[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]





 FEDERAL INFORMATION SYSTEMS INTEGRATION AND CONSOLIDATION: MAXIMIZING 
             TECHNOLOGY INVESTMENT ACROSS AGENCY BOUNDARIES

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

                                HEARING

                               before the

                SUBCOMMITTEE ON TECHNOLOGY, INFORMATION
                POLICY, INTERGOVERNMENTAL RELATIONS AND
                               THE CENSUS

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 15, 2003

                               __________

                           Serial No. 108-122

                               __________

       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

                     TOM DAVIS, Virginia, Chairman
DAN BURTON, Indiana                  HENRY A. WAXMAN, California
CHRISTOPHER SHAYS, Connecticut       TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
MARK E. SOUDER, Indiana              CAROLYN B. MALONEY, New York
STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
DOUG OSE, California                 DENNIS J. KUCINICH, Ohio
RON LEWIS, Kentucky                  DANNY K. DAVIS, Illinois
JO ANN DAVIS, Virginia               JOHN F. TIERNEY, Massachusetts
TODD RUSSELL PLATTS, Pennsylvania    WM. LACY CLAY, Missouri
CHRIS CANNON, Utah                   DIANE E. WATSON, California
ADAM H. PUTNAM, Florida              STEPHEN F. LYNCH, Massachusetts
EDWARD L. SCHROCK, Virginia          CHRIS VAN HOLLEN, Maryland
JOHN J. DUNCAN, Jr., Tennessee       LINDA T. SANCHEZ, California
JOHN SULLIVAN, Oklahoma              C.A. ``DUTCH'' RUPPERSBERGER, 
NATHAN DEAL, Georgia                     Maryland
CANDICE S. MILLER, Michigan          ELEANOR HOLMES NORTON, District of 
TIM MURPHY, Pennsylvania                 Columbia
MICHAEL R. TURNER, Ohio              JIM COOPER, Tennessee
JOHN R. CARTER, Texas                CHRIS BELL, Texas
WILLIAM J. JANKLOW, South Dakota                 ------
MARSHA BLACKBURN, Tennessee          BERNARD SANDERS, Vermont 
                                         (Independent)

                       Peter Sirh, Staff Director
                 Melissa Wojciak, Deputy Staff Director
                      Rob Borden, Parliamentarian
                       Teresa Austin, Chief Clerk
              Philip M. Schiliro, Minority Staff Director

   Subcommittee on Technology, Information Policy, Intergovernmental 
                        Relations and the Census

                   ADAM H. PUTNAM, Florida, Chairman
CANDICE S. MILLER, Michigan          WM. LACY CLAY, Missouri
DOUG OSE, California                 DIANE E. WATSON, California
TIM MURPHY, Pennsylvania             STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio

                               Ex Officio

TOM DAVIS, Virginia                  HENRY A. WAXMAN, California
                        Bob Dix, Staff Director
                 Scott Klein, Professional Staff Member
                      Ursula Wojciechowski, Clerk
           David McMillen, Minority Professional Staff Member


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 15, 2003....................................     1
Statement of:
    Conway, Craig A., president and chief executive officer, 
      Peoplesoft, Inc.; Kevin Fitzgerald, senior vice president, 
      Oracle Corp.; S. Daniel Johnson, executive vice president, 
      Bearingpoint, Inc.; and Paul M. Cofoni, president, Federal 
      sector, Computer Sciences Corp.............................    31
    Forman, Mark A., Administrator of E-Government and 
      Information Technology, Office of Management and Budget....    13
Letters, statements, etc., submitted for the record by:
    Cofoni, Paul M., president, Federal sector, Computer Sciences 
      Corp., prepared statement of...............................   124
    Conway, Craig A., president and chief executive officer, 
      Peoplesoft, Inc., prepared statement of....................    34
    Fitzgerald, Kevin, senior vice president, Oracle Corp., 
      prepared statement of......................................    95
    Forman, Mark A., Administrator of E-Government and 
      Information Technology, Office of Management and Budget, 
      prepared statement of......................................    16
    Johnson, S. Daniel, executive vice president, Bearingpoint, 
      Inc., prepared statement of................................   112
    Miller, Hon. Candice S., a Representative in Congress from 
      the State of Michigan, prepared statement of...............     9
    Putnam, Hon. Adam H., a Representative in Congress from the 
      State of Florida, prepared statement of....................     4

 
 FEDERAL INFORMATION SYSTEMS INTEGRATION AND CONSOLIDATION: MAXIMIZING 
             TECHNOLOGY INVESTMENT ACROSS AGENCY BOUNDARIES

                              ----------                              


                         TUESDAY, JULY 15, 2003

                  House of Representatives,
   Subcommittee on Technology, Information Policy, 
        Intergovernmental Relations and the Census,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10 a.m. in 
room 2154, Rayburn House Office Building, Hon. Adam Putnam 
(chairman of the subcommittee) presiding.
    Present: Representatives Putnam, Miller, and Clay.
    Staff present: Bob Dix, staff director; John Hambel, senior 
counsel; Scott Klein and Lori Martin, professional staff 
members; Ursula Wojciechowski, clerk; Suzanne Lightman, fellow; 
Jamie Harper and Erik Glavich, legislative assistants; Chris 
Koves and Richard McAdams, interns; David McMillen, minority 
professional staff member; and Jean Gosa, minority assistant 
clerk.
    Mr. Putnam. The Subcommittee on Technology, Information 
Policy, Intergovernmental Relations and the Census will come to 
order. Good morning, everyone, and welcome to today's hearing 
on Federal Information Systems Integration and Consolidation: 
Maximizing Technology Investment Across Agency Boundaries.
    This hearing is a continuation of the aggressive oversight 
by this subcommittee to ensure that the Federal Government is 
taking full advantage of the efficiencies created through E-
Government and improving the way the Federal Government manages 
its IT investments.
    Let me take one moment to reaffirm the purpose of this 
subcommittee. We don't hold hearings just for the sake of 
holding hearings. With the help of OMB and the private sector 
and a number of CIOs and IGs, we are developing quite a body of 
evidence pointing to efficiencies that can be derived from 
better use of IT investment, and we will continue to pursue 
that aggressive oversight and continue to expect results. The 
recurring theme has been that what we face is not a technology 
problem, it is a cultural problem, changing the culture of the 
executive branch as well, frankly, as some aspects of the 
legislative branch, and we will continue to demand results 
through further aggressive oversight.
    Despite its distinction as the largest buyer of information 
technology in the world, the Federal Government has a tradition 
of purchasing and maintaining tens of thousands of stove-piped 
systems that operate separately from other agencies and are not 
interoperable with other systems. Simply getting a handle on 
what systems exist and agreeing to a unified plan to coordinate 
this disparate IT environment is a monumental task.
    One of the primary ways the Federal Government is improving 
its productivity and results from IT investments is by 
improving agency IT reporting mechanisms through the Office of 
Management and Budget. To secure funding for future IT 
purchases, agencies must now provide OMB with a business case 
that links new IT investments to performance improvement. 
Agency IT budget requests also must synchronize with the so-
called Federal Enterprise Architecture, the governmentwide 
modernization blueprint of the Government's future IT 
structure.
    It is clear that the ongoing development of the Federal 
enterprise architecture has proven to be a powerful tool for 
OMB to identify key gaps and redundant efforts, and is being 
used to determine the most effective investment of IT, not to 
mention to help address our massive cybersecurity challenge. 
Agencies also must develop their own agency enterprise 
architectures describing exactly how that IT spending will 
transform and modernize around the needs of citizens.
    In carrying out those duties and in preparing their budget 
submissions, agencies utilize an IT planning framework 
developed by the Federal CIO Council known as the Business 
Reference Model [BRM]. The BRM describes the Federal 
Government's lines of business independent of the agencies that 
actually perform those functions.
    By describing the Federal Government around common 
functional lines of business across Government instead of the 
traditional stove-piped agency-by-agency viewpoint, the process 
forces agency collaboration to leverage technology, and 
technology purchases, across various agencies, by function, in 
order to eliminate redundant spending. By recognizing 
opportunities for integration and consolidation, OMB has, in 
effect, created a process that determines our next wave of 
cross-agency E-Government initiatives to join the list of 24 
projects already being pursued.
    The purpose of today's hearing is to examine the progress 
being made by the Federal Government to modernize agency 
information technology management around those lines of 
business that cross agency boundaries. Several common internal 
lines of business were identified during this year's budget 
process deserving of immediate attention for potential 
consolidation. They include integration and consolidation of 
systems in the following areas: financial management, human 
resources, monetary benefits, criminal investigations, data and 
statistics, and public health monitoring.
    In addition to reviewing the status of these identified 
areas, I would also be interested in the recommendations of our 
witnesses today on how this effort coincides with two other 
issues: cybersecurity and software procurement.
    First, it seems clear that integrating and consolidating 
our IT around these business lines could concurrently provide 
an opportunity to better secure our IT systems in a far less 
expensive manner than patching up old systems and processes. 
Second, I am encouraged by the additional cost savings we might 
derive by connecting today's topic to the large discounts I 
believe we can secure through economies of scale, such as 
through the recently announced SmartBuy software licensing 
initiative.
    It is becoming more evident everyday that these various 
pieces of IT spending must be considered as a package. Sticking 
to an architecture and eliminating redundancies by looking 
across boundary lines is a process that addresses our 
cybersecurity challenges and fosters savings opportunities. 
Conversely, an IT framework based on unique solutions only 
further exacerbates our cybersecurity challenges and increases 
software costs.
    The subcommittee particularly looks forward to hearing 
advice from some of our Nation's leading software and 
integrator companies on making the Federal Government operate 
its common cross-agency systems more efficiently, lessons 
learned from their previous clients pursuing enterprise-wide IT 
integration, and how to best derive taxpayer savings by more 
productively managing these major cross-agency investments.
    As always, today's hearing can be viewed live through 
WebCast by going to reform.house.gov and clicking on the link 
under Live Committee Broadcast.
    It is always a pleasure to be joined by the ranking member 
of this subcommittee, the distinguished gentleman from 
Missouri, Mr. Clay, and I recognize him at this time for his 
opening remarks.
    [The prepared statement of Hon. Adam H. Putnam follows:]

