, which we on this side of 
the aisle very much appreciate.
    Today we are here, of course, to discuss the status of both 
domestic and international efforts to fix the year 2000 
computer problem, commonly known as Y2K, which occurs when 
computer systems or microchips fail to recognize a four-digit 
date code.
    We have heard from people who warned that Y2K will cause a 
global financial crisis. On the other hand, we also know that 
13 stock exchanges and 29 major brokerage firms have finished 
extensive Y2K repairs and turned their computers forward to the 
year 2000 in recent preliminary tests of their system. 
Fortunately, only 1 percent of stock trades in the tests were 
affected by computer problems.
    We also know that in Maryland, Montgomery County has 
recently simulated the century date change in a test of its 
traffic, telecommunication and emergency response systems, all 
of which functioned properly.
    It is important to recognize that in both of these examples 
it took many months of testing, repair, and preparation and 
hundreds of thousands of dollars to be successful. These 
examples point out, as well as many others we could cite, that 
early preparation, concerted efforts and testing are the answer 
to the Y2K problem.
    Although no one knows for sure what will happen on January 
1, 2000, it is important for all of us to try to separate fact 
from fiction, reality from media hype, and encourage 
rationality rather than hysteria. Hopefully, preparations will 
keep disruptions to a minimum and public health and safety and 
the environment will not be put at risk. Rumors, false fears, 
and Internet chat can, in fact, change imagined problems into 
very real ones.
    The government and private sector entities that prepare 
adequately likely will make it through this next year without 
serious disruptions in their operations and in their 
activities. The Federal Government, under the leadership of Mr. 
Koskinen, has been working hard to make sure that it is ready 
for the date change. Last night President Clinton reassured our 
senior citizens that Social Security checks and direct deposits 
will not be disrupted. The Federal Government needs to keep 
pushing to assure that no Federal programs are negatively 
affected by the Y2K problem, particularly those Federal benefit 
programs that are administered by the States.
    We have the mechanisms in place now to track the Federal 
Government's progress on Y2K and provide the necessary 
oversight. However, many other governmental entities and 
private sector industries do not fall within the Federal 
Government's purview and are at greater risk of failure than 
are the Federal computer systems. Unfortunately, we are 
beginning to hear that small and medium-sized companies, and 
even State and local governments, may not be preparing 
adequately for Y2K.
    We have very little information on international 
preparations for the date change, and from what we know so far, 
there appear to be serious problems in many foreign countries, 
and in particular, the lesser-developed countries. China and 
Russia may be especially hard hit. International shipping, 
transportation, telecommunications and financial sectors may be 
particularly vulnerable to the Y2K problem. Because of the 
global nature of our modern economy, the United States may be 
adversely affected by their failure to prepare.
    I would like to thank Mr. Koskinen for his leadership and 
all of our witnesses today for providing us with the benefit of 
their knowledge on this subject. Working together, I am 
confident that we will be able to meet the challenge of Y2K. 
Thank you, Mr. Chairman.
    Mr. Horn. I thank the gentleman very much for those 
constructive comments.
    Mrs. Morella has one more point.
    Mrs. Morella. I wanted to thank Mr. Turner for pointing out 
the extraordinary work in Montgomery County, MD, which I happen 
to represent. Thank you.
    Mr. Horn. Any comments from our new members or any opening 
remarks? Mr. Ose.
    Mr. Ose. I have no idea what I am doing, Mr. Chairman. I am 
afraid to say the wrong thing and, apparently, the phrase I 
want to use is, I yield back my time.
    [The prepared statement of Hon. Doug Ose follows:]
    [GRAPHIC] [TIFF OMITTED] T0491.007
    
    Mr. Horn. Mr. Miller, any comments?
    Mr. Miller. Yes, Mr. Chairman, I am honored to be here. I 
thank you for holding these hearings. I also appreciate the 
focus we are making on the problem we are going to deal with in 
the future, and I am looking forward to being an integral part 
of this committee.
    Mr. Horn. Thank you. Mrs. Biggert, any comments to make?
    Mrs. Biggert. Thank you, Mr. Chairman. I am also very happy 
to be here and am honored to be on this committee. I have 
served in the Illinois Legislature and was the sponsor of the 
Y2K Task Force in Illinois, so this is an opportunity for me to 
broaden my horizons to the national and the global issues that 
concern this. So I am very happy to have the opportunity to 
participate.
    Mr. Horn. Well, We are glad to have you here, and we are 
delighted the chairman of the full committee has designated you 
as vice chairman of this Subcommittee on Government Management, 
Information, and Technology. So we look forward to working with 
you.
    Now, Mr. Koskinen, you know the routine that we swear all 
witnesses that come before us, and you have taken the oath many 
times, so I am sure you know it by heart.
    [Witness sworn.]
    Mr. Horn. Thank you very much. Please be seated. Start in. 
We are going to give you as much time as we can divide between 
the three of you this morning, because we want to thoroughly 
get into this. So feel free to educate us.

 STATEMENT OF JOHN KOSKINEN, CHAIRMAN, PRESIDENT'S COUNCIL ON 
                    THE YEAR 2000 CONVERSION

    Mr. Koskinen. Thank you and good morning Chairman Horn, 
Chairwoman Morella. I am pleased to appear again before this 
joint session of your subcommittees to discuss the activities 
of the President's Council on Year 2000 Conversion and the 
status of public and private sector efforts to address the year 
2000, or Y2K as it is known, computer problem.
    With your permission I will submit for the record my full 
statement, along with the most recent OMB report on the status 
of Federal progress and the first quarterly report by the 
President's Council on the national assessments of progress in 
critical sectors. With your permission, Mr. Chairman.
    Mr. Horn. Without objection it is in the record.
    Mr. Koskinen. I appreciate the increased visibility you 
have given to the year 2000 problem through your oversight and 
regional hearings. The problem presents us with a management 
challenge unlike any we have ever seen. Businesses and 
governments across the country are engaged in vigorous efforts 
to ensure that systems are prepared for the date rollover. The 
scope of the challenge is vast, and not every system will be 
fixed by January 1, 2000. While progress is being made in the 
public and private sectors, continued efforts are necessary if 
we are to achieve our shared goal of minimizing Y2K-related 
disruptions.
    One aspect of the Y2K problem applies to every public and 
private sector organization. You are never really done. It is 
not enough for the Federal Government or any organization just 
to fix its own systems. Organizations also need to be concerned 
about the progress of partners they exchange data with and 
depend upon as well as progress among other organizations whose 
failure could have a significant effect upon their operations.
    The Council began its work last year using this ``three-
tiered'' model. From the Federal Government's point of view, it 
means first ensuring that critical Federal systems are ready 
for January 1, 2000; next, working with our interface partners 
for important Federal services, primarily States, to ensure 
they are remediating their systems; and finally, reaching out 
to those whose failures domestically or internationally could 
have an adverse effect upon the public.
    To reach out beyond the Federal Government, the Council has 
formed working groups focused on Y2K challenges in over 25 
critical sectors such as finance, communications, 
transportation, electric power, oil and gas, and water supply. 
The working groups have reached out to form cooperative working 
relationships with major trade associations and other umbrella 
organizations representing the individual entities operating in 
each sector.
    We have also created a Senior Advisors Group to the 
President's Council which will hold its first meeting tomorrow. 
This group is comprised of Fortune 500 company CEOs and heads 
of national public sector organizations representing our 
working groups. I am submitting for the record also the present 
list of group members.
    Mr. Horn. Without objection it will be put in the record at 
this point.
    [The information referred to follows:]

    [GRAPHIC] [TIFF OMITTED] T0491.008
    
    Mr. Koskinen. The group will provide the Council with an 
additional perspective on Y2K challenges that cut across sector 
lines and will recommend how industries can best work together 
in critical areas.
    As noted, our first challenge is to ensure that Federal 
systems are prepared for the year 2000. I am pleased to report 
that the Federal Government continues to make strong, steady 
progress in solving its Y2K problems.
    According to the most recent OMB report released last 
month, 61 percent of all Federal mission-critical systems are 
now year 2000 compliant, more than double the 27 percent 
compliant a year ago. The report also states that of critical 
systems requiring repair work, 90 percent have been fixed and 
are now being tested.
    The President has established an ambitious goal of having 
100 percent of the government's mission-critical systems Y2K 
compliant by March 31 of this year, well ahead of many private 
sector system remediation schedules. Although much work 
remains, we expect well over 80 percent of the government's 
mission-crictical systems will meet the March goal, and monthly 
benchmarks for completing the work will be available for every 
system still being tested and implemented. We expect that all 
of the government's critical systems will be Y2K compliant 
before January 1, 2000.
    This does not mean that we are without significant 
challenges. While the Defense Department continues to make 
progress in addressing its massive Y2K challenge, OMB reported 
that DOD's rate of progress indicates that not all of its 
systems will meet the March goal of being 100 percent 
compliant. At a recent day-long meeting at the Pentagon to 
review the status of all DOD mission-critical systems, Deputy 
Secretary Hamre and I were advised that most systems will 
either meet the March date or be in the process of 
implementation. And, in fact, as of January 1 of this year, 73 
percent of the Department's mission-critical systems are now 
compliant.
    According to the last OMB quarterly report, the Energy 
Department had completed testing on only 53 percent of its 
critical systems, below the governmentwide average. Secretary 
Richardson made clear at the beginning of his tenure at the 
Department that this issue will receive his personal attention, 
and recent progress has the Department confident that over 90 
percent of its systems will meet the March government deadline.
    HHS's Health Care Financing Administration [HCFA] has 
finished renovating and testing all of its internal systems. 
Although a tremendous amount of systems work and contingency 
planning will remain after March, most Medicare contractors are 
expected to complete renovation and testing by the 
governmentwide goal.
    The State Department also faces a significant challenge in 
simultaneously managing its complex Y2K project and completely 
replacing information systems installed around the world. 
However, as I was informed at my monthly meeting last week with 
the Department senior managers, the State Department expects 
that well over 90 percent of its systems will meet the March 
governmentwide goal.
    At the Transportation Department, the FAA's rate of 
progress has improved dramatically, but the percentage of DOT's 
critical systems that have been tested and implemented 
continues to lag behind the government-wide schedule. 
Nonetheless I am confident the air traffic system will be 
totally compliant well in advance of the year 2000.
    Our second challenge is the work with the Federal 
Government's interface partners, primarily the States, as they 
work to ensure that their systems are ready for the year 2000. 
As a general matter, most States are making good progress in 
remediating their systems. But not every State is doing well. A 
National Association of State Information Resource Executives 
survey indicated that a handful of States report that they have 
not yet completed work on any of their mission-critical 
systems.
    Federal agencies are actively working with the States to 
ensure the Federal-State data exchanges for State-administered 
programs will be ready for the year 2000. Most Federal agencies 
and States have now inventoried all of those exchange points 
and are sharing information with one another to ensure the 
exchanges will function in the year 2000.
    For the February 1999 quarterly report, OMB has asked the 
Federal agencies to provide assessments of each State's Y2K 
progress on key State-administered Federal programs such as 
food stamps and child welfare programs.
    The third challenge for the President's Council is to reach 
out beyond the Federal Government and its partners to those 
organizations whose failures would have an adverse effect upon 
the public. As noted earlier, the Council has formed over 25 
working groups performing outreach in critical sectors. The 
working groups, under the leadership of their outside industry 
group partners, are focused on gathering industry assessments 
of Y2K preparedness in critical sectors. Earlier this month the 
Council issued its first quarterly summary of this assessment 
information, which I have provided for the record.
    While many industry groups are just beginning to receive 
survey data from their members and some report they expect to 
have such information for the first time within the first 
quarter of the year 2000, I would like to make three points 
about what we know thus far.
    First, we are increasingly confident there will not be 
large-scale national disruptions in key infrastructure areas. 
In particular, the telecommunications and electric power 
industries have constructed well-organized and comprehensive 
responses to the problem.
    Second, banks, large and small, are well prepared for the 
year 2000 transition. In the most recent examination by Federal 
regulators, 96 percent of the Nation's depository institutions 
were on track to meet the regulators goal of completing Y2K 
work by June 1999.
    The third point is obvious but bears repeating. Our 
greatest risk lies in organizations that are not paying 
adequate attention to the problem. The greatest risks therefore 
at this time, in our view, are in three areas: smaller 
government entities, small businesses, and internationally.
    At the local level, many towns, cities, and counties are 
aggressively attacking the problem and are making good 
progress. But according to a December 1998 National Association 
of Counties survey done for us of 500 counties representing 46 
States, roughly half of the counties do not have a county-wide 
plan for addressing year 2000 conversion issues, and almost 
two-thirds of the respondents have not yet completed the 
assessment phase of their year 2000 work.
    Many small and medium-sized businesses are also taking 
steps to address the problem and to ensure not only that their 
systems are compliant but that organizations they depend upon 
are ready for the year 2000 as well. However, a National 
Federation of Independent Businesses survey released this month 
indicates as many as one-third of small businesses using 
computers or other at-risk devices have no plans to assess 
their exposure to the Y2K problem.
    Internationally, there is more activity now than there was 
a year ago, but it is clear that most countries are 
significantly behind the United States in efforts to prepare 
critical systems for the new millennium. Awareness remains 
especially low among developing countries. While strong 
international coordination of Y2K efforts has existed for some 
time in the areas of finance and more recently has begun to 
take shape for telecommunications and air traffic, we are very 
concerned about the lack of information and coordination in the 
area of maritime shipping.
    The Council has been working to improve the response among 
smaller governments, small businesses, and international 
entities. For smaller governments, we have been working to 
reach out through groups like the National Association of 
Counties and the National League of Cities. We are also 
encouraging State year 2000 coordinators to focus on the 
efforts of smaller governments within their jurisdictions.
    For small businesses, the Council joined the SBA, the 
Commerce Department, and other Federal agencies in launching 
National Y2K Action Week last October, to encourage small and 
medium-sized businesses to take action on the year 2000 problem 
with educational events that were held across the country. 
Another week is planned for this spring. And SBA has mounted an 
aggressive outreach program where, through its Web page and 
partners in the banking and insurance industries, it is 
distributing Y2K informational materials to the Nation's small 
businesses.
    Internationally, as the chairman noted, the Council worked 
with the United Nations to organize last month a meeting of 
national year 2000 coordinators from around the worlds, perhaps 
the most important year 2000 meeting to date. More than 120 
countries sent representatives to New York, and I was delighted 
Chairman Horn and Congressman Kucinich attended as well. The 
delegates at the meeting agreed to work on a regional basis to 
address cross the border issues. They also asked the steering 
committee we had created to help organize the meeting to 
establish an international mechanism for coordinating regional 
and global activities, including contingency planning. We are 
now working with this steering committee to create an 
International Y2K Cooperation Center which will support 
regional activities and international initiatives in areas such 
as telecommunications and transportation.
    The Federal Government responds to a range of emergencies 
under the direction of several agencies. One of the challenges 
of the Y2K problem is that while we do not expect major 
national failures in the United States, it is possible that we 
will have a confluence of demands for assistance and response 
as the clock turns to January 1, 2000. Therefore, we are 
working with all of the major emergency response agencies to 
create a coordinating center to ensure that we can respond 
effectively to whatever challenges we face moving into the next 
century.
    We will also be discussing with our partners in our varied 
working groups, under the leadership of the Senior Advisors 
Group, the status of industry-wide plans for dealing with any 
emergencies they may confront. While these responses are 
primarily the responsibilities of each individual enterprise 
and industry, we clearly will all benefit by coordinated 
planning and communication.
