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





                        Y2K MYTHS AND REALITIES

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

                             JOINT HEARING

                               before the

                       SUBCOMMITTEE ON TECHNOLOGY

                                 of the

                          COMMITTEE ON SCIENCE

                                and the

                            SUBCOMMITTEE ON
                         GOVERNMENT MANAGEMENT,
                      INFORMATION, AND TECHNOLOGY

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                            NOVEMBER 4, 1999

                               __________

                       Science Serial No. 106-61

                  Government Reform Serial No. 106-67

                               __________

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


                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
61-629                     WASHINGTON : 2000


                          COMMITTEE ON SCIENCE

            F. JAMES SENSENBRENNER, Jr., Wisconsin, Chairman
SHERWOOD L. BOEHLERT, New York       RALPH M. HALL, Texas, Ranking 
LAMAR SMITH, Texas                       Minority Member
CONSTANCE A. MORELLA, Maryland       BART GORDON, Tennessee
CURT WELDON, Pennsylvania            JERRY F. COSTELLO, Illinois
DANA ROHRABACHER, California         JAMES A. BARCIA, Michigan
JOE BARTON, Texas                    EDDIE BERNICE JOHNSON, Texas
KEN CALVERT, California              LYNN C. WOOLSEY, California
NICK SMITH, Michigan                 LYNN N. RIVERS, Michigan
ROSCOE G. BARTLETT, Maryland         ZOE LOFGREN, California
VERNON J. EHLERS, Michigan           MICHAEL F. DOYLE, Pennsylvania
DAVE WELDON, Florida                 SHEILA JACKSON LEE, Texas
GIL GUTKNECHT, Minnesota             DEBBIE STABENOW, Michigan
THOMAS W. EWING, Illinois            BOB ETHERIDGE, North Carolina
CHRIS CANNON, Utah                   NICK LAMPSON, Texas
KEVIN BRADY, Texas                   JOHN B. LARSON, Connecticut
MERRILL COOK, Utah                   MARK UDALL, Colorado
GEORGE R. NETHERCUTT, Jr.,           DAVID WU, Oregon
  Washington                         ANTHONY D. WEINER, New York
FRANK D. LUCAS, Oklahoma             MICHAEL E. CAPUANO, Massachusetts
MARK GREEN, Wisconsin                BRIAN BAIRD, Washington
STEVEN T. KUYKENDALL, California     JOSEPH M. HOEFFEL, Pennsylvania
GARY G. MILLER, California           DENNIS MOORE, Kansas
JUDY BIGGERT, Illinois               Vacancy
MARSHALL ``MARK'' SANFORD, South 
    Carolina
JACK METCALF, Washington
                     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                PATSY T. MINK, Hawaii
THOMAS M. DAVIS, Virginia            CAROLYN B. MALONEY, New York
DAVID M. McINTOSH, Indiana           ELEANOR HOLMES NORTON, Washington, 
MARK E. SOUDER, Indiana                  DC
JOE SCARBOROUGH, Florida             CHAKA FATTAH, Pennsylvania
STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
MARSHALL ``MARK'' SANFORD, South     DENNIS J. KUCINICH, Ohio
    Carolina                         ROD R. BLAGOJEVICH, Illinois
BOB BARR, Georgia                    DANNY K. DAVIS, Illinois
DAN MILLER, Florida                  JOHN F. TIERNEY, Massachusetts
ASA HUTCHINSON, Arkansas             JIM TURNER, Texas
LEE TERRY, Nebraska                  THOMAS H. ALLEN, Maine
JUDY BIGGERT, Illinois               HAROLD E. FORD, Jr., Tennessee
GREG WALDEN, Oregon                  JANICE D. SCHAKOWSKY, Illinois
DOUG OSE, California                             ------
PAUL RYAN, Wisconsin                 BERNARD SANDERS, Vermont 
HELEN CHENOWETH-HAGE, Idaho              (Independent)
DAVID VITTER, Louisiana


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

   Subcommittee on Government Management, Information, and Technology

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

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
          J. Russell George, Staff Director and Chief Counsel
                  Matthew Ryan, Senior Policy Director
    Bonnie Heald, Communications Director/Professional Staff Member
                          Chip Ahlswede, Clerk
           Trey Henderson, Minority Professional Staff Member


                            C O N T E N T S

                              ----------                              

                            November 4, 1999

                                                                   Page
Opening Statement by Representative Constance A. Morella, 
  Chairwoman, Subcommittee on Technology, U.S. House of 
  Representatives................................................     1
Opening Statement by Representative James A. Barcia, Ranking 
  Member, Subcommittee on Technology, U.S. House of 
  Representatives................................................     7
Opening Statement by Representative Debbie Stabenow, Subcommittee 
  on Technology, U.S. House of Representatives...................     8
Opening Statement by Representative Jim Turner, Subcommittee on 
  Government Management, Information, and Technology, U.S. House 
  of Representatives.............................................     9
Opening Statement by Representative Judy Biggert, Subcommittee on 
  Technology, U.S. House of Representatives......................    82
Opening Statement by Representative Steve Horn, Subcommittee on 
  Government Management, Information, and Technology, U.S. House 
  of Representatives.............................................    85

                               Witnesses

The Honorable John A. Koskinen, Special Assistant to the 
  President, Chairman, Y2K Conversion Council:
    Oral Testimony...............................................    11
    Prepared Testimony...........................................    14
    Biography....................................................    19
The Honorable Joel Willemssen, Director of Civilian Agencies 
  Information Systems, United States General Accounting Office:
    Oral Testimony...............................................    20
    Prepared Testimony...........................................    22
    Biography....................................................    73
The Honorable Barry F. Scher, Vice President of Public Affairs, 
  Giant Food, Inc.:
    Oral Testimony...............................................   101
    Prepared Testimony...........................................   104
    Biography....................................................   108
    Financial Disclosure.........................................   110
The Honorable J. Patrick Campbell, Chief Operating Officer and 
  Executive Vice President, The Nasdaq-Amex Market Group, Inc.:
    Oral Testimony...............................................   111
    Prepared Testimony...........................................   113
    Biography....................................................   126
The Honorable Ronald Margolis, Representing the American Hospital 
  Association, Chief Information Officer, University of New 
  Mexico Hospital, Health Sciences Center:
    Oral Testimony...............................................   127
    Prepared Testimony...........................................   129
    Biography....................................................   139

                                Appendix

Booklet:
    Y2K and You, Prepared by the President's Council on Year 2000 
      Conversion, Federal Emergency Management Agency, Federal 
      Trade Commission...........................................   157

 
                        Y2K MYTHS AND REALITIES

                              ----------                              


                       THURSDAY, NOVEMBER 4, 1999

        House of Representatives, Subcommittee on 
            Government Management, Information, and 
            Technology, Committee on Government Reform, 
            Joint with the Subcommittee on Technology, 
            Committee on Science,
                                                    Washington, DC.
    The Subcommittees met, pursuant to call, at 2:15 p.m., in 
room 2318, Rayburn House Office Building, Hon. Constance A. 
Morella (Chairwoman of the Subcommittee on Technology) 
presiding.
    Chairwoman Morella. I am going to gavel the joint 
subcommittees' hearing to order.
    You just heard the beeper; we're going to have a series of 
about four, probably maybe even five votes. But I thought I 
would give an opening statement and then return right after the 
votes. There is also a markup taking place in Government 
Reform, which is where our co-chair is right now, and that is 
why you do not have the members here. They will return. But I 
will at least comment on what we are here today to listen to 
and what the topic is of the meeting.
    I want to welcome all of you to the House's Y2K Working 
Group, that is comprised of the Science Committee's Technology 
Subcommittee and the Government Reform Committee's Government 
Management, Information, and Technology Subcommittee.
    With the anticipated adjournment of the first session of 
this 106th Congress looming before us, this hearing is expected 
to be the culmination of our House Y2K Working Group efforts 
before the January 1, 2000, deadline.
    It is sometimes hard to believe that we have focused on 
this issue ever since the spring of 1996. When our two 
subcommittees held the first congressional hearings 3\1/2\ 
years ago on the then little publicized year 2000 computer 
problem, the millennium bug seemed to be more suited to the 
realm of exterminators than Congress. But our Y2K review 
revealed some troubling news. At that time, our Nation was 
simply not moving forward with the required dispatch to 
effectively respond to the devastating effects of the 
``mother'' of all computer glitches, potentially crippling 
vital Government functions, critical industry performance, and 
our robust economy.
    We in Congress attempted to step up to the plate by raising 
awareness about the problem and by pushing Federal agencies and 
private industry toward immediate corrective measures. We did 
this through a series of comprehensive hearings, vigilantly 
exercised our oversight authority, and enacted laws that 
required the creation of a national Federal strategy and 
prohibited the purchase of Federal information technology that 
was not Y2K compliant.
    It was clear, however, that despite our congressional 
powers, the legislative branch alone was ill-suited to lead our 
Nation's Y2K efforts. We desperately needed the help of the 
President's executive powers. We were frustrated by what seemed 
to be the lack of leadership. It was clear to us that without 
greater urgency and aggressive agency management, Federal 
agencies were at risk of being unable to provide services or to 
perform functions that are critical to its mission and vital to 
the American public.
    We spent a year urging the President to personally embrace 
the need for Federal action and to appoint a Y2K czar to 
oversee the Nation's public and private sector initiatives, 
until he finally appointed a very capable man, who is here 
today, John Koskinen, to chair the Year 2000 Conversion 
Council. Given the late start in his appointment, John, who was 
lured out of retirement to take on this herculean task, 
obviously had his work cut out for him. And while we have not 
necessarily agreed on all aspects of our Nation's Y2K strategy, 
I want to say to John that your extremely competent 
achievements, performed with such a high level of professional 
dedication and commitment to public service, really do deserve 
recognition.
    Since John's appointment, we in Congress have successfully 
worked together to require greater Federal and private sector 
disclosures, provide a special Federal appropriation solely for 
Y2K efforts, raise Y2K awareness throughout the country, and 
enact laws to improve Y2K readiness, and to curb the number of 
frivolous glitch-related law suits.
    Yet, as we now move toward the remaining 50 days before the 
unforgiving and immovable Y2K deadline, Americans still have a 
number of questions about how, in the midst of all their 
millennium celebrations, they will be affected, if at all, by 
the year 2000 problem. We know the American people are counting 
on us.
    This hearing is designed to respond to some of those 
questions. I am pleased that we have a distinguished panel of 
witnesses that seek to help us provide some of those answers 
today.
    Finally, before I turn to our ranking member of the 
Technology Subcommittee, I want to thank, on behalf of both of 
us including Chairman Horn, who will be with us later, to all 
of our fellow colleagues on the House Y2K Working Group, I want 
to thank them for their leadership, support, and participation. 
It is also important to note that our Y2K efforts have been 
bipartisan. I want to commend our ranking members, Mr. Barcia 
of Michigan, who is here with us, Mr. Turner of Texas, Mr. 
Gordon of Tennessee, Mrs. Maloney of New York, Mr. Kucinich of 
Ohio.
    And now I would be very happy to recognize the Ranking 
Member of the Technology Subcommittee, Mr. Barcia, for any 
opening remarks before we go vote.
    [The prepared statement of Hon. Constance A. Morella 
follows:]

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    Mr. Barcia. Thank you, Chairwoman Morella. I want to return 
the compliment and thank you for the leadership and the 
bipartisan nature in which you have conducted the hearings of 
this subcommittee, and the tremendous amount of energy and time 
that you have invested in this Y2K issue and its importance to 
the citizens across the country.
    I want to join my colleagues on the subcommittee in 
welcoming our distinguished panel to this last hearing of the 
year 2000 computer bug.
    Over the past 3 years, we have held hearings on almost 
every aspect of the Y2K problem; on Federal agencies' efforts, 
international issues, State and local government efforts, the 
impact on industry, and liability. Although confident with the 
strides made by Federal agencies, we continue to be hampered in 
our assessment of the impact of the year 2000 problem on State 
and local governments and industry because there is still a 
lack of factual information on Y2K readiness.
    I urge our panelists today to provide us with as much 
specific information as possible about the overall level of Y2K 
readiness in the United States and abroad, if you can. If we 
are to calm public fears, we must provide the public with 
facts.
    This series of hearings has served to educate the public 
about the magnitude and scope of the Y2K problem. And although 
it has been my experience that most people are aware of the Y2K 
issue, they still do not have a good understanding of its 
potential impact or lack of impact. I am concerned because, 
unless we get the message out, the level of public fear could 
rise.
    What could be the single largest public awareness 
announcement, a November 21st made for television movie, 
entitled, ``Y2K: The Movie.'' According to news reports, this 
movie has the U.S. Government grounding all airplanes, the 
Eastern seaboard experiencing a major power outage, and even 
worse problems yet to come. In the absence of facts, what is 
designed to be entertainment could achieve the saddest effect.
    As this is the last hearing, I would like to commend Mr. 
Joel Willemssen and the staff of GAO for the outstanding work 
that they have done during the past 3 years. I would also like 
to commend Mr. Koskinen for the coordination role his office 
has provided in the administration's Y2K efforts. And, of 
course, finally, I want to thank the witnesses for appearing 
before us. I look forward to hearing your comments.
    Thank you, Madam Chair.
    [The prepared statements of Hon. Debbie Stabenow and Hon. 
Jim Turner follow:]

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    Chairwoman Morella. Thank you, Mr. Barcia.
    As you probably know from the timing, we have got to go 
over to vote. We have got about 6 minutes, if even that, before 
the vote. There are going to be about five procedural votes.
    Mr. Koskinen, I know you must leave here shortly. So what I 
will do is go over and vote and, if there is a 15 minute 
interval, come back so we can hear some of your oral testimony. 
Will there be somebody else here who could also respond to any 
questions we may have when you have to leave?
    Mr. Koskinen. Well, with all these wonderful witnesses, 
someone will know. But there is no one else from my office.
    Chairwoman Morella. And you have a written testimony for 
us, too, which will be part of the record.
    So I shall return after our first vote when we have a 15 
minute interval. For the rest of you, it will probably be about 
three-quarters of an hour before we reconvene fully the hearing 
beyond Mr. Koskinen. Thank you.
    [Recess.]
    Chairwoman Morella. I am going to reconvene the joint 
hearing.
    I am going to ask Mr. Koskinen and Mr. Willemssen, in the 
tradition of the Science Committee, if they would please stand 
and raise their right hands. Do you swear that the testimony 
that you are about to give is the truth, the whole truth, and 
nothing but the truth?
    [Witnesses respond in the affirmative.]
    Chairwoman Morella. The record will show an affirmative 
response.
    Mr. Koskinen, we are delighted that we will have you give 
us your comments at this very last meeting of the year 1999 of 
the Joint Y2K Working Group.