    [GRAPHIC] [TIFF OMITTED] T2653.001
    
    [GRAPHIC] [TIFF OMITTED] T2653.002
    
    Mr. Clay. Thank you, Mr. Chairman, and I thank the 
witnesses for taking their time to be with us today. I look 
forward to this discussion today.
    The use of technology in the Federal Government has a 
checkered past. The Federal Government was well ahead of both 
businesses and State and local government in embracing 
technology. The census began using punch cards in the 1890 
census, and housed one of the first computers ever built. 
Indeed, it was research and human capital from the Federal 
budget that seeded many of today's information technology 
giants like IBM.
    The Federal Government invested heavily in computers for 
science and data management. At the same time, businesses and 
universities were beginning to understand that the computer 
revolution was about more than the data processing division 
that kept the books and cut the checks, and computer companies 
began to realize that they were selling more than just 
hardware. Those organizations learned 20 years ago what the 
Federal Government is still struggling to grasp: the revolution 
is about information, not technology.
    As a result, many of the system modernization projects 
undertaken by the Federal Government flopped badly. GAO can 
line a room with reports of programs like Tax System 
Modernization and similar projects at the FAA, the Weather 
Service, and the Medicare system. Many of those reports 
documented expenditures of tens or hundreds of millions of 
dollars in systems that did not work. One of the refrains that 
echoed throughout those reports was that no system 
modernization will work unless the agency fundamentally 
rethinks its business processes.
    I am pleased to see that OMB has taken up that charge and 
is not linking technology funding with agency business 
processes. That is exactly the kind of leadership Congress had 
in mind when it assigned the responsibility for the information 
management to OMB in the Paperwork Reduction Act of 1980.
    I look forward to the discussion of how this is going to be 
done through the budget process. I would ask, however, that our 
witnesses do so without the reliance on jargon and acronyms. If 
we have a discussion of how the BRM is a foundation of the FEA 
to describe the LOBs, then I am going to get lost, and I 
suspect most of the room will be lost.
    Mr. Putnam. Thank you, Mr. Clay.
    At this time I will recognize the vice chairman of the 
subcommittee, the gentlelady from Michigan, Ms. Miller.
    Ms. Miller. Thank you, Mr. Chairman, very much. I certainly 
appreciate your holding this hearing today, and learning all 
these acronyms as a freshman Member of Congress has been part 
of the whole living experience, I will tell you.
    Improving the efficiency and the effectiveness of the 
Federal Government's technology investment certainly is an 
important topic, and I am certainly looking forward to the 
testimony of all the witnesses today. Throughout my career as a 
public servant, I have always placed a very high value on 
customer service, and we who serve the people must realize that 
the money that we spend is not our own money, it is the money 
of the American people who have worked very hard to earn it; 
therefore, every step must be taken to ensure that this money 
is spent in the most effective way possible.
    Too often, unfortunately, the Government does not do enough 
in this regard. Government waste is viewed as common practice, 
and this, of course, is unacceptable. The focus of today's 
hearing is to examine the measures taken by Federal agencies to 
reduce waste associated with Government IT investments, and 
with all the criticisms made about Government's IT initiatives, 
I am very pleased to say that OMB is an exception to this rule. 
OMB has been very proactive in implementing an interagency 
technology integration plan that shows an awful lot of promise, 
and I am very hopeful that these successes can be a model for 
other agencies still not in compliance with Federal standards.
    I have always felt that customer service should not be a 
novel concept for government, any level of government. 
Governmental officials, from elected officials at any level, to 
career government workers, to all of those that participate in 
the everyday functions of government should always search for 
better and more efficient ways of doing things. Improving the 
functions of Government is a team effort, and everyone on the 
team has to play a very active role in ensuring that not any of 
the hard-earned money of this Nation's citizens is wasted.
    Actually, after my election to Congress, I was very honored 
to be named as a vice chair of this subcommittee because I 
believe that active measures must be taken to improve the 
Government's return on investment in technology spending. The 
development of the Federal enterprise architecture and OMB's 
focus to integrate like processes as an interagency level I 
think, again, are very promising. With cross-agency 
cooperation, the Federal Government could save taxpayers about 
$3 billion. This saving actually equates to about 5 percent of 
all the Federal Government's IT estimated expenditures for 
fiscal year 2004. These are certainly substantial savings by 
any measure. These savings, though, can only be realized if 
everyone in Government is dedicated to improving the 
efficiency.
    The Federal enterprise architecture has identified six 
areas in need of improvement, and we are certainly not going to 
stop our efforts on this subcommittee until everyone in the 
Government, from CIOs on down, work wholeheartedly with OMB. 
These six areas of concern are identified as business lines for 
a reason: they are vital to the everyday business functions of 
the Government and do not need to be done separately by each 
agency. By integrating these business lines across agencies, 
billions of dollars can be saved. I certainly support reducing 
the funding of any program that has its own unique system and 
encourages the outdated stove-pipe model that has been referred 
to by the chairman as well.
    As Members of Congress, we need to support Mr. Forman in 
the attempts by OMB to improve IT investments. Each program 
must fit the plan of the Federal Government, or else its 
funding should be restricted. The integration and consolidation 
plan of the OMB shows tremendous potential, and I am certainly 
hopeful that this subcommittee can learn where our Government 
is in its implemen-
tation and what the future will bring.
    Again, I am looking forward to all the testimony of the 
witnesses today. Thank you all for coming.
    And thank you, Mr. Chairman.
    [The prepared statement of Hon. Candice S. Miller follows:]

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    Mr. Putnam. Thank you, Ms. Miller.
    At this time we will proceed to our first panel. As is the 
custom with the committee, we swear in our witnesses. So, Mr. 
Forman, if you would please rise and raise your right hand.
    [Witness sworn.]
    Mr. Putnam. Note for the record the witness responded in 
the affirmative.
    At this time I would like to introduce Mr. Forman. Mark 
Forman was appointed by President Bush to be Administrator for 
the Office of E-Government and Information Technology in April 
of this year. He is effectively our Nation's Chief Information 
Officer, charged with managing more than $58 billion in Federal 
IT investments, and is the chief architect of the President's 
E-Gov Initiative. Mr. Forman also oversees executive branch 
CIOs and directs the activities of the Federal CIO Council.
    It is always a pleasure to have you at our subcommittees. 
You are a most frequent guest, and you are recognized for your 
opening statement.

STATEMENT OF MARK A. FORMAN, ADMINISTRATOR OF E-GOVERNMENT AND 
    INFORMATION TECHNOLOGY, OFFICE OF MANAGEMENT AND BUDGET

    Mr. Forman. Thank you, Mr. Chairman, members of the 
committee. Thank you for the very generous comments, as well, 
and your support. We are managing through a big change in the 
Federal Government, and your leadership here is critical to the 
success of modernizing the Federal Government, so I appreciate 
the supportive comments very much.
    On March 13th of this year, I testified that there were six 
long-standing IT management problems, and a lot of that 
resulted in duplicative IT investments for the Federal 
Government. Our policy is very clear here: we support shared 
use of information technology to stop redundant IT purchases, 
and we also believe the best practices in private industry 
create several opportunities for saving. I want to talk a 
little bit more off the cuff about these opportunities.
    These are opportunities to perform mission-critical 
operations more effectively. At the heart of this is how 
effectively can we move people to where they are needed, money 
to where they are needed, better alignment and responsiveness 
of the information, exactly as Mr. Clay said, and the question 
comes down to how fast can the Federal Government move. So the 
opportunity is there, the technology makes it possible, but in 
order to do this, the traditional silo-based model that 
Government has had for decades has to change.
    There are also opportunities to more effectively, more 
rapidly deploy these major IT systems. There are operational 
cost reductions in the billions and there are IT investment 
cost reduction in the billions. The numbers that you see in my 
testimony and that we have been working on in the reports are 
the billions of savings that are potentially possible through 
just the IT side. There are many more billions also on the 
operational side that are possible to be saved.
    Now, we are living through a time of convergence. There are 
convergences between business processes and operations that are 
made possible by today's technology. It means the organization 
structure has to change; it means the business processes have 
to change. But there is no question this is largely driven by 
the new technologies that are available.
    I want to make clear our approach here is not 
centralization. The approach is all about the ability of 
organizations to more effectively use information, make a 
decision, allocate people, monetary resources where needed. So 
we should look for ways to make Government work faster. We 
should measure improvements of cycle time, as well as reduction 
of cost. We should measure improvement and results as well as 
reduction of cost. And it takes an enterprised view to do that. 
That is why the architecture is so important.
    So I will try not to use terms like the business reference 
model and the Federal enterprise architecture, but when I was 
working the staff in the Senate, one of the chairman of the 
committee I worked on lambasted me and a colleague on the issue 
of business process re-engineering. He said, I don't know why 
they call it re-engineering; it was never engineered in the 
first place. And that is the scenario we are operating in: it 
was never architected in the first place. But if we are going 
to move to a faster, more responsive Government, we need the 
architecture, we need to understand what are the business 
processes, what are the organizations, what are those 
technologies, and how does it all relate together to drive 
better results.
    We chose to focus on about six lines of business or 
functions of the Federal Government. We know from our analysis 
last year about a third of the lines of business of the Federal 
Government have a lot of IT redundancy. We know that, last 
year's view, 10 of the agencies out of the 25 cabinet-level 
agencies and departments do the same line of business, same 
function. It doesn't mean they have to do it in their own silo, 
it means they can operate together in today's technical 
environment. But that requires a change in organization 
structure and approach and business processes, so we decided to 
pick six.
    And some of these are the back office or administrative 
function: human resources, management, financial management. 
Some are very much at the forefront of a couple areas that are 
very important for homeland security: case management for 
criminal justice purposes and law enforcement, and public 
health monitoring systems. And then a couple are some common 
lines of business that have been chronic problems for many 
years: how we manage monetary benefits, because that is such a 
large portion of the operations of the Federal Government; and 
how we manage data and statistics, because we have known for 
decades that we have somewhere around 70 statistical agencies. 
They share their work, they operate as a competency. They are 
often different processes that could be brought to bear. So we 
picked the six.
    What we found out through the study is that leadership 
emerged in a couple areas: public health, architect, is 
probably one of the most important ones. We knew, after the 
anthrax scares in late 2001, that we simply didn't have the 
public health information systems that would allow the Federal 
Government to understand the elements of the health 
organizations out in the field, at the county level, the 
hospitals, and how they would let somebody in Washington know. 
And what happened is the 18 different agencies all sent their 
own information structures out to the field. But there is only 
one person at the end of those information systems in that 
county health department or in that hospital, and we run the 
risk not architecting this well, not organizing this well, that 
we would have 18 different systems with 18 different single 
looks at an event, and no comprehensive view that in fact this 
was tied together as an event that ought to be dealt with 
either for counter-terrorism purposes or disaster response or 
public health purposes. It has to get tied together; otherwise, 
I can promise you, 5 years from now somebody will have the 
additional information system needed just to pull that all 
together.
    So it needs to be architected well from the beginning. 
There probably need to be only a couple, not 18 or 20, 
different systems. And that is the point of this architecture 
work. Having leadership means that we can pool those 
organizations together without each having their own 
information system into an architecture. It requires a lot of 
different type of work and Government issues. That is a case 
study.
    In financial management and human resources information 
system, the leadership so far has not quite yet emerged in the 
agency level. The traditional buying behavior is such that we 
can't take a corporate approach, and we haven't been able to, 
and we are just striving to that now. I believe it will emerge. 
And here, too, many times it is so easy for the agencies to say 
Congress expects us each to have our own financial system or 
our own human resources information system, and we can't do 
that real enterprise financial management or human capital 
management. That is why it is so important that Congress and 
the executive branch work together here.
    The last two areas we hit the limits to change, and so I 
don't think we are going to be able to get as far as I would 
like this year. There are some opportunities that are laid out, 
and those are valid, and significant cost-savings opportunities 
will emerge from those. But in terms of where we would put our 
eggs, we know there are essentially three buckets: ones where 
they are critically important to us and agency leadership has 
emerged; ones where there are huge cost savings and enterprise 
opportunities, and we need to foster that understanding and 
movement; and ones where the movement to change is probably 
worth more than the benefit we will get out of it, and we look 
for other cost savings and efficiencies.
    With that, I will conclude. Thank you.
    [The prepared statement of Mr. Forman follows:]

