[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
FINANCIAL MANAGEMENT AT THE DEPARTMENT OF HEALTH AND HUMAN SERVICES
=======================================================================
HEARING
before the
SUBCOMMITTEE ON GOVERNMENT EFFICIENCY
AND FINANCIAL MANAGEMENT
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 30, 2004
__________
Serial No. 108-273
__________
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
______
U.S. GOVERNMENT PRINTING OFFICE
98-484 WASHINGTON : 2005
_____________________________________________________________________________
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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
TODD RUSSELL PLATTS, Pennsylvania JOHN F. TIERNEY, Massachusetts
CHRIS CANNON, Utah WM. LACY CLAY, Missouri
ADAM H. PUTNAM, Florida DIANE E. WATSON, California
EDWARD L. SCHROCK, Virginia STEPHEN F. LYNCH, Massachusetts
JOHN J. DUNCAN, Jr., Tennessee CHRIS VAN HOLLEN, Maryland
NATHAN DEAL, Georgia LINDA T. SANCHEZ, California
CANDICE S. MILLER, Michigan C.A. ``DUTCH'' RUPPERSBERGER,
TIM MURPHY, Pennsylvania Maryland
MICHAEL R. TURNER, Ohio ELEANOR HOLMES NORTON, District of
JOHN R. CARTER, Texas Columbia
MARSHA BLACKBURN, Tennessee JIM COOPER, Tennessee
PATRICK J. TIBERI, Ohio BETTY McCOLLUM, Minnesota
KATHERINE HARRIS, Florida ------
MICHAEL C. BURGESS, Texas BERNARD SANDERS, Vermont
(Independent)
Melissa Wojciak, Staff Director
David Marin, Deputy Staff Director
Rob Borden, Parliamentarian
Teresa Austin, Chief Clerk
Phil Barnett, Minority Chief of Staff/Chief Counsel
Subcommittee on Government Efficiency and Financial Management
TODD RUSSELL PLATTS, Pennsylvania, Chairman
MARSHA BLACKBURN, Tennessee EDOLPHUS TOWNS, New York
STEVEN C. LaTOURETTE, Ohio PAUL E. KANJORSKI, Pennsylvania
CANDICE S. MILLER, Michigan MAJOR R. OWENS, New York
MICHAEL R. TURNER, Ohio CAROLYN B. MALONEY, New York
KATHERINE HARRIS, Florida
Ex Officio
TOM DAVIS, Virginia HENRY A. WAXMAN, California
Mike Hettinger, Staff Director
Larry Brady, Professional Staff Member
Nathaniel Berry, Clerk
Adam Bordes, Minority Professional Staff Member
C O N T E N T S
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Page
Hearing held on September 30, 2004............................... 1
Statement of:
Steinhoff, Jeffrey C., Managing Director, Financial
Management and Assurance, Government Accountability Office;
Keith A. Rhodes, Chief Technologist, Center for Technology
and Engineering, Government Accountability Office; and
Kerry N. Weems, Acting Assistant Secretary for Budget,
Information, and Finance, Department of Health and Human
Services................................................... 2
Letters, statements, etc., submitted for the record by:
Steinhoff, Jeffrey C., Managing Director, Financial
Management and Assurance, Government Accountability Office,
and Keith A. Rhodes, Chief Technologist, Center for
Technology and Engineering, Government Accountability
Office, prepared statement of.............................. 6
Weems, Kerry N., Acting Assistant Secretary for Budget,
Information, and Finance, Department of Health and Human
Services, prepared statement of............................ 23
FINANCIAL MANAGEMENT AT THE DEPARTMENT OF HEALTH AND HUMAN SERVICES
----------
THURSDAY, SEPTEMBER 30, 2004
House of Representatives,
Subcommittee on Government Efficiency and Financial
Management,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 2 p.m., in
room 2247, Rayburn House Office Building, Hon. Todd Russell
Platts (chairman of the subcommittee) presiding.
Present: Representatives Platts and Turner.
Staff present: Mike Hettinger, staff director; Larry Brady
and Tabetha Mueller, professional staff members; Nathaniel
Berry, clerk; Adam Bordes, minority professional staff member;
and Jean Gosa, minority assistant clerk.
Mr. Platts. This hearing of the Subcommittee on Government
Efficiency and Financial Management will come to order.
Today's hearing continues the subcommittee's oversight of
Federal financial management and focuses on one of the most
important building blocks for success: financial system
implementation.
The clear goal of management reforms passed over the past
two decades is timely, accurate, useful information, financial
data that can be used to manage and make decisions. Without
this information, the Federal Government cannot analyze costs
and benefits or gather an accurate assessment of program
performance. In our oversight we have seen time and time again
the importance of financial system implementation and how
Federal agencies must construct the proper framework to achieve
the goal of sound management.
As part of our oversight of these system implementations,
we requested that the Government Accountability Office review
the multi-year effort now underway at the Department of Health
and Human Services to implement the Unified Financial
Management System. The UFMS implementation is critical to the
Government's delivery of vital services to millions of
citizens, and we look forward to discussing both the progress
that has been made and the concerns that have been raised
regarding this implementation.
We are honored here today to have Jeff Steinhoff, Managing
Director of Financial Management and Assurance at the
Government Accountability Office. He is joined by Keith Rhodes,
Chief Technologist at the GAO Center for Technology and
Engineering. We also have Kerry Weems, Acting Assistant
Secretary for Budget, Information, and Finance at the
Department of Health and Human Services before us today. We are
glad to have you back as well, and have your knowledge as a
panel shared with us again today.
Mr. Towns is not going to be able to join us today. So we
are going to move forward right into your opening statements.
As a practice of the full committee and this subcommittee, if
we can have you rise, I will swear you in and we can get
started.
[Witnesses sworn.]
Mr. Platts. Thank you. The clerk will note that all
witnesses affirmed the oath.
We appreciate the written testimony you have provided to
give us a chance to prepare for today's hearing. As far as your
opening statements, if we can roughly be guided by 5 to 10
minutes, we are not going to be real sticklers because it is
just more of an intimate dialog here today.
Mr. Steinhoff, if you would like to begin, then we will
proceed to Mr. Weems.
STATEMENTS OF JEFFREY C. STEINHOFF, MANAGING DIRECTOR,
FINANCIAL MANAGEMENT AND ASSURANCE, GOVERNMENT ACCOUNTABILITY
OFFICE; KEITH A. RHODES, CHIEF TECHNOLOGIST, CENTER FOR
TECHNOLOGY AND ENGINEERING, GOVERNMENT ACCOUNTABILITY OFFICE;
AND KERRY N. WEEMS, ACTING ASSISTANT SECRETARY FOR BUDGET,
INFORMATION, AND FINANCE, DEPARTMENT OF HEALTH AND HUMAN
SERVICES
Mr. Steinhoff. Thank you very much, Mr. Chairman. It is a
pleasure to be here today to discuss HHS' efforts to implement
a Unified Financial Management System. At the outset, I want to
thank you for the leadership you and this subcommittee have
provided over your tenure to really move financial management
ahead. This is very important. The challenges that HHS is
facing, as well as the other CFO agencies, in working on
difficult systems issues really require oversight and
understanding by the Congress. So, thank you for all of your
efforts.
The report we are releasing at today's hearing, which was
prepared at your request, includes 34 recommendations that
focus on mitigating the risks associated with this project. For
eight of these recommendations in particular, we recommended
that until they are substantially addressed, HHS should delay
the October 1st planned deployment of the new system at CDC. As
you will hear today, they have, in fact, done that.
The core concepts and goals of financial management are
captured well in the 1990 CFO Act. At the heart of the act are
three provisions that require, first, the systematic
measurement of performance; second, the development of cost
information; and third, the integration of systems, program
budget, and financial. Good financial management is having
reliable, useful, and timely information needed for day to day
decisionmaking and management. This requires first rate
financial management systems that go far beyond core accounting
and financial statement preparation. The systems must address
the broader concepts imbedded in the CFO Act and addressed in
the President's Management Agenda which is moving us toward a
business-centric Government.
We support HHS' decision to replace its five outdated
accounting systems. We are not questioning whether a new system
is needed or HHS' commitment to making this happen. Our work
focused on whether the project was being managed in a way that
best ensures long-term success. This is a major project. All
projects are difficult; a major project, you multiply that
several-fold. Full implementation is targeted for 2007, so
there is a lot of time to address issues, and the estimated
cost of this project is around $700 million. Not only must the
system ultimately replace five accounting systems, but it must
also interface with about 110 other systems.