   TESTIMONY OF HON. JOHN KOSKINEN, SPECIAL ASSISTANT TO THE 
     PRESIDENT, CHAIRMAN, PRESIDENT'S COUNCIL ON YEAR 2000 
 CONVERSION; AND JOEL C. WILLEMSSEN, DIRECTOR, CIVIL AGENCIES 
      INFORMATION SYSTEMS, U.S. GENERAL ACCOUNTING OFFICE

    Mr. Koskinen. Thank you. Good afternoon, Chairwoman 
Morella. I am pleased to appear before you today to discuss the 
year 2000 issue, or Y2K, as it is known. Let me begin by 
thanking the Chairwoman for her very kind comments which I 
genuinely appreciate.
    The subcommittees themselves deserve great credit for their 
continuing interest in the Y2K issue. Your efforts have helped 
to increase the visibility of this important challenge within 
the Federal Government and the country as a whole.
    With your permission, I will submit my full statement for 
the record and summarize it here.
    Chairwoman Morella. Hearing no objections, so ordered.
    Mr. Koskinen. In keeping with the title for this hearing, 
let me begin with what I believe are some of the more important 
myths and realities regarding the Y2K issue.
    One of the more troubling Y2K myths is the notion that 
January 1 is a seminal date on which everything, or nothing, 
Y2K-related will occur. As you know, year 2000 challenges can 
happen any time a computer that is not Y2K-compliant comes into 
contact with a year 2000 date, before or after January 1. In 
fact, a number of businesses and governments have already had 
to use year 2000 dates in their automated operations. 
Information technology professionals are well aware that the 
Y2K challenge is not limited to January 1 and they will be 
monitoring systems well into the New Year for flaws in billing 
and financial cycles and possible slow degradations in service.
    Another important myth deals with the reporting of Y2K 
readiness data. It goes something like this: Self-reported Y2K 
information is not valid since people will not voluntarily 
report problems, so virtually everything we have heard in terms 
of industry and Government progress reports cannot be believed. 
This is not true for several reasons. Most organizations have 
structures in place whereby independent authorities have been 
reviewing the results of Y2K testing. In some industries, such 
as electric power, Government agencies have conducted selected 
audits of the reported information and found no major 
discrepancies. And, most importantly, the industry surveys done 
for the President's Council have been conducted pursuant to the 
Year 2000 Information and Readiness Disclosure Act provisions, 
which the Congress passed at our urging last year. This act 
guarantees individual companies that their responses to these 
surveys will be treated confidentially, such substantially 
increases the likelihood of candid responses.
    In the interest of time, let me now move to a discussion of 
the operation of the Council's Information Coordination Center, 
or ICC, as it is known.
    The ICC will be the Federal Government's central point for 
coordinating a wide range of information on system operations 
and events related to the Y2K transition that will be collected 
by Government emergency centers and the private sector. The ICC 
will gather information about system operations in Federal 
agencies; among State, local, and tribal governments; in 
critical areas of the private sector; and internationally.
    To accomplish this task, we are relying to the greatest 
extent possible on existing structures and expertise. 
Domestically, information on systems operations will be 
collected by the States and provided through normal channels to 
FEMA which will review the reports and pass them on to the ICC. 
In addition, the ICC will receive reports from national 
information centers established, many for the first time, by 
the private sector. The status reports will be provided to 
appropriate lead agencies. We presently have agreements with 
the electric power, banking, finance, telecommunications, oil, 
gas, airline, pharmaceutical, and retail industries to operate 
information centers during the rollover period and to share 
information on the status of their members with the ICC.
    The ICC will receive international status reports from the 
State Department, the Defense Department, the intelligence 
agencies, private sector information centers, and national Y2K 
coordinators around the world. In addition, the ICC will work 
with the National Infrastructure Protection Center and Computer 
Emergency Response teams here and around the world to monitor 
unauthorized intrusions into systems.
    Information gathered by the ICC will be the basis for 
complete, regularly updated national and international status 
reports that will be provided to all Federal agencies and 
organizations sharing information with the center. These 
reports will help agency decision makers determine what, if 
any, Federal actions are appropriate in response to Y2K-related 
difficulties. Status reports will also be provided on a regular 
basis to the Congress and to the public.
    As I mentioned earlier, based on available information, we 
do not believe the Y2K issue will create significant problems 
in the United States. But no one can rule out the possibility 
that there will be temporary disruptions in some services. This 
week we published ``Y2K and You,'' an information booklet on 
the Y2K issue as well as a ``Y2K Preparedness Checklist,'' 
which I am submitting as part of the record. Our suggestions 
include preparing for the long holiday weekend by having at 
least a 3 day supply of food and water, keeping copies of 
important financial records before and after January 1, 2000, 
and checking with manufacturers to make sure that home 
electronic equipment is Y2K ready.
    Perhaps most importantly, whatever people are going to do 
to prepare, they should do it early. If everyone waits until 
the last moment to take even modest precautions, supply systems 
could be overwhelmed.
    When I appeared before you in January of this year, I 
closed by saying that overreaction by the public to real or 
perceived Y2K risks was in some ways our greatest challenge. I 
still believe that. On the other hand, our goal is not public 
complacency. All of us need to encourage the public to take the 
appropriate steps to be ready for the date change. As I said in 
January, the way to achieve this delicate balance is to provide 
people with as much information as possible about Y2K readiness 
efforts, the good and the bad.
    Thank you for the opportunity to continue this process of 
information sharing here today. I would be pleased to answer 
any questions you may have now or in the future.
    [The prepared statement of Mr. Koskinen follows:]

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    Chairwoman Morella. Thank you, Mr. Koskinen.
    I am now pleased to recognize Mr. Willemssen. But as I do, 
I just want to comment on the fact that the GAO mission is to 
independently audit all Federal Government agencies and we have 
worked very closely with GAO over the past 3\1/2\ years on the 
year 2000 computer problem. Just as John Koskinen has 
demonstrated an exemplary dedication and commitment to public 
service, so has Joel Willemssen. He has always been ready to 
assist. His contributions to our House Y2K Working Group's 
efforts cannot be understated. He has been very much 
appreciated. And while he may have been a thorn in the side of 
agencies that required greater congressional attention, he is 
also one of the reasons that those agencies have redoubled 
their efforts to comply with the Y2K computer glitch. So, in 
welcoming Mr. Koskinen, I welcome Mr. Willemssen for his 
comments.

                TESTIMONY OF JOEL C. WILLEMSSEN

    Mr. Willemssen. Thank you very much, Chairwoman Morella. 
Thank you for inviting us to testify today. And as requested, I 
will briefly summarize our statement.
    In early 1997, we identified Y2K as a high risk area for 
the Federal Government. Since that time, we have observed 
substantial progress in the Federal Government's Y2K readiness. 
While this progress has been significant, it has not been 
uniform among all Federal agencies. Some agencies have long had 
strong Y2K programs, others have made dramatic improvements, 
while still others must continue to be monitored carefully.
    For example, on one end of the spectrum is the Social 
Security Administration, which started its program 10 years 
ago, has been very responsive to any issues that have surfaced, 
and has been a government-wide leader in such areas as 
contingency planning and day one planning. Departments such as 
Veterans Affairs and Education have made major strides in 
readiness after relatively slow starts. Other agencies and 
departments have also made major progress, but still need to be 
monitored closely because of the criticality of information 
systems to their missions and the work that remains 
outstanding. These agencies would include: the Health Care 
Financing Administration, the Department of Defense, FAA, and 
IRS. For example, DOD reports that it still has 31 mission 
critical systems that are not Y2K compliant, 6 of these are not 
expected to be compliant until December.
    Beyond the compliance of individual systems, significant 
progress has also been made in improving the Government's 
overall approach. For example, OMB has identified 43 high 
impact programs as the Government's top priorities. Further, 
agencies are performing end-to-end testing of multiple systems 
supporting key business functions, and they have developed 
business continuity and contingency plans and day one 
strategies.
    Regarding State governments, the available information 
indicates that States have greatly improved their readiness 
during this year, with only 4 States now reporting less than 75 
percent of mission critical systems completed compared to 40 
States reporting this status earlier this year. Nevertheless, 
there is still much work to do for many of these States. For 
example, as we testified last month, many States were not 
planning to be compliant for some key human services programs, 
such as Medicaid, Food Stamps, and Child Support Enforcement, 
until last quarter of 1999.
    Y2K is also a challenge for the public infrastructure and 
key economic sectors. Our work has identified sectors that are 
clearly leaders on Y2K, while others are lagging behind. For 
example, banking and finance have clearly been a Y2K leader. 
Among the areas most at risk, however, are health care and 
education.
    For health care, we have testified on numerous occasions on 
the risks facing Medicare, Medicaid, and biomedical equipment. 
We remain concerned about the overall readiness of this sector.
    Regarding education, recent surveys conducted by the 
Federal Department of Education show that many school districts 
and post-secondary institutions are not yet compliant. In 
September, our report on the Y2K readiness of 25 of the 
Nation's largest school districts revealed that only 7 believed 
that all their mission critical systems were compliant, and 9 
said they didn't plan to finish until December.
    That concludes a summary of my statement. I will be pleased 
to address any questions you may have. Thank you.
    [The prepared statement of Mr. Willemssen follows:]