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    Mr. Putnam. Could you, just in summary, put the two back 
into each of those baskets, your great-opportunity-but-more-
leadership-needed-basket and your-costs-don't-justify-the-
benefits-because-of-the-resistance basket?
    Mr. Forman. I think in the public health architecture and 
the criminal law enforcement systems or case management systems 
we have seen terrific leadership out of the Justice Department 
in the case of case management systems and out of Health and 
Human Services in the case of public health architecture. 
Financial management and human resource management we have 
counsels operating, and so that is an area where we need to 
foster leadership. It is a new way for them to operate. Data 
and statistics and monetary benefits we identified through the 
study opportunities which could be exercised, but not to the 
level of re-architecting how the Federal Government goes about 
its work in those areas.
    Mr. Putnam. Thank you very much for your statement.
    At this time I will recognize the vice chair of the 
subcommittee, Ms. Miller, for the first round of questions.
    Ms. Miller. Thank you, Mr. Chairman.
    You know, just sitting on this subcommittee, we are always 
using the phrase the stovepipes, the stovepipes. In fact, I 
think if we took the word stovepipes out of our vocabulary, 
that would reduce what we are up here talking about.
    Are you finding that there is greater awareness amongst all 
the different agencies about the stove-piping effect and how it 
is handicapping your ability to move forward here? I mean, is 
everybody really cognizant? Do you feel that the agencies are 
cognizant of the problem that they are all facing?
    Mr. Forman. Obviously it is dealt with differently by 
different levels of the organization. I will tell you I 
continue to be impressed by many people, generally at the 
working level or first level of supervision, who know that they 
have been living in a silo, if you will, in just their realm of 
the world, and meet together. There are huge strands of either 
official or unofficial groups that get together. For example, 
there is a group of folks that just are regulatory writer 
process experts. They may represent different types of 
expertise, environmental versus transportation regulations, but 
they get together to talk about how to improve the quality of 
the regulatory process. And I think to the extent that we can 
leverage their understanding and the business practices that 
allow them to leverage their knowledge, we are fairly 
successful.
    I would say there is another group of folks, though, that 
grew up and were successful within their organization 
structures, and they are used to the processes operating within 
their organization. The technology today says that no longer 
makes sense; that there are many opportunities now where the 
organization doesn't drive the decisionmaking, but we need to 
let the information drive the decisionmaking. And that means 
they have to operate with information that sits outside of 
their normal organization. That could be information about 
human resources.
    Now, matched up with that information, you have to have the 
ability to exercise those assets, those resources, people, for 
example; and we simply don't have that capability yet. That is 
the business process integration that you will hear a lot of 
people in large commercial companies talk about, and sometimes 
you will hear us talk about it at OMB. That is going to require 
architecting those business processes. And, quite frankly, they 
understand that and I think some of them are a little worried, 
that is threatening to them. And at the working level I 
continue to be impressed they want access to those, they want 
those new processes, because they see that is a better way to 
get their job done.
    Ms. Miller. Well, that is, I guess, the old saw wherever 
you are, right? People say why are you doing it this way; well, 
I have always done it that way. And obviously that is not 
always the correct answer. So I know you all do have that 
challenge as well.
    I am just trying to understand. You are talking about a 
business plan, and I looked at some of your lines of business 
here and perhaps I could have a better understanding if you 
just sort of took me through. Like financial management would 
seem to be sort of a no-brainer. What kind of challenges are 
you finding throughout the different agencies? I mean, 
financial management, to me, would seem to be something that 
the different agencies could glom onto very quickly to 
eliminate the stove-piping effect. Perhaps you could just sort 
of take me through that a little bit so I understand why 
doesn't that happen very expediently.
    Mr. Forman. Sure. I think the situation that we are working 
through now, bringing back to the fact that financial 
management is one of the five management agenda items for the 
President, so we put pressure on the agencies to improve their 
financial management, Congress put pressure on the agencies to 
improve their financial management. Generally, this committee 
has been at the forefront of a cross-agency approach, but I 
think it is fair to say there are many appropriation 
subcommittees and authorizing committees that also put pressure 
on their agencies to improve financial management. Generally, 
the money gets tied to that.
    So the agencies buy their own financial management system 
to generate responses to their authorize as appropriators, 
inspectors general, GAO, but it is based on a point solution, 
fixing the problems that they see. And they never see the fact 
that their problem cuts across the agencies. I think this 
committee sees that, I think the Senate Governmental Affairs 
Committee sees that, perhaps the Budget Committees see that. 
But they don't get the same pressure or funding alignment to do 
this jointly, and that is the change that we are trying to 
bring to bear.
    So the difficulty for a CFO at a department is being 
responsive to their oversight and, by the same token, making 
sure that the cross-agency solution allows them to be 
responsive, which we believe it does; and that is a training 
and education, finding a leader and agents for change that we 
are working through now.
    Ms. Miller. I appreciate that. You know, I am a person that 
has done budgets for years and years and years in my 
background, so my mind, I think, is somehow trained to think 
numerically, so I am looking at this financial management. But 
I suppose on the political side of my brain, if you look at 
some of the different IT problems that you have identified 
again in your line of business with criminal investigations, of 
course we all watched the horrific conditions with the D.C. 
sniper. And I guess my question is going to is there a way that 
the Federal Government could work better with the State and 
locals as well to share some of this? As you are doing your 
architecture, are you taking into consideration how you need to 
partner the information that we are gathering to assist in 
these kinds of things, whether it is a D.C. sniper or homeland 
security? Should the Federal Government be setting out some 
standards that could filter down?
    Mr. Forman. Yes. I think absolutely that is the case in 
certainly the two lines of business that are leading here, with 
the strong leadership and the public health architecture. There 
is no question. A lot of the modernization of county health 
agencies and the public health infrastructure in the States is 
going to come out of that money, and having that well 
architected at the front end means that we take a good approach 
to work with a much more integrated organization at the county 
level and in hospitals. So there is a very strong working 
relationship there.
    I think criminal justice case management systems is very 
similar. A lot of the States have adopted integrated case 
management systems; a lot of that has been funded out of the 
Justice grants programs, and the architecture framework that is 
being used really provides for that. And I think the attorney 
general has been very clear; his leadership here is extremely 
important; he has been outspoken in the importance of that. I 
think similar from Secretary Thompson; he has been outspoken in 
that. And to get that leadership and to make it both cut across 
the policy side, the IT side, you know, the organizational side 
is really important, and we are seeing it in those two areas.
    Ms. Miller. And just my final question, Mr. Chairman.
    As I look at your line of businesses here as you have 
identified your priorities and those types of things, could you 
sort of give us a quick status report on actually where you are 
with the implementing and some of the challenges that you have, 
a timeframe as you have laid it out in your own business plan?
    Mr. Forman. Well, four of the areas need a business case. 
Basically, we had literally hundreds of business cases for 
redundant investment, so we know there are a lot of good ideas 
there. Study methodology we used with force and agreement on 
what is the good idea and where should somebody not buy their 
own unique project because they can leverage economies of scale 
or where there is an opportunity to do an integrated process. 
That means we have to form the team to pull that together. We 
are fairly far along on that in public health architecture and 
criminal investigations, case management systems.
    We need to get the leadership working in human resources 
management and financial management, so we are working with the 
chief human capital officers counsel. OPM is providing strong 
leadership there. We are working with the CFO counsel, Linda 
Springer, the Controller for the Federal Government is 
providing strong leadership there. But we need some champions 
to emerge within the agencies that are actually going to make 
that happen.
    In monetary benefits, the opportunities were referred to 
Social Security Administration, and they are figuring how to 
work that into their next round of business case submissions. 
And in data and statistics, the Census Bureau, as one of the 
heavy demanders of software licensing, has taken that 
initiative, and they are working to pull together the team to 
adopt a similar approach to the SmartBuy approach.
    Ms. Miller. Thank you, Mr. Chairman.
    Mr. Putnam. You are very welcome, Ms. Miller.
    I recognize the ranking member, Mr. Clay.
    Mr. Clay. Thank you, Mr. Chairman.
    Mr. Forman, earlier this year we heard testimony from GAO 
about how DOD has over 1,200 different financial management 
systems and was spending millions of dollars developing new 
systems that don't work. DOD has designated $18 billion for 
business systems in 2003 and, according to GAO, that 
expenditure is at risk. Recently, DOD canceled one of these 
projects after spending $126 million over 7 years. And that is 
not an isolated example. According to GAO, there are at least 
three other projects that are also investments going bad. Would 
the project you are testifying on today address these problems 
at DOD?
    Mr. Forman. I think within the financial management arena 
there is an awful lot of opportunity for synergy, so absolutely 
in the financial management arena we should see some 
opportunities. I will tell you there are a few things that are 
unusual. I won't say they are wrong, just because of the pure 
scale of the Defense Department. A hundred million dollars for 
an architecture study is a lot of money, and there are lessons 
learned and priorities that have to be made in the options that 
came out of that study. But there are also a lot of insights 
that we can use across the Federal Government in terms of 
architecting better financial management processes. There are 
concepts and solutions that I think Linda Springer has in 
general financial management with the Federal Government. I am 
sure she has testified on that before the committee. And so to 
get the cross pollination of that. We hope to have good working 
relationships continue as we move forward with the business 
case for integrating the core financials.
    Mr. Clay. Let me add in your testimony you identify several 
hundreds of millions of dollars in projects that will be 
reviewed. Are these potential savings from buying the same 
software for all agencies instead of separately, or are they 
situations where some agencies will be told to stop and go back 
to the drawing board?
    Mr. Forman. The first part is certainly a huge opportunity 
for us, and how this will actually come out of the business 
case analysis I can't predict. What I would say, though, is 
that there is a slightly different opportunity than the second 
one that you characterized. It is a question of how many times 
do we want to buy the same innovation, when the technology 
allows us to leverage economies of scale. So can we take 5 or 
