[House Report 105-827]
[From the U.S. Government Publishing Office]



                                                 Union Calendar No. 469

105th Congress, 2d Session  -  -  -  -  -  -  -  - House Report 105-827


 
                         THE YEAR 2000 PROBLEM

                               __________

                             FOURTH REPORT

                                 by the

                        COMMITTEE ON GOVERNMENT

                          REFORM AND OVERSIGHT

                             together with

                            ADDITIONAL VIEWS





October 26, 1998.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed


              COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT

                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
J. DENNIS HASTERT, Illinois          TOM LANTOS, California
CONSTANCE A. MORELLA, Maryland       ROBERT E. WISE, Jr., West Virginia
CHRISTOPHER SHAYS, Connecticut       MAJOR R. OWENS, New York
CHRISTOPHER COX, California          EDOLPHUS TOWNS, New York
ILEANA ROS-LEHTINEN, Florida         PAUL E. KANJORSKI, Pennsylvania
JOHN M. McHUGH, New York             GARY A. CONDIT, California
STEPHEN HORN, California             CAROLYN B. MALONEY, New York
JOHN L. MICA, Florida                THOMAS M. BARRETT, Wisconsin
THOMAS M. DAVIS, Virginia            ELEANOR HOLMES NORTON, Washington, 
DAVID M. McINTOSH, Indiana               DC
MARK E. SOUDER, Indiana              CHAKA FATTAH, Pennsylvania
JOE SCARBOROUGH, Florida             ELIJAH E. CUMMINGS, Maryland
JOHN B. SHADEGG, Arizona             DENNIS J. KUCINICH, Ohio
STEVEN C. LaTOURETTE, Ohio           ROD R. BLAGOJEVICH, Illinois
MARSHALL ``MARK'' SANFORD, South     DANNY K. DAVIS, Illinois
    Carolina                         JOHN F. TIERNEY, Massachusetts
JOHN E. SUNUNU, New Hampshire        JIM TURNER, Texas
PETE SESSIONS, Texas                 THOMAS H. ALLEN, Maine
MICHAEL PAPPAS, New Jersey           HAROLD E. FORD, Jr., Tennessee
VINCE SNOWBARGER, Kansas                         ------
BOB BARR, Georgia                    BERNARD SANDERS, Vermont 
DAN MILLER, Florida                      (Independent)
RON LEWIS, Kentucky
                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
           David A. Kass, Deputy Counsel and Parliamentarian
                 Lisa Smith Arafune, Deputy Chief Clerk
                 Phil Schiliro, Minority Staff Director

   Subcommittee on Government Management, Information, and Technology

                   STEPHEN HORN, California, Chairman
PETE SESSIONS, Texas                 DENNIS J. KUCINICH, Ohio
THOMAS M. DAVIS, Virginia            PAUL E. KANJORSKI, Pennsylvania
JOE SCARBOROUGH, Florida             MAJOR R. OWENS, New York
MARSHALL ``MARK'' SANFORD, South     CAROLYN B. MALONEY, New York
    Carolina                         JIM TURNER, Texas
JOHN E. SUNUNU, New Hampshire
RON LEWIS, Kentucky

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
          J. Russell George, Staff Director and Chief Counsel
                John L. Hynes, Professional Staff Member
        Randall J. Kaplan, Professional Staff Member and Counsel
                          Matthew Ebert, Clerk
                     Mason Alinger, Staff Assistant
            Brian Cohen, Minority Professional Staff Member


                                     
                         LETTER OF TRANSMITTAL

                              ----------                              

                                  House of Representatives,
                                  Washington, DC, October 26, 1998.
Hon. Newt Gingrich,
Speaker of the House of Representatives,
Washington, DC.
    Dear Mr. Speaker: By direction of the Committee on 
Government Reform and Oversight, I submit herewith the 
committee's fourth report to the 105th Congress. The 
committee's report is based on a study conducted by its 
Subcommittee on Government Management, Information, and 
Technology.
                                                Dan Burton,
                                                          Chairman.


                            C O N T E N T S

                              ----------                              
                                                                   Page
 I. Summary of Oversight Findings and Recommendations.................1
        A. Introduction..........................................     1
        B. Overview of Investigation.............................     3
        C. Committee Findings....................................     4
        D. Committee Recommendations.............................    12
II. Report on the Committee's Oversight Review.......................16
        A. Background............................................    16
        B. Proceedings of the Subcommittee.......................    17
             1. 104th Congress...................................    17
             2. February 24, 1997, Hearing.......................    18
             3. March 20, 1997, Hearing..........................    19
             4. July 10, 1997, Hearing...........................    20
             5. September 15, 1997, News Conference..............    22
             6. October 17, 1997, Hearing........................    23
             7. December 11, 1997, News Conference...............    23
             8. February 4, 1998, Hearing........................    24
             9. March 4, 1998, News Conference...................    25
            10. March 18, 1998, Hearing..........................    27
            11. June 2, 1998, News Conference....................    29
            12. June 10, 1998, Hearing...........................    30
            13. June 22, 1998, Hearing...........................    31
            14. August 13, 1998, Field Hearing (New York, NY)....    32
            15. August 17, 1998, Field Hearing (Mesquite, TX)....    34
            16. August 19, 1998, Field Hearing (New Orleans, LA).    36
            17. September 1, 1998, Field Hearing (Lakewood, OH)..    38
            18. September 2, 1998, Field Hearing (Indianapolis, 
                IN)..............................................    39
            19. September 3, 1998, Field Hearing (Palatine, IL)..    41
            20. September 9, 1998, News Conference...............    42
            21. September 24, 1998, Hearing......................    44
            22. September 29, 1998, Hearing......................    46
            23. October 2, 1998, Hearing.........................    48
        C. The Federal Level.....................................    48
            1. The Federal Year 2000 Problem.....................    48
            2. The Federal Leadership Role.......................    55
        D. The State and Local Level.............................    60
            1. The State and Local Government Year 2000 Problem..    60
            2. Basic Infrastructure: Electricity, 
                Telecommunications, Water........................    66
III.Conclusions......................................................70


                               Appendixes

Appendix A.--Correspondence......................................    71
Appendix B.--Subcommittee Report Cards...........................    86
Appendix C.--Executive Order.....................................   101
Appendix D.--Citizen's Check Lists...............................   104
Appendix E.--Committee Findings and Recommendations..............   110

                                 Views

Additional views of Hon. Stephen Horn............................   111
Additional views of Hon. Henry A. Waxman, Hon. Dennis J. 
  Kucinich, Hon. Tom Lantos, Hon. Robert E. Wise, Jr., Hon. Major 
  R. Owens, Hon. Edolphus Towns, Hon. Paul E. Kanjorski, Hon. 
  Gary A. Condit, Hon. Carolyn B. Maloney, Hon. Thomas M. 
  Barrett, Hon. Eleanor Holmes Norton, Hon. Elijah E. Cummings, 
  Hon. Rod R. Blagojevich, Hon. Danny K. Davis, Hon. John F. 
  Tierney, Hon. Thomas H. Allen, and Hon. Harold E. Ford, Jr.....   112



                                                 Union Calendar No. 469
105th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 2d Session                                                     105-827
_______________________________________________________________________


                         THE YEAR 2000 PROBLEM

                                _______
                                

October 26, 1998.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

_______________________________________________________________________


  Mr. Burton of Indiana, from the Committee on Government Reform and 
                   Oversight, submitted the following

                        F O U R T H R E P O R T

    On October 8, 1998, the Committee on Government Reform and 
Oversight approved and adopted a report entitled, ``The Year 
2000 Problem.'' The chairman was directed to transmit a copy to 
the Speaker of the House.

          I. Summary of Oversight Findings and Recommendations

                            A. INTRODUCTION

    The Committee on Government Reform and Oversight (the 
``committee'') has primary legislative and oversight 
jurisdiction with respect to the ``overall economy, efficiency 
and management of Government operations and activities, 
including Federal procurement.'' \1\ In addition:
---------------------------------------------------------------------------
    \1\ Rules of the House of Representatives, 105th Congress, X, 
1(g)(6).

          [T]he Committee on Government Reform and Oversight 
        may at any time conduct investigations of any matter 
        without regard to the provisions . . . conferring 
        jurisdiction over such matter upon another standing 
        committee. The committee's findings and recommendations 
        in any such investigation shall be made available to 
        the other standing committee or committees having 
        jurisdiction over the matter involved.\2\
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    \2\ Rules of the House of Representatives, 105th Congress, X, 
4(c)(2).

    Pursuant to this authority, the Subcommittee on Government 
Management, Information, and Technology (the ``subcommittee'') 
convened an oversight hearing on April 16, 1996 to examine 
whether computers throughout the Federal Government, the United 
States, and the world would be able to handle the transition 
from the year 1999 to the year 2000. The subcommittee has 
continued this investigation throughout the 105th Congress.
    The potential problem, known as the Year 2000 problem or 
Y2K, is simple: In the 1960s, when large computers had very 
little storage space, programmers saved computer memory by 
using two digits instead of four digits to represent a calendar 
year--for example, 1966 became ``66.'' This method functions 
well until computers confront the year 2000, which will appear 
as ``00.'' Unless corrected, computers will not know if ``00'' 
means the year 1900 or the year 2000. If computers and 
microchips around the globe are unable to recognize this date, 
they could generate corrupted data, suffer malfunction, or even 
shut down entirely.
    For Federal computers, this could affect everything from 
Social Security and Veterans' benefit payments to missile 
maintenance systems, from the Federal Aviation Administration 
to the Internal Revenue Service. There are at least 7,000 
mission critical computer systems (those systems essential to 
the performance of important governmental functions) in the 
executive branch of the Federal Government.
    It is now clear that a large number of Federal computer 
systems simply will not be prepared for January 1, 2000. At the 
same time, the utilities industry, the financial services 
industry, the telecommunications industry, vital modes of 
transportation, and other indispensable industrial sectors are 
all at risk.
    The problem lies not just with software in mainframe 
computer systems, but with embedded microchips as well. These 
chips serve as the brains of devices from elevators to security 
systems to automated manufacturing equipment. There may be as 
many as 25 billion microchips in use around the world. Seven 
billion microchips were shipped across the globe in 1997. It is 
estimated that between 2 and 5 percent of all microchips have 
the date problem.\3\ This sounds like a tiny fraction, but it 
is a tiny fraction of a huge number. Furthermore, embedded 
chips by definition are hard to find and hard to test for Year 
2000 compliance.
---------------------------------------------------------------------------
    \3\ See ``Year 2000 Risks: What are the Consequences of Information 
Technology Failure?,'' Mar. 20, 1997 (testimony of Ann Coffou, Giga 
Group).
---------------------------------------------------------------------------
    The Year 2000 problem could result in a stunning array of 
technological failures. Air traffic could be delayed or even 
grounded; telephone service could be interrupted; breakdowns in 
the production and distribution of electricity could bring 
widespread power failures; automatic teller machines might 
malfunction; traffic lights could stop working; timeclocks at 
factories might malfunction. Government payments, including 
checks from the Internal Revenue Service, the Treasury, and the 
Veterans Benefits Administration, could be interrupted; 
military technology, including the Global Positioning Satellite 
System, could malfunction. Closer to home, devices with a 
timing function, including microwave ovens, personal computers, 
video cassette recorders, and climate control systems could all 
falter or even shut down entirely.
    Some early failures have already occurred. According to one 
survey, more than 40 percent of companies in the United States 
already have encountered Year 2000-related system failures. In 
1995, for example, computers at the Unum Life Insurance Co. 
automatically deleted 700 records from a database that tracks 
the licensing status of brokers when a computer program 
interpreted some of the ``00'' expiration dates as 1900. More 
dramatically, when Phillips Petroleum ran a Year 2000 test on 
an oil rig in the North Sea, a safety system that detects 
emissions of deadly hydrogen sulfide gas stopped working. When 
the Chrysler Corp. turned clocks forward at one of its assembly 
plants in 1997 to simulate the date change, the security system 
failed, preventing people from leaving the building. In a 
similar exercise by NORAD personnel in 1993, the result was 
total system blackout.\4\
---------------------------------------------------------------------------
    \4\ Fred Kaplan, ``Military on Year 2000 Alert,'' Boston Globe, 
June 21, 1998.
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    Failures such as these may be the tip of the iceberg. 
Solving the problem, however, is an expensive process. In 1996, 
the Gartner Group estimated that the worldwide cost of Year 
2000 repairs would reach $600 billion, with half of that going 
to repairs in the United States, and $30 billion to the Federal 
Government. The Office of Management and Budget has insisted 
the Federal cost would be much lower, but has repeatedly raised 
its own estimate. Beginning with $2.3 billion in 1997, OMB's 
estimate swelled to $5.4 billion as of August 15, 1998 
(although the 24 largest departments and agencies were asking 
for $6.3 billion at that time). Subcommittee Chairman Stephen 
Horn has long argued that the executive branch should be 
prepared for costs to exceed $10 billion. In the private 
sector, General Motors expects to spend $565 million, Citicorp 
estimates its costs at $600 million, and MCI at $400 million.
    The Federal Government must be sure that the most important 
systems at the key Federal agencies are revamped before January 
1, 2000. Similar action needs to be taken by nations around the 
globe. By failing to address the Year 2000 problem, the United 
States could suffer severe disruptions in the delivery of 
essential governmental and private industry services. It has 
been suggested that this could even precipitate an economic 
recession.\5\
---------------------------------------------------------------------------
    \5\ See, for example, ``Year 2000 Recession? `Prepare for the 
worst. Hope for the best.' '' By Dr. Edward Yardeni, chief economist, 
Deutsche Morgan Grenfell, New York.
---------------------------------------------------------------------------