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    Chairwoman Morella. Thank you, Mr. Willemssen.
    I know that Mr. Koskinen is going to have to leave us soon, 
and we have another vote.
    Mr. Koskinen. No, I am actually here till 3:30.
    Chairwoman Morella. Till 3:30. Very good. I guess I will 
start off with the concept that I have heard from some 
quarters, that there has been a little criticism from the Y2K 
community, maybe because you represent the Government, but the 
criticism has been that you have been overly optimistic about 
your assessments and that what you say should sort of be taken 
with a grain of salt. I wonder, how do you respond to those 
critics? You base a lot of your assessments on self-reporting. 
I wonder how much faith do you have in these self-reported 
data, and picking up also on what Mr. Willemssen had said about 
the areas of education and health.
    Mr. Koskinen. Well, there are a few things to note. First 
of all, there is a very small minority of people out there who 
are in the activist community who do think that, in fact, we 
are going to confront much greater damage and challenges than 
the evidence supports. None of those people have any evidence 
that disputes any of the surveys that have been presented, any 
of the information provided by the private sector or the 
Government.
    So, at this point, our view is, and continues to be, that 
we have an obligation to the public to provide them all the 
information we have, the good information and the areas we are 
troubled about. Those who have been concerned about whether we 
are too overly optimistic have been unhappy that we think that 
the critical infrastructure in this country, indeed, is going 
to work. Power, telecommunications, banking, finance, air 
traffic systems, all have been demonstrated to be ready.
    But they have ignored the fact that we have in fact for 
some time, certainly in the last year, have been pointing to 
areas where we are concerned. We have been concerned about 
developing countries abroad, as Mr. Willemssen has noted, we 
have been concerned about and our surveys have demonstrated the 
risks involved in smaller institutions in health care and 
education, in small businesses, at the local government level. 
So that I think what you have to do is take with a grain of 
salt those people who are concerned about whether we are over 
optimistic or under optimistic.
    The real issue is what are the facts as we know them, what 
are the facts as industries have them, and then people need to 
respond accordingly. Our view has been all we are doing is 
telling you what we know, what we have been told. I talked in 
my prepared statement and my oral statement about why we have 
reasonable confidence in the survey data that has been provided 
because it has been provided confidentially. And as noted, if 
people were going to make it up, they would have made up total 
compliance some time ago, and the surveys have not done that.
    Chairwoman Morella. I do notice that organizations, 
businesses, and even communities are coming out with their Y2K 
checklists, and obviously we have yours. I received one 
recently from an area that I represent. It is a little bit 
troublesome the list of items that they say one must need. You 
must change from standard incandescence to compact fluorescence 
and halogen, replace all appliances' solar panels and wind 
generators, composting toilets, reflector-powered ovens, crank-
powered radio, et cetera. It goes on and on with a whole list 
of things.
    Do you think, again on the other side, that there are areas 
or people that are actually contributing to panic?
    Mr. Koskinen. Well, there are clearly those from the start, 
over the last 3 to 4 years, who have for one reason or another 
been predicting the end of the world as we know it on the 
ground that this is a massive problem, which indeed it is, but 
their prediction has been we will never be able to solve it. My 
disagreement with them has not been that it is a massive 
problem, it has been with whether we will be able to solve it.
    I think there are still people pushing that if you do not 
buy a lot in New Mexico and leave town, at a minimum, you ought 
to be prepared with three to six months supplies, which I think 
there is no evidence to support. On the other hand, there are 
concerned civic groups that think that more than 3 days 
supplies are necessary.
    Our view has been, and our brochure talks about, at least 3 
days supply. And we stress that people need to take a look at 
their own circumstances. In the community conversations we have 
run across the United States, when I was in Miami, there they 
were talking about preparations of 7 to 10 days because that is 
their experience with hurricanes. In Los Angeles, their 
standard is a week.
    What we have said is everyone needs to take a look at what 
their own personal situation is, what the situation is where 
they live. If you are in a rural community and it takes longer 
to find you, you will have a different approach to it. If you 
live in Minnesota, your approach will be different than if you 
are in Florida.
    And so what we think is important, again, is for everybody 
to decide in light of the facts as they see them what they feel 
most comfortable about. Clearly, we think if the whole country 
decided that they wanted to at the last minute have months of 
supplies of food and water, or in fact take a lot of other 
activities, that by itself could create a problem where there 
is no basis for one.
    Chairwoman Morella. You have been trying to create a 
balance, I can see.
    Mr. Wu, the gentleman from Oregon, who is on our 
subcommittee, may not be able to return after the next vote. So 
I am going to let him ask a question.
    Mr. Wu. Thank you, Madam Chairwoman.
    I would like to ask the panel, as you all know, the 
Securities and Exchange Commission has for some time required 
that private companies which are publicly held make disclosure 
of Y2K vulnerability in their annual statements on form 10K. 
How satisfied are you that these publicly held companies have, 
as they say, made full and fair disclosure of their Y2K 
vulnerabilities under the circumstances as warranted?
    Mr. Koskinen. We have not made a judgement about that. We 
have not reviewed those in any detail. We have been more 
comfortable and confident with the information we have 
collected through the industry associations because, again, 
that is information provided with a guarantee under the statute 
that it is confidential, it cannot be reached by litigants or 
even the Federal Government.
    There is a dispute, some companies are held up as models of 
disclosure in the SEC filings, others are held up as models of 
obfuscation. I think it obviously runs across the spectrum. But 
the judgements about the adequacy of that I think are 
appropriate judgements for the SEC to make since it is their 
regulations and their filings.
    Mr. Willemssen may have a different view.
    Mr. Willemssen. Congressman, we have not done an analysis 
of those submissions. So I am not in a position to address that 
question.
    Chairwoman Morella. Gentlemen, we are going to recess for 
probably about 15 minutes and then we will return.
    [Recess.]
    Chairwoman Morella. The subcommittee will come to order.
    I would now like to recognize Mr. Bartlett for his 
questioning.
    Mr. Bartlett. Thank you very much.
    When you listed the items that you suggested people have in 
preparation, I noticed it was food and water primarily. January 
1 is in the northern part of our country very cold. It is also 
just a few days after the shortest day in the year, with a lot 
of darkness. A few flashlight batteries probably will not 
suffice. What advice do you give relative to heat and light?
    Mr. Koskinen. At this point, we do not advise anybody to 
take power into their own hands and go buy generators, again, 
unless you are out in the rural area, if you are at risk in the 
winter time from long term power outages. If Y2K is the first 
time you ever decide to deal with that, that is important to do 
it. But we do not think, in light of what we know, that there 
is any risk.
    The power industry will operate that weekend normally at 50 
percent of capacity. They will have all of the capacity or most 
of it spinning that weekend. So we can lose a lot of power 
companies, which we do not expect to lose any of them, before 
we will run out of power. The oil and gas industry is basically 
at close to 95 percent done with their work. They will, in 
fact, have oil and gas readily available.
    So, at this juncture, we do not see any indication that we 
are going to have any outages, there will be glitches, that 
will last more than a few minutes. So the question about what 
happens if the power goes out in the winter time is a long term 
question people need to address regularly. We have ice storms 
and blizzards and your chances of having power outages are, in 
fact, greater I think because of an ice storm or a blizzard 
than Y2K.
    And the question is ``What do you do in those circumstances 
in your communities?'' There have been places in the United 
States in the northeast in blizzards and ice storms that have 
had power outages for days rather than hours. And the answer is 
whatever their emergency plans and backup systems are for those 
situations obviously would be applicable here. We do not think 
there is a Y2K necessity to change to deal with those issues 
beyond what you normally deal with.
    Mr. Bartlett. My personal feeling is that it will come and 
go and we will hardly notice it. But I also think that tonight 
will come and go and my house will not burn. But still I have 
fire insurance on my house. So as a prudent person, I think it 
is incumbent on us to have the equivalent of fire insurance for 
this possibility.
    Looking at it that way, what would you say would be the 
equivalent of the fire insurance policy you have on your home 
for Y2K?
    Mr. Koskinen. We think the equivalent of fire insurance on 
your home is the checklist we have put out. Again, as I say, if 
you think you are at risk of power going out, I think your 
greater risk is in an ice storm and you ought to be prepared 
for this weekend the same way you are prepared for the 
possibility of an ice storm. What happens in ice storms is 
people go to shelters, power is usually not out everywhere and 
they go to places where there is power. We have not had a 
problem from any of the great blizzards or ice storms in this 
country with people suffering because of the lack of heat or 
power. And whatever those processes are, the emergency managers 
around the United States are prepared with their normal 
precautions. We have, in fact, been in close contact with them 
and they are prepared to respond as they always do in the 
winter time if there are any outages.
    Mr. Bartlett. What concerns many people about the power 
grid is that it tends to fall back on itself. A minor problem 
in one place can, like dominoes, cause major problems in other 
places--the great northeast blackout and subsequent blackouts 
that were supposed to be fixed and could not happen, yet they 
did happen.
    Do we have contingency plans so that this kind of thing 
will not happen?
    Mr. Koskinen. The power industry is prepared. As I say, 
first of all, we will have substantial excess capacity. In 
fact, if there is any challenge to the grid, it will be lowered 
load demand rather than increased load demand to make sure we 
have stability. They, as I say, will have most of their systems 
spinning, not producing power on the grid but basically 
available to fill in if need be. They will make sure that there 
is room on the transmission lines to transmit power from area 
to area in case there is any need for that to be done. So they, 
in fact, have run two national contingency plan exercises 
testing how to run power plants without telecommunications, 
what their other contingency plans are, and they have gone 
through all of that with virtually every major power company in 
the United States in April and September. They are extremely 
confident. Their business is reliability. Their responsibility 
is responding to emergencies. And they are prepared to do that.
    Mr. Bartlett. How do they simulate the embedded chip 
problem? I understand with computers, we should be having some 
problems now because of Y2K because many computers are looking 
ahead several months.
    Mr. Koskinen. Right.
    Mr. Bartlett. I am not seeing any problem, so I suspect 
that in terms of the programming that has been pretty well 
fixed. But what about the concern about embedded chips where 
there is no way to test them ahead of time? If it is a generic 
chip and you are not using the time function, that if it has a 
date code in it, the chip, as I understand, could shut down 
anyhow. How are they testing for embedded chips? And are they 
prepared to wire around these tens of thousands of embedded 
chips that are in components that they really cannot test for?
    Mr. Koskinen. Embedded chips have been an issue that the 
industries generally, in addition to electric power, have been 
focused on. At this point, no one has found an example even 
though the web pages and the doomsayers continue to say there 
are functions in there for clocks that even if you are not 
using them are going to shut you down. No one yet has been able 
to provide a case where functionality not being used actually 
shut the production down. And in fact, the power companies have 
not found a Y2K problem failure that would shut down 
production.
    But what they are all doing is they have reviewed those 
chips, they know where they are. They have reviewed them with 
manufacturers. Wherever they can, they have rolled the control 
systems and other systems forward to see what will happen. But 
the bottom line is, the reason we are all talking about nobody 
can guarantee perfection, is until we actually roll through 
either Greenwich Mean Time--some are set by Greenwich Mean 
Time, some are set on midnight--until we roll through those, we 
will not be able to conclusively demonstrate there is no 
problem. But at this point, I would stress no one has reported 
a problem where you could track it to a system that had that 
hidden clock problem that you are talking about.
    Mr. Bartlett. Greenwich Mean Time is 7 p.m. here, is that 
correct?
    Mr. Koskinen. It is 7 p.m. New Year's Eve.
    Mr. Bartlett. So if there is going to be an embedded chip 
problem, you will expect it at 7 p.m., and not midnight?
    Mr. Koskinen. No. It depends on how the systems are 
structured and where they take their time derivation.
    Mr. Bartlett. But for all of those chips that have 
Greenwich Mean Time, it will be 7 p.m.?
    Mr. Koskinen. It will be 7 p.m. So, 7 p.m. New Year's Eve 
we will know a lot. We will actually know a lot starting at 7 
a.m., New Year's Eve because New Zealand will go into the Year 
2000 at 7 a.m., Australia will go at 9 a.m., and we will 
monitor how the world is doing. And if there are going to be 
systemic problems, we will have plenty of warning in terms of 
whether they are systemic and occurring.
    Mr. Bartlett. My last question. Several months ago the 
power industry testified before this committee. They told us 
then that because of the tens of thousands of embedded chips 
that they probably would not be ready, but they were sure they 
could wire around it. Has that changed?
    Mr. Koskinen. All I know is what the public information 
surveys from them are, and that is that they are prepared. They 
think that they have done now 100 percent of their work, 
including looking and working on embedded chips and being able 
to respond. And we have no information that any power company 
is not prepared for the rollover.
    Mr. Bartlett. Thank you very much.
    Chairwoman Morella. Thank you, Mr. Bartlett.
    I now want to ask Mr. Baird from the State of Washington if 
he wants to ask any questions.
    Mr. Baird.
    Mr. Baird. Thank you, Madam Chair.
    One of the concerns I have is I sort of did a mental 
checklist of my district and said what are the various 
potential problems. For example, we have large chemical 
manufacturing plants not that far away from residential areas. 
And one of the questions I had was let us suppose the worst 
case scenario; let's suppose a power outage comes along that 
impairs certain procedural machines or something within the 
chemical processor, they begin to have a breakdown, dangerous 
chemicals are released into the environment, we have got 
communications problems and transportation problems. I am not a 
doomsdayist by any means, but if I were a local community, I 
would like to have run through those various scenarios.
    To what extent do you believe local communities have done 
that? And what should we do if they have not done it yet?
    Mr. Koskinen. I think some communities have and, 
unfortunately, some communities have not. We held a White House 
Round Table on chemical manufacturing. We had a press 
conference, it produced a lot of information. We are trying to 
reach out. I have written a personal letter to every Governor 
in the United States drawing their attention to the problem, to 
the programs that California and New Jersey have for reaching 
out to the local levels.
    But, clearly, it is exactly as you note, an emergency 
preparedness problem at the local level. We have encouraged the 
companies to be in touch with their local emergency planners. 
But the local emergency managers and public officials need to 
make sure that they know, they should know beyond Y2K purposes, 
where those plants are, what the emergency preparedness is, 
and, most importantly I think, is to ensure that people are on 
alert over that weekend and people know immediately how to get 
in touch with each other and what the plans are if there are 
any difficulties, whether, again, it is from Y2K or for some 
other purpose.
    Mr. Baird. I personally see Y2K as a potential benefit in 
the sense that it helps us improve our emergency readiness. Are 
there particular checklists or steps they should go through, 
for example, a community working with the chemical industry and 
how would we get hold of that for our own districts?
    Mr. Koskinen. EPA and the chemical manufacturers produced a 
manual of the items that are at risk for a smaller chemical 
facility that they should be checking. That is available on the 
EPA web site. I am sure you can get that through the Council 
web site of www.Y2K.gov. That material has been provided to 
every State. FEMA and the emergency managers have it. So I 
think my suggestion to a community would be their local 
emergency manager should contact their State or FEMA to get any 
additional scenario development or testing that should go on so 
they can ensure that they are ready for that particular kind of 
problem.
    And I think you are right, the emergency managers across 
the United States think that Y2K is a great opportunity for 
individuals as well as organizations to review their emergency 
planning and preparedness and, in fact, to be better prepared 
than they may have been generally.
    Mr. Baird. Thank you very much. Thank you, Madam Chair.
    Chairwoman Morella. Thank you, Mr. Baird.
    Mr. Ose, do you have any questions? As a matter of fact, 
before we ask that question, I was on a panel with a Red Cross 
representative who said, and you reminded me of it, Mr. Baird, 
is that what we should have on hand is what we should always 
have on hand.
    Mr. Koskinen. Right.
    Chairwoman Morella. I think that is something that makes us 
take inventory.
    Mr. Ose from California.
    Mr. Ose. Thank you, Madam Chair.
    A couple of questions. Some weeks ago we had a hearing, I 
think Mr. Willemssen was there, regarding the FAA and the 
relative responses we have had from some of our international 
partners. At that time, we were able to ferret out information 
about a number of countries that had not yet responded to our 
Y2K circular questioning their preparedness or inquiring of it. 
I think the total number of countries at that time was 34 or 
35. I am curious whether or not there has been any update to 
that list of 34 or 35.
    Mr. Koskinen. There has been. The Department of 
Transportation and the FAA both have web sites now listing the 
information they have about preparedness internationally as 
well as domestically. I do not know what the number now is, but 
there has been an increase in the response. Transportation has 
now been able to categorize the nature of those responses and 
any concerns they have about particular airports so that the 
public or travel agents have direct access to that.
    Mr. Ose. Madam Chair, the reason I bring this up is I want 
to take a moment, and I hope no one falls over here in shock, I 
want to take a moment to express my appreciation to Mr. 
Koskinen and Mr. Willemssen and the others who work in the 
Federal Government because we had this hearing on like a 
Tuesday or a Wednesday and we were asking for this information, 
and the agencies of the Federal Government, in response to the 
requests from Members of Congress, were able by Friday to 
refine the list from approximately 110 countries to 34 or 35 
that had not responded.
    The reason that is important is that, as with many people, 
my wife and I travel a great deal, and people in the United 
States travel a great deal. And the uncertainty that existed 
prior to the refinement of that list relative to these 70 or 80 
other countries that were on the list were creating quite a bit 
of havoc relative to people's travel plans because they need to 
plan ahead, sometimes as much as 90 to 120 days.
    So I want to take this moment to express my appreciation to 
these two gentlemen and to the others who could not join us 
today for making that list public, for helping the American 
public define where it might be safe to go and where it might 
not be safe to go. They really did the people's business and 
they deserve our applause, wherever you call it.
    The FAA does have a web site on which this data is posted. 
If I understand correctly, it is fly2K.gov?
    Mr. Koskinen. Correct.
    Mr. Ose. I would encourage everyone to visit that who is 
planning on traveling over the turn of the millennium.
    And, finally, one little tidbit, Madam Chair, if I could. 
The businesses that I used to run before I came to Congress, we 
have any number of security features in each of those 
businesses. We did a little test of our own about our Y2K 
preparedness. We, in effect, took the calendars on our 
computers and rolled them forward to where they were like five 
minutes prior to midnight on the 31st and we were essentially 
doing our self-testing. And to those people who have not done 
that, I would encourage you to do that now rather than wait 
until the last week of December. We were fortunate. We were in 
compliance. But it is just a little self-test everybody might 
engage in.
    With that, I yield back.
    Chairwoman Morella. Thank you, Mr. Ose. And you reflect the 
views of both subcommittees in commendation to the agencies, 
Mr. Koskinen, and Mr. Willemssen, and all of the others that 
responded so promptly. I think we have all found that to be the 
case.
    I am now pleased to recognize Ms. Rivers, the gentlewoman 
from Michigan.
    Ms. Rivers. Thank you, Madam Chair.
    I have only a very brief question. There are a number of 
materials that are interesting and useful here in preparation 
and also the GAO information on evaluating how things are 
going. Most of us have web sites that our constituents visit on 
a regular basis. Are we free to link to your web sites or to 
use any of these materials on our sites?
    Mr. Koskinen. We would be delighted to have you link. We 
would be delighted to have you take anything on the web site 
and put it on your web site.
    Ms. Rivers. Okay. Mr. Willemssen?
    Mr. Willemssen. Certainly.
    Ms. Rivers. Great. Thank you.
    Chairwoman Morella. Thank you, Ms. Rivers.
    I am now pleased to recognize Mrs. Biggert, the gentlewoman 
from Illinois.
    Mrs. Biggert. Thank you, Madam Chair.
    If I might ask unanimous consent to enter my statement into 
the record.
    Chairwoman Morella. Without objection, so ordered. I am 
also going to, without objection, have Chairman Horn's opening 
statement included in the record.
    [The prepared statements of Hon. Judy Biggert and Hon. 
Stephen Horn follow:]

