[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]




 HELPING STATE AND LOCAL GOVERNMENTS MOVE AT NEW ECONOMY SPEED: ADDING 
              FLEXIBILITY TO THE FEDERAL IT GRANT PROCESS

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

                                HEARING

                               before the

           SUBCOMMITTEE ON TECHNOLOGY AND PROCUREMENT POLICY

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                              JULY 9, 2002

                               __________

                           Serial No. 107-183

                               __________

       Printed for the use of the Committee on Government Reform


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


                                 ______

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                            WASHINGTON : 2003
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                     COMMITTEE ON GOVERNMENT REFORM

                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut       MAJOR R. OWENS, New York
ILEANA ROS-LEHTINEN, Florida         EDOLPHUS TOWNS, New York
JOHN M. McHUGH, New York             PAUL E. KANJORSKI, Pennsylvania
STEPHEN HORN, California             PATSY T. MINK, Hawaii
JOHN L. MICA, Florida                CAROLYN B. MALONEY, New York
THOMAS M. DAVIS, Virginia            ELEANOR HOLMES NORTON, Washington, 
MARK E. SOUDER, Indiana                  DC
STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
BOB BARR, Georgia                    DENNIS J. KUCINICH, Ohio
DAN MILLER, Florida                  ROD R. BLAGOJEVICH, Illinois
DOUG OSE, California                 DANNY K. DAVIS, Illinois
RON LEWIS, Kentucky                  JOHN F. TIERNEY, Massachusetts
JO ANN DAVIS, Virginia               JIM TURNER, Texas
TODD RUSSELL PLATTS, Pennsylvania    THOMAS H. ALLEN, Maine
DAVE WELDON, Florida                 JANICE D. SCHAKOWSKY, Illinois
CHRIS CANNON, Utah                   WM. LACY CLAY, Missouri
ADAM H. PUTNAM, Florida              DIANE E. WATSON, California
C.L. ``BUTCH'' OTTER, Idaho          STEPHEN F. LYNCH, Massachusetts
EDWARD L. SCHROCK, Virginia                      ------
JOHN J. DUNCAN, Jr., Tennessee       BERNARD SANDERS, Vermont 
JOHN SULLIVAN, Oklahoma                  (Independent)


                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
                     James C. Wilson, Chief Counsel
                     Robert A. Briggs, Chief Clerk
                 Phil Schiliro, Minority Staff Director

           Subcommittee on Technology and Procurement Policy

                  THOMAS M. DAVIS, Virginia, Chairman
JO ANN DAVIS, Virginia               JIM TURNER, Texas
STEPHEN HORN, California             PAUL E. KANJORSKI, Pennsylvania
DOUG OSE, California                 PATSY T. MINK, Hawaii
EDWARD L. SCHROCK, Virginia

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
                    Melissa Wojciak, Staff Director
              Victoria Proctor, Professional Staff Member
                         Todd Greenwood, Clerk
          Mark Stephenson, Minority Professional Staff Member


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 9, 2002.....................................     1
Statement of:
    Heller, Sherri Z., Ed.D., Director, Office of Child Support 
      Enforcement Administration for Children and Families, U.S. 
      Department of Health and Human Services, accompanied by 
      Richard Friedman, Centers for Medicare and Medicaid 
      Services...................................................    46
    McClure, David L., Director, Information Technology 
      Management Issues, U.S. General Accounting Office..........     7
    Salazar, Roberto, Administrator, Food and Nutrition Service, 
      U.S. Department of Agriculture.............................    58
    Singer, Larry, CIO, State of Georgia, National Association of 
      State Chief Information Officers...........................    76
    Stauffer, Robert, health and human service business 
      development manager, Deloitte Consulting...................    86
    Valicenti, Aldona, CIO, Commonwealth of Kentucky, National 
      Association of State Chief Information Officers............    69
Letters, statements, etc., submitted for the record by:
    Davis, Hon. Tom, a Representative in Congress from the State 
      of Virginia, prepared statement of.........................     4
    Heller, Sherri Z., Ed.D., Director, Office of Child Support 
      Enforcement Administration for Children and Families, U.S. 
      Department of Health and Human Services, prepared statement 
      of.........................................................    48
    McClure, David L., Director, Information Technology 
      Management Issues, U.S. General Accounting Office, prepared 
      statement of...............................................    10
    Salazar, Roberto, Administrator, Food and Nutrition Service, 
      U.S. Department of Agriculture, prepared statement of......    60
    Singer, Larry, CIO, State of Georgia, National Association of 
      State Chief Information Officers, prepared statement of....    79
    Stauffer, Robert, health and human service business 
      development manager, Deloitte Consulting, prepared 
      statement of...............................................    88
    Valicenti, Aldona, CIO, Commonwealth of Kentucky, National 
      Association of State Chief Information Officers, prepared 
      statement of...............................................    71

 
 HELPING STATE AND LOCAL GOVERNMENTS MOVE AT NEW ECONOMY SPEED: ADDING 
              FLEXIBILITY TO THE FEDERAL IT GRANT PROCESS

                              ----------                              


                         TUESDAY, JULY 9, 2002

                  House of Representatives,
 Subcommittee on Technology and Procurement Policy,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room 2154, Rayburn House Office Building, Hon. Thomas M. Davis 
(chairman of the subcommittee) presiding.
    Present: Representatives Tom Davis of Virginia, Horn, Ose, 
and Schrock.
    Staff present: Melissa Wojciak, staff director; George 
Rogers, Uyen Dinh, and John Brosnan, counsels; Victoria Proctor 
and Teddy Kidd, professional staff members; Todd Greenwood, 
clerk; Mark Stephenson, minority professional staff member; and 
Jean Gosa, minority assistant clerk.
    Mr. Tom Davis of Virginia. Good morning. Welcome to the 
Subcommittee on Technology and Procurement Policy's oversight 
hearing on State and local governments' information technology 
grant management process. Before I continue, I ask unanimous 
consent that all Members' and witnesses' written opening 
statements be included in the record. And without objection, so 
ordered.
    I also ask unanimous consent that articles, exhibits and 
extraneous or tabular material referred to be included in the 
record. Without objection, so ordered.
    The Federal Government provides over $2 billion in grants 
each year to support a variety of State programs including 
Medicaid, child support enforcement, food stamps, and juvenile 
justice. The State governments, through their chief information 
officers, have voiced concerns that restrictions on how Federal 
funds are spent inhibit their ability to coordinate related 
functions across departments or agencies, thus making it 
difficult to provide effective service to citizens.
    Information systems are a critical tool to support and 
enhance program administration, improving the ultimate goal of 
serving clients. In fiscal year 2000, the Federal Government's 
expenditure for information technology [IT] planning, 
development, acquisition and operations for State systems that 
support the child support enforcement, child welfare, Medicaid 
and Food Stamp programs totaled almost $2 billion.
    Measuring the effectiveness of Federal investment in State 
and local IT initiatives requires a look at whether these 
investments have improved productivity and the quality of 
services delivered by State and local governments.
    Most State governments have embraced information 
technology's promise to deliver better services to citizens at 
a lower cost. State and local governments spent $39 billion on 
information technology products and services in 2001. That's 48 
percent of all government spending on IT. State and local 
spending on IT is increasing at a faster rate than Federal 
spending, not including defense and security-related 
expenditures, and State and local governments will be the 
beneficiaries of much of the supplemental funding approved for 
homeland defense. However, State and local IT planning faces 
the same general challenges that the Federal Government faces: 
incompatible legacy systems, stove-piped organizations and 
difficulty in transforming government processes to best use the 
new technologies.
    Stove-piped, or vertical organizations, where each agency 
develops and guards their own independent IT capabilities, 
often result in higher procurement costs and multiple IT 
systems that can be incompatible. Data and processes maintained 
by one agency's systems are usually not accessible to another 
agency's systems. SAP, a leading enterprise software firm, 
reports that roughly 40 percent of the average IT budget is 
spent on trying to achieve interoperability of different IT 
programs.
    Presently, many commercial solutions already permit 
different information systems to communicate with one another 
and to be used as a single, compatible whole, often known 
generically as ERP or Enterprise Resource Planning systems. 
Compatibility of IT systems requires changing process and 
management structures which has made it difficult to achieve 
government buy-in. Most Federal, State and local agencies are 
resistant to change or reluctant to attempt solutions that 
could erode their power. This problem is compounded because IT 
compatibility is an issue that crosses jurisdictional lines 
between State and Federal.
    The subcommittee is interested in learning more about how 
State and local information technology grants are managed and 
if the process of allowing States the flexibility to procure 
these systems in a timely, efficient and cost-effective manner 
while giving the Federal Government the appropriate and proper 
oversight. The focus is clearly directed at providing the 
delivery of government services to citizens efficiently. The 
private sector has already developed the information systems 
and programs that will facilitate this process. This hearing 
will attempt to determine whether the Federal Government should 
re-evaluate its role and permit State and local governments 
greater flexibility while maintaining accountability standards 
so that they can obtain the information technology tools they 
need to share information and deploy systems to achieve 
effective service delivery.
    The subcommittee today is going to hear testimony from Dr. 
David McClure, the Director of Information Technology 
Management Issues at the GAO; Dr. Sherri Heller, the 
Commissioner of the Office of Child Support Enforcement 
Administration for Children and Families, U.S. Department of 
Health and Human Services, accompanied by Mr. Richard Friedman, 
the Director of Division of State Systems, Center for Medicaid 
and State Operations Centers for Medicare and Medicaid 
Services; Mr. Roberto Salazar, the Administrator of Food and 
Nutrition Services, U.S. Department of Agriculture; Ms. Aldona 
Valicenti, the chief information officer, Commonwealth of 
Kentucky; Mr. Larry Singer, the chief information officer of 
the State of Georgia; and Mr. Robert Stauffer, the health and 
human services business development manager, Deloitte 
Consulting.
    [The prepared statement of Hon. Tom Davis follows:]