    Let me close by noting that we all continue to confront the 
challenge of encouraging organizations to take the Y2K problem 
seriously, remediate their systems, and prepare contingency 
plans without causing a public overreaction that is unnecessary 
and unwarranted. Our strategy is based on the premise that the 
public has great common sense and will respond appropriately 
when they have the necessary information.
    We believe, therefore, that everyone working on this 
problem, at the Federal level, at the State and local level, 
and in the private sector, needs to provide the public with 
clear and candid information about the status of their year 
2000 activities. That is why we are making the industry 
assessments we gather publicly available. That is why the OMB 
reports on Federal progress are available to the public. That 
is why we have created the 1-888-USA-4-Y2K information line for 
consumers. That is why we will provide details of our 
contingency planning and are encouraging others to do the same 
for the public.
    A corollary principle is that everyone working on this 
problem has a responsibility to ensure their comments 
accurately reflect the factual information that is available 
and that they avoid overgeneralizations that will only play 
into the hands of those who want to create panic for their own 
gain.
    We remain committed to working with your subcommittees and 
others in Congress on this critical issue, and I would be 
pleased to answer any questions you may have at this time.
    [The prepared statement of Mr. Koskinen follows:]

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    Mr. Horn. Thank you very much for that very thorough 
testimony. I have simply one question and then we are going to 
yield to Mrs. Morella for 5 minutes, then yield to Mr. Turner 
for 5 minutes, then go down the line for each Member with 5 
minutes, and if more arrive we will alternate by party.
    But let me ask you, one of the key things here that I think 
worries you as well as worries us, and that is the status of 
the Federal agencies' data which are based on self-reporting. 
And I think you will recall that we had a case where the 
Inspector General of Defense found that--and GAO, I might add--
found that the Department of Defense reported certain systems 
fixed when in fact they were not.
    How do you deal with that when you are getting the data and 
you are not over there, and how do we handle something like 
that?
    Mr. Koskinen. It is obviously an important problem across 
the board. You may recall I chaired the interagency groups of 
Inspectors General in my prior incarnation when I was at OMB. I 
have met regularly with the Inspectors General and encouraged 
them to independently review the status of the agency year 2000 
efforts. And, in fact, they have done an excellent job in a 
number of agencies by revealing areas where there are problems.
    OMB has also required all of the agencies to have 
independent verification and validation. In fact, before the 
President announced that Social Security was completed, we 
waited until the Social Security Administration had certified 
its systems were compliant, we waited until the Treasury 
Department's Financial Management Service was able to certify 
that its systems were year 2000 compliant, and we waited until 
those systems had been tested and worked together. So I think 
there is an ongoing need to ensure that we continually evaluate 
and check the information agencies provide.
    GAO has also done an excellent job not only in providing 
general information about how to deal with the problem, but in 
conducting independent reviews to determine whether or not 
there are gaps. As the agencies and the Inspectors General 
understand, the goal here is not to, in fact, find people who 
have made a mistake and point that out for the sake of pointing 
it out. The goal is to ensure that as many systems as possible 
are functioning and are able to function as we move into the 
year 2000.
    Mr. Horn. I thank the gentleman. And now, Mrs. Morella, the 
co-chairman, 5 minutes.
    Mrs. Morella. Thank you. Thank you for the progress you are 
making Mr. Koskinen. We appreciate it and you have to be kind 
of a wonder man to do it all.
    Let me just reiterate the fact that last year I introduced 
a bill which had three different segments, Mr. Barcia had 
contributed one of his bills to part of it, and Mr. Leach in my 
bill, and it passed the House. I am recrafting it because it 
didn't get out of the Senate because I want you to be involved. 
I want your support of the bill.
    The administration appeared to be in favor of it. We have 
changed it so that it doesn't have as many requiring mandates 
within it, which I think was one of your concerns. I don't know 
whether you have had a chance to look at it, but----
    Mr. Koskinen. I have not seen any drafts.
    Mrs. Morella. I would like to work with you on it very 
soon.
    Mr. Koskinen. I would be delighted to review the draft and 
certainly to work with you and your staff.
    Mrs. Morella. Excellent. I think something is needed. It is 
not something that is going to be threatening and I think it is 
something that definitely will help. So I have your assurance 
we are going to work together soon.
    Now, when I was in Tokyo, I remember reading in the 
newspaper there, the Japan Times, about the fact that China had 
issued a mandate that on January 1, 2000, every plane was going 
to be flying. Now, I don't want to fly on one of those planes.
    Mr. Koskinen. Actually, the mandate is that every senior 
executive of the airlines be on those planes.
    Mrs. Morella. Every senior executive will be on those 
planes. Now, I don't know quite how to respond to what that 
tells us. I mean I suppose it is a good opportunity to put 
people on certain planes and take care of changing the 
governmental leadership, but I wonder how you feel about that, 
because actually that gets into my question.
    I understand that you have detailed Bruce McConnell from 
OMB to spearhead the Council's international efforts. Can you, 
not only whatever response you may have to what the Chinese 
officials are mandating, but also if you could give us more 
details regarding this effort and then how we in Congress can 
best assist.
    Mr. Koskinen. I think the thrust of the Chinese initiative 
is to ensure that there is a great incentive to make sure their 
planes are able to fly. As you know, the problem with the 
planes flying is not safety, it is really whether in fact there 
are substantial delays. And, in fact, I have been committed for 
some time to fly to New York on New Year's Eve on a commercial 
airliner and take the first plane back on January 1st so that I 
can be in my office, because I do think it is important for the 
public to understand that we are confident these systems are 
going to work.
    With regard to the International Cooperation Center, as 
Chairman Horn remembers, when we pulled the 120 countries and 
their senior year 2000 executives together at the United 
Nations meeting, we had a couple of goals. One was to get the 
delegates to commit to going back to their respective countries 
and to work on a regional basis to address cross-border issues, 
whether they be in telecommunications, power, shipping, 
whatever. They also asked the steering committee to set up an 
International Cooperation Center. Mr. McConnell's detail to the 
Council will allow him to chair and organize that center.
    The center will be a virtual organization with 
contributions of senior executives from other countries. We 
already have offers from Mexico, Chile and South Africa. The 
center will provide support to existing regional activities. 
There is a major meeting coming up in Manila the first week of 
March.
    It will also help coordinate and support international 
sector activities in such areas as banking, where the central 
banks have been supportive; telecommunications, under the 
International Telecommunications Union; and air traffic, under 
the International Civil Aeronautics Organization.
    Also, as a result of the U.N. meeting, and through the 
leadership of the Coast Guard, we are creating and organizing a 
meeting that will also be held the first week in March of all 
major shipping interests around the world--private and public--
to ensure that there is more coordination in that area.
    Our goal is to support with other countries a more 
organized global approach to this problem, not only by 
countries but by sectors. We went to try to do as much as we 
can, first to ensure that countries fix as many systems as 
possible, and second to ensure that there is an organized set 
of contingency plans and emergency response mechanisms in place 
around the world.
    Mrs. Morella. The 120 countries have all indicated that 
they are going to be part of this conference and be involved?
    Mr. Koskinen. Yes. We were overwhelmed with the response to 
the United Nations meeting. We had thought we would do very 
well if we could get 50 countries. But when we had 120 
countries show up and commit not only to do this work but to 
meet again in June at the United Nations to review progress 
across the board in great detail, I was convinced it was 
probably the most significant year 2000 meeting that had been 
held to date.
    Mrs. Morella. It certainly is important. And, of course, 
the resources that are going to have to go into this, too, 
countries are just not aware of that, nor do they know how to 
expeditiously do it, since it is so labor intensive.
    Just one final question. A number of my colleagues are very 
concerned about the potential of a deluge of civil litigation 
for possible Y2K failures. Is the Council going to be working 
with industries, consumer organizations for legislative 
remedies?
    Mr. Koskinen. Liability is not totally within our domain. 
Our goal, as I have told people, is to have systems function at 
the end of this year. What happens after this year, once they 
are functioning, is not within the Council's jurisdiction.
    We have worked very closely with Congress, and we genuinely 
appreciate the committee's support of the Year 2000 Information 
and Readiness Disclosure Act, because, as you noted, the 
disclosure of information is critical if we are to have systems 
function. But within that context we obviously have a wide 
range of working groups and contacts and we are listening to 
their concerns about liability. We have asked them to begin to 
quantify what the reality of those concerns are. There is a lot 
of hype and overexaggeration in all aspects of this problem. 
The art form, I think, is to try to figure out what is the 
reality, or what can we really expect, and then what is an 
appropriate response to that reality.
    At this point, there are a wide range of industry groups 
focused on this problem who have yet to come together 
themselves on a common approach, but we are prepared to listen 
to their suggestions.
    Mrs. Morella. We are concerned about a cottage industry of 
lawyers waiting there in advance.
    Thank you.
    Mr. Horn. I thank the gentlewoman and now yield to the 
ranking minority member, Mr. Turner, 5 minutes.
    Mr. Turner. Mr. Koskinen, thank you for your report today. 
I know the Internet is full of doomsday theories. One area I 
wanted to particularly inquire about--I have a district with a 
lot of small towns and rural hospitals--is the suggestion that 
rural hospitals may be more vulnerable than most with some of 
the equipment that you find in emergency rooms and in intensive 
care units that are date-sensitive.
    Is that a problem, and do you know what is going on, 
particularly among rural hospitals, to try to address it?
    Mr. Koskinen. It is an important question. The rural 
hospitals are no more exposed to equipment issues than large 
hospitals. The concern we all have is that in rural areas, or 
smaller towns and communities, there may not be the same level 
of attention and focus on this problem or there may not be the 
same resources available.
    We have been working in our health care outreach area with 
the American Hospital Association, and other health care groups 
to provide them and encourage them to provide technical 
information and resources to all of their members and to 
nonmember hospitals many of which are in rural areas so that 
they can take advantage of the experience and information that 
has been gained by large hospitals and major research centers 
who have been dealing with this problem.
    The FDA, the VA, and the Department of Defense have all 
banded together to provide a Website with updated information 
on the status of medical devices. Fortunately, it turns out a 
very small percentage of those devices have a year 2000 
problem. For those that do, the problem is generally not that 
they don't function but, as you noted, that they provide 
erroneous or incorrect data information, which can be 
critically important.
    These are systems over which we have no direct control, but 
our goal is to try to do everything we can to increase the 
amount of information that is available to every rural hospital 
in this country on how to deal with the problem. Obviously, it 
is their responsibility to use that information, but our goal 
is to make sure that no one is unaware of the problem and 
without access to the best information that we and our working 
group partners can provide.
    Mr. Turner. I have been told that there are one or more 
dates during 1999 that could provide opportunities to know 
whether or not systems will fail on January 1, 2000. Is that 
the case, and, if so, would you explain that to me a little 
bit?
    Mr. Koskinen. There are a range of issues that software 
programs will confront as we move through this year. First, any 
system that has to look forward into the year 2000 will 
obviously be challenged. We have all had experience with credit 
cards that have expiration dates that for a long time said 
1999. Now, many cards expire in the year 2000 or beyond and 
most card processing systems are able to deal with the year 
2000. If you have to make an airline or hotel reservation, if 
you order inventory and need to track it in the year 2000, the 
systems have been made to be compliant.
    As we noted in December, unemployment insurance is the 
first major Federal program to encounter the year 2000 problem 
because those benefits are calculated on a look-forward of 12 
months. So starting the first week of January 1999, the State 
systems running that program had to be able to deal with the 
first week of January 2000. Some of the State systems are not 
yet compliant but, fortunately, those States have good 
contingency and backup plans so no one is missing an 
unemployment check while those States are finishing the work.
    There are other dates people have focused on, particularly 
those that involve the number 9. A nonstandard programming 
practice was to use numbers like 99 to end a program operation. 
Fortunately, it was not an acceptable practice. But people 
originally focused on September 9, 1999 to see whether that 
date would work. People were also interested whether just 
rolling into the year 1999, whether January 1, 1999 would 
trigger defaults. Thus far there are only a handful of 
anecdotal reports from around the world that anyone had a 
problem with January 1, 1999. Another date will be April 9, 
1999, which will be the 99th day of 1999.
    Our expectation is that these dates will not cause major 
problems first, because everybody is aware of them and, second, 
because it was not a standard programming issue. But countries, 
governments, and businesses with fiscal years that start before 
the end of this year, will have fiscal year 2000 issues to 
confront. Many States have fiscal years starting in April, June 
or July. The Federal Government's begins on October 1, 1999, 
and will be operating against a fiscal year 2000 issue.
    So all of those dates are important and all of them will 
give us some indication as to how successful year 2000 
remediation has been. But I will tell you that even if you meet 
the September 9, 1999 and other challenges, it does not 
necessarily mean that you will not have a problem with the year 
2000 transition.
    Mr. Turner. Thank you. I know the Federal Reserve has 
requested the Treasury Department print an extra $50 billion in 
cash for potential use at the end of the year. There are a lot 
of people, I noted in a town meeting I had a week ago, who seem 
to be aware that it might be important for them to withdraw 
cash from their bank accounts before January 1, 2000.
    I assume that someone determined that the $50 billion in 
cash would be a sufficient amount, but is that a real problem 
and should the public be concerned about being able to get 
cash?
    Mr. Koskinen. No. As I have said on numerous occasions, we 
have an obligation to be very candid with the public and tell 
them what works and what doesn't work, what has been completed 
and what has not been completed, so they can respond 
accordingly.
    Initially, when people started talking about this and the 
Fed made that announcement some months ago, there was a concern 
about whether the ATM machines would work, whether you would 
have access to your cash, whether the banks would be able to 
function. The good news is that, at this point, as I noted, 96 
percent of the banks are at the highest rating of preparedness 
in terms of dealing with the year 2000, according to the 
independent Federal regulators. So we expect the banks will be 
able to function.
    The reason for ensuring that people are confident that the 
cash is there is not to combat fears that they won't get access 
to it, but to allay concerns about banks running out of cash if 
everyone decides to take out some extra money. The calculation 
was made that, on any basis, it is reasonable that the public 
should not be concerned about cash availability. And like 
anything in banking, if people are confident the cash is going 
to be there, obviously they will be less likely to actually use 
it.
    It is a long weekend; our general advice is that people, as 
they normally would, should have cash for that long weekend. 
What we are anxious to do is to not have the public 
unnecessarily decide that they need a month's cash or 2 months' 
cash, which would be a very different problem.
    Mr. Turner. It seems that the public information challenge 
that you have is enormous. You could make a judgment that to 
talk about it makes the problem worse. You could say, no, we 
have to talk about it because people need to know the facts. I 
find that people are very uneasy about it.
    In this town meeting I referred to, we went through a 
litany of things that I knew from service on the committee were 
taking place to try to prepare for the year 2000. The group 
listened, obviously with some skepticism, and at the end they 
said, ``Congressman, what are you going to do on January 1st?'' 
And in a moment of candor I said, ``Well, I probably won't fly 
that day.''
    Mr. Koskinen. I was just going to invite you to join me. 
But that is an issue. As I said when I testified last spring, 
if nobody gets off an airplane in Hawaii for 2 weeks, just to 
be careful, and if that is not necessary, we will have created 
a very major economic problem for the airlines and for Hawaii. 