When all is said and done, how does one define success? In
2007, in addition to basic accounting and financial reporting,
we think of it in terms of three results. First, a system that
routinely provides the day to day management information
envisioned by the CFO Act and the President's Management
Agenda; second, a system that operates efficiently, meaning, it
does not require a whole lot of manual processing to make up
for shortfalls in design or implementation; and third, a system
that does not require expensive rework. All systems require
some. The real goal is to control any rework.
By any measure, the implementation of a new information
system, whether in Government or the private sector, this is
not a government-centric issue, is difficult and brings with it
a degree of risk. As I said before, for a major project the
risk is much greater. While risk cannot be avoided, it can be
managed and reduced to acceptable levels through the use of
disciplined processes, which, in short, represent best
practices that have proven their value in the past.
Our experience is that serious implementation problems are
generally the result of not effectively implementing
disciplined processes. It is easy to forego, shortcut, or delay
key steps, especially when your project is date-driven; you
have pressures to meet schedule, to meet budget. We have seen
this in our work at other agencies and it has had serious
repercussions for them.
At HHS we found that some best practices were adopted. For
example, the project had strong support of senior officials, as
well as verification and validation oversight by independent
experts, commonly called IV&V. We also view HHS' decision to
follow a phased implementation to be a sound approach.
At the same time, at the time of our review, the project
demonstrated some of the classic symptoms of schedule-driven
efforts for which disciplined processes, such as requirements
management, and testing had not yet been effectively
implemented. In addition, compounding the project-specific
risks were department-wide weaknesses in information technology
management, enterprise architecture, and information security.
Finally, staff shortages and limited strategic work force
planning resulted in the project not always having the needed
resources.
For these reasons, we concluded that HHS had not yet
reduced its risk to an acceptable level. Among our 34
recommendations, as I mentioned at the outset, we called for
HHS to delay deployment at CDC until certain actions had been
completed to reduce the risk to an acceptable level. Last week,
HHS advised us that it had decided to defer full deployment of
the system at CDC for 6 months. This additional time provides
HHS the opportunity to address our concerns as well as similar
concerns raised by its IV&V contractor.
Keith Rhodes will now highlight what we think are some of
the things that need to be done, and done now, to take full
advantage of this 6 month period. He will focus on four key
areas.
Mr. Rhodes. Thank you, Mr. Chairman. HHS will face a number
of challenges in the upcoming 6 months. The key challenge
being, as Mr. Steinhoff stated, to move from a schedule-driven
project to an event-driven project. This will be critical to
address problems that both we in GAO and the IV&V contractor
have identified. I will focus my comments on four areas: First,
requirements management; second, testing; third, quantitative
measures; and fourth, data conversion and interfaces.
We view requirement managements and testing as two of the
pillars of successful efforts, while quantitative measures are
critical to understand the risks that are being undertaken and
whether the project is ready for deployment. Finally, good data
conversion and interfaces are critical to being able to provide
the kind of management information that will be needed to meet
the goals of the CFO Act and the President's Management Agenda.
Regarding requirements, requirements must one, describe the
functionality needed to meet user needs; two, be defined in a
way that is clear and unambiguous; and three, support an
effective testing process, meaning that compliance with the
requirement can be validated through quantitative means. Once
you have the good requirements, HHS will be in a position to
conduct effective testing activities.
The foundation of an effective testing program is a
documented testing plan that describes how testing will be
carried out and controlled. For example, HHS will need to
implement effective functional testing and user acceptance
testing which will enable HHS to know what the system can and
cannot do, and whether the system meets the users' needs,
including being user friendly. In the private sector, you are
doing the user acceptance testing to figure out what the take-
up of the system is going to be.
Quantitative measures. HHS will need to use quantitative
measures to evaluate the success of the events that are used to
measure project progress in order to help ensure that it is
adopting event-driven processes. Without reliable and rigorous
quantitative measures, it is impossible to see where you are on
the playing field. Intuitively, you might think that you are
moving ahead and making progress. But how far and in what
direction is the bigger question.
Finally, HHS' ability to convert data from its legacy
systems to the new system will be critical to the success of
the project, as will the ability to interface the system with,
as Mr. Steinhoff stated, 110 other information systems that
support key functionality, such as grant accounting. For
example, HHS expects that UFMS will need to support about 30
system interfaces for the CDC deployment alone.
This does not mean that by successfully addressing these
four areas alone HHS will have reduced its risks to acceptable
levels. Rather, relatively speaking, we view these areas as
being critical and needing to be fully addressed between now
and the planned April 2005 full deployment.
In closing, if the past is prologue, taking the time to
effectively implement the disciplined processes discussed in
our report and called for by HHS' IV&V contractor will pay
long-term dividends, and to do otherwise has proven to be
counter-productive and costly in the long term.
Mr. Chairman, this concludes our summary comments. We would
be pleased to respond to any questions that you may have.
[The prepared statement of Mr. Steinhoff and Mr. Rhodes
follows:]
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Mr. Platts. Thank you, Mr. Steinhoff and Mr. Rhodes.
Mr. Weems.
Mr. Weems. Mr. Chairman, thank you for the opportunity to
appear before you today. It is probably rare that somebody
sincerely thanks the subcommittee when asked to appear in
response to a GAO report. However, I believe we have a strong
story to tell, so my thanks are sincere. I am here to discuss
the HHS Unified Financial Management System. When completed in
2007, we believe it will be the largest integrated financial
management system in the world.
In 2001, HHS was engaged in replanning and budgeting for
our five major financial management systems. Secretary
Thompson, believing that current technologies would allow for
consolidation of the five systems into a single system,
producing lower cost and better financial outcomes, challenged
us to plan, procure, and implement a single system. I direct
the committee's attention to my first chart, which is a
reproduction of the Secretary's memorandum directing us to
begin that endeavor.
Looking just briefly at the goals that this memorandum
looked for, it looked for consolidation, it looked for better
management reporting, and lower administrative cost. This was
very early in the Secretary's tenure, as you can see from the
date, and this is how long this charge has been with us.
To illustrate what the Secretary gave us in this charge,
this next chart illustrates how we moved from our former
decentralized environment to a new business intelligent shared
services environment. Currently, Mr. Chairman, we struggle
every year to be able to get a clean opinion because of the
nature of our financial systems. We looked for a financial
system to provide that information in an integrated way and to
make that essentially a slam-dunk every year.
We look forward to going to a shared services environment
where a single service center can, for instance, pay bills for
the entirety of the agency rather than having separate service
centers. That is the vision. And also, to be able to provide us
reliable, business intelligent information about the direction
of program activity and about the direction of HHS overall.
The scope of the undertaking is breath-taking. HHS has the
largest budget of any cabinet agency, projected to be nearly
$580 billion in the fiscal year that starts tomorrow. Within
that budget is an extremely complex array of spending
arrangements, including mandatory spending, discretionary
spending, loan programs, the Government's largest grant
portfolio, single and multiple year appropriations, buildings
and facilities account, Medicare payments, user fees, revolving
funds. The list goes on. The task of implementing a single
system to manage those various business arrangements and to
provide HHS leadership with meaningful financial information
for decisionmaking is a monumental task.
I am happy to report to this subcommittee that HHS has
achieved a number of successes and stands on the cusp of
achieving more. In doing so, I would like to acknowledge the
Government Accountability Office and their efforts to better
help us manage this undertaking. Before I review those
successes with the committee, I would like to discuss the draft
GAO report.
The thrust of the GAO report was that certain management
practices increased the risk of the UFMS project, and the
report contained a number of recommendations to mitigate the
risks. HHS has accepted and implemented a number of those
recommendations. From our perspective, the GAO comments can be
distilled into five main areas of concern: Requirements
management and traceability; testing and data conversion;
concept of operations; information technology infrastructure;
and project management. I would like to discuss each one of
these in turn.
HHS chose an off-the-shelf software package, Oracle Federal
Financials. The effect of making such a choice is to say HHS
will mold its business practices to the software. That is very
different than a ground-up software development effort where
all requirements are identified at the finest level of detail
and the new software is coded to meet the demands of the
business practices. For HHS, the choice of molding our business
practices to the software means that we can have uniformity of
business practice, exactly what the Secretary envisioned in
standardizing our business practices across the 12 operating
divisions in HHS.
The managerial benefits of standardization are immense. A
bill to be paid can be booked and paid exactly the same way in
FDA as it is in CDC, or, indeed, a payment for all agencies can
be made from a single center. Since many of the requirements
are contained in the software, requirements can be managed at a
higher level of granularity.