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    Mrs. Biggert. This has been an unusual day. I apologize for 
missing your statements. I would like to ask, have you heard 
rumors about Y2K that you would like to dispel? Is there 
something that you hear out there that you would have concern 
about?
    Mr. Koskinen. I appreciate that question. In my formal 
statement, we have listed the myths and the rumors that 
generally we are concerned about. I suppose, and it goes back 
to the Chairwoman's question, the ultimate rumor I would like 
to dispel is that somehow we have information in the Federal 
Government or in the President's Council that we are not 
sharing with the public. There is no evidence, nobody has ever 
established something we know that we have not told. And, in 
fact, our strategy for now going onto 2 years has been to share 
with the public everything we have as we get it.
    So, as I say, I think the rumor that there is this secret 
information that we are somehow afraid to release is just that, 
a rumor. Our goal in life is to have the American public feel 
they know everything I know and can then decide how to respond 
appropriately.
    Mrs. Biggert. Okay. Mr. Willemssen?
    Mr. Willemssen. I would also echo Mr. Koskinen's comment. 
Obviously, we come at this from an audit and evaluation 
perspective. We have seen all the data as best as I know that 
Mr. Koskinen has available. To the extent that we identify that 
data, we take the opportunity to publicize it in our reports 
and testimonies. That is why one thing we wanted to do today in 
our testimony was reflect the broad nature of everything we 
have done and the kind of progress that has been made, while at 
the same time pointing out some residual risks.
    Mrs. Biggert. Certainly, we have spent a lot of time, had a 
lot of hearings. I would like to commend the two chairmen of 
these two committees for everything that they have done, and 
certainly started long before I got here this year, working on 
this.
    Is there anything that you think we as the Congress have 
missed doing that we should have done on the Y2K problem?
    Mr. Koskinen. I do not think so. We have had, I think the 
Chairwoman was right, this has been a very bipartisan issue. We 
have not had any concern in either house of Congress about any 
kind of political issues entering into this. We have had great 
support. We have obviously had a very good working relationship 
with GAO as well working on behalf of the Congress. So if we 
had to do it again, there is nothing that we have asked of the 
Congress that has not been granted to us. I think it has been a 
very good example of the cooperation between the legislative 
and the executive branch dealing with what is a serious 
national challenge.
    Mrs. Biggert. Mr. Willemssen?
    Mr. Willemssen. Looking forward, I would say the one thing 
that the Congress can still be of great benefit to the 
citizenry is reminding the citizens what the facts are. I think 
as we are into November and we turn into December, there is 
going to be the opportunity for some to view this in 
survivalist terms, if you may, that it really is going to be 
much worse than it actually will be. So I think the Congress 
can still serve a very useful role in informing the public of 
what the facts are, what the readiness is, where we do have 
some risks, but the overriding fact is we are in a much better 
prepared state today than we have been.
    Secondly, to the extent that problems do occur, major 
Federal agencies and most private organizations are planning 
detailed day one strategies to be prepared in the event that 
disruptions occur.
    Mrs. Biggert. I think there was something in the paper the 
other day that everyone should not get on the phone at 12:01 to 
say everything is okay because it is going to jam the 
telecommunication lines.
    Mr. Koskinen. That is right. We refer to it in our 
checklist, too. There is likely to be Mother's Day by multiples 
if everybody both celebrating the millennium and also just 
checking in does that at one time. At a minimum, what people 
should understand, if you do not get a dial tone immediately or 
you get a rapid dial, it is very likely not to be a Y2K problem 
but to be the fact that your neighbors and everybody else have 
joined you on the phone at the same time.
    Mrs. Biggert. Right. Thank you very much for all your hard 
work. Thank you Madam Chairman.
    Chairwoman Morella. Thank you, Mrs. Biggert.
    Mr. Koskinen. Madam Chairman, I am afraid I have over 50 
people on this conference call that I noted I need to join. I 
hate to deprive your co-chair here of his chances----
    Mr. Horn. I do not think you are going to deprive me.
    Mr. Koskinen. But I am going to have to leave. I would be 
happy to take a question or two, and then I am going to have to 
go.
    Mr. Horn. Fine. All right. If you had to do it over again, 
when you were appointed in February 1998 and you started in 
April 1998, what would you advise Congress and a President to 
do in terms of the type of structure or communications or 
whatever? Say we had something similar to this where all of our 
computers were crashing because of people that were using sort 
of economic terrorism, if you will, how would you deal with 
that, and would you deal any differently than you have done?
    Mr. Koskinen. I would not change, certainly for the Y2K 
issue, anything that we have done. I think, again, we have had 
great cooperation with the Congress. I think our basic approach 
has been validated by the amount of progress that has been 
made. I think there is no way, as some suggested, that we could 
legislate our way out of this problem, to in fact start telling 
everybody how to do it. What we needed to do was marshall the 
expertise and the energy of the people in the private sector as 
well as the public sector.
    I think your point is well taken in terms of going forward; 
and that is, we are going to become more reliant, rather than 
less, on information technology in the future, which means we 
will be more vulnerable, rather than less, to terrorists, to 
hackers, to others who want to in fact disrupt our systems. 
And, therefore, I think we do need to be prepared for that. But 
at this juncture, I do not have a proposal as to how we ought 
to move from this issue to that in terms of structuring to deal 
with it. All I can tell you is I think the structure worked 
very effectively for the crisis we knew we were facing when I 
took on this role.
    Mr. Horn. Well, in terms of getting the work done in a 
timely way, do you think February 1998 was a little late? And 
shouldn't the early Clinton Administration and the Bush 
Administration been involved in this? After all, Social 
Security showed the way and they did 100 percent.
    Mr. Koskinen. Well as I said when you asked me that 
question over a year ago, we will know the answer to that in 
terms of how we get through this process effectively. As I say, 
at this point, the Federal Government is over 99 percent done. 
I do not think there are any risks in the Federal processes 
that would have been avoided otherwise.
    As you know, when I was in the Government before, we 
started a cross-government issue dealing with this in 1995. So 
that hindsight is always interesting, but at this point we do 
not have a view that we would be in a whole lot different 
shape. It might have been a little less hectic if we could have 
gotten people's attention. But you have to understand, as you 
remember when you were one of the lone voices raising this 
issue back when we were working on it----
    Mr. Horn. April 1996. And nothing much happened until 
February 1998.
    Mr. Koskinen. Yes, 1998. Well, what we both had, and I had 
that same experience, is in 1995 and 1996, even for people who 
should have known better, the year 2000 seemed like a long way 
off. And it was our biggest challenge, even when we all started 
working together in February 1998, the biggest challenge was 
getting people to understand they needed to pay attention to 
this, not just as another issue, but as their top priority in 
terms of the threat it made to their ability to operate. And I 
think you started early, the Government started early, but I 
think it is human nature not to focus on things any earlier 
than you can make people do that.
    Mr. Horn. Well I know a lot of Government operates just 
like universities do--your neck has to be in the guillotine or 
you are pushed against the wall and then finally something 
happens.
    Mr. Koskinen. A lot of people in the private sector still 
have not even gotten there yet. So it is not just a Government 
or university problem.
    Mr. Horn. That is my next question to you.
    Mr. Koskinen. This will have to be the last one. I really 
am late.
    Mr. Horn. All right. In August, you reported confidence and 
concerns in various public and private sectors. For example, 
the Council expressed ``High degree of confidence'' in major 
domestic areas like financial institutions, electric power, and 
the Federal Government. However, the Council expressed concerns 
with local governments, health care, education, and small 
businesses.
    The President's Council plans to issue its final Y2K report 
next Wednesday. I guess I would ask you, in foreshadowing your 
forthcoming report, what domestic and international areas are 
you still concerned with?
    Mr. Koskinen. Again, we are pulling that report together 
and we still have some information being provided by some----
    Mr. Horn. Just whisper me----
    Mr. Koskinen. Just whisper any. Basically, we do not have 
new sectors that we are now any more concerned about than we 
were. What is hardest for us to measure is how much progress is 
being made in the areas we are concerned about. Last week, we 
had an event with the Department of Education in which it was 
noted that educational institutions, for instance, have made 
substantial progress. They have gone from about a third 
readiness of the organizations to two-thirds, which is the good 
news. The bad news is that still means a third of them are not 
prepared at this time, both higher education and elementary and 
secondary.
    So that I think the best way to summarize the difference 
between August and November will be that progress continues to 
be made but there are still going to be organizations that are 
at great risk because they are going to be talking about 
finishing their work in December and that does not give them 
any margin for error. Which means that they, of all people, 
need to have contingency plans and backup plans because, if you 
are planning to finish your work in December, there is a 
reasonable chance something will not work well, you will not 
have time to test adequately, you need to be prepared with a 
backup plan.
    Mr. Horn. Will the Council be pushing for that right up to 
December 31st?
    Mr. Koskinen. We will push testing. Our view is you need to 
keep working on remediation, on testing, re-testing, and on 
contingency plans with every day and every hour you have left 
in this year, even if you think you are done today.
    Mr. Horn. I think you will recall a couple of months ago I 
sent a letter to the Secretary of Education, copied you, and 
talked to you about it. I have not heard much action. Is 
anything happening? I heard some press release or something the 
Secretary did that, gee, it is tough with K-12.
    Mr. Koskinen. We have written, the Secretary and I, to 
every superintendent of education, every State department, we 
have written to local superintendents. We have had meetings 
since then. We have provided technical information. The 
Department since then has done another telecommunication to 
sites all around the United States. Again, at some point it is 
a little like our problem with some small businesses--you can 
lead them to water, but you cannot make them fix their systems.
    Mr. Horn. Well, I was looking for the Secretary to say, 
look, it is going to take X amount to help K-12. Let me 
reprogram the money. I think Congress would have permitted him 
to reprogram the money. So that is what has bothered me. It 
just seems like a little bit of drift.
    I will let you off on that happy note.
    Mr. Koskinen. Thank you. Thank you all very much. I 
apologize.
    Mr. Horn. We appreciate your work.
    Chairwoman Morella. Mr. Turner will be asking his question 
of Mr. Willemssen.
    Are you going to be the media spokesperson in the ICC?
    Mr. Koskinen. I am going to be the media spokesperson. I 
will be there.
    Chairwoman Morella. You will be the one that will contact 
us. We will be in touch. Thank you very much.
    Mr. Koskinen. I get all the good jobs. Thank you all very 
much, and I apologize for having to leave.
    Mr. Horn. Thank you, John.
    Chairwoman Morella. Thank you for the good work that you 
have done. We look forward to staying in touch with you now.
    Mr. Willemssen, do you mind staying here with the next 
panel? Would that be all right?
    Mr. Willemssen. Certainly.
    Chairwoman Morella. Excellent. Thank you. You have been 
very patient from the beginning to the end. Great.
    I am going to ask the next panel if they would come 
forward. We have Mr. Campbell, Mr. Scher, Mr. Margolis. Mr. 
Robert Kringley, unfortunately, could not be joining us today.
    And so, leading off on the second panel is Mr. Pat 
Campbell, the chief operating officer of the NASDAQ stock 
market, the largest stock market in the world in terms of 
dollar value of shares traded, and whose composite index hit an 
all time high, cresting at over 3,000 just yesterday. Mr. 
Campbell is going to discuss with us some of the concerns 
affecting investor confidence in the stock market.
    Next on our panel is Mr. Barry Scher, who is the vice 
president of Giant Food, the largest retail food/pharmacy chain 
serving the mid-Atlantic region. We have asked Mr. Scher to 
talk about Y2K marketing and what Americans can expect as they 
go to the stores before and after January 1, 2000.
    And rounding out our second panel is Mr. Ronald Margolis, 
the chief information officer of the University of New Mexico 
Hospital in Albuquerque. Mr. Margolis is also speaking on 
behalf of the American Hospital Association that represents 
nearly 5,000 hospitals, health systems, networks, and other 
providers of care. Mr. Margolis will discuss with us some of 
the strong Y2K collaborations with hospitals, emergency 
services, and the government that he helped to create in 
Albuquerque. He will also help us to review some of the 
concerns dealing with hospitals and whether Americans can 
expect to receive necessary medical treatment as we begin the 
new millennium.
    Additionally, the American Medical Association has 
submitted written testimony. I seek unanimous consent to insert 
it into the record. Hearing no objections, so ordered.
    [The prepared statement submitted by the American Medical 
Association follows:]

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    Chairwoman Morella. Gentlemen, will you also rise and raise 
your right hands and I will administer the oath. Do you swear 
that the testimony you are about to give is the truth, the 
whole truth, and nothing but the truth?
    [Witnesses respond in the affirmative.]
    Chairwoman Morella. Again, the record will show an 
affirmative response.
    What we traditionally do is allow about 5 minutes for any 
opening statement that you may have, recognizing the fact that 
any written statement you have given us in its entirety will be 
included in the record.
    So we will then start off with, if you have no particular 
preference, Mr. Scher.