Again, my view is I don't want the public to do anything that 
is risky. On the other hand, I think it is important for the 
public not to unwittingly create a problem even if the systems 
are running fine; that we have a problem with financial 
markets, we have a problem with banks, or we have our problems 
with a sector of the economy.
    So I think what you are saying, the high wire act from the 
start has been on the one hand to be able to get people to 
understand this is a real problem, it is a serious problem that 
needs to be dealt with without, on the other hand, 
unnecessarily having them take unnecessary action. So we have 
an obligation to inform the public, and we are going to work on 
that. That is why we have the hotline, to provide the public 
with all the information we have and to give them our best 
advice as to what they ought to be doing to prepare for 
whatever the eventualities are.
    My bottom line is we are concerned about preparedness at 
the local level and we are anxious in small and medium-sized 
cities and counties, to have people asking their governments to 
discuss with them where they are and what steps they have taken 
to deal with this problem.
    Mr. Horn. I thank the gentleman. And now the gentlewoman 
from Illinois, the vice chairman of the Subcommittee on 
Government Management, Information, and Technology, Mrs. 
Biggert, 5 minutes.
    Mrs. Biggert. Thank you, Mr. Chairman. Last year I 
understand that the chairman, Mr. Horn, did meet with the staff 
in Illinois, the Year 2000 Task Force, to talk about the year 
2000 compliance. And out of this meeting came assurances that 
the Illinois utilities will be prepared for the year 2000, and 
particularly the systems that depend on power, such as water 
and sewer and things that we think of applying to 
municipalities, and they will continue to function effectively.
    Is this true of other States? Are they far along in 
planning for these, dealing with utilities and things that 
cross really municipal lines but really are the functions that 
will go across the State?
    Mr. Koskinen. As I noted, we are in the process with our 
working groups of reaching out and asking organizations to 
provide information on progress at the State and local level to 
us. That is where the National Association of Counties survey 
came from. As a general matter, I think the vast majority of 
States are doing a very good job. They are well organized and 
prepared to deal with the program. There are a few that are 
starting slower and have had a lower priority, but I think that 
is changing.
    Our concern, even in the States doing very well, is at the 
local level. As you know, there are thousands of counties and 
cities out there that States do not directly manage those and, 
in fact, oftentimes do not have regular communication with 
them. So the challenge I have given to the States, as well as 
to Federal agencies, is to do whatever we can to reach out to 
make sure that every mayor, every city manager, and every 
county executive has this problem as a priority. If they have 
it off on the side, if they say somebody else is taking care of 
it; or, as we increasingly hear, ``We will fix it when it 
breaks.'' I think that there is great risk in those communities 
to their emergency response system, their local hospitals, 
their local power plants, their local telephone companies.
    Mrs. Biggert. What are you doing, then, to increase that 
awareness; are there meetings?
    Mr. Koskinen. We have had meetings. We are working with the 
associations of counties, of cities, of States. We are 
providing information to them. We are encouraging them to 
provide information to them. The National League of Cities and 
the National Association of Counties have an organization, 
Public Technology, Inc. [PTI], which has been providing 
information to local governments.
    Ultimately it is the responsibility of the local 
communities and the local governments are responsible for 
fixing their own systems, but our goal is to make sure nobody 
can say, ``Gee, I didn't know about it.'' They may have to 
explain why they didn't do anything about it, but we are making 
sure that we are doing everything we can to make sure it is on 
their radar screen. It is up to them to make sure it is their 
priority.
    Mrs. Biggert. It is their responsibility, but do you have 
any contingency plans in case the State systems should fail?
    Mr. Koskinen. Yes. Our concern, as I noted, is that I think 
we will end up with no major national problems, but without 
work done locally, we could have a whole series of local 
problems, of local power outages or other local challenges. And 
it will all happen at once, as we go into the year 2000.
    So FEMA is now engaging in starting a series of regional 
meetings with State and local emergency managers and their year 
2000 coordinators to look at that problem, because I think that 
will be the real challenge for the emergency response system. 
We can handle a localized hurricaine or a tornado or whatever 
it might be. The question is how do the State systems and the 
Federal systems respond to what may be not necessarily 
guaranteed, but what may be a wide number of, local outages or 
problems.
    If you have 20 such problems in a State and you have 50 
States, you could have 1,000 communities all across the country 
saying, ``Gee, we should have done more and now we have a 
problem, what help can you give us?'' And we need to have a 
system capable of responding.
    Mrs. Biggert. Just one other question, then. As far as the 
Department of Defense, you said that they were probably not 
moving as fast as some of the other agencies. Can we be really 
assured that they will meet those goals that have been set?
    Mr. Koskinen. Yes. The Defense Department, obviously, is 
the largest Federal department. It has, in many ways, the most 
challenging systems because it has a lot of embedded chips or 
integrated circuits built into all their weapons systems. If 
you look at the structure in response to this problem over the 
last 12 months, you will see major changes in the way the 
Department has organized with it.
    In August, the Secretary made it clear that this was on his 
agenda; that every commander in chief had to have it on their 
agenda. This issue was moved out of being an issue or CIO issue 
and into an operational force readiness issue. And, as I said, 
a week ago Saturday we spent the entire day reviewing the 
progress of every service and every function. And I think that 
while not every Department of Defense system will make the 
governmentwide compliance goal, I think the Department will 
have close to 90 percent of its systems done by March 31, which 
is an amazing accomplishment in light of where they were 9 
months ago.
    Mrs. Biggert. Thank you. Thank you, Mr. Chairman.
    Mr. Horn. You have still got 30 seconds or so.
    Mrs. Biggert. Well, in the words of Mr. Ose, I yield back 
my time.
    Mr. Horn. We will go right to the top of the ladder. Sheila 
Jackson Lee is with the Subcommittee on Technology of the 
Committee on Science, 5 minutes for questioning.
    Ms. Jackson Lee. Mr. Chairman, thank you very much. I 
appreciate the opportunity for this hearing. Let me say to the 
public, if you wanted to know who that singular member was, it 
was my good friend, Connie Morella, last night standing up. And 
I am sure Chairman Horn was nearby on the Y2K issue, a very 
important issue.
    In fact, let me say to Mr. Koskinen that I am being asked 
these questions in my district, so people are really concerned 
about the Y2K.
    Not hearing all your presentation, and I apologize for 
being in other meetings and also apologize for having to leave, 
but would you take a stab at a question that has been posed on 
various news magazine shows and various sort of expose news 
magazine, television programs of people running to the hills 
and preparing?
    Since the government has the responsibility of setting the 
tone and giving comfort to our citizens that we are aware of 
this issue, that we are moving expeditiously to ensure that 
civilization as they know it remains, can you speak to limiting 
hysteria about the issue that we are dealing with?
    I know the questions were asked earlier, but I do want to 
have you just state for me succinctly, in looking at 
Congressman Horn's assessment of the government efforts. I 
think I heard you say March 31st, but can you say to me why you 
think that is going to happen with what they have in place? 
With respect to the public and its general concern about us not 
being prepared, do you have a response to that?
    Mr. Koskinen. Yes. And there is a longer response in my 
formal statement. But I think the bottom line is, what we are 
saying is in a context in which we have an obligation to 
provide real information to the public, and I think that is 
important. At this point, there is no indication that there 
will be any major national problem resulting from the year 2000 
and, therefore, there is no indication that people need to 
disrupt their lives in preparation for it.
    We will continue to provide the public information. I am 
confident--and Congressman Horn and I continue to discuss 
this--that the Federal Government is not only making great 
progress, but the vast majority of systems will meet the March 
31 deadline and all systems will meet the January 1, 2000, 
deadline. So the Federal Government will not be the source of 
any difficulties that the public or the economy confront as we 
move into the year 2000.
    On the other hand, there are areas we are concerned about. 
We are concerned about issues internationally. We are concerned 
about ensuring, to the extent we can, that State and local 
governments and smaller businesses all pay attention to this 
problem. And ultimately our commitment to the public is that 
they should know everything about this problem that I know; and 
we are doing everything we can to share information with them. 
Because I think what the public needs and what is an obligation 
in the private sector, as well as the public sector, is to 
provide information. The public needs to know about the state 
of preparedness.
    The Federal Government is now acknowledged as the most 
transparent organization in the world on this issue. There is 
no one that provides as much information about its year 2000 
progress, and as much discussion about it, as the Federal 
Government. And a lot of that is the result of an ongoing, 
constructive dialog between these committees and the executive 
branch. But we need to have that happen more often, because I 
think people are uneasy when they have no information about 
what the facts are, and they don't know what is going to 
happen.
    So our goal over the next 6 months is to provide that 
information to the public. But at this stage in time, I can 
state confidently there is no evidence that there are going to 
be major dislocations. But people need to be engaged in a 
dialog with their county executives, with their mayors, with 
their city managers to ensure they are paying attention to this 
problem.
    Ms. Jackson-Lee. On that, might I followup very briefly?
    Last evening the President acknowledged that all Social 
Security checks would be on time. This computerized problem 
probably will impact most decidedly those who are least 
advantaged, primarily the beneficiaries, if you will, of 
government programs. And when I say ``government programs,'' 
AFDC, and you mentioned local governments, but Veterans, et 
cetera.
    We mentioned Social Security. Where are we on those other 
kinds of issues, and would you also comment--and forgive me if 
it is in your speech as to whether or not--in your remarks, 
there are internal task forces, I imagine, in each of the 
departments and the agencies that correlate with your work.
    Mr. Koskinen. Yes, there are. Benefit programs run by the 
Federal Government are basically--to all intents and purposes, 
are none, not only Social Security, but Veterans Affairs and 
those benefits. Our challenge is that most Federal benefit 
programs are actually administered by State and local 
governments; food stamps, unemployment insurance, Medicaid are 
all State-run programs.
    As I noted, we are concerned about this because it won't do 
us any good if 45 out of 50 States do a wonderful job. In those 
five States, the answer cannot be that beneficiaries do not 
receive benefits. So in the next OMB quarterly report, we have 
asked the Federal agencies to report the status of each State 
in each of the major Federal programs in terms of their 
progress, and we will monitor that progress as we go forward, 
because we need to ensure that those programs operate.
    Because you are exactly right, the people most in need will 
oftentimes be Social Security beneficiaries, veterans 
beneficiaries and local people benefiting from programs like 
food stamps; and we have to ensure that jointly, working with 
the States, those programs operate.
    Mr. Horn. Thank you very much.
    Ms. Jackson-Lee. Thank you.
    Mr. Horn. We now have, first, the Government Management, 
Information, and Technology Subcommittee and then we are going 
to yield to the Technology Subcommittee. And eventually, we 
will cover everybody here.
    Mr. Ose, the gentleman from California.
    Mr. Ose. Thank you, Mr. Chairman.
    First, may I pass a compliment, noting the subject matter 
that we are on, I walked in the room this morning at 11:14 and 
promptly at 11:15 this committee meeting started. So I think 
that is a great standard to adhere to. And I want to compliment 
you, Mr. Koskinen, I have a couple questions.
    Is the Fed prepared?
    Mr. Koskinen. Yes.
    Mr. Ose. Treasury?
    Mr. Koskinen. The Fed and the Treasury not only began work 
on their own systems, but have been major leaders not only 
domestically but internationally in trying to ensure that the 
financial systems around the world and the banks around the 
world operate. The Fed is a leader with the world's central 
banks; the Fed acutally chairs the joint Year 2000 Council 
which the banks set up.
    The Fed has already been testing its interfaces with 
several thousand banks to make sure they work. And the Fed is 
one of the most active participants on the President's council. 
So I think, while we have issues and a lot of work going on in 
the other areas, the financial institutions area is in the best 
shape of any business area in the United States.
    Mr. Ose. So when the check-clearing process hopefully 
doesn't stop, if it does stop, we know where to come?
    Mr. Koskinen. That's right. I think at this juncture, that 
won't be the problem, at least from the Federal Government. I 
can't guarantee that every company's financial management and 
payroll system will function, but the clearinghouses will 
function, and the Federal checks will be issued.
    Mr. Ose. All right. I want to followup on my colleagues' 
comment or question earlier, am I right, the question about 
insurance. Any of the interface partners, the contractors that 
we deal with here, many of them cannot provide service when 
asked to bid, because they cannot obtain insurance on any 
actuarially sound basis, because there is no way of quantifying 
the exposure.
    With respect to Mrs. Morella's question about the liability 
exposure, is there any way we, as the Federal Government, can 
set a standard for quantifying that exposure that would then 
allow insurance companies to set a policy for potential service 
providers in this area?
    Mr. Koskinen. Well, it is the kind of a transition 
challenge in the legal issue. There is the issue in terms of 
how do we ensure that people can continue to work on systems. 
And there is a warranty and a patent and copyright problem; if 
the manufacturer doesn't exist or can't help you, can you work 
on this system, without violating copyright and patent laws? So 
those areas fit into my concern about what do we do to make 
sure the systems operate.
    At this juncture, while there has been a lot of talk over 
the last 6 to 9 months about the insurability or 
noninsurability with people doing the work, it does not appear 
to have been a major impediment--certainly, from the Federal 
Government, where we monitor it carefully--to getting the work 
done.
    It doesn't mean that there aren't companies out there that 
are having difficulty; there was a recent article about some 
service providers who have been negotiating in that area. So I 
think it is worth considering. But at this juncture, and even 
in our working groups, we have not found significant parts of 
the economy or the government that have said, we cannot get 
people to work on the problem because they cannot get 
insurance.
    Mr. Ose. Mr. Chairman, if you will indulge me, I don't 
quite know if this is the context, but in the course of our 
deliberations, I think this is one of the critical issues that 
we are going to deal with is finding a way to open the door for 
providers to come and provide assistance, not only to the 
Federal Government, in our world here, but also to private 
industry.
    With that, I yield the rest of my time.
    Mr. Horn. You have made a very good point, and I thank you 
for making it. Now, long-suffering Mr. Gutknecht has 5 minutes 
and then Ms. Norton, Mr. Miller, and that will round out the 5-
minutes.
    Mr. Gutknecht. Thank you, Mr. Chairman. I couldn't help 
observe as I came into the room that about--almost 4 years ago 
we had our first hearing on this matter, at least in the 
technology committee. And at that hearing, I think we had three 
experts, maybe half a dozen staff, maybe two people who 
wondered in off the street. But there was almost no interest in 
this matter. And it is interesting how it has now finally, I 
think, dawned on the American people, this is a serious issue.
    And I remember that first hearing and almost no one showed 
up. And, in fact, I sort of wondered why I was there when I 
looked at the audience. But I do congratulate the Chairs. And I 
congratulate you, I think we have made significant progress.
    More for the benefit of some of the other Members here, I 
would encourage other Members--all Members should consider 
doing what my staff and I did about a month and a half ago, 
back in our district, in fact, I hope we can do another one. 
That is, have a town hall meeting just about this subject.
    And we invited some people from the financial institutions, 
a couple of large banks. We invited people from State and local 
government. We invited people from the utilities. We were 
fortunate enough to get the top person from Northwest Airlines 
to come in and speak. And it was a very, very interesting 
hearing. And the only regret that I had is, we didn't publicize 
it quite enough. So we should have had a little better public 
attention, but it did get pretty good press.
    I think what was great about that, really is twofold, first 
of all, it opened up my eyes--and I will get to a question. The 
problem in some respects is even bigger than some of us had 
thought before the meeting.
    And you raised the issue of embedded chips, and I want to 
come back to that.