HHS has a central repository of over 2,100 requirements for
UFMS, which includes the requirements specified by the Joint
Financial Management Improvement Program. Those requirements
not met by the software underwent a business change process to
conform business practices to Oracle Federal Financials, or, in
a few limited instances, an extension was written for the
software. HHS has also built a requirements traceability
verification matrix to verify that all requirements are met by
the system and to demonstrate to HHS and outside parties that
we have satisfied the system requirements.
At the time of GAO's review, full test plan and test
scripts were not available for review. So, understandably, GAO
raised concern. Since that time, a full test plan has been
developed and implemented. Testing is appropriate to Oracle
Federal Financial's mature product. Therefore, our testing is
unit testing, integration testing, and user acceptance testing.
These tests focus on items such as interfaces developed
specifically from, as I say, user and feeder systems. Testing
continues to this day.
As GAO notes, data conversion is a difficult task. HHS
originally planned two mock conversions, essentially dress
rehearsals for final data conversion. We now intend to conduct
four. This demonstrates that our project management was
flexible enough to accommodate difficulties outside of the plan
but still stay on course.
The GAO report urges HHS to adopt a concept of operations;
that is, what operations must be performed, who must perform
them, and where and how they must be performed. Our own
independent verification and validation contractor, Titan
Corp., has also urged us to do so.
In July 2002, HHS developed and adopted a target business
model, a description of business operations and how a design of
those operations will be performed at HHS. We believe that this
business model provides a suitable concept of operations while
maintaining flexibility required by our rapidly changing
business environment, including changes to travel, acquisition,
grants management, financial management, and information
technology. Let me give you an example. The idealized concept
of operations would say how bills get paid in HHS and who will
do it. Our business model has the ``how'' but not the ``who.''
The implementation of the unified financial management
system will foster a significant organizational transformation
for HHS, a department that has traditionally followed a
decentralized approach to financial management. Although this
initiative relies on technology at its core, it is a business
transformation initiative, emphasizing the importance of
standardization across our business units.
For a number of business functions, we have asked our
operating divisions to prepare business plans and bid to be a
service provider. This produces internal competition for
business and produces a better result than a pre-determined
``who.'' So our divisions are essentially competing to be one
of the providers of the services.
Finally, we have a governance structure, which we
illustrate here, that allows us the flexibility to adopt our
concept of operations to changing business needs. GAO also
noted our governance structure as a best practice, the
department from top to bottom is heavily invested in this
program, from the users of business systems to our leadership.
Changes are run through this model. Also, this model and this
structure is used to implement other business changes in HHS,
for instance, the recent changes that we have made to e-travel.
Because UFMS is the central architecture to these things, we
use this structure as a means of decisionmaking for those
items. Users, managers, and leaders all share a voice.
GAO noted several deficiencies in HHS information
technology infrastructure, especially security. I am happy to
report that HHS has greatly increased security for its systems.
Right now, of the 175 systems, 96 percent have completed a risk
assessment, 95 percent have security plans, and 93 percent have
been certified and accredited for security. Eighteen of the
nineteen systems that interface with UFMS have been certified
and accredited.
As the accrediting official for UFMS, I expect to accredit
UFMS in the next several days. UFMS will run on a new secure
network recently implemented in HHS, called HHS-net, which is
slated for certification and accreditation in October 2004,
making 19 of 19 systems. In fact, UFMS will be the first
enterprise-wide system deployed over HHS-net.
In the area of program management, we found a number of
areas where we agree with GAO. We agree we were prematurely
closing identified risks. And we have modified our risk
management accordingly. We agree that the management of human
capital has been and continues to be a significant risk. And we
agree that our project status monitoring could be strengthened
further.
Where we do not agree is in the overall management
strategy. GAO believes that the project should be event-driven
and the project should be governed by the achievement of
objectively measured milestones. In a perfect world I would
agree with GAO. However, we are a schedule-driven project, even
though that means increasing risk.
The legend about Federal employees and Federal executives
is that they are not risk-takers and they seek the path of
least risk and least resistance. In HHS we are undergoing a
tremendous metamorphosis in the way that we do business. Our
employees want to be very much a part of that, and my job as a
manager is to harness that enthusiasm and to translate it into
real outcomes for HHS. I believe we have succeeded. Through
outreach, demonstration, and training, there have been nearly
6,000 experiences for HHS employees with UFMS. Awareness and
expectation exceed even those levels.
So, what are the consequences of being schedule-driven? In
February of this year a sober, objective, hard review of where
we stood on CDC implementation revealed that perfect execution
would be required to meet full implementation in October.
Understanding the consequences of that, our team was excited
because they believed perfection to be within their reach.
By May, our assessment was that a heroic effort would be
required, but we pressed on. For members of the team it meant
workdays that extended to 12 or 14 hours, workweeks that
extended into 6 days or more, and limited or no leave during
this period. The amount of personal sacrifice on the part of
our employees was tremendous. The amount of sacrifice on the
part of our contractor, the systems integrator, BearingPoint,
was tremendous also. And I am grateful for all of their
sacrifices.
On August 20, I received an alert from our independent
verification and validation contractor asking me, among other
things, to obtain a briefing from the project team on systems
readiness. I met with the project team here and in Atlanta and
conducted a systems readiness review. At the conclusion of
those reviews, and using objective, quantifiable measures of
readiness and completion, we decided to deploy UFMS in October
for CDC and FDA. The deployments would include general ledger
and payroll for both, and grants for CDC later that quarter.
Other functionality for CDC is phased to April to match that of
FDA, and we have completed a project plan accounting for that
phasing.
In conclusion, I believe that UFMS continues to succeed. We
were able to capture the enthusiasm and know-how of a
remarkable group of Federal employees and contractors to
complete two implementations of UFMS. We are proud of the
milestones that we have achieved. The implementation at NIH
will have functioned for a year. This year's financial reports
for NIH will come from that implementation.
The October deployment of general ledger, payroll, and
grants remains a tremendous accomplishment. The overall
schedule for UFMS remains the same. We still plan to have full
implementation across HHS by the end of 2007, a date that seems
less distant all the time. The work that has been accomplished
is valuable and has been preserved by the phased implementation
strategy. Participants can look back with pride on their
accomplishments and forward to even more successes in the
future.
Finally, Mr. Chairman, in the days when Federal managers
are being urged to take risks and Federal employees are
criticized as being risk-averse, we took a calculated risk by
being schedule-driven. We believe it to have been a necessary
risk and one in the best interest of the project. I want to
publicly thank the members of the UFMS team across the
department for their dedication and diligence. I would also
like to thank GAO for their comments, and this committee for
your oversight and for having this hearing today. Thank you.
[The prepared statement of Mr. Weems follows:]
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Mr. Platts. Thank you, Mr. Weems. Again, my thanks to all
three of you for your testimony here today and your written
testimony.
Let me start, Mr. Weems, maybe where you left off in
talking about risk-taking and the decision and approach you are
taking being schedule-driven. In your testimony I think or your
response to GAO, you suggest that the title of their report
should have been better titled, ``Aggressive Schedule Increases
Risk of Implementation of HHS' Financial Management System.''
In making a decision for risk-taking, there is a cost-benefit
analysis.
What is the substantive benefit to be achieved? I assume it
is getting the system in place quicker. But what was the cost-
benefit that was done in taking what you acknowledge to be
greater risk to be schedule-driven as opposed to event-driven?
Mr. Weems. Thank you for the question, Mr. Chairman. In
making that calculation, I think we looked at several things.
First, we had a coalition of the willing who were ready to sit
down and work enthusiastically on a project whose concept had
already been proven at NIH. We had a group of people who were
willing to work very hard in making this implementation happen.
Our contractor, BearingPoint, uses a schedule-driven model as
their best practice in implementing these systems.
Now, I would not say that we are exclusively schedule-
driven, Mr. Chairman, and Mr. Steinhoff and I had the
opportunity to discuss this beforehand. If we were purely
schedule-driven, we would have not considered the empirical
data we were getting from testing. We would have gone ahead
with an October implementation. Instead, we were able to
accomplish a tremendous amount of work. All of that work is
still preserved.
Much of the system that will be implemented in April, that
work is done. We are in the testing phase. I would say we
simply ran out of runway to be able to achieve what we were
going to achieve. We had a good test plan. We simply were not
able to complete testing on time. Given that, we decided to
pull back certain pieces of our implementation and implement
what we were rock hard solid on.