10 different initiatives where 5 or 10 different agencies were 
coming up or trying to come up with an innovative approach, and 
take the 2 or 3, or we already have the innovative approach and 
just leverage economies of scale through perhaps a cross-
servicing model or a standard blueprint, if you will, for the 
architecture? Those opportunities clearly are there; that has 
come out of the study work we are doing. Now comes the details 
of how do we get to take advantage of those opportunities. But 
it probably will mean some agencies will not continue on with 
their same approach to figuring out or reinventing the wheel 
that have been typical for the Federal Government.
    Mr. Clay. OK. Well, given that these projects are already 
in the 2004 budget request, what will happen to the funds for 
those projects that are stopped?
    Mr. Forman. There are different approaches that have to be 
considered, and ideally I would like to say that they wouldn't 
be spent. Obviously one of the opportunities here is that we 
get a total cost reduction, and so the whole point of the 
business case process is to lay that all out; and that will be 
done in September, before the beginning of the fiscal year.
    Mr. Clay. OK. Last week we had the National Archives and 
Records Administration here. It is my understanding that 
legislation has been introduced that would transfer the 
operations of the National Personnel Records Center from the 
Archives to the Department of Veterans Affairs. Now, that 
Record Center is in my district, and according to the GAO, the 
Archives has made great strides in improving the management of 
that Center. It doesn't make sense to me to take the Center out 
of the hands of an agency whose primary function is records 
management and give it to an agency whose primary function is 
delivering services. Has administration taken a position in 
this transfer of function? Were you aware of it?
    Mr. Forman. I am not familiar with that issue. And what I 
would like to do is get back to you on it.
    Mr. Clay. Would you please? Thank you, Mr. Forman. Thank 
you for your answers.
    Mr. Putnam. Thank you, sir.
    Mr. Forman, you mentioned in your testimony that a third of 
the business lines that you looked at were redundant.
    Mr. Forman. The IT investments.
    Mr. Putnam. Give us some examples of those that were not, 
so that we know what we are working with that are in pretty 
good shape.
    Mr. Forman. OK. I would ask that I get back to the 
committee on that. I am more familiar with the ones that were 
redundant, versus the ones that were not.
    I think perhaps one of the lesser ones would probably be 
air traffic control, where we might see the Defense Department 
and the FAA.
    Mr. Putnam. That is adequate. I just want everybody to have 
a sense of, you know, being able to divide what is and what is 
not.
    For the last several months, this subcommittee has heard a 
lot of testimony from you on the enterprise architecture and on 
the management initiative that will get our arms around this 
almost $60 billion in IT investment, and we are not going to 
approve any new IT investments in agencies that are not part of 
the business case. And from our standpoint, we have now voted 
on several of the 13 appropriations bills. Have we voted on any 
new IT investments that don't make a business case?
    Mr. Forman. Well, buried in the budgets may or may not be. 
So many of the IT investments are not explicitly appropriated. 
In fact, the vast majority are not. A lot are funded out of 
working capital funds. And your approving a budget is not the 
same as approving that IT investment, per se. And, similarly, 
the fact that an agency gets a budget is not the same as having 
the authority to move forward. We have been trying to make that 
clear to the agencies. Second is a lot are funded out of the 
salaries and expenses line, and sometimes that is scrubbed and 
sometimes it is not, and the standards are different.
    Within that, we know that there are still systems that are 
considered at risk; they haven't made the business case fully. 
They are mission-critical, they are important, but, you know, 
likely what will happen is they will have cost overruns of 
schedule slips unless they have the business case. And I think 
it is fair to say, traditionally in the budget process and 
financial management, approving the funding and how the funding 
is actually allocated increasingly has been driven by results 
more. So thereto on the IT side I think it is fair to say you 
are approving the funding for the purposes, whatever that may 
be, that ultimately a portion of which may be used on the IT 
investment. It is still incumbent on OMB under the Clinger-
Cohen Act, under the E-Gov Act of 2002 to hold the agencies 
accountable for delivering results. We all understand what it 
is to be spent on; we now have to make sure that it delivers 
the results that were purported.
    Mr. Putnam. Well, we expect you to fill that role, but to 
the extent that we can be helpful as well and hold our 
colleagues accountable to Clinger-Cohen and E-Gov, and that we 
don't continue to fund these programs, we certainly look for 
your input on that as well.
    You identified an estimated $3 billion in savings if we 
consolidate four of the six business areas that you laid out. 
Do you have any ballpark estimate of what the potential in 
savings is if we get good at this, another five or six?
    Mr. Forman. Or if we were to go after the full third. I 
don't, actually, and the reason is you know that there is 
redundancy, but until you do the analysis you don't know which 
one you want to keep versus which ones to turn off. There is no 
question there will be savings. There is no question, I think, 
based on commercial practice and experience, that the savings 
will number in the billions. There are many examples of other 
companies that are a fraction of the size of any Federal 
agency, and they are always able to save a billion or multi-
billion dollars from this. So I think it is fair to scale those 
to the Federal agencies and hold us accountable for doing the 
analysis, doing the work to maximize those savings.
    At the same time I think there are performance 
improvements. One of the things that has most impressed me 
about the e-business approach is that it costs less, agencies 
or organizations become simpler, and they become faster and 
more responsive, more agile is the business term of art today. 
So it is one of these scenarios where you spend less to get 
more; and that has to be the framework here, it has to be.
    Mr. Putnam. One of the things I am looking forward to 
hearing from the second panel that I would ask you to comment 
on are the ancillary benefits on the personnel side through the 
consolidation of these systems. What types of savings 
monetarily, but also what is the complexity saving? You know, 
what is the simplicity factor on training costs on that many 
fewer systems and that many fewer new ways of doing things 
across agency lines, what types of savings can we expect there 
on the personnel side?
    Mr. Forman. Generally, I am not familiar with the 
statistics there. There is no question in my mind that there 
are savings from the simplification and training. Out of the 
savings analyses that have been done, it is hard to 
differentiate between how much of the training cost reduction 
was due to standardization versus just using a browser, you 
know, using the Internet, basically, as the user interface, 
which tends to be designed different from the old IT system, so 
it is easier for most people to use; and that too has generated 
a lot of training cost reduction.
    Mr. Putnam. We tend to be very critical where there are 
shortfalls, but the carrot that we have offered these agencies 
is that savings derived from E-Government will be kept by the 
agencies. Have any agencies benefited from that so far, and has 
it proven a powerful incentive? Is it working?
    Mr. Forman. I have seen, in the realm of the 24 E-
Government initiatives, that there have been savings. I think 
perhaps the best example that this committee has looked at was 
in the geospatial or geographic information systems arena, and 
not too long after those hearings, the geodata.gov Web site was 
released, as was the open GIS consortium portal. The ability to 
reuse information, to reuse different tools has created quite a 
bit of savings opportunity. We will continue on that way, but 
as a result now we do see some agencies that are saying, geez, 
we don't have to buy this tool or that data, because we can get 
access to that portal. We see many more at the local government 
level, which generated reduction in grants requirements, so the 
ability to use grants for other purposes.
    In the realm of the six lines of business that we looked 
at, obviously the biggest savings are going to come in the 
financial management and human resources information systems, 
because those are areas where we spend literally billions of 
dollars every year for fundamentally common business purposes. 
The two that have agency leadership, cost savings are 
important, but the primary issue is the ability to better 
perform the mission.
    Mr. Putnam. We have talked a little bit about the 
cybersecurity implications of eliminating stovepipes. On the 
one hand you could achieve some cost savings by eliminating the 
stovepipes and not having to go back and do as much patch 
management, but on the other hand sometimes redundancy is not 
such a bad thing. You know, we have a lot of redundant systems 
on the space shuttle, we have a lot of redundant systems in 
other types of technology where you want backup. What are the 
cybersecurity consequences of consolidating these systems?
    Mr. Forman. I think you are absolutely right that you want 
to architect the redundancy, and you do that for disaster 
recovery, for some elements of cybersecurity. I think the other 
reason you want to architect this is to build in the 
appropriate cybersecurity. Again, I think some of the six, 
perhaps public health information networks are most important, 
clearly covered by the health care privacy laws, but also 
important for just the ability to speed by which Government can 
respond and understand these threats. So cybersecurity is very 
important for the public health architecture that is being 
built.
    Having multiple redundant systems in multiple places 
creates a security difficulty, so you want to architect it so 
you have the redundancy, but you want to constrain the number 
of redundant elements because the redundancy makes it harder to 
protect, and usually that is when you hit two or three 
versions. Beyond two or three, you have limited the value of 
the redundancy and you are into a cybersecurity difficulty.
    Mr. Putnam. Thank you very much, Mr. Forman. My time has 
expired.
    Are there final questions from the panel? I have been 
informed we are going to have a vote between 11:15 and 11:30, 
so we want to quickly get to our second panel.
    Mr. Forman, if there are additional questions, we will 
submit them to you and ask that you reply in writing for the 
record. As always, we appreciate your insight. And we will 
excuse you, Mr. Forman, and seat the second panel as quickly as 
possible.
    Mr. Forman. Thank you.
    Mr. Putnam. The committee will stand in recess for a minute 
and a half.
    [Recess.]
    Mr. Putnam. We will reconvene our hearing and seat the 
second panel. I appreciate your cooperation in helping us to 
move as quickly as possible. I apologize for this; that is sort 
of the nature of the beast in this town.
    At this time I will ask the members of the second panel to 
please stand and raise your right hands for the oath.
    [Witnesses sworn.]
    Mr. Putnam. Note for the record that the four witnesses 
responded in the affirmative. We will move directly to their 
testimony, beginning with Mr. Conway.
    Craig Conway is president and chief executive officer of 
PeopleSoft, one of the world's leading providers of business 
enterprise software. In 2001, Mr. Conway was named one of 
Business Week's top 25 corporate managers. Also in 2001, 
Forbes.com named PeopleSoft to its list of five over-achieving 
companies. He is credited for leading PeopleSoft's efforts on 
developing its pure Internet architecture product, the 
foundation of what I am told is the industry's only suite of 
pure Internet enterprise applications. Conway is also credited 
with forming his own internal processes at PeopleSoft to 
streamline operations and reduce costs. He spent 8 years as an 
executive vice president at Oracle and, in fact, rumor has it 
that Mr. Conway's former employer seems to like what he has 
done at PeopleSoft.
    Mr. Conway, we thank you for flying in from California to 
join us on this important topic. Welcome. You are recognized 
for 5 minutes.