                      B. OVERVIEW OF INVESTIGATION

    The subcommittee has worked to build an understanding and 
awareness of the Year 2000 problem and the remedial actions 
that must be taken by organizations everywhere. The 
subcommittee has provided oversight of government and industry 
efforts by conducting a series of hearings to explore the 
problem.\6\ The subcommittee has also issued report cards 
grading the progress (or lack of progress) Federal agencies are 
making toward Year 2000 compliance.\7\
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    \6\ The subcommittee and committee have been joined by many other 
committees in the House of Representatives. Combined, committees of the 
House (and their subcommittees) have conducted more than 40 hearings on 
Y2K. These include the Committees on Agriculture, Appropriations, 
Banking, Education and the Workforce, Resources, Science, Small 
Business, Transportation and Infrastructure, Veterans' Affairs, and 
Ways and Means.
    \7\ The minority staff did not participate in preparing these 
report cards.
---------------------------------------------------------------------------
    One important objective has been to inspire action by the 
President. As Chief Executive, the President must play an 
active leadership role in moving the Nation forward on the Year 
2000 problem. In July 1997, the chairman and ranking member of 
the subcommittee, together with the chairwoman and ranking 
member of the Technology Subcommittee of the House Committee on 
Science, formally asked the President to use the ``bully 
pulpit,'' as Theodore Roosevelt called it, to explain the 
problem to the American people. They also recommended that he 
appoint a senior administration official as coordinator for the 
national Year 2000 effort.\8\
---------------------------------------------------------------------------
    \8\ See Appendix A.
---------------------------------------------------------------------------
    The President has still not implemented the first 
recommendation: to explain the Year 2000 problem to the 
American people. In July 1998, he addressed some of the members 
of the National Academy of Sciences. That is preaching to the 
choir. He has been urged to speak in a ``fireside chat'' 
environment, similar to the approach of President Franklin D. 
Roosevelt in the 1930s. The appointment of a full-time 
coordinator to pull together the pieces of the administration's 
effort took place in February 1998, when he designated John 
Koskinen, a retired Office of Management and Budget official, 
as Assistant to the President. Mr. Koskinen did not take office 
until March 1998.\9\
---------------------------------------------------------------------------
    \9\ This was part of Executive Order 13073, ``Year 2000 
Conversion,'' which was issued on Feb. 4, 1998. See Appendix C.
---------------------------------------------------------------------------
    Despite this belated step in the right direction, many 
Federal agencies are simply not moving quickly enough to be 
Year 2000 compliant by January 1, 2000. As noted above, the 
subcommittee has prodded executive branch agencies to action by 
grading them on their Year 2000 efforts. The grades are based 
on an analysis of the quarterly reports from the agencies 
themselves as well as follow-up investigative work by the staff 
of the subcommittee and the General Accounting Office, the 
fiscal and program auditors for the legislative branch. Each 
report card has revealed a disturbing lack of progress within 
the executive branch. Overall, the administration has received 
a grade of ``F'' and ``D'' in the last two quarters.
    The subcommittee has concentrated not just on Federal 
computer systems and the effect their failure would have on the 
delivery of services, but also on the leadership role that the 
Government plays throughout society. For example, the 
Securities and Exchange Commission and the Federal 
Communications Commission have important oversight and 
leadership functions in segments of the private sector. At a 
higher level, the President can voice priorities for society as 
a whole. Oversight of this leadership element of the Federal 
Year 2000 effort is central to the subcommittee's investigation 
and to this report.

                         C. COMMITTEE FINDINGS

    Based on the investigation and oversight hearings conducted 
by the Subcommittee on Government Management, Information, and 
Technology, the committee finds as follows:

1. The Federal Government is not on track to complete necessary Year 
        2000 preparations before January 1, 2000

    The most recent data on Federal executive branch 
preparations were released for the quarter ending August 15, 
1998. There are approximately 7,300 mission critical systems in 
the executive branch of the Federal Government. As of August 
15th, only 50 percent of these systems were Year 2000 
compliant. At the current rate of progress, the percentage 
compliant would climb only to 66 percent by March 1999, the 
President's deadline to fix noncompliant systems and still have 
enough time to test and implement the systems.
    The committee is deeply concerned that approximately one-
third of all Federal mission critical systems will not be 
compliant by March 1999, only 9 months before January 1, 2000, 
and only 6 months from the beginning of the Federal 
Government's new fiscal year on October 1, 1999. This is 
troubling in part because once these systems are ``compliant,'' 
they need to be put back into operation, their compliance must 
be verified by an independent party, and they must be put 
through a rigorous end-to-end testing process that ensures 
coordination among multiple systems. Testing and verification 
can take at least 9 months, and often requires even more time 
than that.
    Several additional factors raise concerns about Federal 
Year 2000 preparations. One is that the focus has been almost 
exclusively on mission critical systems. The problem is that 
mission critical systems are only a small percentage of the 
total number of Federal computer systems. Many of these 
secondary systems are important even if not mission critical. 
It is unwise to ignore their Year 2000 compliance. A second 
concern is that many agencies are planning to replace rather 
than repair some of their noncompliant computer systems. This 
is a high-risk strategy. Experience shows that the Government 
does not put new computer systems in place on schedule.\10\ 
This time, the executive branch faces a deadline that cannot be 
extended.
---------------------------------------------------------------------------
    \10\ This is equally true of large computer projects at 
nongovernmental organizations. One witness before the subcommittee 
cited statistics showing that about 80 percent of computer projects 
costing over $5 million fail. See ``Year 2000: Biggest Problems and 
Proposed Solutions,'' June 22, 1998, original transcript, p. 85 
(testimony of Tom McCabe, Sr., chairman, McCabe & Associates).
---------------------------------------------------------------------------
    A crucial component of Year 2000 remediation is the 
exchange of data between organizations. Fixing internal systems 
simply is not enough. Federal agencies have data exchange 
partners throughout society--including other Federal agencies, 
State and local governments, and private and non-profit 
organizations. These data exchanges must be tested through 
cooperative effort. Current indications are that the Federal 
agencies lag badly in this area.
    The August 15, 1998 quarterly reports were the primary 
basis for the subcommittee's September 9, 1998 report card. 
Overall, the executive branch of the Federal Government earned 
a `D.' This was only a modest improvement from the `F' earned 
on the June report card. Several specific agency grades were 
especially troubling. The Department of Justice and the 
Department of Education each went from a `D' in June to an `F' 
in September. The Department of Defense earned a `D' and simply 
is not on track to complete Year 2000 compliance efforts before 
January 1, 2000. The committee is encouraged, however, by the 
strong leadership demonstrated recently by Defense Secretary 
Cohen and Deputy Secretary Hamre. They are making the Year 2000 
problem a top priority, and the importance of this kind of 
executive leadership is the key to success. But, the leadership 
must develop an organization that can do the job. Defense has 
lost several top people from its Year 2000 project.
    The Department of Transportation merited a `D.' The Federal 
Aviation Administration is part of this grade. The Nation's air 
traffic could face serious disruptions for an extended period 
after December 31, 1999 if the FAA's Year 2000 repairs are not 
done on time. The Department of Health and Human Services 
earned an `F' for the second quarter in a row, as did the 
Department of Energy.
    Many people in the Federal Government are working hard on 
the Year 2000 problem. Progress is being made--but it is not 
being made fast enough. The Government must be the leader, 
setting an example for the Nation.

2. Some State and local governments are lagging in Year 2000 repairs 
        and in many cases lack reliable information on their Year 2000 
        status

    While the data on Federal systems reflects a somewhat 
gloomy picture, at least overall data exist. The same cannot be 
said for the status of State and local entities. Subcommittee 
hearings found that there is limited aggregated data for Year 
2000 activity at the State and local levels.
    From the data that are available, States and cities are at 
varying degrees of readiness. Many smaller municipalities are 
stuck in the awareness stage--still trying to understand the 
problem. Large cities have made more progress in converting 
their systems but have not fully assessed embedded systems, 
identified exchange partners, or developed contingency plans. 
Also, some States and larger cities are concentrating on 
outreach efforts with institutions (universities, private 
entities), while many smaller governments are left to struggle 
on their own.
    A July 1998 survey found that about one-third of the States 
had reported that 50 percent or more of their mission critical 
computer systems had been assessed, remediated, and tested. 
This survey was conducted by the National Association of State 
Information Resource Executives.\11\ A survey by Public 
Technology Inc. and the International City/County Management 
Association in late 1997 found that approximately 3,200 of 
3,673 cities, ranging in population from 2,500 to more than 1 
million, were lagging in their Year 2000 efforts.\12\
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    \11\ See ``Oversight of the Year 2000 Problem: Lessons to be 
Learned from State and Local Experiences,'' Aug. 17, 1998, original 
transcript, p. 21 (testimony of Joel Willemssen, Director, Information 
Resources Management, Accounting and Information Management Division, 
U.S. General Accounting Office).
    \12\ See ``The Status of the District of Columbia's Year 2000 
Compliance Effort,'' Oct. 2, 1998, prepared testimony of Jack Brock, 
U.S. General Accounting Office.
---------------------------------------------------------------------------

3. The Year 2000 status of basic infrastructure services, including 
        electricity, telecommunications, and water, is largely unknown