TESTIMONY OF BARRY S. SCHER, VICE PRESIDENT, GIANT FOOD, INC., 
WASHINGTON, D.C.; J. PATRICK CAMPBELL, CHIEF OPERATING OFFICER 
  AND EXECUTIVE VICE PRESIDENT, THE NASDAQ-AMEX MARKET GROUP, 
     INC.; AND RONALD MARGOLIS, CHIEF INFORMATION OFFICER, 
  UNIVERSITY OF NEW MEXICO HOSPITAL, HEALTH SCIENCES CENTER, 
        REPRESENTING THE AMERICAN HOSPITALS ASSOCIATION

                  TESTIMONY OF BARRY S. SCHER

    Mr. Scher. Thank you very much. My name is Barry Scher and 
I am vice president for Giant Food. We operate 175 stores in 
Virginia, Maryland, the District of Columbia, New Jersey, and 
in Delaware. We are also a part of the Royal Ahold family----
    Chairwoman Morella. Mr. Scher, I think that we had already 
said that Mr. Campbell would go first. I was simply looking at 
the manner in which we were seated.
    Would you prefer to go first, Mr. Campbell?
    Mr. Campbell. No. Let him go.
    Mr. Scher. Either way.
    Chairwoman Morella. Thank you very much. He is a good 
friend; he understands. Thank you.
    Mr. Scher. Giant is a part of the Royal Ahold family, a 
Netherlands-based international food retailer. In the United 
States alone, Ahold owns, aside from Giant Food, Stop & Shop 
based in Boston; Tops based in Buffalo; BI-LO from Maulden, 
South Carolina; and Giant Food Stores in Carlisle, 
Pennsylvania.
    Our preparations for Y2K at Giant have been going on since 
1996. We have been checking our numerous systems, one-by-one, 
to certify them as Y2K compliant. Although our administrative 
tests have given us a very high level of assurance that we will 
enter Y2K without system failures, our certifications test 
could not test how the systems would work together, as they do 
every day at Giant, when we enter the new year.
    These early Y2K certifications were performed on system 
environments that were virtually identical to those that we use 
every day.
    In August, these Y2K workhorses took on a new role at 
Giant. We ran our systems in a computer lab that simulated all 
the computer systems in a real store environment. There, our 
team moved the test systems' clocks to December 31st. As the 
minutes and hour ticked away, the systems were used and 
monitored as they would be in a real store to see how they 
would operate as we entered the new year. We also wanted to see 
how they would handle the leap year day, February 29, 2000.
    In the lab, everything worked just fine. We could place 
orders, ship, select, receive, weigh, and scan product, keep 
track of everyone's time and attendance, process prescriptions, 
and so on. Yet, there still loomed a larger question: Would all 
of these systems--stores, security, non-store environments--
work together when the clock struck midnight and the new 
millennium began?
    We decided that what we needed at Giant was a fully 
integrated test, doing exactly what we did in the lab; that is, 
advance the clock to the end of the year in an actual working 
store, while all of the systems were being used. Our concern 
was the potential impact that we would have on our business and 
the inconvenience to our customers if we field tested as 
customers shopped. Then, as so often happens, out of adversity, 
opportunity knocked.
    In early September, we closed a store in Valley Forge, 
Pennsylvania. With no buyers available, the store was vacated 
and all the remaining product was shipped to a neighboring 
store. But before tearing out the computer systems and scales, 
our Y2K team was able to utilize this empty, but fully 
operational store to test our company's IT systems.
    On September 28th, Giant put the computer systems to the 
ultimate Y2K test. They all passed. All of them, from EBT to 
DSD to POS, and these are food industry terms meaning such 
things as electronic benefit transfer, direct store delivery, 
and POS, which is point of sale or the front-end checkouts. The 
whole alphabet passed with flying colors.
    While we are very confident in our own IT systems, we 
realize that there is always a chance that something could go 
wrong on January 1, 2000. As a result, we have developed a very 
comprehensive set of Y2K contingency plans that have been 
distributed just today, as a matter of fact, to all of our 
store and non-store management associates.
    Now, in anticipation of peaks in consumer demand for 
certain products, we are also developing specific merchandising 
plans that include buying and distribution strategies. The 
focus will be on spreading the expected increased demand across 
the next few months by offering exciting promotions for certain 
products prior to the holidays. And when the holidays arrive, 
Giant's support system will not go on vacation. An expanded 
team of support associates will be on hand at Landover, where 
we are headquartered, and others will be on-call to address any 
and all issues that might arise come January 1, 2000.
    We have also developed an internal and external 
communications plan. Our objective has been to inform and 
educate a number of stakeholders about our Y2K readiness. Just 
to cite some of the examples of our educational and 
informational activities:
    We have developed a Y2K brochure, you should have it in 
front of you, I will hold it up in the event you do not. This 
brochure was given to all of our stores and distributed free to 
our customers. We have also been asked to send it to area 
schools and other institutions. We have done so.
    We have also placed newspaper advertisements in the 
Washington Post and Baltimore Sun. This is a copy of one. This 
was also placed in other major weekly newspapers throughout our 
marketing area.
    We also decided to send personal letters to business, 
civic, and government leaders to inform them about our Y2K 
readiness. And, finally, we addressed business and civic 
groups, as we were often requested to do.
    Plus we have done a great deal more--all with the objective 
of informing our customers and the general public that at Giant 
Food we are ready for Y2K.
    And I mentioned earlier, Mrs. Morella, that I am speaking 
on behalf of the Ahold companies. All of the other Ahold 
companies are also ready. We are a member of the Food Marketing 
Institute, which is an international association representing 
food retailers. They have also testified before Congress. The 
food industry is, indeed, ready. Thank you.
    [The prepared statement of Mr. Scher follows:]

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    Chairwoman Morella. Thank you very much, Mr. Scher. I do 
think this is an excellent pamphlet. It is colorful, it is 
accessible, it is understandable. And I commend you for it.
    I am now pleased to recognize Mr. J. Patrick Campbell, 
chief operating officer of the NASDAQ stock market. Thank you, 
Mr. Campbell.

                TESTIMONY OF J. PATRICK CAMPBELL

    Mr. Campbell. Thank you, Madam Chair. I am pleased to be 
here.
    The SEC, the National Association of Security Dealers, the 
securities industry associations, and other firms, exchanges, 
and utilities have been leading the way in an industry-wide 
effort to be Y2K ready. The NASD and each of its companies are 
prepared to transition successfully into the 21st century, 
along with the rest of the securities industry. We are 
confident that our business systems, infrastructure, vendors, 
contingency plans, and transition command centers are ready. 
Investors should know that we have invested heavily to ensure 
that we are ready for the year 2000. In fact, the U.S. Senate 
and the GAO has given our industry its highest rating for Y2K 
preparedness.
    The NASD began in 1996 to ensure that the business systems 
of the NASD companies will transition to the year 2000 
successfully. We believe that our capital markets in the United 
States, our national treasures, and their integrity is 
paramount.
    The NASD has spent $55 million, dedicated more than 100 
staff to the effort. The NASD's year 2000 program has 
remediated over 300 applications, 11 million lines of code in 
mainframe, mid-range, and desktop systems. The securities 
industry has treated the problem just as seriously and has 
spent billions of dollars to meet the challenges that it poses.
    Our programs have been focused in three areas: The 
readiness of NASD internal and market systems, the readiness of 
our 5,600 member broker-dealers, and, as important as anything, 
keeping investors well informed.
    The first aspect of the NASD's year 2000 program deals with 
its internal systems, especially its market systems. The NASDAQ 
stock market and the American Stock Exchange, as well as all 
the other exchanges, participated in a series of successful 
Year 2000 industry-wide tests conducted over four weeks in 
March and April of this year. These full-cycle tests simulated 
the securities transactions process for the dates of December 
29, 30, and 31, 1999, and for January 3, 2000.
    The NASD tested its services with other participants, all 
the way from our NASDAQ workstation terminals through our 
network into our data center and back, end-to-end. The systems 
executed more than 170,000 simulated transactions for nine 
different security products over the tested dates. After this 
rigorous testing, we are confident that there will be no 
serious disruptions in our services and our markets, and that 
investors will be protected.
    In addition to systems testing, we have also made extensive 
contingency plans to ensure business as usual, and to protect 
our computing and communications systems as well as our 
physical facilities. As part of these efforts, the NASD has 
established corporate and business line command centers that 
will operate from late December through the first week in 
January 2000. We will pre-position staff, resources 
strategically in each of these centers, as well as around the 
country, to ensure rapid, fast response to protect investors' 
interests. These centers will be linked to the SEC and other 
industry organizations.
    A second major area of NASD focus has been on its broker-
dealer members. In 1998, the Securities and Exchange Commission 
adopted a rule requiring all broker-dealers to report their 
readiness through two successive filings. We use this 
information to help our firms meet the Y2K challenge.
    We have held over 90 educational workshops, coordinated 
with extensive update materials. A year 2000 help desk has 
responded to member questions, approaching 20,000 in the last 2 
years. We also have allowed firms to post letters dealing with 
their readiness on our web site to assure their investors that 
they can keep their money and assets safe.
    The third major area of NASD Y2K focus has been on investor 
education. A comprehensive investor education program has 
resulted in a coordinated campaign with all the major markets, 
the SEC, the Securities Industry Association, and the 
President's Council on Year 2000. This coordinated campaign has 
communicated the readiness of the industry, as well as 
practical tips for investors preparing their personal finances 
for the transition.
    Examples of these effort include a year 2000 investor kit, 
which has been made available to the members of the committee, 
and is also posted on our world-wide web, as well as an open 
investor letter, that ran today, by coincidence, in the Wall 
Street Journal. We will continue to run these letters by all 
the markets in the country basically expressing our Y2K 
position. This open letter outlines the industry's preparations 
and repeats the advice to investors found in our investors kit.
    We appreciate this opportunity to testify. And you should 
take comfort that we have since 1996 exercised I think our 
fiduciary responsibility to the Nation and the people who are 
investors in our capital markets. Thank you.
    [The prepared statement of Mr. Campbell follows:]

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    Chairwoman Morella. Thank you, Mr. Campbell, for your 
testimony and for what has been done. And thank you for being 
such a great constituent.
    Mr. Campbell. Thank you.
    Chairwoman Morella. I am now pleased to recognize Mr. 
Ronald Margolis, chief information officer at the University of 
New Mexico Hospital in Albuquerque, and also representing the 
American Hospital Association.
    Mr. Margolis.

                  TESTIMONY OF RONALD MARGOLIS

    Mr. Margolis. Thank you, Madam Chair. I am Ron Margolis, 
chief information officer at University of New Mexico Hospital 
in Albuquerque. I am here on behalf of the American Hospital 
Association and their 5,000 hospitals, health systems, 
networks, and other providers.
    I would like to focus on four questions about year 2000 and 
hospitals: Will hospitals be ready? How have hospitals been 
preparing over the past few years? What if something goes 
wrong? Finally, how are hospitals reassuring the public at this 
last 55 days?
    Will hospitals be ready? In a word, the answer is, yes. An 
AHA survey last spring found that 95 percent of hospitals 
expected that their medical devices, computerized information 
systems, and infrastructure to be Y2K compliant or to operate 
without a problem on December 31st. A report issued last month 
by the Health and Human Services Office of Inspector General 
also indicated high confidence in hospitals' Y2K readiness.
    For example, in New Mexico, our State Hospital Association 
survey very recently found that all systems directly related to 
patient care were expected to be compliant by the year's end, 
and right now are greater than 96 percent prepared. It is 
reasonable to infer that since these surveys were conducted 
earlier in this fall season, readiness among all hospitals has 
increased.
    How are hospitals preparing? Hospitals have taken inventory 
of all of our equipments--that's medical devices, computer 
systems, hardware and software. From that inventory, a 
remediation or repair plan was developed and is now being 
completed. We have tested, using rigorous means, all of our 
computer systems with a special priority toward patient care 
systems to ensure that they will work well into the next 
millennium. We have developed and acquired software that allows 
us to warp the time ahead so that we were able during the 
summer to test systems for the period December 27th through 
April 1st, which includes the leap year which is unusual this 
next year as well as January 1st.
    Also, through manufacture and vendor contact, we have 
determined other systems in medical devices which may be 
affected and how they will be affected. We are following up as 
required, which could mean anything from repairing a device, 
loading new software, or taking a device out of service for the 
period of the date change.
    Also, all hospitals plan to increase the level of staffing 
during the days surrounding the millennium date change. 
Hospital personnel will be on hand during the date change to 
make sure equipment is safe and working properly before being 
used on any patients.
    Let me point out that hospitals are somewhat unique in 
their use of technology. It is used as a clinical efficiency 
aide. Clinicians, of course, are fully able to perform nearly 
every function that patient support devices provide. We do not 
under any circumstances hook patients up to computers and then 
ignore their humanness; we certainly will not on December 31st. 
To paraphrase the slogan of a telephone company: In the medical 
world of technology, people make a difference, and we truly 
believe that is a major differentiator.
    Nationally, the American Hospital Association is working 
with the President's Council on Y2K Conversion and with other 
associations to make sure the availability of drug products, 
pharmaceuticals, and medical supplies will continue as needed 
into the new year. In New Mexico, hospitals are working closely 
with the two major drug houses to assure uninterrupted 
distribution of pharmaceutical supplies.
    What if something goes wrong? Here in Washington, members 
of the District of Columbia Hospital Associations have pledged 
to back each other up in case of any kind of trouble or high 
demand for patient services. A Memorandum of Understanding 
provides a blueprint for inter-hospital support. This kind of 
cooperation is happening in communities all across America.
    In my State, hospitals are sharing information on medical 
devices, contingency plans, and performing readiness drills. We 
have emergency preparedness procedures in place at the State, 
county, and the local levels. We have emergency power 
generation capabilities that support all of our critical care 
and emergency care facilities.
    Finally, how are hospitals reassuring the public? As 
hospitals continue to perform their inside preparations, they 
are also reaching out to the communities. They are holding town 
meetings to ensure the people they serve are aware of what is 
being done. For example, New Mexico hospitals are taking part 
in Y2K community conversations. In Albuquerque, local hospitals 
are participating in the Mayor's Millennium Committee which has 
provided a public forum for citizens' concern and input.
    In summary, the AHA distributed to all of its members 
``Health Care and Y2K: What You Need to Know About Health Care 
and the Year 2000.'' This booklet was developed jointly by the 
President's Council with the help of the American Hospital 
Association and other affiliated organizations to focus on 
consumer questions about Y2K. We encouraged all our members to 
make this easy to read booklet available to their communities.
    To conclude, Madam Chairperson, the year 2000 issue will 
affect every aspect of American life, but few, if any, are as 
important as health care. What I have outlined today is merely 
a snapshot of a much more in depth and thorough and united 
effort to ensure patient safety at midnight on January 1st and 
beyond. Hospitals and health care systems, their State 
associations, and the AHA are working together toward a smooth 
and healthy transition into the new millennium. Thank you.
    [The prepared statement of Mr. Margolis follows:]

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    Chairwoman Morella. Thank you, Mr. Margolis.
    I am going to turn for questioning now first to a gentleman 
who has not had a chance to ask questions, the distinguished 
Ranking Member of the Government Management, Information, and 
Technology Subcommittee of the Government Reform Committee, Mr. 
Turner, the gentleman from Texas.
    Mr. Turner. Thank you, Mrs. Morella.
    I want to commend each of our three witnesses on this 
panel. I can tell you have invested many hours and many dollars 
in trying to be ready for Y2K. I have always held the opinion, 
at least after our many months of study on this committee, that 
it is the myths about Y2K that could hurt us rather than the 
realities.
    I did not get the chance to ask Mr. Koskinen a question 
that I really think I will direct at Mr. Willemssen. He in his 
work with the GAO probably knows the answer as well as Mr. 
Koskinen. The Council that Mr. Koskinen has an Information 
Coordination Center which, as I understand it, is designed to 
be a place that is kind of a central point for coordinating all 
information about Y2K problems, about events that surround the 
new year.
    It seems to me that our emphasis at this point, after 
months of preparation, which I feel very good about, both in 
the public and the private sector, that we need to rethink a 
little bit about what we are doing to prepare to address the 
rumors and the myths that may surround the New Year. At one of 
our recent meetings, I even suggested that perhaps Mr. 
Koskinen's council should bring aboard some high profile, 
credible personality to be a spokesperson, someone who could 
answer press inquires and someone who could pass along the 
realities and dispel the myths, someone of the caliber of 
Walter Cronkite.
    But it seems to me that is our real fear. I can sense, Mr. 
Campbell, that you and the securities market would be 
particularly sensitive to the rumors and the myths that may 
float around the new year. I come from a small town and in a 
small town we used to all understand that there were a lot of 
rumors that started at the bridge clubs and at the coffee 
shops, and if you circulated in the right groups you could pick 
up on those rumors, and they would pretty quickly get around 
town.
    With the advent of mass media, television, radio, 
obviously, information spreads much faster all across the 
country. But at least there, there is responsible journalism to 
kind of screen the information that comes across the airwaves. 
But on the Internet, you can put anything on there you want to 
and spread that story to tens of thousands of people in a 
matter of hours. Most of us on this committee have experienced 
in our own offices receiving large volumes of mail on subjects 
that our constituents heard about over the Internet that we 
turn around and have to write letters back to them and tell 
them what they read is absolutely false, there is no such 
proposal in Congress to tax the Internet, or whatever the issue 
happens to be.
    And I am fearful that Y2K offers the opportunity for 
pranksters and for outright frauds to run rampant on the 
Internet, and that we need to be very careful about how we 
structure Mr. Koskinen's Information Coordination Center to be 
sure that it is going to not only be able to process all of the 
myths that may surround the new year, but be able to speak with 
credibility to dispel those myths.
    Mr. Willemssen, do you know what Mr. Koskinen has done to 
ensure that we are going to have that kind of response in 
place?
    Mr. Willemssen. I was over at the Information Coordination 
Center on Monday. They are located on about 18th and G. We got 
a tour, my staff did, of the facility. They do have a press 
briefing room set up I think for about 60 people. And as I 
recall, General Kind, the head of the ICC, mentioned to me that 
the plan was for Mr. Koskinen to provide press briefings 
approximately every 4 hours during that rollover period.
    Secondly, echoing back to one of the comments you made 
earlier, as one of the ideas that we have suggested before, 
especially now that we are in November and entering into 
December, is the executive branch may want to look at 
opportunities to use public service announcements now and in 
December rather than waiting for just the rollover period, 
especially to the extent that some may start to view Y2K as 
entertainment opportunities, as opportunities to show worst 
case scenarios. I think given that, it is best to combat those 
kinds of announcements with facts, the facts that we have 
discussed here today. So I think there still is an opportunity 
prior to that rollover period to come out with those kind of 
announcements.
    Mr. Turner. Mr. Campbell, do you have similar plans for the 
securities industry to be able to speak with credibility to 
dispel rumors?
    Mr. Campbell. Congressman Turner, yes, we do. We expect 
fully to have our command centers staffed from the 28th of 
December on. We have hot links, hot lines, satellite 
communication, et. cetera, with our vendors, with the news 
media, with the President's working group, with the Securities 
and Exchange Commission. We have a broadcast facility at which 
we expect to have Frank Zarb, our chairman, available.
    We will close our markets on December 31st at 1:00 in the 
afternoon. We have that afternoon, that evening, and the entire 
weekend. The way we dispel the myths is that Monday at 9:30 
a.m. the capital markets in the United States open and they 
trade.
    Mr. Turner. Thank you.
    I think we might could sustain a run on the grocery store, 
Mr. Scher, but I do not think we could sustain a run on the 
banks or the security market.
    Mr. Scher. Well, as I said earlier, on behalf of the food 
industry, we have been in an offensive manner of working with 
our customers and our vendors ever since earlier this year. The 
food industry has done a very good job of communicating to the 
consumer that there is no need to panic. We are saying in ads 
and in a brochure, and the whole food industry is, if you are 
really worried, we advise you to stock up as if it were going 
to be a snowfall, no greater, no less. But if you are worried, 
get items like batteries and perishable and non-perishable 
items. Of course, the perishable items the day or so before, 
the non-perishable, we are telling people if you are really 
worried, you can stock up now. But we are telling people there 
is no reason to do so. We think we have done a good job of 
informing the public that you do not have to panic.
    Mr. Turner. Thank you. Thank you, Mrs. Morella.
    Chairwoman Morella. Thank you, Mr. Turner.
    Mr. Scher, you spoke on behalf of Giant Food. But how about 
other food distributors, are they in the same situation, do you 
know?
    Mr. Scher. The Ahold family, I mentioned earlier all the 
companies that are part of the Ahold family, over 1,000 stores 
along the East Coast. Dr. Tim Hammonds is president and CEO of 
the Food Marketing Institute, he has appeared before Congress, 
and I know that other food chains have also appeared. And the 
message has been one of that the industry has worked on the 
issue, that we are ready for Y2K, and we will, indeed, be 
ready. I might add that also goes for the vendors, the 
companies that supply the food retailers. We at Giant have 
contingency plans, but we also know that they have worked with 
other food chains around the country. So the manufacturers, the 
vendors, the people that supply us within the food industry, 
they are also ready.
    Chairwoman Morella. Mr. Campbell, in your testimony you 
outlined some categories of potential Y2K events. I am curious 
about an example that you might want to give with regard to Y2K 
problems that would affect business processing and be visible 
to the public.
    Mr. Campbell. We start off with protecting our 
infrastructure and our technology with very basic starts, where 
all of our computer facilities, including the one in Rockville, 
are fully self-contained entities starting with the electric 
power. Our generator facilities have the capability of 
operating our operations stand alone.
    Our biggest concern has always been the fear that people 
will make decisions about economics and buying or selling their 
securities based on a rumor. And it is our hope that our 
education has really been at the forefront and that people 
should not make economic decisions based on non-economic rumors 
or baseless fact.
    We expect fully that all of our systems, we have done the 
end-to-end testing, we have contingency plans that have 
addressed every area that we can humanly comprehend or think 
up, we have prepositioned technology response teams across the 
country, and will do so. To our way of thinking, the worst part 
of any of the Y2K issues that we confront is the lack of 
investor education. And we continue to do that every day.
    Chairwoman Morella. Where are you going to be on January 1, 
2000?
    Mr. Campbell. I will be in my command center at K Street 
here. We will have a lot of our folks in Washington as well as 
both our primary and backup computer facilities in Connecticut 
and in Rockville.
    Chairwoman Morella. Mr. Scher, are you going to be walking 
through the grocery store at that time?
    Mr. Scher. We will be ready.
    Chairwoman Morella. Mr. Margolis, you mentioned that an 
inventory that had been done had something like 95 percent of 
the hospitals were compliant, but you assume there would now be 
more. Do you want to speculate on how many more? And of those 
that are not compliant, are they rural hospitals? And what will 
you do about that?
    Mr. Margolis. Thank you. I think they would not be 
differentiated as being just rural or just urban hospitals. The 
process of remediation with the thousands of medical devices is 
a process of working with vendors and testing equipment. And I 
feel confident that process continues to go on. Many vendors 
early on, and this is back in the spring of this year, were not 
even certain about their equipment and what impact it would 
have on Y2K. So that it took them some period of time to check 
with their own chip processors that made the embedded chips and 
the other circuitry contained within the equipment.
    The remediation efforts are nearly complete. That 95 
percent, which is actually more recently in our State of New 
Mexico 96 percent, is that equipment which has completely been 
remediated. And it is for that reason that I am confident that 
the remaining 4 percent is in the last few days of checking out 
and finally getting its Y2K compliance sticker, or that pieces 
of equipment that should not be used because it questionably 
may fail, it will be locked in a closet as not Y2K compliant 
and then could be pulled back out after January 1st.
    Chairwoman Morella. And where are you going to be on 
January 1st?
    Mr. Margolis. Well, we have a command center in the 
hospital. It is a conference room with about 25 telephone lines 
in it which connects to the various departments. So I will not 
be partying. Maybe we will have some non-alcoholic punch 
available for 1 a.m. But in the Mountain States Time Zone we 
will be watching closely what happens here on the East Coast, 
and, of course, jointly with the AHA and the President's Y2K 
task force, we will be watching what happens to medical 
institutions and health care facilities in New Zealand, which 
is about 19 hours earlier than the Mountain States, should 
specific pieces of equipment be affected.
    Chairwoman Morella. Thank you.
    Mr. Willemssen, you have been very patient. I know that my 
time personally has elapsed, but I just wanted to quickly 
mention that I was alarmed when I read that in education 56 
percent of the elementary and secondary schools in the United 
States were not compliant. I am just wondering what that can 
mean and what is it that we can do about it. This was like 
heating, security, telecommunications.
    Mr. Willemssen. The education sector is one that you should 
be concerned about. Education has gotten a late start. As Mr. 
Koskinen mentioned, they have made excellent progress. But when 
your starting point is relatively so late, there really is 
reason for concern.
    And one of the things that we have been emphasizing is the 
need for contingency plans for those educational institutions. 
Our survey of 25 of the largest school districts found many of 
them planning on December compliance dates. And as you know as 
well as anyone, information technology-related projects are 
often late. So that when you are planning on a December 
compliance date, it is going to be very difficult probably to 
make that date for all of those school districts.
    So I think there is reason for concern. And I think it is 
therefore incumbent upon all of us to continue sounding the 
alarm for this particular sector, as Mr. Koskinen and the 
Department of Education have done in the very recent past. That 
needs to continue.
    Mr. Margolis. Madam Chair.
    Chairwoman Morella. Yes, Mr. Margolis?
    Mr. Margolis. Thank you. I just wanted to comment on higher 
education particularly as it pertains to medical schools. One 
issue has been, and we have talked about it collaboratively, 
the safeguarding of research projects, research specimens that 
are refrigerated that could be affected if power is lost. At 
most major academic centers, which certainly includes the 
University of New Mexico at this point, emergency power is in 
place to assure that both clinical laboratory specimens as well 
as long term research specimens, such as tumors, are under 
emergency power for continued refrigeration.
    Chairwoman Morella. That just shows the tremendous 
implications that one has to think of. You cannot take anything 
for granted.
    I am now pleased to recognize Mr. Bartlett.
    Mr. Bartlett. Thank you very much.
    I do not know what the estimates are of the total amount 
that it has cost our country to get ready for Y2K. My question 
is, we knew a long time ago that this problem was coming. We 
started very late. Had we started in 1990 rather than in 1997 
or 1998 or 1999, whenever we started, how much less in your 
judgement would we have paid to solve this problem? Obviously, 
the longer we waited, the more technology was there that needed 
to be fixed and assessed and it was going to cost more. How 
much less would it have cost us, you may give it as a 
percentage, in your judgement, if we had started this in 1990 
rather than when we did?
    Mr. Margolis. Mr. Bartlett, I believe that the costs would 
probably be insignificantly less because in the case of 
hospitals, and I am sure in the case of financial institutions, 
there are so many interdependencies with other trading 
partners. Hospitals themselves could very well have upgraded 
their systems, checked their devices. But without input from 
the manufacturers of certain components, they would have been 
waiting until the present time until a lot of information was 
made available.
    I think it is human nature to think of things in the future 
when the future gets a little closer. I speak from my own 
personal experience. I started out in computer programming and 
development myself in the 1970s and we talked many years ago 
about Y2K and no one believed that the computer programs that 
we were writing then would even be remembered by the time 1999 
came along.
    Mr. Bartlett. But they have been remembered and we still 
use them. And when did we stop using a two-digit code in 
programming, which would tell you when the cost of fixing would 
be stabilized.
    Mr. Margolis. I could not answer that question directly. I 
know that at our hospital we stopped during the development of 
our current generation of client information systems. But I do 
know we have heard from other sectors that other software 
manufacturers have even introduced operating systems as recent 
as this year which had year 2000 defects. But they are easily 
correctable because they are upgraded with a later version of 
the software. That is not to dispute why they were introduced 
as being deficient to begin with though.
    Mr. Bartlett. Which is the basis for my question. If 
starting in 1990 we had produced no programs with a two-digit 
date code, would not the problem have been a simpler fix?
    Mr. Margolis. I think it would have, but the interfaces 
between the systems would still be at issue. And in hospitals, 
that is the largest issue that we have. In our specific 
hospital, we have 80-some systems that speak to one another, 
that transfer data between one another. So it is not only the 
interface programs that hand off that data, but each of the 
programs that have to be Y2K compliant in the same way or in a 
way that you can understand so that the data is properly 
translated.
    So that what you suggest would be the ideal. I am not sure 
that the cooperation of all the trading partners would have 
been achieved until the pressure of Y2K, the President's 
Council, and the Congress had been felt.
    Mr. Bartlett. Of course, if we had started with a four-
digit date code, there would have been zero fix; is that 
correct?
    Mr. Margolis. That is absolutely correct.
    Mr. Bartlett. Okay. Mr. Campbell, our procrastination has 
cost us nothing?
    Mr. Campbell. Whenever you procrastinate, it costs you 
something. I would say that the greatest time that we have 
spent has been on our legacy systems, our older systems. As you 
build a one-of-a-kind computer system in the world and you 
start back many years ago, it is the legacy systems that take 
so much time to recertify. We would have also, Congressman 
Bartlett, had to certify all new systems that we put in place 
also. While it has cost us something, I think it is very 
difficult to place a percentage on it, and I do not think that 
percentage is a big percentage because of the integration 
testing and the certification of all systems across all 
vendors, across all different legacy and new systems. So even 
the systems that we put in today, we still make sure that we 
certify them as Y2K.
    Mr. Bartlett. Mr. Scher?
    Mr. Scher. Within the food industry, most major retailers 
started working on the problem 2 or 3 years ago. We do not 
believe there would have been significant cost-savings. Time is 
money, as they say, and there probably would have been some 
better flexibility with time scheduling in advance. But 3 years 
back the industry looked at the situation and worked 
aggressively, and the retail industry is ready.
    Most people think of the food industry as a rather simple 
business--you go in, you buy groceries, you go home. Looking at 
what we have developed as far as contingency plans, it is mind-
boggling. Things that we within the food industry, not just 
Giant Food, have had to be cognizant of include such things as 
advertising, direct store delivery, front-end operations, fuel 
operations, gas, getting products to our stores from our 
various vendors, perishables, areas of payroll, what happens if 
there is a power failure, if we cannot get store supplies, 
transportation, water and sewage. These are major issues that 
most people say, ``Gee, I had no idea that is what was 
necessary to run a food store''.
    Again, I do not think it would have saved a great deal of 
money. Time, yes, if the industry would have worked a few years 
earlier. But, again, most retailers that I am familiar with 
have tackled the problem starting about 3 years ago in 1996.
    Mr. Bartlett. Madam Chair, I would like to ask Mr. 
Willemssen just a simple question.
    Do you concur, sir, that the major liability that we have 
in starting late is that we might not finish rather than it 
cost us more?
    Mr. Willemssen. I think the major liability is exactly 
that, that we may not finish in time. But I would also add that 
because we did get a late start, the pace, for all intents and 
purposes, was more frantic than it would have otherwise been. 
And you have to pay for that more frantic pace.
    Speaking from the Federal Government perspective, the most 
recent estimate we have, the 24 major Federal departments and 
agencies, is about $8.9 billion that it will cost overall. One 
could argue that if that had been stretched out over a longer 
period of time, it may have been less. Indeed, there was a 
$3.35 billion emergency supplemental that was just for Y2K. One 
could argue that if the effort had been stretched out over 
time, agencies could have funded these activities through their 
normal budgeting process.
    Mr. Bartlett. Thank you all very much. Thank you, Madam 
Chair.
    Chairwoman Morella. Thank you, Mr. Bartlett.
    I am pleased to recognize Mrs. Biggert.
    Mrs. Biggert. Thank you, Madam Chairman.
    One of the rumors that I have heard lately, and I do not 
know if it is rumor, but so many of the hotel rooms in major 
cities have been booked, not for the celebrations of the 
turnover on New Year's Eve, but the fact that so many companies 
are having so many staff having to man the offices that they 
actually are having their families come into the cities and 
celebrate there because they will be involved with the 
turnover. Is that true, Mr. Campbell, from your standpoint?
    Mr. Campbell. We have scheduled, in Washington, 10 rooms at 
the Mayflower. We have scheduled rooms across the country 
because our staff needs to be there prior to the date, as well 
as the holiday traffic. So we have booked a considerable amount 
of room in the hotel industry around this country. You are 
absolutely right.
    Mrs. Biggert. I think it will certainly be well-spent if we 
have those glitches that somebody will be there.
    I would also like to commend you on your brochure and I 
guess this postcard. Is this something that was put into store 
bills, or is this something that was sent out through 
information?
    Mr. Campbell. It was sent out by our member broker-dealers 
across the country in the statements which they send to their 
customers every month.
    Mrs. Biggert. Have you had response from the customers?
    Mr. Campbell. We have had quite an active session on our 
web sites with customers. And many of those customers would 
directly ask the broker-dealer that they deal with on a day-to-
day basis many of the questions that they would ask us, and 
then we would respond either directly or to the member firms 
themselves. But our help desk has responded to over 20,000 
requests over the last period of time. So it has been very 
active, which is why we have really thought that education was 
probably the most important thing that we do.
    Mrs. Biggert. I know one of the concerns about this has 
been fraud and that people were coming out with schemes to try 
and make money from this or take away money from people, 
particularly seniors, with scare tactics. Have you heard of 
anything where people have called your offices saying that 
somebody has tried to perpetrate something?
    Mr. Campbell. Not that I am aware of. The one issue that we 
have heard about is inducing people to withdraw money from 
their bank in cash form and then defraud them of that in one 
form or another. By and large, the securities industry is 
either book entry or by certificate, and the ability for 
somebody to walk into an office and demand ready cash is 
generally not the same as a bank.
    Mrs. Biggert. And then Mr. Scher, I know that we have had 
concerns that there will be people who will decide at the last 
minute that they need to ensure that they have those supplies 
that they had not thought about until the last day or so. Do 
you think that still is going to happen? I do know that in a 
snow storm, coming from an area where we do have a lot of snow 
at that time of the year usually, that this happens--even in a 
major snow storm--where people rush to the grocery store at the 
last minute.
    Mr. Scher. We have extra merchandise that will be available 
in the stores and in our warehouses, both perishable and non-
perishable, to ship. And we can do that in a matter of hours if 
need be.
    I do not think you will be seeing that. Early in 1999, the 
news media was hyping this, and there was, indeed, a lot of 
interest on the part of consumers about what is going to 
happen. People were worried. We were getting dozens of media 
calls and consumer inquiries. Let's advance to November 1999. 
We are getting about six customer calls or letters a month, 
which is nothing, and all the news media calls to date have 
died down significantly. I think they will probably heighten 
slightly the last week of December.
    But the message has changed from the news media's 
perspective, because of good reporting, to there is no need to 
panic. The message today is that the industry is ready. And 
that includes the banking industry that I have read about, the 
food industry, the airlines. So I think the apprehension on the 
part of the consumer is a lot less today than it was at the 
beginning of this year.
    Mrs. Biggert. Good. Great. Thank you very much.
    Thank you, Madam Chairman.
    Chairwoman Morella. Thank you, Mrs. Biggert.
    I am now pleased to recognize Mr. Ose.
    Mr. Ose. Thank you, Madam Chair.
    I first want to commend Mr. Scher's organization for this 
helpful pamphlet which on the back lists any number of web 
sites down at the bottom that folks can visit for additional 
information, and if they do not have access to the Internet, 
there is a phone number that they can call for information on 
this, a toll-free number, 888-USA-4Y2K. So my compliments to 
your organization for putting this together.
    Mr. Scher. Thank you.
    Mr. Ose. I cannot let the occasion pass, Mr. Campbell, 
without expressing my compliments to you and your organization.
    Mr. Campbell. Thank you.
    Mr. Ose. If I understand correctly from listening to each 
of you, the manner in which your business transacts is an 
increasing amount of its commerce is electronically. The 
hospital folks are ordering supplies electronically, you are 
exchanging shares electronically, you are buying food and 
produce electronically, probably paying your people 
electronically with direct deposit, et cetera. Each of those 
transactions goes over the telephone lines, in effect. It is a 
telephone conversation. Which brings me to my question, and I 
regret we do not have the opportunity to visit with someone 
today on that.
    Mr. Willemssen, as far as the telephone companies, it is my 
understanding they are perhaps the most ready of all the 
various organizations in the country for this rollover.
    Mr. Willemssen. I would probably not go along with they are 
the most ready. I am much more optimistic today than when I 
testified in the summer of 1998. I would continue to say that 
the banking and finance sector is probably the most ready. 
Within the telecommunications area, I think among some smaller 
local exchange carriers there is still some level of concern 
about their readiness. So bottom line for me on telecom, much 
more optimistic, but I would not put them at the absolute top 
of the heap.
    Mr. Ose. Well, that brings me exactly to my question, and 
it relates primarily to Mr. Campbell's area of commerce. On 
Friday, December 31st, at 1 p.m., the exchanges are going to 
close, and at 9:30 a.m. on Monday, January 3rd, they are going 
to open. What is plan B if on Monday the 3rd there has been a 
problem?
    Mr. Campbell. Essentially, we operate one of the largest 
private communications networks that there is. We have paired 
T-1s to every server that we have across the country and across 
the world. All of those private, secure T-1 lines have been 
tested and tested and tested. The servers which they interface 
with have been tested. We have not only had physical on site 
presence to those servers, but the end-to-end testing that we 
have been involved in for quite some time leads us to believe 
that we know that our telephonic lines are operable in a Y2K 
environment.
    We also have the ability to do many tests over that 
weekend, which we will. We do not quit testing. We do believe 
that the communications that transact share volume in the 
NASDAQ stock market are ready and operable, and will be, as 
they have throughout all of our end-to-end testing. We have 
transacted business coming in, we have compared trades, the 
clearing organizations have vented the transparency of that 
trade back out at the price that it took place. We have gone 
through the order entry, to the transaction, all the way 
through the settlement and clearing process in a year 2000 
environment, having rolled on numerous times our calendars 
forward.
    We believe that we are ready. If we have issues to deal 
with, we will deal with them. But we believe that with the 
integrated testing end-to-end that we have done, we are ready 
and we will be ready.
    Mr. Ose. Thank you.
    Chairwoman Morella. Thank you, Mr. Ose.
    It is now my pleasure to recognize the co-Chair of the 
House Working Group on Y2K, the gentleman from California, Mr. 
Horn.
    Mr. Horn. Thank you, Madam Chairman.
    Let me start with NASDAQ. It established a record high, as 
we all know, surpassing 3,000 in closing yesterday. And 
technology stocks really dominate that board. Last week, IBM 
announced that mainframe computer customers are waiting to buy 
new equipment until after January 1st as they grapple with 
their own Y2K problems.
    What is the danger that Y2K could adversely affect the 
stock exchanges and investors' interests?
    Mr. Campbell. First of all, I think that whenever you 
approach year end, you either speed up your purchasing or you 
delay your purchasing, depending upon where you are with your 
budgets or the issues that you are dealing with. We do that at 
NASDAQ and I know the Federal Government does that. 
Essentially, in IBM's case, I believe that it was a 
postponement, obviously, is what you said, and deferral of 
major purchases while they concentrated on making sure they 
were Y2K compliant.
    The SEC has been very diligent in requiring the disclosure 
of the Y2K risk that firms have. They have gone back and back, 
and those firms they felt had not been as forthcoming as they 
would have desired, they have gone back to them and asked them 
for more specificity with respect to their risks. I think that 
the technology companies are more aware of Y2K and as 
sophisticated in the remediation because they are either the 
problem or they have been the solution. So relative to the 
damage that it would pose across the country, I think that it 
will be very limited in scope.
    Mr. Horn. In terms of contingencies, what things do you 
have on Y2K problems that affect businesses? What is the 
contingency plan?
    Mr. Campbell. Our contingency plan deals with many 
different levels of issues; whether or not somebody has 
telephone issues, whether or not they have order entry issues, 
whether or not they can operate their systems. We have it 
tiered in many layers. We have very specific reporting 
requirements over the weekend from December 31st to January 
3rd. Those very specific reporting requirements go to the 
different capital markets and the regulators. The Securities 
and Exchange Commission has very specific reporting 
requirements over that weekend. We will be, and have been, 
linked in terms of all the communications that will take place.
    So there are checklists for as many contingencies as our 
creative minds have been able to think up over the last couple 
of years. They are quantified, they are in books, they are in 
our command centers. We practice, we will continue to practice, 
and we will have basically triaged as many different 
contingencies and unexpected kinds of issues that we know how 
to create.
    Mr. Horn. A number of us have said from the very beginning 
that this is a management problem, not just a technological 
problem. What have you learned out of this experience that 
might be useful should some similar circumstance ever occur? It 
might be the encryption bit and how little bright kids break 
through computer security and all the rest of it.
    Mr. Campbell. We deal with security issues every day. From 
a management perspective, my best training is probably as an 
Air Force pilot and knowing what to expect that nobody has ever 
trained you for. Essentially, not only from our web sites, but 
our private communications systems, to our computers, to our 
people issues, I think that it has continued to make us more 
aware that it has to be done on every facet every day from a 
security perspective. So I think that it has been, at least 
from my perspective, a very broadening experience. Hopefully, I 
have learned something from it.
    Mr. Horn. Would any of you other witnesses like to comment 
on that? What have you learned from this that might be 
worthwhile knowing as a management problem when we ever get 
into something like this again? It obviously will not be this 
particular thing, hopefully, but it could be other things that 
relate to computers.
    Mr. Scher. That is a very good question, Mr. Horn. We are 
looking at Y2K as an opportunity. We think we will not miss a 
heartbeat; it will pass us by. But your question is a good one. 
In the event of a natural disaster within the food industry, 
let's take just one segment, people on welfare, people who 
receive Government benefits from the State and Federal levels, 
if the phones go down, for example, people that are on the 
electronic benefit transfer program, which is almost throughout 
the United States today, they would go into a food store and 
not be able to access their benefits.
    So what have we learned? We have learned that, aside from 
Y2K, we should indeed have good contingency plans in the event 
of, for example, telephones go out. A large segment of our 
customer base would not be able to shop for something they need 
to survive--food. So we have to look at alternative plans to 
handle a situation if, for example, the telephone lines go down 
again, how do we serve that customer. It is a question that we 
discuss today with one of our other owners, one of the other 
members of the Ahold family, Giant Food Stores of Carlisle, and 
we do not have the answer. It is a very good question. Aside 
from Y2K, if the phone lines go down, how do we serve this 
important segment of our business. We are going to be 
addressing that also.
    So it has widened our horizons. It has opened our eyes to 
look at possible other disasters that could occur within a 
retail business, how do we solve those problems. Some of those 
solutions are inherent with what we have found out with Y2K. 
Others we will be exploring over the next few months. But it 
has, indeed, opened our eyes to potential other disasters that 
could occur.
    Mr. Horn. Would cellular phones be one of the options for 
your major customers, a direct line?
    Mr. Scher. Possibly. If phone lines go down and a welfare 
individual or family is in a food store, they are at the 
checkout, we would have--currently, if the computer does not 
work today, we have a number that we can call within the State 
government to make sure that the benefits or their so-called 
account has funds in it. A cellular line would work perfectly 
for that. It is a little cumbersome, but we would have to 
resort to something other than telephone lines and that is what 
we would use.
    Mr. Horn. Mr. Scher, in terms of the food situation, is 
there a concern within the food retail distribution industry 
about transportation being available to get the products you 
need on a regular basis? I assume a lot of the stores use what 
we call the Japanese inventory approach; on a timely basis, it 
gets there based on the demand. Is there going to be 
stockpiling in some cases in the back of particular stores if 
they do not have the space?
    Mr. Scher. Mr. Horn, for certain commodities within the 
food industry, yes, the food stores, to the best of their 
ability, have small back rooms that they will stock up with 
extra merchandise. Our warehouses will also have certain items 
that we know that, for example, if there is a snow storm, 
people would normally buy, including such items that are non-
perishable like batteries, candles. We will have our truck 
fleet standing by. In the event that we see panic buying 
occurring, we will be able to ship merchandise to the stores. 
But with certain commodity groups, we will have excess product 
in the store just to be safe.
    Mr. Horn. Let me ask the gentleman from New Mexico. I have 
long admired the medical school at the University of New 
Mexico. I am curious, they were the ones that in the freshman 
year of medical school mixed the students studying medicine 
with actual patients, and not just the dull bio-chem or 
whatever courses, anatomy, so forth, but relating them to real 
human beings. Is that still going on at New Mexico?
    Mr. Margolis. Yes, sir, Mr. Horn, it does. It is the 
encounter or problem-based medical training. They were pioneers 
in that area.
    Mr. Horn. Well they were No. 1, but Harvard got the 
publicity because it is Harvard.
    Mr. Margolis. I am glad that story has travelled back east.
    Mr. Horn. And having headed a State university and been a 
head of a lot of those people, but you never get publicity 
because you do not have 35 people on your staff.
    Mr. Margolis. That is right.
    Mr. Horn. So I was just wondering if that kept going, 
because I have had a great respect for that institution for 20 
years.
    Mr. Margolis. I will let the dean know. He will be very 
glad to hear that.
    Mr. Horn. Well, it is a very interesting situation. Let me 
ask you, with the AHA, when we were in Cleveland the 
representative of the Cleveland Clinic, a very distinguished 
group of hospitals, was our witness and noted that there was a 
common web site where you could check out the equipment as to 
machine number, patent, and all of the rest of it and you did 
not have to reinvent the wheel if you were checking your 
various pieces of equipment in the emergency room. Has that 
worked pretty well? And has the hospital profession been able 
to get and share information with each other so they do not 
have to reinvent the wheel?
    Mr. Margolis. Yes, that has worked very well. Actually, 
through the leverage of the State Hospital Associations and the 
American Hospital Association, we have shared a lot of 
information like that. The FDA, as you know, has a site for 
medical devices where you can check serial number, 
manufacturer, and other information to rely upon the piece of 
equipment being tested by the manufacturer, which is often the 
safest reliance you can have.
    In addition, the American Hospital Association has put 
together a monthly telephone conference line, one for rural 
hospitals and one for large urban hospitals, where on a monthly 
basis for the last 11 months we have shared information 
regarding what we have found with our vendors, what we have 
found in our own institutions, and how our remediation plans 
have been going, which has been an excellent forum for learning 
from one another and avoiding that issue of reinventing the 
wheel. So, although in many ways we are competitive with other 
hospitals in our community, it is important to share certain 
levels of data because we are community service-based providers 
and it is critical that we be able to respond as a team and not 
as a single hospital island.
    Mr. Horn. Now a lot of the manufacturers of some of that 
emergency equipment probably were out of business. Did you find 
there were ways to get replacements for some piece, or did you 
just have to go and let's buy something new?
    Mr. Margolis. In some cases. I can think of three or four 
pieces of equipment, and that was I believe EKG pieces of 
equipment, that had to be replaced because the manufacturer had 
in fact been out of business for something more than 10 or 12 
years and there was no successor to that manufacturer that 
could provide the upgrade. The reality is a piece of equipment 
like that has a useful life of 8 to 10 years. So, on the one 
hand, it was probably time to replace it, but, as you know and 
commented about New Mexico, we probably did not have the money 
to budget to replace it and so we would have liked to have kept 
it running. But, for the most part, there has been successor 
companies who are able to provide the upgraded software, and in 
many cases the upgraded computer processing board, which will 
allow that piece of equipment to operate beyond January 1st. 
Most of that was done under warranty or maintenance service 
agreements that we have.
    It is a large challenge for hospitals to have identified 
all that. But that is part of their remediation plan and, as 
you pointed out, much of that information has been shared over 
various web sites.
    Mr. Horn. Now in going through this exercise, which nobody 
wanted obviously to do, but you had to do it for your own 
computer systems, have you learned something that will help you 
in better arranging new computers which are needed in terms of 
a new generation? We are always out; the minute we have bought 
one, it is 3 years out of whack anyhow. But what have we 
learned from that in terms of did we need all those programs, 
could you get rid of some, could you merge some? Did anybody 
use that as an exercise to say why are we doing this?
    Mr. Margolis. I think a valuable lesson that we have 
learned is the compatibility between equipment and the need 
when procuring equipment or software, which is mostly what 
hospitals do rather than develop their own software, to use 
common standards in data communication to insist that vendors 
can provide that common interface. There are committees of HCFA 
I believe that have defined something called HL-7, which is a 
standard of data interface, and that has become very popular in 
the last 2 years, to insist that vendors provide software that 
can communicate using this HL-7 interchange. I think that is 
probably the most valuable lesson because that will ensure not 
only for year 3000, which is quite a distance off, but for 
various things that happen in terms of Federal programs and 
insurance programs, that various pieces of the data process 
share the same codes for the same meaningfulness of the data.
    Mr. Horn. The way you are getting the new replacements for 
some of us, we might be around in the year 3000.
    Mr. Margolis. I hope I am.
    Mr. Horn. You gentlemen really did a great job and in your 
written presentations. I think it is one of the best panels we 
have ever had before us. It was very useful as to what you have 
gone through.
    I am going to ask Mr. Willemssen, who has followed us 
everywhere in the United States, overseas, you name it, and we 
usually ask him, because he has got all this knowledge, to say 
what have we missed. And what would you suggest? Ask some 
questions that make sense to you.
    Mr. Willemssen. I think you have really touched on some of 
the key points that you would want to hear from these 
witnesses. The only thing that I might add from a lessons 
learned perspective that maybe these sectors have learned, that 
we have definitely learned in the Federal Government, is going 
into this, and going into future information technology 
problems such as this, you need to focus on the business 
function first and the system second, instead of thinking 
systems and then how do they work for the business. That is one 
lesson learned in the Federal Government is focusing on the 
programs and then looking at the supporting systems rather than 
the other way around.
    Mr. Horn. Anybody want to add something that came to mind 
that we did not ask you? This is your chance.
    [No response.]
    Mr. Ose. Mr. Chairman, I have one thing I want to make sure 
that Mr. Scher addresses, because come January 1st, if there is 
not an adequate supply of Oreo cookies in his store, he is 
going to have trouble.
    Mr. Scher. They will be there, I promise you.
    Chairwoman Morella. You are talking to a Marylander, we 
believe in the Oreos, however you spell it.
    Mr. Horn. Well, if the Chair would indulge me, there is a 
few closing remarks I would like to make that I did not make 
because I was not here. I was in a markup of my subcommittee 
earlier.
    Chairwoman Morella. Mr. Chairman, before you make the 
closing remarks, may I just ask one other question. We are also 
going to open it to members of the committee of both 
subcommittees to be able to present any other questions to you, 
if that is amenable.
    But I just had a question that dealt with an article that I 
saw in USA Today. It was an article that indicated that a 
number of companies have failed to comply with SEC regulations 
requiring full disclosure of a company's vulnerability to Y2K. 
I just wondered if any of you wanted to comment on is this a 
widespread problem? Does this imperil investor confidence? 
Because I think it would affect all of you and I just wondered 
if you wanted to make any comment on that.
    Mr. Campbell. It is my understanding, Madam Chair, that it 
is a very small contained group of companies that the SEC has 
gone back and asked for further information. Obviously, the 
most important thing that the management of a company can do is 
maximize and protect their shareholder value. And those 
companies that do not have full disclosure obviously risk that.
    Chairwoman Morella. Anyone else, because it actually would 
affect all of you.
    Mr. Scher. No problem.
    Chairwoman Morella. Are you okay with, I know NASDAQ is 
going international, but the Asian markets, the 
interoperability concept?
    Mr. Campbell. We are moving forward relative to 
globalization of our markets. The links at this present time do 
not provide major risk to the U.S. capital markets. 
Essentially, we will know early whether those markets operate, 
how they operate. But the connection between the markets is not 
there at this point in time. So at least to U.S. citizens, the 
issue relative to their domestic securities is not at issue, it 
is their foreign owned securities. We have not had any direct 
conversation with the foreign markets except in terms of 
exchanging information about Y2K from a technology perspective. 
So I really cannot address that.
    Chairwoman Morella. If there were a run on the Asian 
markets and you found out before it happened here, how would 
you react?
    Mr. Campbell. I think our reaction would be to address the 
confidence issue in our domestic markets. I think all of our 
markets, all the regional markets, the national exchanges would 
address those in concert along with the SEC. The most important 
facet, we believe, of our markets is there is confidence in 
them; they are well-regulated, they are transparent, and they 
do protect the investor. That happens no where else in the 
world like it happens here. So we would address that very 
openly and very directly and we would share with the investing 
public exactly what is happening.
    Chairwoman Morella. Mr. Willemssen, do you want to comment 
on that issue at all?
    Mr. Willemssen. We have not done an analysis of that 
particular issue, so I am not in a position to comment.
    Chairwoman Morella. Thank you. I want to thank all of you, 
too.
    Now I am going to defer to Chairman Horn, the co-Chair.
    Mr. Horn. Thank you very much, Madam Chairman.
    No one really knows what is going to happen on January 1 
and December 31 in terms of what happens when we switch over. 
We have got predictions that are springing up like wild flowers 
about this. We have eager entrepreneurs promoting their year 
2000 survival kits. We have some of the people in the county 
jail have already talked to the warden and the captain of the 
guard to say could you let me off for December 31st and January 
1st because they think everybody will take money out of the 
bank and put it in their homes. That is the stupidest thing an 
American citizen or anyone here could do is take money out of 
the bank and put it in their homes because that is just where 
the robbers and burglars and all the rest of them will be 
looking.
    Already, I read into one hearing a letter to Ann Landers on 
the scams already happening to elderly citizens. And all I can 
say is it needs to be ``buyer beware'' in those last few days 
in terms of people selling you things you really do not need. A 
lot of them just might collapse on you anyhow. I have been 
looking at probably 100 different magazines over the last 
couple of weeks and have seen these ads that are the kinds of 
things you would see in the National Inquirer or something that 
want to scare your wits out of you. But we do have some real 
problems.
    Of course, some of this is just amusing in a way, but it 
certainly is upsetting people. For example, in 1993, Minnesota 
officials instructed 104-year old Mary Bandar to report to 
kindergarten. Now it turned out that the State computers had 
misread Ms. Bander's 1889 birth date as 1989, placing her at 
age 4. Recently in Maine, several hundred car owners were 
dismayed to find the titles to their new year 2000 model 
vehicles categorized as ``horseless carriages.'' State 
computers has misread the year 2000 as 1900.
    Well, we can get by those things. But some of the more 
serious ones obviously worry us; and that is, how you get gas 
from Russia to Eastern Europe, Central Europe, would that 
affect the United States in any way? Will the electricity fail? 
So forth. Now both the administration and the Congress have 
looked at a number of these questions around the country and I 
think people have been very prepared. When we had a problem on 
nuclear reactors, we asked the Nuclear Regulatory Commission to 
look at all of them, not just 10 percent; they were only going 
to look at 10 percent. They have looked at all of them and 
presumably that situation which generates electricity is okay. 
But we really will not know until you get it all in an 
operational sector where you have all of these different 
factors coming together in a typical operational day. And that 
is the main thing we really have to care about.
    We will have two more things in terms of these two 
subcommittees. One, we will hold the final grade release to the 
press on November 22nd, a Monday, and the staffs and the GAO 
team that has worked very closely with us will be doing the 
work of analysis that week. We think that should tell us a 
little bit about at least the executive branch. I think Mr. 
Koskinen and his team have done a fairly good job. The question 
is could it all have been done earlier, and would it have cost 
less. We still have shades of panic even in the executive 
branch as well as in private industry when a lot of their 
talented people have been bought out from under them by other 
industries who want talented people. The question will be did 
we have enough human resources in the right place at the right 
time. Again, that is a management question.
    So, Madam Chairman, I think we hope you will be there on 
November 22nd. And then your committee and mine, after this is 
all over, we will have a retrospect summing up, and if 
something has gone wrong, what could we have done to get the 
administration to do it the right way then. I was worried for 
several years over the procrastination. I think they have 
played catch-up and I hope they make it. That is what we need. 
We should not have to do things that are just fouled up and not 
run on a steady track of some sort of management approach to 
solving the problem.
    And so that is where we are. We do not know what is going 
to happen on January 2nd and December 31st. But you certainly 
give us some heartening hope in major industries that you 
represent, the hospitals, the grocery industry, the stock 
markets. I know the stock markets were one of our first 
witnesses when we started and I think they have done a splendid 
job. So thank you all for coming.
    Mr. Horn. Mrs. Morella, I think we have the tributes to the 
staff.
    Chairwoman Morella. And as he gives the tributes, I want to 
indicate that I would agree that the cost has escalated, maybe 
it would not have had we started earlier. I remember the first 
submission by the President was $2.3 billion. Remember that, 
Mr. Willemssen? Now it is $8.9 and probably continuing. But we 
will be continuing to monitor, and we appreciate very much your 
being here and for your patience for being here all afternoon.
    Mr. Horn. I might add that the GardnerGroup, when they 
testified before our subcommittee, said it will be about a $30 
billion cost in the case of the Federal Government. We think, 
and we thought as it went along, and we simply pulled it out of 
the air, but that is the way they sometimes build budgets 
around here, we thought it would be $10 billion. And that is 
about where it is I believe.
    So we are going to thank our staff that has stuck with this 
now since 1996. Russell George, the staff director and chief 
counsel, is standing against the wall there. Don't worry, we 
are not some Latin American banana republic where people that 
stand by walls are in trouble. You are in good shape. Matt 
Ryan, senior policy director, is right behind me here. Bonnie 
Heald, communications director, is probably working with the 
press. Chip Ahlswede, our clerk, is right there with them. Rob 
Singer, the staff assistant; P.J. Caceres, intern; Deborah 
Oppenheim, intern. That is all of our staff.
    And then Mrs. Morella's staff of the Subcommittee on 
Technology of the Science Committee: Jeff Grove, the staff 
director; Ben Wu, behind us, counsel; Joe Sullivan, staff 
assistant.
    The minority staff on the Government Management, 
Information, and Technology Subcommittee team is Trey 
Henderson, minority counsel; Jean Gosa, the minority staff 
assistant. On the Technology Subcommittee, Michael Quear, the 
professional staff member; and Marty Ralston, staff assistant. 
And the court reporter is Ruth Griffin.
    We thank them all for all they have done. They have worked 
overtime many a night, many a weekend to get the job done, and 
we appreciate it.
    Chairwoman Morella. We will now adjourn the committee 
meeting.
    [Whereupon, at 5:07 p.m., the subcommittees were adjourned, 
to reconvene at the call of their respective Chairs.]

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