 STATEMENTS OF CRAIG A. CONWAY, PRESIDENT AND CHIEF EXECUTIVE 
   OFFICER, PEOPLESOFT, INC.; KEVIN FITZGERALD, SENIOR VICE 
  PRESIDENT, ORACLE CORP.; S. DANIEL JOHNSON, EXECUTIVE VICE 
 PRESIDENT, BEARINGPOINT, INC.; AND PAUL M. COFONI, PRESIDENT, 
            FEDERAL SECTOR, COMPUTER SCIENCES CORP.

    Mr. Conway. Good morning. Thank you for giving me the 
opportunity to address the House Government Reform Subcommittee 
on Technology, Information Policy, International Relations and 
the Census.
    I have been asked to share my observations about Federal 
information systems, particularly their integration between 
agencies, and I would like to start by observing, first of all, 
that there are really only two reasons to deploy technology: 
first, to automate a repetitive organizational process and, 
second, to do something that was not possible to do before.
    The Federal Government has always been a good candidate for 
information technology because it deals with massive amounts of 
administrative repetitive processes. However, the Federal 
Government has not historically been as successful in deploying 
information technology as the private sector. There are a 
variety of reasons for this. First, scale. The sheer size of 
the data that the Federal Government deals with has 
historically required very large, very complex, and very costly 
systems. Second, customization. The Federal Government has 
historically preferred to change or customize information 
technology rather than use commercial off-the-shelf software. 
Three, skilled people. The types of highly skilled people 
required to implement these large, highly complex, highly 
customized solutions are hard to find and even harder to retain 
because their value in the market is greater in the private 
sector. And, four, procurement. The process the Federal 
Government has used to procure information technology was self-
defeating; it would take at least 18 months to define the 
system requirements, another 18 months to solicit bids and make 
an award, another 6 months to handle the vendor protests. By 
that time, 3 or 4 years had gone by and the technology had 
changed.
    For all of these reasons, the success of the Federal 
Government utilizing information technology has lagged the 
commercial sector.
    All of that, however, has begun to change. Today, in fact, 
the most dramatic examples of information technology improving 
business process has been in the public sector. Why? Again, a 
variety of reasons. First of all, the Internet. The Internet 
has provided a readily available, infinitely scalable 
architecture. Remember, massive scale used to be a challenge to 
the Federal Government. But Internet technology is infinitely 
scalable and easily expanded. Two, best practices. The Federal 
Government today embraces best practices and is much less 
willing to change or customize commercial off-the-shelf 
solutions, and that has reduced the complexity and it has 
reduced the time and the expense of these Federal systems. 
Three, quality people. As the complexity of the Federal systems 
has been reduced, the caliber of people required to use them 
has become more realistic to attract, and the Federal 
Government has done a better job of attracting and retaining 
quality people, including some very senior talent from the 
commercial sector. And, four, the procurement process. The 
procurement process has also improved over time. In fact, today 
the Government can weigh the tradeoffs between market cost, 
vender viability, and experience in a manner similar to the 
commercial market.
    The results of these four changes in the public sector have 
been profound. E-Government initiatives today have been among 
the most impressive uses of information technology in the last 
10 years. In many State governments, citizens now renew their 
driver's licenses and pay their parking fines and register 
their vehicles on line. In universities today, students apply 
for admission on line; they apply for financial aid on line; 
they enroll in classes on line.
    PeopleSoft has participated in these and other impressive 
E-Government initiatives. The U.S. Mint, Department of Treasury 
have online financial systems from PeopleSoft. Department of 
Agriculture, and Coast Guard have online HR systems from 
PeopleSoft. The Army's continuing education program, called 
eArmyU, is from PeopleSoft.
    PeopleSoft today is a major supplier. We are a supplier to 
13 of the 15 cabinet level agencies; 15 States run on 
PeopleSoft; 650 universities run on PeopleSoft; almost 5,000 
commercial companies run on PeopleSoft.
    But I would like to conclude my remarks looking to the 
immediate future. Online E-Government initiatives have become a 
reality at Federal agencies, State agencies, and universities. 
It has been a quantum leap in the use of information technology 
in the last few years, but it is really just getting started.
    The value of information technology in the Federal 
Government could be exponentially higher if it were deployed 
across agencies, because today, to some extent, individual 
agencies are reinventing the same business processes. How many 
different HR systems do you need to deploy to the Federal 
Government? How many different ways are there to pay Federal 
workers? How many different benefit plans really apply? Would 
it not be more beneficial to have a single HR system that could 
support different agencies rather than different HR systems in 
different agencies? Would it not be more beneficial to have a 
single financial system that can support different agencies and 
immediately, immediately consolidate budget results?
    The products exist today to do that. In fact, the 
Department of Defense today is deploying a cross-agency system 
called DIMHRS. DIMHRS will consolidate 79 different HR systems, 
79 different HR systems across the Army, Navy, and Air Force 
into a single payroll and benefit system. PeopleSoft is working 
with DIMHRS, with Quicksilver, and with the line of business 
applications that you heard previously.
    Cross-agency deployment of information technology does 
represent an enormous leap in efficiency for the Federal 
Government. It is realistic; it is practical; it is affordable. 
It is not a limitation of technology; it is a matter of people. 
People have to agree on a common system, agree on 
specifications. People need to handle the change management 
issues. And we all appreciate the challenges of getting people 
to cooperate across agencies, but the benefit to the Federal 
Government would be profound and immediate.
    Let me end by saying we are just starting to glimpse the 
profound benefits of these online information systems as they 
integrate and consolidate across agencies, but also as they 
integrate and consolidate into the private sector. And 
ultimately they will integrate and consolidate actually between 
countries.
    Thank you very much.
    [The prepared statement of Mr. Conway follows:]

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    Mr. Putnam. Thank you very much, Mr. Conway.
    I will now introduce our second panelist, Mr. Fitzgerald. 
Kevin Fitzgerald is senior vice president of Oracle's 
Government, Education & Healthcare group. He has more than 25 
years experience and is currently responsible for all Oracle 
activities in the Federal, State, and local markets. Under his 
leadership, Oracle's focus has been on providing local, State, 
and Federal Governments with a secure integrated infrastructure 
to better share information. He also has held key management 
positions with Siebel, Crossworlds Software, Netscape, NBI, and 
IBM.
    For the record, we invited Mr. Ellison, Oracle's chairman 
and CEO, to join the panel today, and I understand his schedule 
did not permit. But we are very pleased that Mr. Fitzgerald was 
able to join us, representing Oracle.
    Welcome to the subcommittee. You are recognized.
    Mr. Fitzgerald. Chairman Putnam, thank you very much, 
Ranking Member Clay and members of the subcommittee. I 
appreciate the opportunity to take Mr. Ellison's place here 
today and appear before the committee.
    Oracle began as a project within the intelligence community 
to better manage its vast quantities of information simply and 
securely. In the 26 years since that time, we have provided 
similar information management solutions to many of the world's 
largest business enterprises, and hundreds of departments and 
agencies in Federal, State, and local governments. We are 
extremely proud of our partnership with the Federal Government, 
and central to that partnership is working with Mark Forman and 
his team at the Office of Management and Budget to achieve a 
successful implementation of the Federal enterprise 
architecture.
    When fully implemented, the Federal Government will be far 
more effective in achieving its policies and administrative 
goals. Many of the concepts articulated by Mr. Forman today are 
very familiar to us and are integral to our own e-business 
suite of applications which we provide to businesses and 
governments around the world.
    An enterprise approach represents a paradigm shift in 
information management. To better understand this 
transformation, it is important to see how businesses and 
government have traditionally bought and utilized information 
management software in the automation wave of the last decade, 
and even to some degree today organizations traditionally have 
bought software to automate a specific operational challenge, 
such as managing customer information or processing financial 
reports. These departmental automation age projects have 
created hundreds of disparate systems within the government 
organizations, with each system usually having its own base of 
information. This makes it virtually impossible for senior 
managers of a large agency to know whether or not organizations 
within the agency are achieving missions effectively and 
efficiently.
    Faced with this dilemma, some enterprises attempt to stitch 
these individual systems together. Of course, the cost of 
stitching and managing patchwork systems is enormous. 
Fundamentally, from a business sense, you haven't really solved 
the problem, and it is no surprise that business and government 
spend a disproportionate share of their IT budgets on 
maintenance-related costs. Frankly, any effort to implement 
this approach for the Federal enterprise would be a massive 
investment and result in failure. The fundamental lesson is 
clear: no business or government agency can fully maximize its 
IT investments if its information infrastructure is not 
designed with the entire enterprise in mind.
    We applied that lesson in developing our e-business suite 
and in the tradition of the Wright brothers, we took our own 
creation out for a test flight to show our customers how an 
enterprise approach automates business processes. It also 
transforms those processes across an entire organization like 
Oracle Corp. Our results were extraordinary. Since we 
implemented our own software, Oracle has saved more than a 
billion dollars, and we sustained our profitability during a 
major economic downturn.
    The Federal enterprise architecture won't happen overnight, 
and it can best be achieved in a modular approach, with each 
software component pre-designed to integrate and collaborate 
with each other, making for one suite of applications. We are 
currently applying this modular approach in several key 
Government agencies, including the Department of Transportation 
and the Department of Homeland Security's Transportation 
Security Administration.
    Again, automation, in and of itself, does not solve the 
basic problem of information fragmentation. An effective 
enterprise architecture has to solve information fragmentation 
on three levels: first, information has to be easy to access; 
second, information has to be easy to share across agencies; 
and, third, information has to be secure.
    When we started our e-business enterprise, our customer 
information was scattered across our entire company; and the 
same problem exists in the Federal Government. While mutual 
functions among agencies will help eliminate redundancies and 
reduce costs, a simple data model can make these agencies both 
cost and mission-effective.
    We know there was information about the September 11 
plotters scattered our law enforcement intelligence systems, 
but there was no way to bring that information together in the 
real time. A unified data model containing information on 
suspected terrorists is better than 100 disconnected data bases 
scattered all over our Government. Having access to the same 
data helps to generate the next solution against fragmentation: 
standardized data models. So that information means the same 
thing to all that are using it. Ironically, by automating 
individual tasks, some enterprises inadvertently create 
barriers for information sharing. An effective enterprise 
architecture breaks down the barriers of the automation age.
    For example, as Mark Forman mentioned, the Center for 
Disease Control launched the Public Health Care Information 
Network, a long-term commitment to modernizing, streamlining, 
and integrating our fragmented public health reporting 
infrastructure. For this network to work, a common data 
standard and accepted definitions for patients' diseases are 
needed for information to flow seamlessly from radiologists to 
practitioner to insurance companies to Medicare or Medicaid. 
These industry-developed standards were incorporated by Oracle 
in our products to both secure and provide portability 
according to the intent of Congress in its HIPAA legislation.
    Last, an enterprise approach to building an information 
infrastructure in government requires an enterprise approach to 
information security. Many organizations private and public are 
hesitant about sharing data that will be potentially exposed to 
insecure systems. These concerns are legitimate since not every 
Federal agency makes information assurance a factor when buying 
commercial software.
    Oracle is one of a number of software companies that has 
its software tested against internationally recognized 
information assurance standards such as the Common Criteria. 
Firms that are certified or become a criteria build security 
into their software as a process rather than bolting it on 
through a barrage of software patches.
    In January 2000, a committee within the National Security 
Agency proposed Federal agencies with information systems 
involved in national security can only purchase commercial 
software that has been independently evaluated as being secure. 
The Defense Department has developed regulations consistent 
with this policy, which Congress endorsed last year.
    Mr. Chairman, I understand you recently expressed an 
interest in looking at the Defense Department regulations and 
exploring the potential effectiveness of applying this approach 
throughout the Federal Government. We believe that kind of 
review is needed. An enterprise approach to security by the 
Federal Government, collectively the single largest buyer of 
commercial, off-the-shelf software products, can change the 
software marketplace for the better overnight.
    Mark Forman has often said that the major obstacle to 
achieving the Federal enterprise architecture is cultural, not 
technological, and I agree. There has to be a commitment 
throughout the enterprise to succeed. Everyone from software 
companies to congressional committee chairmen should get behind 
the OMB team to ensure the Federal enterprise architecture is 
achieved with maximum mission and financial benefits.
    In the end, as complicated as technology appears to be, 
what we are here to do is so simple and fundamental: how can 
Government better manage and use information in these 
challenging times. Oracle was founded to help the intelligence 
community meet this fundamental challenge, and we look forward 
to continuing that partnership with successes that will be felt 
throughout the Government enterprise.
    Mr. Chairman, thank you for the opportunity to participate 
with you this morning.
    [The prepared statement of Mr. Fitzgerald follows:]