    But it was also very impressive to me how much is being 
done in the private sector. I sort of kept a little running 
total of the companies and, as I say, these were--well, we had 
a couple of major utilities and a major airline, and obviously 
it is an important issue to them. But I think of the private 
concerns that testified that day at this town hall meeting that 
we had, they were committing somewhere north of $100 million to 
this effort. So they take it extremely seriously, and I think 
that was the good news.
    But the bad news--I want to come back to this--one of the 
utilities had testified, I think, if I remember correctly, they 
had discovered that they have somewhere in the area of 312,000 
embedded chips somewhere in their whole system. And you touched 
on that. How serious do you believe that problem is?
    They are confident that they have enough backup systems, or 
even if one should cause a problem somewhere, that it will not 
cause a major disruption. From your perspective, do you have 
any idea how big the embedded chip problem is for the Federal 
Government and are things being done about it?
    Mr. Koskinen. Well, fortunately, from sampling the Federal 
Government, the embedded chip problem is primarily an 
operational issue, and other than the Defense Department and 
running a few power plants, the government is primarily engaged 
in information and data exchange and, the financial exchange 
software side of the issue. But it is a major issue. Depending 
on who you ask, there are 40 to 50 billion chips out there, 
loose or tied down, in the world.
    Last week, the North American Electric Reliability Council 
issued its second assessment of the electrical power industry, 
and they are obviously, as noted, focused on this. They had a 
lot of concerns in their first assessment, released last fall, 
about the scope of the embedded chip problem. The report last 
week revealed that fortunately it turns out the number the 
chips that actually have the problem in power production or 
distribution is relatively small, and most of them would not 
shut down the power plant; they would create problems in 
bookkeeping and recordkeeping and other issues. And the NERC is 
confident that information is now available and is being shared 
within the industry.
    So that in the power industry, while there are a large 
number of chips out there--in terms of thousands per company 
and probably billions in the industry generally--companies are 
beginning to address the problem effectively. And at this 
point, the industry does not view it as being an insurmountable 
obstacle or a major threat to them, although it is going to 
take a lot of work.
    Mr. Gutknecht. Let me just come back to one last point 
before my time expires here.
    You have stated you will be in crisis management in 1999?
    Mr. Koskinen. Right.
    Mr. Gutknecht. Judging by your general demeanor, I find 
that hard to believe, or I should say, I am not certain anyone 
will really know, and I think thats good. I appreciate the fact 
that you are approaching this with a very calm demeanor.
    Have you developed a crisis management strategy and, if so, 
how will you implement that? I mean, I am not really clear on 
what you mean by that.
    Mr. Koskinen. Yes, I have been--I said we would go through 
and the council would go through a proselytizing, organizing 
phase into a monitoring and assessment phase, which is where we 
are now, and into a contingency planning, crisis management 
phase. We need to be prepared as we move through this year, and 
certainly as we move into January 1st to be prepared for 
whatever happens, domestically and internationally.
    Our strategy across the board is to buildupon existing 
infrastructures and organizations and experiences. So we are 
forming a coordinating center for the Federal response to this 
issue, whatever it might be, which will build on the existing 
work of FEMA domestically, the State Department and the 
Treasury and the Defense Department internationally, along with 
the intelligence community, and that would be built into the 
Federal level. We are working with State and local governments. 
Tomorrow, with the Senior Advisors Group, will begin discussing 
with them the status of industrywide plans, industry by 
industry, for their own emergency responses.
    All of that will be integrated, so we will know if somebody 
has a water treatment problem or a power plant problem where 
the resources are in the private sector, to deal with that 
issue. There will be data bases available and inventories of 
the resources done, and with a little luck, we will have a very 
effective structure that won't have much of a challenge.
    But what we have to be prepared for in terms of dealing 
with those crises and what the public needs to have confidence 
in is, in the fact that we are prepared for whatever will 
happen.
    Mr. Gutknecht. Thank you.
    Mr. Horn. I thank the gentleman, and now call on the 
delegate from the District of Columbia, Ms. Norton.
    Ms. Norton. Mr. Chairman, I want to--despite the fact that 
I have been delayed in getting here, I certainly want to 
commend and thank you for starting this session off right with 
a Y2K Federal Government hearing.
    I just want to say to my colleague, John Koskinen--who has 
always been unflappable ever since we were in law school 
together, so I am not surprised he remains unflappable in the 
wake of this problem--that under his leadership, I am 
absolutely confident it is being solved.
    I do want to thank the Federal Government, as well, for its 
assistance to the District of Columbia, which is going to be 
receiving some assistance as it readies itself for the Y2K 
problem. It is particularly important because the District 
government itself is being rebuilt and the District doesn't 
want to build into the Y2K problem, but just the opposite.
    The question on crisis management, I think, is the one that 
is really in the--that you have just heard is Sputnik is in the 
back of everybody's mind that, yeah, all the big fellows do 
their jobs, but then somebody else doesn't, and there is some 
ripple effect and we all end up, God knows where.
    I have two questions, and one is, I don't quite understand 
how anybody who does her job can control people who are not 
doing theirs when it comes to this problem. I just do not 
understand how that occurs. And I take it you could only 
safeguard yourself in case those who ripple down the line 
haven't done theirs. I would just like to get a few words on 
that. I apologize for being tardy; I might have missed 
something in that regard.
    And, second, I would like to know how the government, 
whether the government has any posture it wants to take with 
respect to how ordinary citizens should respond to the 
independent operator analysts who are out there, some 
predicting the end of the world; and unfortunately, Y2K 
corresponds with the millennium, so there is a bunch of fools 
running around as well, and whether there is any--and any 
thought has been given to some kind of sane, reliable voice 
that people could turn to who aren't in this hearing, who 
haven't heard all the facts, so that as the time approaches, 
you won't have people hunkered down in their basements or--and 
please tell me now if you should have that--or gathering their 
food for the next year.
    In other words, have you taken into account that a crisis 
mentality may be building up unless somebody hears from 
somebody they can trust?
    Mr. Koskinen. All right. Well, the first question. Clearly 
that has been a challenge for us from the start. We are working 
with and trying to raise the level of awareness, activity, and 
compliance within organizations internationally, as well as 
domestically, over whom we have no authority at all. In fact, 
most of the people I spend my time with don't have to listen to 
me at all, and our goal and challenge has been to set up 
cooperative working relationships with them internationally and 
domestically.
    And the good news is, thus far, certainly in the United 
States, we have had wonderful cooperation and response from 
every critical sector in the country and the major trade 
organizations. You are exactly right, this problem reveals the 
growing inter-connectiveness of everything. That is why we 
started out saying even if we could get all the Federal systems 
done, it doesn't necessarily come close to solving the problem.
    The reason I am spending all this time in all these other 
areas is because it is, in fact, an increasingly seamless web. 
And no one is an island unto themselves, either as an 
individual or a country or a city. And so we all have a great 
stake in everybody else's ability to deal with this problem. 
And the crisis management issue and the contingency planning we 
are asking all Federal agencies to engage in and encourage 
everybody in is to first take a look at doing the best they can 
to fix their problems, and second to have a backup program. If 
your systems don't all work, what will you do to keep your 
business operating, your government agency functioning; and 
what is your backup system if others you depend upon have 
systems that don't work.
    In the Washington, DC area, in the last few days a lot of 
people obviously had to exercise backup plans when power that 
they relied upon was not available. With regard to public panic 
and public response, I think over time we will continue to 
provide the public with information and advice.
    The Red Cross now has a very good Website that basically 
says that if you are worried about the year 2000 transition you 
should think of preparing as you would normally be prepared in 
the wintertime for a long weekend or a winter storm, and have a 
couple of days and water and food. But our view is that, at 
this juncture, there is no indication that you should disrupt 
your life.
    And one of the things we need to do is to ensure the public 
is confident about our ability to deal with the problem. As you 
said, if we thought you ought to be hunkering down, we would be 
the first people to tell you, because I think the Federal 
Government has an obligation to give the people its best 
advice.
    So on our hotline, as we move forward, we will continue to 
update the information we have and to provide advice to the 
public on what we think is an appropriate response. At this 
juncture our advice to the public is not to panic, not to go to 
New Mexico and buy a lot, and, in fact, primarily to be 
informed consumers of information, to pay attention, call our 
hotline, look at our Website. There will be plenty of time as 
the spring unfolds for all of us jointly to review that 
information and respond accordingly.
    And we will be providing the public with updated 
information about what we think are the appropriate responses.
    Mr. Horn. I thank the gentlewoman.
    And now I yield to the gentleman from California, Mr. 
Miller, who has been long-suffering, waiting to get his 
questions in. And we finally made it, Gary.
    Mr. Miller. Well, thank you, Mr. Chairman.
    It is a good feeling to be a new member and a freshman on a 
committee. And it is especially refreshing when you ask all the 
questions last, and all the good ones have been asked, and you 
are left with the other ones. But I look back at this and I 
have to praise the technology companies over the past years for 
getting this message out and creating the panic. You did a 
great job in driving the stock prices up. It really did; I 
invested in some of those companies.
    And then the press further took those concerns and expanded 
upon them because they sell newspapers. And then I have 
listened to the questions presented by the knowledgeable and 
experienced members on this committee, and they create more 
questions. I hate to fall into the category of those crazies we 
refer to out there, who look at panic and comply with that and 
become a part of it.
    But there are some questions I guess I have never thought 
of until I listened to the questions asked today and the 
questions answered. One was the Y2K problem, many have said is 
going to be the end of the world as we know it; and the press 
did a good job of playing that up very well.
    But I look at what we have done. Welfare reform is a good 
example. When the Federal Government enacted welfare reform, 
they turned it over to the States; and the States' and our job 
at this point is we turned it over to many counties. And 
counties also are responsible for Medicaid distribution and 
others.
    And I guess I am concerned on the flow of technology to the 
States and substates who are fiscally impacted currently and 
counties, and most of our counties are fiscally impacted, 
especially California, and how the flow of technology gets to 
those counties, because now the counties are distributing the 
welfare funds that we provide to the States and the Medicare 
checks that are--Medicaid checks that are being given to them.
    How do we ensure that there is an adequate flow not only to 
the States, but to the counties? Because by the time the flow 
of information gets to the States, they are dealing with their 
issues. How do we ensure that information also flows to the 
counties, who are actually providing most of the services that 
are being delivered today?
    Mr. Koskinen. That is and has been one of our biggest 
challenges. I spent last summer at the National Association of 
Counties executive meetings, because in many ways the hardest 
people to get a hold of in this country are counties. They 
don't have a regular line of communication directly with the 
Federal Government, and in fact, the States told me when I 
started working with them last spring, counties don't want to 
hear anything from the Federal Government and they don't want 
to hear too much from the States. So there aren't regular, as 
you say, lines of communication.
    We hope in response to your earlier question that we have 
done everything we can think of, but we are going to continue 
to work on it to get the information to the counties about the 
importance of the problem and ensure that they have access to 
technical information. With regard to State-run Federal 
programs, we are now going State by State to get assurances 
from the States as to the status of their preparedness; and to 
the extent they rely upon counties, information they have on 
county preparedness and what work they have been doing with 
counties.
    And California has done a very good job. California held 
statewide meetings of county executives in major cities last 
year to start dealing with this problem. And, in fact, they and 
several other States have done that, Texas and others, we 
encouraged States to have that as a benchmark to follow.
    There are some States where there is very little 
communication going on with their counties. And as I noted, I 
am concerned about that.
    Again, I don't think we can mandate compliance across the 
board, but we can be very focused on at least the 
administration of Federal programs. There are 160 Federal 
programs that are run by States and localities, and we need to 
continue to focus on them. And I think, as we go through the 
spring, that is going to be a growing problem for us, which is 
why I am delighted when there are regional and local hearings 
and town meetings. Because while we need to keep paying 
attention to how the Federal Government is doing, and it was an 
appropriate place to begin the dialog 3 or 4 years ago, it is 
increasingly clear to me that the problem is going to be at the 
State and local level if we are going to have a problem.
    Mr. Miller. Mr. Ose touched on an issue that has become a 
concern, and that is, we are asking people to share technology. 
The minute you do that there is liability risk associated with 
that sharing of technology. And I guess this question can be 
for the chairman, although, I think, more for him to think of 
in the future: What are we doing to cap the liability risk to 
encourage sharing of technology? I mean, I am sure in many 
cases organizations or groups will have the technology 
available, but they understand that clearly by them sharing 
that with others, they are at risk if there is a problem that 
occurs through that sharing of technology.
    Are we doing anything in that fashion?
    Mr. Koskinen. Yes. In my earlier discussions with the major 
industries, including telecommunications and securities, they 
were concerned about this issue. And, as I noted, last October 
the President signed into law legislation passed by Congress 
that protects not only companies, but trade associations who 
voluntarily disclose technical or other information about how 
they deal with this problem. It does not deal with the issue of 
those who are selling that service, and whether they can get 
insurance, but we have now removed the legal obstacles to 
information sharing. The interesting problem is--we are working 
with about 170 trade associations--many lawyers are still 
advising their clients not to say anything on the grounds that 
it will get them into trouble.
    Mr. Miller. That is where the problem is?
    Mr. Koskinen. Yes. So in our working relationships with 
industry groups we are trying to figure out exactly how to 
break that barrier down, because you are exactly right, the 
exchange of that information is critical not only for large 
companies to compare test results, but it is critical 
information available to smaller and medium-sized organizations 
in the public and private sector, who can then go to that 
information and say--I haven't got a lot of time left, but I am 
told by those people that this is where I ought to spend my 
time and money and that is what I am going to do, and if they 
are wrong, at least I am better off than I would be otherwise.
    Mr. Miller. A closing question about maritime. And this is 
a question I hate to ask because maybe it is a little 
farfetched. Listening to the rumor, watching the press and the 
panic that could be created, we talked about printing available 
cash, but what impact might that have on our banks that have 
cash reserve requirements they have to meet, minimum 
requirements of standards? If this thing is blown out of 
perspective, that might impact that.
    Are we doing anything to alleviate that impact?
    Mr. Koskinen. Yes. We have--one of the reasons to have cash 
available is to ensure the banks don't run into difficulties. 
But again it goes into the balancing act I talked about and we 
have all worried about for the last year. This is a serious 
problem, people have to pay attention, and we have to solve it. 
But on the other hand, if 200 million Americans decide to do 
anything very different economically than they normally do, 
that has the potential of being a self-fulfilling prophecy of a 
major problem, even if all the systems run fine.
    So all of us have to try to deal with that problem. I am 
trying to make sure people address that problem, and understand 
the seriousness of it. But on the other hand, I do not want 
people to gratuitously decide, ``Well, I think what I am going 
to do is not necessarily buy a lot in New Mexico, I will just 
take some money out of the markets, some money out of the bank, 
and go out and buy some extra supplies.''
    Mr. Miller. We are going to address the reserve problems if 
that does occur?
    Mr. Koskinen. If there is a reserve problem, the Fed is 
focused on it.
    Mr. Horn. I thank the gentleman.
    I see Mrs. Maloney, former ranking member of this 
Subcommit- 
tee on Government Management, Information, and Technology.
    Would you have any questions to pose to our witnesses?
    Mrs. Maloney. Of course, Mr. Chairman, I congratulate you 
on your chairmanship, and I see you are on the case. We just 
got organized yesterday and you are already holding hearings.
    And I just wondered--I thought it was very important that 
the President mentioned very, very strongly the Y2K problem and 
the attention that he and the Vice President and the 
administration are giving the problem in making sure that we 
are ready for the 21st century.