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    Mr. Tom Davis of Virginia. I now yield to Congressman 
Turner for any opening statements he may wish to make.
    Mr. Turner. Thank you, Mr. Chairman, and welcome to all of 
our witnesses this morning. I think this is a very important 
hearing, and I am glad that we're having the opportunity to not 
only hear from the witnesses here today, but to hear from the 
GAO regarding the report that the chairman and I requested some 
months ago regarding this issue.
    You know, I found with information technology we all 
understand full well the advantages that it brings to both the 
public and the private sector in terms of increased 
productivity, savings, cost savings, to the taxpayer, and yet 
we also, I think, have to admit that it is one of those areas, 
because it involves so many thousands, even millions of dollars 
of expenditures, that the potential for making mistakes, making 
errors in purchasing, making decisions about infrastructure, 
planning can lead to significant waste of taxpayers' dollars. 
And one particular area that I think we all share a mutual 
concern regarding is whether or not some of the requirements 
coming from the Federal Government to our States on State-
administered Federal programs has resulted in waster of 
taxpayer dollars because of some of those technical 
requirements.
    So the purpose of our endeavor today is to try to be sure 
that we are eliminating any of those possibilities for waste 
and to be sure that there is a seamless relationship between 
the Federal Government and the State government in these 
programs.
    So with that, Mr. Chairman, I thank you for having this 
very important hearing, and I look forward to hearing from our 
witnesses.
    Mr. Tom Davis of Virginia. I thank you very much.
    Mr. Horn, any opening statement?
    Mr. Horn. Thank you, Mr. Chairman, for holding the hearing, 
and I'll be very brief so we can get to the witnesses.
    I have just two general observations to make. One, as we 
have seen too many times in the past, Federal agencies often 
have serious problems whenever they undertake a major upgrade 
of their computer systems. The IRS, the FAA, the National 
Weather Service and others have experienced disastrous outcomes 
in past modernization efforts. So having Federal agencies 
supervise and advise the States on new information technology 
is an interesting proposition from the start.
    Two, the States often seem equally adept at fouling up 
information technology projects, so it is clear that the source 
of IT perfection will not be found in Sacramento or Richmond or 
Washington or anywhere in between. That brings us to today's 
hearing and the question of whether we can find some ways to at 
least simplify and streamline the current process while 
maintaining accountability for tax dollars.
    Federal and State agencies should not spend months and 
years debating, examining and then reexamining plans for new 
computer systems that are obsolete before they are unpacked. I 
doubt that there is a simple answer to this problem, but I hope 
and expect from our expert witnesses that we can be enlightened 
on this, where the problems are, and what logical systems might 
be pursued to allow American taxpayers to get a better return 
on our IT investments. Thank you.
    Mr. Tom Davis of Virginia. Thank you very much.
    Mr. Schrock, any opening statement?
    Mr. Schrock. Thank you, Mr. Chairman. I don't have an 
opening statement except to say thank you for doing this. I 
came mainly to hear what you all have to say, how what you're 
doing can maybe help us get our act in order up here as well, 
and I think Mr. Turner said it best. In the chairman's opening 
statement the one key word I looked at was 
``interoperability.'' That seems to be the key to everything, 
so I'm hoping you can focus on that and help us get our ducks 
in a row as well. And, again, I look forward to hearing your 
testimony.
    Mr. Tom Davis of Virginia. Thank you.
    As you know, I'm going to call a panel of witnesses to 
testify. As you know, the policy of this committee is that all 
witnesses be sworn, so if you'd rise with me and raise your 
right hand.
    [Witnesses sworn.]
    Mr. Tom Davis of Virginia. Be seated.
    To afford sufficient time for questions, if you could limit 
yourself to 5 minutes for your statements. We have a light in 
front, and when the light turns orange--it will be green--when 
it turns orange, you have a minute to sum up. When it turns 
red, your 5 minutes are up, and if you'd move to try and 
summarize after that. Your entire testimony is in the record, 
and Members, certainly their staffs--presumably the Members 
have read the testimony and have gleaned questions off of that. 
As I said, the total written statements are made part of the 
permanent record.
    We'll start with Dr. McClure and move on down the aisle. 
Thanks for being with us.

STATEMENT OF DAVID L. McCLURE, DIRECTOR, INFORMATION TECHNOLOGY 
       MANAGEMENT ISSUES, U.S. GENERAL ACCOUNTING OFFICE

    Mr. McClure. Thanks, Mr. Chairman. It's a pleasure to be 
here this morning, welcome us here at the hearing. We are here 
to discuss our review of the Federal funding approval process 
related to State IT systems used by HHS and USDA for the child 
welfare, child support enforcement, Medicaid and food stamp 
programs. I know that you and other members of the 
subcommittees have specific issues of interest that you want to 
followup on, and I'll be happy to do that in the Q and A 
period.
    My written statement provides details on the statutory and 
regulatory requirements that govern the Federal approval and 
funding for State IT development and acquisition projects in 
these four program areas. It's important to note that any 
changes to existing processes would require modifying 
regulations and possibly legislation to amend current statutes, 
most of which were put in place to ensure oversight 
accountability and stewardship over Federal funding provided to 
the States.
    There's also been much written about how the Federal IT 
approval process in the human services area works. In hearings 
and other forums, some State officials have reported that the 
process takes too long, is inefficient, duplicative, and yields 
questionable value for all of the parties that are involved. Of 
particular concern is the OMB requirement that when a system is 
to be used by more than one Federal program, plans must be 
submitted to multiple agencies that provide sufficient detail 
to demonstrate that costs are allowable and fairly allocated 
among the various Federal and State programs that benefit from 
the project. This cost allocation provision is one which many 
State officials want changed largely from a practicality 
standpoint as it relates to today's growing demand for a highly 
integrated technology environment.
    To obtain a factual picture about the timeliness of the 
Federal review processes, we examined State requests for 
Federal IT funding involving these four programs for 2 fiscal 
years, fiscal year 2000 and 2001. This entailed some 1,150 
planning and acquisition documents submitted to HHS's 
Administration for Children and Families, to the Center for 
Medicare and Medicaid Services, and USDA's Food and Nutrition 
Service. Unfortunately, we are unable to assess how long the 
Federal processes took to reach final decisions on all of these 
State submissions because the information required to do so is 
simply not readily available. We also did not assess the 
adequacy of the Federal analysis or the agency responses.
    What we can comment on is the time that it took agencies to 
respond to the initial State request. For a vast majority of 
these cases, 89 percent, agencies, the Federal agencies, did 
respond in the form of an approval, a disapproval or a request 
for more information within the 60 days generally required by 
regulation.
    We also examined a sample of 51 requests that exceeded 60 
days. When known, the most common cited reasons by the Federal 
agency for the additional time involved were resource and 
staffing shortages, the complicated nature of the issue 
involved or multilayer views required. A large number of these 
involved questions about cost estimation and cost allocation. 
Additionally, Mr. Chairman, in all but three of the cases where 
Federal responses exceeded 60 days, State officials that we 
spoke to reported that the timing of the Federal response had 
no negative impact on the State IT project. Still, some noted 
specific problems associated with the quality and consistency 
of the reviews, and clearly officials from one-third of the 
States that we contacted did surface problems and believe that 
this process should be more streamlined.
    With that, let me turn to the issue of consistency of the 
cost allocation reviews. OMB's cost allocations requirements 
are based on appropriations law, which provides that an agency 
may not expend appropriated funds for purposes other than those 
for which the appropriations were made. Mr. Chairman, while 
ACF, CMS and FNS did attempt to coordinate their reviews, we 
did find instances of inconsistent Federal actions taken by HHS 
and FNS when reviewing APD cost allocation plans. This 
accentuates the critical need for effective Federal 
coordination on these matters.
    Despite the expressed desire for change, progress in this 
area has been extremely slow to date in changing the processes. 
An ongoing work group performed by ACF, CMS, FNS to address 
these problems has been in place for almost 2 years, but it's 
currently stalled and at present has no plans to recommend 
changes to the ADP process.
    In short, the common concerns of the involved parties in 
these review processes revolve around five issues: timeliness, 
approval and funding criteria, review duplication and 
consistency, Federal and State staffing capability and 
competency, and governance-structured issues dealing with 
effective State and Federal working relationships.
    To be successful it will be important for future 
alternatives or improvements to the existing Federal review 
procedures, processes and practices to address these 
fundamental issues. And in short, the Federal agencies and the 
State need to reach agreement on what parts of the process can 
be retained and those which should be changed to improve the 
efficiency of the process.
    Thank you, Mr. Chairman. I look forward to dialog and Q and 
A.
    Mr. Tom Davis of Virginia. Thank you very much.
    [The prepared statement of Mr. McClure follows:]

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    Mr. Tom Davis of Virginia. Go ahead, Dr. Heller.

STATEMENT OF SHERRI Z. HELLER, Ed.D., DIRECTOR, OFFICE OF CHILD 
 SUPPORT ENFORCEMENT ADMINISTRATION FOR CHILDREN AND FAMILIES, 
 U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, ACCOMPANIED BY 
  RICHARD FRIEDMAN, CENTERS FOR MEDICARE AND MEDICAID SERVICES

    Ms. Heller. Thank you. Good morning, Chairman Davis and 
members of the subcommittee. Thank you for inviting Rick 
Friedman of CMS and myself to be with you. I look forward to 
the dialog as well.
    At HHS we review and approve major IT developments and 
programs for which Federal funding is open-ended. These 
programs are Medicaid, the child support enforcement program 
and the child welfare programs. Since States receive matching 
Federal funds for IT expenditures on these programs, and since 
these can be costly and risky, the Federal Government has 
exercised oversight in this area for quite a long time. HHS 
committed $1.903 billion in fiscal year 2001 to State systems. 
States contributed $809 million. These systems provide 
important information that helps States and HHS manage 
Medicaid, child support enforcement, and child welfare 
programs, including providing performance and outcome 
information that assists Congress in making decisions.
    We've traditionally seen the necessity of reviewing 
expenditures in programs that are potentially open-ended such 
as Medicaid. The Clinger-Cohen Act establishes that Federal IT 
projects should be subject to high-level scrutiny in terms of 
cost, IT system outcomes and relationships with other projects. 
This public stewardship role is especially relevant for this 
administration's management agenda, which stresses improving 
financial management and the effectiveness of e-government 
solutions and reducing IT project redundancies in the Federal 
Government.
    We want an approval process that helps States meet their 
program goals, serve the taxpayers' interests and adheres to 
applicable regulations and cost principles. The APD process 
generally provides States with fast responses. In the past 2 
years of APDs, we have responded to States within 60 days in 94 
percent of the cases. Even where more complex situations 
demanded more lengthy analysis, such as integrated systems that 
serve multiple programs, we maintain productive communications 
with States and coordinate with our Federal peers to ensure 
fair and timely review.
    And I'll skip some things here because you said them very 
nicely.
    The APD process reduces potential problems or waste by 
ensuring that once taxpayers buy a new IT system for one State, 
that same system can be offered to other States across the 
country. This prevents States from duplicating work that was 
already performed using Federal funds.
    We are pleased to have the GAO reaffirm for us that in the 
vast majority of cases we are timely in our response to States, 
and we're also encouraged by the States' report that when 
delays did occur, they did not generally cause problems for the 
development of their systems.
    We continue to believe that Federal oversight, including 
prior approval of open-ended major IT expenditures, is 
necessary, but we think that the funding process and review 
process could be improved to reduce the States' burden and 
improve program outcomes.
    After working with several years--for several years with 
States, State associations and with the Federal Government, in 
1996, the Department raised the dollar threshold for triggering 
the APD requirements. We have helped lead an interagency group 
with State representatives that is examining whether such 
thresholds could be raised again, and that group is also 
identifying other potential improvements in the process as 
well, including ways to reduce documentation and process 
requirements in exchange for increased accountability from 
States and better system outcomes.
    We provide a variety of technical assistance to States 
including weekly meetings with States that are developing major 
systems. We also conduct training sessions, share best 
practices at conferences and through Websites, and facilitate 
system transfers to help States and the Federal Government save 
money.
    We acknowledge that it does take some time and management 
attention to develop a strong plan for a major IT project and 
to assure that all the relevant organizations approve it. We, 
of course, go through a similarly demanding process for any new 
IT investment at HHS as required by the Clinger-Cohen Act. As 
overseers of these investments the Office of Management and 
Budget and the Congress frequently request additional 
information or explanations about the project, raising 
important issues that we need to address before moving forward 
with a project.
    Likewise, we want to make sure that State investments of 
Federal dollars in IT are the best investments possible. We 
have worked to ensure that States have access to federally 
funded IT tools and systems that are already developed and want 
to continue to maximize our previous investments.
    We intend to work continually with our Federal partners and 
with our State partners to develop some new approaches, such as 
performance measures for the development of systems that would 
tie funding specifically to desired outcomes. We think it's 
important, in short, to maintain accountability for the 
substantial investment being made in these systems, especially 
where the funding is open-ended, but we think that there is 
room to be responsive to the kinds of concerns that are being 
raised.
    We look forward to the dialog today and think that it's 
just the first step at an ongoing constructive dialog. Thank 
you.
    Mr. Tom Davis of Virginia. Thank you very much.
    [The prepared statement of Ms. Heller follows:]