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    Mr. Putnam. Thank you very much, Mr. Fitzgerald.
    Our next witness is S. Daniel Johnson. Mr. Johnson is 
executive vice president for public services for BearingPoint, 
one of the world's largest consulting and systems integration 
firms in the world, with 16,000 employees in 39 countries. Mr. 
Johnson oversees BearingPoint's enterprise integration 
technology and performance improvement services to the Federal, 
State, and local levels. He has served as head of 
BearingPoint's Public Services practice since 1997, during 
which time revenues have grown more than three-fold.
    I understand BearingPoint has business alliances with both 
PeopleSoft and Oracle, so Mr. Johnson's perspective from the 
viewpoints of systems integration, regardless of software or 
hardware, will be helpful to the subcommittee.
    We thank you for being here, and would ask, to the greatest 
extent possible, that our remaining witnesses stick to our 5 
minute rule. Welcome.
    Mr. Johnson. Yes, sir.
    Mr. Chairman and members of the subcommittee, thank you for 
this opportunity to share some of BearingPoint's views on the 
topic of Federal information systems integration and 
consolidation.
    BearingPoint, formerly known as KPMG Consulting, is one of 
the world's largest systems integration and management 
consulting firms. We do employ over some 16,000 people 
worldwide, we fulfill the needs of over 2,500 clients, and we 
have revenues approaching $3 billion. Three years ago we 
separated completely from KPMG LLP, the tax and audit firm, and 
in February 2001 we were the first of the Big Five accounting 
firms to become a publicly held corporation. Just last October 
we changed our name to BearingPoint.
    I lead BearingPoint's Public Services business unit, the 
largest of our four groups, and am responsible for over 3500 
practitioners providing systems integration services to the 
Department of Defense and its military services, as well as all 
the civilian executive agencies.
    Today I would like to comment briefly on the framework that 
has been created for the management of Government IT programs, 
some E-Government trends that we are observing in the 
marketplace, and areas where we see opportunity for 
improvement.
    Since the promulgation of the administration's E-Government 
strategy, significant progress has been made to establish an 
information technology management framework that will simplify 
Government service delivery and unify redundant IT systems. The 
stated vision requires the transformation of existing delivery 
models within and among agencies to drive significantly higher 
performance and productivity.
    BearingPoint is supporting several cross-agency initiatives 
that challenge the status quo and redefine how fast Government 
can work on behalf of its citizens. Our observation of the 
market suggests that E-Government transformation is progressing 
along three paths. First, there are far-reaching initiatives, 
sponsored by the President's Management Council, to implement 
certain Web-based financial applications across the Federal 
Government. These include the Quicksilver initiatives and 
implementing the build once/use many philosophy.
    Second, there are Web-based applications that have been 
provided effectively in one agency and are now being extended 
to several other agencies. An example of this path is the 
General Services Administration recognizing the value of the 
Department of Defense Central Contractor Registry System and 
incorporating it as a module in their Integrated Acquisition 
Environment program.
    Third, other successful Web-based applications currently 
being implemented within one agency that may provide the 
impetus for the next generation of initiatives. An example of 
this path is the innovative approach for implementing its core 
financial system at the Department of Health and Human Services 
to share best practices and economies across its component 
organizations.
    Whether the initiative is sponsored by PMC or an outgrowth 
from a current initiative, it supports the strategic objective 
to leverage technology in order to improve Government 
performance. Still, we see opportunities for improvement. For 
instance, we believe there is an opportunity to improve the 
management framework by better and more closely linking the 
capital planning and acquisition process to ensure that the 
procured solution fully supports agency performance goals as 
they were articulated in their project business case.
    There is also an opportunity to drive further consolidation 
among common lines of business, as has been previously 
discussed. Emerging new initiatives covering financial 
management, human resources, monetary benefits, criminal 
investigations, data and statistics, and public health 
monitoring.
    Also, as we move ahead, agencies must adopt the new 
management framework and use it to drive a holistic view of 
Government that puts the citizen at the center of the service 
delivery process. Congress can further facilitate a holistic 
view of Government by taking a unified cross-agency view in the 
funding and conceptualization of programs. Agencies can support 
this view by realizing that while technology has changed the 
art of the possible, the new processes and desired behavior. To 
do so, we will need to stick with the new direction, reinforce 
it, and consistently promote and reward managers that 
demonstrate leadership and accept accountability for results.
    Mr. Chairman, again, thank you for holding this important 
hearing today. We look forward to working closely with you and 
the rest of the subcommittee in any way you deem appropriate.
    [The prepared statement of Mr. Johnson follows:]

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    Mr. Putnam. Thank you very much, Mr. Johnson.
    At this time we will introduce Paul Cofoni. Mr. Cofoni is 
the Federal Sector president of Computer Sciences Corp., where 
he has held key leadership positions for the past 13 years. 
Prior to joining CSC, Mr. Cofoni had a 17-year career with 
General Dynamics, where he served in several leadership 
positions, including vice president of IT services. Prior to 
General Dynamics, from 1970 to 1974, he served as an officer in 
the U.S. Army.
    CSC is one of the Federal Government's largest systems 
integrators, with contracts in nearly every agency in the 
Federal Government, totaling $4 billion annually. CSC is an 
acknowledged leader in their systems integrations efforts, as a 
prime contractor for IRS modernization, FBI's trilogy, and 
EPA's IT solutions integration.
    Welcome to the subcommittee. You are recognized.
    Mr. Cofoni. Thank you, Mr. Chairman and members of the 
subcommittee.
    I would like to share with you just a few lessons learned 
from several of the programs you have mentioned, and a special 
reference to the Army Logistics Modernization Program and the 
IRS Modernization Program. Both of these programs are extremely 
complex undertakings, on a scale really unmatched in the 
private industry. And both involve significant transformation 
of both business organization process as well as technology.
    We have found that commercial and government transformation 
practices have much in common, and the modernization enterprise 
architecture is essential in setting the foundation for 
transformation activities. The enterprise architecture links 
the business strategy to the key elements of change in 
transformation; those are organization, process, technology, 
data, and applications. And this really becomes the baseline 
framework for transformation. We recommend that a business-
centric approach to enterprise architecture, thinking in those 
broad terms, process first, ahead of technology, in fact, 
setting architectural standards.
    Among the many lessons we have learned, I would like to 
highlight four. First, while a business line architecture and a 
discipline implementation process serves as a road map for 
change to ensure the end-state vision, change must be driven 
from the top of the organization, and this requires strong 
leadership. All parties must be aligned from top down and 
across the organization or across organizations.
    Second, system interoperability is critical, but, as you 
know, it is not just a technical problem. Significant 
organizational process changes will be the key to program 
success for transformations. For example, the Army Logistics 
Legacy Systems were based on 25-year-old technology crossing 
20-some data bases with 25-year-old processes. Simply adopting 
newer technology to that problem set wouldn't make a 
difference. Technology alone, without the business and 
organizational changes that a company can take advantage of new 
technology is the key. And here, in the case of the Army 
Logistics Modernization program, together in partnership with 
the U.S. Army and the Army Material Command, we have in fact 
changed the processes and the organizational structure; we have 
adopted the best practices of industry as embodied in the 
commercial, off-the-shelf software. And that system went into 
production, I am proud to say, last week.
    Third, defining a data and information model is a critical 
component, but, again, it is often more management decision 
than a technical issue. With today's technology, the 
consolidation of data to a single data base environment with 
realtime availability of data is there, it is here today, and 
it provides significant benefits. The key to an integrated data 
base is the organizational commitment to create data only once, 
at its point of origin, and to use it many times in a shared 
technology environment. Again, a business decision.
    And the last point is, as has been said several times 
already this morning, security and privity of data in new 
technology environments is critical. This, again, must be a 
part of a business-oriented approach that adapts to a constant 
stream of new threats. But the security architecture must be 
linked to the enterprise architecture, and decisions on 
security tradeoffs must be made from a business point of view.
    A theme I keep repeating is enterprise architecture must 
first be business-focused. Modernization really is a mission 
and business-led function with support from IT organizations. 
The transformation must come from the top and be driven down 
through the organization. And in talking about business lines 
or businesses, the architectures are, again, a framework, but 
leadership must be the champion to make the organization adhere 
to those architectures. So in thinking about business lines and 
business line architectures, it will take an innovative, out-
of-the-box thinking and collaboration between OMB, Congress, 
Federal agencies, and in many cases State and local 
governments; and leadership must emerge to do that.
    Commercial companies have been using this sort of shared 
service approach for decades, and in the last decade have 
really swung way over. Our own company uses a shared service 
approach that takes advantage of these same sort of synergies. 
CSC has been supporting government transformation for years, 
and hopes that we will continue our contributing role in 
government transformation.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Mr. Cofoni follows:]