    And I just want to know, in a brief oversight or review, do 
you think we are going to be ready? Do we have reason to be 
concerned? Could you just respond?
    Really, I am sure you heard the President's speech last 
night, and I am sure you heard him talk about year 2000. I 
would just like to know in a general sense, where do we stand 
in the Federal Government?
    I know you say some of the smaller governments are having 
some problems. What about internationally? Would you like to 
just give us a broad, brief overview of, do you think we are 
going to be ready? Are we going to meet the President's 
challenge of being ready and making sure that everything is 
working?
    Mr. Koskinen. That is more than a 5-minute answer. My 
testimony is designed to deal with those issues. As a general 
matter, I think the Federal Government will be ready; I am 
confident of that. I think that the vast majority of States are 
doing a good job. I am concerned about local communities that 
may not be focused on the problem, but a lot of them have done 
that.
    I am concerned about the risks of overreaction by the 
public, and internationally, I am concerned about the countries 
that have not yet paid enough attention to this problem and 
have the potential to create difficulties for the American 
economy and the American public.
    Mrs. Maloney. Well, since you seem to think that 
domestically we are all right, could you talk about the 
international problems that you expect would possibly be the 
most problematic to the United States?
    Mr. Koskinen. The most problematic to us and the largest 
challenges, I think, are in maritime shipping; and I think that 
not because I know there is a problem, but because I don't know 
what the information is, because there is no organized attack 
on that problem in that area yet.
    I think that international financial transactions are 
generally in good shape. It will not be a problem for us. We 
are concerned about ensuring that in a lot of countries there 
are power supplies, particularly that those provided by 
Russian-made nuclear plants are safe and can operate as we go 
forward.
    I think we will have, in some countries, difficulty getting 
telephone or other services. So I think, while it may not 
affect the American public generally, we will have an 
obligation to advise travelers about what they can expect in 
some countries and to work with American businesses operating 
abroad. At a minimum, we have to worry about how to run 
embassies and consulates in areas that may have difficulty with 
their infrastructure.
    Mrs. Maloney. Well, the chairman has had numerous----
    Mr. Horn. That is panel 2, you know, on the international 
situation.
    Mrs. Maloney. Well, since he is here and he mentioned 
shipping, if I could ask him a brief question on that.
    Mr. Horn. Sure.
    Mrs. Maloney. And I know, Mr. Chairman, you have had many, 
many hearings, and I congratulate you for being on the case.
    But you express some concern on international shipping and 
that 95 percent of all goods that enter the United States are 
transported by ship. And specifically what are your concerns 
and why hasn't there been enough focus on this area, given the 
fact that 95 percent of all goods come by ship; and what can we 
do to change that so that the shipping or maritime industry 
will not be disrupted during this date change?
    Mr. Koskinen. The U.S. Coast Guard has done an excellent 
job on their statistics for me, and they have been working very 
actively with American shipping interests in American ports. As 
I noted, there has been no organized global effort in this 
area. We are trying to solve that by, in fact, starting that 
effort in March, in London, with all the major international 
port and shipping associations dealing with this problem.
    Certainly, when you look at oil or any other thing we rely 
on that comes from abroad you have to figure out, how do you 
get it out of the ground or out of the production mode to the 
port? How do you get it through the port and onto the ships? 
How do you get it across the oceans and into U.S. ports? That 
is a complicated supply chain, and we hope to have more 
attention paid to it.
    The individual companies and major shippers, and certainly 
U.S. ones, have been paying attention to this, but again they 
do not control foreign port operations and often they do not 
control foreign production sources. We all need to see what we 
can do about that in the next 344 days.
    Mrs. Maloney. Well, my time is almost up. But I want to 
make sure the electricity is working on that day. I mean, we 
are going to all need it. And the Secretary of Energy, Bill 
Richardson, publicly raised concerns earlier this month about 
electric utilities falling behind the Y2K repairs. A recent 
industry poll indicates that a number of utilities will not 
meet their June 30th deadline for compliance systems. And 
Secretary Richardson indicated that he may name specific firms 
if sufficient progress is not achieved.
    Should other Cabinet secretaries follow this approach for 
vital industry sectors and businesses that are not on track for 
the Y2K, compliant with public health and safety, and does the 
Y2K Council have any plans to release the names of companies 
that are likely to miss Y2K deadlines?
    Mr. Koskinen. We do not have that information. In fact, the 
act that was passed allows us to collect industry association 
information and industry information by protecting individual 
companies from having anybody reach that data, so that 
companies will be candid about it. But one of the reasons the 
North American Electric Reliability Council has 96 or 98 
percent participation is that they have listed everybody who 
participated in their survey, which drove a lot of people to 
participate. We are going to encourage other industry groups to 
do that. This way the public will know which companies are 
actually providing the information and participating in the 
surveys.
    With electric power, I think it is important to note that 
what the Secretary is concerned about is a small percentage of 
the power companies. The industry has a June 30 goal to have 
everything done; it is not a question of those companies not 
meeting the January 1, 2000 goal. And I think it is appropriate 
for all of us, as I say, to know as the Secretary said, there 
are no show stoppers and there will not be national issues. But 
it is also appropriate for us to be concerned about our local 
power companies. And we in Washington are concerned about, how 
will Pepco and Virginia Power deal with it, and we won't find 
that out from the national assessment.
    We need to find that out, and those companies need to be 
forthcoming across the countries locally. We are going to try 
to do what we can to encourage that.
    Mrs. Maloney. I thank you for your testimony and for your 
public service. I can see why the President called you back 
into public service to work on this critical problem for the 
country. And I appreciate your willingness to serve and for 
being here today. Thank you.
    Mr. Koskinen. Thank you.
    Mr. Horn. In rounding this out, I am going to yield myself 
5 minutes, which I have not taken. And let me just ask three 
fast questions.
    During our staff research, we found that the police 
departments have not been too proactive on assessing the Y2K 
status of the 911 systems.
    Do you have any information? Have any of your staff taken a 
look at that problem?
    Mr. Koskinen. Yes. In the Emergency Services Working Group 
we are reaching out to--there is a group of people who run 911 
systems, there is an association, and our Emergency Services 
Working Group is reaching out to get an assessment from them of 
that problem. FEMA and the Justice Department are working with 
State and local emergency managers to get people to understand 
they need to look at it.
    The 911 systems are at risk. They are generally 
increasingly sophisticated computer operations that have 
problems, and we are concerned about that.
    Mr. Horn. In terms of your plans with reference to Federal 
agencies, are you assured in your mind that all of them will 
meet the January 1, 2000, deadline?
    Mr. Koskinen. I am.
    Mr. Horn. You are?
    Mr. Koskinen. Yes.
    Mr. Horn. What makes you so optimistic?
    Mr. Koskinen. I don't view it as optimism. I have actually 
spent since May----
    Mr. Horn. I know you are a happy personality.
    Mr. Koskinen. I am a very happy person. I should start 
frowning more when I say we have big problems. I have been 
meeting with all of the OMB tier 1 agencies and their senior 
managers on a monthly basis since May and monitoring their 
progress, as OMB has been doing and ensuring. I am confident at 
this juncture, and have been for some time, that the 
Secretaries of each of those agencies is personally committed 
to dealing with that problem.
    I met yesterday at the Energy Department with Secretary 
Richardson and his senior staff as part of my monthly surveys, 
and they are making strong progress. I am confident that the 
information is generally accurate, because as I have said, if 
agencies wanted to make up the numbers, they would have figured 
out how to do that a couple of years ago, and they wouldn't 
have had either negative reports from you or OMB.
    It has taken a lot of work. It is a great tribute to 
phenomenal efforts by Federal employees in all of those 
agencies. And I am, as I say, confident on the basis of the 
progress they are making and the reports that are coming out--
and I think you are going to see in, as I noted in my 
testimony, the major agencies we are all concerned about by the 
time we get to the March 31 deadline, that substantial progress 
has been made over the last 6 to 9 months. And it has come with 
a lot of prodding and encouragement from all of us.
    And as I have said in my prepared testimony, I think we all 
have to be prepared to acknowledge that accomplishment, just as 
we have been prepared to encourage them to move forward. 
Because a lot of employees are working around the clock, they 
are working weekends, they are dedicated to making sure that 
their agencies can perform their missions.
    Mr. Horn. What legislation do you feel the administration 
should be recommending and Congress acting on that relates to 
Y2K? What is needed now to be helpful in the next phase?
    Mr. Koskinen. We have asked the President's Council and the 
agencies to provide us any legislative needs they have, either 
for expanded authority or limited authority in particular 
areas. At this juncture, we do not have a major legislative 
request or initiative that we can see.
    The emergency funding has been a significant help for us 
and a major issue. We are listening and trying to learn more 
about what the concerns are in the private sector on liability, 
but at this point, there is not a coordinated industry response 
in that area. But in terms of specific agency responsibilities, 
the only issue we are looking at that may require legislation 
is what, if anything, should we do around the January 1 
weekend.
    There have been issues raised about whether or not to move 
the holiday and whether we can allow people to move payments 
from the first week in January to the last week in December to 
take pressure off systems. If you do that and want to keep it 
as year 2000 income, you need a tax policy or a tax change. We 
have a task force, led by the Federal Reserve actually and all 
the agencies, looking at that. I think we will not recommend a 
holiday change, but we have other recommendations in terms of 
technically allowing companies and certainly Federal agencies 
to try to take pressure off their systems and that may take 
legislation. But other than that, I think our problem is 
primarily management and administration.
    Mr. Horn. Well, I agree with that, with over the years, and 
my own feeling was, last fall, as you know, I was not keen on 
any legislation relating to liability at this point. I wanted 
everybody to get out there, provide leadership, get the job 
done and quit worrying about it. And I felt a lot of people had 
been misadvised by saying, Don't say anything, Chief; then they 
can't sue you.
    Well, it seems to me if you don't say anything and don't 
provide the leadership, they will sue you.
    Mr. Koskinen. Exactly.
    Mr. Horn. So we are now, though, into another era, and the 
question is, should liability legislation be developed to 
either get a specialized court that would really know something 
about computing and the whole history of it, or do some other 
things that would limit the liability if good-faith efforts 
have been made.
    Do you have any reaction to that?
    Mr. Koskinen. At this point we do not have a position. As I 
say, at this juncture, we do not have any proposals or any view 
that there is a need for legislation. But we are--we are 
cognizant of the fact that a wide range of people are focused 
on it, and we are prepared to listen to what they have to say.
    Mr. Horn. OK. I am going to yield back the rest of my time, 
so if Mr. Turner, as ranking member, has any questions--feel 
free--Mrs. Morella, as co-chair, has any questions, fine.
    Or we can send him down and have the staff and you answer 
them and put it in the record at this point.
    So whatever your wishes are. We have two more witnesses and 
two major topics to go into.
    Mrs. Morella. Just briefly. You are going to love the 
legislation that I am going to ask you to look at. It is not 
liability, because I recognize the difficulty of coming up with 
something, particularly at this point, that is going to cover 
the liability system, but it would help to provide for the 
acceleration of business continuity plans, et cetera, and for 
more openness.
    I want to ask you, have you thought about doing any PSAs, 
because another part of this bill would have to do with letting 
consumers know what they should be asking, kind of reaction 
plans. But it just seemed to me it would just be a great 
opportunity to do some PSAs to alert the public, as well as the 
businesses, about the----
    Mr. Koskinen. We for some months have been looking at what 
the appropriate Federal role should be in that area. The 
Advertising Council early on told us the programs they 
generally work with have a 5-year time horizon and, therefore, 
the short-term nature of the Y2K problem didn't fit within the 
5 year timeframe.
    The other problem with PSAs, by themselves, if they are 
free, they usually run late at night and at odd times. We have 
actually talked with public relations and advertising firms 
about, what it would take if you mounted a full-scale program; 
and in some detail, we have had proposals to spend $50 to $100 
million. As I said, I am not quite sure how to explain to you 
or the public that I spent $100 million on an advertising 
program, as opposed to giving the money to people locally to 
solve their problems.
    One of the things we hope to explore with our Senior 
Advisors Group and the working groups is to see what the 
private sector is doing in terms of both research about the 
problem and their media campaigns, and take a look at what the 
appropriate integration of a Federal response to that ought to 
be.
    In the meantime, we are spending a lot of time with the 
press responding to all of the inquiries. We have yet to turn 
anybody down. But it is a very important point, and we are 
trying to figure out what is the most effective way to get 
information into the hands of the public. And to the extent 
that it--and we can find an effective role for the Federal 
Government and even the expenditure of some money integrated 
into the messages that others are providing, we will do that 
and be pleased to share it with you.
    But at this juncture no one has been able to convince me 
yet that it is the right of priority for us to independently be 
spending phenomenal amounts of money.
    Mrs. Morella. No, but you know, PSAs, as you say, they have 
to do it, the media; and I just think that you can get 
television and radio--it won't all be at 2:30 a.m. Besides, 
there are a lot of people who listen at this time and watch 
anyway. But I think they would use it at various other times 
during the day.
    I think you should consider that in other ways also of 
communicating this. Don't be an alarmist, but don't be a 
Pollyanna, you know, I mean that kind of thing.
    I know that--I don't want to take more time, because we 
have got two more panels. But I think it is always a shame that 
a person like you can't be there when the other two panelists 
are talking so you can respond, because I have already read 
much of that testimony. And, you know, we are talking about 
trade, we are talking about commerce, a suggestion from Mr. 
Willemssen that maybe we prioritize, your council prioritize 
what the United States needs, in terms of oil, in terms of food 
and commodities; and then have plans to make sure that we are 
going to receive it, the early warning system, that this is 
from the National Intelligence Council. Mr. Gershwin talks 
about Russia and China and early warning systems.
    And then I also wonder about, in the United States, our 
own--the money we transmit for Medicare, Medicaid, for all 
kinds of things, student loans and all--have we, have we traced 
any of that money to the States and the localities to find out 
whether they are compliant? What I am saying is, a steady 
stream--the hip bone connected to the thigh bone connected to 
the knee bone--have we made these agencies that dole out this 
money find out from their recipients whether they are ready?
    In other words, say you are part of our food chain of the 
line; do you see what I am getting at?
    Mr. Koskinen. Yes. Let me first say to your general 
concern, Mr. Gershwin is an active member of the President's 
Council. We are working very closely with the National 
Intelligence Council on this matter, so I think I am very well 
versed on where he is. And Mr. Willemssen and I show up in a 
lot of places together. And actually, once a month GAO, Mr. 
Willemssen and Mr. Dodaro and others and I sit down and spend 
an hour or two reviewing where we are and their recommendations 
on what we are dealing with. So I think I am well advised about 
what their suggestions are.
    And, as always, we have found that GAO's suggestions are 
particularly helpful. And as you will note, over time, a lot of 
those suggestions have been accepted and integrated into either 
the OMB work or our work.
    Mrs. Morella. The recommendation is great. But I mean in 
terms of the action beyond the recognition. I know you are 
working very hard; I commend you for what you are doing. It is 
just, I do think they offer some good recommendations that need 
some action. Thank you.
    Thank you, Mr. Chairman.
    Thank you, Mr. Koskinen. I look forward to meeting with 
you.
    Mr. Horn. Mr. Turner, any questions?
    Mr. Turner. Mr. Chairman, maybe just a couple.