So I would say the calculation that we made was to leverage
the enthusiasm and know-how that our employees were willing to
put to it. And frankly, Mr. Chairman, after 23 years in the
Federal Government, I have seen projects that are not schedule-
driven stretch out and become careers for people.
Mr. Platts. Let me follow that up. I certainly believe the
accuracy of your statement--of the team you have and being
committed to your efforts, and I am also grateful for their
efforts and believe you and all involved in moving this
daunting task forward should be commended, and I certainly
share that. In your testimony, though, when you were making the
decision up front, you talk about the team and the confidence
and the enthusiasm, but in your testimony you said, ``Three
years ago most HHS employees impacted by this business
transformation had little confidence in the system. Today, many
employees have already learned how to use it.''
It does not seem like there was that level of confidence
when you were making that risk assessment and decision up
front. It seems like there was not yet a buy-in other than at
the senior management level. Can you expand on that?
Mr. Weems. Sure. And that is a very good question. I think
that at the initial inception of almost any change people are
very skeptical. The Secretary himself is a leader of boundless
enthusiasm and that enthusiasm is highly infectious. I think
what we did--and if I could have that chart--one of the things
that we have done on this project is to make sure that we went
out and we touched people with this.
We had rapid early adoption where and when it was time to
start selling this project, my predecessor and then, later, I
went out on the road, met with every operating division head,
met with each one of the agency CFOs and CIOs and said this is
the direction that we are taking. I think that we were able to
make a case that as they looked at their financial systems,
which I think they would readily admit are held together with
duct tape and baling wire, that they said this is the way to go
and get me there now.
Mr. Platts. The other aspect of my question on the risk
assessment or cost-benefit analysis is, again, not what
resources or strengths you had going in, but why take higher
risk? What will we see in the end be the benefit of greater
risk, assuming we can avoid those risks?
Mr. Weems. Well, the benefits of the project, first of all.
And I think those benefits have been clear from the outset.
Right now, we pay bills all over HHS. We do not need that
redundancy. We need to get to those benefits as quickly as we
can. And it is not paying bills or booking accounts receivable.
Those are things that I have functional responsibility for.
The thing that I have direct responsibility for, providing
the Secretary, Members of Congress, and others information
about the financial condition of HHS, I find that to be a very
frustrating experience right now where we are. I want to get to
the end. I want to be able to inform this committee, the
President, the Secretary about some simple things about our
programs and others more complex about the condition of finance
in HHS.
Mr. Platts. Was there, I know some of this is really in
relation to your predecessor, and I am asking you----
Mr. Weems. I am still responsible, sir.
Mr. Platts. I am asking you to draw from your predecessor.
But I agree, the sooner we can achieve your ultimate goal, the
better for everybody, and most importantly for you and all at
the department making day-to-day decisions, and that serves
then all of our citizens that your department works with.
Was there a calculated decision that if we take this
approach to implementing the system, which is not what we are
really focused on but how we are ensuring the implementation
goes well, was there a decision in taking a schedule-driven
approach we have higher risk than if we take an event-driven
approach, but we can do it in 2007 instead of 2009? There must
have been a timeframe, that if we take a more cautious, less
risky way, it is going to take longer. That is my assumption.
Mr. Weems. I do not have a lot of insight into where that
process would have driven us. I am afraid that is one thing
that I do have to say that I probably do not know precisely how
the decisionmaking was done. But I would say, and, again,
something for which I stand responsible, those alternatives
have been presented to me as I have managed this project.
In February, when we knew that it would require perfect
execution, I asked what the alternatives were. Those were
clear--we would have to delay certain things, it would stretch
out the time when HHS would be fully JFMIP-compliant. I took a
decision that I did not want to do that, that I wanted to stick
with schedule. The same thing in May. When we got to August, we
had pushed the project I think as far as we could. We had gone
through testing and the empirical metrics at that time said
there are some things we can do and some things we cannot.
So we are going to do those things that we can do. Those
things that we cannot, we have completed substantial work on.
That is done. I think if we had pulled the project back, we
would be in the same place we are today except for those things
being done. We could do general ledger and payroll for CDC
except we would not have all of the other functionality that we
have virtually ready to go in the test phase right now. We
would be working that through until April. So I would say we
are much farther ahead of the game.
Mr. Platts. I want to followup on that a little bit. But I
want to give Mr. Steinhoff a chance to comment on the decision.
In your experience with various agencies, the additional risk,
that HHS acknowledges in taking this approach, is your
experience that taking a less risky event-driven decision would
have added a great amount of time into the expected completion?
Mr. Steinhoff. No. Basically, what we find are things
fairly similar to what we saw at HHS--the folks are very
committed to the project, they work very hard. There is no
question about that. What we find is that there is such a
desire to go on line with a new system that people do. And what
typically occurs, they have problems in developing all of their
requirements and they have testing problems.
And that is what happened basically at Interior a few years
ago, that happened at NASA. They did not have metrics, they did
not have ways to really look at their performance in specific
terms. They had not defined every requirement.
HHS has I think something like 2,100 requirements. Many,
probably most, are defined. Some are not. You have to define
well what environment the system is going to be in,
configuration management, integration. You have to test to try
to find defects, and have very clear measures as to how many
defects are acceptable. What we typically find when someone is
date-driven, and oftentimes the beginning of the fiscal year is
that magical date so the agency can have a complete fiscal
year, they make that choice to roll out the system to meet the
date.
And, typically, the problem falls into two areas; and that
is, properly defining all the requirements and testing. A COTS
package will do a lot for you, but there are other things one
would need. One needs to know how the system is going to be
applied in their environment, how it is going to be
implemented, how is it going to be used by the user, what is
the expected performance.
This is a huge endeavor. Mr. Weems stated it was one of the
biggest ever. You are talking about three-quarters of a billion
dollars based on the present estimate. Basically, in our view,
event-driven is really the way one should go. That does not
mean you do not have a schedule, that you do not try to hold
people's feet to the fire, but you assure you do not consider a
step completed until that event has been proven to be
successful, that you have determined that you have
satisfactorily defined all of your key requirements, you have
determined that you understand how the system is going to work,
and that, whatever the environment the system is in, you have
determined how interfaces with other systems will work. And to
us, that is the way to approach these projects, especially one
of this magnitude.
If you look at the views that we have, they are very
similar to the IV&V. They have questioned requirements.
Certainly along the way the IV&V has found requirements are
better defined, but they have questioned the specificity of
many requirements, whether they are ambiguous or not. It is
hard to test against that. The IV&V had a fairly extensive
critique of the testing, not just that the system was not quite
ready to pass the test, but it raised concerns with planning
for the test, how the test was conducted; it was really soup to
nuts. They talked about the deterioration of some of the
documentation in the latter stages before October 1st. That
typically happens when people are under tremendous pressure to
push something out by a given date. Short-cuts occur and you
end up having problems.
What is difficult to say at this time, Mr. Chairman, is
ultimately what will happen. No one has a crystal ball. And
there are folks, I will acknowledge, that maybe do not follow a
disciplined process and things work out for them. Others might
follow disciplined processes but some things go awry later on.
But our belief is, and a very strong belief, that you
should always be safe on these projects and that disciplined
processes have been proven to be the way to go, and event-
driven is what people really have found gives you the best
chance for success.
We have a chart on page 15 of our report, a figure that
shows what typically happens when all the key disciplines are
not followed, or not followed substantially. You have a lot of
visible progress in the beginning--again, you cannot always
tell what your progress is because you have not really had the
metrics in place to measure it well. Where you run into the
problem is when you get to the end. And the real proof of the
pudding for HHS will come sometime in 2007.
The goal that we have is really to provide our best
thinking at this stage in looking at this project, given the
fact that HHS has more time before project completion, and say
here is what we think you should be doing now and here is what
you should do to go to that next step. So, we feel strongly
that event-driven is the way to go. But, again, only time will
tell how this will turn out.
Mr. Platts. Let me expand on that approach. Mr. Weems, in
talking about your decision to delay the October implementation
plan, you said that in February there were kind of some early
warning signs I guess.
Mr. Weems. Yes.
Mr. Platts. And your team said you would have to be
perfect, but you think you can be perfect and go forward. Then
in May, it is going to take a heroic effort, but we are going
to make that heroic effort to get it done. In August, IV&V
comes back with I guess some more concerns about the ability to
really do what you are planning. And then here in late
September you make a final decision to not go forward.