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    Mr. Putnam. Thank you very much, sir.
    And we appreciate all of the witnesses' testimony. I will, 
again, using the ladies first rule, begin with Ms. Miller.
    You are recognized.
    Ms. Miller. Thank you, Mr. Chairman.
    Mr. Cofoni, I might start with you. It is my understanding 
that you are the prime contractor with the IRS.
    Mr. Cofoni. That is correct.
    Ms. Miller. Well, if you want to run for Congress, you can 
run against the IRS. I mean, it has to be the most hated agency 
in all of the Federal structure. I am just interested if you 
could tell us a little bit, discuss some of the different 
challenges that you faced, some of the things that we should be 
aware of so that we don't repeat those kinds of problems as we 
start to integrate some of these agencies. That had to be an 
unbelievably daunting task.
    Mr. Cofoni. At the IRS we have been working for some 4 
years, and the first really 2\1/2\ years were focused on the 
topics I spoke about earlier: defining architecture, setting 
the plan, setting the road map, building organizational 
alignment for change. And in the last year and a half we have 
really begun to start reaping some of the benefits by 
implementing the applications that ride on top of that 
infrastructure.
    The complexities at the IRS, really it is the most complex 
organization I have ever seen in terms of scale, complexity. It 
is a challenge for everyone who works there and all of us that 
are fortunate enough to serve there as contractors and system 
integrators. Because of the scale and complexity, and because 
of the enormous amount of oversight at the IRS and the fact 
that one error can affect millions of people in a negative way, 
the intense focus on quality at the IRS, those three 
components, complexity, scale, and intense focus on quality, 
tend to have an effect of slowing our progress. So while we are 
making progress, we don't feel we are making it as fast as we 
would like to. However, we understand the elements of 
complexity in scale and quality that are prerequisites, and 
they are more important, really, than schedule.
    So I would share with you that those are the issues as far 
as the IRS. We have, fortunately, been able to start delivering 
results there, and the pace of delivery we expect to pick up 
over the next few years.
    Ms. Miller. Did you design the Telefile and all of that 
type of thing?
    Mr. Cofoni. No. Telefile is a system that was defined some 
time ago. We have delivered a new system for the call center, a 
brand new call center technology system; refund fact-a-filing. 
Six million citizens were able to access the IRS this year and 
inquire as to the whereabouts of their refund, status of their 
refund that we implemented. And just yesterday we went live on 
that same technology with an application that allows citizens 
who are eligible for the advance child care tax credit to 
inquire as to the status of their tax credit check that they 
will be getting.
    Ms. Miller. Thank you. I just think that is so interesting, 
as all of you have mentioned in your testimony. The largest 
room is always a room for improvement. There is certainly a lot 
of room for improvement, and opportunity, I suppose, should be 
more the operative phrase, for the Federal Government to really 
look at technology and the kinds of things that we can do from 
a customer service standpoint, whether that is filing with the 
IRS or what have you.
    And I appreciated Mr. Conway's statement. You mentioned 
some of the different States where you can actually renew your 
driver's license on line and some of those things. In a former 
life I was a Michigan Secretary of State where I did all the 
motor vehicle. We were the first one to do E-Government and 
driver's licenses and that on line, and it has been a 
tremendous help. But it is very difficult to get people 
actually to do that; they want to come in and actually see you 
to transact business. So that is just a generational culture, I 
suppose, that we all have to get over.
    But as we were doing some of the design work in our State, 
we looked at best practices particularly with the Big Three in 
Michigan, of course, and how they were doing some of their IT; 
and often times they would bring in from the outside, as many 
of you mentioned here how difficult it is for the Federal 
Government to attract and then retain the different IT 
geniuses, really; they are so marketable out there today. We 
tried to think about I don't know if I want to use the term 
privatizing, but really outsourcing an awful lot of our project 
management and bringing them in for specific kinds of things 
and then letting them go off again rather than growing the 
government. And, again, we always looked to the Big Three as 
really the innovative incubators of all those kinds of things 
in our State.
    Do you have any feeling as you looked at some of these 
different lines of business, if you have had an opportunity to 
review what Mr. Forman has laid out for the Federal Government, 
whether or not, I won't use the term privatizing, but 
outsourcing some of these kinds of things, if that is something 
we should be looking at closely? I guess I will throw that out 
generally.
    Mr. Fitzgerald. I mean the answer, I think, is 
categorically yes, again, using scale as one barometer and 
cross-functioning. Many of the processes which the Federal 
Government could outsource are being done in business and other 
governments, and can be hosted very economically by companies 
at considerable operational cost to the Government. So I think 
in the future we are going to see much more opportunity for 
those situations to arise. And, again, it is a matter of scale 
and a matter of the technology being there, now to do it.
    Mr. Conway. There are three major contributors to the 
length and cost of the implementation of these systems. One is 
standardizing the business process. You know, automating 
something that can't be standardized is hard. The second thing 
is resisting the temptation to customize. When you go to an 
agency and you ask them how they would like to automate 
something, the natural reaction is exactly the way I am doing 
it today, instead of taking a fresh look and seeing if there is 
a more efficient way to do it. Then the third trap for length 
and cost is change management, getting people to adopt a new 
way of doing something. You mentioned the DMV. You know, hard 
to imagine people are all that happy about going to a State 
facility and waiting in a long line to renew their driver's 
license, when they can do it 7 days a week, 24 hours a day, by 
dialing in on their home computer; but yet there is a change 
management process. There is a change management process for 
the users and the people that provide the systems.
    So the direct answer to your question is you can turn to 
people that know best practices and ask for their guidance, and 
I think that is the business that BearingPoint and CSC and 
Accenture and their competitors are in, advising on best 
practices.
    Ms. Miller. Just one other question, then. Talking about 
best practices, I often found it difficult, I suppose because 
it is counterintuitive when you are dealing from a public 
standpoint, with the private sector with a particular vendor of 
having the vendor actually tell you. I mean, I would say, well, 
these are all of our priorities, we have 300 priorities, 
waiting for the person to say, well, you can't have 300 
priorities, you can only have 3.
    I know many of you do business with the Federal Government. 
Do you feel that you are adequately advising the Federal 
Government, the different agencies that you are dealing with, 
that some of the things that they are asking you for just 
really aren't the best practices, even though it may negatively 
impact your bottom line?
    Mr. Fitzgerald. I think the comment that Craig just made, 
and I agree with wholeheartedly, we continually advise 
Government managers not to change already automated work 
processes which are found in software but, rather, modify your 
business process. The benefit to that in terms of the 
maintenance of that software and that function for the 
Government moving forward is phenomenal; it is extraordinary. 
So by taking the time to have those discussions up front, 
rather than just saying, sure, we will do it your way, I think 
saves everybody money up front in putting a project in and 
saves the Government considerable cost during the maintenance 
of that system.
    Mr. Cofoni. I would add, as a system integrator, we 
recognize our primary role is to be the trusted advisor and to 
bring challenging thoughts to the table, provocative new ways 
of thinking about old problems. And we generally find in 
government that there is good receptivity to those ideas, and 
then the issues always become a matter of driving those kinds 
of new thinking down through the organization and dealing with 
the years of doing it a different way is just bringing change 
about in an organization so it is not a different problem or a 
new problem.
    But we do bring that to the table; we view that as the 
first core confidency we bring to an engagement.
    Mr. Johnson. I would just like to add that I think one of 
the core characteristics of successful implementations of 
large-scale systems of these types within the Federal 
Government is a strong public-private partnership between the 
Government and the integrator and the solution provider, 
because there are always going to be very difficult decisions 
to be made of the type that you described earlier, where people 
want to continue to do things the way they have in the past; 
and often times if we are talking about an agency 
implementation, we are talking about a number of components of 
those agencies which have always done things the way they have 
done them with different systems. So it has to be a very strong 
partnership at the top that can (a) make those decisions and 
then (b) push those decisions down through the organization to 
ensure that they get implemented.
    Ms. Miller. Thank you very much.
    Mr. Chairman.
    Mr. Putnam. Thank you, Ms. Miller.
    Mr. Clay.
    Mr. Clay. Thank you, Mr. Chairman.
    I would be interested to hear how each of the panelists 
responds to this question. Recently we discovered in the 
Government Reform Committee that the Department of Defense was 
selling chemical and biological protection suits on the 
Internet for $2 to $3. At the same time, the agency was 
purchasing these same suits for $200 to $300. The suits for 
sale were new, not expired, in the original packing. Clearly, 
there is no link between the process for declaring inventory 
excess and the procurement process. How difficult is this 
problem to solve? This discovery was reported to the committee 
over a year ago. Should we expect the agency to have solved the 
problem by now?
    And each of you can give it a shot.
    Mr. Johnson. Well, I will take a crack at just the overall 
issue of assets in inventory in the Federal Government and 
their disposition. And I think the general feeling is there is 
a tremendous value within the Federal Government that is not 
being taken advantage of in terms of accountability and 
disposition. And if one were to look at rules and laws for 
disposition, there probably is some advantages that could be 
made in changing some of those to make it work to the advantage 
of the entity who has control of that such that if they can 
dispose appropriately with a proper return, that they can keep 
the funding, rather than the argument one might get is it costs 
me more to find out what I have than it does to dispose of it.
    Mr. Fitzgerald. I agree wholeheartedly, because you hear 
that comment time and again; it is easier for me to basically 
sell off the assets than really try and figure out what I have. 
And anyone who has made a trip up to Assistant Secretary 
Zatheim's office in DOD to see the plan for the financial 
system and asset management of DOD recognizes the monumental 
issues involved with this. My comment, I guess, would be that 
it doesn't appear to be a problem that will be solved in the 
near term, but that there is obviously a very large-scale 
attempt to make the system a rational system.
    Mr. Conway. Huge issue; phenomenal benefit, potential 
benefit. Great care study is the county of Los Angeles General 
Service, this is the county GSA, if you will, tried to get 
their arms around supplier relationship management and asset 
management automated the system, was able to reduce inventory 
by more than 50 percent within a year and closed half their 
warehouses in 12 months. Now, this is a large county. But can 
you imagine what the benefits would be of getting that type of 
visibility across Federal agencies to be able to match need and 
demand and supplier and inventory more efficiently? It is a 
phenomenal opportunity.
    Mr. Clay. It is a matter of being more efficient.
    Did you want to add?
    Mr. Cofoni. Well, I would only add that we have just last 
week implemented for the first part of the Army Material 
Command a new logistics system which will begin to solve those 
types of problems. This logistics system inventories for the 
Army Material Command all materials, parts, supplies, and even 
some weapon system platforms around the world, and it 
integrates all the warehouses and the inventories at all of the 
warehouses and brings them together in one place.
    Mr. Clay. Let me ask you. The Office of Management and 
Budget has identified six lines of business that it will focus 
on in the 2004 budget. Which of these six do you believe will 
have the greatest return not in terms of dollars, but in terms 
of agency performance? Anyone can take a crack at it.
    Mr. Fitzgerald. One we are involved in is the Public Health 
Information Network, a very vital system for reducing the cost 
for health care in this country by using information and 
automating those functions from the time of diagnosis to the 
time that a reimbursement is given. Tremendous leverage in 
opportunity there. We see that as affecting everybody from the 
local to State to county and Federal, obviously, agencies, so 
it cuts across the entire country in a very vital area. Again, 
we are heavily involved in that and see it as a great 
opportunity.
    Mr. Conway. I think it is hard to say; they are all 
tremendous areas of opportunity. The two that PeopleSoft are 
involved in is the human resource management and financial 
management. I am sure those will be the most successful.
    Mr. Cofoni. I would say, just a point of view, the two that 
strike me as having the greatest benefit to the public in terms 
of major effect would be in the criminal investigation and in 
the health data monitoring area.
    Mr. Clay. Final question. Going back to our experience with 
the oversight of DOD, we have found it extremely difficult to 
get the forces within the Department to work together. One of 
the reasons there are over 1,200 financial management systems 
in the Department is that every service insists on having its 
own set. Given that it is difficult to get agencies within a 
department to coordinate, how is OMB going to get agencies 
across departments to use identical systems?
    Mr. Johnson. I will take a crack at that one. Just some 
personal experience. We are heavily involved in the current 
convergences in the Department of the Navy, and there is in 
fact an initiative right now to reduce from well over 200 
financial systems to concentrate on one converged system within 
the Department of the Navy. There are similar instances going 
on in the Department of the Army, and I think the Air Force is 
just watching to see what is going to happen. But there are 
initiatives that are moving in that direction, to do exactly 
what you just said, within the Defense Department; it just 
takes time.
    Mr. Clay. They are moving in that direction?
    Mr. Johnson. Yes, sir.
    Mr. Clay. All right.
    Thank you all for your answers, and thank you, Mr. 
Chairman.
    Mr. Putnam. Thank you, sir.
    You know, it just boggles your mind to think about how we 
got into this mess. Two hundred different financial systems 
just in the Navy, and the Air Force is going to watch and see 
what happens. I mean, I have heard estimates as high as over 
50,000 legacy systems in the Department of the Navy alone. Does 