    Chairwoman Morella expressed an interest in PSAs, and I was 
just looking at the latest report from OMB to this committee 
regarding the estimated cost to the Federal Government of 
complying with Y2K, and I believe it says it is close to $6.5 
billion.
    Mr. Koskinen. Correct.
    Mr. Turner. Maybe $100 million, if it would be profitable 
and helpful, might not be that large a sum in the scheme of 
things.
    My concern, as I shared with you earlier, is that I 
certainly want to be very careful about what PSAs we are 
airing, because it is hard, I am sure, to judge whether PSA's 
are going to increase public comfort or discomfort with the 
problem.
    One of the things that I wanted to ask you about is that a 
year ago people were saying there just aren't enough computer 
programmers out there to help us comply with this problem, and 
we are going to have to figure out how to find some folks and 
get them trained. You don't hear a lot about that anymore.
    What is the status of the necessary personnel to solve Y2K?
    Mr. Koskinen. It is a problem we are all concerned about; 
as a potential problem, we have been monitoring it very 
carefully with the Federal Government. One of the first things 
we did when I started was to have OPM authorize the agencies to 
bring back annuitants, retirees, who knew about these kinds of 
issues without forcing them to give up their retirement 
benefits.
    What has happened, while the cost has gone up in the 
private sector, to some extent for services, which generally 
happened, I think, as we monitored--and the reason there hasn't 
been a national shortage is that the tools and the techniques 
for dealing with this problem have increased at about the same 
rate as the demand, so that the original assumptions--where you 
would have to take each line of code and change it--and people 
then started multiplying out how long it took and how many 
billion lines of code there were, it turned out there have been 
a lot of what are called ``windowing techniques'' that allow 
you to adjust for the problem without necessarily changing all 
the programmatic codes.
    Also, while there is no silver bullet, there are a wide 
range of tools that, depending on the software programs and the 
operations, that have speeded up the process for either finding 
out where the problems are or testing against them.
    There have been some anecdotal reports of shortages. GAO 
again did a review of the agencies and found some specific 
areas and pockets of concern. But as a general matter, the 
Federal Government has not found that it or its contractors 
have had trouble getting enough personnel. And even in the 
private sector, we have not yet seen major shortages occur.
    And I think it is primarily not because people are wrong in 
the concern; I think it is because everybody has gotten a lot 
better at figuring out how to get the work done efficiently.
    Mr. Turner. Thank you.
    Thank you, Mr. Chairman.
    Mr. Horn. Vice Chair Biggert, any last questions?
    Mrs. Biggert. No.
    Mr. Horn. OK. We will now move to the second panel.
    And we thank you very much for spending the time with us. I 
never--I know you will never not answer a question. You answer 
it eloquently. You answer it very speedily.
    Mr. Koskinen. Thank you, Mr. Chairman, and Chairman 
Morella. I do appreciate your ongoing support.
    Mr. Horn. If you can stay a little, we would welcome 
anything you want to say.
    Mr. Koskinen. Thank you, but as you can imagine what my 
life is like, right now I am almost late for my next meeting.
    Mr. Horn. If panel 2 would come forward, please.
    We have, on panel 2, Dr. Lawrence Gershwin, National 
Intelligence Officer for Science and Technology of the National 
Intelligence Council. This is Dr. Gershwin. And then you are 
accompanied by Norman Green, Deputy National Intelligence 
Officer for Science and Technology. So can we have him take a 
seat also?
    I am going to swear you all in, since one of you will be 
talking probably somewhere along the line. Dr. Michael 
Harrington, principal technical staff--and tell me how to 
pronounce it; is it the MITRE Corp., is that the best way----
    Dr. Harrington. Yes.
    Mr. Horn [continuing]. And Mary Walsh, Year 2000 Issues 
Manager, Directorate of Intelligence, Central Intelligence 
Agency.
    Come on up, get chairs here. Will the staff make sure that 
we have enough chairs or just grab one. And Joel Willemssen, 
our favorite witness here, Director of Civil Agencies 
Information Systems, Accounting and Information Management 
Division, General Accounting Office.
    So have we got everybody a seat?
    [Witnesses sworn.]
    Mr. Horn. The clerk will note that all five witnesses have 
affirmed the oath.
    And we are now going to begin with Dr. Lawrence Gershwin, 
National Intelligence Officer for Science and Technology at the 
National Intelligence Council. You might tell us the formation 
of the National Intelligence Council, just for the record.

      STATEMENTS OF LAWRENCE K. GERSHWIN, Ph.D., NATIONAL 
INTELLIGENCE OFFICER FOR SCIENCE, ACCOMPANIED BY NORMAN GREEN, 
     DEPUTY NATIONAL INTELLIGENCE OFFICER FOR SCIENCE AND 
TECHNOLOGY, NATIONAL INTELLIGENCE COUNCIL; MICHAEL HARRINGTON, 
Ph.D., PRINCIPAL TECHNICAL STAFF, MITRE CORP.; MARY WALSH, YEAR 
   2000 ISSUES MANAGER, DIRECTORATE OF INTELLIGENCE, CENTRAL 
  INTELLIGENCE AGENCY; AND JOEL WILLEMSSEN, DIRECTOR OF CIVIL 
   AGENCIES INFORMATION SYSTEMS, ACCOUNTING AND INFORMATION 
         MANAGEMENT DIVISION, GENERAL ACCOUNTING OFFICE

    Dr. Gershwin. Sure. The National Intelligence Council works 
for the Director of Central Intelligence as an interagency 
intelligence mechanism. And our purpose is to bring together 
the work of all of the intelligence agencies into one unified 
set of analyses for the purpose of serving the Director of 
Central Intelligence in his overall role as manager of the 
entire intelligence community.
    And as such, I am 1 of the 12 National Intelligence 
Officers on the council. And our job is, of course, to work 
certain areas, and in my case, science and technology issues, 
for the Director of Central Intelligence.
    Mr. Chairman, Mrs. Morella, I am pleased to be able to 
discuss today the understanding that the intelligence community 
has about foreign efforts to deal with the Y2K problem. I will 
give you our current assessment of where we see the problems as 
most likely to occur. But we are not yet in a position to make 
a confident assessment of the global impacts of the likely Y2K 
failures or the implications for U.S. interests.
    The Y2K situation is very fluid, and our assessments could 
change significantly over the next several months as more 
information becomes available, as countries become more aware 
of and deal with Y2K issues, and as incidents of Y2K failure 
increase. I will highlight for you today those areas that we 
think have a significant chance of affecting U.S. interests.
    All countries will be affected to one degree or another by 
Y2K-related failures, and problems in one country sector can 
have widespread consequences because of interdependence between 
sectors worldwide. The consequences of Y2K failures abroad will 
range from the relatively benign, such as a localized inability 
to process credit card purchases, to problems within systems 
across sectors that will have humanitarian implications, such 
as power loss in midwinter.
    We have few indications that countries are today 
undertaking contingency planning for recovery from Y2K 
failures. Foreign countries trail the United States in 
addressing Y2K problems by at least several months and, in many 
cases, much longer.
    Y2K remediation is underfunded in most countries, and time 
and resource constraints will limit the ability of most 
countries to respond adequately by 2000. Governments in many 
countries have begun to plan seriously for Y2K remediation only 
within the last year, some only in the last few months; and 
some continue to significantly underestimate the costs and time 
requirements for remediation and, importantly, testing.
    Because many countries are way behind, testing fixes will 
come late and unanticipated problems typically arise in the 
testing phase. The largest institutions, particularly those in 
the financial sectors, are the most advanced in Y2K 
remediation. Small- and medium-sized entities trail in every 
sector worldwide.
    Most countries have failed to address aggressively the 
issue of embedded processors. And while recent understanding is 
that failures here will be less than previously estimated, it 
is nevertheless the case that failure to address this issue 
will still cause some highly dependent sectors with complex 
sensor and processing systems to have problems centered right 
around the January 1st date.
    The lowest level of Y2K preparedness is evident in Eastern 
Europe and Russia, in Latin America, in the Middle East, and 
Africa and several Asian countries, including China. But global 
linkages in telecommunications, financial systems, air 
transportation, the manufacturing supply chain, oil supplies, 
and trade mean that Y2K problems will not be isolated to these 
individual countries, and no country will be immune from 
failures in such sectors.
    Regarding Russia and Ukraine, the coincidence of widespread 
Y2K-related failure is likely to occur in the winter of 1999 to 
2000. With continuing economic problems and food shortages, 
already difficult conditions for the population could have 
major humanitarian consequences for those countries. While the 
Russian Government initiated centralized guidance to ministries 
and agencies in May 1998, the State committee responsible for 
initiating overall guidance has stated that there is not enough 
time or money to resolve the Y2K problem. We think they are 
right.
    Russian estimates of the cost of remediation of their 
government system seem considerably less than Western estimates 
for comparable systems in other countries or what we regard as 
what it will cost in Russia. Thus far, both Russia and Ukraine 
have exhibited a low level of Y2K awareness and remediation 
activity. While Russia possesses a talented pool of 
programmers, they seem to lack the time, organization and 
funding to adequately confront the Y2K problem.
    Concerns include problems with computer-controlled systems 
and subsystems within power distribution systems and nuclear 
power generating stations leading to reactor shutdowns, or 
improper power distribution resulting in loss of heat for 
indeterminate periods of time in the dead of winter in Russia 
and Ukraine. Indications point toward a slow, reactive mode of 
operations on the part of, for instance, the Russian Atomic 
Energy Ministry.
    Although Western Europe is in relatively better shape than 
some of the regions I have cited earlier, European awareness of 
and concern about the Y2K problem is uneven, and they do lag 
the United States in fixing their problems.
    I should point out that none of the countries that we are 
dealing with seem to have anything like the level of 
government-led activity, as we heard earlier from John 
Koskinen. And frankly it is that level of government activity 
and leadership on it that I think is required worldwide in all 
of these countries, including some of the more advanced 
countries in order to make this stuff work.
    European attention was focused on modifying computer 
systems for the European Monetary Union conversion, which was 
implemented successfully on January 1, but this was done, in 
many cases, by postponing coming to grips with Y2K problems. 
For example, the Netherlands has expressed concern that the EU 
members are not working together to solve Y2K problems and has 
threatened to cutoff its own power grid from the rest of Europe 
in order to protect domestic power distribution from external 
problems.
    The Asian economic crisis has hampered the Y2K remediation 
efforts of all of the Asia-Pacific countries except Australia. 
While the lines of authority for China's Y2K effort have been 
established, its late start in addressing Y2K issues suggest 
Beijing will fail to solve many of its Y2K problems in the 
limited time remaining and will probably experience failures in 
key sectors such as telecommunications, electric power and 
banking.
    We are focusing increasingly in the intelligence community, 
in our own study of foreign Y2K problems, on those critical 
sectors that directly affect U.S. interests. These include, 
among others, foreign military systems, trade, and oil 
production and distribution, all of which I will elaborate on.
    First, regarding military systems, military systems and 
their command and control are particularly information-
technology dependent, and thus potentially vulnerable to 
disruption if Y2K problems are not adequately addressed. We 
have been especially attentive to the issue of foreign 
strategic missile systems, and particularly those in Russia and 
China, to experience Y2K-related problems. United States and 
Russian officials have been discussing these issues for some 
time now, and we do not see a problem in terms of Russian or 
Chinese missiles automatically being launched or nuclear 
weapons going off because of computer problems arising from Y2K 
failures.
    Rather, the problem that we are more focused on is whether 
the Russians will manage to locate and fix problems in their 
early warning systems that they use to monitor foreign missile 
launches and how their leadership is preparing to deal either 
with the prospect of incorrect information being provided by 
such systems or with system outages. The level of concern in 
Russia is growing on these issues as awareness of the nature of 
the Y2K problem grows.
    Turning to world trade and oil, some of our most important 
trading partners have been documented by, among others, the 
Gartner Group, as behind the United States in fixing their Y2K 
problems. And China and Japan will be good examples. 
Significant oil exporters to the United States and the global 
market including a number of countries--Venezuela, Saudi 
Arabia, Mexico, Nigeria, Angola and Gabon--that are lagging in 
their Y2K remediation efforts.
    Oil production is largely in the hands of multinational 
corporations in the oil-producing countries, but this sector is 
highly intensive in the use of information technology and 
complex systems using embedded processors, and is highly 
dependent on ports, ocean shipping and domestic 
infrastructures.
    The oil industry is fraught with potential Y2K problems. 
Embedded microprocessors are found throughout the oil industry 
in drilling, pumping, transportation, processing and refining 
operations. A typical offshore platform or onshore gas plant 
reportedly uses 50 to 100 embedded systems, each containing up 
to 10,000 individual microchips.
    While the industry has been actively involved in 
remediation, planning for remediation of a single offshore 
platform can reportedly involve up to 60 different vendors. We 
are concerned about the shipping of oil products, because ocean 
shipping and foreign ports have both been flagged as among the 
least prepared sectors.
    One additional issue I want to raise is that many foreign 
officials and companies who are aware of Y2K problems are 
looking to the West, and particularly the United States, for 
help, and to western suppliers for technical solutions. In some 
cases, foreign companies or governments may blame the United 
States and other foreign vendors for problems in this equipment 
and thus seek legal redress for their failures. And worldwide 
litigation issues are quickly becoming a part of the Y2K 
international scene.
    In closing, let me note that today we can list all the 
issues that concern us worldwide in terms of the impact of Y2K 
failures on infrastructures, economies, countries and regions, 
national security, trade and so on. But today we cannot yet 
provide good answers or predictions that would be meaningful on 
the consequences. We have cast a wide net for information on 
Y2K developments and are working very closely through the 
President's Council on Y2K Conversion, with the rest of the 
Federal Government. As the time for greater likelihood of 
failures comes nearer, awareness of and reporting of Y2K 
problems abroad should increase dramatically and we thus expect 
to have a much better handle on the type and extended failures 
we are likely to see around the world.
    But the incredible complexity of global interconnectivity 
and interdependence, and the effects when some parts of the 
information technology baseline start to fail, is a daunting 
challenge to interpret and analyze. There will be many analysts 
in both public and private sectors here and abroad trying to 
make reasonable judgments about the consequences and 
implications. The problem is formidable, but we will do our 
best to support the U.S. Government in assessing these 
consequences. Thank you.
    [The prepared statement of Dr. Gershwin follows:]

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    Mr. Horn. We thank you for that very helpful statement, and 
we will now go to Mr. Willemssen.
    Mr. Willemssen. Thank you, Mr. Chairman, Chair Morella, 
Ranking Member Turner, Congresswoman. Thank you for inviting us 
here to testify today on Y2K.
    I will briefly summarize our statement on, one, where the 
Federal Government stands, issues confronting State and local 
governments, and the readiness of key infrastructure and 
economic sectors. And in doing so, I will focus on suggestions 
we have for Mr. Koskinen and OMB to improve its oversight of 
these areas.
    First, regarding the Federal Government. While the most 
recent November quarterly reports show improvement in 
addressing Y2K, many agencies still have a long way to go. We 
have a number of suggestions for Mr. Koskinen and OMB to 
consider in this area.
    First, on reporting of Y2K progress. OMB's draft guidance 
to agencies for the upcoming February quarterly reports asks 
agencies to identify and report on their core business 
functions that are to be addressed in their business continuity 
and contingency plans. We endorse this initiative. In fact, OMB 
could go a step further and use this information to ask 
agencies to report on their end-to-end testing and contingency 
plans for these critical functions.