I guess two aspects. One is, what is the likelihood you
would have gone forward and tried to fix the process as you
went forward if the GAO report was not coming out which added
some pressure or scrutiny? And I would appreciate a frank
dialog on that. And second, if you had back in February 20/20
hindsight, I openly acknowledge that, would the delay--right
now you are looking at a 6-month delay is my understanding.
Mr. Weems. Yes.
Mr. Platts. So talking next April I guess, maybe May.
Mr. Weems. April.
Mr. Platts. Would it be April or May to be where you think
you can go forward if you had not been driven by the October
date, the schedule being October? I think I am paraphrasing
this well, that if it was event-driven, you would say we are
not worried about October, worry about just dealing with what
we need to do right, and so we would have made changes back in
February. Do you think you would have been delayed until April
if that had been the case?
Mr. Weems. Sure. But let me take your first question first,
and that is the events leading up to the decision that we took.
I got the alert from the IV&V contractor. I get reports from
them every 2 weeks, but from time to time they will issue a
special alert, and that is what this was. It was outside of the
normal process. It is something that says, Mr. Weems, you need
to go pay attention to this now.
Obviously, I knew that our friends at GAO were looking at
us. Though their engagement with us had ended at that point, I
certainly was cognizant of their presence. But I would say that
alert itself had some very discreet recommendations in it. We
had just finished our readiness review, so there were some
objective measures.
I sat with the team leaders down there, spent a good part
of the day with them going through at a very granular level
where are we, where are we, where are we. And as they looked at
the empirics coming out of testing, as they looked at the
amount of testing being done, there were a couple of things for
which they could not offer me assurance. And I would say that
in my mind those were the things that made up my mind.
I was not offered complete assurance of funds control by
the time that we would turn the system on. That as somebody
with delegated responsibility of CFO, I knew at that point we
could not do it until I had that assurance.
The second piece was there was some question as to whether
or not we would be able to pay bills timely. Causing
consternation among our community to which we pay bills is not
something that I was looking forward to. We had already, I
would say, engaged that community to start telling them that
there would be a 2-week delay in bill paying as we switched the
system. Well, I was not going to let 2 weeks stretch into 3
weeks, stretch into 4 weeks.
And so I would say at that time I stepped back and I said,
OK, we cannot go forward with full functionality. What can we
do? And the team quickly came up with those things that had
been rock hard in implementation and testing, general ledger,
payroll, and we could get to grants. So those are the things
that we decided to implement. So we went forward with an
implementation, but those things that were not rock solid we
pulled back.
To answer to your second question, sir, in talking to my
team in February and in May about, OK, if we have to do
something here, what would we do, a good deal of the advice
that I was getting would say that we would have delayed for a
year from October rather than to April. So I think taking the
steps that we took, we got a lot of work done between February
and September. The step that we took at the end of August and
beginning of September now allows us to reflect on that work,
to subject that work to testing, to implement it in April.
Mr. Platts. OK. Clearly, the empirical data associated with
the testing played a big role in your decision.
Mr. Weems. Yes.
Mr. Platts. That would seem to make a strong case for what
GAO argues of the importance of having more clearly defined
standards, the requirements management up front, a tighter
approach up front than a more flexible plan. It seems like you
have had an example of that now. Is that going to cause you,
along with the report in total, to look at maybe the need to
revise some of your requirements now before you keep going
forward?
Mr. Weems. Well, I think we are going to try and do both at
the same time. We have accepted a number of the recommendations
from GAO, and certainly we are grateful for their help in that
regard. So with those revisions, I do think we are positioned
to continue the project, continue pace and tempo, and to
continue to measure how we are doing with objective measures,
but to keep that April date in front of us, too.
Mr. Platts. Maybe a followup that kind of relates to how
defined your standards are up front, your requirements up
front. As I read the testimony in preparing for today, a big
part between HHS and GAO is the different mindset with using a
commercial off-the-shelf product. And your contention is that
because you are using that COTS, you necessarily cannot be as
defined as if it was a customized plan or product. GAO, your
history with other departments and things, yours is that even
with using a COTS system, there still needs to be more
specifics than HHS is approaching.
Mr. Steinhoff. Yes.
Mr. Platts. Mr. Steinhoff, if you want to expand on that,
and I guess, specifically, you mentioned Interior. In your
review of other departments and agencies that have undergone
these efforts, I guess one thing is maybe address the
difference in your belief that it should be more defined even
though it is a COTS; and then second, is there a history of
other agencies that have used a COTS product and thus thought
they had to be less specific, but then in the end they had
problems and we get into the rework and the cost of that?
Mr. Steinhoff. Yes. Let me kind of talk a little bit about
the philosophy behind COTS, and to say at first that I serve on
the JFMIP steering committee. I had chaired the committee for
several years and I am now a member, been on it for many years.
What this process is about, this certification process, is
the Government was buying commercial packages, working with
vendors, doing a lot of customization. And the Government
stepped back and said let us lay out what our requirements are,
our core requirements. There may be A to Z specific
requirements, and for an entity such as HHS there may well be
many others. There are also mandatory requirements and value-
added requirements, more value-added are becoming mandatory as
time goes on.
But what the government basically said was let us have a
process in place to look at commercial packages and to really
make those packages meet a certain level, certain standards. We
will define the requirements and we will test against those
requirements. And at each step of the way, I think the testing
itself has become more robust and more complete.
You have 331 requirements that are now tested by JFMIP and
they are tested in a controlled environment, one environment,
1,500 transactions. COTS packages are not tested in HHS'
environment, or Interior's environment, or NASA's environment.
They might be configured differently. The systems might work a
little differently and have different functionality you can
turn off and on.
The issue of how precise you have to be in your
requirements really comes after you purchase the package. As
you are making your decision on purchasing the package, you can
be I think more general; what does this do for me, and how does
it roughly do it. And then the key, as Mr. Weems said
correctly, is to then adjust your own processes to meet that
system. There may be some areas where you do not. And there is
probably no COTS package that is not customized in some manner.
I am not sure exactly how many of these are going to be applied
later one, but I think HHS had something like 2,100
requirements identified at the time of our work and the core
functionality tested in the COTS package was 331, or about 15
or 16 percent.
So, once you have purchased the package, you have to sit
down and really define exactly how it is going to be
configured, you are going to have to look at the suitability,
you are going to have to define how you want that requirement
to work for you. And that is pretty much accepted practice. The
JFMIP makes very clear on its Web page that these are things
that you have to do. You have to test this in your own
environment. You have to determine how you are going to use the
functionality and determine the requirements.
And really looking at the methodology selected by HHS--and
I will add that our differences with HHS is not so much with
their methodology, it is in how far they have gotten along in
the methodology; you know, the metrics or the rigor to it. HHS'
methodology spoke about reviewing and updating requirements for
design process workshops, establishing baselines, performing
fit and gap analysis, developing gap closure alternatives,
creating final baseline requirements.
We think those are proper things to do. What we and the
IV&V contractor found were a number of requirements that were
not yet specific enough to really even know what you were going
to get from that requirement, to actually develop a test script
to test it. So it was really a matter of more needed to be
done.
But regardless of whether you have a custom system, which
we do not recommend people develope, the way to go is to buy
the COTS packages, or whether you buy a COTS package, you still
have to work hard on the requirements or you will get to the
end and the system will not be able to do some things that are
essential for you. I will give you an example at an agency that
had really struggled with a COTS package because of the
liability to readily process the transactions it has.
GSA, which has a high volume of transactions, found that
the number of steps the software went through took too long. It
is called scalability. And the way the software was designed,
it was not set up to operate efficiently in GSA's environment.
GSA found that out once it turned on the switch. The agency
spent a lot of time and effort to work through that. The key is
to identify problems before you turn on the switch, long
before, and make those changes early on so you do not face the
rework later on. Rework is where you spend a lot of money.
Mr. Platts. Mr. Rhodes, did you want to add anything
regarding the approach and those standards or the specificity
of some of the standards for which you have asked for more?
Mr. Rhodes. I guess I would get back to the discussion on
risk that you were having earlier. Mr. Weems is revolutionary.
He is wanting to completely change. He is wanting to enact what
the Secretary wants, which is to transform Health and Human
Services. By definition, that is risk. As he stated, largest
budget, widest and most diverse portfolio, etc.
I do not think, based on my having looked at the JFMIP
requirements, I do not view that as a revolution template. That
is ultimately a partial calibration of an accounting system.
What Mr. Weems wants to do is revolutionize financial
management at HHS. That is the correct thing to do.