    No one knows the overall extent of our Nationwide 
vulnerability to Year 2000 risks, or the extent of our 
readiness. No assessment across private and public sectors has 
been undertaken. The President, through his Council on the Year 
2000 Conversion, should conduct a broad assessment of the 
Nation's Year 2000 readiness, identifying and assessing the 
risks to the Nation's key economic sectors. This should include 
risks posed by international linkages and by the failure of 
critical infrastructure components.
    The President's Council on the Year 2000 Conversion, headed 
by Assistant to the President John Koskinen, has established 
over 20 working groups to focus on distinct sectors of society. 
The working groups are organized according to important 
sectors: buildings/real estate, consumer products, defense, 
education, energy, environment, finance/banking, food supply, 
health care, other industry, information technology, insurance, 
international, public benefits, science and technology, small 
business, social service, state and local services, taxes, 
telecommunications, transportation, and worker protection 
(human resources).
    The President's Council has released very little 
information about these groups and what they are doing. In any 
case, they are currently not playing a leadership role in 
setting out a national strategy for dealing with the most 
urgent and universal aspect of the problem: power, 
telecommunications, water, and other essential infrastructure.
    Inadequate attention to the Year 2000 problem by electrical 
utilities is seen as the cause for ``potentially major 
catastrophes,'' writes a representative of large electrical 
users.\13\ Major industrial power users are ``concerned'' and 
``dismayed'' that ``electrical utilities lag behind other 
industries'' in preparing their computers for the next 
millennium. The lack of action in the past is most likely to 
lead to very high costs when the Y2K problem is dealt with on 
an emergency basis. Public utility commissions in the States 
must exercise oversight over utilities in their States to 
ensure that action is taken. The public, State and local 
governments, Federal department, and agencies, Congress, and 
private organizations must be kept informed as to how critical 
sectors are progressing. If progress is not made on a steady 
basis, this might lead to a last-minute panic in hiring those 
workers who can make the repairs on time. That unplanned effort 
will lead to higher human resources costs.
---------------------------------------------------------------------------
    \13\ John A. Anderson, Electricity Consumers Resource Council, 
Elcon Report, No. 3, 1998, p. 3.
---------------------------------------------------------------------------

4. Embedded microchips are difficult to find, difficult to test, and 
        can lead to unforeseen failures

    Although initially the Year 2000 problem was understood 
mainly in terms of software-operating systems, databases, and 
other programs, the vulnerability of embedded chips has been 
widely publicized. There are between 25 and 40 billion such 
chips in use around the world. Many of them are hard to access, 
encased in products or equipment. Some are simply invisible: 
the owners and operators of the equipment do not know that it 
depends on embedded chips, or at least do not know which 
functions depend on the chips.
    Organizations addressing the Year 2000 problem generally 
understand the embedded chip aspect and are working diligently 
on it. Based on subcommittee hearings and investigation, 
however, it appears that the sheer number and relative 
inaccessibility of embedded chips will overwhelm these efforts. 
The result will be failure--often unforeseen. One witness 
before the subcommittee, an expert in embedded chips, stated: 
``Fewer than 10 percent of the enterprises in the world have 
begun serious embedded systems testing . . . [E]very 
microprocessor-based embedded system and equipment item must be 
individually tested to be sure of its Year 2000 status. There 
is insufficient time and trained resources to assess every 
microprocessor-based embedded system and equipment item in the 
United States, much less the world.'' \14\
---------------------------------------------------------------------------
    \14\ ``Oversight of the Year 2000 Problem: Lessons to be Learned 
from State and Local Experiences,'' Sept. 3, 1998, pp. 68-69 (testimony 
of David Hall, Senior Engineer, CARA Corp.).
---------------------------------------------------------------------------
    The Office of Management and Budget conceded the 
seriousness of the embedded chip problem when Deputy Director 
for Management Edward DeSeve observed that ``this is the great 
unknown about the Year 2000 problem . . . At this point, it 
appears that any large piece of machinery could have an 
embedded chip problem.'' \15\
---------------------------------------------------------------------------
    \15\ DeSeve, ``Year 2000: Biggest Problems and Proposed 
Solutions,'' June 22, 1998, original transcript p. 10.
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5. Strong leadership from senior management is necessary to address the 
        Year 2000 problem

    The key to success is support from senior level management. 
Awareness of the Year 2000 problem among the technology experts 
at an organization is meaningless if those experts do not have 
the backing and direction of senior management. Year 2000 
repairs deliver no new benefit to an organization. Management 
tends to see the repairs as a burden to be delayed for as long 
as possible. This is in part because of the persistent belief 
that someone will invent a silver bullet to fix the problem. 
Unfortunately, there is no silver bullet. Instead, management 
must bite the bullet--devoting considerable resources to the 
repair effort. Inevitably, this means taking support away from 
other projects. Senior management must make hard choices, but 
the process begins with recognizing there is a problem and, if 
it is to be solved, organized action must occur in a timely 
way.
    For too long, Federal management has been in denial about 
the Year 2000 problem. In the Department of Transportation, for 
example, the Federal Highway Administration first learned of 
the Year 2000 problem in the late 1980s. That agency began 
working on repairs. But the fact that other Department of 
Transportation computers were vulnerable to Year 2000 failure--
including such crucial systems as air traffic control at the 
Federal Aviation Administration--was neither accepted nor acted 
upon anywhere else in the Department. This denial at the 
management level continued until 1997, when the Department's 
Chief Information Officer admitted he had never heard of the 
Year 2000 problem until late in 1996.\16\
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    \16\ ``I didn't even know there was such a thing as a year 2000 
problem until August (1996) when I became the Acting CIO.'' Michael 
Huerta, Associate Deputy Secretary, Acting Chief Information Officer, 
Department of Transportation, ``Will Federal Computers Be Ready for the 
Year 2000?'' Feb. 24, 1997, p. 100.
---------------------------------------------------------------------------
    The General Accounting Office emphasized the importance of 
strong management in the context of the Federal Year 2000 
effort at a subcommittee hearing in 1997: ``Whether agencies 
succeed or fail will be largely influenced by the quality of 
executive leadership and program management. Executive 
leadership sets the tone; program management makes it happen. 
It will be imperative for top agency management, including the 
agency head . . . to not only be fully aware of the importance 
of this undertaking, but to communicate this awareness and 
urgency to all agency personnel in such a way that everyone 
understands why year 2000 compliance is so important.'' \17\
---------------------------------------------------------------------------
    \17\ Joel Willemssen, Director, Information Resources Management, 
Accounting and Information Management Division, U.S. General Accounting 
Office, ``Will Federal Computers Be Ready For The Year 2000?'' Feb. 24, 
1997, pp. 12-13.
---------------------------------------------------------------------------

6. Organizations are dependent on the Year 2000 preparedness of their 
        data exchange partners

    The constant exchange of data between all types of 
organizations makes each organization dependent on the Year 
2000 preparedness of its data exchange partners. Federal 
agencies and State governments use thousands of electronic data 
exchanges to communicate with each other and other entities. 
Much work remains to ensure that Federal and State data 
exchanges will be Year 2000 compliant. As of August 1998, over 
half of the Federal agencies reported that they have not 
finished assessing their data exchanges. Furthermore, only two 
agencies had completely identified and reached agreements with 
all of their data exchange partners. They were the National 
Science Foundation and the Nuclear Regulatory Commission.
    One witness before the subcommittee illustrated the 
extraordinary level of connectivity between organizations and 
therefore the shared nature of the Year 2000 problem by 
describing a routine international transaction between a buyer 
and seller: ``[Y]ou have two port authorities, maybe a 
railroad, you have a couple of trucking companies, two banks, 
an insurance company, warehousing facilities . . .'' And then 
there is the transactional side: ``[T]he flow of paper, the 
purchase orders, the releases, the shipping documents, the 
money, the customs inspections. All of this is done 
electronically.''\18\
---------------------------------------------------------------------------
    \18\ Testimony of Dennis Grabow, president, Millennium Corp., June 
22, 1998, original transcript pp. 86-87.
---------------------------------------------------------------------------
    One witness before the subcommittee articulated the 
importance of data exchanges this way: ``Fixing internal 
systems is but one leg of a multi-legged stool. It is one thing 
to be able to say that all our systems are millennium ready, it 
is a whole other thing to be able to say that after their 
conversion, they still have the ability to talk to one 
another.'' \19\ This witness, who spoke from the perspective of 
the health care industry, spoke in disturbing terms about the 
Year 2000 readiness of data exchanges in that field. ``[T]he 
billing and collection function for services rendered in health 
care is one of the most complex processes in our industry . . . 
. I believe there is a very high probability of failures at 
this billing and reimbursement interface.'' \20\
---------------------------------------------------------------------------
    \19\ Dr. C. Martin Harris, chief information officer, the Cleveland 
Clinic Foundation, testifying at ``Oversight of the Year 2000 Problem: 
Lessons to be Learned from State and Local Experiences,'' Sept. 1, 
1998, original transcript, p. 87.
    \20\ Ibid. p. 84.
---------------------------------------------------------------------------

7. Data exchanges, testing, and contingency planning have received far 
        too little attention

    Based on hearings and analysis of agency quarterly reports, 
the committee found that many organizations are focusing solely 
on fixing their own computer systems, paying little or no 
attention to their data exchanges with other organizations, the 
need to thoroughly test their systems once repairs are 
completed, and the need for contingency planning even if the 
repairs are on schedule.
    Organizations must ensure that their systems can reliably 
exchange data with other systems and that they are protected 
from errors that can be introduced by external systems. To 
achieve this goal, agencies must perform end-to-end testing for 
their critical core business processes. The purpose of end-to-
end testing is to verify that a defined set of interrelated 
systems--which collectively support an essential function--work 
as intended. In the Federal Government, agencies that 
administer benefits payment programs exchange data with the 
Department of the Treasury which, in turn, interfaces with 
various financial institutions to ensure that benefits checks 
are issued.
    In the process of preparing for the year 2000, many systems 
in the end-to-end chain will have been modified or replaced. 
This makes testing more complicated but also more important. It 
makes it more difficult to isolate, identify, and correct 
problems. Organizations must therefore begin working with their 
data exchange partners as soon as possible to conduct end-to-
end tests.
    Business continuity and contingency plans should be 
formulated to respond to both predictable and unpredictable 
failures. Predictable failures include systems where 
renovations are already far behind schedule. Unpredictable or 
unforeseen failures include systems that fail despite having 
been on schedule for compliance before January 1, 2000 or even 
having been certified as Year 2000 compliant. Organizations 
that develop contingency plans only for systems currently 
behind schedule are not addressing the need to ensure the 
continuity of even a minimal level of core business operability 
in the event of unforeseen failures.
    Moreover, contingency plans cannot focus solely on internal 
systems. Most organizations depend on data provided by business 
partners, as well as services provided by the public 
infrastructure (power, telecommunications, transportation, 
water, et cetera). One weak link anywhere in the chain of 
critical dependencies can cause major disruptions to business 
operations. Given these interdependencies, it is imperative 
that contingency plans be developed for all critical core 
business processes and supporting systems, regardless of 
whether these systems are owned by the organization. Further, 
those program managers responsible for core business processes 
should take a leading role in developing business continuity 
and contingency plans because they best understand their 
business processes and how problems can be resolved.