    For example, with the time available for end-to-end testing 
diminishing, OMB should consider for the government's most 
critical functions setting target dates and having agencies 
report against them for the development of end-to-end test 
plans, the establishment of test schedules, and the completion 
of those tests.
    For business continuity and contingency plans, OMB could 
consider setting a target date such as April 30th for the 
completion of those plans, and a date such as September 30th 
for completing testing of those plans.
    Another key task that could be aided by identifying the 
government's core business functions is setting priorities. 
Having this information in hand provides an opportunity to 
ensure that the most important areas will be addressed; namely, 
those affecting health and safety, national defense, adverse 
financial impact to the citizen and adverse economic impact. 
This would enable agencies and OMB to report in 1999, after 
March 31, on the Y2K compliance of business functions, not 
individual systems. And, really, that is the bottom line of 
what we are trying to accomplish here, is business functions 
being Y2K compliant, not individual systems.
    Another key element of a business continuity and 
contingency plan is the development of a zero day, or day one 
strategy for the period in late December 1999 and early January 
2000. The Social Security Administration, a recognized Federal 
leader on Y2K, has developed such a strategy. Among the 
features of that strategy is a moratorium on software changes 
for the last few months of 1999 and first few months of 2000. 
Because this type of action can reduce agencies' risks, we 
think OMB may want to consider requiring other agencies to also 
take this kind of initiative.
    Turning next to State and local governments. They face a 
major risk of year 2000-induced failures to the many vital 
services they provide. The report we issued in November on 
State systems used in Federal welfare programs revealed that 
the majority of those systems were not compliant. For example, 
States told us that only about 16 percent of Medicaid systems 
were compliant.
    The extent of information available to the public on State 
and local year 2000 readiness, however, varies considerably. 
For example, while some State and local governments provide 
detailed year 2000 readiness information on their Websites, 
others provide very limited data. We think that States that are 
providing detailed data are doing their citizens a service in 
letting them understand what kind of progress is being made.
    Accordingly, we think another initiative that Mr. 
Koskinen's council could undertake is developing and 
distributing to State and local governments a template that 
identifies the types of year 2000 information that the entity 
could disclose to the public. Disclosure of such information 
could reduce the public's concern and potential panic over 
potential disruptions caused by Y2K.
    Turning last to the key infrastructure and economic 
sectors, we believe Mr. Koskinen and his council are to be 
commended on the strides they have made over the last several 
months in this area. However, to enhance the further 
availability of information on sector Y2K readiness and to 
further reduce likelihood of major disruptions, we offer some 
additional suggestions for Mr. Koskinen.
    First, the Council must continue to aggressively pursue 
readiness information in the areas in which it is lacking, such 
as the health sector and local law enforcement. If the current 
approach of using associations to voluntarily collect 
information does not work, the Council may have to consider 
other legislative remedies such as requiring such disclosure, 
especially where it is important in certain infrastructure 
areas.
    Second, to encourage the reporting of more complete 
information, the Council should consider requesting that all 
the national associations publicly disclose, at a minimum, 
those companies that have responded to surveys.
    Third, for the next report of the Council scheduled in 
April, we would urge the Council to include key data to help 
evaluate the readiness of sectors and to identify each sector's 
major components and its readiness.
    And last, since the international arena, as we have heard, 
carries some of the greatest risks and uncertainties, the 
Council could consider prioritizing those trade and commerce 
activities that are most critical to our Nation's well-being 
and identify alternative options to obtain needed materials, 
should the need arise.
    That concludes a summary of my statement, and I would be 
pleased to address any questions that you may have.
    [The prepared statement of Mr. Willemssen follows:]

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    Mr. Horn. Thank you very much. I yield 5 minutes to the co-
chairman of the Task Force, Mrs. Morella, chairman of the 
Subcommittee on Technology.
    Mrs. Morella. Thank you, Mr. Chairman. I want to commend 
both of you for your excellent, succinct and candid testimony. 
I must say to GAO, Mr. Willemssen, you have certainly done a 
tremendous number of reports that all deal with Y2K. I 
remember, I think it was 3 years ago, under the issues at risk, 
at-risk issues, Y2K was mentioned then with computer security 
on it, which continues to be mentioned.
    Mr. Gershwin, I certainly again value the statement you 
made about other countries and what they haven't done, what 
they have done, and the leadership that we must show.
    I asked Mr. Koskinen kind of the question in sort of a 
rough-hewn verbiage to try to find out what is being done under 
his direction to coordinate the concerns that both of you have 
expressed. And you have expressed a series of recommendations 
throughout. You have expressed the problems with some ways that 
maybe we can look at it.
    Would you tell us, these two committees, subcommittees, how 
you work with Mr. Koskinen; what more needs to be done to push 
forward that kind of action that we need? Either of you can 
answer first.
    Mr. Willemssen. I will start first. As John mentioned up 
front, when he was here earlier, we do meet with him on a 
monthly basis and we share issues that we have, and he does 
likewise.
    In addition, as issues come up on individual agencies where 
we are doing reviews, we will give him a heads-up as soon as we 
have the available data, to let him know of our concerns and 
that we will be reporting on those.
    Similarly, with some of the suggestions we have offered 
here today, we have let him know of those suggestions, and also 
OMB, and I think it is accurate to say they, in general, agree 
with those suggestions. They also added we might be a little 
ahead of them; that they were considering these types of 
actions anyway. But we do have general concurrence.
    So we have found the working relationship to be working 
pretty well. Not to say that we haven't always wanted a little 
more aggressive action in some of these areas. But if you look 
back at some of the major recommendations we made to Mr. 
Koskinen as soon as he took the job, most of those 
recommendations now have been implemented, although some of 
them not as quickly as we would have liked.
    Mrs. Morella. Would you like to comment, Mr. Gershwin?
    Dr. Gershwin. Yes. I am the intelligence community's 
representative on the President's Council on the Y2K 
Conversion, so I regularly attend the meetings. But much more 
than that, we are heavily involved, my deputy Norm Green and I, 
in the international working group that is part of the Council. 
We have been actively involved with State Department, who 
chairs that working group, and in providing briefings to people 
in State Department about our information on the foreign Y2K 
efforts. We will be doing the same thing with the Department of 
Energy, because I have been meeting with those folks.
    We are very actively engaged with the Defense Department's 
work in the President's Council. In fact, Norm Green and one of 
the DOD people chairs a subgroup that has to do with 
international issues. So I think we are extraordinarily 
involved in the work of the President's Council, as well as 
doing our own independent analysis of this. But it is 
essentially all being provided to not only John Koskinen but 
other members of the Council.
    Mrs. Morella. Too bad we cannot clone both of you in terms 
of what you know needs to be done.
    My concern is that these governments have so many other 
problems, like the Asian financial crisis, that Y2K is still, 
regardless of your international group, still at the bottom of 
the list; and in terms of putting money into it and the 
expertise that they don't have.
    Mr. Willemssen, I am interested in, too, is the suggestions 
are made, they are listened to, affirmative response in terms 
of we agree with what you are saying. Do you, the next month 
when you meet, followup and say, these are some recommendations 
that it would have been far better had you done something with 
it; or would you tell us what you have done? What kinds of 
accountability is there other than these are some suggestions?
    Mr. Willemssen. We do followup with them. I will give you 
one example. The recommendations that we had made early in 1998 
was for John Koskinen to take a sector-based approach and 
conduct detailed assessments of those sectors. He eventually 
did that. I wish he would have done it 6 months earlier. And he 
knew that we were pushing him to do that, and I am glad that he 
has done it.
    The type of rich detailed data that we need on many of 
those sectors still isn't there. And I think when the next 
quarterly report comes out from John in April, if we still 
continue to see the dearth of rich detailed data, then we have 
to start looking at other alternatives to get that information.
    Mrs. Morella. It is a tremendous frustration, from my point 
of view, in terms of so many things need to be done. I am 
convinced we are not going to be ready, and yet I am not one 
who panics. I tell everybody, ``Don't worry, critical-mission 
systems will be taken care of.'' I am not really even sure of 
that. And I am really worried about, what did you call it, 
``business connections,'' when I talk about making sure about 
how one group links with one another. Oh, ``business continuity 
points.'' Whatever, you know exactly what I mean. The kind of 
connection I think we need to do more evaluating and working on 
that.
    So I look forward to continuing to work with both of you 
and with your very capable staffs to make sure that it is 
incorporated soon.
    Thank you, Mr. Chairman.
    Mr. Horn. Thank you. Now Mr. Turner, the ranking member, 5 
minutes for questioning.
    Mr. Turner. Dr. Gershwin, one of the concerns you addressed 
was the lack of preparation in Russia by the Russian Atomic 
Energy Ministry. If I were to ask you what are the greatest 
threats or problems that could occur, what national security 
problems would be on your top list of concerns? What kind of 
things would you list for us?
    Dr. Gershwin. As far as Russia is concerned?
    Mr. Turner. Russia and, in general, national security 
concerns.
    Dr. Gershwin. OK. National security in a broad sense is 
more than military issues, obviously, and we are really quite 
concerned now, as we see it, about world trade issues, which 
are essentially U.S. and global economic security.
    The potential for there to be enough disruption of the 
global economy that, as we have seen in the last 6 months, the 
United States is certainly tied into the global economy in a 
serious way. So I would probably put that as the top issue I 
would raise as far as the international implications.
    Another one, which I think is really quite important, is 
the fact that these disruptions, particularly in places like 
Russia and China, will be taking place in the middle of winter. 
And we have had a little taste of that in our area here in the 
last few days.
    Mrs. Morella. My area, as a matter of fact.
    Dr. Gershwin. Particularly in Montgomery County. But Russia 
is likely to experience some serious power outages. Their 
nuclear reactors, some of their nuclear reactors may shut down.
    One of the issues on their nuclear reactors is simply the 
vital role that Russian nuclear reactors play in the overall 
power distribution in that country and the difficulty they 
might have in getting them back up again, leading to serious 
power outages, which would hurt an already hurting economy.
    In addition, a worry that we have, and that we are working 
on rather hard to get more information on, is the potential for 
nuclear reactors in places like Russia to have safety problems 
in their shutdowns. If the nuclear reactors experience 
failures, if the back-up diesel generators experience failures, 
there could be electrical problems that interfere with the 
safety mechanisms in those nuclear reactors.
    While we don't want to raise the specter at this point of 
huge problems in terms of safety of nuclear reactors worldwide, 
the fact is that in Russia itself that is a concern to us, and 
we are going to be studying that in a lot more detail over the 
next few months. So I would certainly raise that, then, as an 
important national security concern because of nuclear power 
problems.
    Taking that a little further, I think just the electric 
power grids in many of these key countries are susceptible to 
some sort of failures, because I don't think most of these 
countries we are talking about, such as China and Russia, have 
done nearly the work done in North America. All of these 
countries are extremely dependent, frankly, on their electric 
power for many, many things.
    So, again, in terms of major domestic disruptions in those 
countries, leading to all kinds of economic difficulties, 
possible needs for United States and western humanitarian 
assistance to those countries in the middle of winter, I see 
some of those as the critical national security issues.
    Mr. Turner. I have seen a lot of efforts being made by our 
domestic utility companies to comply and be ready for Y2K, and 
I am sure many efforts are being made with regard to nuclear 
power plants within our own country. Have we made any efforts 
to offer international assistance, or would that be an 
appropriate response to what appears to be a very serious 
potential problem?
    I assume you are talking about that it is not beyond the 
realm of possibility that there could be another Chernobyl as a 
result of Y2K in Russia or some other country where they have 
not prepared their nuclear reactors.
    Dr. Gershwin. That would be the issue obviously we ought to 
be worried about, although at this point I think it would be 
premature to raise that flag, but I think it is something that 
we are watching.
    The Department of Energy is certainly in a position to 
discuss nuclear power issues with other countries. You would 
really have to ask them where they stand in terms of those 
kinds of discussions. But I think there is a fair amount of 
information shared from one country to another; various 
mechanisms to discuss nuclear power problems.
    One of the issues is simply that countries like Russia do 
not easily welcome advice from the West on their Y2K problems. 
There has been some discussion, but they have been very slow to 
react in many areas, and that would be one of them.
    Mr. Turner. Thank you, Mr. Chairman.
    Mr. Horn. Thank you. Vice Chairman Biggert, 5 minutes.
    Mrs. Biggert. Thank you, Mr. Chairman.
    Dr. Gershwin, you mentioned that there are many of these 
countries in the infancy stage of awareness. What is kind of 
the cutoff date? If they haven't done anything, is there a time 
that it really is too late, and then what do we do?
    Dr. Gershwin. As John Koskinen told me sometime back, when 
we start to go through these, there are countries that are 24 
months behind the United States, 36 months behind. It is never 
too late to do something. And part of the purpose of the U.N. 
meeting in December was to make it clear to countries that, as 
behind as they are, they can do an awful lot in 1999 to help 
themselves out. They may not, and in fact they won't be as well 
prepared as the United States, but they can do a heck of a lot 
better and avert a lot of the problems by doing some serious 
contingency planning and the like.
    So it is really hard to put a firm cutoff date; but, 
frankly, if a country is 24 months behind the United States, 
and the United States will be prepared without a lot of time to 
spare, then I would say a lot of the countries, particularly in 
the developing world, are going to have failures that they have 
not prepared for and are going to have to deal with the 
consequences afterward.
    The best bet, I think, for these countries is to identify 
where their problems are most likely to occur and start making 
plans for how to work around those problems.
    Mrs. Biggert. Have you seen evidence of these countries 
identifying these problems since December and since that 
meeting?
    Dr. Gershwin. It is probably a little too quick to be able 
to tell. Some of them just appointed national coordinators for 
this to get ready for the meeting in December, and a lot of 
their plans are only going to start rolling in over the next 2 
or 3 months. And, frankly, one of the problems we have in 
trying to assess this is the lack of information, certainly 
publicly available from abroad, compared to what is going on in 
this country, makes it difficult for us to gather a lot of key 
information about sectors and countries and so on.
    In the intelligence community we have other ways to get 
information, other than what people declare, but the fact is 
that openly available information would be extremely helpful to 
us. A lot of countries are simply not providing that at this 
point because I don't think they themselves even know.
    Mrs. Biggert. Well then, can you say there really is no 
problem that there might be an automatic missile launch from 
China and Russia?
    Dr. Gershwin. Fortunately, countries like China and Russia 
are countries that we have for years, for decades, we have 
studied very carefully their missile systems. I used to do that 
for a living, before I got into the Y2K business here. And so 
we know enough about the Russian strategic weapons, the Chinese 
strategic weapons to be quite confident that those systems 
should not experience the kinds of failures that would lead to 
anything automatically launched.
    The worry we do have, and as I expressed in my testimony, 
and particularly for the Russian early warning system, that the 
Russian early warning system needs some serious scrutiny by the 
Russians so that they understand the potential failures they 
could have there, and that they don't misinterpret the 
information. But in terms of automatic anything, we don't think 
automatic launches of missiles are conceivable.
    Mrs. Biggert. I think that Mr. Koskinen stated that the 
international financial transaction markets were in good shape, 
and we certainly have been working on that at a domestic level, 
for example, in Illinois. But what about the Asian financial 
markets; could this cause a problem there? And then how would 
that affect other international transactions?
    Dr. Gershwin. Well, the issue from countries in the Asian 
area is, since they have been heavily preoccupied with the 
financial problems over the last many months, it tends to 
detract from their attention on the Y2K problem. And one thing 
we have learned about the Y2K problem is, you have to be 
consistent and energetic in working the problems and then good 
things will happen.