But, with that in mind, then if I am going to establish
cost as an independent variable and I am going to say there is
$700 million and I am not going to break this budget, and I
have the constraints of making certain that I pay the
contractors and pay the bills of HHS on time, I have the
operational requirement, and I have 110 systems that I have to
interface, the concern that I have is that when words of
perfection or heroic or Herculean effort and things like that
are brought in, then I have to view it as risk.
In looking at it through risk, day 1, event-driven or
schedule-driven, there is a great deal of rigor and specificity
required for success. The fundamental difference between event-
driven or schedule-driven is emphasis. The date is more
important than the function, or the function is more important
than the date. That is really the only distinction.
So, if I take Oracle's view, or PeopleSoft, or SAP, or
whomever, I take Oracle's view of the universe, well, their
having a market-centric view to get the JFMIP compliance, but
they may not know anything at all about HHS. Fine. That means
the onus is on HHS to do the gap analysis between how do we do
things now and what does this bring to the table so that we can
get the delta in place so that we can understand what we have
to test for. As Mr. Steinhoff said, what is critical, what is
not critical, what can be deferred, what cannot be deferred.
The real challenge that I see for them is making certain
that there is that, as I described for you last time when we
were talking about the Department of Defense, that crimson
thread of salvation that runs through this requirement set. It
leads from concept of operations directly to large scale
requirements bounced against the system that we are procuring,
then you start getting down into the detailed requirements, and
from that, we are building the test case that comes back and
proves that the system actually does this. If that is in place
and supports the schedule, then being schedule-driven is not
bad because your requirement set is strong enough to say I
believe my schedule. If it requires perfection, then I better
have perfect requirements.
I am not trying to be tautological here. But the onus, the
pressure is on to be absolutely correct and be correct the
first time out of the can. And when your effort is already
heroic because you are trying to transform something as large
as the financial management at Health and Human Services, then
the requirements had better be strong and they had better be
precise, because there is going to be some work you have to do
and if the ultimate changes you make to the system are greater
than 25 percent, then you have just expended the same amount of
energy you would if you had started from scratch.
And those are the things that need to be understood and you
have to be collecting the metrics that let you know where you
are. For example, it is not a matter of defect tracking, it is
a matter of trend analysis--what problems am I encountering in
this development cycle and am I getting better, is the number
going down, are they able to bundle together, things like that.
That is the kind of quantitative measures that provide you the
trend analysis to know where you are headed. But they all come
back to the stability, veracity, clarity, lack of ambiguity in
your requirement set.
Mr. Platts. The fact that we have the five legacy systems
and the 110 or so interfaces, and just the breadth of the whole
transformation is part of that argument of why the greater
detail up front?
Mr. Rhodes. Absolutely.
Mr. Platts. Mr. Weems, I want to reemphasize if I did not
say it earlier, we want you to have great success by 2007 so we
can move you over to Defense and then replicate the success
there. [Laughter.]
Because a $400 billion budget will be nothing after we
succeed with $580, right?
Mr. Weems. That is right.
Mr. Platts. I had a number of points to followup on. I want
to have everyone engaged in the dialog here. Mr. Weems, earlier
you talked about, in taking the approach you have, a schedule-
driven model, that it was BearingPoint's approach, that is
their best practice. Was that a big part of the decision to go
this way versus the approach that GAO has recommended, because
BearingPoint being your contractor and you are trusting them
once you make that decision that they are who you are in the
battle with and their belief that this is best practice?
Mr. Weems. That certainly did bear on it that our partner
was also engaged in this effort. I would also say the Oracle
model follows the same type model as best practice for
implementation. That was important, but I think the thing that
makes us look to schedule is the benefits of the system, is
having Federal managers across HHS look at what they have now,
believe in the possibility of the future and say Kerry, get me
there now, get me there sooner, I need that. I think that is
the thing that drives us.
Capturing those benefits, having Federal managers
understand where they are financially in an enterprise that is
over half a trillion dollars a year is absolutely essential,
and that is where our managers want to be. That is why they are
saying get me there now.
Mr. Platts. I would think you would agree that enthusiasm
is great and that buy-in is so critical. But part of your role
is to see the whole picture and, you know, we want to get you
there but maybe--and I will say it in the way as a parent might
sometimes with kids. We could be going to the park and they
want me to hurry and get them there because they want to get
playing. But I have to stay within the speed limit, because
getting them there as quickly as I can but safely is something
that is my responsibility. And part of your role is to take all
that excitement, enthusiasm, buy-in, but make sure it is still
going to be at the end of the day truly the most responsible
approach.
Mr. Weems. Absolutely, Mr. Chairman. I think that was the
role that I and my leadership team played at the end of August
and early September is that we stepped in, looked at where
things were, and said we are not ready. We took an affirmative
management action.
And when I took that decision, I immediately conferred with
my leadership team and then we went right down that pyramid
that I had up earlier. We talked to the managers, we told them
where they were, and they were very accepting. So we took the
decision that was appropriate at the time. If I and my team had
taken no action, we would right now be hurtling toward full
implementation starting tomorrow.
Mr. Platts. You certainly have appropriately emphasized the
importance of all personnel buying-in and being part of this
team effort. Can you address the issue of your staffing, that
is one issue GAO has raised, and your having staffing that you
need to move the ball forward in an appropriate fashion?
Mr. Weems. Yes. And that I certainly will admit from the
beginning has been a particularly nettlesome issue because of
the predicate from which we began, and that is that we were not
going to build permanent Federal bureaucracy to implement this.
That we were going to bring in a few key people, the rest of
the Federal effort has been comprised of folks who have been
detailed in from the agencies to fill roles.
Those details work for 6 months, in some cases a year, and
then the agency needs them back. Other roles, especially in the
site implementations, have been filled by people doing double
duty, where they do their day job and then at 6 in the evening
they go do their UFMS work. That is sort of a test of some of
the dedication of the staff. They have worked very hard to do
that.
Looking back, we probably should have opened up a couple of
more permanent positions, if I had to say what would I have
done differently. For the positions that we have that have been
opened, we have offered temporary positions--why not come in,
we will give you 2 years' worth of work, after that we are not
sure what happens. We have not had particularly good luck in
filling those positions. So I would say, as GAO notes, our
overall human resources strategy is something that we need to
take a step back to look at. We need to make sure that we have
those positions filled with good, competent people.
One of the benefits though that we think that this strategy
of using detailees and folks from the agencies is it cuts down
substantially on our training costs. If somebody comes and
works on the project for 6 months, for a year, and then goes
back to the agency, they not only going to be fully trained,
they are going to be a super user. When the system comes up
they are going to say, hey, I worked on this project, I know
how to do this. We think that is one of the benefits. We
understand that we have some key vacancies and that certainly
is something that we are going to have to spend some time
working on. Hiring a Federal employee is very hard and the
process is not particularly nimble.
Mr. Platts. I am glad to hear that acknowledgement--that
you are actively looking at your human resource issue and how
to address the challenges you are facing there. When I hear the
heroic efforts and dedicated effort being put forth as you try
to move forward to your October deadline, that is great.
But when I look and think we are basically on a 5-year plan
and 3 years more to go, the ability to maintain that tempo
without burning out key people and in the end losing that
wealth of knowledge is something that we need to be careful of.
And the fact that you are looking at how to correct that is
good. And in this case I imagine you would like to have what
DoD has, which is some hiring flexibility so that you can more
quickly fill spots that you need as opposed to the bureaucratic
process that takes a while.
Mr. Weems. I am also worried, though, about creating a
permanent bureaucracy. Having three or four people, five
people, a nucleus around which we can work I think is
important. But in my 23 years in Government, sir, I have seen a
lot of project offices turn into things that live well beyond
their useful life and draw resources from the Government that
they should not be drawing. And that is one of the things that
we have tried to be careful to avoid.
Mr. Platts. Yes. Because once we create a position, it
stays.
Mr. Weems. Yes.
Mr. Platts. Create a program, it stays, even if it out-
lasts its appropriate use.
We have been joined by Mike Turner, a member of the
committee. Mike, I appreciate your being with us. Did you have
anything you wanted to say?
Mr. Turner. I just appreciate the chairman's continued work
on this issue.
Mr. Platts. Thank you. Let me talk about maybe some of the
cost issues. With that three-quarters of a billion dollar
estimate out there, I guess the testimony had information about
the CDC pilot implementation, that NIH pilot, and that was
about a $100 million cost using the same COTS system and about
$12 million to migrate that system over to the UFMS.
Mr. Weems. Yes.