that seem high to you?
    Mr. Johnson. Could be.
    Mr. Putnam. It could be?
    We have our work cut out for us, Mr. Clay.
    Mr. Cofoni, you laid out sort of a four-point test, the 
bottom line of which was that business focus is the key. And 
Mr. Forman divided them up into three baskets; he divided his 
six and said we have good strong leadership, good commitment at 
the top on the public health component and the case management 
component, so-so commitment on HR and financial, and we are 
just not going to get anywhere on the data statistics and the 
payment management system.
    Do you attribute the last category, the we are not going to 
make much progress at all to a lack of commitment from the top? 
Is that a pure management system or are there legitimate 
technical issues preventing progress in that area?
    Mr. Cofoni. You know, I don't have specific knowledge about 
that, and I would probably defer to Mr. Forman on that. But in 
general you can see in an organization like the Army Material 
Command or in the IRS, where there is a strong central leader 
who is directing change downward. And when you look at 
initiatives that you are trying to drive across organizational 
boundaries, you have to find, and I think Mark Forman said 
that, you have to have leadership emerge that will drive that 
change across those organizational boundaries. So it is, by 
nature, more difficult to drive systemic change across multiple 
organizations than it is to drive it down one; and it is hard 
to drive it down through one. So I sort of would defer to Mr. 
Forman for the exact answer to that.
    Mr. Putnam. Anyone else want to comment on that?
    Mr. Fitzgerald. I think most of us have said these are 
cultural issues, not technology issues.
    Mr. Putnam. So there is no technical barrier that you are 
aware of for any of these six becoming implemented.
    Mr. Fitzgerald. I think Mark used a good example of the 
geospatial data system now that is being shared by all of the 
departments and agencies effectively; it is a good example of 
how data, in this case, can be shared amongst all applications 
that need geospatial data. There is no real technical reason 
for the fact that it can't be shared.
    Mr. Cofoni. We have not seen technology as the limiting 
factor in bringing about this type of change.
    Mr. Putnam. In your contract work with the Government, have 
you formed any ideas about other lines of business or business 
functions outside the top six that are ripe for consolidation 
or integration?
    Mr. Fitzgerald. We think that they have solicited a lot of 
input, I think, from Government and contractor community, and 
we think the six are very, very obvious for all of us to help 
the Government work.
    Mr. Putnam. They are the obvious six. Is that sort of the 
consensus? These are the first bite of the apple, easy six.
    Mr. Conway. But I believe Mark Forman has a superset list 
of 20-some business processes or lines of business, and I think 
the six that have been started with are the very fertile areas 
for savings. But all 24 will represent benefit to the 
Government.
    Mr. Putnam. Mr. Conway, would you like to share your 
thoughts on the Federal Government SmartBuy software licensing 
initiative?
    Mr. Conway. You know, the Government has a tremendous 
opportunity to exercise its buying power. Traditionally, our 
industry, the software industry, has charged its customers by 
number of users, and it is a bit counterintuitive, because what 
you really hope is that you get the maximum number of users. 
But every time you extend the user of a system, you have to pay 
a supplier, and so a lot of times, in our industry, 
historically, a software company sales representative shows up 
every quarter, counts the number of users, and gives you an 
additional bill.
    The opportunity exists to do it differently, which is to 
license the entire enterprise, whether the enterprise is a 
commercial company, a university, a series of universities, or 
the entire Federal Government; and that is what I think 
SmartBuy will evolve to, enterprise-wide licensing of the 
Government that is not counterproductive or counterintuitive, 
but encourages the use of these systems for every user that can 
benefit from them.
    Mr. Putnam. Mr. Fitzgerald, do you wish to add anything to 
that?
    Mr. Fitzgerald. Sure. I mean, the GSA schedules have always 
provided the benefit of one-time buys getting the best price 
for the Government. As Craig said, and we clearly agree with 
it, the opportunity now to license large segments of the 
Federal enterprise with software technology we think is a 
rational way for the Government to buy and a rational way for 
companies to sell and serve the Federal Government, so we are 
engaged in the conversations and dialog on the SmartBuy 
initiative.
    Mr. Putnam. Many of you have stayed in local governments as 
customers, you have given examples of cost savings, significant 
cost savings at governmental levels other than the Federal 
Government. Could you share your observations on how far ahead 
of the Federal Government, State governments are, if they are, 
and what the keys to their success have been in successfully 
bringing about the cultural change to implement the 
technological advances?
    Mr. Johnson. I will give a few thoughts on that. And I 
think one reason might be just in sheer scope and scale of 
addressing technological implementation at a State level, as 
opposed to the size that we are talking about in the Federal 
Government. We have had quite a bit of success with portal 
technology with the State of Texas. All of the licensing that 
we have talked about before, plus some new innovations. A most 
recent one is e-filing, we term it e-filing, where all the 
legislative filings within a State that go to the courts, which 
heretofore went on paper, are now going to be conducted over 
the Internet; and it is the lawyers that are going to pay for 
that and be charged a specific dollar value per filing. So we 
are taking about filing a case, interrogatories associated with 
the case, the motions associated with the case. There are 
millions of these. And that is sort of a tactical slice that 
one can take on a specific issue in a State. And, of course, 
now once that is delivered and seems to be working, it is 
something that could be transported to other States.
    But, you know, you look at that and then try to compare 
that to something in a Federal component, and it is almost 
mind-boggling.
    Mr. Putnam. Any other thoughts?
    Mr. Fitzgerald. You know, with criminal justice, I can look 
at the city of Chicago that has automated their entire criminal 
justice processes, now just taken over the entire State of 
Illinois doing it for the State police, as seeing sometimes 
systems scaling now throughout, intergovernmental scaling of 
systems. So I think all of us can cite tremendous examples of 
efficiencies that State and local governments have achieved, 
but, again, the scale of the Federal Government's objectives 
are just massive, and I think Mr. Forman and the team are doing 
a good job of OMB of tackling them.
    Mr. Conway. The best example at a State level that I think 
corresponds to the Federal level was the State university 
system in California, the largest university system in the 
country; 23 different universities. A new chancellor of 
education came in, noticed that all 23 universities had their 
own data center, they all had their own data processes, very 
similar to agencies here in the Federal Government. That 
chancellor, whose name is Charlie Reed, decided that the State 
university system really has one student that is in the system; 
it doesn't matter whether they are attending one campus or 
another campus. He standardized the business process, shut down 
all the data centers, went to a single data center, and that 
business process was replicated from 23 different instances to 
one.
    The lessons learned in there were tremendous. The 
resistance from the 23 universities was the single greatest 
challenge to overcome, because they didn't like losing the 
control; they wanted to do it themselves. And yet once the 
system was in place, it has been tremendously successful. Of 
course, failures are orphan and success has a lot of fathers, 
and at this point a lot of people are taking credit for that 
system, but it really leads back to the leader, the person that 
came in with the vision; and I think it is a great example for 
the Federal Government as a microcosm.
    Mr. Putnam. Charlie Reed can be very persuasive. We hated 
to lose him from Florida. How long did it take to implement 
that?
    Mr. Conway. It took about 2\1/2\ years to get from the 
initial specifications through the implementation. And 
initially there was an investment in the system, but after the 
system was implemented, of course, the costs are a fraction of 
what they would have been otherwise, had each of these systems 
been operating independently. And, of course, today there is 
the same HR system, the same financial system for students, 
faculty, and employees. So this has not only been across 
agency, in their vernacular, universities, but it has also 
crossed different users of the system, from the students to the 
faculty to the employers of the university system. It is really 
a wonderful case study.
    Mr. Putnam. The issue of retaining and recruiting quality 
IT managers in the Federal Government has been a challenging 
one, and it is one that has received an awful lot of attention. 
Several of you alluded to this in your testimony, and it 
clearly gets to the heart of our leadership issue, our business 
case issue, our personnel challenges. What are you finding as 
your companies are pitching the Federal Government for 
business? Are you finding high-quality, knowledgeable, 
professional people in positions who can make educated 
decisions on behalf of the taxpayer about what systems they 
need, what components they don't need, what fair prices are? 
Are you finding that the quality of IT personnel in the Federal 
Government is something that we can all be proud of?
    Mr. Fitzgerald. In general, I think the quality is good. I 
think the issue is one in which we have a tremendous number of 
legacy systems with the people who have been charged with 
running those systems about to retire from the Federal 
Government, and there is an emerging or looming crisis between 
the personnel with the skills to continue to manage these 
systems and getting the new systems and modernized systems to 
take their place in the meantime. So, you know, I think there 
are always issues at a particular project level, but in general 
the quality is very good, but there is a looming crisis of 
skills about to retire from the Federal work force.
    Mr. Putnam. Anyone else?
    Mr. Johnson. I would agree with that. I also think that the 
Federal Government IT force is making a concentrated effort to 
improve itself, given the new technology which is now getting 
into the marketplace and transitioning away from the legacy 
systems.
    Mr. Putnam. The consolidation of these systems obviously 
creates a situation where there are clearly fewer systems and, 
therefore, less contracts for the private sector to compete 
for. How do you balance the savings that we secure through open 
competition versus the savings that we receive through 
economies of scale yielded through consolidation? Is that 
something we ought to be worried about at all?
    Mr. Conway. Yes, I think you should. There is already, as 
providers to the Federal Government for these types of systems, 
very few suppliers. In the software area there are three major 
suppliers; there is SAP, there is Oracle, there is PeopleSoft. 
These companies have invested enormous amounts to handle the 
complexity and the scale associated with Federal and State 
governments and large commercial organizations.
    It is important to maintain the number of providers so that 
there continues to be innovation, competition, price pressure, 
and competition among the providers so that the Federal 
Government has choice. And I think that as the Government looks 
to standardize on technologies, it will be important to strike 
a balance between the providers of that technology and their 
competition in the open market.
    Mr. Putnam. Mr. Fitzgerald.
    Mr. Fitzgerald. I think consolidation is inevitable in 
every industry, but I think the issue for the Federal 
Government is making sure that we continue to cultivate small 
and disadvantaged businesses into our contracting process as we 
serve the Government and make sure that very vital link in 
terms of skills and labor is available in the economy.
    Mr. Putnam. Anyone else?
    Mr. Johnson. I think we have all accepted the fact that the 
Federal Government is modernizing its information technology, 
and that is going to happen. I mean, the Fortune 1,000 has done 
it; the middle market is doing it now; and everyone is reaping 
significant cost benefits because of it. So if part of your 
question was do you see any foot-dragging to hold on to legacy 
systems because they are inefficient and you can make more 
money on them, I don't think that is going to happen. I think 
that the wheels are in motion.
    Mr. Cofoni. I would just add that you need to contemplate 
your question, Mr. Chairman, in the full context of a global 
economy and ask the question is the amount of consolidation 
that is likely to occur in U.S. Federal Government enough to 
sway the balance that might be going on in a global competitive 
environment between the various contestants.
    Mr. Putnam. Fair point.
    A vote has been called and we have just a few minutes to 
get down to the House floor. I will take this opportunity to 
allow any of the panelists to take 1 minute apiece, if you so 
desire, to point out any issue that you think has been 
neglected or overlooked in this hearing, or just allow for any 
parting thoughts that you may have, beginning with Mr. Cofoni.
    Mr. Cofoni. Well, I really thank you for the opportunity, 
Mr. Chairman, to be here today. I think I communicated most of 
the major points I would have, and I look forward to serving in 
any capacity that would benefit the subcommittee in the future. 
Thank you.
    Mr. Putnam. Thank you.
    Mr. Johnson.
    Mr. Johnson. I would just like to thank you for the 
opportunity. I think this was an excellent idea and a very good 
meeting.
    Mr. Fitzgerald. I echo the remarks and, as Oracle Corp., 
any way we can serve the subcommittee, we look forward to the 
opportunity of doing that.
    Mr. Putnam. Thank you.
    Mr. Conway.
    Mr. Conway. And finally I would say that if there was one 
quality that consistently corresponds to success and use of 
information technology, it is leadership. When you find a 
leader that has a vision for how to use technology, great 
things can happen; and I think you do have the leadership here 
with Mr. Forman. I think this subcommittee is crucial to 
starting a process which will pay off for the U.S. Government 
in the billions and billions and billions of dollars, so I 
really applaud what you are doing. Thank you.
    Mr. Putnam. Thank you.
    And I want to thank all of you, and Mr. Forman as well, for 
their expertise in helping us to understand these issues. I 
speak on behalf of the entire subcommittee in saying that OMB 
clearly has our support in this effort. I also note that 
agencies are currently preparing their IT budgets for fiscal 
year 2005, and I would caution each CIO to heed the direction 
of Mr. Forman and the commitment of this subcommittee in 
identifying redundancies ripe for integration and 
consolidation. Obviously, this subcommittee and staff will 
continue its aggressive oversight, both publicly and behind the 
scene, until we arrive at a more citizen-centric Federal 
Government, a more efficient Federal Government, and cost 
savings to the taxpayer.
    There may have been some questions for panelists or 
statements that we did not get to because of time. The record 
will remain open for 2 weeks for such submissions, and we would 
ask the panelists' cooperation in answering submitted 
questions.
    With that, I thank all of you, and we stand adjourned.
    [Whereupon, at 11:55 a.m., the subcommittee was adjourned, 
to reconvene at the call of the Chair.]

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