8. Fear of legal liability has made some organizations reluctant to 
        share the Year 2000 status of their products and internal 
        systems with other businesses and data exchange partners

    Although the Year 2000 computer problem is complex and 
technological, the key to solving it is committed management. 
Organizations should share information in order to identify 
obstacles and master solutions as quickly as possible. Sharing 
information among individuals, workers, and firms is critical 
to resolving the Year 2000 problem. Sharing information without 
the fear of lawsuits will expedite Year 2000 problem resolution 
by the private and government sectors. A potential barrier to 
information sharing, however, is the fear that any disclosure 
of information related to the Year 2000 problem could increase 
an organization's risk of being sued.\21\
---------------------------------------------------------------------------
    \21\ Some legal experts have contended that disclosure--even of bad 
news--will not increase an organization's liability.
---------------------------------------------------------------------------
    Companies are afraid, for example, that if they disclose 
the Year 2000 compliance of their own products and there turns 
out to be errors in this information, they could lose in court. 
The same applies to disclosure of a company's own 
administrative Year 2000 progress, as well as the test results 
of other companies' products. The result is that companies are 
not holding candid--and crucial--conversations with their 
suppliers, vendors, and others. Companies must be able to 
engage in these communications without fear that their 
statements could be used as an admission of liability in court 
unless they were made recklessly or with the intent to deceive.
    Several Year 2000 lawsuits have already been filed, 
although none pertains specifically to information disclosure. 
In one recent example, some owners of the financial software 
called Quicken, which is made by Intuit Inc. of Cupertino, CA, 
filed a class action lawsuit against Intuit. The complaint was 
that Intuit was unfairly forcing customers either to upgrade to 
Quicken 98 at a cost of $20 to $40 or to experience the 
consequences of Year 2000 defects in their software.\22\ 
Potential Year 2000 liability claims include fraud, breach of 
warranty, liability, personal injury, and shareholder actions 
against company directors for failing to prepare for the Year 
2000.
---------------------------------------------------------------------------
    \22\ See ``Software Makers Win a Round in Year 2000 Court Fight,'' 
the New York Times, Sept. 7, 1998, p. C2.
---------------------------------------------------------------------------

9. Resource problems center around hiring and retaining skilled workers 
        and attaining the needed funding to perform the Year 2000 fixes

    The No. 1 challenge faced by those with Year 2000 problems 
is finding the right people to perform the fix. People with 
skills to fix Year 2000 problems are found working within the 
computer and data processing industry. Their skills are in 
great demand throughout America.
    Demand has increased rapidly for high tech workers and this 
is expected to continue well into the next century. According 
to the Bureau of Labor Statistics [BLS], there are over 1.2 
million computer and data processing services workers today 
with 2.5 million expected by 2006. Rarely, in history, have we 
seen such sustained rapid job growth within an industrial 
sector.
    Thus employment in the computer and data processing 
services industry will increase by over 100 percent between 
1996 and 2006. BLS finds that ``Computer scientists, computer 
engineers, and systems analysts are expected to be the three 
fastest growing occupations through the year 2006. Employment 
of computing professionals is expected to increase much faster 
than average as technologies, making for plentiful job 
openings.''
    A growing list of high tech service providers are not 
taking on any more Y2K work as they are already booked up 
through January 2000. The bottom line is that there will be a 
Y2K personnel shortage as we enter the home stretch toward the 
new millennium. Over 100,000 new high tech workers must be 
trained each year for new jobs and this does not count 
replacements--projected to be as many as 60,000--for workers 
moving up to management position or out.
    Starting salaries for computer professionals are among the 
highest in America. Hardware design and development college 
graduates accepted offers that averaged $41,237 in 1997. New 
Ph.D. computer engineers earned $63,367. And men and women with 
special computer skills and experience may earn $200,000 or 
more in the private sector. Thus the demand for Year 2000 
workers has raised the level of their salaries and benefits. No 
downturn is projected through at least 2006.
    Federal officials have expressed serious concerns about 
their ability to hire and retain skilled workers to perform the 
Year 2000 fixes. Many stated that it is difficult to compete 
with the private sector salaries and benefits.
    State and local government witnesses noted that hiring 
skilled people is more difficult because of private sector 
competition. Officials from local communities expressed concern 
because many of the senior level officials such as city council 
members are still unaware of the magnitude of the problem. As a 
result, smaller cities have not provided the staff or funding 
needed to adequately undertake Year 2000 preparations.
    A representative from the city of Chicago reported: ``We 
particularly are having trouble finding skilled workers.'' She 
went on to note: ``We have chosen to privatize almost the whole 
year 2000 project, for a couple of reasons. One is our 
attrition is up near 20 percent and we are constantly seeing 
people turn out of our technology department.'' \23\
---------------------------------------------------------------------------
    \23\ Ms. Beth Boatman, chief information officer, City of Chicago, 
testifying at ``Oversight of the Year 2000 Problem: Lessons to be 
Learned from State and Local Experiences,'' Sept. 3, 1998, original 
transcript, p. 57.
---------------------------------------------------------------------------

                      D. COMMITTEE RECOMMENDATIONS

1. The President and the executive branch of the U.S. Government must 
        approach the Year 2000 problem with greater urgency

    Executive leadership is the key to rectifying the Year 2000 
problem. Senior executive management--in Federal agencies, 
other levels of government, and for-profit and non-profit 
organizations throughout society--must make Year 2000 efforts a 
priority. This involves accepting the responsibility, freeing 
up the necessary resources, and insisting on a timeline for 
finishing the job before January 1, 2000. This is especially 
true for the Federal Government. The Federal Government is 
uniquely positioned to publicize the Year 2000 crisis as a 
national priority and to take a leadership role. The President 
is the elected leader of the Nation. All efforts to combat the 
Year 2000 problem take their cue from the top.
    The current evidence points to considerable Year 2000 
failure unless the rate of progress throughout society improves 
considerably. In too many sectors, there is simply no reliable 
information about Year 2000 vulnerability. We cannot head into 
the new millennium unprepared. It is time for the President to 
declare that the Year 2000 problem is a National Priority. If 
sufficient progress is not made by an intermediate deadline, he 
may even need to escalate the Year 2000 problem to a National 
Emergency.
    The point of calling for such urgency is not to trigger 
panic, but in fact to avoid panic. If this problem does not 
receive the attention it demands during the next 6 to 9 months, 
and if we allow the date change to approach without knowing our 
vulnerability, panic will be the inevitable result. The only 
way to avoid this is to act now. The President must sound the 
alarm and address to the Nation now in order to avoid panic 
later.

2. Public and private organizations as well as Federal, State, and 
        local governments must all work in partnership to prepare for 
        the Year 2000 date change

    America needs a national Year 2000 Conversion strategy. As 
the year 2000 approaches, anxiety will increase throughout 
society. One major aggravation to this anxiety, which could 
cause more problems than the technology failure itself, is lack 
of information. It is imperative that citizens have as much 
information as possible. This includes information that can 
help individuals, families, and organizations prepare for the 
year 2000. This also includes information on how others are 
preparing: the Federal Government, State and local governments, 
telephone companies, utility companies, schools, banks, and so 
on. It also includes information on all kinds of products, from 
complex medical equipment to microwave ovens. Making this type 
of information available will have the double benefit of 
preparing citizens and pressuring organizations to complete 
their Year 2000 fixes on time.
    Along with Congress, State, and local representatives, the 
President must work in partnership with private companies and 
associations to define a Year 2000 action plan and make this 
information available. In addition to specific action items, a 
minimal strategy should include goals, objectives, benchmarks, 
and performance measures. Most Federal departments and agencies 
have a Year 2000 strategy and are well on their way to 
satisfying requirements. The private sector has a much broader 
range of effort. Some have just begun their effort. Others are 
nearing completion.
    At the current time, the most logical mechanism for 
establishing a Year 2000 strategy to coordinate efforts, share 
information, and alert citizens to the status of Year 2000 
preparations is the President's Council on the Year 2000 
Conversion. It is headed by Assistant to the President John 
Koskinen. As noted above, this Council has already established 
a number of working groups to focus on particular sectors of 
society, but these efforts seem to be taking place behind 
closed doors. Openness is crucial: dissemination of information 
should be a primary function of these working groups. For 
example, each of these groups should establish a database of 
compliant and noncompliant products as well as other 
information relevant to the sector.
    A coordinated, public/private effort, under the leadership 
of the President, could effectively bring together the key 
economic sectors to coordinate the Nation's Year 2000 efforts 
and ensure that all sectors, as well as interdependencies 
between sectors, are being adequately addressed, and that the 
American people are fully informed as the year 2000 approaches.

3. Congress and the President should establish carefully limited 
        Federal liability protection for organizations that share 
        information in order to facilitate Year 2000 repairs

    Companies that go out of their way to inform other 
companies and the public of their Year 2000 status should not 
be exposed to civil liability for unintentionally inaccurate 
statements. Limited protection from such liability would 
facilitate information sharing as the clock ticks toward 
January 1, 2000. S. 2392, the ``Year 2000 Information 
Disclosure Act,'' establishes a uniform standard of legal 
liability to protect those who, in good faith, share 
information on the Year 2000 problem and solutions to it. This 
bill passed the Senate on September 28, 1998. The House of 
Representatives passed the same bill by unanimous consent on 
October 1, 1998.\24\
---------------------------------------------------------------------------
    \24\ Although the bill had not become law by the time this report 
went to press, the President was supportive of the measure and was 
expected to sign it. Assistant to the President John Koskinen expressed 
support for the bill, which was based on a White House proposal, when 
it passed Congress: ``No one's ever confronted this kind of issue 
before,'' said John Koskinen, chairman of President Clinton's Year 2000 
Conversion Council. ``People have to be able to compare notes.'' See 
``President Sent Bill on Year 2000,'' Associated Press, Oct. 1, 1998.
---------------------------------------------------------------------------
    The key provision of the bill shields companies that make 
inaccurate statements on Year 2000 issues from civil liability 
unless the statements are knowingly false or negligent. The 
bill also ensures that there is no threat of product defamation 
from inaccurate Year 2000 statements unless they are knowingly 
false or negligent. Even well-tested systems can fail, 
especially in unusual situations.
    The bill would not relieve companies of liability for 
building bad products. It protects sharing of information, but 
nothing more. The committee believes it would be 
counterproductive to relieve companies of liability for 
building bad products, doing sloppy work, or being careless 
with the truth. But with this legislation, Congress recognized 
that mistakes can be made, and that it is now more important 
for organizations to share Year 2000 information than to argue 
over liability. The real work must begin in earnest as time is 
short. By taking the liability card off the table, 
organizations can share crucial information and focus on 
getting the Year 2000 job done.