Mr. Platts. I guess the first question would be, why the
$12 million cost to migrate it over? And is that $100 million
part of the $700 million?
Mr. Weems. Yes.
Mr. Platts. OK. That is good. I was hoping it was.
[Laughter.]
Mr. Weems. So is the $12 million.
Mr. Platts. And the $12 million is?
Mr. Weems. Yes, sir.
Mr. Platts. Why, if it is the same COTS? Kind of educate
this lay person to understand that.
Mr. Weems. It is an excellent question. When we started
back in June 2001, the five systems that we were looking to
replace were not in the same place. NIH was much farther along.
Also, NIH's system brought to the table other administrative
functions beyond financial management.
Our choice at the time was to use the NIH system as a model
for the rest of the department. But their work was not scaled
right for the rest of the department, their effort was not
scaled right. So that did not seem like a viable alternative.
Our other alternative was to stop NIH from what they were
doing, delay the benefits of their implementation, and let the
rest of the department catch up.
The third way was to let NIH proceed, let the rest of the
department catch up, and at some later point merge the two
implementations. That latter choice is the choice that we made.
The $12 million cost, that is an estimate right now of what it
will take. But the NIH implementation proceeded in a way to
meet NIH's needs, not the needs of the broad HHS. That $12
million is the cost of bringing those two things together.
We think we made the right decision. Right now, we closed
the books today. NIH is going to do financial reporting this
year on its system. We did not want to delay that. NIH has a
very efficient and effective e-travel system, way ahead of the
rest of the department. We did not want to delay that. They are
going to have other administrative functions like supply chain
management. We did not want to delay the benefits of those
things.
So, the short answer is, NIH developed an implementation
for NIH. We allowed them to proceed. It meets their business
needs. We will catch up with them this next year as we bring
their business needs into UFMS and align their project with
UFMS.
Mr. Platts. Mr. Steinhoff, in your assessment of that
approach and kind of the focus on the cost issue, is that $12
million estimate of integrating it over something that seems
viable, or is it going to actually be more?
Mr. Steinhoff. We did not actually look at that at all. I
would say though, Mr. Chairman, it gets back to our earlier
discussion about COTS packages. Mr. Weems said it very well,
that package was taken and configured for NIH. So, for every
COTS package, it is very important that you configure it for
your use and you determine how functionality is going to be
employed.
So it is not surprising that HHS would have to make some
changes to take the NIH package into the broader parameters
here. Also, as the department better defines its requirements,
it may find other things are needed to assure that the NIH
system is in fact meeting the broader needs. For example, the
COTS package is primarily core accounting, whereas the vision
is much broader.
So, we did not look at the estimate. But these are the
kinds of costs that one would have, and it is not surprising to
incur a cost to convert the same COTS package to another
environment.
Mr. Platts. Mr. Weems, in talking about where you were with
NIH, you touched on something that I was going to raise about
the legacy systems. In June 2001, when the Secretary's
memorandum came forward that HHS was basically going to have
one--great vision and commendable effort that is going on--
various components of HHS were already moving forward, like
NIH. What is the status of those others? Have we continued to
spend money elsewhere? Or were the other ones pretty much put
on hold and are part of the big picture?
Mr. Weems. That is right.
Mr. Platts. OK.
Mr. Weems. In fact, Mr. Chairman, I remember this meeting
very, very clearly with the Secretary. In February, just after
he was confirmed, we sat down and we started working through
the budget with him. And in CDC, in FDA, in PSC, in NIH, there
were budget requests to build five different accounting
systems. He looked at us and essentially said why are we doing
this. Let us have one.
And that led to that memorandum. That budget meeting in
February led to that memorandum. So since then we have done
maintenance costs on the legacy systems to keep them going. But
we are not building systems outside of UFMS. We absolutely put
an end to that.
Mr. Platts. That is great and glad to hear that. Do you by
any chance remember, ballpark, what those estimates were if you
had gone forward with those independent efforts to rewrite
them?
Mr. Weems. No, I do not remember the total project costs of
each incremental budget cost or what we were looking at at that
moment. I do not recall. But the thing that they were doing
were simply buying new of what they had. There was not the
vision in the agencies of being able to go to a shared service
environment and say we are going to have one place in HHS that
pays bills, and guess what, guys, we are going to compete to
see who gets to do that. We are going to have one place that
maintains the system, we are going to have one place that has a
Help Desk for all of UFMS. That vision was not present in those
budget requests. That vision was present in June.
Mr. Platts. And that is something with your vendors, all
the private sector, that has to be something that they look
forward to, I would think, that there is one place that pays
bill so they know who to go to between the various entities.
Mr. Weems. I am sure our partners look very much forward to
that, and certainly those of us who have to track financial
transactions across the institution do too.
Mr. Steinhoff. Mr. Chairman, if I may add.
Mr. Platts. Yes.
Mr. Steinhoff. I will add that concept is one that we
support strongly. I think Mr. Weems got to the bottom line of
the issue in actually making that happen when the Secretary
said you are not going to spend the money. You probably
remember when we testified on DOD, we said part of the problem
is the military services and other commands still have their
own budgets and still have their own constituencies through
appropriations and are building away. You have to control the
money. You have to provide that discipline. And this approach
is one we strongly support.
Mr. Platts. And it is a good model for other entities like
DOD to follow.
Mr. Steinhoff. Yes.
Mr. Platts. And for Mr. Weems, for you at the department
headquarters and ultimately for the Secretary to have that
knowledge. In our hearing in this room not too long ago with
NASA, the CFOs are dedicating their efforts, but those
independent NASA Centers are kind of going their own ways.
Mr. Weems. If I might make a point there, Mr. Chairman. We
did not create a single budget for UFMS. The budget for UFMS is
in every one of our operating divisions. They have a stake in
the success of this project and they have not gone off with
that budget and hired somebody else and said this is crazy.
They have seen the benefits, they have stayed with us, they are
using dollars appropriated to them, and we bring it all
together through a Memorandum of Understanding in a central pot
to expend it. But those dollars are appropriated to them and
they have stewardship of those dollars.
Mr. Platts. Good approach. How about on the issue, as you
move forward with your implementation, the need for manual
efforts to really address shortcomings in the program that were
not envisioned? What do you expect with CDC as you go forward?
What is likely to be the level of manual operations or
processes that are going to be required to make up for
something that was not envisioned?
Mr. Weems. Well, the short answer is, a few. There will be
some. But that I think follows the rule that you have to give a
little to get a lot.
Mr. Platts. Are there some specifics, some examples that
maybe you envision?
Mr. Weems. Oh, yes. Most of these actually have to do with
existing interfaces that are going to be manual transactions
now that will not be automated in the initial implementation.
International invoices, how we pay our partners
internationally, that is a fairly small workload, one that we
did not think was worth writing an extension for. E-mail
notification of purchase order exception processing, this
purchase order did not work so we are going to send you an e-
mail and tell you, we will have to have a manual work-around
for that. CDC has an interactive voice recognition system that
they use for some vendor payments, and we will have a manual
work-around for that in this implementation too.
So there will be a few. We think that actually these will
be taken care of in subsequent releases of UFMS. But there will
be a few, and I am afraid I do not have any example with me,
where writing an extension to the software just was not worth
it and so we are going to adopt the business change that using
Federal Financials brought to us without writing an extension
to do something manually. These will be small things where it
just was not worth the dollars to write the extension for the
software.
Mr. Platts. Mr. Steinhoff, is that something, I am not sure
how much detail you looked at, that likely manual work-arounds
are going to be required? Anything you want to add?
Mr. Steinhoff. Well, they had not actually rolled out the
system so you could not really see exactly what would be
entailed there. It has been a problem with other agencies who
have found that their system does not provide them what they
need. So the staff immediately goes off and develop an ad hoc
system or end up with 1,000 Excel spread sheets and they pull
down data, or at times people find that the information is
there but it is not there in a form that is easy for them to
use it. So the performance of the system and the ability to
meet the users' needs is lacking. But HHS was not yet in a
position that we could tell what would happen. And you really
tell that oftentimes when these things go live. And when the
activities or entities that are using the systems find that it
does not provide them the agility and the quality of
information they need, they themselves will start developing
those ad hoc systems.
Mr. Platts. Mr. Weems, it sounds like for those work-
arounds that you purposely did not write an extension, you
really are going to be looking to learn from that with CDC for
the subsequent implementation efforts so to try to diminish the
number of manual work-arounds.