    So, frankly, we are not yet in a position to evaluate on a 
kind of a regional basis just how well Asian financial 
solutions will take place. But certainly the countries that 
have been experiencing problems, it is a real flag that would 
go up. I indicated in my testimony that we think at least some 
of the Chinese financial institutions could have some problems. 
I would certainly worry as well about Japan, just because of 
the enormous difficulty they have had in the last many months.
    Any country experiencing global financial disruptions is 
going to focus so heavily on that that it could detract from 
their Y2K fixes.
    Mrs. Biggert. Have there been any international lawsuits 
filed over this issue?
    Dr. Gershwin. Yes, there have, and I don't know if any of 
my colleagues have any specifics on that. I know there have 
been already some international litigation being filed. Anybody 
know? No.
    Mrs. Biggert. Do you know what the type or nature of the 
litigation is?
    Dr. Gershwin. I think it has to do with western information 
technology companies that have been involved in these 
countries, and whether they have essentially provided 
technology and services which warrant Y2K compliance and, 
hence, are undermining the economies and technologies and 
companies and so on.
    But we do have some specifics on that, not a lot, but it 
has been building. We could certainly get that for you.
    Mrs. Biggert. Could you supply that for the record?
    Dr. Gershwin. Certainly.
    Mrs. Biggert. Thank you.
    Mr. Horn. Without objection it will be put in the record at 
this point.
    [The information referred to follows:]
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    Mrs. Biggert. Then a question for Mr. Willemssen. Do you 
agree with Mr. Koskinen that the traffic control system will be 
totally compliant well in advance of the year 2000?
    Mr. Willemssen. No, I wouldn't agree with that statement, 
especially well in advance. FAA's air traffic control system 
still has a lot of risks.
    FAA, its Administrator, Administrator Garvey, the Program 
Manager Ray Long, have done a tremendous job over the last 
year. Unfortunately, FAA got a very late start on this issue, 
and they are heavily automated. In some cases that automation 
is fairly archaic, and it will take a tremendous effort, 
continued tremendous effort for them to be fully compliant and 
to test those systems from an end-to-end perspective and have a 
full understanding of their data exchanges and data flows with 
other partners, such as airports, airlines, National Weather 
Service, Department of Defense.
    So am I optimistic that they will complete all of that well 
in advance? No.
    Mrs. Biggert. They have also put in new computer systems in 
some of the regions, too, and there has been some downside to 
that; there have been some failures. You suggested having a 
moratorium on software changes and other things. How is that 
going to affect?
    Mr. Willemssen. You have just pointed out another reason 
for why it is so difficult for FAA. They have multiple 
locations throughout the country. We are not talking about one 
system in one place. That increases the complexity that much 
more. And to the extent they continue installing new systems or 
modifying existing systems, every time you open up the 
software, you increase the risk of additional Y2K-related 
problems. And, therefore, that is something that FAA is going 
to have to look at as they near the end of 1999.
    Once they have certified, for example, a system is 
compliant, if they go in and modify the software, well, 
essentially, that is not really compliant anymore, if you have 
made a lot of adaptive changes or made major modifications to 
the software. So that is something for them to consider.
    Mrs. Biggert. Thank you. Thank you, Mr. Chairman.
    Mr. Horn. Thank you. Good questions.
    Let me just ask a few wind-up questions, although if my 
colleagues have other questions, fine.
    But, No. 1, on the reactors--and the vice chairman comes 
from a State where much of their electric power is from nuclear 
reactors in Illinois--what do we know about the types of 
reactors that we have around the world and the extent to which 
there can be a malfunction there of some sort that would affect 
the power grid and power coming out of those reactors?
    And if you had to look from the Moon down at the United 
States and then at Russia and then at France, because the 
competition on reactors over 30 years has been the United 
States reactors or the French reactors, what would you be able 
to tell us as to where is the highest risk that a power grid 
can go out just because of something that is built into any of 
those reactors?
    Dr. Gershwin. I think Russia is the No. 1 problem.
    Mr. Horn. How many Chernobyl-type reactors do they still 
have, or did they change that?
    Dr. Gershwin. No, they still have roughly the same number 
they had before because they really have not modernized their 
reactors.
    Mr. Horn. That is about 11 or so?
    Dr. Gershwin. No, I think there are more than that.
    Mr. Green. In the mid-fifties.
    [The information referred to follows:]

    The Number of active Chernobyl-type reactors in Russia, 
Lithuania, and Ukraine that pose a potential moderate to high 
risk of radioactive release is 14. There are some 20 reactors 
of other types in Russia and East Europe that also present a 
potential moderate to high risk.

    Dr. Gershwin. There are a number not only in Russia but 
actually in some of the other countries, in Eastern Europe, 
Lithuania, places like that.
    Those particular reactors are worrisome to us. We have 
studied in the intelligence community, with the support of the 
Department of Energy, what we call the most dangerous reactors 
in the world, apart from just Y2K issues. Russia and its former 
allies just lead that list.
    Those are dangerous in the sense of we didn't think their 
safety enhancements were very good. These are the very same 
reactors that have not really received enough Y2K attention in 
terms of Y2K remediation. And they are, obviously, extremely 
connected to the electric power grids in Russia and some of the 
other countries, which can work both ways: failures in electric 
power grid, causing reactor problems; failures in the reactors, 
causing overall reduction in the electric power available to 
run the country.
    So when you look at all that, I think the Russian reactor 
problem and those of some of the other nearby countries is 
serious, a serious problem.
    I should just mention in France, and it is an area 
obviously we are interested in as well, French reactors are 
pretty much all of the same design. If there were a Y2K problem 
in French reactors, it might affect a large number of reactors 
in France, and that could cause France to have some serious 
problems.
    This is something we will be looking into. I am not raising 
the issue right now that we are worried about France, but just 
the nature of nuclear reactors is such that we ought to look 
particularly carefully at nuclear reactors around the world. 
And we will be doing that.
    In fact, we have a study under way at Pacific Northwest 
Laboratories in the State of Washington under the Department of 
Energy guidance, which I asked them to do, to look specifically 
at reactors and the implications of reactor failures in terms 
of what could happen in those countries, both from a safety 
point of view and an energy point of view. So we will be 
looking very closely at that particular subject area.
    Mr. Horn. Is there a problem with the embedded chips within 
these reactors, or to what degree do they operate on sort of an 
automatic flow-through; that that power can be shut off under 
certain circumstances or permitted to go into the distribution 
system or what?
    Dr. Gershwin. There are certainly embedded processors in a 
lot of those systems. We don't necessarily have the exact 
designs of all those things, so in some cases we have to 
estimate it. But they are very complex indeed, in many cases 
largely because of the safety mechanism and how those are 
implemented. So nuclear reactors are certainly an area where 
the embedded processor problem could become significant.
    Mr. Horn. If you looked at American reactors the same way 
you look at Russian reactors--and you know we have had a 
blackout in the central States, we had a blackout in New York, 
we had a recent blackout in San Francisco--anything we can 
learn from what is going on elsewhere? Are we in that danger?
    Dr. Gershwin. Well, of course, we in the intelligence 
community don't really study the United States as such, so I 
can't really say about that.
    Mr. Horn. Well, I always felt you should. And when I was in 
strategic intelligence, we looked at a lot of stuff to see what 
other people could find. And all you did was go to the 
Government Printing Office and there was the plans usually for 
everything.
    Dr. Gershwin. I know there has been quite a bit of scrutiny 
already of U.S. nuclear reactors. In fact, when I was at 
Pacific Northwest Labs last month, one of their experts, who 
was a nuclear reactor designer, had in fact been visiting some 
U.S. reactors and had learned how they are dealing with the Y2K 
problem. And the message he gave me was you have to really know 
an awful lot about these reactors to identify places where 
there could be a Y2K problem, and then it is quite fixable.
    He was quite optimistic that the U.S. reactors would do 
well in this Y2K remediation. But he, as a result of that, 
became more concerned about foreign reactors because he knows 
how complicated it is to take a look at these things and figure 
out what to do.
    Mr. Horn. Moving to refining and to these huge tankers, to 
what extent do they pose a problem in terms of embedded chips, 
microprocessors?
    Dr. Gershwin. They are very heavily dependent on embedded 
processors and processor systems for many, many key functions, 
because they do a lot of monitoring, status monitoring, looking 
at recent maintenance to make sure that things are being 
maintained on a proper schedule. So there is quite a bit of 
date sensitivity in the oil industry and the shipping 
associated with it.
    So that throughout the oil industry, from extraction, 
refining, shipping and so on, there are just many, many places 
where Y2K problems can emerge. So that it is a very complicated 
business, in fact, to take a look at this. And our concern is 
because of that complexity, the potential for failure is 
significant. And we know enough about this to know that there 
is quite a bit of concern being raised about some of the 
foreign oil companies, particularly located in some of these 
foreign countries, as to how well they are going to do. It is 
an area of high interest, obviously now by the President's 
Council, by a number of folks.
    Mr. Horn. To our knowledge at this point, would there be 
any chance of an environmental spill as a result of something 
going wrong?
    Dr. Gershwin. I would just hazard a guess that, yes, that 
could possibly happen. We haven't specifically looked at that, 
but that would certainly be within the realm, I would think. 
Somebody else might disagree, but I will just give you my top-
of-the-head impression.
    Mr. Horn. Who will look at that question? Is it EPA, is it 
the Department of the Interior? Who is going to take a look at 
the environmental----
    Dr. Gershwin. I think the Department of Energy and the 
Environmental Protection Agency would seem like naturals for 
that issue.
    Mr. Horn. We are going to have them in in a couple of 
weeks. We are going at the laggards that were pretty far behind 
and trying to find out what the problem is, as well as some of 
the success stories which we ought to be sharing with the 
others.
    Do any of my colleagues have any other points here they 
would like to make?
    Mrs. Morella. This has been excellent testimony. With 
regard to the prioritizing, what should happen after that is 
done? You suggest prioritizing in terms of oil, trade, food, 
pharmaceuticals. I guess you would add nuclear reactors to 
that.
    Dr. Gershwin. Yes, and military systems generally.
    Mrs. Morella. Military systems. What actions would you 
suggest following prioritizing?
    Dr. Gershwin. Well, our role, at least in the intelligence 
community, is to try to assess the likelihood of failures in 
some of these key infrastructure areas and then assess the 
implications for the United States, which should, hopefully, 
lead to ideas for actions the United States could take to 
reduce the impact on the United States.
    If you look at sort of the oil industry example, as we get 
closer to understanding this, we should be able to have a 
better sense of a scope of the magnitude of the potential 
failures. And that should help lead to an assessment of whether 
that will have a small effect on the United States' interest or 
a big effect.
    Mrs. Morella. Have we done anything in terms of 
prioritizing, or is that just a suggestion?
    Dr. Gershwin. We are just moving in that direction now. We 
have a lot of work to do. We are still gathering data, and we 
have not done a lot of assessment yet, frankly.
    Mrs. Morella. Right. One of our problems is that we don't 
have the opportunity to have a continuing resolution when it 
comes to January 1, 2000. So I do hope you move. It is a great 
idea. I do hope you get the Council to move very fast on that.
    Dr. Gershwin. I think we are doing--there is a lot of 
energy being put into this at this point, by not only the 
President's Council but by the U.S. intelligence community.
    Mrs. Morella. Mr. Willemssen, do you have any other 
comments you want to make?
    Mr. Willemssen. No, other than glad to hear the comments 
Dr. Gershwin made that there is an increasing focus in this 
area. We need data in order to make some decisions and 
understand where our risks are so that we can take appropriate 
actions.
    Mrs. Morella. I hope you will both keep us posted, and I 
look forward to working with you. Thank you. Thank you, Mr. 
Chairman.
    Mr. Horn. Thank you.
    Mr. Willemssen, I have just one short question. Months ago 
I suggested to Mr. Koskinen that he ought to have some people 
on a weekly report to keep the heat on them. Do you know if 
they are doing that at all at this point, and are the laggards 
being separated out from the people that do know what they are 
doing?
    Mr. Willemssen. Those in the bottom two tiers are reporting 
monthly to OMB and Mr. Koskinen. One thing you may want to 
consider is, obviously, the March 31 date is fairly important. 
It may be something useful for OMB and Mr. Koskinen to report 
shortly after that date so that we know where indeed we stand 
as a Federal Government.
    And then we have to start shifting the focus away from 
compliance of individual systems and thinking more about 
compliance of key business functions and whether they are going 
to operate as intended; multiple systems, again working 
together, often across agency boundaries, often involving our 
State and local governments. That is where a lot of the 
attention is going to have to be paid in the latter part of 
1999.
    Mr. Horn. Well, those are helpful suggestions. I share Mrs. 
Morella's praise for both of you and your testimony and your 
colleagues that have helped with that.
    Today's compelling testimony, I think, further provides 
evidence that the Federal, State and local governments are 
striving to identify and solve their problems, but as Mr. 
Willemssen suggests, there are a lot of ways to go about that, 
and we can't just make it an afterthought as we concentrate 
solely on the Federal Government because we have found numerous 
connections between agencies and the State and county 
governments, for that matter, that have administered many of 
these programs for 40 or 50 years. Still, we in Congress are 
deeply concerned that much work remains. And as the President 
said last evening, Y2K must not become the first crisis of the 
21st century.
    In the very near future we will hold hearings to review the 
status of Y2K efforts at the Departments of Defense and the 
Postal Service. We have not been involved with the Postal 
Service, but our understanding is that a report of the 
Inspector General there seems to require us taking a look at it 
in conjunction with the Subcommittee on the Postal Service of 
Government Reform. In addition, we will be delving into the 
muddy area of Y2K litigation.
    As a government and as a Nation we must continue to be 
industrious and vigilant in these efforts so that we can zap 
this so-called computer bug that some people still don't 
believe in. Some think it is a hoax. Some think it is a way to 
sell books. We have heard every excuse you can think of, but 
most of us know that, in most situations, we have got a 
problem, and we ought to deal with it in some managerial, 
efficient and effective way.
    Let me now thank the staff that prepared this hearing, 
starting with J. Russell George, the staff director and chief 
counsel of the Government Management, Information, and 
Technology Subcommittee; Matt Ryan, who we are glad to have 
back with us, sitting right behind me, a senior policy adviser 
for the subcommittee; Bonny Heald, who is out there somewhere, 
and our director of communications and professional staff 
member, who has been very helpful; Matthew Ebert, our clerk, 
who puts most of this work together; and Mason Alinger, the 
staff assistant for the subcommittee; and then Paul Wicker and 
Kacey Baker, our interns. We appreciate their help.
    And for the Subcommittee on Technology, Richard Russell, 
the very able staff director of that committee; and Ben Wu, the 
professional staff member; and Joe Sullivan, is it? Am I 
reading that right? I have a problem with some people's 
penmanship, even though I am a former college professor and can 
read almost anything, who is the clerk on the Technology 
Subcommittee.
    And then for the minority, Faith Weiss is the professional 
staff member. And Earley Green, staff assistant.
    And then our overworked--and we should have taken a recess 
if we had known we were going to go this long--court reporters, 
Pam Garland and Cindy Sebo. Thank you both.
    With that, this hearing is adjourned.
    [Whereupon, at 1:55 p.m., the hearing of the joint 
subcommittees was adjourned.]
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