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    Mr. Tom Davis of Virginia. Mr. Salazar.

STATEMENT OF ROBERTO SALAZAR, ADMINISTRATOR, FOOD AND NUTRITION 
            SERVICE, U.S. DEPARTMENT OF AGRICULTURE

    Mr. Salazar. Good morning, Mr. Chairman, members of the 
subcommittee. I'm Roberto Salazar, Administrator of the U.S. 
Department of Agriculture's Food and Nutrition Service, also 
known as FNS. I am pleased to join you here today as you review 
the management of State information technology grants, an 
interest shared by this administration in its support to States 
in acquiring computer systems for an array of Federal programs.
    A little over 2 months ago, I joined Secretary Ann 
Veneman's team at USDA. I had previously served as executive 
director of the Office of Science and Technology for the great 
State of New Mexico. I was eager to join with Food and 
Nutrition Consumer Service's Under Secretary Eric Bost and 
Deputy Under Secretary Suzanne Biermann, who have extensive 
State program and administrative experience. This collective 
experience allows us now as Federal administrators to see both 
sides of the coin. Together we bring an understanding of this 
State perspective to the issues that I believe we will discuss 
today. Each of us has experienced both the frustrations and 
successes of the APD process, and because of those experiences 
we are committed to providing leadership at the Federal level 
in order to work with our State partners to improve and 
expedite the approval process while maintaining integrity.
    The development of successful computer systems is a joint 
responsibility of Federal agencies and their State partners. 
FNS devotes resources, both human and financial, to the 
development and upgrade of State computer systems. In fiscal 
year 2002, FNS received a budget allocation of $750,000 to 
enhance our ability to support timely reviews and provide 
state-of-the-art technical assistance on food stamp and WIC 
program State-automated systems, and we expect to have those 
funds obligated before the end of this fiscal year.
    FNS and the States combined spend an estimated $340 million 
per year on these State-owned and operated systems that are 
instrumental to the effective administration of the food stamp 
program--this amount includes both operational and development 
costs--while the WIC program, which is nearly 100 percent 
federally funded, spends about $145 million in Federal funds 
per year on automated systems. A total combined Federal and 
State funds of approximately $485 million per year is spent in 
support of this area by FNS grantees.
    Technical support can be used to strengthen project 
management practices in order to reduce the risk of project 
failure and improve project outcomes. Federal support, however, 
must be a coordinated effort among Federal agencies to be 
successful.
    I'm very happy to be here today with my colleagues from the 
Department of Health and Human Services to hear their comments 
on the working relationship that we must ensure with our State 
partners. An example of that partnership is a site systems 
requirement reform project. The reform project was established 
among DHHS, FNS and our State partners to better respond to the 
effects of rapid changes in information technologies and 
increased flexibility as a result of changes impacting our 
programs, such as welfare reform. The vision of the reform 
project is to facilitate and encourage the use of information 
technologies designed to support State-operated programs that 
drive significant improvements and efficiencies, effectiveness 
and the delivery of services to needy households. The project 
seeks to insure a positive Federal-State partnership. Arizona, 
Kansas, Maryland, Minnesota, New York, North Carolina, 
Pennsylvania, Texas, and Virginia have participated in these 
discussions.
    The reform project is a work in progress that focuses on 
complex issues. Most of these center around improving current 
methods and processes for the APD approval and enhancing 
States' flexibility while optimizing Federal oversight. For 
example, some States have indicated that Federal agencies are 
not sensitive to State internal project approval schedules. 
This is a serious concern, especially for States with 
legislative sessions that provide for minimum opportunity for 
program agencies to seek approval for project implementation 
and the finances to support the effort. We must be sensitive to 
these timeframes and agree that there is room for improvement 
as we strive to better accommodate States' internal time lines.
    We have been a strong advocate of the use of industry 
standards and increased use of off-the-shelf software to reduce 
costs and length of development cycles. We continue to believe 
that through our joint efforts, Federal agency and States, 
greater efficiencies in the review and oversight process will 
be accomplished.
    The APD process is the established means for Federal and 
State agencies to communicate about very complex acquisitions. 
By its very nature, computer systems development demands the 
need for close, trusting working relationships among all the 
parties. There is a need for Federal and State agencies to 
share responsibility for ensuring that the systems will work as 
promised to accurately establish and record the case 
information eligibility systems and to deliver and reconcile 
program benefits. While the process at times is frustrating, we 
are committed to a process that promptly responds to the 
requests of States for funding, while maintaining our 
stewardship of the Federal funds and client access to our 
programs. There are successes and improvements that we should 
always recognize, and it is important that we continue to 
buildupon our partnership with both our Federal and State 
partners.
    Mr. Chairman, I truly appreciate the opportunity to appear 
here before you today, and I look forward to working 
cooperatively with this committee and our Federal and State 
partners to speed and simplify the APD process. This concludes 
my remarks, and I stand for questions.
    Mr. Tom Davis of Virginia. Thank you very much.
    [The prepared statement of Mr. Salazar follows:]

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    Mr. Tom Davis of Virginia. Ms. Valicenti. Thanks for being 
with us.

 STATEMENT OF ALDONA VALICENTI, CIO, COMMONWEALTH OF KENTUCKY, 
    NATIONAL ASSOCIATION OF STATE CHIEF INFORMATION OFFICERS

    Ms. Valicenti. Good morning. Mr. Chairman, honored members 
of the committee, thank you for this opportunity to appear in 
front of you one more time. What I would like to do is--by the 
way, we have submitted testimony in writing, and we will 
actually amend that and resubmit it because we'd like to cite 
some of the past work that had already been done on the APD 
process.
    Mr. Tom Davis of Virginia. Without objection.
    Ms. Valicenti. But what I do is I bring you a 
practitioner's perspective, and a practitioner's perspective is 
one that may be somewhat different from a policy perspective. 
But as you know, the States today are moving very much into 
what I would call a one stop/one screen environment, treating 
our citizens as customers, as customers of the system. And as 
we do that, we have found, in fact, what has already been 
echoed here over and over again, that individual stovepipe 
systems do not lend themselves to such an environment, and 
therefore, there are and have been identified two issues which, 
in fact, are the impediments. One of them is the ADP process, 
and second is the cost allocation model.
    Now, you have already heard a great deal about the ADP 
process, and it has been being worked on continuously to 
integrate the forms and distribution. But allow me one small 
story from Kentucky. You know, you have already heard stories 
about two printers and two computers on a desktop. We decided a 
couple of years ago that we needed a common desktop with a 
common set of software to allow for much greater flexibility 
and support and, frankly, to lower the cost of support. In 
order to achieve that, it took multiple trips, multiple 
answering of questions, the cabinet CIO making trips to 
Washington to coordinate that process. So although we have--
might have worked on the form end of it, we have not yet 
arrived at the practice end of it.
    Recently I've had the opportunity to speak to 
representatives from New Mexico, who, in fact, are also 
embarking on a one stop/one screen kind of environment, with 
the opportunity for them to look forward to integrating 
eligibility systems and working with nine different agencies. 
Frankly, folks, they have narrowed that down to three now and 
are equally as frustrated in trying to integrate the three 
systems. Because of continuous questions, restarting of the 60-
day clock, they have backed off to three agencies and, in fact, 
are talking about backing off of requesting any Federal funds.
    I bring you those two stories as examples of a 
practitioner. The cost allocation process is one that was 
alluded to, but let me give you one number. I asked a couple of 
people in my agency--and by the way, we are very well versed in 
cost allocation not only internally in the running of the 
environments that we do for the Commonwealth, but also in 
allocating back the appropriate costs to the Federal agencies. 
I asked them to estimate for me what percentage of every dollar 
is, in fact, due to the cost allocation process. Unequivocally 
I got 20 percent; 20 percent of every dollar goes back to the 
cost allocation process. That is a very large number. That is 
used in the delivery of the service and not in the service 
itself. And let me make that point again: in the delivery of 
the service, and not in the service itself. Those are 
staggering numbers, and there might be many more scientific 
ways to do that, but when I asked other people, that is pretty 
much the same number that I get, 20 percent.
    Not only that, but sometimes when we look forward to the 
more sophisticated environment that we are moving to, which is 
the Internet, to be able to provide some of the services over 
the Internet, I have been told that number may, in fact, be 
higher. So consequently, we have two processes that need 
additional work, the APD process and the cost allocation 
process. I bring you those two examples from a practitioner's 
point of view.
    I think NASCIO is very much in tune to being accountable, 
and accountable from a State perspective, to the money that is 
allocated, but, again, there is a huge environment which is 
changing, and that is the environment of how we serve citizens, 
and that, folks, requires our attention now. Thank you very 
much.
    Mr. Tom Davis of Virginia. Thank you very much.
    [The prepared statement of Ms. Valicenti follows:]

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  STATEMENT OF LARRY SINGER, CIO, STATE OF GEORGIA, NATIONAL 
        ASSOCIATION OF STATE CHIEF INFORMATION OFFICERS