4. Year 2000 problem managers should develop goals that are linked to 
        readiness measures

    Effective oversight by Congress and the executive branch 
needs to measure regular progress toward Year 2000 compliance 
for both public and private sectors. Year 2000 management 
should develop sector-by-sector goals. These goals should be 
linked to Year 2000 readiness measures. The measures will 
provide a basis for determining what is being accomplished.
    The Year 2000 problem must not be allowed to spark a 
national crisis. Good measures of Year 2000 readiness will be 
both a technological and psychological antidote to panic. For 
example, the subcommittee has measured how well the Federal 
Government is meeting the Year 2000 challenge. It has developed 
a report card for the critical computer systems in the 
executive branch. Grades are determined by the number of Year 
2000 compliant systems which are remediated by each agency 
achieves.
    This model should be replicated. Markers or benchmarks must 
be developed for the broad spectrum of Year 2000 problems 
across the country. The Year 2000 computer problem will not be 
resolved unless we approach it systematically. A results-
oriented approach to Year 2000 will go a long way to moving the 
United States constructively into the 21st century.
    One of the most difficult jobs in any human organization is 
to develop these markers, the behavioral standards, benchmarks, 
the points along the way toward achieving goals. These markers 
measure performance and are meant to hold people accountable 
for their performance. A few State and national governments 
have shown leadership here.\25\
---------------------------------------------------------------------------
    \25\ The States of Oregon and Florida have developed broad policy 
goals and benchmarks. New Zealand and Australia have also done this. 
New Zealand, for example, uses results-oriented government for its 
Central Bank (the equivalent of our Federal Reserve). If the head of 
the Central Bank does not hold inflation to 2 percent, this person's 
salary is cut substantially. The message is clear: ``produce or live 
with the consequences.''
---------------------------------------------------------------------------

5. Citizens should demand information on Year 2000 readiness from their 
        State and local governments, their utility companies, and other 
        organizations upon which they are dependent

    As noted above, there are at least two significant barriers 
to effective Year 2000 remediation: (1) Management denial--the 
reluctance of senior management to recognize the Year 2000 
problem and make the hard choices necessary to solve it; and 
(2) fear of legal liability--which can have the effect of 
stifling the kind of disclosure and exchange of information 
necessary to solve the problem. These barriers to serious Year 
2000 efforts must be broken down. Perhaps the most effective 
means of doing so is public pressure. Profitmaking 
organizations respond to pressure from consumers; political 
institutions respond to pressure from constituents; non-profit 
organizations respond to their donors and public opinion as 
well.
    Furthermore, the Year 2000 problem raises the specter of 
widespread panic. There has been talk of customers withdrawing 
their money out of banks, stockpiling weapons, and taking other 
steps that could be more dangerous than the technological 
failure itself. One of the best antidotes to this panic is 
information. People need to speak directly with their banks, 
utility companies, and other organizations whose failure would 
have drastic consequences. They need to assure themselves that 
the fixes will be made. They need to know--based on direct 
contact--that there is no reason to panic. They need to know 
what reasonable steps should be taken to prepare as January 1, 
2000 approaches. Some general advice in this area can be found 
at the end of this report.
    The ProFutures Financial Group stated that investors have 
not been given adequate disclosure of Year 2000 issues by 
public companies. In addition, the ProFutures Financial Group 
stated that the Federal Reserve must start releasing the names 
of banks which are behind in their compliance programs. A 
consultant with Roma International stated that many vendors, 
suppliers, customers are either refusing to respond to Year 
2000 inquiries or are responding with vague generalities on the 
advice of their legal counsels. This consultant was uncertain 
whether a ``safe harbor'' bill would improve the situation.

             II. Report on the Committee's Oversight Review

                             a. background

    The Year 2000 problem first became apparent in large--and 
often old--mainframe computer systems. The challenge of 
preparing these systems for the new century was measured by how 
many lines of computer code would need to be reviewed and 
renovated. Generally, organizations scheduled their Year 2000 
project around the ultimate goal of having these systems fixed, 
tested, and implemented by the end of 1999. Slowly, 
organizations have begun to realize that there are several 
other aspects of preparing for the date change, including 
embedded systems, data exchanges, and contingency planning.
    Embedded systems--microprocessors embedded in devices 
ranging from fax machines to elevators to assembly line 
equipment--are easily overlooked. In part, this is because Year 
2000 projects naturally fall to an organization's computer or 
information technology group, while embedded systems are 
generally under the care of those in maintenance. Another 
reason is that embedded systems are hard to locate and hard to 
test.
    Embedded chips are a special case of the Year 2000 problem 
because of the difficulties of finding them, assessing their 
compliance, and renovating them. Embedded chips feed data to 
process control systems, which in turn, feed data to software 
applications. The embedded chips themselves may fail. The 
process control logic boards may fail. And, the dependent 
software may fail. Worse, an embedded chip failure may cause a 
process control misunderstanding, which in turn may 
purposefully cause the software application to shut the whole 
system down.
    Although most information technology executives and 
managers have understood their interdependency on the Year 2000 
status of organizations with which they share data, most have 
also been slow about pursuing this aspect of the problem. One 
popular solution to the date problem is called ``windowing.'' 
This is a shortcut that allows organizations to avoid the time 
consuming and expensive process of changing all two-digit years 
to four-digit years. Windowing enables the computer to 
calculate the date by assuming that certain two-digit dates, 
such as ``50'' to ``99,'' are from the 1900's, while others, 
such as ``00'' to ``49,'' are from the 2000's. The computer 
would therefore interpret ``98'' as 1998 and ``01'' as 2001.
    Contingency planning is essential even if an organization 
has made all of its internal systems and equipment Year 2000 
compliant. The date change will inevitably involve unexpected 
failures. Because there is no way to anticipate all of the 
consequences, contingency planning is crucial.
    Increasingly, organizations are taking into account these 
different aspects of the Year 2000 problem. This is a major 
step forward, but time is running short. This report is an 
attempt to assess the current situation and make effective 
recommendations for the next year. The committee believes that 
neither assessment nor the recommendations can be made without 
taking into account each aspect of the Year 2000 problem.

                   b. proceedings of the subcommittee

1. Proceedings during the 104th Congress (1995-1996)

    On April 29, 1996, Chairman Stephen Horn and then Ranking 
Minority Member Carolyn Maloney sent a joint congressional 
oversight letter to the heads of each executive department and 
10 additional agencies.\26\ The letter asked 13 detailed 
questions intended to ascertain the status of each agency's 
preparation for the year 2000.
---------------------------------------------------------------------------
    \26\ See Appendix A.
---------------------------------------------------------------------------
    The overall response the subcommittee received was 
discouraging. Only 9 of the 24 departments and agencies 
reported that they had a plan for addressing the problem. Five 
of them had not even designated an official within the 
organization to be responsible. Seventeen of the departments 
and agencies lacked any cost estimates. Even those with partial 
cost estimates could only provide projections for a limited 
part of the agency. On the positive side, the Social Security 
Administration had begun its Year 2000 initiatives in 1989 and 
the Small Business Administration also had more advanced Year 
2000 efforts.
    Chairman Horn and other members of the subcommittee 
released their conclusions based on the agency responses at a 
July 30, 1996 news conference.\27\ To underscore their 
conclusions, each of the 24 departments and agencies received a 
letter grade based on the subcommittee's assessment of its 
performance. Four were given ``As.'' Four were given ``Fs.'' 
Ten were given ``Ds.'' None of the ``Ds'' had any plan in place 
for addressing the problem, or available cost estimates. The 
decision to give each agency a grade was intended to emphasize 
the responsibility that each individual department or agency 
must take the problem seriously and quickly become effective in 
addressing it.
---------------------------------------------------------------------------
    \27\ See Appendix B.
---------------------------------------------------------------------------
    Other major findings resulting from the April 29th 
oversight letter presented at the news conference included:
          1. Major departments were in the initial planning 
        stages of this effort.
          2. Even those agencies considered leaders in this 
        effort, such as the Social Security Administration, 
        were not close to completing the inventory and solution 
        stages of the conversion process.
          3. Only six agencies had any cost estimates on the 
        monetary resources needed to address the problem.
          4. The Department of Defense had not yet completed 
        its inventory of the computer software code in need of 
        conversion.
          5. The National Aeronautics and Space Administration 
        (NASA) is one of the most innovative, advanced and 
        computer dependent agencies in the Federal Government, 
        but it had not prepared a plan to solve the problem and 
        did not anticipate having a plan completed until March 
        1997.
    The subcommittee held two hearings on the Year 2000 problem 
during the 104th Congress. On September 27, 1996, the committee 
issued a report on the problem entitled, ``Year 2000 Computer 
Software Conversion: Summary of Oversight Findings and 
Recommendations.'' The findings and recommendations in that 
report laid the foundation for action by the subcommittee and 
committee in the 105th Congress.

2. February 24, 1997, Oversight hearing: ``Will Federal Government 
        Computers Be Ready for the Year 2000?''

    The first Year 2000 hearing of the 105th Congress drew, in 
part, on agency responses to a January 14, 1997 oversight 
letter requesting each of the department and agency chief 
information officers to provide the subcommittee with updated 
plans and activities on the Year 2000 problem within their 
jurisdiction.
    Chairman Horn opened the hearing with three questions for 
each major agency: (1) Have you defined the size and scope of 
the problem? (2) Do you know how and when the fixes will be 
made? (3) Have you identified mission critical systems and set 
clear priorities for action? There was grave concern that 12 of 
the 14 Federal departments planned to implement their solutions 
in the final 3 months of 1999, leaving no margin for error in 
such a limited time for testing.
    Witnesses included the following agency chief information 
officers: Ms. Liza McClenaghan, Department of State; Assistant 
Secretary Emmett Paige, Department of Defense; Ms. Patricia 
Lattimore, Department of Labor; Mr. John J. Callahan, 
Department of Health and Human Services; Associate Deputy 
Secretary Michael Huerta, Department of Transportation; and Mr. 
Mark D. Catlett, Department of Veterans Affairs. In addition, 
Joel Willemssen, Director, Civil Agencies Information Systems, 
Accounting and Information Management Division, U.S. General 
Accounting Office, testified about GAO's work on the topic.
    Mr. Willemssen's testimony focused on GAO's newly-released 
report: ``Year 2000 Computing Crisis: An Assessment Guide.'' 
The purpose of the report was to provide a useful framework for 
agency managers planning and implementing their Year 2000 
programs. The Guide set out five phases of a Year 2000 project: 
awareness, assessment, renovation, validation, and 
implementation. The assessment phase includes decisions about 
which systems are mission critical. The renovation phase should 
involve consideration of interdependencies among systems as 
well as data exchanges. Mr. Willemssen stressed the importance 
of the validation--testing--phase, saying: ``In many cases, 
this is going to take agencies at least a year to do, and we 
generally have set aside the entire calendar year 1999, to 
address most of this phase.'' \28\
---------------------------------------------------------------------------
    \28\ ``Will Federal Computers Be Ready for the Year 2000?'' Feb. 
24, 1997, p. 10.
---------------------------------------------------------------------------
    The General Accounting Office also told the subcommittee of 
a recent Year 2000 failure. The Defense Logistics Agency in 
Columbus, OH, devised a 3-year contract beginning on January 1, 
1997. The agency's computer system, mistakenly identifying the 
ending date asJanuary 1, 1900, generated a 97-year delinquency 
notice.\29\
---------------------------------------------------------------------------
    \29\ Ibid., testimony of Mr. Keith Alan Rhodes, Technical Director, 
Office of Chief Scientist, U.S. General Accounting Office, p. 25.
---------------------------------------------------------------------------
    Ms. McClenaghan testified that the Department of State had 
accurately defined the Year 2000 problems it faced. She 
reported that 57 of the 85 mission-critical systems were not 
Year 2000 compliant. She estimated the total cost of the Year 
2000 problem for the State Department at $135.2 million. The 
strategy she presented included integrating Year 2000 fixes 
into a larger plan for modernization of information technology 
infrastructure.
    Assistant Secretary of Defense Emmett Paige testified that 
the DOD was ``far down the road to completing'' the assessment 
phase. He pointed to the Defense Integration Support Tools, or 
DIST, as a management tool to track essential information 
regarding DOD systems. He also noted that the DOD was 
reprogramming resources from all areas for use in solving the 
Year 2000 problem and asked that Congress reduce the drain on 
resources by lowering the number of special reporting 
requirements.