Mr. Weems. Yes. And in some cases, for instance, the voice
recognition system that CDC uses, we did not write an extension
to that. CDC has found that a very useful functionality and it
may actually be an instance where we want to pick up that
functionality and look at it for the rest of the department.
So, for instance, if CDC were to become our bill payer, that
functionality would be very, very important and that would be
the kind of thing that we would write an extension for or make
sure that meshed with the software, because its value at that
point, if CDC were our bill payer, would be very high.
Mr. Platts. That is something that will be down the road,
that decision?
Mr. Weems. Yes. Yes.
Mr. Platts. Right. A couple more areas maybe to touch on.
One is, actually when we were talking about the cost, and I
realize that you are putting your best estimate out there on
the whole cost, but one aspect of it is the integration of UFMS
with your HIGLAS Medicare program. Is that something that is
still in the works or not included in that estimate of $700
million?
Mr. Weems. Integration at the reporting level is included
at the $700 million. The HIGLAS and the UFMS components will be
able to produce consolidated financial reports within the $700
million plan.
Mr. Platts. As part of the $700 million, it really does
include how to integrate the two then? I am not sure I am
understanding you.
Mr. Weems. I think it depends on what we mean by
integration. We will be able to produce integrated reports.
They will not be, for a number of very good and proper reasons,
integrated systems. Handling the Medicare workload is just so
different both in volume, complexity, and just by its very
nature is different from a good deal of the rest of what HHS
does. So we are not going to integrate that at the systems
level.
Mr. Platts. OK. So other than reports, you really do not
envision that level of integration?
Mr. Weems. That is right. At least at this stage of the
technology, we do not envision what a layman would call, and I
certainly consider myself that, a full integration.
Mr. Platts. Is that a change from the initial memorandum of
a single HHS system, the original vision?
Mr. Weems. I think even when this was written we knew that
the volume and nature of things at CMS would mean that we would
still need something separate at some level--at the machine
level, at the code level, some level--where it just would not
be fully integrated. The Medicare processing workload is
immense. It is nearly a billion Medicare bills that are
processed a year, and that is before Part D of the new
prescription drug program.
Mr. Platts. And that is prior to all the baby-boomers
retiring, right?
Mr. Weems. That is right. That is before I start submitting
my bills. [Laughter.]
Mr. Platts. Mr. Steinhoff, do you have any thoughts about
keeping those systems separate, that being good, bad, or it is
hard to say at this point?
Mr. Steinhoff. We really have not looked at that in
particular. We noted that in pulling the plan together HHS had
not stated how it was going to integrate those systems. So I
think we have gotten the answer today. But that is something
that we did not cover as part of our review.
Mr. Platts. OK. As we move toward a wrap-up here, we have
talked about the interaction between GAO and HHS, the GAO
report and its recommendations, 34 specific recommendations I
believe, 9 that were more pressing, and then some others to
work through. Maybe you would comment on how those sifted out;
the ones you have embraced and you already have addressed, ones
you are addressing, or ones that you disagree on. Is there a
consensus of how you are going to go forward with those
recommendations and what you are going to do in response to
them?
Mr. Weems. I think that in HHS we have adopted a good
number of them, and I think we have informed our friends at GAO
of those that we have adopted. For others, such as requirements
and testing, at the time of the engagement GAO's comments were
proper. But things have changed since then and I think our
requirements traceability matrix is much more defined. I think
the testing that they have been put through reveals that. Also
at the time of their engagement, we did not have a complete or
good test plan. I think since that time those things certainly
have changed.
So we, on balance, considered their comments very useful.
We will continue to work on our management of human capital,
for instance. That is something that was pointed out.
Obviously, it had been a concern of ours, but it is something
that we need to do. We will use clear metrics in defining where
we are going, but we are still going to continue to keep dates
in front of people and to drive to those dates while
maintaining the quality and integrity of the program.
Mr. Platts. Mr. Steinhoff, maybe if you could address any
specific recommendations you have made where you have had
dialog and maybe there is not agreement. Is there one or two or
whatever number that you think are critical that HHS take a
further look at?
Mr. Steinhoff. I think the four things that Keith Rhodes
talked about up front are really the most important areas now.
Testing is critical, and testing is driven by the requirements.
I am encouraged that the requirements issues have been resolved
as Mr. Weems stated today because they were a concern to us
when we were there. The question will be how effective has that
been.
Mr. Platts. And on the testing, it sounds like your testing
is more defined today than when GAO was reviewing.
Mr. Weems. Absolutely.
Mr. Steinhoff. There were a number of recommendations made
in the most recent IV&V report, both that special report Mr.
Weems mentioned as well as the report the IV&V contractor
issued on September 10th which covered their August activity.
There were really a litany of issues surrounding testing and
they are a variety of important tests. So I think HHS has a
roadmap on what to do.
But it will be very important to assure you have the
requirements in hand, and you have the test in a manner that is
disciplined. It is seeking to find deficiencies because you
want testing to be as rigorous as you possibly can have it. You
want to be able to truly pass that test. You want to make sure
the system is useable by the user. I read about a system the
other day where I guess the users started crying when they
turned on their computer screens. That is the last thing one
wants.
Mr. Platts. Especially after $700 million.
Mr. Steinhoff. Yes. You are going to have to work really
hard, as Mr. Rhodes stated, when you get down to the ability to
actually convert the information you now have to the new system
as well as integrate with the other 110 systems, in the case of
CDC the 30, and then the metrics are very key. We continue to
believe that event-driven is the way to go. Our hope is that
HHS will have both event-and date-driven. Have a date in front
of people but assure that things have moved through certain
events successfully and have the metrics to show that. Because
we feel without that the risk is very, very high. And none of
us want to be here in 2007 revisiting this.
Mr. Platts. We want to be here celebrating.
Mr. Weems. That is right.
Mr. Platts. Mr. Rhodes.
Mr. Rhodes. I would just echo Mr. Steinhoff's points of
what we consider key to their success. Just taking one example
of the interfaces, for example, it is not the number, it is
that as we have seen at HHS, which we have seen at DoD, which
we have seen at NASA, which we have seen at Bureau of Indian
Affairs and Department of Interior, the systems to which they
are trying to interface are not necessarily well-defined in and
of themselves.
And so trying to figure out what that interface is both at
a data level, at a process level, and then at the actual
physical, electrical level is very complicated. That is
extremely important because that is going to be their data
source and that is really the pathway they move to the
transformation that the Secretary and Mr. Weems are talking
about. As long as the requirement leads to the test and it is
being measured, they will be able to get there. But that is the
challenge for them.
Mr. Platts. I think your feedback certainly has been well
reviewed and is being weighed in good faith by the department.
With Government in general, the joke sometimes is, I am from
the Government, I am here to help. I imagine the departments
sometimes view GAO that way, we are from GAO and we are here
really to help, there is some skepticism. I hope that is not
the case here because I think there is a wealth of knowledge
and good faith effort to help HHS to be part of the team of
this transformation.
The one thing I would add, and I think, Mr. Weems, you
appreciate it, is that Mr. Steinhoff and Mr. Rhodes personally
and GAO in a broad sense has a wealth of knowledge and
historical perspective with other agencies and departments who
have gone through similar efforts. The counsel they are sharing
is not based on just some theory, but based on real practices,
experiences elsewhere. So I appreciate you and your staff in
your efforts in giving great weight to their input.
Thank you all for your great insights today and for helping
to better educate this lay person on where we stand. I want to
thank you each individually for your work and please convey to
your respective staffs back in your offices my sincere thanks
for theirs.
I think being a public servant is a very admirable
profession. Earlier this week I had the pleasure of recognizing
a postal service employee in my district, in Gettysburg, in
fact, who, after 30 years of service and 1 million miles of
safe driving delivering mail, was recognized and welcomed into
the Million Mile Club. As one who commutes daily, drives about
30,000 miles a year in my commute from my district I think, I
have to be here 33 years to catch up. [Laughter.]
But as I commended him, I commend each of you and your
staffs for your work. We know you are truly looking out for the
best interest of your fellow citizens, especially in important
areas like NIH and CDC, and Medicare, because I want it to be
there too when I get there.
I look forward to our committee and staff continuing to
work with your offices as we move forward in this truly great
vision that we want to become a reality. And I certainly thank
committee staff on both sides for their legwork and also
helping to educate and prepare this lay person. So, thanks for
your testimony. We will keep the record open for 2 weeks for
any additional information that needs to be shared.
This hearing stands adjourned.
[Whereupon, at 3:45 p.m., the committee was adjourned.]