    Mr. Singer. Thank you, Mr. Chairman. The members of the 
committee, and, first of all, I want to thank you for inviting 
me here today. This has been a subject of intense interest of 
mine for many, many years, and, in, fact I've had an 
opportunity--participated on a variety of work groups, task 
forces with the agencies represented here, with States from 
when I was in academia, and we've been reviewing this issue for 
many years.
    I would like to take this opportunity to identify three 
issues or three points, to make three points that I think might 
help us address this. The first is that the review of 
information technology expenditures associated with Federal 
program grants should become part of the actual review of the 
program itself rather than through a separate review process; 
second, that Federal funds should be promoted and not only 
permitted to be used on program systems run across integrated 
networks; and third and finally, Federal funds should be 
authorized for the purchase of proprietary software for 
programs with the understanding that custom development 
software continues to be placed in the public domain.
    All of these reforms will help State governments focus on 
the delivery of services to their constituents in a more 
effective and efficient manner without sacrificing 
accountability, while reducing costs to both Federal and State 
programs.
    The first point regarding the review of IT expenditures. 
Currently all States' program plans are reviewed by a Federal 
agency prior to the receipt of Federal dollars. That process 
applies whether the funding is for Medicaid, transportation or 
child enforcement. All of those programs undergo appropriate 
and rigorous scrutiny. Unfortunately, however, in addition to 
that scrutiny, information technology expenditures associated 
with those programs oftentimes have to go through a completely 
separate and additional review process. The APD process 
requirements applied by HHS and Department of Agriculture force 
States to submit separate and detailed plans. They also force 
prior approval for related procurement in addition to the plan 
approvals and for IT expenditures approval prior to each 
procurement or project initiation.
    Of all the Federal grant processes across the entire 
Federal Government, this APD process is by far the most 
cumbersome, expensive, and perhaps provides the least value to 
the Federal oversight and to the States. The APD process once 
had great value when it was originally developed. It was 
developed around 30 years ago, and it was developed around a 
time where the initial implementation of information systems to 
determine eligibility for Medicaid, food stamps and general 
welfare programs, the AFDC programs.
    With the rollout of eligibility determination 
responsibilities to States, there was great fear among Federal 
authorities of whether States would be able to handle large 
system deployments and procurements. At that time the States 
were not using systems for the other operating activities to 
any great extent, and the only real public sector successes 
with large-scale information systems had been with Federal 
programs such as Social Security and Medicaid--Medicare 
systems. As a result, it made a lot of sense to impose 
specialized reviews for IT to take advantage of the much 
greater expertise and experience at the Federal level to assist 
States and to provide assurance of State capabilities to spend 
funds in a responsible manner when procuring or planning 
information systems.
    Today, however, States are the largest consumer of IT 
resources in this country, larger even than the financial 
services industry, retail and manufacturing industries, and, 
combined with local governments, larger than the Federal 
Government. States understand their environments, their 
associated risks, and all have established procurement rules 
that are consistent with those imposed on Federal agencies by 
the General Services Administration.
    In addition, the people at HHS charged with the 
responsibility of reviewing these programs are no longer in 
many cases the same individuals charged with responsibilities 
for the Federal systems their agencies are responsible for 
deploying. Oftentimes they have no IT experience and almost 
always have less experience than those of their State 
counterparts.
    What we'd like to suggest as an alternative to the ADP 
process itself and is a more effective method of review, the 
approval of the IT approaches and systems should be integrated 
with program planning approaches at the beginning of the year. 
There should be nothing special about IT expenditures when 
compared to other program initiatives designed to improve 
programming performance. IT expenditures should be considered 
just another tool to improve program performance, no different 
than organizational changes, policy changes, process change 
initiatives and personnel changes. Having an integrated review 
process will foster a comprehensive understanding on the State 
change initiative by reviewing the entire plan in context.
    My colleague has talked a lot about the use of cross-
integrated networks. Interoperability is a major concern to 
every State. We focus very much on integrated architectures, on 
using the Internet to provide a seamless interface for citizens 
to share information across agencies. But the APD process 
creates a tremendous barrier to developing these common 
architectures. Also, the cost allocation process, which it 
works pretty well when it comes to buildings and personnel and 
others, isn't a process that works very well when it comes to 
allocating the electrons that cross across a common network.
    We think it's very important that we get together with OMB 
and the General Accounting Office and we look at something like 
a CPU-based costing model or a cost-per-service model that 
allows allocation on real, tangible, dividable items.
    Finally, and I'll make this very quick, there are currently 
restrictions at HHS against the use of Federal funds to 
purchase proprietary applications under the belief that this 
restriction will allow States to transfer systems readily 
between one another, pay for the system once. But what we've 
learned in the software industry is that a market economy 
allows for sale of package software at a much lower cost than 
custom development. We haven't been able to find a very good 
model for system transfer, and so in almost every case on the 
programs that are under APD control we have a preponderance of 
the systems that are developed as custom-built systems with a 
significantly greater cost than could be enjoyed if we were to 
allow a vendor to make a system specifically for implementation 
on a particular program across the States.
    So I'd suggest we look at those three points. I look 
forward to the discussion. Thank you.
    Mr. Tom Davis of Virginia. Thank you.
    [The prepared statement of Mr. Singer follows:]

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    Mr. Tom Davis of Virginia. Mr. Stauffer.

STATEMENT OF ROBERT STAUFFER, HEALTH AND HUMAN SERVICE BUSINESS 
            DEVELOPMENT MANAGER, DELOITTE CONSULTING

    Mr. Stauffer. Good morning, Mr. Chairman and members of the 
subcommittee. I am honored to have a few minutes to speak with 
you today on the topic that is very important to Deloitte 
Consulting, our State government clients, and ultimately the 
millions of the citizens those clients serve.
    Allow me to begin by saying I was involved in establishing 
the original Federal approval requirements for information 
technology grants management in the late 1970's and believe 
that after more than two decades, it is time to reform the 
process. It is a process that has not kept pace with the 
changing technology needs of the States and in some instances 
has hindered innovation, integration and competition.
    In the interest of time, I plan to focus on the issue of 
cost allocation and will provide some suggestions of Federal 
Government action related. Cost allocation. Over the past two 
decades, the combination of different Federal funding streams 
along with the fact that some programs are entitlements and 
others are block grants have influenced the development of very 
complex cost allocation process formulas. Today HHS program 
integration is a focus around the country. However, the 
existing cost allocation process is a barrier to that 
integration initiative in almost every State.
    State HHS integration efforts, which vary from State to 
State based on what programs are included, are critical to 
improving HHS program delivery throughout our Nation. Our 
recommendation is that the Federal Government develop a 
simplified cost allocation process which reduces the number of 
formulas. This simplification will encourage HHS program 
integration and hopefully accelerate the funding process.
    Steps for the Federal Government. We would recommend that 
the Federal Government reform the approval process, and also 
recognize that is the required legislation in many areas; 
redefine their role to focus on technical assistance and to 
develop performance measures. We also suggest that HHS IT 
project standards be established, and if a project meets those 
standards, that approval is not required. Those standards 
should address project management qualification for both the 
contractor and State project management. Neither the project 
manager for the State nor the contractor should be making their 
debut on a high-risk, high-cost project.
    No. 2, require that the business side and the IT side of 
the project be partners and sponsors. We believe there is a 
direct correlation between project success with active 
participation on both sides.
    Three, realistic procurement dates to maximize competition.
    Four, realistic project milestone deliverables and 
completion dates.
    Five, communication guidelines to maximize competition.
    Six, risk management that includes active terms and 
conditions to protect the State and maximize competition. 
Onerous terms and conditions such as unlimited liability, 
increase project costs and frequently force quality contractors 
from bidding.
    Next, procurement guidelines to outline when a planning 
contractor can bid on the development project.
    And finally, project outcome performance measures with the 
high--with a focus on high-risk and high-cost projects.
    We believe that any exceptions to the above, such as State 
procurement practice, etc., would require Federal approval. 
With these items clearly addressed within a new set of Federal 
standards, States will gain the consistency needed, and 
competition will be encouraged. This cannot help but improve 
the process that has outlived its time.
    Mr. Tom Davis of Virginia. Thank you very much.
    [The prepared statement of Mr. Stauffer follows:]