3. March 20, 1997, Oversight Hearing: ``Year 2000 Risks: What Are the 
        Consequences of Information Technology Failure?'' (held jointly 
        with the House Science Subcommittee on Technology)

    The subcommittee's second hearing on the Year 2000 problem 
in 1997 extended the focus beyond standard computer systems to 
survey other affected technologies, including embedded 
microprocessors. Witnesses included: Bruce Hall, Research 
Director, the Gartner Group; Ann Coffou, Managing Director, 
Giga Group; Vito Peraino, attorney with Hancock, Rothert & 
Bunshoft; Harris Miller, President, Information Technology 
Association of America.
    The subcommittee learned that many critical technology 
systems depend on automated devices that control their 
operations. These can include security systems for badge 
readers, surveillance and home security systems, medical 
devices, factory machinery, and telephone systems. Furthermore, 
telephone systems, video recorders, bar code readers, automatic 
teller machines, factory machinery, civilian and military 
avionics, process control and monitoring equipment, sprinkler 
systems, and air-conditioning systems could all be at risk. 
Automated devices such as these malfunction when they encounter 
situations that their software is not designed to recognize. 
Sometimes the malfunction means failing to perform properly. 
Sometimes it means shutting down altogether. Many products 
contain multiple embedded systems made by multiple 
manufacturers. Testing these products for year 2000 compliance 
is difficult and can be expensive.
    Bruce Hall was asked to elaborate on the Gartner Group's 
cost estimate for Federal Year 2000 repairs. He stressed 
caution in trying to estimate cost, saying that any current 
estimate would ultimately prove inaccurate because it was 
necessarily based on inadequate information. He suggested that 
fixing Federal computers would be like renovating an old house. 
We are ``all weighing in on what we anticipate to be the cost 
of remodeling this house. [But] we've yet to ascertain the 
square footage. We've yet to understand even how many rooms 
there are, or even how extensive the modeling job needs to be 
to achieve minimum requirements.'' \30\
---------------------------------------------------------------------------
    \30\ ``Year 2000 Risks: What are the Consequences of Information 
Technology Failure?'' Mar. 20, 1997, p. 38.
---------------------------------------------------------------------------
    Ann Coffou testified on the problems with embedded 
microchips. She described Year 2000 tests of fax machines and 
microwave ovens that resulted in total shutdown of the 
machines. She also told of a camera with an automatic dating 
feature, purchased recently, and for which neither the store 
nor the manufacturer could attest to its Year 2000 compliance. 
Ms. Coffou advised that the rule for embedded chips must be 
guilty until proven innocent. ``I recommend for the general 
public to start putting the pressure on manufacturers. Call and 
find out. Ask questions.'' \31\
---------------------------------------------------------------------------
    \31\ Ibid. p. 39.
---------------------------------------------------------------------------
    Vito Peraino covered the potential for Year 2000 liability 
claims. Referring to the Gartner Group's estimate that Year 
2000 repairs would cost $300-$600 billion worldwide, Mr. 
Peraino observed that never in history has such an expensive 
problem failed to attract significant legal attention. ``I know 
a litigation catastrophe when I see one. For better or for 
worse, the Year 2000 problem is a litigation catastrophe 
waiting to happen.'' \32\
---------------------------------------------------------------------------
    \32\ Ibid. pp. 25, 28.
---------------------------------------------------------------------------
    Harris Miller testified about the Information Technology 
Association of America's [ITAA] Year 2000 certification 
program, called ITAA*2000. This was ITAA's response to Chairman 
Horn's 1996 request for a industry-based ``Good Housekeeping 
Seal of Approval'' on Year 2000 repairs. Mr. Miller testified 
that as of March 1997, 11 organizations had received 
certification under the program, while a further 18 were under 
technical evaluation and a total of 189 had requested the 
questionnaire necessary to become certified. ``The focus of the 
program is on the processes and methods that organizations use 
to develop Year 2000 compliant software and services . . . [W]e 
have designed the program to apply to any company, 
organization, government agency, or any entity involved in a 
Y2K conversion . . . It provides an independent, third party 
review of their Y2K processes and methods.'' \33\
---------------------------------------------------------------------------
    \33\ Ibid. p. 33.
---------------------------------------------------------------------------
    Following the hearing, the chairmen and ranking members of 
the two subcommittees sent an oversight letter to department 
and agency heads to determine whether the agencies were 
assessing their vulnerability to the embedded chip problem.\34\ 
The letter was targeted especially to the various regulatory 
authorities that already have the power to alert people. The 
responses to that letter indicated that many agencies were only 
just beginning to assess the problem of embedded microchips 
with the Year 2000 problem.
---------------------------------------------------------------------------
    \34\ See Appendix A.
---------------------------------------------------------------------------

4. July 10, 1997, Oversight Hearing: ``Will Federal Government 
        Computers Be Ready for the Year 2000?'' (held jointly with the 
        House Science Subcommittee on Technology)

    The third hearing on the Year 2000 problem in 1997, was 
again held jointly with the House Science Subcommittee on 
Technology. Federal Year 2000 progress was evaluated on 
thebasis of the quarterly progress report provided to Congress by the 
Office of Management and Budget on June 23, 1997. At this hearing, 
several subcommittee members called upon executive branch officials to 
attach far greater urgency to the Year 2000 effort.
    Witnesses included Sally Katzen, Administrator, Office of 
Information and Regulatory Affairs, Office of Management and 
Budget; Joel Willemssen, Director, Civil Agencies Information 
Systems, Accounting and Information Management Division, U.S. 
General Accounting Office; Kathleen Adams, Chair of the 
Interagency Year 2000 Subcommittee of the Chief Information 
Officers Council and Assistant Deputy Commissioner for Systems, 
Social Security Administration; and Joe Thompson, Chief 
Information Officer, General Services Administration.
    At this hearing, the subcommittee focused on the essential 
elements of preparing for the century date change, including: 
(1) Are agencies moving fast enough to address the Year 2000 
problem? (2) Are the agency timetables realistic and adequate 
to address the Year 2000 problem? (3) Do the department and 
agencies have sufficient management processes to monitor their 
Year 2000 efforts?
    Chairman Horn opened the hearing by stressing the 
importance of high-level executive attention. With a senior 
official of the Office of Management and Budget as the lead 
witness, he asked: ``Has the President of the United States 
made this an issue? He is one of the great communicators of 
this century. We need him to awaken the Nation to this very 
serious situation.'' \35\
---------------------------------------------------------------------------
    \35\ ``Will Federal Government Computers be Ready for the Year 
2000?'' July 10, 1997, p. 40.
---------------------------------------------------------------------------
    Chairman Horn asked these questions in the context of the 
disappointing news reflected in OMB's May 15, 1997 quarterly 
report (issued on June 23rd), which showed that some agencies 
with critical responsibilities for providing public services 
were stuck at the starting gate. As of May 15th, fully 18 out 
of 24 agencies had yet to finish assessing the vulnerability of 
their computer systems to the Year 2000 problem. Out of 24 
agencies, 10 had yet to complete any testing of software 
changes. These were discouraging and worrisome statistics.
    Joel Willemssen of the General Accounting Office was much 
less optimistic. He testified that based on the latest 
information, Federal agencies simply did not have enough time 
to complete all necessary fixes. He strongly urged agencies to 
prioritize so that critical systems are fixed in time: ``OMB's 
perspective would seem to imply that there is no cause for 
alarm. We don't share that view. On the contrary, we believe 
that OMB and Federal agencies need to increase their level of 
concern, and move with more urgency to clearly demonstrate that 
a business-as-usual approach on the Year 2000 issue won't 
work.'' \36\
---------------------------------------------------------------------------
    \36\ Ibid. p. 24.
---------------------------------------------------------------------------
    Joe Thompson testified that the General Services 
Administration was working to raise awareness of the Year 2000 
problem throughout the government. He reported that GSA's 
Federal Supply Service has notified manufacturers and service 
and equipment providers that all products sold to the 
Government must be Year 2000 compliant. He also described GSA's 
database of Year 2000 compliant commercial-off-the-shelf 
products. Representative Morella, chair of Science's Technology 
Subcommittee, asked how GSA determines that these products are 
compliant. Mr. Thompson noted that GSA lacked the resources to 
carry out the testing itself. ``Those items have been tested 
and verified by the corporations themselves whose records of 
testing can be obtained from them.'' \37\
---------------------------------------------------------------------------
    \37\ Ibid. p. 104.
---------------------------------------------------------------------------
    Kathleen Adams testified on the role of her interagency 
Year 2000 Subcommittee. She reported that they were developing 
a database that will contain information regarding whether 
commercial-off-the-shelf software presently in use in Federal 
agencies will function properly after January 1, 2000. She 
stressed that although the efforts such as this database can 
help, the responsibility for success or failure ultimately lies 
with the Chief Information Officer of each agency and with the 
Office of Management and Budget.
    Sally Katzen testified that the administration's estimate 
for the cost of preparing its executive branch computers for 
the date change had risen from $2.3 billion in February to $2.8 
billion in July. Despite this, she insisted that the Government 
was on track to complete all necessary fixes before January 1, 
2000. Her prepared testimony concluded that ``the Year 2000 
computer problem will be a non-event.'' Subcommittee member 
Representative Tom Davis expressed amazement that Ms. Katzen, 
speaking for OMB and therefore the President of the United 
States, was taking such a casual approach to the Year 2000 
problem. ``You have to approach this more cautiously than that, 
don't you?'' Ms. Katzen replied that ``we will all breathe a 
very happy sigh of relief on December 31st 1999.'' \38\
---------------------------------------------------------------------------
    \38\ Ibid. pp. 14, 54.
---------------------------------------------------------------------------

5. September 15, 1997, news conference on Year 2000 report card

    At this news conference, Chairman Horn released his second 
report card of Federal preparations for the Year 2000 problem. 
These grades measured the progress that 24 departments and 
agencies of the Federal Government had made in fixing their 
Year 2000 problems by August 15, 1997. Mr. Horn made the 
following statement:

          Averting electronic chaos at the turn of the 
        millennium is going to be labor intensive. Without time 
        and a concerted effort by management, there is no way 
        to avoid a breakdown of unpredictable proportions.
          This is the real danger. The Year 2000 problem is a 
        procrastinator's nightmare. Time is marching 
        relentlessly toward the absolute deadline of January 1, 
        2000. Thousands of Government computer programs must be 
        changed before then. The Administration can not issue 
        an Executive order postponing the coming of the 
        millennium.
          These grades are sad. No ex-professor can be happy 
        when handing out 11 Ds and Fs but only one A in a class 
        of 24. Last year agencies could get good grades simply 
        by establishing plans and putting someone in charge of 
        addressing the Year 2000 problem. This year plans 
arenot enough. Action is required for a good grade because at this 
point, action is required to get the job done on time.
          On average, only 14 percent of Federal systems in 
        need of repair have been fixed and tested. Some 
        agencies have not even completed an assessment of their 
        systems to see what repairs they face.
          I cannot issue these poor grades without feeling 
        sadness and disappointment. We have been working with 
        these agencies for almost two years now. I see 
        disturbingly little concern among agency management 
        that service to the taxpayers might suffer.
          This casual approach also makes it hard to get a 
        serious estimate of the costs we face. The Office of 
        Management and Budget put the figure at $2.3 billion in 
        February and $2.8 billion in July and now (September 
        1997) estimates $3.8 billion.
          Still, we must not lose hope. It is within the power 
        of every agency listed here to earn an A by next year. 
        But the starting point for such progress is a serious 
        commitment of attention and resources by the head of 
        each agency. Short of such a commitment, we can forget 
        about celebrating on the eve of the new millennium.

6. October 17, 1997, subcommittee meeting in Beverly Hills, CA: 
        ``Russia's Year 2000 Problem''

    On Friday, October 17, 1997, the subcommittee held a 
meeting on Russia's Year 2000 problem and its implications for 
the United States. Former Soviet President Mikhail Gorbachev 
discussed the Year 2000 problem with Chairman Horn and then 
Ranking Member Carolyn Maloney. Initially, Mr. Gorbachev had 
been scheduled to testify before the subcommittee as the sole 
witness at a hearing.\39\ Following the meeting, Mr. Horn 
addressed the audience gathered at the Beverly Hills City Hall:
---------------------------------------------------------------------------
    \39\ President Gorbachev had earlier requested a meeting with 
Chairman Horn to learn more about the Year 2000 problem. That meeting 
was held in Washington, DC, on Apr. 16, 1997. The chairman was 
accompanied by Subcommittee Staff Director Russell George. President 
Gorbachev was accompanied by his translator.

          This hearing was to have President Gorbachev testify. 
        We have just met with former President Gorbachev to 
        hear a report on what he has been able to accomplish in 
        Russia by discussing the Year 2000 problem with Prime 
        Minister [Chernomyrdin] of Russia and alerting [Russian 
        leaders] to what this subcommittee has been doing since 
        April of 1996 with the American Government. [Mr. 
        Gorbachev] has assured us that he feels his portion of 
        that job, to alert his own country, is sufficient.
          He has various commitments in Los Angeles he has to 
        keep, so except for our 20-minute meeting, he will not 
        be testifying today. I am sorry that he won't, because 
        I think he has made a lot of progress on this subject, 
        but he feels he needs to leave it to the Russian 
        Government now to carry on addressing the Year 2000 
        problem. . . .
          ``[W]hat Russia faces, the United States faces, every 
        nation in the world faces, is how do we solve this 
        problem by January 1st 2000? Mr. Gorbachev has been the 
        first former statesman in Europe to take this problem 
        seriously, but he feels he can't go much beyond Russia 
        on this; and I am hopeful other statesmen in Europe 
        will urge their governments to move ahead, just as 
        parts of our Government have done.

7. December 11, 1997, news conference on Year 2000 projections

    Executive departments and agencies released their third 
quarterly Y2K status reports on November 15, 1997. The 
subcommittee and GAO staffs analyzed these reports. Their 
analysis provided the basis for Chairman Horn's projected 
completion dates for each agency. The primary effort was on 
judging the current pace of each agency. The projections showed 
that, without an increase in the rate of progress, the 
Department of Energy and the Department of Labor would not 
finish Year 2000 conversions until the year 2019; the 
Department of Defense would finish in 2012; the Department of 
Transportation in 2010; and the Department of the Treasury in 
2004. In opening the news conference, Chairman Horn stated:

          Another year has passed and the latest data show that 
        the current work on the Year 2000 problem in Federal 
        computers is unacceptable and potentially disastrous. 
        Unless agencies make faster progress soon, the Federal 
        Government runs a serious risk of massive electronic 
        breakdown on January 1, 2000.
          Year 2000 problems need to be fixed in thousands of 
        Federal computer systems. If Federal computers fail 
        because they cannot understand the year 2000, the 
        distribution of benefit checks could be disrupted, the 
        air traffic control system could become gridlocked, and 
        computerized records could be lost or damaged. At best, 
        we may face a major headache, at worst, an electronic 
        disaster.

    In addition to releasing these projections, a letter was 
sent to then Director of Office of Management and Budget 
Franklin Raines recommending possible ways to improve progress 
on the Year 2000 problem.\40\ The recommendations included 
making quarterly reports more accurate; expanding the scope to 
include mission critical systems being replaced, second-tier 
systems, and embedded microchips. The Chairman also repeated 
his call for a full-time coordinator to spearhead the Federal 
Y2K effort.
---------------------------------------------------------------------------
    \40\ A copy of this letter can be found in Appendix A.
---------------------------------------------------------------------------

8. February 4, 1998, Oversight hearing: ``FAA at Risk: Year 2000 Impact 
        on the Air Traffic Control System'' (held jointly with the 
        House Science Subcommittee on Technology)

    This hearing reviewed the Year 2000 readiness of the 
Federal Aviation Administration [FAA], with particular emphasis 
on the Air Traffic Control System. The subcommittees focused on 
the deficiencies and progress of the FAA in both fixing and 
testing its computer systems for the Year 2000 problem. The 
primary purpose of the hearing was to alert the new 
FAAAdministrator to the importance of this problem with the objective 
of improving the percentage of compliance FAA could achieve in the 
following 23 months.
     Specific issues addressed at the hearing included the 
FAA's data exchanges and contingency plans. In terms of data 
exchanges, this included what interface standards the FAA had 
established for commercial airlines, both domestic and foreign. 
In terms of contingencies, the subcommittees were interested in 
what level of flight capacity the FAA could sustain if forced 
to use a completely manual system.
     Witnesses at the hearing included Federal Aviation 
Administrator Jane Garvey; Department of Transportation 
Inspector General Ken Mead; Federal Aviation Administration 
Chief Information Officer Theron Gray; Joel Willemssen, 
Director, Civil Agencies Information Systems, Accounting and 
Information Management Division, U.S. General Accounting 
Office; and Stanley Graham, Senior Management Consultant, Tech-
Beamers, Inc.
    Representatives of the General Accounting Office and the 
Department of Transportation Inspector General each reported on 
studies they had recently conducted on the Year 2000 problem at 
FAA. Each study found the FAA seriously lacking in several key 
areas. At its rate of progress during late 1997 and January 
1998, the FAA would be unable to finish fixing all of its 
mission critical systems before January 1, 2000. Further, it 
appeared that even those systems the FAA would be able to fix 
would not be thoroughly tested before the new century and the 
FAA did not have a viable contingency plan for this likelihood.
     All agreed that the question is not one of safety. The 
airlines, the pilots, and the tower controllers will not allow 
a plane to take off unless they are absolutely sure it is safe 
to do so. The airline industry default condition is: ``when in 
doubt, ground it.'' But this leaves unanswered a serious 
question about capacity: If failures occur, what flight 
capacity will FAA be able to support, and for how long will the 
airline industry be forced to operate at reduced capacity?
     The General Accounting Office testified that the Federal 
Aviation Administration has lagged in making its computer 
systems ready for the year 2000. Without an increased rate of 
progress, the FAA would not be ready for the new century. The 
agency has been severely behind schedule in completing basic 
awareness activities, a critical first phase in an effective 
Year 2000 program. For example, FAA appointed its initial 
program manager for Year 2000 issues only 6 months before this 
hearing, and its overall Year 2000 strategy was not yet final.
    The FAA also did not know the extent of its Year 2000 
problem because it had not yet completed assessing the Year 
2000 vulnerability of its computers. The potential consequences 
include degraded safety, grounded or delayed flights, higher 
airline costs, and customer inconvenience. Delays in completing 
awareness and assessment activities also leave FAA little time 
for critical renovation, validation, and implementation 
efforts--the final three phases in an effective Year 2000 
program. With 2 years left, FAA was quickly running out of 
time, making contingency planning for continuity of operations 
even more critical. FAA estimates that the entire program will 
cost $246 million, although the agency lacks the information it 
needs to develop reliable cost estimates.

9. March 4, 1998, news conference on Year 2000 report card

    Chairman Horn released his third report card, assigning new 
grades to Federal departments and agencies on their Year 2000 
efforts. For the first time, a governmentwide grade was also 
issued: it was a `D-.' The following statement was made by the 
Chairman:

    As almost everyone now knows, [the Year 2000 problem] 
refers to the use of two digits rather than four to represent 
the year in computer date functions. When the ``00'' of the 
year 2000 rolls around, computer systems and embedded 
microchips that are not prepared to recognize the new 
millennium will become very confused. A range of possible 
computer failures and shutdowns could result.
    Our focus is on the Year 2000 problem of the Executive 
branch of the Federal Government. Over the past several weeks, 
we have received the very latest information on where the 
largest Federal departments and agencies stand in fixing this 
problem. These data reveal a troubling portrait. We have 
analyzed these data and have summarized the result as a report 
card agency by agency. This follows on report cards issued by 
the Subcommittee on Government Management, Information, and 
Technology in the summer of 1996 and again last September 
(1997). We are shortening the grading periods as the deadline 
approaches.
    For the first time, we are issuing a governmentwide grade 
along with grades for individual agencies. As you can see, most 
are grades you would not want to take home to your parents. But 
the key point of this exercise has always been to focus high-
level attention on this problem. On that score, there is a 
slight ray of hope coming through the dark El Nino clouds 
above.
    When we first issued grades, the criteria focused almost 
exclusively on whether the leaders at each agency had a clue 
about this problem. The grades last fall took account of 
whether an agency was making progress on actually fixing the 
problem.
    This time, the focus is shifting to the broader 
perspective: how is the Government doing overall? It is 
increasingly clear that a large number of Federal computer 
systems simply will not be prepared for the date change on 
December 31, 1999. The goal now is to make certain that the 
most important systems at the most important agencies can 
function in the new century.
    The need for governmentwide focus is easily illustrated. 
First, look at the Department of Defense. It has one third of 
all the mission-critical computer systems in the entire Federal 
Government. You do not have to think very hard about the 
function of many of those Defense systems to agree that failure 
is intolerable. Added to this is the disturbing fact that 
Department of Defense has just suffered an exodus of its entire 
staff leadership on the Year 2000 problem. It is time for 
people outside Defense--as well as inside --to start sweating 
about this.
    In a second illustration, consider the Financial Management 
Service, which is part of the Department of the Treasury. Most 
Federal agencies have their checks issued through the Financial 
Management Service. When Treasury's Financial Management 
Service is lagging behind, all the hard work to be Year 2000 
compliant at Social Security (SSA) or the Small Business 
Administration (SBA) is for naught. SSA's and SBA's checks 
cannot be processed in a timely way unless the Financial 
Management Service completes its Year 2000 work.
    The Year 2000 problem, then, is a governmentwide problem 
that demands a governmentwide strategy. That strategy must set 
clear priorities and begin focusing intense attention, 
expertise and resources on the most critical systems. The one 
ray of hope I see now is that President Clinton recently signed 
an Executive Order recognizing the urgency of the problem and 
establishing a task force to address it. The task force will be 
headed by Assistant to the President John Koskinen, the 
respected former Deputy Director for Management at the Office 
of Management and Budget.
    Even John Koskinen's skills, however, do not change the 
fact that the Executive branch is still on the edge of failure. 
There are almost 8,000 mission-critical computer systems in the 
Executive branch. At the current rate of progress, only 63 
percent of those systems will be ready for January 1, 2000 when 
the clocks roll over less than 667 days from now. We need a 
centralized approach. We need to prioritize. We need to 
coordinate. We need to do all of those stages very soon.
    Over the past two years, our subcommittee has worked to 
create an awareness that this is a serious, urgent problem. I 
believe we are succeeding in that effort. Now we will focus our 
attention on the need for a coordinated and effectively 
implemented strategy.
    Phase one of this effort--defining the problem--took almost 
two years. Phase two--solving the problem--must be completed in 
less than 22 months. We have a long way to go and a short time 
to get there.

10. March 18, 1998, Oversight hearing: ``Governmentwide Year 2000 
        Issues and the Department of the Treasury'' (held jointly with 
        the House Science Subcommittee on Technology)

    At this hearing, the subcommittee reviewed the 
governmentwide Year 2000 effort with a particular focus on the 
Department of the Treasury and on agencies within the Treasury 
Department that perform crucial governmentwide functions.
    The witnesses were: John Koskinen, Assistant to the 
President and Chair, President's Council on Year 2000 
Conversion; Gene Dodaro, Assistant Comptroller General, U.S. 
General Accounting Office; Michael P. Harden, President, 
Century Technology Services, Inc.; Constance E. Craig, 
Assistant Commissioner, Information Resources, Financial 
Management Service; Jim Flyzik, Acting Chief Information 
Officer; Arthur A. Gross, Associate Commissioner for 
Modernization and Chief Information Officer, Internal Revenue 
Service; and Denis Schindel, Deputy Assistant Inspector General 
for Audit, Department of the Treasury.
    On the governmentwide level, the General Accounting Office 
completed a study of Year 2000 issues and made recommendations 
at this hearing. The subcommittee also took this opportunity to 
welcome Assistant to the President John Koskinen to the Year 
2000 effort as the Chair of the President's Council on Year 
2000 Conversion. Mr. Koskinen had previously served at Deputy 
Director for Management at the Office of Management and Budget. 
``I can't think of a better person for the Administration to 
bring in at this time,'' said Representative Tom Davis, who 
added: ``I think it's a huge task ahead of you . . . there are 
some agency heads who give [the Year 2000 problem] lip service 
but still don't seem to get the enormity of this problem.'' 
\41\
---------------------------------------------------------------------------
    \41\ ``Joint Hearing on the Oversight of the Government's Year 2000 
Efforts,'' Mar. 18, 1998, original transcript, p. 20.
---------------------------------------------------------------------------
    Chairman Horn urged Mr. Koskinen to put the laggard 
agencies on a weekly reporting schedule. ``There needs to be a 
real interaction with your office knowing what the agencies are 
doing.'' Chairman Horn noted that too much slippage had already 
occurred when agencies report on a quarterly basis: ``When we 
looked at the last quarterly reports, some people had done 
absolutely nothing. . . . Something is needed to keep them on 
track and to let you know what kind of progress [they are 
making]. There's nothing like a weekly report to shape people 
up, I can assure you, having run a fairly large organization.'' 
\42\
---------------------------------------------------------------------------
    \42\ Ibid. pp. 50-51.
---------------------------------------------------------------------------
    At the departmental level, the Department of the Treasury 
reported 327 mission-critical systems. As of February 15, 1998, 
only 22 percent of these mission-critical systems were 
renovated. Continuing at its previous rate of progress, 
Treasury would renovate only 38 percent more of its mission-
critical systems before the deadline, leaving 40 percent or 130 
mission-critical systems noncompliant by January 1, 2000. This 
is unacceptable for any Federal department and especially for 
Treasury, which plays such a critical role in Federal finance.
    The subcommittee also focused on the Internal Revenue 
Service and the Financial Management Service. IRS takes the 
money in and FMS sends the money out. Both had serious 
questions of readiness. The Financial Management Service 
reported 62 mission-critical systems. As of February 15, 1998, 
only 16 percent of these mission-critical systems were 
finished. FMS did not complete implementation of any fixed and 
tested mission-critical systems in the last 3 months. FMS 
issues all the non-Defense checks for the entire Federal 
Government. Social Security will deliver its address tapes on 
time, but if the systems at FMS are not done, then the 48.3 
million monthly checks will not be processed.
    The Internal Revenue Service reported 123 mission-critical 
systems. As of February 15, 1998, only 14 percent of these 
mission-critical systems were finished. Besides the Year 2000 
problem, the IRS has three additional computer challenges 
occurring simultaneously. IRS is consolidating mainframes from 
10 Service Centers into 2 Computing Centers. IRS is replacing 
its input and remittance systems with a new system that is 
scheduled to be installed in all 10 Service Centers before the 
end of 1999. And, of course, the IRS must make the refunds for 
individuals who have had too much deducted from their payroll 
checks and input the changes to reflect any tax law revisions 
in time to handle tax season in the year 2000. This confluence 
of challenges raised serious questions about whether the IRS 
would be able to prepare for the year 2000 in time. In its 1998 
reform of the Internal Revenue Service, Congress stressed that 
appropriate time must be made available for becoming Year 2000 
compliant.

11. June 2, 1998, news conference on Year 2000 report card

    Chairman Horn released his fourth card grading Federal 
departments and agencies on their Y2K efforts. Each of the 
Government's 24 largest departments and agencies received a 
grade primarily on the basis of when its mission-critical 
computer systems would become Year-2000 compliant. Four 
additional criteria were used in grading: contingency planning, 
telecommunication systems, embedded microchips, and external 
data exchanges. The following statement was made by the 
Chairman:

    About two weeks ago, a single communications satellite spun 
out of control. For the next couple of days, 90 percent of all 
pagers in the United States were useless, many television 
stations had nothing to broadcast, several news wires failed, 
and gasoline stations, banks, and retail stores that use small 
satellite dishes found themselves in the dark. All this 
resulted from the failure of just one satellite. It was a 
timely reminder of what is really at stake in the smooth 
functioning of technology--a tiny hint of what the Year 2000 
could bring. With Federal Y2K efforts cast in this urgent 
light, we turn to the latest data on Federal preparations.
    Overall, the Federal Government earned an ``F.'' Underlying 
this dismal grade is a disturbing slow-down in the Government's 
rate of progress. For the quarter ending February 15, the 
Government brought mission-critical systems into compliance at 
a rate of 9.4 percent; for the quarter that ended May 15, the 
rate of progress slowed to 5.4 percent. This would be 
discouraging in any context. Less than a year before the 
President's March 1999 deadline for Y2K repairs, a reduction in 
productivity is deeply troubling. This trend must be reversed.
    Specific agency grades raise further concerns. The 
Department of Defense earned a ``D'' and is still not on track 
to complete Y2K compliance efforts until two years after the 
date change. The Department of Transportation merited an ``F.'' 
This grade includes the Federal Aviation Administration, which 
provides crucial services to the flying public. Without 
dramatic improvements, the Nation's air traffic could face 
serious disruptions for an extended period after December 31, 
1999. The Department of Health and Human Services also earned 
an ``F.'' The Medicare program, among others, depends on the 
smooth functioning of its computer systems.
    At the other end of the curve, the Social Security 
Administration (SSA) is a model for all agencies. SSA earned an 
``A+'' this quarter by achieving 92 percent compliance and by 
paying close attention to two secondary areas: contingency 
planning and external data exchanges. SSA also deserves credit 
for actively assisting other agencies in their Year 2000 
efforts. We are counting on more of this coordination and 
teamwork over the next 18 months.
    I noted last quarter that SSA's outstanding performance may 
be for naught: Social Security checks are actually issued by 
the Treasury Department's Financial Management Service (FMS). 
This is a potential bottleneck of dramatic proportions. The 
Treasury Department earned a ``C'' this quarter, held back by a 
dismal performance by FMS. Despite urgent calls for progress in 
March, FMS's accomplishments over the last three months have 
been far from reassuring. We must have action on this urgent 
problem.
          With January 1, 2000 a year and a half away, we must 
        not panic. The President and his administration must 
        set priorities if the conversion is to be successful. 
        We must not become discouraged by the work that still 
        remains. This is the time to focus, to redouble our 
        efforts, and to move forward aggressively.
          As we have urged before, the President must use the 
        bully pulpit and inform the people of this Nation. Now 
        is the time for the President to designate the Year 
        2000 problem as a national priority.
          According to the June report card, of the 7,336 
        mission critical systems in government, 2,766 are not 
        expected to be converted in time for the March 1999 
        milestone. That is unacceptable.

12. June 10, 1998, Oversight hearing: ``Status Update on the Year 2000 
        Problem''

    This hearing involved broad oversight of Federal Y2K 
efforts based on the May 15th quarterly reports. Four 
departments particularly behind in their efforts were selected 
as witnesses for this hearing: Defense, Education, Energy, and 
Health and Human Services.
    Witnesses included Joel Willemssen, Director, Civil 
Agencies Information Systems, Accounting and Information 
Management Division, U.S. General Accounting Office; John 
Callahan, Assistant Secretary, Management and Budget, 
Department of Health and Human Services; Marshall Smith, Acting 
Deputy Secretary, Department of Education; William A. Curtis, 
Special Assistant for Year 2000, Department of Defense; and 
Howard E. Lewis Jr., Acting Chief Information Officer, 
Department of Energy.
    Chairman Horn opened the hearing by noting the crucial 
importance of the departments and agencies developing 
contingency plans, assessing the effectiveness of the 
telecommunications systems, identifying the various embedded 
systems, and reviewing the external data exchanges. Regarding 
these last two, Mr. Horn remarked: ``Embedded systems are the 
sleeping giant in the Year 2000 problem. Tiny little computer 
chips embedded in control devices are everywhere in industry 
throughout the world. They can stop an automobile assembly 
line, a chemical plant, or an electric utility grid . . . 
External data exchanges are also crucial. Most systems pass 
data from computer to computer. Consider a simple bank check 
which may go through dozens of computer systems.''
    At the March 18th hearing on Year 2000, Joel Willemssen of 
GAO and Assistant to the President John Koskinen agreed that 
not all mission-critical systems will be done in time. Two 
months later, the rate of progress had not improved. As of May 
15, 1998, only 39 percent of all Federal mission-critical 
systems were Year 2000 compliant. At the current rate of 
progress, over 3,000 mission-critical systems would not be done 
by the President's deadline of March 1999.
    Worse, some systems that are completed on time would still 
fail, either because the testing was not rigorous enough or 
because of corruption from data exchanges with other 
noncompliant systems. The Federal Government must be prepared 
with contingency plans to maintain core business activities 
even for systems believed to be compliant.
    The first question to each Department at this hearing was 
basically the same: ``Why are you behind?'' The second was: 
``What do you need to improve your rate of progress?'' The 
intent of the subcommittee was to help agencies become 
compliant.
    The General Accounting Office discussed the results of the 
most recent reports submitted to the Office of Management and 
Budget on the Federal Government's slow progress in achieving 
Year 2000 compliance. Mr. Willemssen raised serious concerns 
about the high number of noncompliant systems that Federal 
agencies plan to replace rather than repair. ``[G]iven the 
Federal Government's track record on replacement systems, of 
not being able to often deliver those systems when promised, 
these replacement efforts generally should be viewed as high 
risk.'' Mr. Willemssen also emphasized the issue of testing. 
``[A]gencies are going to need a significant amount of time for 
end-to-end testing of multiple systems that have individually 
been deemed Year 2000 compliant. . . . Without such testing, 
systems individually deemed as compliant may not work as 
expected when linked with other systems.'' \43\
---------------------------------------------------------------------------
    \43\ ``Status Update on the Year 2000 Problem,'' June 10, 1998, 
original transcript p. 13 (testimony of Joel Willemssen, Director, 
Information Resources Management, Accounting and Information Management 
Division, U.S. General Accounting Office).
---------------------------------------------------------------------------

13. June 22, 1998, hearing: ``Year 2000: Biggest Problems and Proposed 
        Solutions''

    At this hearing, the subcommittee solicited the views of 
recognized experts in the field. With less than 18 months 
remaining, the emphasis was to discuss the top priority 
problems and possible solutions. The focus was on managerial 
and practical solutions rather than on a technical or 
theoretical exploration.
    The scope of the Year 2000 problem is both global and 
local--from international trade to the embedded chip in your 
fax machine. This is a challenge that confronts everyone from 
the Federal Government to local water districts; from 
multinational corporations to Mom-and-Pop businesses. The scope 
of the problem is also cross-functional--from agriculture to 
medicine. There are problems in government, finance, 
manufacturing, distribution, and services. There are problems 
in wholesale, retail, and the infrastructure. The question at 
this hearing was what role Congress could play in moving Year 
2000 efforts forward.
    The witnesses included: Edward DeSeve, Deputy Director for 
Management, Office of Management and Budget, accompanied by 
Bruce McConnell, Chief of Information Policy and Technology, 
Office of Information and Regulatory Affairs; Dr. Rona 
Stillman, Chief Scientist for Computers and Telecommunications, 
General Accounting Office, accompanied by Joel Willemssen, 
Director, