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




                               before the


                                and the


                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION


                           FEBRUARY 10, 2000


                             Serial 106-86


         Printed for the use of the Committee on Ways and Means

65-267 CC                   WASHINGTON : 2001

            For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 

                      COMMITTEE ON WAYS AND MEANS

                      BILL ARCHER, Texas, Chairman

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

                     A.L. Singleton, Chief of Staff

                  Janice Mays, Minority Chief Counsel


                    Subcommittee on Social Security

                  E. CLAY SHAW, Jr., Florida, Chairman

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

                    Subcommittee on Human Resources

                NANCY L. JOHNSON, Connecticut, Chairman

PHILIP S. ENGLISH, Pennsylvania      BENJAMIN L. CARDIN, Maryland
WES WATKINS, Oklahoma                FORTNEY PETE STARK, California
RON LEWIS, Kentucky                  ROBERT T. MATSUI, California
MARK FOLEY, Florida                  WILLIAM J. COYNE, Pennsylvania
SCOTT McINNIS, Colorado              WILLIAM J. JEFFERSON, Louisiana
JIM McCRERY, Louisiana
DAVE CAMP, Michigan

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.

                            C O N T E N T S



Advisory of February 3, 2000, announcing the hearing.............     2


Social Security Advisory Board:
    Hon. Stanford G. Ross, Chair.................................     7
    Sylvester J. Schieber, Ph.D., Member.........................    17
U.S. General Accounting Office, Cynthia M. Fagnoni, Director, 
  Education, Workforce and Income Security Issues, Health, 
  Education, and Human Services Division; accompanied by Joel C. 
  Willemssen, Director, Civil Agencies Information Systems, 
  Accounting and Information Management Division.................    30


Coates and Jarratt, Inc., James E. Burke.........................    75
McTigue, Hon. Maurice P., Q.S.O., George Mason University........    87
National Quality Program, National Institute of Standards and 
  Technology, Technology Administration, and U.S. Department of 
  Commerce, Harry S. Hertz.......................................    81

                       SUBMISSIONS FOR THE RECORD

Matsui, Hon. Robert T., a Representative in Congress from the 
  State of California............................................     6
National Association of Disability Examiners, Zachary, LA, Terri 
  Spurgeon, statement............................................    99
Steinberg, Michael A., Michael Steinberg & Associates, Tampa, FL, 
  statement......................................................   102



                      THURSDAY, FEBRUARY 10, 2000

                  House of Representatives,
                       Committee on Ways and Means,
        Subcommittees on Social Security and Human 
                                                    Washington, DC.
    The Subcommittees met, pursuant to notice, at 11:23 a.m., 
in room 1100, Longworth House Office Building, Hon. E. Clay 
Shaw, Jr. (Chairman of the Subcommittee on Social Security) 
    [The advisory announcing the hearing follows:]




                                                CONTACT: (202) 225-9263


February 3, 2000

No. SS-9

                    Shaw Announces Hearing Series to

  Examine Social Security's Readiness for the Impending Wave of Baby 
                          Boomer Beneficiaries

    Congressman E. Clay Shaw, Jr., (R-FL), Chairman, Subcommittee on 
Social Security of the Committee on Ways and Means, today announced 
that the Subcommittee will hold a series of hearings to examine Social 
Security's readiness for the impending wave of Baby Boomer 
beneficiaries. The first hearing in the series is a joint hearing by 
the Subcommittees on Social Security and Human Resources, and will 
focus on current and future service delivery challenges that the Social 
Security Administration is facing in the 21st Century. The hearing will 
take place on Thursday, February 10, 2000, in the main Committee 
hearing room, 1100 Longworth House Office Building, beginning at 11:00 
    Subsequent hearings in the series will be announced at a later 
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. 
Witnesses will include members of the Social Security Advisory Board, 
representatives from the U.S. General Accounting Office, and service 
delivery experts. However, any individual or organization not scheduled 
for an oral appearance may submit a written statement for consideration 
by the Committee and for inclusion in the printed record of the 


    The services that the Social Security Administration (SSA) provides 
impact the lives of nearly all Americans. For example, in 1999 SSA paid 
benefits to more than 45 million retired and disabled workers and their 
families and to more than 6.6 million Supplemental Security Income 
recipients, processed 250 million reports of earnings and more than 6 
million initial claims for benefits, handled more than 26 million 
visitors requesting services at 1,300 field offices, fielded 80 million 
calls to the 800-number service, issued 16 million new and replacement 
Social Security numbers, and provided 30 million Social Security 
Statements to help individuals plan for their financial future.
    As America enters the 21st Century, SSA will face increasing 
challenges. SSA workloads are projected to begin increasing rapidly 
within the next decade as the huge Baby Boom generation enters its peak 
disability years prior to reaching early retirement age starting in the 
year 2008. Social Security retirement and disability workloads are 
projected to rise 16 percent and 47 percent, respectively, between now 
and the year 2010. Claims under the Supplemental Security Income (SSI) 
program, which is administered by SSA and provides cash benefits to 
poor disabled and elderly individuals, are expected to grow 12 percent 
between now and the year 2020. At the same time, Social Security 
programs are becoming more complex, with initiatives to prevent fraud 
and abuse, complete continuing disability reviews, provide increased 
rehabilitation and employment services for the disabled, and perform 
reviews to determine whether SSI beneficiaries continue to meet the 
program's income and resource requirements. These factors, combined 
with recent workforce downsizing and the coming retirement of large 
numbers of SSA's aging workforce, will place tremendous pressures on 
the Agency to meet the public's need for service in the 21st century.
    In announcing the hearing series, Chairman Shaw stated: ``Ensuring 
the Social Security Administration delivers quality service in a timely 
way is more than a goal--it's a necessity for American workers and 
families. Workers pay their hard-earned wages for their Social Security 
benefits. It's their program and they deserve not only all the benefits 
they paid for, but the highest quality of service as well. Our goal is 
to ensure that happens without any glitches, despite the Social 
Security Administration's many challenges ahead.''


    This hearing will focus on the Social Security Administration's 
service delivery practices, key service delivery challenges in the 
future, and effective strategies to address these challenges.


    Any person or organization wishing to submit a written statement 
for the printed record of the hearing should submit six (6) single-
spaced copies of their statement, along with an IBM compatible 3.5-inch 
diskette in WordPerfect or MS Word format, with their name, address, 
and hearing date noted on a label, by the close of business, Thursday, 
February 24, 2000, to A.L. Singleton, Chief of Staff, Committee on Ways 
and Means, U.S. House of Representatives, 1102 Longworth House Office 
Building, Washington, D.C. 20515. If those filing written statements 
wish to have their statements distributed to the press and interested 
public at the hearing, they may deliver 200 additional copies for this 
purpose to the Subcommittee on Social Security office, room B-316 
Rayburn House Office Building, by close of business the day before the 


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

    Note: All Committee advisories and news releases are available on 
the World Wide Web at ``HTTP://WWW.HOUSE.GOV/WAYS__MEANS/''.

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


    Chairman Shaw. Welcome. I apologize for being a few minutes 
late starting, but I would like to welcome all of you to the 
joint hearing of the Human Resources and Social Security 
    Yesterday, Chairman Archer raised an issue that is very 
disturbing to me and to many of us, and I am sure it is 
disturbing to the Subcommittee Members on both sides of the 
aisle. I'm referring to the computer hackers disabling major 
Internet Web sites and accessing consumer credit information. 
We are concerned because the Social Security Administration's 
computer systems guard the most sensitive records of the 
American people, their wage and other personal information.
    I know Social Security has world-class security measures in 
place, and I am sure this is a top priority for the 
Commissioner, but I want to comment publicly that the Social 
Security Administration has the full support of this Committee 
to help protect the privacy of the American people. Such was 
stated yesterday by Chairman Archer. We must catch these 
Internet hijackers and put an end to this cyberterrorism. There 
is nothing funny or smart about it. It is criminal activity and 
they should be punished.
    Today's hearing is about Social Security's current and 
future service delivery challenges. Social Security touches 
nearly every American family. In 1999, the Social Security 
Administration paid Social Security and SSI benefits to more 
than 50 million beneficiaries. Without a doubt, continuing to 
provide timely, accurate benefits and world-class service will 
remain Social Security's number one mission in the years ahead. 
This mission will become more complicated as the huge baby 
boomer generation enters its peak disability years and then 
enters retirement age starting in 2008.
    By 2010, Social Security retirement benefits claims are 
expected to rise by 16 percent and disability claims by 47 
percent. The rapid rise in disability claims is especially 
noteworthy since we know disability cases are the most complex, 
time consuming, and expensive from an administrative 
standpoint. For an agency facing a wave of retirement by its 
own workers and high expectations from customers, there is a 
great challenge. This is no idle concern.
    Although Social Security is widely regarded as among the 
best administered Federal programs, and it is, the need to 
improve public service was highlighted in a recent report by 
the bipartisan Social Security Advisory Board. The report 
concluded, and I quote, ``There is a significant gap between 
the level of services that the public needs and that which the 
agency is providing. Moreover, this gap could grow to far 
larger proportions in the long term if it is not adequately 
    This is our purpose today, to examine what Social Security 
is doing now to prepare for the even greater challenges of 
tomorrow. In addition to the Advisory Board and General 
Accounting Office, we will hear from experts on how high 
performing public and private organizations have prepared for 
emerging challenges and thrived. We have even booked a 
futurist--new word to me--to help us to do some deep thinking 
about changing values, attitudes, customer service preferences, 
and technologies that will affect Social Security's ability to 
provide services for the impending wave of baby boomers.
    For those who think that it's just too much action to pack 
into one hearing, you are right. That is why the Social 
Security Commissioner, Ken Apfel, will join us at an upcoming 
meeting about Social Security's plans to respond to such 
challenges. Today's hearing will put those plans in context. 
That way, we will have a better chance of assessing what the 
right track is and whether Social Security is on it when it 
comes to delivering the services to the public in the 21st 
    I now yield to my co-chairman of this hearing, Nancy 
    Chairman Johnson of Connecticut. Thank you, Chairman Shaw. 
I just want to welcome those who are testifying.
    I share the Chairman's great alarm at the security 
challenges that the Social Security system faces. Of all of our 
government agencies, the Social Security computers contain more 
personal data routinely and across the board than any other 
system, and it is extremely important that we meet the 
challenge of security. And while I know they are serious and 
dedicated about this, as we witness new abilities to enter our 
systems, we really are going to have to look at new 
possibilities for security. So it is a tremendous challenge, 
but it is an extremely important one. We will not be able to 
govern if we cannot protect private information.
    I also want to mention that, unfortunately, I am not going 
to be able to stay through the whole hearing, and I just wanted 
to extend a special welcome to the former member of Parliament 
from New Zealand who is here as a distinguished visiting 
scholar and from whom we will hear on the last panel, Hon. 
Maurice McTigue.
    We do have an excellent series of witnesses, and I would 
like to move on with the hearing. So welcome to you all and 
thank you, Chairman Shaw.
    Chairman Shaw. Mr. Cardin.
    Mr. Cardin. Thank you, Mr. Chairman. First, I would like to 
put into the record the opening statement from Mr. Matsui, the 
Ranking Member on the Social Security Committee, if I might; 
and, Mr. Chairman, let me also acknowledge that we have on the 
floor today a bill from the Ways and Means Committee, so I am 
going to have to leave also and I apologize for that. These 
conflicts do occur.
    Mr. Chairman, we may spend a good portion of this year 
debating on how much of the overall Federal budget surplus 
should be Social Security and Medicare. At the very least, 
there appears agreement not to spend any of the Social 
Security-generated surplus other than use for Social Security. 
However, saving Social Security money while allowing the 
disbursement system for those funds to deteriorate may be a 
hollow victory for our elderly and disabled Americans who 
depend on the timely assistance from our insurance system that 
they paid into.
    I am therefore pleased, Mr. Chairman, that you are holding 
these hearings to examine the readiness of the Social Security 
Administration to provide reliable service when the baby boomer 
generation retires. In this context, there is one question our 
Subcommittee must address head on. How long can a shrinking 
work force cope with a growing workload before the quality of 
service is affected? Over the last 15 years, the number of 
full-time employees of SSA has declined from 80,000 to 63,000 
while the amount of work performed by that agency has grown 
    Mr. Chairman, I might tell you that many of those 63,000 
live in the Third Congressional District of Maryland. I am very 
proud of the work that SSA employees do every day of the week 
in their public service on behalf of the citizens of this 
nation. They work very hard. They are very dedicated and they 
have been working with less and less resources every year.
    The increase in SSA's workload is projected to continue to 
grow over the next decade, 16 percent for retirement cases, 47 
percent for disability cases, and 10 percent for SSI claims. 
Increased efficiencies due to technology advances or system 
improvements may moderate the impact of workload increases on 
SSA, but we all need to acknowledge that there is a core work 
force that is needed at SSA in order to handle the 
applications, answer questions, and determine eligibility.
    Mr. Chairman, I look forward to our witnesses addressing 
these work force issues as well as providing their advice on 
special steps that SSA should take to improve the service it 
provides to millions of Americans. Thank you.
    Chairman Shaw. And thank you, and without objection, your 
full statement, that of Mr. Matsui, and all the Members of both 
these Subcommittees will be placed in the record.
    [The opening statement of Mr. Matsui follows:]

Opening Statement of Hon. Robert T. Matsui, a Representative in 
Congress from the State of California

    Thank you, Mr. Chairman.
    I want to commend you for holding this hearing on the 
challenges facing customer service delivery at the Social 
Security Administration. By now, it is common knowledge that 
long-term demographic trends will pose a challenge for the 
financing of the Social Security program in the years ahead. 
However, the challenges that these and other trends will create 
for the administration of the Social Security and SSI programs 
are less widely discussed.
    Consequently, I look forward to hearing from our witnesses 
today about the customer service challenges those trends will 
create and about the initiatives that SSA has already 
implemented or is currently developing in order to meet those 
    We all know that as the Baby Boom generation retires, SSA 
will experience rapid workload growth. At the same time, 
however, SSA will experience the loss of a significant 
proportion of its workforce since many of its employees are 
Baby Boomers themselves. SSA must begin to plan now to ensure 
that it is prepared to handle these events when they occur.
    The task at hand is vitally important. With the possible 
exception of the Internal Revenue Service, the American people 
interact with the Social Security Administration more than any 
other federal agency. As a result, for many Americans the 
Social Security Administration is the face of the government. 
They equate the manner in which SSA delivers services with the 
government's responsiveness in general to the problems they 
face and the needs they may have.
    Recent studies indicate that SSA is performing fairly well 
with regards to customer service. Last December, SSA scored an 
82 out of a possible 100 on the American Customer Satisfaction 
Index compiled by the University of Michigan Business School 
and the American Society for Quality. In contrast, the 
aggregate score for the federal government as a whole was 68.6.
    We should also keep in mind that SSA was at the forefront 
of the federal government's efforts to prevent Y2K-related 
computer problems, easily the largest and most pressing service 
delivery issue the government has addressed in recent years.
    Despite these successes, progress still needs to be made on 
a number of service delivery problems, such as the length of 
time necessary to complete a disability appeal. While it is 
incumbent upon the Congress to highlight these problems and to 
ensure that SSA is administering its programs properly, it is 
also incumbent upon the Congress to provide SSA with the 
resources it needs to meet a growing workload.
    The FY 2000 appropriation for SSA's administrative budget 
that Congress enacted last year was $6.572 billion, $134 
million below the $6.706 billion requested by the President. 
SSA projects that, as a result, the agency will be able to 
process 169,000 fewer disability claims, 91,000 fewer 
retirement/survivors claims, and answer 3 million fewer 
telephone calls to its national 800 number.
    While we must receive every assurance from SSA that the 
agency is utilizing its existing resources in the most 
efficient manner possible, I strongly hope that we will not 
repeat this short-sighted approach to budgeting when we 
consider the agency's FY 2001 appropriation this year.
    I want to thank all of the witnesses for being here, and I 
look forward to hearing your testimony.
    Thank you.


    Chairman Shaw. Our first two witnesses, Mr. Ross and Mr. 
Schieber are members of the Social Security Advisory Board. 
This Advisory Board was set up back in 1994 as a bipartisan 
board which was supported by the Administration as well as by 
the Congress in order to take a close look and give us a road 
map on how we can do better in providing the Social Security 
functions to the people that it's designed to serve.
    Welcome to both of you, and, Mr. Ross, if you would start 
out on the testimony. Thank you for being with us.


    Mr. Ross. Mr. Chairman, Chairman Johnson and Members of the 
Subcommittees, I want to thank you for your invitation to 
testify. This is an opportunity for the Social Security 
Advisory Board to address the issue of how the Social Security 
Administration can better fulfill its obligation to serve the 
American people.
    With your permission, I would like to submit my full 
statement for the record and briefly summarize some of the 
major points.
    Chairman Shaw. Without objection, the full text of the 
testimony will be placed in the record, as it will for all the 
witnesses today, and you may proceed as you feel most 
comfortable. Thank you.
    Mr. Ross. I'm going to be sharing my time with Sylvester 
Schieber who is member of the Board. As the chair of the Board, 
I'm going to try to present the basic thrust of what we learned 
in over 2 years of study.
    First of all, I want to make it clear that when Congress 
created our Board in 1994, it was given a mandate to make 
recommendations for how the Social Security Administration can 
improve its service to the public. We did not volunteer for 
this task. This task was part of the job that you wanted the 
Board to do.
    When we began our work, we had no preconceptions, but by 
the time we finished after 2 years and issued our 85-page 
report last September, we had the unanimous endorsement of all 
of the members of the Board, Democrats and Republicans, and 
most importantly our report was issued in a nonpartisan spirit. 
It was a professional job.
    The bottom line of that report is as follows: The Social 
Security Administration has serious problems that need prompt 
attention. Most importantly, there are not only current 
problems that need attention, but it is absolutely clear that 
the problems will get worse in the future if not addressed now. 
It takes a long time to get to the situation that the agency is 
now in, and there are no quick fixes. It's not going to be easy 
to get out of it, but the time to start is clearly now.
    This is a situation that the public will feel directly if 
the tide is not reversed. So the time to do something is now 
before you have a lot of public discontent. We have come to the 
Congress to try to get the Congress to deal with this set of 
    All is not bleak. The Social Security Administration is 
fortunate to have an experienced and dedicated work force and a 
management that ranks among the top of government agencies. 
Having said that, though, those assets do not justify 
complacency because they alone have not been adequate so far to 
deal with the problems that face the agency. SSA needs to move 
forward on its problems urgently. It needs to change, but it 
also needs resources to help it make the changes that are 
    What are the problems? Problems manifest themselves most 
obviously in overcrowded waiting rooms where waits of 2, 3, or 
4 hours are not uncommon, inconveniencing many people who come 
to the office to get a Social Security card or file a claim and 
putting pressure on overworked employees to process work faster 
even if it means cutting corners. There are large backlogs in a 
number of areas of the agency's work, which means that work 
does not get done in a timely manner, and there is also broad 
consensus among staff in the field that the quality of work and 
program integrity are at times seriously threatened.
    To deal with workload pressures, the agency is continually 
shifting work from one component to another, addressing one 
problem while creating a new one. A prime example of this 
robbing Peter to pay Paul is how the agency deals with the 800 
number. To meet the goal of answering 95 percent of calls in 5 
minutes, SSA has been diverting employees from their own 
important work to answer the telephone. This is generating 
delays in other parts of the agency and producing even more 
telephone calls. A vicious cycle has been created that is 
undermining the quality of service agency-wide.
    Despite agency efforts, 800 number service remains far from 
satisfactory. As Chart 1 shows, of the 79 million calls to the 
800 number in 1999, 20 million either resulted in a busy signal 
or were abandoned before receiving service. Thus only 75 
percent of the public's calls actually received service. 
Moreover, this performance will only go down in 2000 under the 
budget that has been proposed thus far. That budget shows only 
57 million calls being answered in 2000, so even if there were 
no more calls, that 75 percent would be down to about 70, and 
if calls increase, it could even go from 75 percent to two-
    I do not think that is adequate telephone service. What are 
the causes? What are the roots of this problem? The telephone 
is just a prime example. Prolonged downsizing has contributed 
to the agency's problem. As Chart 2 shows, since 1982 
employment at SSA has declined by 27 percent, and most 
importantly the number of employees in the field has declined 
by more than 29 percent. Downsizing has occurred across 
government, and in Chart 3 we have compared SSA to two other 
agencies that have service delivery functions, the IRS and the 
Department of Veterans Affairs, and Social Security has 
declined more where as the IRS has even gotten increases.
    Changes in the managerial structure have also been an issue 
and created difficulty. There are far fewer managers, and the 
managers are less able to monitor, to check, to try to provide 
the kind of quality control that they have previously provided. 
The impact of past staffing cutbacks and managerial changes 
will be felt even more acutely over the next decade when a 
large portion of the agency's seasoned work force is expected 
to retire.
    Chart 4 shows that the number of retirees will almost 
double between now and 2007, and this retirement wave will be 
occurring at the same time that the baby boomer generation will 
increase the numbers who need to be served, which is shown on 
Chart 5. A significant portion of this growth, too, will be in 
the DI and SSI disability programs which are highly complex to 
    In general, the agency's work is growing more complex. 
Disability applications, for example, increasingly involve 
mental impairments which are frequently difficult to evaluate 
and require careful judgment. The legislation passed last year 
to help the disabled return to work will add to the agency's 
responsibilities. And yet, as far as I know and I received a 
briefing yesterday, there is no money in the budget 
specifically designated to address the new responsibilities and 
needs that will be created by the new legislation.
    I could say more, but time is short, but I hope I will have 
said enough to convince you that SSA cannot continue with 
business as usual if it is to meet its growing challenges. The 
Board has made several basic recommendations for how the agency 
should proceed to begin to meet these challenges.
    First, the agency needs a service delivery plan that sets 
fourth for the short- and long-term how it expects to handle 
its growing workloads, whether through staffing increases, 
technological improvements, changing the way the agency does 
its business, or a combination of these approaches. It needs 
the work force plan that was called for by the 1994 legislation 
and which has not yet appeared, and that work force plan needs 
to be tied in with an information technology strategy so that 
people are trained and hired to do the right jobs based on the 
rapidly changing technology that is available.
    Second, the agency needs to make dramatic improvements in 
its telephone service and systems capabilities and accelerate 
significantly the use of new technologies.
    Third, the agency needs to address longstanding 
institutional problems. These include a culture that 
discourages open discussion of problems, which means that 
problems are not being addressed in a forthright way. Also, 
there are major weaknesses in communication between SSA's 
headquarters and operations in the field, including the state 
disability agencies, which undermine the ability of those in 
the field to understand agency policies as well as the ability 
of headquarters to benefit from the experience and ideas of 
employees in all parts of the agency. Further, SSA's 
administrative structure spreads responsibilities over too many 
components, making communication, coordination, team work, and 
timely decisionmaking difficult to achieve.
    Changes in SSA's structure and business processes are 
crucial if the agency is to the meet its future challenges, but 
the agency will need additional resources as well, both in the 
short term and long term. The upcoming retirement wave and the 
aging of the baby boomers make it critical for the agency to 
begin quickly to hire and train a work force for the future. We 
believe as a Board, and it is unanimous, an important first 
step is that the agency's administrative budget, like its 
program budget, should be explicitly excluded from the 
statutory cap that imposes an arbitrary limit on the amount of 
discretionary domestic spending.
    The agency's budget should be work-based, not based on 
artificial constraints. The American people, by their 
contributions, are paying for the program and for the service, 
and they ought to get the service which they need and to which 
they are entitled. It is time for a work-based budget to be 
given to the agency.
    In conclusion, I want to commend Commissioner Apfel and the 
agency for beginning to respond positively to the findings and 
recommendations in the Board's report. They have started to 
take some steps to address a number of problems that are 
described in our report, but they will need the help of the 
Congress and the administration if they are to be successful.
    Let's make no mistake. There is a long way to go. Staying 
the course will require years of consistent work. The agency 
reached its present condition over a long period, and there are 
no quick fixes. But the important thing--the vital thing--is to 
get started now, this year.
    Thank you very much, Mr. Chairman.
    [The prepared statement follows:]

Statement of Hon. Stanford G. Ross, Chair, Social Security Advisory 
Board (former Commissioner of Social Security Administration)

    Chairman Shaw, Chairman Johnson, and members of the 
Subcommittees on Social Security and Human Resources, I want to 
thank you for your invitation to the Social Security Advisory 
Board to testify on the subject of Social Security's service to 
the public. I am accompanied today by Sylvester Schieber, a 
member of the Board, who is filing his own testimony. I hope 
that these hearings, coming as they do at the beginning of this 
second session of the 106th Congress, will provide the impetus 
for the prompt action that is needed to ensure that the Social 
Security Administration can fulfill its current and future 
obligation to serve the American people.
    Although most people are aware of the financing deficit 
that the Social Security program faces over the long term, few 
are aware of the Social Security Administration's serious and 
growing service delivery problems. On behalf of the Board, I 
welcome this opportunity to begin a public discourse on what 
needs to be done to ensure that these problems are 
appropriately addressed. In the report on service that we 
issued last September, we set forth our unanimous 
recommendations for the actions we believe are necessary.
    When the Congress created the independent, bipartisan 
Social Security Advisory Board in 1994, you included in its 
mandate a specific charge that the Board make recommendations 
for how the Social Security Administration can improve its 
service to the public. Responding to that charge has been one 
of the Board's highest priorities. Over the course of more than 
two years, we talked with thousands of SSA and State disability 
agency employees in all regions of the country. We examined 
agency reports and statistics, and we held hearings to hear the 
views of the public. As with all the studies that we have 
undertaken, we have worked in a spirit of nonpartisanship, with 
the objective of serving the best interests of the agency and 
the public. While we have at times been critical of the agency, 
we have tried to be constructive.
    SSA has significant strengths, including an experienced and 
dedicated workforce and a management that ranks among the top 
of government agencies. But it is also presently experiencing 
serious problems and, more importantly, problems that will only 
grow disastrously if left unattended. We are grateful for the 
opportunity to share with you the findings and recommendations 
that emerged from our study.

             Problems of Service Delivery--An Untold Story

    Social Security's problems in serving the public have been 
an untold story so far as the American people are concerned. 
But they are a story well known to those who are serving the 
public on the front lines. The response of Social Security and 
State agency employees around the country to the Board's report 
on service delivery has been overwhelmingly supportive. 
Employees in all parts of the system -including field offices, 
teleservice centers, program service centers, and State 
disability agencies -have called and written to express their 
appreciation that the Board has recognized their concerns and 
is giving voice to a situation that urgently needs to be 
    The employees who carry out the agency's work have a 
tradition of loyal service to the agency and the public. They 
share a ``can do'' attitude that has helped the agency to cope 
with the many administrative crises that it has faced over the 
years. But as workloads have grown and become more complex and 
resources have dwindled, these highly motivated employees have 
become increasingly concerned about their capacity to provide 
aged and disabled individuals with what they believe is an 
appropriate level of service.

         SSA's Service Delivery Problems are National in Scope

    SSA's service delivery problems are being experienced in 
all regions of the country. Although most acute in urban areas, 
they are prevalent in suburban and rural areas as well. In our 
discussions with managers and other employees in the field, we 
heard repeated accounts of overcrowded waiting rooms, where 
waits of 2, 3, or 4 hours are not uncommon. These long lines in 
waiting rooms are not only causing serious inconvenience to 
those who need a Social Security card or want to file a claim 
for benefits, they are putting pressure on employees to process 
their work faster, even if it means cutting corners. An agency 
executive told the Board that ``employees no longer have the 
time to cross the t's and dot the i's.''
    The effects can be serious. For beneficiaries and claimants 
it can mean an inaccurate benefit check or failure to file a 
properly documented disability claim. For the agency and the 
public at large it can mean overpayments, failure to follow up 
on potential fraud, or erroneous issuance of a Social Security 
    Although the agency's indicators are generally positive, 
there are signs of problems. For example, despite the agency's 
increasing emphasis on collecting overpayments, the amount of 
outstanding debt owed to the agency due to overpayments has 
increased steadily over the last 5 years. At the end of fiscal 
year 1994, outstanding debt was $4.l5 billion. By the end of 
fiscal year 1999, outstanding debt was $6.52 billion, a 57 
percent increase.
    SSA has a large backlog of postentitlement actions in its 
field offices, actions that are necessary to maintain the 
accuracy of the benefit rolls. These actions involve changes in 
income or resources, changes in address or living arrangements, 
or other changes that can affect eligibility or payment amounts 
or the accuracy of the benefit rolls. Data from SSA show that 
the volume of pending postentitlement actions increased from 
1.4 million at the end of fiscal year 1995 to more than 2 
million at the end of 1999.
    The results of a recent survey of field office managers 
underscore the concern about the quality of service that SSA is 
able to provide. The survey, conducted by the National Council 
of Social Security Management Associations, included 111 
managers representing a cross-section of offices from all 
regions, ranging from large metropolitan offices to small rural 
offices. While three-quarters of those responding rated the 
quality of their office's Social Security claims work as good 
or excellent, only about half rated their Social Security 
postentitlement work as good or excellent, and half rated their 
SSI claims work, as only fair or poor. Sixty percent rated SSI 
postentitlement work fair or poor.
    To deal with workload pressures, the agency often shifts 
work from one component of the agency to another, so while one 
problem is addressed, a new one is created. A striking example 
of this is what is happening with the agency's 800 number. For 
years, SSA has been trying to shift as much of its workload as 
possible to the 800 number in order to cut down costs. An 
agency goal has been to answer 95 percent of calls in 5 
minutes, and to meet this goal, SSA has been diverting 
employees in its program service centers from their own 
critical work to answer the telephone. As a result, issues that 
field offices have sent to program service centers for 
resolution are taking longer and longer to process. At the end 
of fiscal year 1999, there were more than a million items 
pending in the program service centers, a 15 percent increase 
from a year earlier. Benefits are being delayed. This generates 
even more calls from frustrated claimants who are trying to 
find out what is happening to their claims. A vicious cycle has 
been created, and overall agency service is suffering.
    SSA's statistics show that the agency has been meeting the 
goal of answering 95 percent of calls in 5 minutes, but what 
this means requires clarification. In fiscal year 1999, 79 
million calls were placed to the 800 number. Nearly 7 million, 
or 9 percent of these callers, got a busy signal. Of the 72 
million calls actually received by the 800 number, 13 million, 
or 18 percent, were abandoned, either while callers were 
waiting for someone to handle the call or before they were able 
to navigate SSA's automated service. In the end, only 59 
million callers out of 79 million or some 75 percent actually 
talked to an SSA employee or finished using SSA's automated 

                     Impact of Prolonged Downsizing

    Although the agency's current service delivery problems 
stem from a combination of factors, the prolonged period of 
downsizing SSA has experienced over the last couple of decades 
has been an important factor. Since 1982, employment in SSA has 
declined by 27 percent, from 88,600 in 1982 to 64,600 in 1999. 
The number of employees in the field has declined even more, by 
more than 29 percent, from 59,800 to 42,300. We believe the 
agency cannot sustain any further reductions, and in fact now 
faces staffing shortages in key parts of its organization.
    Downsizing has occurred across government, by some 14 
percent overall. But the impact has not been evenly spread 
across agencies. SSA's cuts have been disproportionately large, 
particularly when compared with what has happened in two other 
agencies that also have significant service delivery 
responsibilities. Although in recent years the IRS has 
experienced cutbacks, over the 1982-1999 period employment in 
the agency grew by 19 percent. Over this same 17-year period, 
employment in the Department of Veterans Affairs declined by 
seven percent, after experiencing substantial growth until 

                      The Looming Retirement Wave

    The impact of SSA's past staffing cutbacks will be felt 
acutely over the next decade. Years of downsizing and severe 
restrictions on hiring have given the agency a rapidly aging 
workforce. The average age of Social Security's employees 
increased from 41 to 46 over the last decade. A major reason 
the agency has been able to cope with its growing workloads as 
well as it has is that its workforce is currently highly 
experienced and there are experienced managers in the field. 
But a large portion of this seasoned workforce is expected to 
retire within the next 10 years. Based on the agency's 
projections, the number of retirees each year is expected to 
more than double, from 1,350 in 1999 to almost 3,000 a year in 
2007 through 2009.
    Compounding the problem is the fact that certain field 
positions will be particularly hard hit. SSA predicts that 
between 6 and 7 percent of its managers and supervisors in the 
field will retire in each year between 2004 and 2008. This will 
come on top of a reduction in the number of managers that many 
in the agency believe is already undermining the quality of 
work by reducing the amount of training and quality review that 
is being done in the field. SSA has the very large challenge of 
hiring and training replacements who will be able to carry out 
the agency's work as efficiently and effectively as has been 
done in the past.

                         Future Workload Growth

    The agency's large wave of retirements will occur at the 
same time that the workload is expected to grow rapidly. Over 
the last decade, the number of people receiving Social Security 
and Supplemental Security Income benefits has grown at a rate 
significantly faster than the population as a whole. This 
disproportionate growth will accelerate as the baby boom 
generation ages, placing increasing pressures on the Social 
Security Administration to find ways to keep pace. These 
pressures will be exacerbated by the fact that a significant 
portion of the growth will be in the DI and SSI disability 
programs, both of which are extremely time consuming for the 
agency to handle. Between 1999 and 2020, the general population 
is expected to grow by about 16 percent. But SSA's actuaries 
expect the number of Old-Age and Survivors beneficiaries to 
grow by 51 percent, while the numbers of DI and SSI disability 
beneficiaries are expected to grow by 71 percent and 17 percent 

                   Growing Administrative Complexity

    The agency's work is also growing more complex. For 
example, disability applications increasingly involve mental 
impairments, which can be very difficult to evaluate and tend 
to require carefully informed judgment. The agency's new 
emphasis on program integrity requires employees to spend 
increasing amounts of time on continuing disability reviews and 
SSI redeterminations. The job of issuing Social Security 
numbers has become more complicated and time consuming for the 
agency as the number of non-English speaking individuals 
applying for numbers has grown. Higher levels of immigration 
are a factor. Immigrants often are not readily able to provide 
all of the documentation that is needed. The number of 
immigrants admitted to the United States has climbed from 
531,000 in 1980 to an annual average of more than 770,000. SSA 
now has employees who speak more than 90 languages.
    SSA is also being asked to fill needs not being met 
elsewhere. Many of those who call or come into the office are 
seeking help with Medicare, Medicaid, Food Stamps, or other 
matters not directly related to SSA's program responsibilities. 
Employees in the field tell us that more and more Medicare 
beneficiaries are turning to SSA for information and advice 
because of the increasing complexity of the law and because no 
other resource is available in their community to provide this 
service. In fiscal year 1999, SSA processed more than 65 
million workload items relating to Parts A and B of Medicare, 
requiring about 1,400 agency workyears.
    The legislation passed last year to help the disabled 
return to work will add to the agency's responsibilities. Even 
if much of the work is contracted out to other public or 
private entities, the public will expect Social Security's 
employees to be able to answer their questions about the new 
program, and to explain the rules and the value of the services 
that are being offered.

                          What SSA Needs to Do

    SSA cannot continue business as usual if it is to meet 
these growing challenges. Although employees at all levels of 
the agency value quality service and are working hard to 
deliver it, their ability to do so is increasingly at risk. The 
agency needs to focus much more sharply than it has in the past 
on the question of what it needs to do to meet its future 
challenges. The Board has made several overarching 
recommendations for how the agency should proceed.

Establish a Service Delivery Plan for the Short Term and the 
Long Term

    Although SSA's strategic plan includes providing ``world-
class'' service as one of the agency's strategic goals, the 
strategic plan does not purport to be a detailed service 
delivery plan and includes only limited discussion of how the 
agency expects to achieve this goal. We recommend that SSA 
establish a service delivery plan that will set forth how it 
expects to handle its growing workloads, whether through 
increases in staffing, technological improvements, changes in 
the way the agency processes its work, or a combination of 
these approaches. The plan should address both the short term 
and the long term.
    Planning should not be a one-time exercise. The agency 
should establish a permanent planning process that will enable 
it to adapt its plan as needed to reflect the changes in law, 
technology, and beneficiary characteristics that will 
inevitably occur.

Improve Service Delivery Practices and Strategies

    Second, the agency needs to make major improvements in its 
service delivery practices and strategies. If SSA is to meet 
its goal of providing high quality service, it will have to 
make dramatic improvements in its telephone service and systems 
capabilities, and accelerate significantly its ability to use 
new technologies in conducting its work.
    In deciding where and how to focus its efforts, the agency 
should follow the example of the best private and public 
entities and become much more oriented toward understanding the 
needs and expectations of its clients. To do so will require 
far better measurement tools than it is currently using.
    At present, there are many basic questions for which the 
agency has insufficient answers. For example: What are the 
service delivery needs and expectations of SSA's different 
client groups? Should the agency be developing different 
service delivery strategies for different client groups? Are 
SSA's current 800 number standards lower or higher than the 
public wants and expects? Would people prefer to call the 800 
number or their local field office and, if so, why?
    Only by getting answers to questions such as these will the 
agency have a valid basis for setting its goals and for 
planning how various components of the agency will be used in 
delivering service.
    The Board has heard numerous concerns about how the agency 
sets its quality goals and the way it measures performance. 
Many of the agency's own employees believe there is an 
overemphasis on process rather than outcomes and that for 
various reasons agency data sometimes fail to provide a true 
picture of the quality of service that is being delivered. 
Because goals and performance measures tend to drive the work 
of the agency, we believe SSA needs to give high priority to 
improving these measures and the way they are being used, 
taking guidance from successful private and public entities.

Address Longstanding Institutional Problems

    Third, we urge the agency's leadership to address 
longstanding institutional problems. Although these problems 
relate to all of the agency's work, they directly affect SSA's 
ability to serve the public. These are problems that have grown 
over many years and to some degree are endemic to any large 
institution. To address them will require changing the culture 
of the agency. These problems include an agency culture that 
discourages open discussion and timely identification and 
resolution of problems and weaknesses in communication between 
SSA's headquarters and operations in the field. The agency also 
has an administrative structure that spreads responsibility 
across many components, making communication, coordination, 
teamwork, and timely decision making difficult to achieve. This 
problem of dispersion of accountability manifests itself 
particularly in the areas of disability and SSI, where some of 
the most serious service delivery problems occur.
    SSA's leadership needs to send a convincing and consistent 
message throughout the agency that open discussion of problems 
is both needed and expected, and that ideas for resolving 
problems will not only be welcomed, but rewarded. The agency 
also needs to develop and institutionalize better tools of 
communication between management in headquarters and employees 
who work in the field and in State disability agencies. The 
problem of dispersion of responsibility across many components 
of the agency with parallel responsibilities needs urgently to 
be addressed in order to enhance accountability for achieving 
results. Trying to promote better teamwork is an obvious 
approach, but organizational changes may be needed as well in 
order to satisfactorily address the problems that we have 

The Agency Needs the Support of the Administration and the 

    Finally, although all of the changes that I have been 
describing are within the purview of the agency itself, there 
is one area in which it must have the support of both the 
Administration and the Congress. The upcoming retirement wave 
makes it critical for the agency to begin quickly to hire and 
train a workforce for the future. The 1994 legislation making 
SSA an independent agency called for the development of a 
comprehensive workforce plan that would serve to clarify the 
agency's human resource needs. SSA's requests for 
appropriations should reflect the real needs of the agency to 
provide high quality service to the public. We urge the 
Administration and the Congress to provide the funds that will 
be necessary to meet those needs.
    The Board is unanimous in urging that the agency's 
administrative budget, like its program budget, be explicitly 
excluded from the statutory cap that imposes an arbitrary limit 
on the amount of discretionary government spending. Both 
workers and employers contribute to the self-financed Social 
Security system, and are entitled to receive service that is of 
high quality. It is entirely appropriate that spending for 
administration of Social Security programs be set at a level 
that fits the needs of contributors and beneficiaries, rather 
than an arbitrary level that fits within the current government 
cap on discretionary spending.


    In closing, I want to commend Commissioner Apfel and the 
agency for beginning to respond positively to the findings and 
recommendations in the Board's report. They have taken some 
steps to begin to address a number of problems that we 
described in our report. The Commissioner has established a 
process for developing a service delivery vision for the 
agency, and steps are being taken to assess the agency's 
workforce needs in future years.
    But make no mistake there is a long way to go. Staying the 
course will require years of consistent effort. The agency 
reached its present condition over a long period and there are 
no quick fixes. But it is vital to get started now and I 
believe the Commissioner is doing this.
    I assure you that the Board intends to follow up on the 
work it has done on service to the public. We expect to monitor 
carefully the progress that the agency is making to make sure 
that there is progress in fact as well as in words. We are 
currently studying how we can work with the agency on a joint 
undertaking to improve the way the agency measures customer 
    The functions performed by SSA touch nearly every 
individual in immediate and direct ways. Employers, workers and 
their families, and beneficiaries are all affected by how well 
the agency does its job, and we all have a stake in its 
success. Our assessment is that SSA is fundamentally strong, 
and with strong leadership and the support from the 
Administration and the Congress that it needs, there is no 
reason why it cannot meet the very large challenges that it 
will be facing in the coming years.





    [An attachment is being retained in the Committee files.]


    Chairman Shaw. Thank you, Mr. Ross.
    We have a vote pending at this time. So it would be a good 
time to break, and I'm going the break until a quarter after 
twelve. That would give people here a chance to run downstairs 
and get a sandwich or something if you would like. It will not 
give you a lot of time, but we will go ahead and break for one-
half hour and we will then reconvene and then, Mr. Schieber, we 
will of course start off with you and then there will be 
questions. Thank you.
    Chairman Shaw. I apologize for the lack of attendance that 
we have here, but there are a number of things going on, 
including a Ways and Means bill on the floor of the House. So I 
know that a lot of our Members are working there with that.
    Mr. Schieber.

                         ADVISORY BOARD

    Mr. Schieber. Mr. Chairman, Members of the Subcommittee, I 
would like to thank you for the invitation to testify here 
    As Mr. Ross indicated in his discussion, all of the members 
of our Advisory Board are in full agreement on the findings and 
recommendations of our report on service delivery. For me, 
personally, getting to those findings and recommendations 
created some considerable ambivalence. I come from a private 
sector background, and I think I'm naturally receptive to many 
of the changes that are occurring at Social Security. Work 
force downsizing, leveling of managerial hierarchy, 
implementing technology, customer satisfaction are concerns for 
survival in business today. Though I embrace these practices 
generally, I am troubled by their adaptation in Social 
Security's case.
    My impression, and I believe that other board members 
agree, is that the staffing levels of the agency are largely 
dictated by budget and personnel goals with little regard for 
the agency's dynamic workloads. To the extent that the workload 
is considered, many people in the agency have little faith in 
the work force measurement systems that are used, and I think 
we are at a point now where the agency should seriously 
consider replacing downsizing with right-sizing as has become 
much more prevalent in the private sector.
    Staffing issues must be addressed forthrightly by the 
agency, and it must engage both the administration and Congress 
to have the resources that are needed to fulfill its charter. 
The managerial staff ratios that have been religiously adopted 
by the agency do not reflect the managerial needs of the 
organization. The agency should strengthen its management 
structure at headquarters and ensure that field managers have 
the flexibility and tools to manage their offices effectively.
    SSA should improve its measurement of the needs and 
expectations of the people it serves and its benchmarking 
against external organizations. Some of the goals that SSA has 
made central to its operation, such as answering 95 percent of 
800 calls in 5 minutes, do not reflect current private sector 
standards. Last year, we had an expert come visit the Board who 
advised that the goal of the answering of 90 percent of calls 
within 30 to 60 seconds is now the market standard. Internet 
access is replacing phone transactions, in many instance 
driving down costs while improving customer satisfaction in the 
private sector.
    Measures of good service from just 5 years ago are no 
longer sufficient. Despite the fact that the 95-5 standard may 
not be up to speed, the agency's singular focus on it is 
resulting in downgrading of other services. Pulling staff off 
of program service center activities to answer phones simply 
delays the processing that's supposed to go on in the PSC 
centers. Once a periodic duty, today PSC personnel spend 
virtually the whole year servicing the 800 system. The problem 
is exacerbated by Social Security's antiquated phone system and 
    The agency needs to become much more adept in acquiring and 
integrating new technologies. Its IWS/LAN project to place new 
computers in all of SSA's offices went out for bids in 
September 1994, but the contract was not awarded until 1996, 
and the national roll-out of these systems is still underway. 
Few companies in highly service-oriented business today rely on 
1994 systems and technology. I wonder how many offices here on 
Capitol Hill are still using 1994 vintage computers and 
operating systems.
    If the agency is to keep up with its needs, it must find 
quicker ways to acquire state-of-the-art systems and to bring 
them online. In addition to the hardware problems, we heard 
repeated concerns about the development of and implementation 
of software systems. Staffing limits are based on system roll-
out schedules that are not met. This phenomenon simply 
compounds the difficulties imposed on field office operations 
by excessive staff reductions.
    The Board's service report did not address the structural 
problem of the agency's disability determination and appeals 
processes which are central to many of the agency's service 
delivery problems. We did address these matters in an earlier 
report. My own personal concern coming out of this is that the 
current disability administration model is so badly flawed that 
it cannot be successfully implemented. I believe this is a 
subject that needs to be reviewed again by the agency, the 
Board, and Congress as Congress did back in the 1970s.
    Downsizing a work force by natural attrition, as Social 
Security has done in recent years, results in significant work 
force aging. The average age of Social Security's work force 
has increased by more than 5 years over the past decade. Within 
the next decade, a disproportionate share of Social Security's 
workers will retire.
    The personnel situation at Social Security provides 
significant risks on at least three fronts. The first relates 
to a lack of infusion of new blood and new ideas into the 
organization dating back more than 15 years. The second relates 
to the potential of an abnormally large number of retirements 
at the time the beneficiary population is going to explode. So 
you are going to have new people without much background and 
understanding of the system taking charge. And the third 
relates to the loss of a whole generation of workers who should 
be maturing into senior positions as these current older 
workers matriculate out of the system into retirement. The 
agency simply cannot put off hiring any longer.
    In closing, let me say that because large bureaucracies are 
difficult to move, making some of the changes that we 
recommend, particularly those that involve changing the agency 
culture, will take strong leadership. You will hear the agency 
has many initiatives to address the problems raised in the 
Board's report, but it has to address them far more 
aggressively than it has in the past if it is to meet the 
changes that it will face in the coming decade. I believe that 
it needs more resources than are being called for in the 
President's proposed budget if it is to meet these challenges.
    Thank you very much.
    [The prepared statement follows:]

Statement of Sylvester J. Schieber \1\, Member, Social Security 
Advisory Board

    Chairman Shaw, Chairman Johnson, and members of the 
Subcommittees on Social Security and Human Resources, I thank 
you for the invitation to testify.
    \1\ Sylvester J. Schieber, Ph.D., is Vice President of Research and 
Information at Watson Wyatt Worldwide. He has been a member of the 
Social Security Advisory Board since January 1998. The views presented 
in this statement are his own and do not necessarily reflect the views 
of other members of the Advisory Board or of Watson Wyatt Worldwide or 
any of its other associates.
    As Mr. Ross has indicated, the Board's report on service 
delivery was the work of all the members of the Board. We are 
in full agreement on the findings and recommendations. For me 
personally, getting to those findings and recommendations 
created considerable ambivalence.
    I have spent most of my career in private enterprise. 
Although I am a working manager, I have been in management 
positions for more than 20 years. I work in an industry and 
business that is highly competitive. In that context, I have 
personally had to deal with ongoing market pressures to produce 
more and better work with steadily diminishing resources. Given 
this background, I am naturally receptive to many of the trends 
that are occurring at Social Security. Downsizing a workforce 
has been a personal experience, one that I should note I did 
not relish. Elimination of unnecessary levels of managerial 
hierarchy is a gospel in our business. The use of technology is 
what allows these things to occur. For the business in which I 
work, customer satisfaction is a condition for survival. 
Despite my receptivity to all of these considerations, I am 
troubled by their adaptation in the administration of the 
programs under the Social Security umbrella. I would like to 
take the opportunity today to elaborate on several points that 
I think are particularly important.
     The Board states in its report that the agency 
cannot sustain any further reductions in its staff and in fact 
now faces staffing shortages in key parts of the organization. 
It is my impression, and I believe that of other Board members, 
that staffing levels in the agency have been largely dictated 
by budget and personnel goals that have not seriously 
considered the agency's workload and how it is changing. To the 
extent workload is considered, many if not most of the people 
in the agency have almost no faith in the work measurement 
system now used to measure the work they do. The private sector 
has replaced ``downsizing'' with ``rightsizing,'' and this 
should be the agency's objective as well. This problem needs to 
be addressed forthrightly by the agency, and the agency needs 
to engage with the Administration and the Congress to get the 
resources that it needs to satisfactorily fulfill its charter.
     The managerial-staff ratios that have seemingly 
been religiously adopted by the agency do not reflect the 
managerial needs of the organization. The agency needs to 
strengthen its management structure in headquarters and ensure 
that managers in the field have the flexibility and tools they 
need to manage their offices effectively.
     SSA needs to do a much better job than it is 
currently doing of measuring the needs and expectations of the 
people it serves and of benchmarking its service goals against 
external organizations. Some of the goals that SSA has made 
central to its operations, such as answering 95 percent of 
calls in 5 minutes, do not reflect present day private sector 
standards. We heard repeatedly that SSA had been judged number 
1 in its provision of 800 level service by a DALBAR survey done 
in 1995. To give you a sense of the dynamics in the private 
market place, my employer was rated number 1 in a 1995 DALBAR 
survey of defined contribution retirement plan record keepers 
in the United States. By 1999 we exited that business because 
the linkage of record keeping to mutual fund investing had 
eliminated our utility as a provider of these services. 
Standards for telephone service have been rising. Last year an 
expert in the private sector advised the Board that a goal of 
answering 90 percent of calls within 30 to 60 seconds -not 95 
percent in 5 minutes -is now the market standard. Measures of 
good service from just five years ago are no longer sufficient.
     Despite the fact that the 95-5 standard may not be 
up to grade, the agency's singular focus on it is resulting in 
the downgrading of other service levels. Pulling staff off of 
Program Service Center (PSC) activities to answer the phones 
simply delays case processing which generates additional calls. 
The use of PSC staff on the 800 system was originally intended 
to cover only a few days a year when call levels spiked, 
specifically days around the first of each month, a day or two 
after holidays, and so forth. Now PSC staff are pulled into 
supporting the 800 system virtually year round. This problem is 
exacerbated by the antiquated phone system used by the agency 
and its underlying software.
     The agency needs to become much more adept at 
integrating new technologies into its processes. Systems 
improvements are being introduced far more slowly than in the 
private sector. In the 1940s, 1950s, and 1960s SSA was a 
pioneer in using computer technology but today it is lagging 
behind. Partly this is a procurement issue that can only be 
resolved with streamlining of governmental procedures. The 
agency's IWS/LAN project, which involves placing new computer 
equipment in all of SSA's offices throughout the country, went 
out for bids in September 1994, but the contract was not 
awarded until June 1996 and national rollout is still 
continuing. Rapid systems advances mean that SSA's equipment is 
already out of date even before it has been universally 
implemented. If the agency is to keep up with its needs, it has 
an urgent need to find quicker ways to get state-of-the-art 
equipment to its employees.
     In addition to the hardware problems, we heard 
repeated concerns about the development and implementation of 
software systems. Staffing levels often are based on promised 
system rollout schedules that are not met. This phenomenon 
simply compounds the difficulties imposed on field office 
operations by excessive staff reductions.
     As we point out problems, we should also point out 
that the agency is required to perform some highly complicated 
tasks. I refer specifically to the administration of the 
disability programs. The Board's report did not address the 
structural problems of the agency's disability determination 
and appeals processes, which are central to many of the 
agency's service delivery problems. In the 1970s, the Congress 
made a careful study of the Federal-State relationship between 
SSA and the State Disability Determination Services. It also 
examined the appeals process, including the Office of Hearings 
and Appeals and the courts. My own personal concern is that the 
current disability administration model is so badly flawed that 
it cannot be successfully implemented. I believe these are 
subjects that need to be reviewed again by the agency, the 
Board, and the Congress.
     Having sat across a desk from more than one 
employee whom I had to terminate because of staff downsizing, I 
appreciate that a preferred way to accomplish such goals is 
through natural attrition. If such a policy is implemented over 
a long time frame, as it has been in the case of the agency, 
the end result is a significant aging of a workforce. The 
average age of Social Security's workforce has increased by 
more than five years over the past decade. Within the next 
decade a disproportionate share of current workers will retire 
from Social Security. The personnel situation at Social 
Security poses significant risks on three fronts. The first 
relates to a lack of infusion of new blood and ideas into the 
organization dating back more than 15 years. The second relates 
to the potential of an abnormally large number of retirements 
at the time the beneficiary population explodes with baby 
boomers' eligibility. The third relates to the loss of a whole 
generation of workers who should be maturing into senior 
positions as older current workers pass into retirement. The 
agency cannot put off hiring any longer.
    In closing, let me say that because large bureaucracies are 
difficult to move, making some of the changes we recommend--
particularly those that involve changing the agency culture--
will take strong leadership. Having a confirmed Commissioner 
has improved the agency's ability to take the necessary action.
    You will hear that the agency has many initiatives to 
address the problems raised in the Board's report. But it will 
have to address them far more aggressively than it has in the 
past if it is to meet the challenges it will face in the coming 


    Chairman Shaw. Thank you. Mr. Schieber, I would like to 
pursue the last part of your statement with regard to the work 
force and new hires and the fact that these retirements are 
going to coincide with the baby boomers coming into the agency. 
In the 104th Congress, we authorized an additional $4 billion. 
That was during a 7-year period for the agency to reduce the 
backlog of the continuing disability reviews. I gather from 
your testimony, are you referring only to the retirement area 
or also in the disability area?
    Mr. Schieber. I'm talking about the whole agency. As we 
have visited a number of regions as we were developing our 
research, we repeatedly heard in the field about the large 
number of people, significant numbers of people in management 
positions that are going to be eligible to retire within the 
next 3 to 5 years. There is significant concern within the 
organization about the availability of people to move up in the 
system and really provide the institutional knowledge, 
institutional wisdom to keep things going.
    Chairman Shaw. What would you do differently?
    Mr. Schieber. I think they need to begin to hire people and 
get them on board and possibly even attract people in mid-
career that can come in and assume leadership roles over the 
next few years. They have begun the necessary actions. They ran 
a retirement window last year providing early retirement 
incentives, I think in August and September of last year, 
offering early out for some workers so they could simply create 
some vacancies to hire new blood. But they need to do more of 
    Chairman Shaw. What is the percentage of the people that 
you see in management that will be retiring over the next 5 or 
10 years? Mr. Ross, you might chime in on this too if you want.
    Mr. Ross. OK.
    Mr. Schieber. We heard some fantastic numbers in some of 
the senior grades of the majority of people eligible to retire 
within the next 5 years, even numbers approaching 70 and 80 
percent in some cases.
    Chairman Shaw. Kim has just handed me a GAO study that I 
suppose you have reviewed which is, indeed, frightening. The 
percentages eligible to retire between--well, this was between 
1999 and 2009. GS-1 to 11 was 50 percent; GS-12, 64; 13, 74; 
14, 83, 86, 84, 54. What has caused that? It seems that an 
agency ongoing like this would have a natural turnover with the 
    Mr. Schieber. What has happened is you have had this very 
significant downsizing that has been going on for about 15 
years, and these agencies do not like to lay people off. So 
what they're doing is they are using natural attrition to do 
the downsizing. If you are using natural attrition and not 
enough people are walking out the door, you simply cannot bring 
very many new people in. That is what has happened. And the 
work force ages very rapidly in that kind of condition. I have 
seen it in private sector companies also.
    Mr. Ross. Let me just add one thing that underscores an 
aspect of this. Because of so much pressure on the work force, 
particularly in the field offices, some of these people may 
retire even earlier than they have historically. There is a 
great deal of burnout and the loss here cannot be described 
just in numbers. The field force in particular is still very 
customer oriented. They really do believe in service and 
dealing with the people who come in the door and who manage to 
get them on the telephone. But unless there is some real 
overlap between the new hires and these people who have the 
historic institutional memory and values, you are going to be 
getting different kinds of people. You really do need this 
    You cannot wait until somebody leaves and then think you 
are going the get somebody in who is really a replacement, 
because you will never replace that institutional memory unless 
they have had a period of mentoring and being part of the 
traditional organization. What's going on is really dangerous, 
particularly with the staff burnout.
    Those figures that have been referred to, could easily get 
worse. These are just best estimates.
    Mr. Schieber. The situation is that today not everybody 
retires when they are eligible, but if you start to see a 
massive infusion of eligible beneficiaries coming online, 
increasing the work burden at the local office level without a 
commensurate increase in resources, you have people that can 
walk out the door because they are eligible for a pension. 
Under increased work burdens they are going to be more likely 
to do it sooner than they have in the past. That is the 
probability. That is the risk.
    Chairman Shaw. Let me switch gears for just a moment to 
you, Mr. Ross. You recommended that Social Security establish a 
service delivery plan over both the short term and the long 
term. I want to know why this has not been developed until now. 
As you know, the SSA came up with a plan to redesign the 
disability program 7 years ago, and the plan still is in the 
progress of being implemented. There have been many questions 
raised all along about whether the redesign has really changed 
anything, and what is the difference between a service delivery 
plan that you are referring to versus the re-design of the 
disability program plan, and what needs to be done differently?
    Mr. Ross. The agency has historically at various times 
tried to get a service delivery plan together, and by that I 
mean a kind of comprehensive analysis of what it's going to 
take, what sort of business processes, what kind of human 
resources, what kind of technology strategy you are going to 
follow, where is the work going to be done, who is going to do 
it. The problem historically the agency has had in doing this, 
and why it's never been accomplished, is that if you get all 
the components represented, they wind up fighting for turf and 
jobs and whatever, and it's sort of a stalemate that is 
    The only way out of that kind of situation is with very 
strong leadership. You need somebody who hears everybody, talks 
to all the stakeholders but then says, ``This is the way it's 
going to go,'' and you put in place a plan. It's not immutable. 
It would be subject to change. Things change. Technology 
changes. The workload changes, but you have got to have 
something that people can relate to so they know what they are 
going to be doing in the future and where. The agency is 
totally lacking in that understanding at present.
    Chairman Shaw. Mr. Collins.
    Mr. Collins. Thank you, Mr. Chairman. Thank you, gentlemen.
    As you read over, Mr. Ross, your report and, Mr. Schieber, 
I did not get back in time to hear all of your comments, and 
listening to you, Mr. Ross, as you went through the current 
problems and also some recommendations, as someone who has been 
in a small business for 35-plus years, you quickly can see 
where the problem lies here and it's in people. When you name 
each one of these, overcrowded waiting rooms, long waits, 
someone is not there to service these people, or the ones who 
are there are not servicing these people. The workloads, and 
it's going to get worse as you say, the telephone services, 
managerial services, all of these pertain to people.
    I am reminded that when we created this independent agency 
that there was a request that--I say request. It was part of 
the legislation that the agency is to submit a work force 
analysis. The agency. I do not believe we have received that 
analysis from the agency itself.
    There is one area that I would like for you to maybe 
further explain, and, too, it goes back to the people within 
the agency, and that is that you refer to the culture in the 
agency. Would you like to further explain what you are meaning 
by culture?
    Mr. Ross. Yes, I would. By culture I mean the sort of 
habits, patterns of thought, processes that get built into any 
institution. There are some good things in the SSA culture, 
particularly in the field. They do care about the 
beneficiaries, the claimants, the people that come in to get a 
card. But for the agency as a whole, and I would say it's 
particularly true in Baltimore at the higher levels where there 
is less contact with the people that are being served, there is 
a tendency to brush aside problems, to ignore them, to say, 
``Oh, we have heard that before, we know what's going on,'' and 
there is very little premium put on really bringing to the top 
management, to somebody who could make a difference, the 
Commissioner for example, a forthright statement of the issues 
and some options for dealing with them.
    For too long there has been a tendency to sort of keep the 
problems away, keep them kicked under the rug, and not really 
pursue them. In part, this is because there have been too many 
Commissioners who have come and gone, Now clearly when the 
independent agency legislation was passed in 1994, the Congress 
felt that one of the things that we would get out of it would 
be the agency coming up and honestly describing its problems so 
that the Congress could address them, give it some help and do 
things, get on with what the people being served need.
    Senator Moynihan's floor statement--he was the principal 
sponsor on the Senate side--said this very explicitly, ``We 
want to hear about it, and we want to deal with it. We do not 
want to wake up some morning and find out that there are all 
these unaddressed problems. We care about this agency.'' And 
that legislation went through on a fully bipartisan basis in 
both houses. Well, here we are 6 years later and that is not 
being done, and we cite in our report numerous examples of 
where the Congress still had to find the problem, ask the 
agency about it, and then get some sort of tepid acknowledgment 
of it.
    Mr. Collins. Well, the light is caution there. You are 
drawing a distinct difference between the Baltimore office and 
the field offices, the waiting rooms, the long lines, the 
telephone ringing in the field offices, and that's where we 
have a shortage of personnel, but we have an abundance in 
personnel in the Baltimore office.
    Mr. Ross. I am not so sure about that. I would hesitate to 
say. I think people care and are dedicated in Baltimore. The 
major thrust of what I was saying, though, when you have to man 
those front windows and see the people you are serving, it 
gives you a different perspective.
    Mr. Collins. Well, I have very few complaints from my 
office in the Georgia and the field offices. I mean they are 
trying to do their best there, but we have had testimony here 
over the last three or 4 years since I have been on this 
Subcommittee referencing the Federal Employees Union and how 
the union itself has actually prohibited or prevented or 
delayed or deterred action within the office. Well, that has to 
be in the headquarters area of Social Security, not in that 
field office.
    Did you sense any problems with the union itself as it 
relates to this culture problem that you are talking about?
    Mr. Ross. I think the field force is heavily unionized too. 
I do not think that's just a phenomenon of headquarters. I 
think the union has very definite concerns. One would hope that 
they would share the concern for the agency's need to serve the 
public and they would balance that concern with their demands 
related to various things.
    Mr. Schieber may want the add to this. We did not get 
deeply into the role of the unions. Our focus was less on who 
shot Jack, because this is clearly a development over many 
Presidents and many Commissioners. But the question for the 
future is where do you need to go and how do you get people 
tied to a plan for addressing the agency's problems. So I 
cannot really fully answer your question.
    Mr. Schieber. I think that the union, the very presence of 
unions in the field offices and in the whole operation has made 
the administration of the program more difficult. But I think 
some of what has evolved here may actually have created the 
environment that led to the unions and the unions' positions. 
If you have people in work environments where they see their 
workload going up consistently and resources available to 
handle that workload declining, and these people do not have 
the sense that management is really paying attention to what's 
going on and cares about the situation, after a while what 
happens is the workers decide that they are going to get 
together and they are going to put together a sufficient force 
that they can command management's attention.
    The big problem that usually occurs when things get to that 
situation in a workplace is that all of a sudden you have both 
parties worrying about the letter of the real or implied work 
contract. Workers refuse to take a call at 7:59 in the morning 
when the work day does not start until 8. Management worries 
about what happens at 4:28 in the afternoon when the work day 
lasts until 4:30. Everyone ends up worrying about what people 
are doing one minute to the next minute and what the precise 
work agreement is and they forget the substance of the primary 
    I think that the unions are a complicating factor, but in 
some regards you can understand why they are there and have 
complicated matters. Somehow we need to get this agency back 
together with every party pulling on their oar all trying to go 
in the same direction. That's part of the challenge here, I 
    Mr. Collins. Well, I believe you are exactly right. That is 
normally what causes problems within a work force, is when 
management itself and the higher-ups do not listen to those who 
are actually doing the work. There becomes this resistance that 
builds up and it gets worse and worse and worse.
    Mr. Schieber. Absolutely.
    Mr. Collins. Do you think that those who are in the head 
positions at the Social Security Administration can handle this 
situation and make the constructions needed? Maybe we should 
not say can. Do you think they will?
    Mr. Schieber. I think that we have gotten their attention 
with our report and some of the prior reports. There are many 
issues that need to be addressed. For example, we are now 
seeing the implementation of the new union in the 
administrative law judge area where, if you really think about 
it, at least from where I come from, is mind boggling. So 
here's a lot of work to do.
    I do believe that we have gotten some people's attention. 
Not everybody is happy with us for what we have said, but at 
least we have begun to lay out a road map.
    Mr. Collins. Well, the frustration among the administrative 
law judges is the reason they made the decision to organize, 
and that frustration runs throughout the labor force at Social 
    Thank you, gentlemen. Thank you, Mr. Chairman, for your 
    Chairman Shaw. Just one final question. This report has 
been presented to the Commissioner, I suppose, in person. What 
type of response have you all received?
    Mr. Ross. I think the Commissioner is trying to take steps, 
and you will hear about some of them when he testifies in the 
next couple of weeks. I know you are planning to schedule him. 
I think it is important to keep the right perspective on this. 
There are no quick fixes. It took a long time to get here. It 
is going to take a long time of continual work to reverse 
    To me, the absolutely most important thing, though, is to 
get started now. It is like the moment when the tide has been 
going out and it starts to come in. We need a clear signal from 
the Congress and the administration that they are going to turn 
the tide on this situation. I think it is wrong to just sit 
still and wait until you start to hear about problems and 
complaints back in your districts which could produce a sort of 
IRS situation which then requires a drastic remedial process. I 
think this is a case where the patient should be taken into the 
intensive care ward right now and given the things that are 
needed and put back going in the right direction, healthy and 
out of danger.
    I think the important thing now is taking the first steps 
and changing the direction, and I think that you will hear from 
the Commissioner that he is going to try to do that.
    Chairman Shaw. Well, thank you both for doing a very fine 
job and being with us here now this afternoon. Thank you very 
    [The following questions were submitted by Chairman Shaw to 
Dr. Schieber and Mr. Ross, and the respective answers, follow:]


    1. What in your view is the most important thing the Social 
Security Administration must do to ensure they are ready to 
effectively deliver service in the 21st Century?
    SSA urgently needs to address directly how it expects to 
meet the serious service delivery challenges that it faces both 
in the short term and the long term. It should develop a 
service delivery plan that presents a straightforward 
assessment of the agency's human resource and technological 
needs. In addition, SSA should engage with the Administration 
and the Congress to work toward getting the resources that it 
needs to provide high quality service to the public.
    2. The Social Security Administration has a strong 
reputation among the American people, which some might contend 
is an extension of the public's support for what Social 
Security does rather than how efficiently they do their work. 
Anyone waiting literally years for their appeal for disability 
benefits to be resolved knows what I mean. How does Social 
Security stack up against companies that provide similar 
services, such as a private disability insurer? Do their 
customers ever experience the long waits that some Social 
Security disability applicants do? If not, what are those 
companies doing to provide better service? At what cost? Is 
Social Security studying any of them in hopes of improving the 
service they provide?
    In 1995, Dalbar, Inc., a Boston-based financial services 
company, completed a comparison of SSA's 800 number service to 
the service provided by private sector firms. At that time, it 
rated SSA's service as number one in the country. But one-time 
measurements are not good enough. Experts in the private sector 
have told the Board that SSA's standard for telephone service 
is now far below the standard used in the private sector. 
Customer service expectations are rising, and the public will 
inevitably find the agency's service wanting if it lags far 
behind, whether this be in telephone service or otherwise.
    The Board believes that SSA needs to follow the lead of the 
best private and public entities and make major improvements in 
the way it measures and uses customer service information. At 
this time, the agency has only limited information on client 
needs and expectations and on client satisfaction with its 
service. This is especially the case with respect to particular 
client segments. For example, SSA does not measure discrete 
client segments such as SSI disabled children or SSI disabled 
adults. Nor does it measure client satisfaction with particular 
types of agency actions, such as the hearing process. As the 
private sector has learned, this type of information is vitally 
important if the agency is to understand and address its 
service delivery problems.
    In addition, in the past the way the agency has set its 
quality goals and the way it has measured performance have been 
largely developed internally. SSA needs to expand its efforts 
to learn how these important functions are being carried out by 
the most successful organizations in the private and public 
sectors. The agency will be taking a step in the right 
direction this summer when it joins with the Board in 
sponsoring a joint effort to bring to the agency outside, 
private sector expertise and advice on how to improve its 
client measurement procedures.
    Although the agency is conducting several major disability-
related research endeavors, such as the Disability Evaluation 
Study and studies of alternative ways of measuring disability, 
we are unaware of any special agency studies relating to how 
private disability insurers are providing service.
    3. You indicate that Social Security's work is complex and 
becoming more so, especially in disability, program integrity, 
return to work, and health-related areas. Can these 
complexities be addressed through changes in regulations or in 
law? Is SSA conducting a review of their regulations and the 
law with an eye towards reducing complexities?
    Much of the difficulty of administering SSA's programs is 
the result of their inherently complex nature. SSI is a means 
tested program, and requires a continuing review of income, 
resources, living arrangements, and other changing factors. The 
statutory definition of disability appears relatively simple on 
its face, but to implement it requires careful development of 
medical history and use of personal judgment. Disability 
decision-makers need extensive and ongoing training to carry 
out their job.
    SSA recently began taking a closer look at the SSI program 
in an effort to identify areas where simplification might be 
possible. We believe that some improvements can be made by 
changing agency regulations. Even relatively small changes 
could make a significant difference to workers in the field. We 
have recommended that as a first step the agency should consult 
with employees in the field to identify rules and procedures 
that are requiring disproportionately large amounts of staff 
time to administer but have little impact on benefit 
determinations and do not require legislative change.
    Over the longer term, the agency should examine areas of 
greater complexity that involve more substantive change, such 
as the rules that apply with respect to living arrangements and 
in-kind support and maintenance. There are 186 pages of 
instructions that field office employees are required to follow 
on this subject alone. Although changes in policy areas like 
this may be controversial because of their possible impact on 
individuals and program costs, we believe the agency should 
take the leadership in identifying the issues that are involved 
and proposing changes in regulations or law where it believes 
they are warranted.
    With respect to disability, the agency proposed a major 
redesign of the determination process in 1994. It has 
subsequently stepped back from many of the changes that it 
proposed at that time, although some are being further tested 
in 10 prototype States with a view to nationwide implementation 
within the next couple of years. Based on our studies, we doubt 
that the changes that are being proposed will result in 
simplification of the process, although for some claimants the 
elimination of the reconsideration step of appeal and changes 
that are being made in the hearing process may speed up 
decisions. One area where the process could be simplified and 
enhanced from the perspective of employees is in systems 
improvements. As we pointed out in our September 1999 report on 
service delivery, we are concerned about the extraordinarily 
slow pace of developing a systems strategy that will serve all 
parts of the disability determination process. Some of the 
agency's most serious service delivery problems now occur in 
the disability programs. We have urged the agency to give high 
priority to developing a system that would support all parts of 
the disability process. We have noted that implementation of a 
well designed system holds promise for speeding up the flow of 
cases through the claims and appeals process, improving the 
quality of the information that is available to decision 
makers, and providing a more uniform basis for decision making. 
In addition, innovations such as electronic retrieval of 
medical information could ease the burden on both claimants and 
disability workers and these should be incorporated into the 
process to the extent possible.
    4. The Advisory Board recommends that Social Security's 
efforts to improve computer hardware and software should be 
strengthened and accelerated. What specific hardware and 
software problems did you observe? How does Social Security's 
systems improvement performance compare with technology 
enhancements being implemented in the private sector?
    Systems are primary enablers of SSA's efforts to improve 
its processes. However, many of SSA's systems enhancements and 
improvements have not been delivered on schedule and sometimes 
they do not perform according to the agency's expectations. 
Moreover, SSA has not been able to demonstrate that promised 
dollar savings have been realized, even when the process has 
resulted in better service or work products.
    One of the primary reasons for the implementation delays at 
SSA is the procurement process. The private sector does not 
have to comply with federal procurement guidelines and can 
introduce new technology more quickly and efficiently. In 
addition, the private sector has greater flexibility than 
government agencies in using innovative approaches to attract 
and retain qualified technical expertise. Nonetheless, we 
believe SSA should make better use of the flexibility that now 
exists in the law to speed up its delivery of systems 
innovations to workers in the field.
    In our visits to field offices around the country, we heard 
many concerns about systems technology from SSA employees. We 
heard that there is a shortage of computers available to field 
offices. Customers are served more slowly as a result. We also 
heard that much of the software used by field offices is not as 
user friendly as it should be, especially for many new 
employees who think they need more training in its use than 
they have been getting. In addition, we heard complaints that 
many of the systems at use in the field are older systems that 
break down regularly, causing delays in workload processing.
    SSA has been lagging well behind the private sector in its 
introduction and use of technology. This is an area where 
considerably greater investment is needed.
    5. You testified that SSA must become much more adept at 
integrating new technologies into its processes. How can SSA 
accomplish this most efficiently and effectively? Does SSA have 
the needed expertise in-house? Are they working with outside 
experts? Should SSA consider outsourcing some of these 
    We do not believe that SSA has all of the technical 
expertise that it needs in house at the present time. The 
private sector has more flexible pay and benefit structures 
that enable it to be more innovative than government agencies 
in attracting and retaining skilled employees. In addition, SSA 
has perhaps not been as aggressive as it could be in using the 
hiring authorities that it currently has.
    Many who work in the field believe that SSA should have far 
greater capacity than it has now to keep up with the agency's 
systems needs. They also believe there is a need for additional 
staff in the field who are qualified to do systems work. One of 
the greatest challenges the agency will face is ensuring that 
it will have adequate staff with the technical expertise that 
will be required to met its future needs in the area of 
information technology.
    SSA is facing a situation where the salaries it is able to 
offer are so much lower than those being offered in the private 
sector that it is losing its ability to compete. Other 
government agencies share this problem, but SSA's needs are 
greater than those in many other agencies because of the 
complexity and vastness of its operations.
    Although the salary issue is important today, there are 
even greater grounds for concern when the impending retirement 
wave begins to hit the agency. SSA needs to begin to hire 
replacements right away if experienced personnel are to be in 
place when they are needed.
    SSA needs to consider whether it should have greater pay 
flexibility so that it can be more competitive with the private 
sector in hiring systems specialists. Even with greater 
flexibility it is likely that the agency's salary scales will 
remain below those offered in the private sector. Given that 
fact, the Board has urged the agency to examine whether there 
are areas in which the private sector may be able to perform 
tasks that are becoming increasingly difficult for the agency 
to do. Additional contracting for some of these tasks may be 
    6. In your testimony you indicated that the response of 
Social Security and State disability employees to the 
recommendations in your report was overwhelmingly supportive. 
Have you heard about any disagreement with your findings or 
    We have been pleased with the positive response that the 
Board has received to its report from all parts of the agency. 
Groups that represent managers and other employees in the field 
have been particularly supportive of our findings and 
recommendations. In addition, the Commissioner has announced a 
number of initiatives that respond to our recommendations. 
Although there may be some within the agency who take issue 
with one or more of our findings or recommendations, no one has 
presented reservations to us. We would be pleased to have a 
dialogue with anyone who would present other views.
    7. One criterion for judging service delivery is the 
accuracy of payments and the ability to recover overpayments. 
You say that the amount of outstanding debt in the form of 
overpayments due to SSA has increased from $4.1 billion in 1994 
to $6.5 billion in 1999, a 57 percent increase. Why has this 
happened and is SSA doing anything about it?
    The Board believes that one of the principal reasons for 
the increase in outstanding debt at SSA is insufficient 
staffing in the field. Downsizing in the field, combined with 
the rapidly growing, more complex workloads that we have 
documented, have meant that employees no longer have as much 
time as they need to work on collections of overpayments. In 
addition, staffing shortages have also resulted in fewer 
quality reviews. In an environment where employees do not have 
the time to work as carefully as they should--and there is 
insufficient attention to training and to quality measures--
more inaccurate payments will occur. The Board has been told 
that the agency is making more mistakes because there are now 
too few managers and supervisors in the field to ensure an 
adequate level of quality control.
    In addition, there are large delays in processing 
postentitlement actions resulting from the agency's focus on 
the 800 number. SSA has been diverting program service center 
staff from their own critical work to answer the telephone. 
This has caused more overpayments to be made because 
beneficiary records are not being kept current. For example, if 
a beneficiary reports a change in living arrangements and the 
SSA program service center is delayed in processing that 
change, inaccurate SSI payments will result until the change is 
    SSA has been taking some important steps to improve program 
integrity. It is doing more cross checking of data with other 
agencies. It is planning to use other debt collection 
authorities, including Federal salary offset, charging 
interest, expanding the Treasury offset program, and credit 
bureau reporting. It has also supported an increase in the size 
of its Inspector General staff. We believe the most important 
need of the agency, however, is sufficient staff in the field 
to do the careful work that is needed to prevent overpayments 
from occurring in the first place.
    8. Your testimony indicates that Social Security should 
follow the examples of the best private and public entities as 
it improves service delivery practices and strategies. Can you 
provide some specific examples to illustrate what you mean by 
this? Does SSA have a process in place to regularly compare 
itself with other public and private high-performing agencies?
    SSA has begun applying the Baldrige Criteria for 
Performance Excellence to its operations. The Baldrige Criteria 
include making regular comparisons with other organizations as 
a way of measuring performance. It is our view that SSA should 
be doing much more than it has been doing in the way of 
benchmarking its performance against the best performers in the 
public and private sectors and it should be doing this on a 
systematic basis. SSA's performance goals, such as trying to 
answer 95 percent of its 800 number calls within 5 minutes, 
need to be regularly reviewed and updated. SSA will have to 
keep up with private sector standards if it is to satisfy the 
public's demands for high quality service.
    9. You point to several major service delivery problems 
that need immediate attention, including problems with 
telephone service, waiting times in field offices, and large 
backlogs of actions after people start receiving benefits (such 
as adjusting benefits for changes in earnings or living 
arrangements). What in your view are the most pressing problems 
and their effects on customers? Did you provide any specific 
recommendations to SSA as to how to address these problems?
    In our report we urge SSA to identify in its service 
delivery plan those problems that need to be addressed 
immediately. We stated that based on our study, we believe that 
improving telephone service is foremost among them and we make 
specific recommendations for how this should be done. We urge 
the agency to improve its measures of the public's needs and 
expectations for telephone service so that it will have a more 
valid basis for setting its goals for service delivery and for 
determining how various components of the agency will be used 
in delivering service. Among other changes, we recommend that 
the agency develop more balanced measures of the telephone 
service that it is providing--for example, measures that 
emphasize the percent of calls that are served as well as the 
percent that achieve access. We urge greater attention to 
improving the telephone service that is being provided by local 
field offices. We also urge the agency to improve its telephone 
service through technological improvements and to strengthen 
its training programs for those who answer the telephone.
    Another area needing prompt attention is the administration 
of the disability programs. We have recommended five priority 
measures to address the problems: development and 
implementation of an ongoing joint training program for all 
adjudicators; development of a single presentation of 
disability policy that is binding on all decision makers, 
including the updating of medical listings and vocational 
standards; development and implementation of a quality 
assurance system to unify the application of policy throughout 
the disability determination system; improvement in the quality 
of medical evidence that is used in determining disability 
claims; and development and implementation of a computer system 
that will provide adequate support to all elements of the 
disability claims process. SSA has begun work on all of these 
recommendations, but progress has been too slow.
    We also recommend that the agency pay close attention to 
service in its field offices, where there are serious problems 
of crowded waiting rooms and long waiting times. We believe 
that in the short term the agency should try to alleviate these 
service dislocations by shifting either employees or workloads 
wherever possible. But we believe that hiring and training 
additional field office staff will also be necessary.
    We will continue to monitor SSA's progress in addressing 
these issues and will work with the agency to resolve them.
    10. Social Security has an aging workforce and will soon 
face a wave of retirements. Do you think SSA is taking 
appropriate actions to prepare for the retirement of its own 
    SSA has been studying its retirement wave and is planning a 
program of allowing employees to opt for early retirement with 
the expectation that this will enable it to hire and train 
younger and more technology-oriented employees to replace them, 
thereby smoothing out the transition. Going beyond this, the 
agency needs to take a realistic look at its future staffing 
needs. It is our understanding that as the agency looks toward 
the future, it is doing so under the constraining assumption 
that staffing for the agency is fixed and will not increase.
    In contrast, the Board believes that the agency needs to 
develop a comprehensive workforce plan as provided for in the 
1994 legislation that established SSA as an independent agency. 
This plan should provide a bottom-up analysis of the workload 
needs of the agency. The agency's budget should be based on 
this plan. The agency also urgently needs a new and more 
accurate work measurement system in order to properly assess 
its workforce needs. SSA's work measurement system has a 
pervasive influence on how the agency conducts its business. 
The field employees who spoke to the Board about the current 
system universally described it as inaccurate and unfair.


    Our next panel will be the United States General Accounting 
Office. We have Cynthia Fagnoni. I have a way of butchering 
names, so I hope the witnesses will correct me. She is the 
director of Education, Work force and Income Security Issues at 
Health, Education, and Human Services Division, and she is 
accompanied by Joel Willemssen who is a director in Civil 
Agencies Information Systems and the Accounting Information 
Management Division.
    Welcome. We look forward to your testimony, and welcome 
back to this Subcommittee.


    Ms. Fagnoni. Thank you, Mr. Chairman and Members of the 
Subcommittee. I am pleased to be here today to discuss the 
Social Security Administration's service to the public.
    SSA faces a number of future challenges that can affect its 
ability to provide high quality service to the public. Today, I 
will discuss these challenges and the agency's strategy to meet 
them. This information is based both on our published as well 
as ongoing work.
    As you have heard, the challenges SSA faces are 
significant, and demand for services is expected to grow 
significantly. Applications for the DI program alone are 
projected to increase by 46 percent by the year 2010. Moreover, 
the expectations and needs of SSA customers are changing. Some 
are expecting faster, more convenient services or more 
automated services. Others, such as the high proportion of 
disabled beneficiaries with mental impairments, may require 
more time and additional staff skills to serve them 
    SSA's ability to cope with these changes will be further 
challenged because of the number of SSA employees expected to 
retire. Agency retirements are likely to peak at the same time 
the agency experiences the large increases in workload. To meet 
these challenges, SSA will need to marshal two of its key 
resources, its technology and its work force.
    We recommended as long ago as 1993 that SSA prepare a 
service delivery plan to guide its investment in these two key 
areas. This plan would provide a detailed road map of who in 
the future will be providing what service, where and how, and 
SSA is beginning to take some steps in this direction. 
Recently, the agency began to work on what it calls a service 
vision for the year 2010. As we understand it, though, this 
vision will provide a high level summary of future service 
options rather than the detailed road map needed to make 
information technology and work force decisions.
    In the meantime, SSA is proceeding with specific 
information technology and work force initiatives to deal with 
its future challenges. To prepare for the expected workload 
increases, SSA plans to rely in large part on efficiencies 
gained through using information technology. However, to date, 
SSA has had mixed success and has not yet been able to show 
specific benefits from some of its most significant 
investments. For example, since 1996, SSA has installed more 
than 75,000 new workstations and related equipment as part of 
its intelligent workstation local area network. The initiative 
is to provide the infrastructure to support redesigned, 
speedier work processes and make information more available.
    However, the benefits of this investment are unclear. SSA 
has not yet assessed the initiative's contribution to improved 
productivity and service delivery. Further, SSA spent most of 
the last decade trying to develop a system to automate its 
entire disability claims process. However, after 7 years and 
more than $71 million, the agency discontinued the effort and 
began testing a new, less ambitious strategy. The new strategy 
currently focuses on automating the disability intake process 
using an electronic folder to speed the movement of disability 
cases from the field office to a disability determination 
    To its credit, SSA is applying some of the lessons it 
learned from the prior unsuccessful effort. It is taking a more 
incremental development approach and is regularly monitoring 
the status of the project at high level meetings. However, the 
initiative is still in the early stages and its cost and 
benefits have not yet been defined.
    SSA is also pursuing other technologies that could help 
enhance service delivery. It is experimenting with different 
ways to provide service over the Internet using imaging and 
document scanning to reduce time spent moving and tracking 
paper documents and is trying video conferencing of disability 
hearings to cut processing time.
    Turning now to SSA's work force initiatives, the agency has 
taken steps to prepare for retirements in its own work force 
and for changing customer needs and expectations. Many of its 
initiatives, however, are still in their early stages. Just 
this week SSA completed a 5-year work force transition plan. 
While a step in the right direction, this plan is long overdue. 
We recommended such a plan in 1993, and as you know, the 
agency's independence law requires one. The new plan spells out 
a number of actions the agency will take to prepare the work 
force for the future; however, much work remains. For example, 
SSA has made progress in identifying the skills that its 
leaders and staff need today, but it still needs to identify 
the skills its future work force will need. SSA has also 
completed a study that helps predict when agency staff are 
likely to retire and is beginning to work on ways to make 
hiring simpler and faster. Because the agency expects to lose 
large portions of its senior executives and other managers, it 
has also initiated a number of leadership development programs 
to prepare its future leaders.
    In conclusion, even if SSA is able to successfully carry 
out all of its planned information technology and work force 
initiatives, it is not clear that the agency is adequately 
prepared for the future. It will be important for the agency to 
clarify its gains from information technology and complete a 
service delivery plan to guide its investments and better 
position itself to cope with future challenges. Without a 
detailed service delivery plan, SSA runs the risk that it will 
not have the right people with the right skills and in the 
right jobs and locations to face its future challenges.
    This concludes my oral statement. We would be happy to 
answer any questions you or the members may have.
    [The prepared statement follows:]

Statement of Cynthia M. Fagnoni, Director, Education, Workforce, and 
Income Security Issues, Health, Education, and Human Services Division, 
U.S. General Accounting Office

    Messrs. Chairmen and Members of the Subcommittees:
    We are pleased to be here today to discuss the Social 
Security Administration's (SSA) efforts to prepare to meet its 
future service delivery challenges. As you know, SSA is one of 
only a few federal government agencies with which most American 
families will have regular contact. In fiscal year 1999, SSA 
provided benefits of over $400 billion to more than 48 million 
individuals through its retirement and disability programs, and 
the agency maintained records on the earnings of the vast 
majority of U.S. workers. Because of SSA's broad reach, the 
quality of its customer service can affect the public's view of 
government overall, and SSA has committed itself to providing 
world-class service to the American public.
    While SSA has generally been viewed as one of the better-
run federal agencies and has been recognized for its service to 
the public, the agency faces a number of challenges that could 
adversely affect its ability to provide world-class service in 
the future. Today, we are here to discuss (1) the extent and 
seriousness of these challenges, (2) SSA's strategy to meet 
them, and, more specifically, (3) the status of the agency's 
efforts to use information technology to cope with the 
challenges, (4) the agency's efforts to prepare its workforce 
for the future, and (5) the implications of SSA's plans and 
efforts for its readiness to meet future challenges. The 
information we are providing is based on both published and 
ongoing work (see the list of related GAO products at the end 
of this statement).
    In summary, we found that SSA will be challenged to 
maintain a high level of service to the public in the next 
decade and beyond. Demand for services is expected to grow 
significantly, with applications for one of SSA's already-
burdened disability programs projected to increase by 54 
percent by 2010. Moreover, the expectations and needs of SSA's 
customers are changing. Some are expecting faster, more 
convenient service, while others, such as non-English speakers 
and the large population of beneficiaries with mental 
impairments, may require additional assistance from staff with 
more diverse skills. At the same time, SSA's ability to cope 
with these changes will be challenged, since the number of SSA 
employees retiring is expected to peak at the same time that 
large increases will occur in applications for benefits, 
according to SSA's Actuary's estimates.
    While we have recommended since 1993 that SSA prepare a 
service delivery plan, SSA is only now beginning to develop a 
broad vision for customer service for 2010. This broad vision, 
as well as a more detailed plan spelling out who in the future 
will be providing what service and where, is needed to help the 
agency focus its efforts to meet its future challenges. In the 
meantime, to cope with pending workload increases, the agency 
is relying in large part on technology to achieve increased 
efficiencies. However, SSA has had mixed success in 
implementing information technology initiatives, and the 
benefits from its technology investments have largely been 
unclear. On the other hand, SSA's efforts to prepare for the 
increasing number of retirements from its own workforce and 
changing customer needs and expectations have shown more 
promise, although many initiatives are still in their early 
stages and much work remains. SSA will need to fully assess the 
skills its workforce will need to serve its future customers, 
particularly its growing population of disabled beneficiaries 
and the high proportion of those with mental impairments. SSA 
will also need to ensure continuity in leadership through 
ongoing succession planning efforts. Finally, without a vision 
for future service followed by a more detailed service delivery 
plan, SSA cannot be sure that its investments in technology and 
human capital--that is, its workforce--are consistent with and 
fully support its future approach to service delivery. It will 
be important for the agency to complete this plan to guide its 
investments and better position itself to cope with its future 


    SSA administers three major federal programs. The Old Age 
and Survivors Insurance (OASI) and Disability Insurance (DI) 
programs, together commonly known as Social Security, provide 
benefits to retired and disabled workers and their dependents 
and survivors. In fiscal year 1999, SSA provided OASI 
retirement benefits totaling more than $332 billion to 38 
million individuals and DI benefits of more than $50 billion to 
6.5 million individuals. The third program, Supplemental 
Security Income (SSI), provides income for aged, blind, or 
disabled individuals with limited income and resources. In 
fiscal year 1999, 6.6 million individuals received more than 
$28 billion in SSI benefits.\1\ SSA needs to keep up with 
changes in the circumstances of those currently receiving 
benefits--from address changes to changes in health or work 
status. In addition, SSA maintains records of the yearly 
earnings of over 140 million U.S. workers and provides them 
with annual estimates of their future benefits.
    \1\ Some DI benefit recipients have incomes low enough to qualify 
them for SSI as well and receive benefits from both programs.
    To meet its customer service responsibilities, SSA operates 
a vast network of offices distributed throughout the country. 
These offices include 1,343 field offices, which, among other 
things, handle application in-take; 132 Offices of Hearings and 
Appeals (OHA); and 36 teleservice centers responsible for SSA's 
national 800 number operations.\2\ The agency's policy is to 
provide customers with a choice in how they conduct business 
with SSA. Options include visiting or calling a field office, 
calling the 800 number, or contacting SSA through the mail. To 
conduct its work, SSA employed 63,000 staff in 1999: 13,000 at 
its headquarters offices and 50,000 in the field offices and at 
other facilities. In addition, to make initial and ongoing 
disability determinations, SSA contracts with 54 state 
disability determination service (DDS) agencies.\3\ While 
federally funded and guided by SSA in their decision-making, 
these agencies hire their own staff and retain a degree of 
independence in how they manage their offices and conduct 
disability determinations.\4\
    \2\ Other SSA facilities include 10 regional offices, 7 processing 
centers, and 1 data operations center.
    \3\ These agencies exist in each state, the District of Columbia, 
Guam, Puerto Rico, and the Virgin Islands.
    \4\ The state DDS sites employ a total of more than 14,000 staff.
    SSA relies extensively on computer technology to support 
its large volumes of programmatic and administrative work. 
Since the 1980s, SSA has taken numerous steps to modernize its 
computer systems in an effort to better serve its increasing 
beneficiary population and improve its productivity. A key 
aspect of the modernization effort has been the agency's 
transition from a centralized mainframe-based computer 
processing environment to a more highly distributed processing 
environment. SSA has also taken other steps to improve its 
service delivery capability, such as enhancing its electronic 
payment services and implementing direct access customer 
service on the Internet.

  SSA Faces Significant Customer Service Challenges Over the Next 10 

    Over at least the next 10 years, SSA will face a number of 
changing conditions that could tax its effort to provide world-
class service. Demand for services will grow as the baby boom 
population ages. This growth will place additional strain on 
the disability claims process, which is already troubled. In 
addition, the agency will have to adapt to changing customer 
service expectations. For example, some customers may expect 
faster, more convenient service through the use of technology. 
As the agency is trying to cope with these changes, increasing 
numbers of its own experienced staff will be retiring.

Customer Demand for Services Is Likely to Grow and Change

    SSA expects customer demand for its services to grow and 
change significantly over the next 10 years. The aging U.S. 
population means many more people will be applying for 
disability and retirement benefits with SSA, and determining 
initial eligibility--and in the case of DI and SSI, continuing 
eligibility--are costly and time-consuming activities. Figure 1 
shows the estimated growth in the number of people applying for 
benefits. By 2010, applications for OASI, DI, and SSI benefits 
are predicted to have increased by 20, 54, and more than 10 
percent, respectively, over 1999 levels. Moreover, applications 
are expected to continue to grow even more dramatically for a 
number of years after 2010 as the baby boom generation reaches 
retirement age. More applications imply growth in other work 
areas for SSA as well, such as updating and maintaining records 
for those awarded benefits.

    Note: SSA's Office of the Chief Actuary does not have 
estimates of applications for OASI and DI beyond 2010. Also, 
these estimates reflect some double-counting of those 
individuals who apply for both DI and SSI--a group that is 
expected to grow from about 480,000 in fiscal year 1999 to 
640,000 in fiscal year 2010.
    Source: Data provided by SSA's Office of the Chief Actuary.

    Increased customer demand for services has serious 
implications for SSA's workforce. For example, if SSA did not 
change the number of staff currently handling initial 
applications for benefits, worker productivity would need to 
increase by 27 percent--whether through technology 
enhancements, process improvements, or other changes--to manage 
increases in applications predicted by SSA's Office of the 
Chief Actuary.\5\ Table 1 shows the increased level of 
productivity that would be needed to manage predicted levels of 
applications in 2010.
    \5\ The estimated increase in productivity might be conservative, 
since SSA predicts a slightly higher proportion of DI applications, 
which are more complex and resource-intensive than retirement 

                        Table 1:--Productivity Needed to Manage Estimated 2010 Workloads
                                                              Initial           Work-years        applications
                      Fiscal year                           applications         required        processed per
                                                             Processed                             work-year
1999 (actual)..........................................          6,177,723             16,714                370
2010 (predicted).......................................          7,855,800             16,714                470
Note: SSA's accountability report used slightly different data in calculating fiscal year 1999 applications than
  did SSA's Office of the Chief Actuary; the difference amounted to about 66,000 cases.
Source: Fiscal year 1999 data are from SSA's Accountability Report for Fiscal Year 1999. Fiscal year 2010 data
  were calculated from Office of the Chief Actuary data.

    Increases in disability applications are particularly 
worrisome for SSA because of its complex process for 
determining whether an applicant is disabled. The process spans 
a number of offices and can take a long time. First, an 
applicant contacts a field office to file a claim for benefits. 
This information is forwarded to one of the state DDS offices 
to determine whether the individual is disabled. To make this 
determination, DDS staff must often collect a number of 
documents, including medical records and other evidence. The 
decision itself requires difficult judgments. If the applicant 
is dissatisfied with the original decision, the process 
provides for several opportunities for appeal: a 
reconsideration of the decision at the DDS, a hearing before an 
administrative law judge at an OHA, and a review by SSA's 
Appeals Council. Finally, after exhausting all these remedies, 
the applicant may file a claim in federal court.
    Even as SSA expects increases in the number of disability 
applications, the agency is experiencing difficulty managing 
its current workload effectively. In 1999, over 500,000 people 
initially denied disability benefits appealed the decision, and 
it took an average of 316 days to reach a final decision for 
these cases. Reducing the lengthy period that the disability 
claims process takes at both the initial and hearings levels 
has become one of SSA's priorities for improving customer 
service. SSA has been attempting for a number of years to 
streamline, or redesign, the disability claims process and has 
counted on these efforts to help absorb some workload growth. 
However, as we testified before you in October 1999, SSA's past 
progress has been slow and disappointing.\6\ The agency is now 
conducting a test of some proposed changes and has also begun a 
new initiative to speed decisions at the hearings level. It 
will be challenging, but necessary, for the agency to achieve 
significant improvements in processing times in order to handle 
the impending workload increases. Otherwise, the predicted 
growth in applications could further erode customer service in 
this area.
    \6\ Social Security Disability: SSA Has Had Mixed Success in 
Efforts to Improve Caseload Management (GAO/T-HEHS-00-22, Oct. 21, 
    In addition to the expected increase in customer demand for 
SSA services, the demands that customers place on SSA are 
changing, presenting SSA with a dual challenge. Changing 
customer expectations are pushing the need for faster, more 
convenient service from SSA, such as by phone or computer. For 
example, the volume of calls handled by SSA's national 800 
number's automated menu grew by over 1.6 million (13 percent) 
between 1997 and 1999. More dramatically, during a recent 6-
month period, requests for individual estimates of future 
Social Security benefits via the Internet increased by 45 
percent. At the same time, some aspects of SSA's customer 
service workload have become more time-consuming and labor-
intensive. For example, SSA is hiring more staff with bilingual 
skills and spending more time serving an increasing number of 
non-English or limited-English speaking customers. In addition, 
since 1986, the proportion of disabled beneficiaries with 
mental impairments has increased--by 18 percent for SSI and by 
over 30 percent for DI--and these beneficiaries can be 
challenging and even more time-consuming to serve successfully. 
Moreover, SSA's efforts to help disabled beneficiaries join or 
rejoin the workforce could require some additional time and new 
    \7\ The Ticket to Work and Work Incentives Improvement Act of 1999 
directs SSA's Commissioner to provide disability beneficiaries with a 
ticket, or voucher, they may use to obtain vocational rehabilitation 
services, employment services, and other support services from an 
employment network of their choice.

Retirements of SSA Staff Will Affect Agency's Ability to Meet 

    SSA's ability to meet growing and changing customer demands 
will be strained by increasing retirements expected within its 
own workforce over the next decade. SSA's retirement wave is 
predicted to begin in 2001 and peak in 2009. As shown in table 
2, more than half of SSA's 63,000 employees will be eligible to 
retire by 2009.\8\ The percentage is higher for employees that 
compose SSA's supervisor or manager ranks. In particular, 83 to 
86 percent of SSA's upper-level managers and executives (GS-14, 
GS-15, and SES level) will be eligible to retire by 2010.
    \8\ SSA officials predict an average of 18 percent to retire each 

                        Table 2:--SSA Employees Eligible to Retire Between 1999 and 2009
                                                                                     Number of
                                                                     Number of       employees      Percentage
                           Grade level                               employees      eligible to     eligible to
                                                                                      retire          retire
GS-1 to 11......................................................          47,983          23,848              50
GS-12...........................................................           8,617           5,518              64
GS-13...........................................................           4,395           3,245              74
GS-14...........................................................           1,568           1,298              83
GS-15...........................................................             479             414              86
SES.............................................................             117              98              84
Total...........................................................          63,159          34,421              54
Source: SSA, Office of Human Resources.

    Retirement eligibility figures, while useful, do not show 
the actual challenge an agency will face in replacing its 
staff. To get a better idea of the challenges it will face, SSA 
has developed estimates of how many staff it will lose each 
year to retirement and other factors. Figure 2 shows SSA's 
predicted workforce losses over the next 20 years. As the 
figure shows, peak losses occur in fiscal years 2009 and 2010. 
This peak generally coincides with the time period for which 
SSA's Office of the Chief Actuary predicts large increases in 
applications for benefits. In addition, the largest number of 
retirements will most likely occur in job positions that 
provide direct service to the public; for example, over 7,500 
of the agency's approximately 16,500 claims representatives--
those who accept and process claims for benefits--are expected 
to retire by 2010. Retirements can especially affect SSA's 
small offices around the country, where the loss of just a few 
experienced staff or managers can seriously undermine customer 
service and effective operations.\9\
    \9\ Of SSA's approximately 1,300 field offices, about 200 have only 
1 to 10 employees, and more than half of all the field offices have 20 
or fewer staff, according to the Social Security Advisory Board.

    Source: SSA, Office of Human Resources.

Service Delivery Plan is Needed to Focus Efforts to Address 
Future Challenges

    To meet the challenges we just outlined, SSA will need to 
marshal its key resources: its technology and its workforce. To 
help ensure that these vital resources are put to the best use, 
SSA needs to complete a service delivery plan, which we have 
recommended as long ago as in 1993.\10\ Such a plan should 
spell out for the future who will be providing what type of 
services and where these services will be made available. It 
should take into account changing customer needs and 
expectations; the views of interest groups and oversight 
bodies; and other future challenges, such as growing workloads. 
We have also criticized SSA in the past for developing plans 
out of sequence, that is, for developing an information 
technology plan without having first developed a service 
delivery plan. Ideally, the agency should base its decisions on 
and investments in both information technology and its 
workforce on a detailed service delivery plan. We view SSA's 
workforce, or its human capital, as an asset whose value can be 
enhanced through investment, such as training and staff 
development. As the value of its people increases, so does the 
performance capacity of the organization. However, to help 
ensure their effectiveness, SSA's human capital strategies and 
practices should be aligned with the agency's vision for the 
future, including its plans for serving its customers and its 
strategic goals and objectives.
    \10\ Social Security: Sustained Effort Needed to Improve Management 
and Prepare for the Future (GAO/HRD-94-22, Oct. 27, 1993). Also, see 
SSA's Management Challenges: Strong Leadership Needed to Turn Plans 
Into Timely Meaningful Action (GAO/T-HEHS-98-113, Mar. 12, 1998) and 
Social Security Administration: Effective Leadership Needed to Meet 
Daunting Challenges (GAO/HEHS-96-196, Sept. 12, 1996).
    SSA has begun taking some long overdue steps to better plan 
for its future service delivery; however, much work remains. In 
1998, SSA established its Market Measurement Program to improve 
and consolidate its approach to assessing customer 
expectations. When this program is fully developed, SSA will 
monitor and measure the needs, expectations, priorities, and 
satisfaction of customer groups, major stakeholders, and its 
workforce. However, collecting complete data on the needs, 
expectations, and satisfaction of these various groups is a 
multiyear project, and as of January 2000, SSA was about midway 
through its initial wave of data collection, analysis, and 
reporting. SSA has a separate initiative under way to assess 
future customer needs and expectations.
    In addition, the agency has recently begun to develop a 
service vision for 2010. This vision, according to SSA 
officials, will be based on future customer and stakeholder 
needs and expectations and will provide a high-level summary of 
the principles on which SSA plans to base its service provision 
and the various delivery options available. The agency plans to 
incorporate this vision into its strategic plan, which will be 
updated this year. However, to be useful for making information 
technology and human capital decisions, this vision should be 
followed by a more detailed service delivery plan. According to 
SSA officials, the agency does not have plans to go beyond this 
vision statement to issue a more detailed plan at this time. 
Without a well-developed plan, SSA cannot be assured that its 
investments in human capital and technology, as well as any 
related decisions regarding the use of its many field offices 
and other facilities, will fully support its vision of service 
delivery. Nor can the agency be comfortable that it has taken 
the necessary steps to meet its future challenges.
    SSA's ability to develop a detailed service delivery plan 
is hampered by weaknesses in the agency's complex systems for 
measuring workloads, productivity, and quality. These 
weaknesses make it difficult both to monitor current customer 
service performance and to use the data to develop and support 
planned changes. For example, SSA has the capability to monitor 
and measure only service provided at the national and regional 
level, not by its various offices located around the 
country.\11\ As a result, line managers and planners do not 
know the efficiency or quality of service provided by 
individual offices, or even the level of service provided by 
phone as opposed to face-to-face, and therefore cannot plan for 
improvements accordingly. SSA recognizes that its workload and 
quality data have limitations. The agency is in the early 
stages of piloting alternative workload measurement systems and 
also just recently let a contract to review its quality 
assurance systems.
    \11\ SSA uses sampling to assess the level and quality of service 
provided. Due to budgetary restrictions, SSA does not collect 
sufficient data to assess service below the national or regional level.
    In the absence of a service delivery plan, SSA has a number 
of information technology and workforce initiatives under way 
to try to prepare for its future challenges. The following 
sections provide specific information on agency progress on 
these initiatives.

SSA is Pursuing Various Information Technology Initiatives, but 
Impact on Service Delivery Cannot yet be Determined

    To cope with its growing workloads, SSA plans to rely 
extensively on information technology to help it achieve 
processing efficiencies and improved customer service. To this 
end, the agency has devoted considerable time and effort to 
identifying strategies to meet its goal of providing world-
class service. SSA has pursued a number of initiatives over the 
past decade aimed at establishing the technological 
infrastructure needed to enhance its claims-processing 
capabilities and the overall administration of its programs. As 
we testified last summer,\12\ however, SSA has experienced 
mixed success in carrying out its information technology 
initiatives and it has not yet been able to demonstrate 
specific benefits resulting from some of its most significant 
investments. Because many of SSA's information technology 
initiatives are still in various stages of development, 
evidence of how they will improve the agency's processing 
capabilities and service to the public remains to be seen.
    \12\ Social Security Administration: Update on Year 2000 and Other 
Key Information Technology Initiatives (GAO/T-AIMD-99-259, July 29, 
    According to a 1999 independent audit of SSA's systems 
environment, the agency must also contend with the challenge of 
further strengthening controls over the information contained 
in its computers.\13\ The vulnerabilities identified could lead 
to unauthorized access to, and modification or disclosure of 
sensitive SSA information. In turn, this could result in the 
loss of data and resources, and compromised privacy of 
information associated with SSA's key business processes.
    \13\ Social Security Accountability Report for Fiscal Year 1999.

SSA's Computer Modernization Benefits Are Not Yet Known

    One of SSA's most significant initiatives is its computer 
modernization effort known as the Intelligent Workstation/Local 
Area Network (IWS/LAN). SSA considers this initiative to be the 
linchpin for both its customer service program and its entire 
business approach. It is expected to provide the automation 
infrastructure to support redesigned work processes and 
improved availability and timeliness of information throughout 
SSA and state DDSs.\14\ SSA began acquiring the IWS/LAN 
equipment in December 1996. As of January 30, 2000, the agency 
reported that it had installed more than 75,600 intelligent 
workstations and about 1,900 local area networks in most of the 
approximately 2,000 SSA and state DDS sites included in the 
    \14\ Under the IWS/LAN initiative, SSA planned to replace 
approximately 40,000 ``dumb'' terminals and other computer equipment 
used at SSA and state DDS sites with an infrastructure consisting of 
networks of intelligent workstations connected to each other and to 
SSA's mainframe computers.
    Despite its progress, however, the benefits of SSA's 
investment in IWS/LAN remain uncertain because the agency has 
not yet assessed the initiative's actual contribution to 
improving productivity and service delivery. While SSA should 
be able to claim some work improvements from various desktop 
management tools that are integral to IWS/LAN, such as on-line 
guides and directories, standardized notices, and electronic 
mail, it has not completed the evaluations needed to fully 
assess the efficiencies achieved through implementing IWS/LAN 
and its impact on providing higher quality and more effective 
    During our testimony before the Social Security 
Subcommittee last July,\15\ we expressed concern that SSA 
lacked target goals and a defined process for measuring IWS/LAN 
performance--two ingredients essential for determining whether 
this investment will yield expected improvements in service to 
the public. We noted, in particular, that SSA had not conducted 
postimplementation evaluations to determine actual project 
costs, benefits, risks, and returns, as required by the 
Clinger-Cohen Act of 1996 and Office of Management and Budget 
guidelines. During a meeting held in December 1999 to address 
our concerns, SSA's chief information officer acknowledged the 
need to measure IWS/LAN's performance, stating that the agency 
had begun formulating plans and studies to evaluate the 
investment in and actual benefits resulting from the 
initiative. On February 8, SSA told us that it is now 
conducting studies to assess the benefits of IWS/LAN.
    \15\ GAO/T-AIMD-99-259, July 29, 1999.

SSA Has Initiated a New Technology Strategy to Support Its 
Disability Claims Process

    As part of its efforts to reengineer the disability claims 
process, SSA intended to achieve many of its benefits from 
programmatic software that was to operate on IWS/LAN. To 
accomplish this, SSA spent most of the last decade designing 
and developing the Reengineered Disability System to serve as 
part of the enabling platform for its modernized disability 
claims process. Specifically, this system was to automate SSA's 
disability claims process--from the initial claims-taking in 
the field office to the gathering and evaluation of medical 
evidence in the state DDSs, to payment execution in the field 
office or processing center, and include the handling of 
appeals in hearing offices. However, after approximately 7 
years and more than $71 million reportedly spent on the 
initiative, SSA discontinued the effort due to software 
development and performance problems.
    SSA is now pursuing a new technology strategy to address 
the needs of its disability claims process. This new strategy 
is expected to incorporate several key components, including: 
(1) an electronic disability intake process, (2) enhanced state 
DDS claims processing systems, and (3) a technology approach to 
support new business processes within OHA. The components are 
to be linked to one another through the use of an electronic 
folder that is being designed to transmit data from one 
processing location to another, and to serve as a data 
repository, storing documents that are keyed in, scanned, or 
faxed. SSA began testing the electronic disability intake 
component and electronic folder in July 1999, with the overall 
objective of automating the disability interview process in the 
field office, storing data collected through the interview in 
an electronic disability folder, then passing key data elements 
to a DDS system.\16\ SSA believes that automating the field 
offices' disability intake process will expedite the movement 
of the disability case to the DDS, and will provide for earlier 
adjudication and claimant notification.
    \16\ Of the 54 state DDSs, 46 currently use one of three standard 
systems to process disability claims. SSA is currently working with 6 
DDSs to procure standard systems and the remaining 2 DDSs use their own 
    To date, SSA has tested the electronic folder concept on 
two versions of the electronic disability software. Based on 
the test results, it now plans to test the software and 
electronic disability folder in a limited production 
environment in May 2000 at its Delaware field offices and the 
Delaware state DDS. However, according to SSA's preliminary 
plans for the effort, the agency does not expect to be able to 
identify anticipated benefits or return on investment from the 
electronic disability intake component until fiscal year 2001, 
after the project has undergone additional testing at other 
    One of the keys to SSA's success in developing the 
electronic disability intake process is avoiding the kinds of 
development and performance problems that caused the 
Reengineered Disability System to be discontinued. As part of 
its evaluation of that development effort, SSA identified a 
number of lessons learned that it is now applying in its 
development of the electronic disability intake component. For 
example, SSA is taking an incremental approach to developing 
the electronic disability software application, and is using 
proofs-of-concept to evaluate design options before pursuing 
full development. SSA also is managing the development by (1) 
requiring a contract between software developers, customers, 
and end users to ensure that all parties agree to the scope of 
the project; (2) performing risk assessments and developing 
risk mitigation and project management plans; and (3) regularly 
monitoring the status of the project during weekly management 
meetings chaired by the Deputy Commissioner for Systems.
    Beyond the electronic disability intake process, SSA has 
agreed to have several state DDSs participate in pilot projects 
to determine the technology required to support a fully 
electronic (that is, totally paperless) disability process, and 
help assess costs and benefits of the electronic folder. For 
example, the California DDS has been selected to explore 
whether a public key infrastructure \17\ can be used to test 
digital signatures and encryption for medical consultative 
examination reports. One challenge associated with this is 
that, by regulation, some medical evidence used to make 
disability determinations must contain an original signature. 
In New York, the DDS has been approved to test the management 
and operational feasibility of an electronic disability folder 
as it moves through all stages of SSA's processes. Further, a 
pilot being undertaken by the Wisconsin DDS will use the 
electronic folder concept to measure the impact of an 
electronic claim on the DDS' internal operations. The results 
of this pilot are expected to provide SSA with information 
needed to interface a fully paperless DDS case processing 
system with an electronic folder, and allow the agency to study 
the ergonomic effects of paperless processing upon DDS case 
    \17\ A public key infrastructure is a system that uses a matching 
pair of encryption and decryption keys, along with digital 
certificates, to achieve secure Internet services.

Various Initiatives Are Being Implemented to Support OHA, but 
Long-Term Efforts Have Not Been Defined

    SSA also considers information technology crucial for 
improving the capabilities of OHA. Therefore, in August 1999, 
the Commissioner of Social Security launched a hearings process 
improvement initiative to create a more customer-focused and 
efficient hearings process. The initiative, combined with 
related activities such as the expanded use of 
videoconferencing, aims to further reduce processing times and 
yield higher quality decisions without additional resource 
expenditures. OHA implemented the first phase of this 
initiative in January.\18\
    \18\ Under phase I, 37 hearing offices were selected to apply the 
new hearings processes in conjunction with 10 states that will 
prototype modifications to the disability process.
    While the hearings process improvement plan relies mostly 
on innovative management and reengineered processes to achieve 
dramatic improvements in the process, it also emphasizes the 
use of various technologies and automation to help support the 
workload management needs of the hearing offices. For example, 
SSA is exploring the use of videoconferencing as a means to 
potentially reduce OHA's hearings processing times, travel time 
and travel-related expenses, and to increase time available for 
in-office case-related work. Currently, in order to provide 
customers with face-to-face hearings and to correct imbalances 
in workloads among various hearing offices, administrative law 
judges can spend a large percentage of time (for example, about 
2 weeks out of every month) traveling to remote sites. However, 
the use of videoconferencing equipment to conduct hearings has 
the potential to reduce travel and processing times, while 
increasing productivity.
    In February 1996, OHA began piloting the use of 
videoconferencing equipment at two sites--West Des Moines, 
Iowa, and Huntington, West Virginia. SSA estimates that, to 
date, a total of about 3,000 hearings have been held via 
videoconferencing at the two pilot sites. According to SSA, an 
evaluation of the initial pilot results cited a reduction in 
processing time of 38 days in one of the pilot offices. OHA has 
been granted permission to expand the use of videoconferencing 
to nine additional sites. Once the equipment has been installed 
at these sites and the users become comfortable with the 
technology, OHA plans to collect data to quantify the benefits 
of expanding the use of videoconferencing at additional sites.
    SSA is also evaluating whether speech recognition software 
can be used by OHA's administrative law judges and other staff 
involved in writing decisions to dictate their casework 
directly into a computer. SSA initiated this effort in December 
1999 and is currently testing the dictation performance of 
speech recognition software on computers of various processing 
speeds. This technology is still being evaluated; therefore, 
the agency has not determined the costs and benefits associated 
with the initiative, or whether it will actually be 
    In collaboration with the Office of the Deputy Commissioner 
for Systems, OHA has also identified four automation efforts to 
support the goals of the hearing process improvement 
initiative. These projects, as shown in table 3, primarily 
involve the use of automated tools to aid in scheduling 
hearings and to monitor and track case progress throughout the 
hearing process.

                            Table 3:--OHA Automation Initiatives to Support HPI Goals
                                                                 Anticipated effect on
              Initiative                      Objective                 workload                  Status
Hearings Process Improvement (HPI)     To make software         Allow users to track     Modifications completed
 software modifications.                modifications to the     incoming HPI work,       in January 2000;
                                        Hearing Office           work assigned to         system currently being
                                        Tracking System that     processing groups, and   used by the 37 hearing
                                        will support HPI.        the date a case is       offices participating
                                                                 certified and generate   in phase I.
                                                                 two new case tracking
Consolidated Hearing Office Tracking   To replace the existing  Enable OHA to provide    System currently being
 System.                                Hearing Office           timely reporting         designed and a
                                        Tracking System with a   nationwide and locally   prototype scheduled to
                                        new application          and reduce the           be implemented at
                                        compatible with IWS/     duplicate data entry     OHA's headquarters in
                                        LAN and to consolidate   currently required to    Falls Church, Va., by
                                        the over 140 separate    track cases during the   September 2000.
                                        databases into a         various levels of OHA
                                        single database.         appeals.
Hearing Office Scheduling System.....  To provide automation    Reduce the manual        Pilot testing began at
                                        support in the           aspects of the hearing   OHA headquarters in
                                        scheduling of hearings   scheduling process.      Falls Church, Va.,
                                        that will record and                              during January 2000
                                        share current                                     and will be deployed
                                        information on                                    at hearing offices in
                                        resource availability                             Johnstown, Pa., in
                                        within the hearing                                February 2000 and
                                        office and                                        Morgantown, W.V., in
                                        electronically notify                             March 2000.
                                        the administrative law
                                        judge that a hearing
                                        has been scheduled.
Document Generation System...........  To provide users with a  Provide the means for    System implemented in
                                        system that generates    generating and           November 1999.
                                        decision notices and     subsequently editing
                                        routine correspondence.  decisions and
                                                                 correspondence, with
                                                                 an automated interface
                                                                 to the Hearing Office
                                                                 Tracking System.
Source: SSA.

    It is too early to know whether these four automation 
projects will successfully support the goals of the hearings 
process improvement initiative. To date, only two of the four 
have been developed and integrated into the phase I process 
modification now under way, and the ability of these systems to 
adequately support the modified
    hearing processes has not yet been determined. Further, 
according to the acting director of OHA's Office of Management, 
these efforts do not represent all of the information 
technology that will be required to help OHA increase its 
productivity and provide better service to its customers. SSA 
is currently in the process of preparing a statement of work 
for the development of an information technology strategy to 
support OHA's business processes. Until this strategy is 
defined, SSA will not be in a position to identify all of the 
technologies that will be required to meet OHA's needs. SSA 
expects to finalize OHA's information technology strategy by 
late 2000.

SSA Is Exploring Other Technologies to Enhance Service Delivery

    As noted, SSA's beneficiaries of the future are likely to 
demand services that require new and different technological 
options to meet their needs. As a result, SSA's success in 
providing world-class service will depend on how effectively it 
can apply such technologies to enhance its processing 
capabilities. Moreover, recently enacted legislation and other 
initiatives have reenforced the urgency for agencies such as 
SSA to pursue new and innovative technologies to carry out 
their work. For example, the Government Paperwork Elimination 
Act states that federal agencies should consider electronic 
alternatives to paper submissions, and the President's December 
1999 electronic government initiative directs the heads of 
various federal agencies to make a broad range of benefits and 
services available through private and secure electronic use of 
the Internet. In addition, the National Partnership for 
Reinventing Government is urging federal agencies to offer more 
online transactions through its Access America initiatives.
    To its credit, SSA has long recognized the potential value 
in exploring alternative technologies to enhance its service 
delivery. Since at least 1997, SSA has included an electronic 
service delivery strategy in its planning documents to support 
the agency's strategic direction in dealing with self-service 
communication technology and access delivery alternatives. 
Moreover, it has explored a number of technology options, 
ranging from Internet/electronic commerce applications to 
document imaging and scanning. SSA is currently in various 
stages of designing, developing, and implementing these 
technologies. In doing so, however, it faces the continual 
challenge of ensuring that the technologies are implemented in 
a manner that is cost-effective and that does not compromise 
the security and privacy of beneficiaries' personal 
information. In addition, a technological challenge that SSA 
must address before some of its interactive Internet or 
electronic commerce initiatives are implemented is upgrading 
its network infrastructure, including IWS/LAN, to provide the 
capabilities to support the new applications.
    Internet service is a major project under SSA's electronic 
service delivery initiative. SSA is pursuing the use of 
Internet applications to increase the number of electronic 
transactions available to the public and to help absorb 
workload increases expected as aging baby boomers become 
eligible for benefits. Over the past 3 years, SSA has explored 
various options for deploying Internet applications on its web 
site without violating privacy issues. As a result, it now uses 
Internet applications to assist customers in conducting 
business with the agency. For example, customers can download 
or access the ten most frequently requested SSA forms, such as 
an application for a Social Security card, and they can use on-
line applications to determine the location of a Social 
Security office and to request statements of benefits.
    SSA has now developed an Internet services tactical plan, 
which includes a framework for identifying and approving future 
electronic service delivery efforts. However, it has not 
finalized a strategy that identifies and prioritizes the 
applications that will be deployed. Further, because it has not 
developed a service delivery plan, SSA does not yet know what 
efforts will be required to meet its future service delivery 
needs. Moreover, according to the framework, before SSA 
launches its future efforts, it needs to determine (1) what 
electronic services make sense to its customers, (2) how the 
new line of service delivery will affect the agency's workload, 
(3) whether the agency has the available resources (staff and 
technology) to implement these actions, and (4) whether the 
technology needed to authenticate the electronic customer is 
available. Furthermore, sound, disciplined processes such as 
business case analyses; cost/benefit analyses; and 
requirements, technology, and risk assessments must drive these 
decisions. Some of these processes are already being applied to 
various projects under the direction of SSA's Software Process 
Improvement Program, which is responsible for serving as a 
focal point to the agency's Office of the Deputy Commissioner 
for Systems. The objective of the Software Process Improvement 
Program is to create an environment that encourages continuous 
improvement in software development activities that will result 
in the ability to develop high-quality software products and to 
deliver those products to the customer as promised.\19\
    \19\ Social Security Administration: Software Development Process 
Improvements Started But Work Remains (GAO/AIMD-98-39, Jan. 28, 1998).
    In addition to its electronic service delivery initiatives, 
SSA intends to support its future workload demands with 
projects that rely on technologies such as imaging and 
scanning. One such initiative, which has been ongoing since 
September 1993, is SSA's Paperless Processing Center project to 
begin to turn SSA into a paperless agency and position its 
resources and processes to meet emerging workloads. Based on 
its initial analysis of the paperless processing concept, SSA 
estimated that 95 percent of a clerk's workday and 10 percent 
of a manager's workday are occupied with paper-related 
activities, such as locating a folder and the associated case 
material. Accordingly, the project's objective is to implement 
document imaging and paperless technologies to improve SSA's 
intensive paper folder processing in program service centers 
and the Office of Central Operations. Paperless processing will 
be used to eliminate SSA's reliance on paper records by 
building and storing comprehensive electronic client records. 
The new technology is expected to increase productivity and 
quality, which in turn should reduce backlogs and improve 
public service.
    SSA has thus far spent about $35 million to implement and 
maintain the necessary hardware and software to pilot paperless 
processing at three program service center sites. According to 
the project manager, about $69 million \20\ in total will be 
required to complete the paperless processing effort at all six 
program service centers and the Office of Central Operations by 
2001. SSA projects savings attributable to the paperless 
processing initiative of about $161 million, or about 5,600 
work years, once fully implemented. However, the agency 
considered this to be a conservative estimate, given that 
additional savings may be realized from being able to redirect 
program service center staff to other activities such as 
assisting the telephone service staff in responding to 800-
number telephone calls.
    \20\ This figure does not include additional costs that may be 
incurred to replace hardware acquired for the initial pilot sites.

SSA'S Efforts to Prepare its Workforce for Future Challenges 
are in Early Stages, and Much Work Remains

    SSA has a number of initiatives under way to help prepare 
its workforce for the remaining two key challenges: the 
impending retirement of many of its experienced staff and the 
projected changes in customer needs and expectations, such as 
the increased reliance on technology as a means of service 
delivery. Many of these steps are consistent with principles of 
human capital management laid out in our self-assessment 
checklist \21\ and common to organizations recognized as 
leaders in human capital management.\22\ (App. I outlines the 
selected principles of human capital management that are most 
relevant to SSA's future challenges.) Many of SSA's human 
capital initiatives, while steps in the right direction, are in 
the early stages. Moreover, without a more detailed future 
service delivery plan linked to the agency's goals and 
objectives, SSA runs the risk that it will not have the right 
people, with the right skills, in the right jobs and locations 
to face its future challenges.
    \21\ Human Capital: A Self-Assessment Checklist for Agency Leaders 
(GAO/GGD-99-179, Sept. 1999).
    \22\ Human Capital: Key Principles From Nine Private Sector 
Organizations (GAO/GGD-00-28. Jan. 31, 2000).

SSA Is Making Progress in Workforce Planning Initiatives, but 
Some Lack Future Focus 

    Principles of human capital management suggest that 
workforce planning be explicitly linked to an agency's 
strategic and program plans and that it meaningfully involve 
the agency's human resource professionals. To address SSA's 
impending staff retirements and to help meet its strategic 
objective ``to create a workforce to serve SSA's diverse 
customers in the 21st century,'' SSA is developing a 5-year 
workforce transition plan. The draft plan strives to project 
what SSA expects to happen in the future, what the effects will 
be on SSA's workforce needs, and what actions SSA should take 
to respond to those needs.\23\ The plan was developed with 
direct involvement of key human resource professionals 
throughout the agency. While a step in the right direction, 
such a plan is long overdue. The Social Security Independence 
and Program Improvements Act of 1994, which made SSA an 
independent agency, required that the agency's appropriations 
requests for staffing and personnel be based on a comprehensive 
workforce plan. Even earlier, we reported that the absence of a 
human resource plan contributed to low morale and problems in 
such areas as management development and training, agencywide 
succession planning, and employee/management communication.\24\ 
Then in our 1993 report, we recommended that SSA develop a 
long-term human resources plan to prepare for future workforce 
    \23\ SSA's draft workforce transition plan includes over 20 action 
items, with milestones for each to (1) improve the workforce projection 
and planning process, (2) recruit new employees with the necessary 
competencies, (3) fully develop and utilize employees, and (4) provide 
a work environment and culture that support employees.
    \24\ Social Security Administration: Stable Leadership and Better 
Management Needed to Improve Effectiveness (GAO/HRD-87-39, Mar. 18, 
1987) and Social Security: Status and Evaluation of Agency Management 
Improvement Initiatives (GAO/HRD-89-42, July 24, 1989).
    \25\ GAO/HRD-94-22, Oct. 27, 1993.
    To link workforce planning to an agency's strategic vision, 
human capital principles call for identifying current and 
future human capital needs. Recognizing that it will shortly be 
facing the prospect of increasing retirements, SSA conducted a 
study that predicts staff retirement and attrition by year, 
from 1999 to 2020, as well as by major job position and agency 
component. In making these predictions, SSA went beyond 
identifying the dates that its employees first become eligible 
to retire by also factoring in 10 years of historical 
retirement data to make more realistic projections. SSA also 
conducted focus groups with recent retirees and current 
employees eligible for retirement to identify factors that 
might affect their decisions to retire once eligible. SSA 
expects the focus group and retirement study will help its 
managers in their workforce planning, and the agency intends to 
update the retirement data on an ongoing basis. However, 
aspects of the retirement study might not provide sufficient 
detail to be useful for some line managers. For example, the 
study lumps all supervisors from the GS-7 to SES levels into 
one supervisory category, whereas planners and managers might 
have a better idea of how to prepare for the imminent 
retirement of upper-level managers if the supervisory data were 
broken out into further detail. SSA officials told us they plan 
to break out these data in their next update. Even with this 
additional information, the agency will still need to develop a 
concrete plan to clarify what staff, where, and with what 
skills will be needed to replace the retirees.
    To ensure that staff are well-prepared to do their jobs, 
agencies need to compare the competencies--that is, the 
knowledge, skills, and abilities--employees need, both now and 
in the future, with the knowledge, skills, and abilities they 
possess. As part of its draft workforce transition plan, SSA 
has already identified core competencies that its leaders and 
employees need to possess today, and the agency is taking steps 
to evaluate and update the competency levels of its existing 
staff.\26\ The agency has developed automated self-assessment 
tools that supervisors and nonsupervisors can use to evaluate 
whether they need improvement in any of the core competencies 
identified by SSA. When the individual completes the 
assessment, the tool identifies areas where the individual 
needs additional training and provides a list of courses 
related to that competency area. The self-assessment tool is 
currently being piloted at a number of SSA offices. Through 
these steps, SSA is making some progress in identifying and 
developing core competencies, but its efforts to date reflect 
today's workforce needs rather than tomorrow's. SSA recognizes 
the need to identify competencies that reflect its future 
workforce needs so that it can more effectively recruit and 
train staff to handle more complex customer needs and new 
technology tools. Once these future competencies are 
identified, SSA will need to develop new training programs, 
including ones to help current and new staff adapt to new 
    \26\ Core competencies identified by SSA are attributes needed by 
all its employees, including qualities such as organizational 
awareness, basic program knowledge, ability to apply computer skills on 
the job, and customer service orientation.
    To ensure continuity of leadership, human capital 
principles call for identifying leadership traits that support 
an agency's mission and goals, and building and sustaining a 
pool of leaders through recruitment, hiring, development, 
retention, and succession planning. We have long stressed the 
importance of succession planning and formal programs to 
develop and train managers at all levels at SSA. As early as 
1993, we recommended that SSA make succession planning a 
permanent aspect of its human resource planning and evaluate 
the adequacy of its investments in management training and 
development.\27\ SSA has recently created three 2-year national 
development programs to help prepare selected staff to assume 
mid-and top-level leadership positions at the agency.\28\ Each 
of these programs accommodates between 35 and 40 staff. Because 
of the large number of expected management retirements, SSA 
hopes to regularly repeat these national programs over the next 
10 years. It will be important for the agency to do so. In 
addition to these formal development programs, SSA is also 
taking steps to provide leadership training for all its current 
supervisors, managers, and executives.\29\ Also, SSA regional 
and headquarters offices are providing additional leadership 
development opportunities to their staff.
    \27\ See GAO/HRD-94-22, Oct. 27, 1993; GAO/HEHS-96-196, Sept. 12, 
1996; GAO/T-HEHS-98-113, Mar. 12, 1998; and Social Security 
Administration: Significant Challenges Await New Commissioner (GAO/
HEHS-97-53, Feb. 20, 1997).
    \28\ Specifically, SSA established the Career Development Program 
in July 1998 to prepare staff for senior executive positions and the 
Advanced Leadership Program in April 1999 to prepare staff for upper-
level management positions. SSA expects to begin the Leadership 
Development Program, to prepare staff for mid-level management 
positions, in March 2000.
    \29\ As a basis for its training, SSA is using 30 leadership 
competencies, or characteristic and measurable patterns of behavior, 
skills, and knowledge, that engender superior performance in a specific 

SSA Recognizes Need to Improve Hiring and Investments in Human 

    Human capital principles call for recruitment and hiring 
strategies that target short-and long-term needs and gaps 
identified through workforce planning. SSA's draft workforce 
transition plan emphasizes that, in the future, the agency will 
need to recruit and hire more effectively in order to compete 
with other employers in an increasingly tight labor market. To 
improve the recruitment process, SSA is seeking ways to 
simplify its hiring process and use special recruiting tools 
and approaches for hard-to-fill jobs. For example, SSA is 
seeking to establish procedures for providing a salary advance 
for job candidates who possess skills that are in high demand 
and is developing criteria for incentive awards for current 
employees who refer candidates who are hired for such jobs. 
However, according to SSA officials, the agency's freedom to 
take some actions may be limited by governmentwide hiring and 
recruitment policies and procedures, such as the Office of 
Personnel Management test requirements for certain SSA 
positions and governmentwide salary limitations on candidates 
who have needed critical skills. SSA recognizes it will need to 
work with the Office of Personnel Management to simplify these 
aspects of its hiring process. Regardless, competition in the 
labor market for staff with certain critical skills, such as 
those with the ability to help design and implement new 
technology and information systems, is already stiff, and SSA 
will have difficulty recruiting the talent that is critical to 
meeting future challenges.
    Maintaining positive working conditions is another key to 
human capital management. The draft workforce transition plan 
contains a number of action items to provide a work environment 
that supports employees. These items include opening or 
expanding child care facilities and fitness centers and making 
improvements to SSA facilities from a environmental health or 
security standpoint where necessary. For certain action items, 
such as expanding telecommuting, it will be difficult for SSA 
to be receptive to employee preferences for telecommuting 
because employees' responsibilities for customer service often 
require an on-site presence.
    Another essential human capital principle involves 
investing in training and development to build and sustain 
critical staff competencies, such as customer service skills. 
This would include appropriate investments in education, 
training, and other developmental opportunities to help 
employees build the competencies needed to achieve the agency's 
strategic mission and goals. To meet the challenge of SSA's 
significant training needs, particularly with respect to the 
large number of anticipated new staff, SSA has been making a 
major investment in Interactive Video Teletraining (IVT). SSA 
currently provides IVT at 78 percent of its sites around the 
country and is considering expanding IVT to all sites. In the 
past, staff generally received classroom training, often away 
from their home units--an approach SSA recognizes will be 
costly to sustain given the large numbers of new staff it 
expects to hire. In contrast, SSA's new IVT training modules 
are transmitted live to staff in their home units, thus 
avoiding travel and per diem costs. However, to be effective 
for new hires, IVT sessions are to be supplemented with on-the-
job training by a mentor at the work site. Providing for 
mentors will be challenging for SSA given the large number of 
experienced staff expected to retire and the growing customer 
service demands being placed on remaining staff. SSA officials 
told us that having the ability to bring new staff on board 
before the experienced staff retire would facilitate the 
mentoring process. SSA plans to evaluate the relative 
effectiveness of IVT, which is important, because IVT is new to 
    Even though individual elements of SSA's workforce 
transition plan are consistent with principles of human capital 
management, to date the agency is undertaking these initiatives 
in isolation from a comprehensive vision and plan for future 
service delivery. It is vital that SSA's workforce efforts be 
well integrated with any future service delivery plans. If they 
are not, actions taken now could prove counterproductive. For 
example, SSA is now considering the expansion of its IVT 
equipment and facilities to all SSA offices. SSA officials told 
us that while IVT equipment is not very expensive, renting or 
otherwise securing appropriate facilities to support IVT 
training can be. However, such investments may ultimately prove 
unnecessary if SSA's service delivery plan calls for 
adjustments in the number of field offices, other facilities, 
or the types of services offered at these facilities. 
Similarly, SSA's current policy to replace each staff person 
who retires might result in the deployment of staff in 
locations or positions inconsistent with the agency's future 

State Disability Offices Face Similar Workforce Challenges 

    While SSA has taken many steps toward preparing its own 
workforce for future retirements and other challenges, its 
workforce planning efforts do not extend to the large number of 
state workers who are responsible for making disability 
determinations. Because state workers are not SSA employees, 
SSA's draft workforce transition plan has not taken into 
account DDS retirement and other workforce trends. However, the 
state agencies will likely be undergoing many of the same 
stresses being experienced by SSA, including the retirement of 
large numbers of skilled staff and stiff competition in the 
labor market for qualified staff. As noted earlier, these DDS 
employees are responsible for making initial and ongoing 
disability determinations, which requires considerable 
expertise and knowledge of complex regulations and policies. It 
will be important for the DDS offices to adequately prepare for 
these workforce changes and for SSA to share its plans and 
other useful approaches with DDS managers. According to SSA 
officials, DDS staff have participated in SSA's training 
programs, and SSA plans to invite them to use the self-
assessment tool for evaluating their core competencies.

Implications of SSA'S Current Plans and Efforts for its Future 

    If SSA is to meet its future customer service obligations, 
it is important for the agency to allocate funds for the human 
capital and information technology initiatives that are vital 
to helping it face its impending challenges. For example, SSA 
will need to continue and possibly expand its leadership 
development programs to fill the gaps left by retiring managers 
and executives. Also, SSA will need to continue exploring and 
investing in various technologies to manage its increasing 
workload and to improve service delivery. As with any 
initiative, continued funding should depend on progress or 
demonstrated success under a program of vigilant oversight.
    Even if SSA is able to carry out all of its planned 
initiatives, however, it is not clear that the agency is 
adequately prepared for the future. SSA is relying heavily on 
its information technology to meet the demands of its growing 
workload. However, until the agency has identified the benefits 
from its various information technology investments, it will 
not know whether it will need to take other steps, such as 
adding staff or contracting out some of its services, in order 
to cope with its future challenges.
    Given the serious challenges facing the agency, you asked 
us to address the possible implications of removing SSA's 
administrative expenses from the caps that are used to limit 
discretionary spending in the federal budget overall. If this 
were done, SSA would no longer have to compete directly with 
other federal agencies for funding of its administrative 
expenses, which could potentially result in increased 
administrative funding. However, most of SSA's administrative 
budget is financed from the OASI and DI Trust Funds.\30\ An 
increase in SSA's administrative budget, unless paid for 
through a separate appropriation of general funds, would not 
provide any new source of funding but would instead draw 
additional resources from the Social Security Trust Funds. This 
would reduce the Trust Fund surpluses and somewhat exacerbate 
the Social Security program's long-term financing problems. In 
addition to the effect on the Trust Funds, there are technical 
implications of removing SSA's administrative expenses from the 
discretionary spending caps. (We provide additional information 
on this issue in app. II.)
    \30\ The OASI and DI Trust Funds are funded by Social Security 
taxes paid by workers and their employers. SSI administrative costs are 
paid through general funds.
    Because of the uncertainty over whether SSA's current plans 
are adequate, it will be important for SSA and the Congress to 
closely monitor the agency's performance. Also, before future 
financing needs can be determined, SSA will need to complete a 
number of important planning activities. To help ensure that 
SSA makes optimal use of its resources and places itself in the 
best position to cope with its future service delivery 
challenges, the agency will need to complete its 2010 service 
vision and use it to develop an overarching service delivery 
plan. This plan would then provide the framework to guide SSA's 
future information technology and workforce decisions and 
investments. In addition, the agency will need to
     complete assessing the benefits (that is, work-
year savings, productivity increases, and improved service 
delivery) expected from its information technology initiatives 
and then closely monitor whether these benefits are being 
     monitor service delivery measures for degradation 
in quality, satisfaction, and timeliness and to look for early 
warnings of work backlogs; and;
     more aggressively pursue all possible options to 
better position itself for the future, such as developing cost-
saving electronic service delivery options or altering the 
agency's network of facilities to more closely align it with 
projected customer needs and demographics.
    This concludes my formal statement. I will be happy to 
answer any questions that you or other Members of the 
Subcommittees may have.

GAO Contacts and Acknowledgments

    For future contacts regarding this testimony, please call 
Cynthia M. Fagnoni at (202) 512-7215 or Joel Willemssen (202) 
512-6253. Kay Brown, Valerie Melvin, Christine Bonham, Michele 
Grgich, Yvette Banks, Robert Tomcho, and Gregory Micco also 
made key contributions to this testimony.

                               Appendix I

Selected Human Capital Principles Key to Meeting Future 
Challenges Faced by SSA

    In reviewing SSA's efforts to prepare its workforce for the 
future, we applied the following human capital principles.\31\
    \31\ An effective performance culture to enable and motivate 
performance is another key human capital principle; however, SSA's 
efforts in this area were beyond the scope of our review.
    Treat human capital management as fundamental to strategic 
business management. Integrate human capital considerations 
when identifying the mission, strategic goals, and core values 
of the organization as well as when designing and implementing 
operational policies and practices. Establish measures that 
provide meaningful data on the full range of human capital 
policies and practices and how these practices promote mission 
    Implement an explicit workforce planning strategy. Link 
workforce planning to the agency's strategic and program 
planning efforts to identify its current and future human 
capital needs, including the size of the workforce; its 
deployment across the organization; and the knowledge, skills, 
and abilities needed for the agency to pursue its strategic 
mission and goals. Include information on attrition rates, 
retirement rates, and projected eligibility by pay level and 
ratios of managers to employees. Identify roles and core 
competencies needed to support the agency's strategic mission 
and goals, and develop an inventory of current and future 
skills needs and gaps.
    Integrate employee input into the design and implementation 
of human capital policies and practices. Incorporate the first-
hand knowledge and insights of employees and employee groups to 
develop responsive human capital policies and practices. 
Empower employees by making them stakeholders in the 
development of solutions and new methods of promoting and 
achieving high performance of organizational missions and 
    Hire, develop, and sustain leaders according to leadership 
characteristics identified as essential to achieving specific 
missions and goals. Define the kind of leaders the agency wants 
(that is, their roles, responsibilities, attributes, and 
competencies) and the broad performance expectations it has for 
them in light of the agency's shared vision. Ensure continuity 
through succession planning; investments in development 
programs; selection criteria linked to the agency's shared 
vision, competencies, and broad expectations; and information 
on attrition rates, retirement eligibility, and retirement 
rates of executives.
    Hire, develop, and retain employees according to 
competencies. Develop a recruiting and hiring strategy that is 
targeted to fill short-and long-term human capital needs and, 
specifically, gaps identified through the agency's workforce 
planning efforts. Make appropriate investments in education, 
training, and other developmental opportunities to help 
employees build the competencies needed to achieve the agency's 
shared vision, and encourage continuous learning and 
    Deploy the agency's workforce in a way that is appropriate 
to mission accomplishment. Ensure that workforce deployment--
both geographically and organizationally--supports 
organizational goals and strategies and is keyed to efficient, 
effective, and economic operations.
    Measure the effectiveness of human capital policies and 
practices. Evaluate and make fact-based decisions on whether 
human capital policies and practices support high performance 
of mission and goals.
    Implement an information technology plan. Ensure that 
employees are making the best use of information technology to 
perform their work and to gather and share knowledge. Emphasize 
the alignment of the agency's information technology programs 
with its mission, goals, and strategies. Obtain employee 
feedback to ensure they have the opportunity, incentives, 
support, and training to make the appropriate use of technology 
to do their work and to acquire and share knowledge.
    Take the necessary steps to help employees effectively, 
economically, and efficiently pursue their work. Establish 
appropriately tailored organizational structures, job 
processes, workplace facilities, tools, work arrangements, and 
other resources and opportunities.
    These human capital principles represent a subset of 
principles from two recent GAO reports that are relevant to our 
review of SSA's efforts to address its future challenges. The 
first report \32\ is a checklist of human capital issues we 
developed for agencies to use to self-assess and improve their 
human capital management. The values found in the checklist 
were derived from various sources, including 32 leading 
organizations in the private sector and governments at the 
state and local levels and abroad; the Malcolm Baldridge 
National Quality Award Program and the President's Quality 
Award Program; relevant parts of title 5 U.S.C., ``Government 
Organization and Employees,'' and 5 C.F.R., ``Administrative 
Personnel"; and the Government Performance and Results 
Act, along with agency guidance contained in OMB Circular No. 
A-11. The second report \33\ identifies common principles 
underlying the human capital strategies and practices of nine 
private sector organizations recognized as innovative or 
effective in strategically managing their human capital: 
Federal Express Corp.; IBM Corp.; Marriott International, Inc.; 
Merck & Co., Inc.; Motorola, Inc.; Sears, Roebuck and Company; 
Southwest Airlines Co.; Weyerhouse Co.; and Xerox Corp., 
Document Solutions Group.

    \32\ GAO/GGD-00-28, Jan. 31, 2000.
    \33\ GAO/GGD-99-179, Sept. 1999.

                              Appendix II

Technical Implications of Removing SSA'S Administrative 
Expenses From the Discretionary Spending Caps

    Currently, SSA's administrative expenses are controlled by 
an obligation limitation contained in the agency's 
appropriation act and are considered to be subject to the 
discretionary caps set forth in the Deficit Control Act 
(DCA).\34\ This means SSA's administrative expenses must 
compete for funding with most of the other discretionary 
programs in the budget.\35\
    \34\ The Deficit Control Act is the Balanced Budget and Emergency 
Deficit Control Act of 1985, as amended by the Budget Enforcement Act 
of 1990, the Omnibus Budget Reconciliation Act of 1993, and the Budget 
Enforcement Act of 1997. The Deficit Control Act, as amended, 
established statutory limits on federal government spending for fiscal 
years 1991 through 2002 by creating, among other controls, annual 
dollar limits (spending caps) on discretionary spending funded through 
the regular appropriations process.
    \35\ For fiscal years 2001 and 2002, SSA's administrative funding 
does not compete with highway and mass transit spending, each of which 
has its own cap.
    We contacted OMB regarding the implications of removing 
SSA's administrative expenses from the discretionary spending 
caps. According to OMB, under the DCA, if this funding was 
moved out from under the discretionary caps by redefining it as 
``mandatory''--that is, not subject to appropriation act 
control--this would be a ``change in concepts and 
definitions.'' The DCA requires adjustments to the caps for 
such changes in concepts, but the timing of the adjustment 
would depend on how the change was made. Further, OMB indicated 
that if the change was the result of technical discussions and 
agreement among the scorekeepers \36\ and was not related to 
making room for additional spending by other agencies under the 
existing discretionary caps, OMB would lower those caps by the 
baseline amount of SSA's administrative funding. If the change 
was made by direction in legislation, the administrative 
funding would not be scored as discretionary and more room 
would be available under the caps for 1 year. However, OMB 
would most likely reflect the change by lowering the caps in 
subsequent years, thus putting more pressure on the following 
year. As a result, in OMB's view, shifting SSA's administrative 
expenses to mandatory spending would create, at the most, 
additional room under the caps for 1 year for funding other 
    \36\ The scorekeepers are the House and Senate Budget Committees, 
the Congressional Budget Office, and OMB.
    Administrative expenses are typically viewed as 
controllable and thus fit into the discretionary category of 
spending. Questions might be raised about considering them 
mandatory. If SSA's administrative expenses are not controlled 
by obligation limitations in an appropriation act, the locus of 
control would shift to SSA's authorizing committees, and some 
mechanism would be required to limit the amount of Social 
Security trust funds that could be spent on administrative 
    It is important to note that the shift in the locus of 
control would not provide any new source of financing, because 
administrative funds come out of the trust funds that pay 
Social Security benefits. Therefore, any increase in the 
administrative budget would reduce the trust funds unless a 
general fund appropriation was made. However, such an 
appropriation would be discretionary and would have to compete 
with other programs for the limited funding under the 
discretionary caps.

Related GAO Products

    Human Capital: Key Principles From Nine Private Sector 
Organizations (GAO/GGD-00-28. Jan. 31, 2000).
    Social Security Disability: SSA Has Had Mixed Success in 
Efforts to Improve Caseload Management (GAO/T-HEHS-00-22, Oct. 
21, 1999).
    Human Capital: A Self-Assessment Checklist for Agency 
Leaders, Discussion Draft (GAO/GGD-99-179, Sept. 1999).
    Social Security Administration: Update on Year 2000 and 
Other Key Information Technology Initiatives (GAO/T-AIMD-99-
259, July 29, 1999).
    SSA Disability Redesign: Actions Needed to Enhance Future 
Progress (GAO/HEHS-99-25, Mar. 12, 1999).
    Social Security Administration: Technical Performance 
Challenges Threaten Progress of Modernization (GAO/AIMD-98-39, 
June 19, 1998).
    SSA'S Management Challenges: Strong Leadership Needed to 
Turn Plans Into Timely, Meaningful Action (GAO/T-HEHS-98-113, 
Mar. 12, 1998).
    Social Security Administration: Software Development 
Process Improvements Started, but Work Remains (GAO/AIMD-98-39, 
Jan. 28, 1998).
    Social Security Administration: Significant Challenges 
Await New Commissioner (GAO/HEHS-97-53, Feb. 20, 1997).
    Social Security Administration: Effective Leadership Needed 
to Meet Daunting Challenges (GAO/HEHS-96-196, Sept. 12, 1996).
    Social Security Administration: Risks Associated With 
Information Technology Investment Continue (GAO/AIMD-94-143, 
Sept. 19, 1994).
    Social Security: Sustained Effort Needed to Improve 
Management and Prepare for the Future (GAO/HRD-94-22, Oct. 21, 
    Social Security: Status and Evaluation of Agency Management 
Improvement Initiatives GAO/HRD-89-42, July 24, 1989).
    Social Security Administration: Stable Leadership and 
Better Management Needed to Improve Effectiveness (GAO/HRD-87-
39, Mar. 18, 1987).


    Chairman Shaw. Thank you. In the report that you have 
submitted to the Congress, and we talked about it several times 
with the previous panel with regard to the aging work force, 
this is one of the more frightening things about what is going 
on. Could you further elaborate on what you found there and 
what you might suggest as where to go?
    Ms. Fagnoni. Well, as we pointed out, SSA did do a study--
    Chairman Shaw. I am talking about the aging work force 
within the agency, not country as a whole. Excuse me.
    Ms. Fagnoni. SSA did do an assessment to try to get a 
handle on what that retirement wave might look like and at what 
pace people might leave the agency due to retirement. In part 
they used historical information that, of course, shows not 
everybody who is eligible for retirement, retires. But they do 
have some estimates of how many people will retire, are 
expected to retire, and, as we show, it will peak about the 
same time that its workloads are expected to be increasing. 
That poses significant challenges, and as the members of the 
Board said, it is important for SSA not only to be positioned 
now to replenish the staff who are leaving, but to make sure 
they know what skills and abilities they need for these new 
staff coming in to meet the challenges with the new kinds of 
clients that they are going to be serving.
    If you think about the fact that many of the people who 
will be retiring over the next 10 years were hired 30 years 
ago, the skill mix that is needed for this century is likely to 
be very different from what was needed 30 years ago when these 
people came into the agency. Just to cite one example, there is 
a significantly higher percentage of individuals on the 
disability rolls who have mental impairments, and that poses 
particular challenges both in terms of how to serve these 
individuals but also the judgments and training that are needed 
to assess whether or not people are, in fact, mentally impaired 
and how severe the impairment is.
    So while SSA officials have taken some important steps to 
get a handle on how many people might be leaving over the next 
decade, they have not gone as far at this point to determine 
what the skill mix might be that they need in the future and 
how that might differ from what they have on board.
    Chairman Shaw. How does all of this relate to the increased 
productivity due to technology? I see that also in your 
testimony you refer to the computers and the aging of these 
particular computers. The replacement that we make today we 
assume will probably be somewhat obsolete at the time the baby 
boomers hit the system. Is there any plan in place for an 
orderly replacement of the technology as it's upgraded? We are 
starting from way behind at that particular point according to 
how I understand your testimony.
    Ms. Fagnoni. I will turn to Mr. Willemssen who is our 
expert on technology.
    Mr. Willemssen. The agency has just undergone a major 
modernization with its field offices on the workstations and 
local area networks, and they are planning a major replacement 
project for that effort to start I believe in Fiscal Year 2003, 
and one of the areas that we are most anxious to see is SSA is 
now committed to demonstrating what kind of benefits have 
accrued from that initial investment so they can use that 
information to better target their technology modernization 
upgrade that will be starting down the line.
    Chairman Shaw. Mr. English.
    Mr. English. Thank you, Mr. Chairman, and thank you, Ms. 
Fagnoni, and welcome back.
    Ms. Fagnoni. Thank you.
    Mr. English. A couple of points you raised that I am 
particularly interested in: First of all, you have expressed 
concern over weaknesses in the agency's complex systems for 
measuring workload, productivity, and quality. How much does 
SSA know about who receives services and the quality of those 
services rendered in the field offices? What is the agency 
doing to address any weaknesses in this regard, and are they 
taking the right steps in your view?
    Ms. Fagnoni. Actually, that is a weakness that has been, I 
think, frustrating to those of us who are trying to get a good 
handle on SSA's service delivery structure and how well 
positioned the agency is, and the reason I say that is because 
while SSA has methods for on a national level knowing how 
satisfied people are with service, what SSA is not able to do 
is go field office by field office and understand how satisfied 
people are with the service at that particular office. 
Particularly they do not have good measures of the numbers of 
people who walk into those offices each day and how that may 
ebb and flow at different points in time.
    They do not have a good handle on the numbers of people who 
call the field office and why they are calling. They do not 
know why people are walking in on a routine basis. Routinely, 
they do not know this and how many might walk out or hang up 
without being served. They have better information on people 
who come in to file for claims because that information gets 
recorded on their systems, so they have a very incomplete 
picture of how their field offices are performing, and I think 
that makes it difficult for them when they try to do their 
service delivery plan to really know which are the offices that 
are especially overcrowded, and are there offices that may be 
undercrowded. Maybe the clientele base that once was there is 
not there or is choosing alternative ways to be served, and I 
think that is the piece of this that SSA has less information 
    In fact, one of the reasons you will hear so much about 
their 800 number performance is because they have a lot of data 
on their 800 number performance and that level of data are not 
available for the field offices--for specific field offices.
    Mr. English. In your testimony you indicated that Social 
Security, while it is making progress in its work force 
planning initiatives, is lacking a future focus. Can you be a 
little more specific about what SSA has done in this area and 
what do you see are the strengths and weaknesses of their 
    Ms. Fagnoni. Well, as I mentioned a little earlier, they do 
have a handle on who might retire, and of course that is a 
piece of knowing what the work force ought to be. They also, as 
we recommended, reinstituted leadership programs at the 
executive and managerial level that they had suspended for some 
time in the mid-nineties. So they do have a better--they are 
better positioned for succession planning at the executive and 
managerial level.
    They have a sense of who is going to retire. They are in 
the process of documenting what skills they have on board. They 
are collecting that information at a sort of general competency 
level and are in the process of determining on a more job-
specific basis what skills they have on hand. What they have 
not yet done, although my understanding is they know they need 
to do this, is to get a handle on what skill mix they will need 
for the future and how that compares with what they have now 
and what they will need for their hiring, for their recruiting 
and retention plans.
    Mr. English. You indicate that the SSA has established 
something called a market measurement program to improve and 
consolidate its approach to assessing customer expectations. 
Can you describe this program, and why do you feel more needs 
to be done in this area?
    Ms. Fagnoni. The market measurement program is something 
that was put in place a couple of years ago in part because 
while SSA had a lot of different initiatives underway in 
different parts of the agency to obtain feedback both from 
customers and in some cases from employees, it was not well 
coordinated. One of the goals of this particular effort was to 
get a better handle on what data were being collected in terms 
of feedback, how that could be better coordinated and 
organized, what else they needed to obtain.
    So SSA has done that. They actually did that with the help 
of an outside consultant. They have also instituted some 
additional surveys such as re-contact surveys where they are 
now asking people who call or go to the fields offices how they 
felt about that service provided. That is something they were 
not doing in the same way in the past, and at this point they 
are partway through gathering and analyzing the data that they 
have obtained. So they will get some better information on--and 
more coordinated information on--customer as well as employee 
    And another very important thing that they are doing for 
the first time is segmenting people's responses by the type of 
customer, and the reason that is important is because I believe 
they may very well find that somebody who is applying for 
retirement benefits may very well have different views and 
different preferences for service than someone who is filing 
for disability benefits or somebody with mental impairments who 
is seeking assistance once they have obtained disability 
benefits. I think that information can be important for SSA in 
understanding and determining how to serve people in the 
    Mr. English. Thank you, and thank you, Mr. Chairman.
    Chairman Shaw. Thank you, Mr. English. And thank you, Ms. 
Fagnoni, for joining us. We always look forward to your 
appearances before this Subcommittee.
    Ms. Fagnoni. Thank you.
    [The following questions submitted by Chairman Shaw, and 
Hon. David M. Walker's responses are as follows:]
                                                  February 28, 2000

The Honorable David M. Walker
Comptroller General of the United States
U.S. General Accounting Office
441 G Street, N.W.
Washington, DC 20548

    Dear Mr. Walker:
    As a follow up to the joint subcommittee hearing held on February 
10 regarding the current and future service delivery challenges that 
Social Security is facing, I would appreciate your answering the 
following questions for the record:
    1. In your testimony (page 1) you state ``While we have recommended 
since 1993 that SSA prepare a service delivery plan, SSA is only now 
beginning to develop a broad vision for customer service for 2010.'' 
Why the 7-year delay?
    You indicate that according to SSA officials, the agency does not 
have plans to go beyond this vision and issue a more detailed plan. How 
is a ``vision'' different from a ``plan''? What does the absence of a 
detailed plan mean for customer service?
    2. Would you elaborate on the consequences of developing plans out 
of sequence, specifically SSA's continued pursuit of workforce and 
information technology planning without a service delivery plan in 
place? Is SSA expending scarce resources today to develop service 
delivery systems that may prove to have limited usefulness by the time 
they are in place? Or hiring employees with the wrong skills to work in 
locations where they may not be needed in the future?
    3. A recent Washington Post article discussed how productivity 
gains especially in manufacturing are helping the economy produce more 
and better goods and services while lifting wages and still keeping 
inflation at bay. Presumably this is occurring because businesses are 
figuring out how to capitalize on the digital revolution.
     In contrast, your testimony points out that, despite SSA's 
efforts to modernize computer capacity since the 1980s (page 3) and 
their ``relying in large part on technology to achieve increased 
efficiencies'' (page 1), ``the benefits from (SSA's) technology 
investments have largely been unclear.'' Further, SSA ``has not yet 
been able to demonstrate specific benefits resulting from some of its 
most significant investments'' (page 10).
     How is it possible that after more than 10 years we do not 
know whether these investments in SSA have increased worker 
productivity there? While I note that SSA recently told you they are 
``now conducting studies,'' when do you think we will have that 
information? What is it likely to show? After how much money has been 
spent on computerization (which SSA calls IWS/LAN)?
     Not having this information seems especially exasperating 
in light of the gains we see elsewhere in the economy, and given your 
point (page 4) that SSA needs to increase worker productivity by 27 
percent between now and 2010 to keep up with expected increases in 
    4. You have made the point that Social Security's customers and 
their needs will change over time. Please tell us more about the 
special challenges that Social Security will face because of this.
    5. About half of all households have online access now. Today, on 
the internet, you can buy a car. You can find a job. You can access 
stocks and savings, and pay all your bills. You can apply for a home 
loan worth hundreds of thousands of dollars in just seconds--without 
ever sitting down and seeing anyone face to face. You can pay your 
taxes, and in fact the government is encouraging people to do so. You 
can even buy and print out stamps without leaving your desk. Yet you 
can't apply for Social Security benefits online. Why? Does Social 
Security see online applications for benefits as one way they will 
provide services in the future? If so, starting when?
    Since it's pretty obvious that online applications for benefits are 
both inevitable and may conserve scarce worker resources, are you 
comfortable with how Social Security is going about developing this 
process from the standpoint of openness, timeliness, and ensuring 
maximum privacy and data protection?
    6. Please talk to us about how online applications for benefits 
might allow Social Security to provide better, more convenient 
services, and perhaps at lower cost to taxpayers. Rather than only 
1,300 field offices, wouldn't people have literally millions of new 
ways to access benefits, including from the convenience of their home? 
Might SSA staff have more flexible work conditions, including working 
from home handling electronic applications? And couldn't field offices 
concentrate on tough cases that require face-to-face service, such as 
disability cases and SSI cases, and maybe do more outreach into the 
community? Does SSA foresee such benefits?
    7. You describe a new technology strategy that the agency is using 
to address the needs of its disability claims process. Can you provide 
a brief overview of the components of this strategy and your assessment 
of the appropriateness of this strategy and the effectiveness of the 
tests of this strategy so far?
    8.Your testimony includes a discussion of the various technology 
initiatives being implemented to support the Office of Hearings and 
Appeals, yet you indicate that long-term efforts have not yet been 
defined. Does this mean SSA hasn't identified all of the technologies 
needed to meet the needs of its hearing offices?
    I appreciate your taking the time to answer these questions for the 
record. If you have any questions concerning this request, please feel 
free to contact Kim Hildred, Staff Director, Subcommittee on Social 
Security at (202) 225-9263.

                                                  E. Clay Shaw, Jr.

    cc: The Honorable Nancy Johnson
    Chairman, Subcommittee on Human Resources
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    Chairman Shaw. Thank you very much.
    The final panel today is made up of James Burke, a futurist 
with Coates & Jarratt; Dr. Henry Hertz, the director of the 
Baldrige National Quality Program in Gaithersburg, Maryland; 
and Hon. Maurice McTigue, Q.S.O., distinguished visiting 
scholar at George Mason University in Virginia and a former 
cabinet minister and member of Parliament from New Zealand.
    Thank you, gentlemen, for being with us. As before, we have 
your full testimony. It will be made a part of the record, and 
you may summarize as you see fit.


    Mr. Burke. Thank you, sir. Thank you, Mr. Chairman, for 
inviting me today.
    As a futurist, one of the things that I do is scan and 
study the world as it might unfold, look at conditions and 
events, and it is less to predict, as a matter of fact, it is 
not to predict, but to just create some insights and 
projections and a framework for understanding customer service 
and access needs in 10 or 15 years.
    Today, we will look at values and trends for the boomer 
generation and the rest of the working population and future 
trends, diversity, and advanced technologies. I would suggest 
you not look at this as expectations for a point solution but 
rather to look at the next few years as a ramp up to a 
transition period that will bring with it great changes and 
great opportunities--boomer retirements and an increasingly 
diverse population.
    I would invite you to come with me to the year 2010 to a 
pleasant suburb where there is a typical boomer couple, John 
and Susan. They have typical values and typical attitudes. They 
are confident. They are well educated, but they are generally 
skeptical towards the government, and they have a belief that 
public officials do not really care about their problems. They 
have no patience for bureaucracy, unresponsive systems, and 
they demand that institutions be effective in protecting public 
safety and security.
    They see themselves as unique with unique needs, and they 
want customized solutions and fast resolution to their 
problems. They tend to be generally comfortable with advanced, 
user-friendly, technology, and they have no real privacy or 
security concerns, but they are a bit uncertain about their 
finances and how much it will take to maintain their particular 
lifestyle after retirement. They expect to live longer than 
their parents, and they look at retirement as a time to relax 
but also to stay engaged, perhaps even work a little bit after 
    They are in their entertainment center on this snowy 
afternoon, and they tell their entertainment center to shift 
from the TV show that they are watching to their intelligence 
agents. John has a virtual electronic agent called Horace. It 
is dressed in flower child clothing of the sixties, while 
Lydia, who is Susan's virtual electronic agent, is dressed as a 
17th century pirate. They tell their agents to visit their 
Social Security account, their investment accounts, and return 
to them with their options for retiring at 5, 6, and 7 years.
    Horace vanishes, and Lydia chuckles and asks Susan if she 
wants some money from another person's account. Susan says no, 
but realizes that since the electronic attacks that took place 
in 2002, electronic security has been very tight and such cyber 
antics are virtually impossible. Within minutes the two virtual 
agents return to the boomer couple and present them with a 
rundown of their options and opportunities, including the tax 
and insurance implications of their retirement options. They 
now have a much better idea of the future, and both vow to 
return to the questions later this week.
    Meanwhile, at the same time across town at the Celestial 
Dollars Cyber Cafe, three young people have gathered to 
socialize. They talk of a friend facing a long-term disability 
and wonder how to get information for her. Two of the three, 
Shankar Shastri and Ernesto Marquez, are recent immigrants, one 
familiar with advanced technology and the other less so. Hua 
Peng, the third person, is a long-term resident and recently 
moved to the local area because of his skills. He acts much 
like his contemporaries, sort of like today's athletic free 
agents, going to companies that provide the best benefits and 
offer the best deal. His new company hires both part-time and 
full-time employees and does a lot of outsourcing work.
    He has on his wearable computer that allows him to stay 
connected to his coworkers in the United States as well as 
around the world, and like his two friends, usually works at 
home or occasionally at a satellite office facility. His 
company also offered him an extensive training program, and he 
knows that life-long learning is a key to his success as well 
as those of the people in his generation and the older 
    The table that they are sitting at has a built-in 
electronic package that lets them access the Internet, cyber 
music, and a variety of government agencies including the 
Social Security Administration, the Postal Service, and even 
Fannie Mae. They could have checked out such a device from 
their local library and even accessed one at the local health 
clinic, child care center, convenience store, gym, or the 
community center.
    They chose the Social Security Administration icon, a 
picture on the menu, and they see another menu with easily 
understood pictures that walk the three through a variety of 
information options. Shankar's English is a bit rough, and he 
selected an icon for a language option and is soon speaking in 
his native tongue to a realistic figure that is outfitted in 
his native culture's dress. They got the information in minutes 
and planned to get one of the local volunteer agencies that 
work with the Social Security Agency to stop by their friend's 
home to get more details using a variety of advanced technology 
and video conferencing capabilities.
    These stories hold several implications for the 
administration. There is a skeptical, but demanding boomer 
generation out there. There is a diverse population with much 
different needs than exist today, and it is growing quickly. 
Flexible jobs and part-time jobs will be existent with 
extensive outsourcing at a variety of different companies. The 
work will be distributed--any time and any place. Skills will 
count more than seniority.
    There will be a highly mobile work force, and the benefits 
will travel with the workers as opposed to losing some benefits 
as they transfer. There will be gradual retirements and people 
will stay in the work force longer. There will be different 
language, culture and service expectations along with special 
groups that will still need specialized personal service.
    Finally, there will be a need for tailored outreach, life-
long learning, and work force management strategies that 
recognize the differences among the workers. The technologies 
that support these stories are well within reach in the next 
decade. By 2010, we expect to see small, rugged wireless 
devices with lots of carrying capacity: data, voice, and video, 
anywhere, anytime. They will have real-time language 
translation. They have intelligent agents who are also know as 
``Knowbots'' that will be two dimensional and three dimensional 
that will interface.
    There will be State and Federal agency coalitions, for 
example, Health and Human Services, the Social Security 
Administration, and Postal Service, Fannie Mae that will come 
together in concert to offer these advanced technology options 
to their clients.
    Some observations: The customers today and in the future 
will want quality and quickness, and knowledgeable and friendly 
service, whether that is in a machine or a person. They will 
want attentive follow-up. Some activities and clients, however, 
will need more personalized service that will be offered 
through coalition activities, local community representatives 
or even volunteer organizations. At some point, the Social 
Security Administration will face the need to shift from a 
system that provides personal access services to one that 
predominantly relies on the electronic access.
    I would suggest you might want to think of the Social 
Security Administration much like this sphere. It is 
multicolored. It is very diverse, and as the Social Security 
Administration goes into the future, this sphere is going to 
expand. There will be a variety of different needs. It will be 
a much larger population. The key to SSA success is bringing 
that sphere back down and touching them with electronic 
advances, yet maintaining the individuality of the clients.
    Thank you for the opportunity to speak to you.
    [The prepared statement follows:]

Statement of James E. Burke, Futurist, Coates and Jarratt, Inc.

    Chairman Shaw and Chairman Johnson and Members of the 
Subcommittees, thank you for the invitation to speak to you on 
the future service delivery and access challenges facing the 
Social Security Administration in the 21st Century. I am a 
futurist, which means that I am engaged in scanning and 
studying the world as it might unfold in the future, looking at 
conditions, events and trends--social, technical, economic, 
environmental, and political--not to predict as much as to use 
insights and projections to create a framework for 
understanding customer service and access needs in 10-15 years.
    Today, I will briefly look at a major category of users of 
that service, the boomer generation and also at trends in the 
rest of the working population, considering: values, desires 
for customized service delivery, work trends, diversity of work 
force and advanced technologies that might contribute to 
solutions. I would suggest that in looking out at the range of 
solutions you probably do not want to create expectations for a 
single, point solution, but rather understand that the next few 
years will be a ramp up to the transition that will come with 
the boomer retirements and an increasingly diverse population.

                             Boomer Values

    Boomers are now about 30% of the US population and about 
40% of the adults. The so-called boomer retirement bulge starts 
about 2008 and carries with it quite a few paradoxes. While 
they are the richest and most educated generation in American 
history, about 70% consider themselves middle class. They 
generally are a self-confident group, based on their education 
and experience, but also tend to be confused over retirement 
financial needs. Their seeming biggest shortfall is their 
tendency to underestimate the money required for particular 
desired lifestyles.
    The boomers also have a declining respect for authority and 
are rather skeptical of status quo, including trust in banks 
and financial institutions, but they want to have systems and 
institutions to fix problems, even if they don't like 
particular institutions. They believe that institutional 
inertia or disinterest that threatens public safety is 
especially irresponsible. They harbor a great desire for 
authenticity, and don't believe that public officials are 
concerned about their problems. Boomers tend to hold a general 
mistrust of people--\2/3\'s believe they need to be careful 
about trusting other people--but they also believe that most 
people would try to be fair and helpful. They do tend to share 
their wealth, but are somewhat selfish about giving up personal 
time and have no sympathy for bureaucratic procedures that 
cause delays.
    They are generally willing to take personal risks, although 
they also tend to be less risk-taking with financial areas. If 
they fail, however, they expect and want some sort of 
institutional rescue and will not hesitate to resort to 
    They tend to hold a different view of retirement than 
previous generations. They expect to live longer and want to 
stay active and engaged, especially since they believe they 
have a lot to offer. Many expect to and a large number will 
consider working after retirement--for financial reasons, but 
also to contribute. They tend to be healthy and less frail than 
previous generations, but the boomers' biggest concern is 
potential for poor or declining health, followed by lack of 
    They have and will continue to have little patience with 
unresponsive or bulky social service systems that do not meet 
their needs and they also see themselves as unique with unique 
needs. For that reason, they have a desire for customized 
solutions and want fast resolution--whether it is to provide 
expected services or to resolve perceived problems.
    The boomer generation generally is comfortable with 
advanced information technology, because many see themselves as 
part of the generation that introduced computers. However, few 
see themselves as highly proficient with computer and advanced 
information technology and demand that programs and systems be 
user friendly. As such they have a low tolerance for complexity 
in operating computer systems. Like most people, boomers want 
privacy and security--although privacy concerns are weakening 
as advanced information technology becomes more ubiquitous and 


    The US will continue to see growth in immigration and a 
much more diverse population in the coming years. Over the next 
two decades minorities in U.S. will grow from about 30% of US 
population to nearly 40% and by 2010, 30% of population over 65 
are projected to be members of minorities. A recent Hudson 
Institute study indicated that 35% of people that entered the 
work force in 1997 were immigrants. This growing group of 
minorities will be younger. In 2010 the average age of non-
minorities will be about 41, while that of minorities about 27-
    This diversity will bring great vitality to the American 
scene, but it also will bring a different set of access 
challenges, the most obvious of which is the potential for 
language and cultural barriers that have to be overcome to 
connect with and provide services. Maintaining connections to 
ensure that all these diverse groups are educated about their 
rights and responsibilities will be embedded in the language 
challenge, but also involve a need for different ways to reach 
out to different communities. While some minorities will be 
comfortable with advanced technology, indeed a greater portion 
of the immigrant population is coming to the use with 
sophisticated technical expertise, immigrants from less 
developed countries will require more care in they way they are 
approached with advanced technologies. Like the boomers, many 
of the newly arriving minorities, as well as some that reside 
in the US today, have declining levels of trust towards 
government institutions, especially those coming with cultural 
values that did not include cooperative working relationships 
with government agencies. This means that the groups have a 
diversity of expectations regarding services from government 
agencies, again calling for tailored education programs.
    Another area of diversity involves generational attitudes, 
specifically those of the generation that follows on the heels 
of the boomers, the so-called Gen-Xers. The Gen-Xers are about 
16% of population, and tend to be more self reliant and 
entrepreneurial than boomers, but also are very skeptical of 
corporate motives and loyalty. The Gen-Xers want flexibility, 
creativity and control over their work environment and in their 
interactions with authority.
    Finally, there are some groups that cut across all 
minorities and generations. These are those who, for what ever 
reasons, tend to be very ill informed about their rights to 
available services. Some are ill informed because they are 
unable to function very well in any organized societal setting, 
because of education, mental capacity or mental conditions. 
This means that a certain percentage of people who are eligible 
for social services will not apply and it will call for special 
efforts by agencies to find and touch these groups.

                              Work Trends

    Along with the changing nature of the working population, 
the work place itself also is changing. By 2015, 90%+ of all 
U.S. jobs will be in service, with only 7-8% in manufacturing 
and 2-3% in agriculture. Jobs will be flexible, contingent and 
often part-time, with outsourcing a growing part of business. 
We anticipate that work increasingly will be distributed--being 
performed anytime, any place. Satellite work centers--in homes 
or in temporary rental office complexes--will become more 
popular, not only to ease commuting, but because fewer jobs 
will call for an on-site presence.
    Electronic commerce will facilitate this trend--i.e., by 
2003 we expect $1.3 Trillion in on-line transactions--and this 
also will ease the challenge for those who want to take 
advantage of the Internet to provide information and services. 
One indicator example: 40% of new car buyers in 1999 used the 
Internet to facilitate a new car purchase versus 25% in 1998.
    US workers will face new challenges themselves. Global 
competition, not only regional or local competition, for jobs 
will become more commonplace. But there are bright spots for 
future US workers. Given current trends, unemployment will be 
low over next 20 years, making a tight labor market, especially 
in the Northeast and Mid-west. The South and West will have 
more workers and a greater share of immigrants. The most 
qualified workers will become more like athletic free agents 
and a greater part of work force will be mobile, moving where 
their skills are most needed and bid for at the highest rates. 
Skills, therefore, will count more than seniority, but older 
workers will stay in work force longer. This naturally calls 
for lifelong learning--personal and organizational and high 
technology training will be increasingly important to retain 
and motivate the best workers. Understanding high technology 
will continue to be critical and jobs requiring a college 
degree are expected to grow by 25% in next decade--increasing 
the need for analytical and math skills.

                             Access Trends

    Picture, if you will, an average boomer couple in the year 
2010. John and Susan are in the last years of successful 
business careers and are a couple years away from retirement. 
They have paid attention to their retirement needs, but want to 
do a bit more research on their options, part of which is 
checking the status of their social security and investment 
accounts. It's a Saturday afternoon and they have tickets to 
the local symphony and plan to spend some time on their 
retirement questions on Sunday afternoon, when the weather is 
predicted to turn cold, blustery and snowy. John interrupts the 
sports event he is watching to mute the entertainment center 
and calls out in a conversational tone, ``Norman, I need some 
help.'' A figure appears on the screen, dressed in 1960's 
flower child clothing, recalling a favorite historical period 
of John's. Norman is John's intelligent agent, a knowbot that 
John created a couple of years earlier. ``What may I do, 
John?'' Norman inquires politely. ``Norman, Susan and I want to 
do some retirement planning tomorrow afternoon, so I want you 
to check out my social security account status and pull 
together the current status of our investment accounts. Have 
three planning scenarios ready for us to discuss, the high, low 
and medium options we discussed last week. Check with Susan's 
intelligent agent, Lydia, and ask her to get Susan's account 
information also. Please have this ready by 1PM tomorrow. Thank 
you, Norman.'' Norman nods, saying, ``OK, man,'' and the screen 
fades back to the half-time show. The next day, over juice and 
low-fat muffins, Norman and Lydia appear right on time, asking 
for permission to go 3-D. With John and Susan's approval, 
Norman and Lydia take advantage of the entertainment center's 
hologram feature and appear as a 3-D team. Norman's bells and 
tie-dyed shirt clash a bit with Lydia's 17th century clothing, 
but the differences fade as each gives John and Susan a run 
down on the status of their accounts and the different ways 
they could take advantage of their social security benefits.
    Meanwhile, in another part of town, the wintry weather 
doesn't slow a hardy young group as they joke over cups of 
steaming coffee in the Celestial Dollars Cyber Cafe, a popular 
neighborhood-gathering place. Three young people, Hua Peng, 
Ernesto Marquez and Shankar Shastri, are part of the local 
vibrant community and frequently meet at the cafe to socialize. 
Today, one of the things they all have on their minds is Social 
Security. A friend in the neighborhood had a run of bad health 
and is facing a long-term disability. They had heard that the 
Social Security Administration might be able to help. Because 
of this they all wondered how their own benefits might look in 
30 or 40 years. To get their answers they used a small device, 
conveniently inserted on every table in the cafe so that it was 
flush with the surface, showing a screen with several icons for 
Fannie Mae, the IRS, the Postal Service, and, in addition to 
several other state and federal agencies, one for the Social 
Security Administration. A simple touch and a menu of choices 
came up. Shankar, who had recently immigrated to the United 
States, wanted to test the system and, when the screen asked 
for a language preference, mentioned his local dialect. The 
screen language immediately transitioned to his language, with 
an icon for speech. When he pressed that, a figure, dressed in 
the clothing of his culture appeared. This virtual person and 
Shankar conversed and the virtual person answered all his 
questions and made some suggestions for follow-up activities. 
Hua and Ernesto accessed their own versions of the virtual 
persons and were quite impressed with the responsiveness and 
detail with which their questions were answered, including ways 
for their friend to get disability assistance.

                    Advanced Information Technology

    The technologies that will allow these stories to come true 
are well within reach in the next decade. The Internet will 
continue to be an important force across cultures because of 
its ability to operate without borders and controls. The 
devices exploiting the networks by 2010 increasingly will be 
wireless, with lots of bandwidth or carrying capacity, allowing 
data, voice and video to be transmitted anywhere, anytime. 
Devices will be voice actuated, with cultural barriers less 
important as real-time language translation becomes 
commercially available.
    Miniaturization will allow wearable offices, with workers 
able to be continually linked to information networks, their 
work places and their own products. To ease the burden from 
this continual connectivity, we expect a growing emphasis on 
intelligent agents--knowbots--tailored for the user and 
increasingly taking on personal search and decision 
responsibilities. These will be closely tied to virtual reality 
and 3-Dimensional holograms that will be used more and more in 
business and even social roles, e.g., interactive, networked 
game playing.
    These advances, of course, will not be limited to the 
business and personal worlds of the future workers. Small size, 
low cost and rugged, wireless designs will allow access devices 
to be integrated with cell phones or to be placed almost 
anywhere--tables in the cyber cafes mentioned above, portable 
wireless devices that can be checked out in libraries for use 
at home, or kiosks in convenience stores, malls, post offices, 
libraries, community centers, health clinics, apartment 
lobbies, child care centers, etc., allowing a wide variety of 
access points for different members of the community. Touch or 
voice actuated will ease use, dissolving some of the digital 
divide problems--transparency and user friendliness will be key 
attributes. Personalized intelligent agents that interact with 
customers in their own language, even cultural styles, will 
help overcome barriers that are sure to arise with the 
diversity expected in the coming years.
    These devices could also offer a menu of ways for different 
state and federal agencies to reach out to the community and 
share information and services. Consumers would accept agency 
coalitions, e.g., Health and Human Services, SSA, USPS, if they 
were comfortable with privacy and security and competence 
levels were equivalent across all services. We would expect 
that some activities, e.g., verification of service needs, and 
some categories of clients, e.g., mentally challenged, will 
need more personalized service, but that could be offered 
through coalition activities or through local community 
representatives or even volunteer organizations. The keys to 
service will be constant, regardless of the technologies--
customers will continue to want quality and quickness, 
knowledgeable and friendly service (machine or person), value 
and attentive follow-up, if needed. At some point, the SSA, 
like many federal and state agencies, will face the need to 
shift from a system that combines personal and electronic 
services, to one that predominantly relies on electronic 
    In summary, we see the future bringing to the Social 
Security Administration a number of service challenges, but 
also a wealth of technical opportunities and solutions that 
could offer personalized solutions to a growing customer base.
    Again, I thank you for the opportunity to speak with you 
about this important aspect of our society.


    Chairman Shaw. I was listening eagerly to see if you were 
going to say that we would have solved the problem of Social 
Security, but I will leave that for another day. I guess you 
need a crystal ball for that, and I doubt that you use that in 
your profession.
    Dr. Hertz.


    Mr. Hertz. Thank you, Mr. Chairman.
    From the start of the Baldrige program in 1987, our 
definition of quality and performance excellence has focused 
both on the customer and on operational performance. We view 
performance excellence as delivering ever improving value to 
customers, resulting in marketplace success while at the same 
time improving overall organizational effectiveness and 
    Let me begin by addressing service quality. Service quality 
is inherently more challenging than product quality. Production 
and consumption are frequently combined. While we have had 
manufacturing winners of the Baldrige award every year since 
its beginning, it was not until the third year that we had a 
service winner, Federal Express Corp. They learned that a 
process orientation could be applied to service delivery, that 
a 12-component performance index developed by FedEx could track 
quality performance and serve as a predictor of customer 
satisfaction, and that empowered customer contact employees 
with data to make decisions could improve their own end company 
    Service quality is dependant on human factors, behavior and 
personality of the customer contact person and the customer's 
perception of their interaction. As opposed to manufactured 
goods, the product cannot be inventoried and it cannot be 
tested fully in advance of delivery. Every customer interaction 
is a moment of truth.
    The environment in which the service is delivered, 
surrounding, wait time, demeanor of the deliverer, and the 
competence of the deliverer are extremely important. That is 
why we see the great emphasis placed by all Baldrige winners on 
employee training. The service category winners of the Baldrige 
award as a group average over 80 hours of training per year for 
each employee.
    Service quality is only one component of overall 
organizational performance quality. The Baldrige criteria 
provide a framework for guiding and assessing overall 
organizational performance. Criteria are based on the following 
11 core values and concepts: visionary leadership, customer 
driven, organizational and personal learning, valuing employees 
and partners, agility, focus on the future, managing for 
innovation, management by fact, public responsibility and 
citizenship, focus on results and creating value, and a systems 
    All these core values and concepts are relevant to today's 
hearing, but let me comment just on one, on personal learning. 
Xerox Business Services, a 1997 Baldrige recipient in the 
service category, has 14,000 employees with more than 80 
percent at 4,300 client sites worldwide. Through a focus on 
learning and empowerment, XBS trains and then empowers its 
employees. XBS learning programs focus on individual learning 
styles, for people learners, information learners and action 
learners. On-site customer interactions lead to learning that 
is electronically communicated for organizational sharing and 
for new service development.
    Data Commercial Credit, a 1996 service category winner, 
uses ``People finding a better way'' as their motto for their 
organization's three-part focus on customer satisfaction, 
quality, and knowledgeable people. All education is followed by 
a course evaluation, a personal improvement plan, 90-day 
follow-up, and correlation analysis to measure effectiveness 
and improved customer focus. Suggestions and innovation, part 
of Data's style, led to a more than tripling of profit after 
tax per person from 1992 to 1996.
    The Baldrige criteria for performance excellence translates 
the core values and concepts into a performance guide using 
seven Baldrige criteria categories: Leadership, strategic 
planning, customer and market focus, information and analysis, 
human resource focus, process management, and business results. 
Performance tracking is extremely important. A shortcoming of 
many early total quality management efforts was a lack of focus 
on results and a lack of focus on strategic organization 
priorities. Obviously, chief executive officers must focus on 
organizational results.
    As part of the 10th anniversary of the Baldrige program, we 
conducted a survey and forum of chief executives to understand 
the other key challenges, aside from focusing on results, that 
they face entering the 21st century. Two subjects received 
considerable discussion. By a 3 to 1 margin, chief executive 
officers believed timely strategy deployment was more 
challenging than strategy development, and the chief executive 
officers strongly believed that the Internet and electronic 
commerce will be the most important and challenging new vehicle 
for conducting business at all levels.
    To meet tomorrow's challenges, we will need high 
performance organization, organizations characterized by 
flexibility, innovation, knowledge and skill sharing, alignment 
with organizational objectives, customer focus, and rapid 
response to changing needs and requirements of the marketplace.
    Thank you, Mr. Chairman. I would be pleased to answer any 
    [The prepared statement follows:]

Statement of Harry S. Hertz, Director, National Quality Program, 
National Institute of Standards and Technology, Technology 
Administration, and U.S. Department of Commerce

    Thank you Mr. Chairman and Members of the Subcommittees for 
the invitation to testify.
    On August 20, 1987, President Ronald Reagan signed Public 
Law 100-107, the Malcolm Baldrige National Quality Improvement 
Act of 1987. The purpose of the act was to provide a national 
program to recognize U.S. companies and other organizations 
that ``practice effective quality management and as a result 
make significant improvements in the quality of their goods and 
services'' and to disseminate information about their 
successful strategies. The program has been managed by the 
National Institute of Standards and Technology, an agency of 
the Commerce Department's Technology Administration, in close 
cooperation with the private sector.
    From the start, our definition of quality and performance 
excellence has focused both on the customer and on operational 
performance. We view performance excellence as delivering ever-
improving value to customers resulting in marketplace success, 
while at the same time improving overall organizational 
effectiveness and capabilities.
    ``The Baldrige public/private partnership has accomplished 
more than any other program in revitalizing the American 
economy,'' said Barry Rogstad, president of the American 
Business Conference and past chairman of the Baldrige Award's 
board of overseers.
    Since 1998, when the first Baldrige Awards were presented 
to three companies, the Baldrige National Quality Program has 
grown in stature and impact. Today, the Baldrige program, the 
Award's criteria for performance excellence, and the Baldrige 
award-winning organizations are imitated and admired worldwide. 
Following are some of the program's 10-year highlights:
     Called the ``single most influential document in 
the modern history of American business,'' almost 2 million 
copies of the Baldrige Criteria for Performance Excellence have 
been distributed. This number does not include the copies 
available in books and from state and local award programs or 
downloaded from the Award's World Wide Web site.
     For the past five years, a hypothetical stock 
index, made up of publicly-traded U.S. companies that have 
received the Baldrige Award, has outperformed the Standard & 
Poor's 500 by more than 2.5 to 1.
     State and local quality programs--many modeled 
after the Baldrige program--have grown from fewer than 10 in 
1991 to over 40 in 1999.
     Internationally, 45 quality programs are in 
operation. Most are modeled after the Baldrige Award, including 
one established in Japan in 1996.
    Today, I would like to share with you some of the lessons 
we have learned from the first decade of the Baldrige Program, 
particularly as they relate to service quality. Those lessons 
are realized in the evolving set of core values and concepts 
that form the foundation for our year 2000 Criteria for 
Performance Excellence. I will briefly discuss these core 
values and some of the resulting criteria. Finally, I will 
present some of the key performance challenges I believe we 
face. I will give some specific business examples to emphasize 
key points.

                            Service Quality

    Service quality is inherently more challenging than product 
quality. In service delivery, production and consumption are 
frequently combined. While we have had manufacturing winners of 
the Baldrige Award every year since its beginning, it wasn't 
until the third year that we had a service winner, Federal 
Express Corporation. They learned that a process orientation 
could be applied to service delivery, that a 12-component 
performance index developed by FEDEX could track quality 
performance and serve as a predictor of customer satisfaction, 
and that empowered customer contact employees with data to make 
decisions can improve their own and company performance.
    Service quality is greatly dependent on human factors: the 
behavior and personality of the customer contact person, and 
the customer's perception of their interaction. As opposed to 
manufactured goods, the ``product'' cannot be inventoried, and 
it cannot be tested fully in advance of delivery. Every 
customer interaction is a ``moment of truth'' and suffers from 
all the complexities associated with such interactions. The 
environment in which the service is delivered (e.g., 
surroundings, wait time, demeanor of the deliverer) and the 
competence of the deliverer are extremely important. That is 
why we see the great emphasis placed by all Baldrige winners on 
employee training. The service category winners as a group 
average over 80 hours of training per year for each employee.
    Finally, and maybe most significantly in a service 
business, conformance to specifications often does not suffice. 
It is the personal concern or added touch that supplements 
accurate service that defines quality. For example, at Ritz 
Carlton hotels (a 1992 and 1999 service category winner), 
employee empowerment is the key to customer satisfaction. All 
employees are empowered ``to move heaven and earth to satisfy a 
guest.'' Each employee can spend up to $2000 without approval 
to obtain that satisfaction.
    If an error is made, not only is recovery important, but 
speed of recovery and how the customer is compensated for the 
error are equally important. At Granite Rock, a 1992 small 
business winner that quarries and delivers stones and concrete, 
their ``short pay'' system encourages customers not to pay for 
any service that doesn't meet the customer's expectations. This 
policy is stated in writing on every delivery form.

                   Baldrige Core Values and Criteria

    Service quality is only one component of overall 
organizational performance quality. The Baldrige Criteria for 
Performance Excellence provide a framework for guiding and 
assessing overall organizational performance. The Baldrige 
Criteria are based on eleven core values and concepts. These 
core values and concepts typify the characteristics of high 
performing organizations of all types. These core values, like 
the Baldrige Criteria, evolve to continue to define leading 
edge high performance practices. The core values and concepts 
     Visionary Leadership
     Customer Driven
     Organizational and Personal Learning
     Valuing Employees and Partners
     Focus on the Future
     Managing for Innovation
     Management by Fact
     Public Responsibility and Citizenship
     Focus on Results and Creating Value
     Systems Perspective
    All these core values and concepts are relevant to the 
subject of today's hearing, but let me comment on four:

    Organizational and Personal Learning

    Achieving the highest levels of performance requires a 
well-executed approach to organizational and personal learning. 
Organizational and personal learning is a goal of visionary 
leaders. The term organizational learning refers to continuous 
improvement of existing approaches and processes and adaptation 
to change, leading to new goals and/or approaches. Learning 
needs to be embedded in the way an organization operates. By 
embedded I mean that learning: (1) is a regular part of daily 
work; (2) is practiced at personal, work unit, and 
organizational levels; (3) results in solving problems at their 
source; (4) is focused on sharing knowledge throughout the 
organization; and (5) is driven by opportunities to affect 
significant change and do better. Sources for learning include 
employee ideas, research and development, customer input, best 
practice sharing, and benchmarking.
    Employee success depends increasingly on having 
opportunities for personal learning and practicing new skills. 
Organizations invest in employee personal learning through 
education, training, and opportunities for continuing growth. 
Opportunities might include job rotation and increased pay for 
demonstrated knowledge and skills. On-the-job training offers a 
cost-effective way to train and to better link training to 
organizational needs. Education and training programs may 
benefit from advanced technologies, such as computer-based 
learning and satellite broadcasts.
    Personal learning can result in: (1) more satisfied and 
versatile employees; (2) greater opportunity for organizational 
cross-functional learning; and (3) an improved environment for 
    Dana Commercial Credit, a 1996 service category winner, 
uses ``people finding a better way'' as their motto. Their 
organization's three-part focus is on customer satisfaction, 
quality, and knowledgeable people. All education is followed by 
a course evaluation, a personal improvement plan, 90-day follow 
up, and correlation analysis to measure effectiveness in 
improved customer focus. Suggestions and innovation, part of 
Dana Style, led to a more than tripling of profit after tax per 
person from 1992 to 1996.

Valuing Employees and Partners

    An organization's success depends increasingly on the 
knowledge, skills, innovative creativity, and motivation of its 
employees and partners.
    Valuing employees means committing to their satisfaction, 
development, and well-being. Increasingly, this involves more 
flexible, high performance work practices tailored to employees 
with diverse workplace and home life needs. Major challenges in 
the area of valuing employees include: (1) demonstrating 
leaders' commitment to employees; (2) providing recognition 
opportunities that go beyond the normal compensation system; 
(3) providing opportunities for development and growth within 
an organization; (4) sharing the organization's knowledge so 
employees can better serve customers and contribute to 
achieving strategic objectives; and (5) creating an environment 
that encourages risk taking.
    Organizations need to build internal and external 
partnerships to better accomplish overall goals.
    Internal partnerships might include labor-management 
cooperation, such as agreements with unions. Partnerships with 
employees might entail employee development, cross-training, or 
new work organizations, such as high performance work teams. 
Internal partnerships also might involve creating network 
relationships among work units to improve flexibility, 
responsiveness, and knowledge sharing.
    External partnerships might be with customers, suppliers, 
and education organizations. Strategic partnerships or 
alliances are increasingly important kinds of external 
partnerships. Also, partnerships might permit the blending of 
an organization's core competencies or leadership capabilities 
with the complementary strengths and capabilities of partners, 
thereby enhancing overall capability, including speed and 
    Successful internal and external partnerships develop 
longer-term objectives, thereby creating a basis for mutual 
investments and respect. Partners should address the key 
requirements for success, means of regular communication, 
approaches to evaluating progress, and means for adapting to 
changing conditions. In some cases, joint education and 
training could offer a cost-effective method of developing 
    Boeing Airlift and Tanker (A&T) Programs, a 1998 Baldrige 
Award recipient, designs, develops, and produces the C-17 
Globemaster III airlifter for the U.S. Air Force. In the early 
1990's, the Department of Defense threatened to cancel all C-17 
orders due to quality problems. Based on a unique partnership 
with its union, A&T's exemplary quality performance by 1996 led 
to A&T receiving the government's largest ever multi-year 
contract for additional C-17's. The union partnership involves 
employee gainsharing and ownership of work teams.

Managing for Innovation

    Innovation is making meaningful change to improve an 
organization's products, services, and processes and create new 
value for the organization's stakeholders. Innovation should 
focus on leading the organization to new dimensions of 
performance. Innovation is no longer strictly the purview of 
research and development departments. Innovation is important 
for key product and service processes and for support 
processes. Organizations should be structured in such a way 
that innovation becomes part of the culture and daily work.
    3M Dental Products Division, a 1997 manufacturing category 
recipient, starts its innovation process with insights into 
changing customer requirements. Introduced in 1979, the 
innovation process itself has been refined 37 times since then. 
Now customer feedback is received at least three times during 
each development cycle. In 1996 more than 40% of 3M Dental's 
total sales stemmed from new products.

Systems Perspective

    The Baldrige Criteria provide a systems perspective for 
managing an organization and achieving performance excellence. 
The core values and the seven Baldrige Criteria categories form 
the building blocks of the system. However, successful 
management of the overall enterprise requires synthesis and 
alignment. Synthesis means looking at the organization as a 
whole and focusing on what is important to the whole 
enterprise. Alignment means concentrating on key organizational 
linkages among the requirements for organizational success.
    Alignment means that the senior leaders are focused on 
strategic directions and on customers. It means that senior 
leaders monitor, respond to, and build on the organization's 
business results. Alignment means linking the organization's 
key strategies with its key processes and aligning its 
resources to improve overall performance and satisfy customers.
    Thus, a systems perspective means managing the whole 
enterprise, as well as its components, to achieve performance 
    Solectron, a 1991 and 1997 manufacturing category 
recipient, realized that to grow its business it had to surpass 
the quality of original equipment manufacturers' internal 
production. A key goal became quality and process capability. 
Key performance indicators and regular review of those 
indicators were established (daily on the floor, weekly by 
division, monthly by the CEO), improvement strategies were 
implemented, and training programs were developed. All 
employees benefit from success through Solectron's variable 
compensation plan.

Criteria for Performance Excellence

    The Baldrige Criteria for Performance Excellence translate 
the core values and concepts into an assessment vehicle for 
determining organizational strengths and opportunities for 
improvement. The seven Baldrige Criteria categories for this 
assessment are: Leadership, Strategic Planning, Customer and 
Market Focus, Information and Analysis, Human Resource Focus, 
Process Management, and Business Results.
    As with the core values and concepts, all of the Criteria 
are relevant to the subject of today's hearing, but let me 
summarize very briefly the first two Criteria categories 
because they are critical to organizational communication and 
future success. These two areas challenge all large 
organizations (and many small ones).
    The Leadership Category examines how an organization's 
senior leaders set, communicate, and deploy values and 
performance expectations, as well as a focus on creating and 
balancing value for customers and other stakeholders. Also 
examined is how senior leaders focus on empowerment, 
innovation, learning, organizational directions, and 
responsibilities to the public and key communities.
    Xerox Business Services, a 1997 Baldrige recipient in the 
service category, has 14,000 employees, with more than 80% at 
4300 client sites worldwide. Through a focus on learning and 
empowerment, XBS trains and then empowers its employees to make 
decisions as if they were running their own small business. XBS 
learning programs focus on individual learning styles for 
people learners, information learners, and action learners.
    The Strategic Planning Category examines an organization's 
strategy development process, including how the organization 
develops strategic objectives and action plans, and key human 
resource plans based on its strategic objectives and action 
plans. Also examined are how plans are communicated and 
deployed to achieve organizational alignment and how 
performance to plans is tracked.
    AT&T Consumer Communications Services, a 1994 service 
category Award recipient, uses a HR planning council to achieve 
alignment of its business plans and HR plans. Council members 
include management and occupational associates. Council members 
are responsible for communicating HR plans to their 
organizations, who then develop organizational work plans and 
individual competency plans.

                       The Importance of Results

    Performance tracking is extremely important. A shortcoming 
of many early total quality management (TQM) efforts was a 
total focus on process without an equal focus on whether 
process improvements were yielding results or whether the 
improvement focus was even on organizational (senior leader's) 
priorities. Furthermore, when results were measured, 
organizations generally measured what was available and easy, 
and not what was important.
    Based on lessons learned by the Baldrige program over the 
last decade, we have developed a set of ``results 
imperatives''--what to measure and how to use the measurements.
     Results should be tied to key business and 
customer requirements.
     Results should be tied to key product/service and 
support processes.
     Results should gauge progress on key strategic 
objectives and their associated action plans.
     Results need to track ``levels and trends.''
         Tracking the level of performance means knowing where 
        one stands relative to goals and to examples of high 
        performance (obtained through benchmarking).
         Tracking trends ensures that the progress made and the 
        rate of progress are acceptable.
     Results must be linked to and produce the measures 
senior leaders use for their organizational analysis and 
     Results must be actionable and action generating!
    In other words, the results an organization should and must 
measure are those that lead to action on the part of that 
organization. This action occurs at all levels--individual, 
work unit, division, and senior leader--and the key results and 
actions are linked.
    At Merrill Lynch Credit Corporation, a 1997 service 
category winner, client satisfaction is a long-term focus. 
Hence, client satisfaction survey measures are tracked at all 
levels of the organization. In addition, key indicators of 
client satisfaction are tracked down to the individual partner 
(employee) level where customers have told MLCC that timeliness 
of loan approval and in-process status information are key.

                             What CEO's Say

    Obviously CEO's must focus on overall organizational 
results. As part of the tenth anniversary of the Baldrige 
program, the private sector Foundation for the Malcolm Baldrige 
National Quality Award conducted a survey of U.S. private and 
public sector chief executives to understand the other key 
challenges they face entering the 21st century. At a July 1998 
CEO forum two subjects that received considerable discussion 
bear comment here:
     By a three-to-one (72% vs 26%) margin, CEO's 
believed timely strategy deployment was more challenging then 
strategy development.
     The CEO's strongly believed that the internet and 
electronic commerce will be the most important and challenging 
new vehicle for conducting business at all levels. While they 
were unwilling to speculate on the specifics of these 
challenges, they felt they had to be leaders in this new 
business technology.

                            Seven Challenges

    As the Baldrige program looks to the future, I see seven 
key challenges for all organizations. Organizations must:
     Go beyond today's performance management and 
quality systems. They will not deliver future results.
     Measure, analyze, and execute for alignment.
     Evaluate and improve with a purpose. Focus on the 
     Focus on their value chain and changing value 
equation. Balance the needs of all stakeholders--all those who 
create value for the organization and for whom the organization 
hopes to create value.
     Build flexible strategies: only change is a given.
     Anticipate the needs and desires of a diverse 
workforce and a diverse customer base.
     Manage knowledge, stimulate innovation, support 
people, learn and grow as an organization.
    To meet these challenges we will need high performing 
organizations--organizations characterized by flexibility, 
innovation, knowledge and skill sharing, alignment with 
organizational objectives, customer focus, and rapid response 
to changing business needs and requirements of the marketplace.
    Thank you, Mr. Chairman, and I would be pleased to answer 
any questions that you may have.
    [An attachment is being retained in the Committee files.]


    Chairman Shaw. Thank you.
    Mr. McTigue.


    Mr. McTigue. Thank you, Mr. Chairman. It is rather strange 
for me to be sitting on this side of the table. I have had more 
experience as a parliamentarian of sitting on your side of the 
table, sir. With your side comes the responsibility of making 
the decisions and I am pleased to be relieved of that.
    Mr. Chairman, the request to address the meeting today was 
couched in terms of you really want to look forward, and I 
congratulate you on the vision of looking forward to what might 
be required of governmental organizations in the future. I 
think that what you are dealing with, and what governments 
around the world are dealing with, is the quandary that the 
demands of the citizenry have dramatically changed. No longer 
as a consumer either of government services or private sector 
services will I accept a standardized response. I want 
everything to be customized so that I am treated as an 
    This is an incredible challenge for governmental 
organizations and cuts right across the tradition of hierarchal 
structures command and control approach from senior management. 
This new environment really says that in the future the 
interface between the customer and the organization is going to 
be the critical learning experience for that organization. 
These organizations are going to have to deal much more with 
the causal factors of problems rather than treating the 
consequences. The learning experience that is required to be 
able to deal with causal factors is quite different from the 
tradition of bureaucracy.
    In the presentations that you listened to a few moments ago 
were some critical observations. One of those was that much 
institutional knowledge in the SSA is likely to be lost with 
the current cohort of retirees. That is not a situation 
applicable just to the Social Security Administration. Many 
organizations are facing the same problems. Some in the private 
sector are solving those problems today, particularly the 
consulting industry. This industry considers each case history 
and records what have been successful outcomes so that the 
knowledge is captured and is available to everybody else in the 
organization to learn from.
    It would be my recommendation that these knowledge building 
capabilities are what government should be seeking from its 
organizations of the future. For government, it is much easier 
to visualize this in terms of the needed capabilities of the 
organization rather than basing decisions on a consideration of 
its inputs.
    When looking at the capabilities of the organization, you 
have to project forward to the year 2005 and say what 
capabilities would we expect of this organization at that time. 
Some of the capabilities I would emphasize would be customer 
access from remote locations, access by telephone or 
electronically. That as a customer when I made first contact, I 
would trigger something like an electronic portal where one 
approach would activate all organizations to address all of my 
problems in a variety of customized ways. Instead of having to 
go to two, three, or four organizations, my business or 
personal problems would be referred to those who are most 
capable of delivering to me successful solutions.
    The Social Security Administration needs to have a very 
tight focus on what are the needs, needs not wants, of 
customers. In meeting those needs, the focus must be on 
actually starting to solve people's problems. You are looking 
for solutions that might help to diminish the dependency of 
this person. Can solutions be found that will allow this person 
to live a more independent life?
    There is no way that this is achievable using only face-to-
face techniques. To be successful this will require the 
creation of an organization that has the following capability 
and characteristics. It would require strong leadership, with a 
clear vision of what was to be achieved. The senior management 
team would now see itself as the facilitator of what happens at 
the interface between its customers and the organization. It 
would be able to respond to the needs of individual customers 
with customized solutions. It would have the capability to call 
in resources from other organizations to solve those problems. 
It would be able to communicate with its customers in a variety 
of different mediums, and it would be able to do that on a 
continuing basis.
    When you look at people's requirements for medical care, 
their problems are not single issue problems. They are 
continuing. Can they come back until their problem is resolved? 
It is certainly possible to build organizations like that 
today. It does require a massive change in the culture of both 
the leadership and of those who have oversight of those 
organizations. It does require real thrust in the future to 
judge organizations on their capability and what it will 
achieve rather than scrutinizing what inputs they consuming.
    Mr. Chairman, I am honored to have been asked to bring my 
presentation to you today, and I am very happy to answer 
    [The prepared statement follows:]

Statement of the Hon. Maurice P. McTigue, Q.S.O., Distinguished 
Visiting Scholar, Mercatus Center, George Mason University, Arlington, 
Virginia; and former Cabinet Minister, and former Member of Parliament, 
New Zealand

    Mr. Chairmen, I am honored to have been invited to give 
testimony before your committees on examining the Social 
Security Administration's capacity to address the needs of an 
aging population in the 21st century.
    Mr. Chairmen, it would be inappropriate for me to comment 
on the merit of policies that drive the activities of the 
agencies of the United States Government as a visitor to your 
country. However, having served as an elected member of the 
Parliament of New Zealand for nine years and as a member of 
Cabinet during a period of unprecedented reform, my experience 
may be of value to you in your deliberations. In particular, in 
my role as Associate Minister of Finance and Chairman of the 
Cabinet's Expenditure Control Committee, I have first-hand 
experience of the change process and, hopefully, some of the 
wisdom of hindsight.
    In addition to the above background, we at George Mason 
University's Mercatus Center have over the last two and a half 
years been conducting a study of the progress of Federal 
Government Agencies in moving toward accountability for 
results, as required by the Government Performance and Results 
    Congress's intent in passing this law was to place a 
concentrated focus on the value to citizens of government 
programs and services. This has brought about in Congress and 
in federal agencies a heightened awareness of the need to 
address issues of customer satisfaction. This changed focus 
should not be interpreted as a criticism of past performance; 
instead, it is yet another indicator of societal changes based 
on the technology revolution. The old world of the last century 
was dominated by industrialization, which required massive 
standardization. The new world made possible by the technology 
revolution is insisting on customization. In my view, that 
demand for customized services applies to government services 
just as it does to our consumer society.
    It is from the above rationale that you have wisely decided 
to conduct this hearing. To satisfy the demands for 
customization, the bureaucracies of government must reverse 
many of the traditions of the past. No longer can they be top-
down, command and control organizations. They need to 
facilitate decision-making at the customer level and not 
attempt to control process decisions from a senior management 
level. What this means is that the civil service tradition of 
hierarchical organizations will have to be replaced by 
creative, innovative organizations that can react 
instantaneously to customer needs. The magnitude of cultural 
change and the time required for this shift in emphasis should 
not be underestimated.
    To be successful, these new organizations will need to 
develop a sharp focus on customer needs. That focus must start 
from a clear articulation of the goal they are ultimately 
trying to achieve. For example: Does the Social Security 
Administration view its role in life as moving supplementary 
income to people in need, or does it view its role as helping 
resolve its customers' dependency problems and using its 
resources creatively to either minimize or eliminate those 
dependencies? The societal consequences from this decision are 
enormous. The impact on SSA as an organization is also 
enormous-particularly if it is to become involved in solving 
people's problems.
    Such a decision would go well beyond the SSA alone, as 
other government resources almost certainly would need to be 
brought in to solve the problem. Yet, in the 21st century, it 
is inevitable that government's focus in dealing with the 
public will move to seeking solutions to causal factors rather 
than dealing only with consequences of societal problems. 
Contemplating such issues brings into sharp focus the 
incredible degree of individualization and customization 
necessary to achieve these social outcomes. The concept of even 
considering this degree of individualization is only made 
possible by advances in technology.
    Today, with the ability to build electronic portal entry to 
government, the capability to deliver the above concepts is a 
reality. The idea that customers could access all of the 
services they need from one electronic entry point is exciting, 
but will require a very considerable commitment of capital and 
resources and a different style of organization. The technical 
requirements and their resource implications are best addressed 
by others more skilled in this area than me.
    The characteristics of the organization of the future are 
something I would like to address.
    The characteristics of the organization of the future--in 
my view--will include the following:
     strong leadership with a clear vision of what is 
to be achieved;
     a senior management team that recognizes that its 
role is to facilitate what happens at the staff/customer 
     an ability to respond to the individual needs of 
     a sharp focus on solving customer problems;
     the capability to call upon resources of other 
Government organizations, where necessary, to facilitate 
     a recognition that it must meet customer needs to 
make contact by a variety of different mediums and in many 
     an ability to continuously measure progress 
towards goals and to utilize this knowledge to influence 
     an ability to instantly disperse--to all 
appropriate levels--knowledge of best practice as experienced 
at the customer interface;
     a capability to communicate on a continuous basis 
to all appropriate audiences information that will facilitate 
knowledge of the organization's capabilities and performance;
     a dream team that constantly looks at what is not 
possible now but might be in the future;
    The above characteristics are matters that I will address 
in more depth in my verbal testimony. Our study of change in 
the public sector does give some insight into current 
capabilities and what is achievable.
    Mr. Chairmen, once again I thank you for the opportunity to 
present testimony to these subcommittees on these far-reaching 
issues. I extend my congratulations to you, Sirs, and to the 
other members of the Committees on your visionary role in 
placing these forward-looking ideas under the spotlight at this 
time. In my view, great good could come from this timely 
    Testimony prepared by:

                                         Maurice P. McTigue
                                     Distinguished Visiting Scholar
                                                    Mercatus Center
                                            George Mason University


    Chairman Shaw. Thank you, Mr. McTigue, and I thank this 
entire panel. I could not help but think while I was sitting 
here that we seem to be putting our head in the sand on this 
whole matter of Social Security both administratively as well 
as the benefit structure that we presently have, the investment 
structure, and the whole fiscal structure of what we have. We 
seem to be going more of the way of Europe and rather than the 
way of New Zealand, which I understand has already made some 
changes in looking to the aging population.
    Mr. Burke, the Social Security Administration is facing a 
wave of retirements. We have spent quite a bit of time on this 
today. Given the trends and challenges, what will Social 
Security have to consider now when they hire their new people 
for the future?
    Mr. Burke. The work force that will be available will be in 
some ways like the boomer generation in terms of their 
skepticism of organizations. The organizations have to present 
to them an environment that supports them, an environment that 
recognizes that younger generations desire for a more balanced 
lifestyle, that when they work, they work hard, and when they 
play, they play hard.
    The generations that are following the boomers are not lazy 
generations. They are very hardworking. They have a desire to 
be as entrepreneurial as possible which will complicate 
government agencies in hiring practices. They want to 
understand why they have to do things. They have very little 
patience for bureaucracy, much like the boomers, and also they 
have a great desire for learning on the job or outside the job, 
and they have the desire to improve their posture.
    Additionally, they have great sensitivity toward social 
justice, justice in the workplace and justice outside the 
workplace, and one of the things Social Security Administration 
has is a reputation for justice which they can use to their 
    The type of folks that probably would be drawn to the 
Social Security Administration would be people that are 
familiar with the advanced technology which is becoming more 
and more common, people that have a multicultural viewpoint, 
and people that understand and are familiar with and 
comfortable with diversity.
    Chairman Shaw. Could you briefly touch upon what Mr. Ross 
was talking about, and that is the cultural difference? Were 
you here for his testimony?
    Mr. Burke. Yes, sir, I was. The cultural differences in 
terms of?
    Chairman Shaw. Of the retiring work force as to the post-
baby boom.
    Mr. Burke. One of the interesting things is that in many 
ways the work force that's out there, is retiring at an earlier 
age, and part of that is because of, as one of the witnesses 
mentioned, that the leadership in some organizations do not 
tend to support these workers, and it makes it difficult and 
workers want to get out from under that.
    Some of the cultural differences with respect toward 
retirement is that the generation that is retiring now, to a 
lesser degree then the boomers, want to retire and relax. The 
boomers will stay engaged, but less so in a work force. The 
generations that are following, and it is hard really to 
project this out, but there is a likelihood that they will have 
greater mobility and greater engagement and will retire 
probably not at the same points but, will stay engaged in the 
work force longer, especially since they will be growing up, 
entering, and living in a work force with lifestyle and work 
style that takes advantage of mobile skills.
    Chairman Shaw. Thank you.
    Mr. Hertz, as you know, the Social Security Administration 
is a 63,000-employee organization. Now assume that you are 
appointed Commissioner. We will make it Commissioner-for-life 
so you do not have to consider about the political whiplash 
that you might otherwise get in that position. What are the 
three things that you would change about the program, and what 
do you see are items that should be preserved?
    Mr. Hertz. I guess I feel less comfortable talking about 
three things I would change, since my knowledge of the program 
comes from reading the Social Security Advisory Board report, 
but let me tell you about what I would preserve from what I 
have read in that report and what I would do when I first 
became Commissioner, maybe the first three things I would do.
    The thing I would try to preserve based on my reading is 
the can-do attitude and the commitment, which was evident 
throughout the report, of the field staff to satisfying the 
needs of the Social Security recipients who come in to talk to 
them or contact them. I think in terms of what I would do, the 
first thing I would do is I would try to understand the 
management system and the communications system within the 
Social Security Administration, and I would try to listen and 
learn from as many learning posts as I could. I would talk to 
employees. I would talk to management. I would talk to 
customers, and I would try to gather an understanding of the 
needs and desires of both the employees, how well 
communications flows through the agency, and also what the 
needs are of the customers who are being served.
    The second thing I would do, based on my background in 
Baldrige, is I would take the Baldrige criteria book. There is 
a section in it called the business overview, and I would work 
with my management team to try to write that business overview 
for the Social Security Administration. That overview asks you 
about the culture of the organization, about your customers and 
their requirements, about your partnering relationships, about 
your competitive situation, and about your directions, your 
future directions, and I would see how well we could answer 
those simple questions, and from those gaps, I would begin to 
develop my agenda.
    The last thing I would do of the first three is I would 
look at what measurement system the Social Security 
Administration has in place, what measurement system to measure 
performance at all levels, customer performance, how we satisfy 
the customer, operational performance, human resource 
performance, and budgetary performance, and then look at where 
we have gaps in that measurement system.
    Chairman Shaw. Mr. McTigue, could you elaborate a little 
bit upon the difference in the system that you are familiar 
with in New Zealand and what you have learned of the system 
that we have here, both from the administrative and from the 
investment standpoint?
    Mr. McTigue. In general, there is little difference between 
the organizations that deliver these services in both of our 
countries, except ours is more extensive in scope and deals 
with more of the problems of individuals than does your Social 
Security Administration. Our Department of Social Welfare tends 
to be the focal point for all the problems people have when 
crises develop in their lives.
    The major change has been that the focus of the mission of 
the organization has moved very much to addressing the issue of 
dependency and developing policies that will help to move 
people out of dependency as much as possible. As a result of 
making that change, all of the policies, programs and processes 
had to be much more flexible. Case workers have to be empowered 
to make decisions about how they might apply that particular 
program to different individuals and what additional resources 
they may call to those individuals needs.
    The focus of the organization then becomes very much a 
focus on solving people's problems rather than administering a 
service, and measurement factors have to reflect recognition of 
what success is being achieved at solving people's problems.
    Chairman Shaw. How about the structure of the financing of 
the benefits?
    Mr. McTigue. Quite different to yours. Retirement income in 
New Zealand is not a payroll tax. It is taken out of general 
revenue. So nobody actually makes a contribution to retirement 
income. It is currently paid at 67 percent of the average wage, 
and it is paid to everybody as of right so there does not have 
to have been an earning history, and there is no income 
testing. Three times in the recent past we have income tested 
retirement income, and three times we have canceled income 
testing, mainly because of the political pressures.
    When dealing with the problems of Social Security, there 
are really only two choices. Either put in more money or change 
entitlement. Our choice has been to change entitlement, and 
each time the battle has been lost politically. Having been 
part of that decision, I still think it is the right decision 
even though I have seen the policy reversed three times. I do 
not think that experience is helpful to you, sir.
    With regard to the rest of the program----
    Chairman Shaw. I would say that is the political culture 
that is very similar.
    Mr. McTigue. I do not disagree.
    With regard to the other programs, they are funded from 
general tax revenue and they encompass virtually the whole 
spectrum of support that you see here. The major change has 
really been in refocusing the organization so that it looks 
from the top down at its customer group and seeks to solve 
    One of the major issues today is the staffing skills for 
providing that service. Currently neither the private sector 
nor the governing sector have recognized that skill sets remain 
current for only about 4 years, and nobody is re-skilling 
people at the rate of 25 percent of their work force per annum. 
You cannot mend this gap by recruitment. To rectify the skill 
gap, organizations must continually work at skilling their own 
work force. Reductions in discretionary funding has 
dramatically reduced skill development activity in government 
to the point where many governments are facing a crisis in 
    Chairman Shaw. Well, your retirement system is a totally 
unfunded system?
    Mr. McTigue. Correct. I do not recommend you do it.
    Chairman Shaw. No. We have got enough problems without 
    Mr. McTigue. Yes.
    Chairman Shaw. And you have even got an aging population as 
we do.
    Mr. McTigue. Yes, indeed.
    Chairman Shaw. And you have people having less kids as we 
do, I would assume.
    Mr. McTigue. Yes, exactly the same problems. They are 
identical however, the peak periods shift by a year or two.
    Chairman Shaw. Is there a movement to bring reform to New 
Zealand as we are trying to do here? Some countries have been 
successful. I think Australia has done something. I am not sure 
exactly what it was. I was of the impression that New Zealand 
has, but evidently I was wrong about that.
    Mr. McTigue. Oh, we have done it, sir. Just each time we 
have done it, we have undone it again, and that is the problem. 
The difficult thing politically to deal with is that it is very 
hard to get society to focus on an event that is 15, 20, or 30 
years in the future. Young people do not believe retirement 
income is going to be there to support them when they get to 
retirement age, people in the middle cohorts are not prepared 
to accept that this problem must be solved now.
    So different age groups give political reactions that are 
very different. There are some places around the world that 
have found solutions, but because our scheme is an entirely 
unfunded program, those solutions were not open to us.
    Chairman Shaw. Well, we have a trust fund that we can claim 
and the President has claimed that it is quite solvent, and it 
is for the time being because of the FICA taxes. For at least 
another 12 or 13 years we will exceed the demand for benefits. 
But following that time, it does not make any difference 
whether we have treasury bills in the fund or not. When the 
time comes to cash those treasury bills in, it will be the same 
as you. We will be going to the taxpayer to get those moneys.
    We do have a dedicated FICA tax which puts us in a little 
better position than just coming out of the general fund, but 
it can be sort of a bottomless pit if the Parliament does not 
exercise a great deal of restraint, and it sounds like you have 
kind of turned restraint on and off intermittently. So maybe we 
ought to sit down with you fellows and try to figure out what 
to do since we are looking for someone to sit down with on this 
Subcommittee to try to come up with some solutions.
    Mr. Johnson. Thank you.
    Let me carry on with that just a minute, if I may. What is 
your total tax on the people of New Zealand versus their total 
income in percentage?
    Mr. McTigue. Yes. Can I just give you a little bit of 
background so that we are comparing like with like?
    Mr. Johnson. OK.
    Mr. McTigue. OK. We have two rates of income tax. The 
bottom rate of income tax for everybody who is below middle 
income is 19 cents on the dollar. The top rate of income tax 
for everybody who is above middle income is 33 cents on the 
dollar. From that general revenue we fully fund all education, 
both in public and private schools. We fully fund all 
retirement income, and we fully fund all health care which is 
universally accessible to everybody. So it is not quite 
comparing like with like.
    Mr. Johnson. Do you have a sales tax as well?
    Mr. McTigue. Yes, we do.
    Mr. Johnson. So what would the total tax burden on average 
be? Around 40, 50 percent? Is it the same as ours?
    Mr. McTigue. It would be--it is estimated to be somewhere 
around the 37 percent.
    Mr. Johnson. Around 40, OK.
    Chairman Shaw. But they get health care.
    Mr. Johnson. Yes, and you have health care.
    Mr. McTigue. Yes.
    Mr. Johnson. OK. Well, thank you very much.
    I would like to refer to Dr. Hertz now, if I may. You 
suggested that heightened demands like Social Security are 
going to be replaced by creative, innovative organizations that 
can react instantaneously. I want to ask you several questions. 
One, what would a Federal agency need to do to achieve such a 
change, how long would it take, and can you tell us in general 
terms what you think the cost of that might be? And it sounded 
like from your answer to Mr. Shaw that you were talking about 
privatization because I do not know of a Federal Government 
agency that can respond like you were talking about.
    Mr. Hertz. Well, there are a number of Federal agencies 
that are using the Baldrige criteria, so I believe--
    Mr. Johnson. Properly?
    Mr. Hertz. I'm sorry?
    Mr. Johnson. Properly?
    Mr. Hertz. Properly.
    Mr. Johnson. OK. Name me one.
    Mr. Hertz. Name you one? National Security Agency is one 
that is using it. There are parts of the Department of Defense.
    Mr. Johnson. Well, NSA does not deal with people directly. 
I'm talking about one that deals with the public.
    Mr. Hertz. Deals with people in the public? Social Security 
has made some inroads, but it is not fully using it, obviously.
    Mr. Johnson. OK. Well, see if you can tell me what it takes 
for them to achieve a change and how long you think it might 
take and what you think the cost might be.
    Mr. Hertz. I have to speak, obviously, from my experience 
from the private sector because that is who I work with, but 
there are organizations that are equally large in the private 
sector. What they tell us is that it basically requires 
cultural change in an organization and the time period for 
establishing something like that is typically 5 to 6 years.
    Mr. Johnson. Does that mean you change the whole employee 
population or what?
    Mr. Hertz. You do not change the employee population 
necessarily. You change the philosophy and hope that the 
employees will come along with the changed philosophy, and what 
companies have found is that many do, and those who do not 
generally choose to leave on their own if they cannot adapt to 
a new culture, and it is really a change in the way one 
    So it is not a cost that is a cost of making the change. It 
is a change in the way one does business, and it is done over 
time, and the cost in the end--and there is one of the famous 
quality people, Phil Crosby, who talks about quality being 
free. In the end, it should actually bring you benefits because 
of the greater efficiencies that you bring to the organization.
    Mr. Johnson. So what you are essentially saying is you 
change the managers and hope the employees go along with them? 
Is that true?
    Mr. Hertz. You would start by changing the culture at the 
    Mr. Johnson. And if we went to a program that just talked 
about personal savings accounts, for example, a percentage, 
would that require changes in the Social Security 
Administration itself?
    Mr. Hertz. Well, I think any change in how you administer 
the retirement will require a change in the philosophy or 
change in the focus, and the biggest issue that we see in 
service organizations is knowledgeable, empowered employees, 
empowering them and giving them information they need to act. 
Obviously, you make any change in the program and you need to 
change the knowledge base and you need to have informed 
employees so that they can carry out the mission.
    Mr. Johnson. Yes, well they have been saying, I think, that 
you cannot get through to them on the telephone, and I presume 
you looked at that. Did you have any discussion on that system?
    Mr. Hertz. Well, I read the concern, again the report of 
the Social Security Advisory Board, and I have talked a lot 
with service companies about telephone standards, and we have 
learned two things, one that forefront companies look at the 
standard right now, if you will, as being responsive in three 
rings, but if you talk to companies that have won the Baldrige 
award, what they tell us what is much more important than 
focusing on answering in three rings is having employees who 
are the contact employees, knowledgeable, informed and with 
data and information at their fingertips so that issues are 
resolved on first contact on the first phone call. That is much 
more important to somebody on the other end of the phone line 
than whether or not it is 3 rings or 5 rings or 10 rings. If 
they can then walk away with the answer and the right answer to 
their issue, they are satisfied.
    Mr. Johnson. Thank you, sir. Thank you, Mr. Chairman.
    Chairman Shaw. Thank you, Sam, and I want to thank this 
panel for being a part of what I think will end up giving 
everyone a wake-up call as to problems. We not only have 
problems of funding. We also have tremendous problems with 
personnel. We have problems of antiquated equipment, and it 
almost looks like we are just taking a piece of dynamite, 
lighting the fuse and handing it to the next generation and 
saying, ``You take care of it, it is your problem.''
    This is something that our Subcommittee, the Social 
Security Subcommittee, will have to exercise an extraordinary 
amount of oversight on and really be sure that we have in place 
plans to go forward and also be sure that we are properly 
funding the changes that are necessary and that have to be 
made. We have had a good working relationship with the 
Commissioner, and I certainly would expect that to continue. 
This problem did not just arise on his watch. It is a 
continuing problem, but it is one that we must address.
    These retirement figures are startling. The figures as to 
people coming into the system are startling. The antiquated 
machinery and computers that are being used is startling. We 
have got to get this thing resolved, and we have got to be sure 
that we have a plan in place to do that so that we are ready 
for retirement of the baby boomers.
    Thank you very much, and we stand adjourned.
    [The following questions were submitted by Chairman Shaw to 
Mr. Burke, Dr. Hertz, and Mr. Mctigue.]

                                                  February 28, 2000
Mr. James Burke
Coates and Jarratt
4455 Connecticut Avenue, N.W., Suite A500
Washington, DC 20008

    Dear Mr. Burke:
    As a follow up to the joint subcommittee hearing held on February 
10 regarding the current and future service delivery challenges that 
Social Security is facing, I would appreciate your answering the 
following questions for the record:
    1. In your testimony you indicate that Social Security's future 
customers will want customized, fast service that is unique to them. 
Can you give us some specific examples of what that will mean? What 
will this desire for personalized service mean for more complicated 
programs like disability benefits? How about for SSI applicants who 
tend to have less education and may not be as experienced with 
computers? Can technology be adapted to help them, too?
    2. You indicate that along with the changing nature of the working 
population, the workplace itself will also be changing. We are already 
seeing evidence of this with increasing work out of the home, more 
temporary positions, and so on. Based on such trends, would you expect 
that Social Security would need to offer more points of access for its 
customers, albeit at less traditional settings such as via their home 
computer or through mobile offices or kiosks in malls, the post office, 
or large workplaces? How would you expect such trends--delivering 
services closer to where the public lives and works rather than only 
through ``traditional'' Social Security offices--will affect customer 
perceptions of Social Security? The morale of Social Security workers? 
Social Security's bottom line in terms of administrative costs?
    In your testimony you provide two examples of Baby Boomers 
interacting with Social Security from their home and a local cafe, as 
well as a description of their interacting with Social Security with 
small wireless devices integrated with cell phones. In it you talk 
about a ``personalized intelligent agent.'' Can you explain what that 
means? When might we see such technology come into use? How long will 
it take for the public to become comfortable with such new modes of 
interaction? Will the costs of such technology serve as a barrier for 
some families, diminishing their access to the best, most efficient 
service? If so, what are some ways to mitigate that?
    I appreciate your taking the time to answer these questions for the 
record. If you have any questions concerning this request, please feel 
free to contact Kim Hildred, Staff Director, Subcommittee on Social 
Security at (202) 225-9263.

                                                  E. Clay Shaw, Jr.

    cc: The Honorable Nancy Johnson
       Chairman, Subcommittee on Human Resources

    [No information had been received at the time of printing.]


                                                  February 28, 2000

Mr. Harry Hertz, Ph.D.
Director, Malcolm Baldrige National Quality Program
National Institute of Standards and Technology
Administration Building, Room A635
Gaithersburg, MD 20899

    Dear Dr. Hertz:
    As a follow up to the joint subcommittee hearing held on February 
10 regarding the current and future service delivery challenges that 
Social Security is facing, I would appreciate your answering the 
following questions for the record:
    1. Both the Advisory Board and GAO have recommended that Social 
Security should follow the example of the most successful public and 
private sector organizations and become more oriented toward meeting 
the needs and expectations of its customers. Could you provide us 
examples companies who have has done this? What steps did they take to 
improve their company/agency performance?
    2. I note the statement in your testimony (page 8) that 
``performance tracking is extremely important.'' Can an organization 
achieve high-performance goals without knowing, for example, how its 
investments in technology are impacting worker productivity? Can such 
an organization effectively plan for future service delivery needs 
without tracking worker performance?
    I assume that performance tracking is also a necessary component in 
rewarding great employees and encouraging others to do better. How do 
high performance companies recognize their employees for outstanding 
    3. Can you comment on the common perception that private sector 
companies and organizations do a better job providing customer service 
than government agencies? Is that necessarily the case? Can you give 
any examples that dispel that assumption?
    I appreciate your taking the time to answer these questions for the 
record. If you have any questions concerning this request, please feel 
free to contact Kim Hildred, Staff Director, Subcommittee on Social 
Security at (202) 225-9263.

                                                  E. Clay Shaw, Jr.

    cc: The Honorable Nancy Johnson
    Chairman, Subcommittee on Human Resources

    [No information had been received at the time of printing.]



                                                  February 28, 2000

The Honorable Maurice P. McTigue
Q.S.O., Distinguished Visiting Scholar
Mercatus Center, George Mason University
3401 North Fairfax Drive, Suite 450
Arlington, VA 22201

    Dear Mr. McTigue:

    As a follow up to the joint subcommittee hearing held on February 
10 regarding the current and future service delivery challenges that 
Social Security is facing, I would appreciate your answering the 
following questions for the record:
    1. Are you aware of any public sector organization that is facing 
service delivery issues similar to Social Security? Do you have any 
suggestions of private and public sector organizations that Social 
Security should compare themselves with on service delivery issues, 
especially the problem areas noted by the Advisory Board?
    2. As we move into the 21st century, you suggest that, with 
heightened demands for customization, current hierarchical programs 
like Social Security will be replaced by creative, innovative 
organizations that can react instantaneously to customer needs. Relying 
on your experience both with the Government Performance and Results Act 
and other efforts to achieve change in government programs, what would 
a federal agency need to do to achieve such change? How long would that 
take? At what cost in terms of administrative costs especially?
    3.You indicate that a sharp focus on customer needs starts with a 
clear articulation of the ultimate goal of the organization. You 
mention that SSA must decide whether its goal is to move income to 
people in need or to help resolve people's dependency needs. Obviously, 
this is a decision that SSA cannot make alone. Based on your 
experiences in New Zealand, how does a country and its government go 
about deciding what is the proper role of agencies such as SSA? If the 
decision is made to deal with the larger issues such as dependency, how 
can the various government agencies be included to work together to 
accomplish such a goal?
    4. Regarding your point that all government agencies have to decide 
what their goal in life is--to simply dispense checks or to help 
alleviate the reasons why someone is seeking government assistance, it 
seems in Social Security's case it is both. The Old-Age and Survivors 
Insurance program provides cash to families in which a worker has 
retired or died. Yet in the case of disability insurance, lots of 
people want to work and overcome their disabilities and may be able to 
do so with the right kind of assistance. The recently-passed Ticket to 
Work bill is based on this premise.
     Do you have any concern about one agency serving both 
     Is there a reason to foresee Social Security's disability 
programs becoming more closely aligned in the future with the 
government's other health, unemployment, and training programs?
     Does the model of welfare reform apply--where government 
programs are converted from providing checks to those who meet certain 
criteria of need into programs that seek to address the reasons why 
someone is needy in the first place?
    5. You describe one of the characteristics of high-quality 
organizations in the future as the ability to instantly disperse, to 
all appropriate levels, knowledge of best practices at the customer 
interface. For us non-management gurus, what does that mean, especially 
from the perspective of a Social Security beneficiary? How about from 
the vantage of a Social Security employee?
    6. ``A dream team that constantly looks at what is not possible now 
but might in the future'' is a characteristic of a future organization 
you mention in your testimony. Who would make up such a group? What 
would be their objective? Do any government agencies in the U.S. have 
such a group at work?
    7. As you know, Social Security is an agency that operates based on 
voluminous laws and regulations. Based on your experience, what is the 
best way to ensure that Social Security is flexible enough to respond 
to the challenges and customer service demands of tomorrow? Can this be 
done while retaining all of today's laws and regulations? Can such deep 
change be implemented gradually, or will Social Security need to 
completely rethink how they go about providing services? Given some of 
what we know about the culture of SSA and the highly political nature 
of what Social Security does, does such change have to come from within 
the agency? Is that likely? Will SSA have any choice but to change?
    I appreciate your taking the time to answer these questions for the 
record. If you have any questions concerning this request, please feel 
free to contact Kim Hildred, Staff Director, Subcommittee on Social 
Security at (202) 225-9263.
                                                  E. Clay Shaw, Jr.
    cc: The Honorable Nancy Johnson
    Chairman, Subcommittee on Human Resources

    [No information had been received at the time of printing.]

    [Whereupon, at 1:50 p.m., the hearing was adjourned.]

    [Submissions for the record follow:]

Statement of Terri Spurgeon, President, National Association of 
Disability Examiners, Zachary, Louisiana

    Chairman Shaw, Chairwoman Johnson and members of the 
Subcommittees, on behalf of the members of the National 
Association of Disability Examiners (NADE), thank you for this 
opportunity to comment on current and future service delivery 
challenges that the Social Security Administration is facing in 
the 21st Century.
    NADE is a professional association with a diverse 
membership and a strong commitment to the viability of the 
Social Security and Supplemental Security Income disability 
programs. Although the majority of our members are disability 
examiners, quality assurance and public relations personnel, 
hearing officers, physicians, administrators and support staff 
employed in the state Disability Determination Service (DDS) 
agencies, our membership also includes Social Security claims 
representatives, physicians, psychologists, attorneys, 
advocates, representatives from private insurance companies, 
and other professionals not in the DDSs who work with, and are 
interested in, the evaluation of disability claims. Many of our 
members have been, or are currently, involved in testing the 
process changes envisioned in SSA's Disability Redesign 
initiative. It is the diversity of our membership, as well as 
our experience working directly with the Social Security and 
SSI disability programs, which provides us with a unique 
perspective and understanding of those programs and the public 
they serve. We understand the importance of the Social Security 
Administration's service to the public and the issues which 
must be addressed in order to maintain and improve that 
    Those of us who have worked with the Social Security and 
Supplemental Security Income programs for even a short time 
have seen enormous increases in the complexity of the issues 
involved in administering these programs. We do not expect that 
to change. In fact, many of the Disability Redesign 
initiatives, while simplifying the process for the claimant, 
have increased the responsibilities of the adjudicator and the 
complexity of the decision making process. The redefined role 
of the disability adjudicator now encompasses responsibilities 
and tasks previously performed by the medical consultant and 
have significantly increased the scope of their duties. 
Legislative initiatives, court decisions and an aging, and 
increasingly diverse, population will further increase the 
complexities of these programs. It is imperative that Congress 
act now to ensure that resources are available to meet the 
challenges ahead.
    The Social Security Advisory Board, in their September 1999 
Report noted, ``The responsibilities of the Social Security 
Administration in serving the public are numerous and 
complex.'' These responsibilities include:

     Issuing Social Security numbers
     Maintaining wage records
     Determining eligibility for OASDI benefits
     Determining eligibility for SSI
     Keeping up with changes in beneficiary 
circumstances (postentitlement changes)
     Delivery of related beneficiary service
     Providing public information
     Developing program policy
     Resolving disputes

    Despite the continued increase in the number and complexity 
of the programs administered by SSA, the Advisory Board's 
September 1999 report documents the dramatic decline in SSA 
staff. The impact of this ``downsizing'' on service delivery 
cannot be overemphasized. Continued budget reductions will only 
serve to further erode public service and public confidence in 
the Social Security program.
    Robert J Myers, former Chief Actuary and Deputy 
Commissioner of Social Security, in his March 5, 1992 testimony 
before the Subcommittee on Social Security stated:

        ``Unfortunately, in recent years, the various services provided 
        by the Social Security Administration have deteriorated 
        somewhat. This, in my opinion, has been due to inadequate funds 
        being made available for administrative expenses--and not to 
        the lack of zeal or ability on the part of the administrators. 
        . . . . Proper administration of an insurance system--whether 
        social insurance or private insurance--requires that 
        administrative expenses should be neither too low nor too high. 
        In the latter case, the funds available for benefits would be 
        eroded. In the former case, inadequate service would be 
        provided. In fact, in some instances weak administration could 
        mean improperly excessive benefit payments due to fraud and 

    The need for appropriate--and adequate--funding for 
administrative expenses described in Mr. Myers' 1992 testimony 
remains true today and provides a framework for the proper 
administration of Social Security's insurance programs.
    The programs administered by the Social Security 
Administration touch the lives of every American. It is 
irresponsible to have an Agency this important be underfunded 
and understaffed. We echo the Advisory Board's belief that, 
``It is entirely appropriate that spending for administration 
be set at a level that fits the needs of Social Security's 
taxpayers and beneficiaries rather than at an arbitrary level 
that fits within the government's overall discretionary 
spending cap.''
    The State DDSs have historically met the challenges posed 
by limited resources and increased program demands. But there 
is a cost to that achievement and a limit to how long it can be 
sustained. NADE has consistently expressed the need for 
adequate resources, including funding, staffing, training and 
clear and timely operating instructions. While we recognize 
that funds for government programs are limited we believe that 
if spending for administrative costs is not sufficient to 
ensure accurate decisions and maintain program integrity, to 
obtain quality medical evidence to document disability claims 
and to combat fraud and abuse, then program costs will 
increase. It is far better to invest in an adequate and well 
trained staff that will ensure that those who deserve benefit 
payments receive them, and receive them in a timely manner, and 
that those who do not deserve benefit payments do not get them. 
It is far better to invest in the quality of service delivery 
and to see that quality of service reflected in how SSA is able 
to meet the expectations of its constituents, than to 
acknowledge that quality public service comes at too high a 
cost, and contribute to further erosion of the public's 
confidence in the service they receive from their government.
    We concur with the recommendation in the September 1999 
Advisory Board report that improvements in the disability 
process should remain a priority of the agency and we strongly 
support the five priority measures described in their August 
1998 report:

     Development and implementation of an ongoing joint 
training program for all adjudicators;
     Development of a single presentation of disability 
policy that is binding on all decision makers, including the 
updating of medical listings and vocational standards;
     Development and implementation of a quality 
assurance system to unify the application of policy throughout 
the disability determination system;
     Improvement in the quality of medical evidence 
that is used in determining disability claims; and
     Development and implementation of a computer 
system that will provide adequate support to all elements of 
the disability claims process.

    All of these require adequate resources, including funding 
and staffing. 
    Ongoing, joint training is needed, both to address the 
increased complexity of the issues involved in the development 
and adjudication of claims, and to improve the quality of the 
decision. NADE has consistently stressed, both to Congress and 
to the Social Security Administration, the need for ongoing 
training. In our October 1999 testimony prepared for these 
Subcommittees we stated:

        The Telecenters and Field Offices are the first point of 
        contact for most disability applicants. While disability is a 
        relatively small part of their workload the quality of the 
        completed application at this level can have a significant 
        impact on the efficiency with which the claim is processed at 
        the DDS level. It is important, then, that these components 
        work together to provide quality service to all applicants. To 
        do this requires ongoing communication and an emphasis on 
        teamwork. Unfortunately, communication between the Field 
        Offices and the DDSs was severely curtailed with the workforce 
        reductions in the 1980s. Efforts to increase communication 
        between all components have recently been initiated and these 
        efforts must be maintained. This, again, will require adequate 
        staffing levels and coordinated training initiatives. SSA must 
        invest in the training of its personnel to insure that those 
        who take the applications for disability benefits, as well as 
        those who adjudicate the claims, have the necessary skills and 
        knowledge to do so. . . . .Ongoing training is important; joint 
        training is essential.''

    It is also essential that the initiatives to increase 
communication between components be continued. Again, this 
cannot happen without adequate resources.

    In 1999 Congress passed the Ticket to Work and Work 
Incentives Improvement Act. This legislation assures that more 
Americans with disabilities will have an opportunity to 
participate in the workforce and lessen their dependence on 
public benefits. NADE supported this legislation and we applaud 
this Congressional initiative. However, while the actual impact 
of this legislation on Field Office and DDS staff and resources 
remains unknown, it is clear that additional resources, 
including staffing and training, will be needed. Other 
congressional initiatives, as well as Circuit Court and Supreme 
Court decisions, have had a significant impact on our 
workloads. As the complexity of the programs we administer 
increases so does the need for ongoing training. Unfortunately, 
staff reductions and budget cuts reduce SSA's ability to 
conduct training at the very time that more is needed.
    In addition to ongoing, joint training, NADE has long 
stressed the need for a single presentation of disability 
policy that is binding on all decision makers. This must be an 
agency priority if the Social Security Administration is to 
insure consistency in the decision making process and restore 
public confidence in the program. However, this cannot be 
accomplished without a strong, consistent and inclusive quality 
assurance system.
    SSA's quality review process has a significant ability to 
shape disability policy through subtle messages imparted by 
tighter or looser reviews, by the kinds of decisions that are 
selected for review or even by increasing or decreasing the 
size of the review sample. A strong, consistent and inclusive 
quality assurance system, with the review process applied in a 
similar manner to decisions made by the DDSs and by OHA, can be 
a major factor in assuring that program policy is implemented 
in a manner that is consistent, fair and nationally uniform.
    A single presentation of disability policy and a strong, 
consistent and inclusive quality review process will promote 
uniformity in the decision making process. Quality decisions, 
however, require quality (complete, detailed and descriptive) 
medical evidence. Changes in the physician/patient relationship 
and in the way medical records are maintained and stored have 
impacted on our ability to obtain the medical evidence which is 
the backbone of any disability decision. To address these 
issues, and to improve the quality of the medical evidence 
received, we must increase our outreach to the medical 
community and provide appropriate reimbursement for the 
information received. However, as the DDSs face severe budget 
cuts they are being asked to reduce expenditures for medical 
evidence. Quality decisions rely on quality medical evidence. 
If administrative funding is not available to obtain that 
evidence, program costs will undoubtedly increase.
    NADE recognizes the value of technology and computer 
support and urges continued development in this area. However, 
we would echo the Advisory Board's statement that the 
Disability Insurance and SSI workloads ``. . . .are highly 
labor intensive and do not lend themselves readily to 
significant savings though systems improvements.'' Computers 
cannot replace people in these areas.
    In an effort to improve efficiency and increase public 
service, in1994 the Social Security Administration issued its 
plan to redesign the disability claims process. This new 
process (prototype) is now being tested in 10 states. NADE 
supports the testing of this prototype although we continue to 
have reservations about some aspects of the new process. We 
have voiced these reservations to both Congress and the Social 
Security Administration. We are not convinced that the new 
process will improve efficiency, provide better service to our 
customers or increase public satisfaction. We hope that the 
prototype will produce sufficient data to clearly establish 
which aspects of this new process will work and which ones will 
not. We urge extreme caution, however, before full national 
implementation of this process, which eliminates the 
reconsideration level of appeal, until the necessary and well 
tested changes have been made at the OHA level of appeal that 
will produce some degree of assurance that OHA is equipped to 
handle the increase in the number of appeals. NADE believes 
that if SSA were to adopt the single presentation of policy, 
ongoing joint training and changes in the quality assurance 
process, the quality of service provided to its customers will 
be greatly enhanced and provide support for the new disability 
claims process.
    Finally, we believe that any action taken by Congress to 
improve the Social Security Administration's service to the 
public should include the elimination of the five month waiting 
period for Title II applicants. Currently Title II disability 
beneficiaries must wait five full calendar months from the 
onset of their disability before they can begin receiving cash 
benefits. Title XVI (SSI) beneficiaries, on the other hand, can 
begin receiving benefits immediately. This fosters a perception 
that the Title II program is unfair to the disabled worker who 
has actually paid into the system. This is particularly evident 
in cases involving claimants with terminal illnesses. Many of 
these claims are closed by the DDSs as ``no decision'' cases 
due to the fact that the claimant died during the waiting 
period. NADE's Position Paper on this subject has been 
previously shared with the Social Security Administration and 
with members of this Subcommittee. We have been encouraged by 
recent actions by the Congress and by SSA to address many 
issues that deal with the public's confidence in the disability 
program and the public's perception of ``fairness'' between the 
two disability programs. NADE strongly urges Congress and SSA 
to work together to produce legislation that will eliminate, or 
significantly reduce, the waiting period. We offer the 
expertise of our membership to assist in this effort.
    Again, thank you for allowing NADE this opportunity to 

Statement of Michael A. Steinberg, Esquire, Michael Steinberg & 
Associates, Tampa, Florida

    Mr. Chairman and Members of the House Ways and Means 
Committee, Subcommittee on Social Security:
    How do you know if you are a baby boomer? If you remember 
drinking ``fizzies,'' you might be a baby boomer. If you 
remember eating Pillsbury ``space food sticks,'' you might be a 
baby boomer. If ``AIDS'' caused you to lose weight because it 
was a diet chocolate candy, you might be a baby boomer. If, 
when someone mentions Ron Howard, you think of ``Opie,'' you 
might be a baby boomer. If your favorite pro wrestler is Chief 
Wahoo MacDaniel. If you remember having to actually get up and 
turn the dial on your television set. If your favorite brand of 
sneakers was P.F. Flyers. If, when you think of famous Chinese 
chefs, the first one that comes to mind is Hop Sing. If, when 
you hear the name ``Buffy,'' you think of Jody instead of the 
vampire slayer. If you have ever used a slide rule. If you know 
what word follows ``My Mother the------------------------.'' If 
you're ever worn a Tonomatic belt. If someone asks if you 
remember Goldie Hawn's first T.V. series and your answer is 
``You bet your sweet bippie.'' If you remember when the names 
of cereal started off with the word ``sugar,'' i.e, Sugar Pops, 
Sugar Smacks, Sugar Frosted Flakes, and, the initials AMC make 
you think of the Gremlin and Pacer, rather than a movie 
theater, you just might be a baby boomer.
    Today's hearing was announced on February 3, 2000. This 
would give an interested member of the public only six days 
including the weekend to prepare a written statement and 
deliver 200 copies to the Subcommittee office if they wanted to 
distribute their statement to the general public at this 
hearing. Thanks to the internet and the Subcommittee's website, 
an interested member of the public can check on a daily basis 
to see whether hearings are scheduled, prepare a statement, and 
have the same delivered in time for this hearing. This would 
have been almost impossible for the general public only a few 
years ago.
    Today's discussion involves the preparedness of the Social 
Security Administration to deal with the impending influx of 
Social Security recipients in the near future. There are two 
main hurdles the Social Security Administration faces in 
administering the retirement and disability programs, to-wit: 
(1) the dissemination of information to the public; and (2) 
internal communication within the Administration.
    The administration of the Social Security program involves 
implementation of the Social Security Act, regulations, 
programs operation manual, Hallex, Social Security rulings, 
etc. These are very complicated rules and regulations on par 
with the Internal Revenue Code. One of the primary complaints I 
have heard from my clients is that they have been given 
incomplete or incorrect information by the Social Security 
Administration. This has resulted in devastating consequences 
to their financial well-being, as well as to their health. The 
Social Security Administration's toll-free 800 number is 
universally considered subpar by most Social Security claimant 
representatives. Communication with the Appeals Council of the 
Social Security Administration is almost nil.
    A possible solution to dealing with the expected, but 
unknown, increase in claims is through the utilization of the 
private sector to assist in preparing and/or processing claims. 
A comparison could be made to the way the Internal Revenue 
Service deals with taxpayers. Imagine the chaos which would 
occur if the Internal Revenue Service attempted to handle all 
IRS matters internally; where private professionals were not 
permitted to charge a fee for assisting a taxpayer with filing 
a tax return without first filing a fee petition to the IRS for 
approval of the fee requested.
    Taxpayers use a variety of experts to assist them with 
planning and filing tax forms. For simple matters, a bookkeeper 
or non-CPA accountant would suffice. For more complicated 
returns, the taxpayer might desire to use a CPA. In the event 
of a disputed claim, a tax attorney might be preferable.
    While it is commendable for the government to want to 
protect Social Security claimants and recipients from paying 
unduly high fees, the goal to provide quality service is 
defeated if access to quality service is not available, because 
it is not financially feasible for experts in the private 
sector to assist claimants.
    Currently, there is a mechanism for approving attorney fees 
in disputed disability claims, but a claimant should not have 
to wait until he has a problem, before retaining an expert. The 
adage, ``An ounce of prevention is worth a pound of cure'' (.44 
kilograms for those who insist on using metric), is appropriate 
in this arena. If experts were allowed to charge a fee without 
first seeking approval from the Administration, a large number 
of experts would make their services available to claimants.
    Of course, the Social Security Administration could still 
provide services at no charge. The cost of services by the 
private sector would be governed by the principle of supply and 
    Historically, Social Security claimants and recipients have 
been dissatisfied with the quality of service provided by the 
Social Security Administration. There is no reason to believe 
that this would improve in the future unless tremendous changes 
take place which necessarily would involve enormous amounts of 
    I would propose an amendment to the Social Security Act, 
removing the requirement that a person desiring to charge a fee 
for assisting a claimant or recipient, must first file a fee 
petition, which must be approved before he can charge a fee. It 
might be prudent to require an examination and licensing to 
insure the provider is competent to provide this service.
    A second recommendation would be to make Social Security 
records more accessible to the claimant or recipient (and his 
authorized representative) as well as to make those records 
more accessible internally . This writer is not unmindful of 
the privacy problems inherent in disseminating information via 
the internet, but these problems are no more insurmountable 
than those with trading stock, banking, buying software, or 
purchasing airline tickets.
    In order to keep up with the expected volume of claims, the 
Social Security Administration must begin storing medical 
records and other paper electronically. Entire claims files 
must be instantly accessible. The days when paper files are 
mailed to six or seven locations during a claims proceeding, 
finally to be stored at a huge megacenter, are numbered.
    My final suggestion is to encourage universities and 
colleges to teach Social Security representation just as they 
would teach tax and accounting. In-house training by Social 
Security is not enough to insure quality service and 
representation either in the private sector or within the 
Social Security Administration.
    I foresee the day when a Social Security claimant can go to 
a neighborhood Social Security claims representative, pay a 
nominal fee, and have his claim for benefits filed 
electronically; when a recipient can ask his representative for 
assistance in planning his retirement and determine his best 
options with respect to continuing employment and medical care; 
and where a claim for disability benefits will not take several 
    With no disrespect to the members of the Social Security 
Advisory Board or Government Accounting Office, how many of 
them have actually represented claimants or served at a Social 
Security branch office and processed claims. In order for these 
hearings to have any substance, Congress must hear from persons 
actually involved in the system, i.e. claimants, administrative 
law judges, attorneys, claims representatives, and disability 
determiners, and not just the administrative heads of these 
groups who are out of touch with the reality of the system.
    As an expert on Social Security law and policy, and having 
personally represented thousands of Social Security claimants 
and recipients during my eighteen years practicing law, I would 
be happy to share my knowledge and experience at any future 

    Respectfully submitted,

    Michael Steinberg, Esquire
    Michael Steinberg & Associates
    1000 N. Ashley Drive, Ste. 801
    Tampa, FL 33602
    (813) 221-1300