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    Mr. Tom Davis of Virginia. It looks to me that the key 
question is, from a philosophical point of view, that 
government wants to have its oversight and make sure this money 
is spent correctly and efficiently. And on the other hand, in 
overseeing that, we seem to have about a 20 percent loss in 
efficiency so as Ms. Valicenti said what's the tradeoff here? 
How much, if you didn't have the same kind of oversight, could 
you gain in efficiency, and how do you maximize this for the 
taxpayer? And that is the crux that we will try to get at a 
little bit today with some of the questions.
    Let me start questioning with my fellow subcommittee 
chairman on the government committee, Steve Horn from 
California. Mr. Horn. Thank you.
    Mr. Horn. Thank you, Mr. Chairman.
    I was very interested, Mr. Stauffer, in your fine series of 
things to look at. What specific steps can you recommend to 
rationalize increased efficiency of the Federal moneys for 
information technology grants? I just want to go down the line, 
see if anything's missing.
    Mr. Stauffer. I mean, that was a list that I developed. I'm 
sure it's probably incomplete, and it probably needs to be 
worked. But I think there's a number of things the Federal 
Government really adds to the process from a private sector 
standpoint, especially about competition. There's a number of 
procurements that you can look at in the States that you'll get 
four, five, six bids, and then you will see a number that 
you'll get maybe one bid. So there's got to be a whole look at 
that type of effort to ensure that there's consistency around 
the country from a private sector standpoint.
    Mr. Horn. Mr.--I can't see it through the thing there.
    Mr. Singer. Singer.
    Mr. Horn. Yeah. Mr. Singer, you've had a lot of experience, 
and what do you feel on that question, rationalizing and 
increasing efficiency of Federal moneys for information grants?
    Mr. Singer. One of the issues that I think Clinger-Cohen 
addresses is a focus on outcomes is generally the best way of 
getting the best efficiency for the expenditures of Federal 
dollars. We're focusing on the wrong end of the process. I 
think, as Mr. Stauffer suggested, if there were some specific 
guidelines up front that people were required to follow, 
instead of the approval process, but if there were specific 
outcomes established by Federal granting agencies, that program 
outcomes, not technology outcomes, that are expected to be 
achieved with the expenditure of the IT funds and an annual 
review of whether those outcomes are being achieved, and if 
they're not, then a more restrictive process of granting to the 
States or an elimination of those Federal grants might be 
appropriate.
    Unfortunately, when you focus on the IT expenditures 
themselves, separate from the program outcomes, you focus on 
the tool rather than the end product.
    Mr. Horn. Ms. Valicenti, anything to add to that?
    Ms. Valicenti. Congressman, I would like to echo maybe a 
couple of the things. One of them is really that the more we 
can do to integrate information technology into the entire 
business plan, the better. And that, my background being 
primarily in the private sector, the more you can do, that the 
more successful you are at the outcome. And the States that are 
doing that--and by the way, the States have begun to do that. 
In the Commonwealth now, we actually do not have a separate IT 
plan. There is an IT plan, though, that is associated with the 
business plan for each of the agencies, because that in itself 
drives the oversight in focus on the outcomes, as Mr. Singer 
said.
    Mr. Horn. Mr. Salazar.
    Mr. Salazar. Mr. Chairman and Congressman Horn, it would be 
difficult to disagree with the statements made, and so I would 
echo, and simply I think it is best said by Steven Covey, start 
with the end in mind. And clearly we have an opportunity here 
to partner with our States to craft perhaps performance 
standards that would define the outcomes that we want to focus 
on as opposed to on the process.
    Mr. Horn. Mr. Friedman, want to add anything to that?
    Mr. Friedman. I think just with regard to the 
interoperability issue, I think one of the reasons why we 
haven't been terribly successful so far is the lack of national 
standards. We're seeing with HIPAA, the Health Insurance 
Portability and Accountability Act, the opportunity to define 
standards which cut across the data silos that we all live in. 
And so I think one of the critical things is in addition to 
looking at the outcomes, make sure that there is national 
standards that facilitate going across the different programs.
    Mr. Horn. Ms. Heller, Dr. Heller, anything to add?
    Ms. Heller. Thank you.
    I agree with so much of what's been said that I--there's no 
need to rattle off a list of all that I agree with. I do think 
it important, however, to characterize where we are right now.
    I don't think we're in a situation where the States are 
badgering a reluctant administration to come into the 21st 
century. To the contrary, I think that the characterization 
that was made earlier be the work group sort of being stymied 
for a while has more to do with the transition. That is what 
happens at the end of an administration. People wait and hold 
their new ideas to try to pitch them to the next crew, and I 
think that what you have now is an eager crew of seven people 
like myself who have 22 years of State and county IT 
development experience. Having been on the other side, I think 
you're going to see some increased cooperation and partnership 
and progress made. It's not that we have to be sort of kicked 
into action.
    Mr. Horn. Mr. McClure, GAO always has something else to 
add. What are they?
    Mr. McClure. Well, Mr. Horn, if you look at Mr. Stauffer's 
list, it resembles GAO's recommended practices for IT 
management, so I think the list is a good one. If you compare 
that list to the requirements of an APD, you're going to see 
some match, and you're going to see some mismatch.
    Referring to Aldona's statement, form over substance, I 
think if you look at the APD process and its requirements, it 
does expect business-case-type needs to be presented. It does 
expect program needs to be built in. So these things are not 
absent from the existing process.
    I think what we have to look at is what are the problems 
caused by the process versus the implementation of the process, 
and I think we're finding that there's issues in both areas, 
but it's not all one or the other.
    Mr. Horn. The next part of this question, people will say, 
my gosh, we're not going to go back to that. When you've got a 
series of small States that could benefit from a certain amount 
of working together, is there any thought here that the smaller 
States would have a compact where they could either have a 
center or whatever it is? And, of course, with Governors 
everybody's parochial, but it could be that it might be a way 
to solve some of these problems. What do you think about that?
    Mr. McClure. I agree, there's nothing specifically that 
precludes that from happening now. I think what you're seeing 
is that the governance process for funding and approval is not 
totally in sync with that kind of mode of operation. It's 
exactly the challenge that is being confronted by the Federal 
Government in moving toward electronic service delivery. Our 
funding and approval processing are all mostly geared toward 
individual programs and agencies. So the request for money, 
when it cuts across these boundaries, is problematic for the 
existing process.
    Mr. Horn. Mr. Friedman, you want to add something to that?
    Mr. Friedman. Yeah. We have several examples actually where 
small States are working together in the New England area, for 
example. Let's see now. New Hampshire, Maine and Massachusetts 
are working on a collective pharmacy system. The State of 
Hawaii is working closely with Arizona in terms of a 
collaborative center in terms of Medicaid and eligibility.
    So I don't, frankly, believe that the APD process is an 
obstacle to collaboration. I think there are other problems 
associated with trying to make sure that everybody's in sync, 
but I wouldn't lay that at the doorstep of the APD process.
    Mr. Horn. I've found in my own university experience when I 
always would get out there and say, hey, let's do this, and I 
found that over time the beginning of the alphabet in Latin is 
no longer any better. And I'd rather be the zebra at the end of 
the line and take some of the shots, but hopefully that we 
would have common sense when it relates to large things to do. 
And that's what--what's your advice for any eager beaver that 
wants to get something done and just wonder how you see these, 
because some people really know how to get this done, and 
others don't? And are they going to have different committees 
that would work that and get it from the national organizations 
and the agencies, so forth?
    So is there anything in terms of which ought to be added 
besides just the paper? Yes.
    Mr. Singer. Congressman.
    Mr. Horn. Mr. Singer.
    Mr. Singer. In the last several years, the way systems are 
built has changed pretty radically. Instead of what we have 
always done, which are very large, complex, tightly integrated, 
hierarchical systems, which take a long time to build and a lot 
of money and you plan them all at once and then you do it 
continuously without stopping, we are now able, with the 
Internet and with Web services and with object development, 
Java and Dot.Net, we are able to build systems in components 
and little pieces. And while it may be difficult for a compact 
of States, whether large or small, to agree on all of the 
issues on a total system, we find that especially as it relates 
to Federal rules that are common that we all follow around 
HIPPA and other activities, there are pieces of our systems 
that we are willing to concede are identical from place to 
place, and it's possible to reuse pieces of software and 
services.
    A lot of our colleagues in the systems integration 
business, like Deloitte & Touche, oftentimes bring reusable 
code with them when they go from one engagement to another 
engagement.
    I will disagree a little bit with my colleague about the 
APD process. Because the APD process is so strenuous and that 
you have to project cost allocation over the life of the whole 
project, it discourages taking projects in incremental pieces, 
defining them as separate projects, because each time you have 
to go through the APD process again.
    So I think perhaps your point of us working together is 
very much a goal not only of NASCIO but of the vertical 
associations in Health and Human Services and Transportation 
and others. But there is a lot more collaboration in 
transportation and law enforcement and other areas where the 
Federal agencies work as facilitators of these common programs 
rather than as reviewers.
    Mr. Horn. Do you believe that the Federal funding and 
procurement regulations encourage--and this is a term I just 
detest, and that's ``stovepiping.'' I once spent 15 minutes to 
get 15 members of the Civil Service to tell me what is their 
definition, and it was as sad as when we started. And, anyhow, 
let's talk about the work against the transformation of 
government's processes needed to make IT investments 
successful.
    Ms. Valicenti. I would like to offer one more perspective, 
and that is that we often talk about a common infrastructure. 
And let me offer an analogy. We expect electricity to be there 
when we turn on the light switch. And that's the way it 
operates when we try to turn on a program. We expect the 
infrastructure to be there, the computing devices, the 
networks, the ability to plug in.
    And it is very difficult to build an infrastructure in 
programmatic thin slices or even robust slices. The 
infrastructure needs to be built in such a way so that 
programs, when delivered, can plug into that infrastructure. We 
tend not to build it every single time. When we move into an 
apartment or a house, we expect electricity to be there. And, 
frankly, when we add a new program, we expect the 
infrastructure to be there.
    This process, as we are practicing it today, makes it 
virtually very, very difficult to build an infrastructure which 
is robust for programs to plug into.
    Mr. Horn. I think my time is up.
    Mr. Tom Davis of Virginia. It is, Mr. Chairman. Thank you 
very much. Mr. Schrock.
    Mr. Schrock. Thank you, Mr. Chairman.
    I thoroughly enjoyed hearing what you all said today, and I 
guess I'm having a rough time knowing where to start; but I 
think I'm going to start with Ms. Valicenti.
    You said something about integrating three different 
systems, I don't know how you'd do that--with a lot of 
difficulty--and achieve the commonality you want. Have you been 
able to do that in Kentucky? And have the folks in Kentucky 
talked to Mr. Singer down south in Georgia, and have either of 
you talked to people like Mr. Salazar out in New Mexico? 
Because I think what Mr. Horn is talking about, getting the 
States--you know, we don't operate totally within our States, 
we operate across borders. And if we can share with one another 
and everybody is interoperable, the costs are going to be less, 
the 20 percent won't be there. How have you been able to 
achieve that? Or----
    Ms. Valicenti. Well, first of all, the States all do talk 
to each other almost continuously.
    Mr. Schrock. Great.
    Ms. Valicenti. We share best practices. It may not 
sometimes be in a very formal way, but very much in an informal 
way, many times. When I gave the previous analogy about a 
common infrastructure, that has probably been one of the first 
things that we have done. We have leveraged each others' 
experiences, whether they are a procurement document which we 
freely distribute among our fellow States, or whether it be a 
certain practice that we actually engage in.
    It has probably been a bit more difficult with specific 
systems because of the way the systems were developed in the 
past and deployed. They tended to be very specific to a 
singular State process. And so let me talk about process for a 
few minutes.
    Because of the way that States have evolved, their business 
model practice has always been incorporated into the delivery 
of system. Not only, for instance, how do I pay a check; 
because, frankly, whether you pay a check in the public sector 
or the private sector is pretty much the same. I think what we 
have done at the State level is embellished that with years of 
tradition, and many times that has crept into the way that 
systems have been developed. But I think when we take a process 
approach, which is sort of strip away the practices and look at 
what are the key elements, you will find that there is probably 
much greater commonality among the States rather than 
differences.
    I think what is evolving is the ability to deliver 
components of systems or commercially built systems that in 
fact would address those critical pieces, yet still allow for 
some configuration at the State level, which is important to 
each State. And I think that's where the industry is evolving.
    And when you ask about Kentucky, we have delivered a common 
system for all agencies to do our accounting, our procurement, 
and our budgeting; that it was not only a huge technical 
undertaking, but a huge cultural change process where 
traditionally people have had 20 or 30 or 40 different systems. 
So, if you multiply that across the States, that is even a 
bigger challenge. But I think we are taking that challenge in 
small bites as we do the best practices.
    So, when I talked about one stop or one screen, that is a 
practice that I think that States have adopted from the private 
sector, because we all want to be treated as customers. And I 
think that our citizens need to be treated as customers. And so 
asking them the same questions 9 times or 20 times over is 
probably not what we want to do from a customer service 
prospective.
    But I think that there is a more serious issue here, and 
that is when we have asked those questions, we have in fact 
duplicated or triplicated those systems, which have not had the 
same information and, in fact, hindered us, how it worked.
    Mr. Schrock. I don't mean to keep picking on you. Mr. 
Stauffer talked about change. How do you get people engaged to 
change? You know, the attitude I've found--I'm a first termer, 
and every time you talk to somebody up here, ``Why do you do 
it?'' ``Well, we've always done it that way.'' I get so sick of 
hearing that, I could scream, because that's not going to serve 
anybody.
    How do you get people engaged in trying to get this stuff 
changed, so that you are operating at today's level and not 20 
years ago, without having them stepping in the way and 
getting--causing problems?
    Ms. Valicenti. Well, sir, I think that process has started, 
and has started some years ago and, frankly, I believe will be 
continued. Because of the way that I think that States are 
operating, and we are hoping that the Federal Government will 
operate in a similar manner, is that we bring people into 
positions who have previous experience or multiple experience 
to provide--whether it's a private sector view or whether it's 
a public sector view or a State view, to better understand that 
many processes are not that different; that they are probably 
the same, and we've sort of got to figure out how to strip away 
all these trappings.
    Second, I cannot find any substitution for leadership, and 
leadership is one of the things that all of us, the State CIOs, 
are expected to have. And, frankly, we take that from our 
Governors and we take that from the Federal Government. So 
leadership is required at multiple levels.
    And I think that this--that the dialog that we are having 
here is a very good one, because it in fact brings together 
multiple levels of government to talk about the leadership 
issues.
    Mr. Schrock. Mr. Chairman, I know my time is up. I would 
like to ask a couple quick questions of Mr. Salazar.
    Mr. Salazar, you mentioned you didn't feel there was enough 
coordination between the Federal and the State levels. I agree. 
In your view, how could we correct that? That's one question. I 
have a second question after that.
    Mr. Salazar. I think communication is always key. From my 
experience at the State level, I noted that we were always most 
successful in the APD approval process, cost allocation formula 
process, when we were most communicative with our Federal 
partners, when we reached out to the Federal agencies far in 
advance of the process and communicated with them on a regular 
basis and looped them in, so to speak. We discovered that as a 
State, when we took the approach that it was easier to ask for 
forgiveness than for permission, we ran into roadblocks and 
difficulties and then threw up our hands.
    So communication is key, and there is always room for 
improvement. And that's true regardless of any issue one is 
dealing with, is that ongoing communication.
    The sharing of best practices is also key in the process. 
We have experienced great successes at Food and Nutrition 
Service with the deployment and development of electronic 
benefit transfer systems, the E BT systems for the delivery of 
food stamp benefits; we have seen multistate acquisitions that 
have taught us valuable lessons both in terms of the point that 
competition was stymied at times, that costs rose when States 
got together and attempted to purchase multistate acquisitions.
    We have seen successes with the appointment of WICEBT 
systems. We currently have two multistate projects taking 
place. We have six New England States currently developing and 
doing E BT. Iowa and South Dakota are another model of two 
States who are jointly doing single system development.
    So it is clearly possible. With those activities we learn 
lessons in terms of cost and competition.
    Mr. Schrock. Mr. Chairman, just one very personal question.
    I could not help but notice that wonderful water bottle you 
have got there. I have been looking for one like that. Where in 
the name of common sense did you get that? That is terrific.
    Mr. Salazar. Mr. Chairman, Congressman Schrock, it was a 
gift, and I will get back to you for the record as to where it 
was purchased.
    Mr. Schrock. Great. Thank you.
    Mr. Tom Davis of Virginia. Just note, it looks like it's 
under the $50 gift limit.
    Mr. Schrock. It does. It's magnificent. I have been trying 
to find one. Thank you very much.
    Mr. Tom Davis of Virginia. Mr. Ose, do you want to followup 
on that question, or are you going to pursue your own line 
here?
    Mr. Ose. I have some questions having to do with that gift, 
Mr. Chairman.
    Thank you, Mr. Chairman. I have a couple questions at the 
moment.
    Ms. Valicenti, welcome to the committee. A couple 
questions. In Kentucky, the budget for IT services and programs 
is how much?
    Ms. Valicenti. We have a centralized budget of $60 million, 
and then there is an additional budget of about $200 million 
within the agencies.
    Mr. Ose. And then on top of that, any Federal grants that 
might be added?
    Ms. Valicenti. Yes, there are specific grants, and I'm not 
sure that I can give you a number for that this minute.
    Mr. Ose. Is the money--the money that comes from the 
Federal Government through these grants, it's very targeted?
    Ms. Valicenti. The money that comes from the grants is 
specifically targeted to programs or to certain initiatives.
    Mr. Ose. So if the State of Kentucky had a certain 
initiative it wanted to do, it could apply for a grant; and 
then, if it received the grant, it could take those moneys and 
dedicate them to that initiative. And, if I understand the 
testimony, thereafter the operating costs would be 50/50.
    Ms. Valicenti. Yes, sir, if that is the structure of the 
grant. It depends on what the grant requirements are. In some 
cases, the grant may in fact require a match; others require a 
match in kind. So there's various grants.
    Mr. Ose. So it varies all over the border?
    Ms. Valicenti. Yes, it does, sir. And it varies from 
agency--from department to department. Justice may have a 
different structure than HHS.
    Mr. Ose. Now, I noticed in the testimony, particularly from 
Mr. McClure, that the grants are focused primarily in three 
areas--actually, two areas, the Department of Health and Human 
Services and the Department of Agriculture that you reported on 
within your testimony.
    Mr. McClure. That's correct.
    Mr. Ose. And I noticed in your testimony a reference to 
California. I obviously have an interest there. And we have a 
curious situation exists in California relative to a certain IT 
issue having to do with acquiring licenses to use IT that we 
don't have employees to use.
    My question is how does the Federal Government protect 
itself from the kind of folly that occurred in California? In 
other words, we don't want to write a check for $95 million and 
then have the Governor buy licenses to use software, the total 
number of which the licenses exceed the number of State 
employees by a ratio of 2 to 1. How do you protect against 
something like that?
    Mr. McClure. I think it's a good question that goes back to 
something that we should factor in, and that is how do the 
State processes work reviewing those kinds of issues compared 
to the Federal processes? And are they in sync so that they are 
not out of connection with one another?
    Mr. Ose. It would seem to me that the money--whatever the 
money is, it's fairly fungible, in that--in the sense that the 
State could take its resources and move them in order to make 
room for a Federal grant. And this is where--I'm thinking 
holistically, much as you are, and I appreciate you mentioning 
this. So I would like to hear your answer at length.
    Mr. McClure. Well, I will continue to expand on it as much 
as I can. I think, again, you have to remember that State 
spending for I T--and we have State folks here--are also 
subject to review and regulations that are passed by the State. 
So that it's not just a question of how much latitude you have 
in the use of the Federal dollar, it's also what are the 
requirements for the use of the State portion of these--of the 
State portion of spending in these projects as well. And there 
can be differences because of differences in State law and 
Federal law, except where the entity is asking for funding from 
both at the same time, and they are laying out the argument 
where this money will be spent, for what specific purposes, and 
what will be allocated to the State share and what will be 
allocated to the Federal share.
    But I think we have a lot of information on what's working 
and not working in the Federal review process, and it would be 
interesting to ask of the States what's working and not working 
among the State processes that could be best practiced, that we 
could emulate more of, so that when we resolve these issues, we 
are working from both ends. And I'm not sure that's adequately 
being done.
    Mr. Ose. Ms. Valicenti, would that work?
    Ms. Valicenti. Sir, each State has procurement laws which 
in fact are--probably have more commonality than differences. 
And in many cases, the States have adopted some of the Federal 
procurement regulations, schedules, etc. If I may be so bold as 
to comment on the California case that you cited.
    Mr. Ose. I would appreciate any insight to that you can 
give to that $95 million----
    Ms. Valicenti. I would say that maybe there is one where 
there was inadequate oversight about the requirements for the 
State. As you mentioned, a number of licenses. For instance, 
enterprise kind of agreements are done by the States all the 
time. We do them in our State. We do them with a great deal of 
foresight on trying to figure out what is going to be our 
future deployment of systems and where do we need such software 
and a schedule of when that software might be needed, so that 
when we do that kind of procurement, that we have some 
knowledge and foresight about the deployment.
    The issue, it appears to me, in California was management 
oversight; then, maybe, inadequate looking at the numbers.
    Mr. Ose. You can understand my concern.
    I did pull from CRS, Mr. Chairman, a list of the IT grants 
for fiscal year 2001 that California received. The total 
exceeds $120 million within just two departments: one, the 
Department of Education; the other, the Department of Commerce. 
I just--I mean, this issue of oversight is--obviously, that's 
why we are all on this committee. But it's such a shame that 
California has squandered $95 million at this point, when we 
have established practices in other States where we could 
completely avoid this issue. I would hope that we would not go 
away from this as we go into the days ahead. And I know my time 
has expired.
    Mr. Tom Davis of Virginia. Thank you. And I think that the 
California issues could be adequately aired over the coming 
months in California, from my reading on it.
    Mr. Ose. I guarantee you.
    Mr. Tom Davis of Virginia. Let me make a comment and then 
ask some questions.
    First of all, IT is ubiquitous now in government. I met 
with a group of Burger King franchises, and I said, ``Well, 
how's the burger business?'' and they said, ``Well, we are not 
in the burger business. We are an IT company. I mean, burgers 
is our product component, but--'' and then they just walked 
through the way they get to it. And it's not that you are an IT 
firm or you are not an IT firm. Technology just permeates 
everything we do in business, and it's getting that way in 
government.
    It's not quite the same in government yet, and that's why 
we have some of these inefficiencies and are still developing. 
And the fact of the matter is, when we make laws and go to 
conference and pass it, the State and local governments aren't 
at the table in the conference. Now, some of us who have served 
at State and local governments are there, and it occurred to us 
along the way how this could be implemented downstream.
    But the fact is, many times that's the last priority when 
you are trying to get out of a conference and resolve difficult 
issues. And the result is a lot of rules and regulations that, 
frankly, when you move them downstream to the people we're 
asking to implement than at the State and local level, they 
don't work as efficiently as they might. And we tend to err on 
the side of oversight.
    I've said before, and it's been said by others, that we 
spend literally billions of dollars making sure that public 
officials, politicians, and people in the bureaucracy don't 
steal money, and we are fairly successful at that. But the 
result is that they can't do much of anything else either.
    And what risks are you willing to take to allow people out 
there, who are trained to do things, to do their job without 
having to check and write reports for everything they do and 
allow them to be efficient?
    And if, in fact, Ms. Valicenti, your number, 20 percent, is 
correct, that's too high a price to pay. I would rather allow 
people out there to make their own moves without the oversight 
than pay a 20 percent cost to oversee everything they do and 
trying to get at what that right balance is.
    Now, obviously, we'd like to have oversight, we'd like to 
have accountability. We don't want to just throw money out the 
door to State and local governments without knowing where it's 
going, how it's being spent; if it is for its intended purpose? 
But if you are paying a 20 percent premium to oversee this, 
that's a lot of money. And no wonder people sometimes don't 
feel they are getting their money's worth for the taxes they 
pay if that's the kind of oversight they get. I just think we 
can do a better job, and I think that's what it's all about: 
finding the right balance.
    So nobody is wrong here, but I think where it is a 
situation is when you have identified some glaring 
inefficiencies where it doesn't work. And I think we can start 
when we are writing legislation to do a better job up front so 
that in the future, as we write additional rules and promulgate 
additional regulations, we are not creating a burden 
downstream. As was said, you should start with the end in mind. 
We don't always do that when we are implementing these issues.
    I guess I have a couple questions as we move through. Is 
there a way that somehow we could build more flexibility into 
this process without having to rewrite everything? Are there a 
couple simple lines we could put in somewhere that would allow 
people like Dr. Heller and Mr. Friedman to allow more 
flexibility in overseeing this so that they don't have to have 
two terminals at a desk where the State--or council of State 
governments, or a group of States could come to you and say, 
``Look, here is the way we like to do it; can you give us a 
waiver?'' Where we could give a kind of blanket option for you 
all to do things in a very practical, commonsense way?
    Ms. Heller. Certainly. And I think it's already underway. I 
think we have to be careful not to set up straw men, as if the 
existing requirements are preventing anything good and novel 
from happening. Already the cost allocation methodology, for 
example, permits cost allocation based on caseload or function 
or development costs or data element counts or screen counts or 
any other methodology that a State can make a case for.
    The majority of States already have integrated their 
eligibility systems for TANF, Medicaid, and food stamps. In 
four States--Florida, Nevada, Maryland, and Rhode Island--the 
child support program is already integrated. Georgia, North 
Carolina, New Jersey, New York, have under development 
enterprise-wide systems that include portals for accessing from 
multiple systems.
    In other words, I don't think it helps the discussion to 
set up the straw man of having three computers on everyone's 
desk.
    Now, on the other hand, is it difficult to get there? Are 
there a lot of processes that could be streamlined in terms of 
having to fill out reports multiple times? Sure, I think 
there's improvements that can be made. Some of what's been said 
on focusing on program outcomes instead of more ritualistic, 
procedural things ought to be a big help to make sure that kind 
of thing happens. I just think we ought to be careful not to 
oversimplify or set up a straw man. We can all nod approvingly 
at words like ``more efficient review process'' and 
``maximizing competition,'' but we have to realize that when 
you make a more efficient review process, you sometimes get 
less competition.
    So we shouldn't oversimplify how these concepts hook 
together. I mean, the story we heard about California made us 
say, yes, oversight is a good thing. But we have all been 
talking about how to administratively get less oversight. I 
just think we have to be--the differences are subtle and 
they're complex, and it's a question of having the will to 
sweep the debris out of our way without sacrificing the 
concept.
    In answer--the short answer to your question is, yes, of 
course there are things we can do to streamline this, short of 
rewriting everything.
    Mr. Tom Davis of Virginia. Well, maybe there is some 
flexibility we can give you legislatively that right now you 
don't feel you have when State and local governments, maybe 
other Federal agencies, come to you at the end of the day. You 
would hopefully exercise it judicially, but we could end up 
with some reasonable outcomes. There needs to be a sniff test, 
a common sense test, for whether something is working or not. 
And I think there are enough stories out there that are well 
documented that don't pass the sniff test because of this.
    It's nobody's fault. You don't think everything through 
when legislation is passed, and another set of laws are passed 
and another set of laws. And, Dr. Heller, you weren't here to 
write any of those laws; you were in Pennsylvania or doing 
something else when all of this was done. So I don't think you 
have to go overboard defending. We are just constantly 
improving.
    Ms. Heller. I think you are absolutely right about common 
sense. The basic idea of the planning and approval process is a 
feasibility analysis of the project, assurance that 
alternatives were looked at and cost/benefit analyses were done 
to make sure that this was the cheapest and best alternative, a 
project management plan, a schedule of budget. Those things 
are--any private sector as well as public sector IT project 
would be expected to have. Now, over the years, we got a lot of 
forms and we got a lot of dates and repetitive processes and--
--
    Mr. Tom Davis of Virginia. Well, technology changes too. I 
mean, we have to constantly review it. Look, you know, you read 
about the history of Federal procurement. We go back and forth 
about too much oversight, and then it gets too burdensome, and 
then we swing back the other way and give it to the guy at the 
desk; and then we don't train the guy at the desk who's making 
the decision, and you get some mess-ups and so you go back.
    It's hard to get the right balance, particularly in a time 
when technology continuously evolves, when our needs 
continuously evolve, and to try to get it right. And I think, 
appropriately, we continue to ask questions.
    But if, in fact, what Ms. Valicenti has said, that it's 
about a 20 percent markup to oversee it, that's, I think, too 
high a price.
    Ms. Heller. I want to state for the record that I'm not 
necessarily accepting that as a fact.
    Mr. Tom Davis of Virginia. I understand. But you haven't 
come up with any numbers. She has come up with it just through 
an informal survey of her people in Kentucky. So we will stick 
with it for now.
    Ms. Heller. Well, it turns out that they're a lot more 
sensitive about Federal people making up and inventing numbers 
than they are about State, in my own personal experience. But I 
think there is a genuine will, as I said, to clean the debris 
out of the way administratively, to whatever extent possible, 
to make this make more sense and to make it responsive to 
modern realities like off-the-shelf software and so forth.
    Mr. Tom Davis of Virginia. Well, I headed a county 
government, Fairfax. It has the second-largest county budget in 
the country. In fact, not to brag, but during our tenure we 
were the second-best financially managed in the country, my 
last 2 years there as head of the government before I came to 
Congress.
    Mr. Ose. Mr. Chairman, and I can tell you--would you yield?
    Mr. Tom Davis of Virginia. Yeah. Well, I was on a roll, but 
that's OK.
    Mr. Ose. The rest of us during that period of time in that 
county--who was in charge?
    Mr. Tom Davis of Virginia. I was in charge.
    Mr. Ose. That's what I thought. Thank you.
    Mr. Tom Davis of Virginia. Thank you very much. Did you 
hear that? I was in charge.
    But the fact is, we had a lot of State burdens on us, a lot 
of Federal burdens on us, and we thought we could do a better 
job. We thought we were pretty hot shots. But the reality is, 
as IT becomes more interwoven into the fabric of everything we 
do, and intercommunicate between governments at all levels, 
we've just got to get better about it. And the culture has not 
been thinking about how we do that, it's just getting these 
rules and regulations out there so we can get services to the 
people. And I think we now are going to rely on people like you 
to get us to the next level. That's all I'm saying.
    Ms. Heller. I appreciate that. And, frankly, optimistic 
because there are people like us who share experiences. I mean, 
I've managed State IT projects and you've managed State--we're 
coming from--we're sitting in different seats, but we have had 
the same handful of formative experiences.
    On the other hand, I look at a State right now that has a 
single bid on a project that's going to exceed $1 billion, and 
the vast majority of it is going to be paid for with Federal 
funds, and I'm frankly glad that I have the authority to ask 
for a cost/benefit analysis and insist that the State compare 
what they are going to build from scratch.
    Mr. Tom Davis of Virginia. Sure.
    Ms. Heller. With what they can purchase that's already been 
built by another State.
    Mr. Tom Davis of Virginia. Sure. And let's face it, some 
States do a great job. And Kentucky and Georgia are very good 
States, with Governors that put a lot into the governments, and 
some States are still the Wild West; some localities are still 
the Wild West when it comes to this. I'm not mentioning anybody 
by name. I don't think that's appropriate.
    But I was also general counsel for a large contractor, $1 
billion a year, and we worked with many State and local 
governments. And you'd go into procurements in some of these 
cities and counties, and you never knew what the rules were or 
how they did it. And a lot of it is just telling what the 
requirements are. Huge problems come around.
    But what I'm asking all of you--and you don't need to 
answer this here today--is if you can come up with some 
specificy language enabling legislation that just gives you 
more flexibility at the Federal level to fix the problem right 
there, instead of saying, ``Sorry, the regulation says I can't 
do it.'' I think that could be very, very helpful because, 
frankly, Dr. Heller, I would trust you to make that decision 
better than I would or the legislature. You are trained, you 
have an experience factor.
    And there are some times you may not have the flexibility 
to get something past the sniff test. That's all I'm saying.
    Ms. Heller. I'd appreciate the invitation.
    Mr. Tom Davis of Virginia. And if you can think of that, we 
would be very interested in hearing about it, and I know our 
State and local governments would be as well.
    Mr. Schrock? He's chomping at the bit.
    Mr. Schrock. Mr. Chairman, let me followup on the oversight 
thing for just a second. I agree with what Dr. Heller said. But 
let me ask Ms. Valicenti, the 20 percent you talked about--you 
will probably regret ever mentioning that 20 percent--but that 
20 percent, was that because of the oversight and reporting 
procedures you were subjected to? And, if not, how much of that 
20 percent was that?
    Ms. Valicenti. Sir, it was very formal, so I have no 
scientific basis for it. But it is--but it also--it is. It's 
the oversight, it's the process, and it's also the cost 
allocation, which, by the way, is fairly rigorous and onerous. 
I run the single largest computing environment in the 
Commonwealth of Kentucky, larger than any of the private 
sector. I allocate back to the agencies; the agencies 
reallocate. So, consequently, when you take all that allocation 
back, 20 percent may not be out of line.
    Mr. Schrock. Thank you.
    Mr. Tom Davis of Virginia. Anything else anyone wants to 
add down here? I had some other questions, but I think we have 
gotten--yes, David.
    Mr. McClure. Mr. Chairman, I think you hit it right on the 
target. I think there are a range of things that can be done, 
and we need to keep that in mind. It's not a single thing that 
you magically change and this process gets better. There are 
some simple things. As neutral observers of this process and 
doing this work, there are some simple things that can be done 
to improve the efficiency by which it works. One of them is 
just the consistency in what is submitted by the States. If 
there could be an agreement on some standards that the States 
would adhere to and there would be a clarification with the 
Federal folks as to what would be submitted and what it should 
look like, that in many instances could resolve this back and 
forth----
    Mr. Tom Davis of Virginia. That's a good point. I think the 
States are trying to get there. And, in fact, if they meet this 
criteria, they get rewarded for doing that. And I think they 
have tried to do that. I don't know if, Mr. Singer, you wanted 
to address that?
    Mr. Singer. One of the difficulties----
    Mr. Tom Davis of Virginia. We are not 100 percent there by 
any means.
    Mr. Singer. But one of the difficulties with that is--I 
think part of what makes this country great is that each of the 
States becomes isles of innovation. The technical approaches 
that we are taking in Georgia, for example, of an integrated 
architecture, which, as much as I complain about the APD 
process, we got a lot of very good feedback from HHS in that. 
But I think they will agree it was fairly unique as to what 
they have seen at this point. And we are working very closely 
with our colleagues who are observing what we are doing to 
determine what they can learn from our actions. And I think the 
difficulty of requiring standardization is that you want to be 
careful not to suppress innovation.
    The suggestion the chairman made of allowing flexibility by 
the folks at the Federal level I think is very important. That 
was a particular case where we asked for some flexibility for 
people to consider this architecture before the individual 
system, and the folks at HHS really did give that flexibility. 
They looked at the architecture separately from the application 
and then put the two together.
    I guess the difficulty is that sometimes that's applied and 
sometimes that's not. And I think the reason we are talking 
about HHS right now is Department of Justice, for example, 
doesn't have a specific APD process that every program follows. 
But different programs have a different level of rigor, 
depending on the type of system and the type of funding. 
Because of legislation, HHS is required to use the same APD 
process regardless of the particular grant. And I think that's 
really the inhibitor, is they don't have the flexibility. You 
have to go through the same process; sometimes it makes sense, 
sometimes it doesn't.
    Mr. McClure. And I would agree, Mr. Chairman. And I didn't 
mean by standards, that a standard be applied to everyone. I 
think standardization in the information being submitted would 
be a great step forward, because there are tremendous 
inconsistencies in what is being submitted that really dictates 
a lot of the back and forth.
    Mr. Tom Davis of Virginia. The difficulty there, of course, 
is that people keep the records different ways. And sometimes 
you ask for something that people don't keep, and that just 
needs to be worked through.
    Mr. McClure. Exactly.
    Mr. Tom Davis of Virginia. Also, the State and local 
governments are the laboratories of democracy in which we learn 
more at the Federal level. That's where the innovation has 
taken place. It's not usually at the Federal level. It's taking 
place at these other areas. But I think that what we've 
suggested here can try to complement everything together. And I 
think as long as we have adaptive, innovative, intelligent 
people at the Federal Government that are not unwilling to bend 
over backward sometimes to make it work, to basically start 
with the end in mind in terms of the way they think, this could 
work very, very well.
    It's when people at the Federal level are afraid to make 
any changes because if something goes wrong, they are to blame. 
I mean, a lot of times the rewards are perverse if something 
goes wrong. But if you do the same old, same old, nothing----
    Mr. McClure. I think it's important, Mr. Chairman----
    Mr. Tom Davis of Virginia. It's a cultural issue.
    Mr. McClure [continuing]. To also recognize that the 
process does work well in some State/Federal relations.
    Mr. Tom Davis of Virginia. Absolutely. Most of the time. 
Look, it does most of the time. I don't think anybody here is 
denying that. But, you know, there is a value added here to the 
taxpayer that is, I think, in the billions if we can just do 
this right.
    Ms. Heller. Thank you. I just wanted to echo Mr. Singer's 
point about the Federal agencies being responsive to what the 
State is doing anyway, rather than imposing a standardization. 
To the extent that we can, we have tried to move in the 
direction of accepting as our documentation, the documentation 
that already had to be produced under State rules.
    Mr. Tom Davis of Virginia. All I'm saying is we may be able 
to put some catch-all language in here, either specific 
legislation as we rewrite it in the future, or across the board 
in some of these areas that gives you a little more 
flexibility; that maybe if we gave you a little more 
flexibility right now in working with the States, we could save 
some money for everybody. That's really what we are after here, 
because time is money.
    Ms. Heller. I'm new at this, and I don't know the 
etiquette. Is it permissible for me to ask my colleagues on the 
panel a quick question?
    Mr. Tom Davis of Virginia. Well, we generally don't do 
that. Why don't you ask me a question, and then I'll ask it.
    Ms. Heller. All right, I will be happy to. One of the 
things that did not come up in any testimony that is a big 
thrust of our thinking right now about how we review projects 
has to do with data security and privacy safeguards, and we see 
that as an important responsibility we have. And it is of 
interest to me what these knowledgeable people have to say 
about the Federal rule in that.
    Mr. Tom Davis of Virginia. Well, I wonder if anybody on the 
panel would like to address that issue.
    Ms. Heller. Thank you, sir.
    Mr. Singer. Well, I will be happy to start. I know Ms. 
Valicenti has spent a lot of time on this. It's probably the 
toughest nut to crack for the States right now. Like the 
Federal Government, especially if you are a southern State, we 
have sunshine laws that shine very brightly on all the 
information that we have. Our open records laws are incredibly 
open, and we have a tremendous deal of--amount of difficulty 
dealing with the balance between security, interoperability, 
which is specifically to promote the sharing of information, 
and with open records. There the security models that have been 
developed for the private sector oftentimes don't apply 
terribly well in the public sector. So there is a tremendous 
amount of work.
    We are working very closely, NASCIO with the Office of 
Management and Budget, to establish a security practice for 
State and local government like we have for the financial 
industry and others to allow the sharing of information, to 
allow sharing of best practices. But there is by no means a pat 
answer to how to solve this yet.
    Ms. Valicenti. Let me comment in two areas. First of all, I 
think that as you probably well know, 47 of the States are in 
serious financial need. In the one area that most States, 
including ours, has still continued to make investments in 
this, in the whole area of security, security of the 
infrastructure, and then security of individual systems. And.
    So let me address these really as two separate issues, 
because security of the infrastructure is one that we deal with 
every day. That manages how we get to our e-mail, that manages 
how we get to offnet access and all of that. So there are 
physical practices there. There are also investments that are 
being made in software and in hardware to make that much more 
secure. And we are working with many of the Federal agencies 
and offices, including the Homeland Security Office.
    I think in the area of systems--and I distinguish this more 
because I think this is the area where maybe some additional 
questions could be generated to make States aware that in 
systems deployment, security needs to be part of the planning 
process, not an after-thought, after you have deployed the 
system. And I think this is one area where we could all work 
together with the Federal agencies to help us to do that 
better.
    I think the States recognize that now, but in many cases it 
may be the programmatic people or the business people that say, 
well, forget about it; think about that afterwards, because it 
is a more serious investment, in many cases an investment 
upfront that sometimes people are not willing to look at. So I 
think in that area, there would be a tremendous amount of help 
by doing that.
    In general, the privacy issue is an issue of how 
information is disclosed and who has access to that and the 
amount of the citizens' control over their private information. 
The States today are making a tremendous amount of effort to 
understand how the data is disclosed, to understand how the 
data is sold, because in some cases the decisions have in fact 
been made at a very low level in a Cabinet or an agency.
    So I'm not sure that there is a good answer yet about the 
privacy issue, but I think that this is one which is 
continuously imbalanced today. How do we make our environment 
more secure and at the same time still provide the citizens the 
privacy that they expect?
    I do know, though, that there is one thing that is probably 
unequivocal, and that is the citizens will hold the States to a 
much higher level about the privacy of their data than, 
frankly, any of the private sector.
    Mr. Tom Davis of Virginia. All right.
    Ms. Heller. Thank you for your courtesy.
    Mr. Tom Davis of Virginia. Thank you.
    Do you want to add something, Mr. Salazar? And then I'm 
going to ask Mr. Stauffer for the last word, as our private 
consultant here has no ax to grind, so I'm going to----
    Mr. Salazar. A very personal observation, Mr. Chairman. It 
was not long ago that I was notified by an Internet-based 
vendor that somebody had breached their system and obtained 
numerous credit card numbers from consumers, mine included. And 
the concern was that information had been released or obtained. 
Sure enough, somebody was attempting to purchase things with my 
credit card number; caused me to question who controls the flow 
and the security of this information.
    In this knowledge-based, fast-paced, high-tech economy, we 
all want to do business at the speed of thought, not 
necessarily at the speed of government. But we are government, 
and we are held to a higher standard than those of the common 
consumer marketplace. And so I caution that we, at the risk of 
being cliche, not throw the baby out with the bath water, 
because the APD process by its very nature is designed to 
ensure those issues of security and integrity. Albeit labeled 
by some a necessary evil, it is necessary nonetheless. And 
there is clearly room for improvement, but let us recognize and 
be thankful that we maintain those securities of sorts.
    Mr. Tom Davis of Virginia. Thank you.
    Mr. Stauffer, I have one question for you. I'm wondering if 
you could try to give me your opinion on the issue of a State's 
inability to purchase proprietary systems with Federal dollars. 
Are there unintended consequences that arise because of that 
prohibition?
    Mr. Stauffer. I believe there are unintended consequences. 
I think, for example, history will--I guess, to back in time. 
I've been in this business a long time. Both at the Federal 
level and now in the private sector, there were initiatives 
around transferring technology from one State to another. And 
there was a sense that we had to keep the technology and 
software in the public domain so we could move it from one 
State to another. And there's, you know, those varying degrees 
of success in that whole effort. And, in fact, some successes 
that were of note would be, say, the Commonwealth of Virginia 
being able to transfer a child welfare system from Oklahoma 
without using a contractor. So they were able to get the code 
from one State to another.
    When you start using proprietary software--and I believe we 
should be using it a lot more effectively, and I think what we 
are doing now is holding back some of the innovation. You 
mentioned SAP, the ERP, CRM; those kinds of applications have 
to be at least considered now to--as part of the solution. And 
in fact--and there is a State that we just recently bid on--and 
I won't mention the State or the company--that we actually bid 
a proprietary-type software package that, you know, would be 
approved by the Federal Government under a new way of looking 
at that kind of technology.
    So I guess the long and the short answer is, it's time to 
look at using this type of software, and keep our head--take 
our head out of the sand that we have been doing, you know, as 
a result of the past.
    Mr. Tom Davis of Virginia. Before we close, I want to just 
take a moment to thank everyone for attending this important 
hearing. I think it's very useful to me and the other Members. 
And for the record, I want to thank Representative Turner and 
the other Members for participating. I also want to thank my 
staff for organizing it. I think it has been very productive.
    If you have any additional thoughts, particularly on 
language that would give you more flexibility, we would be 
happy to put that in the record or keep it out. But if you 
could get that to us in the next 10 days, that could be very, 
very helpful to us. We would solicit that from any of you, OK?
    Hearing nothing else, the hearing is adjourned.
    [Whereupon, at 11:44 p.m., the subcommittee was adjourned.]

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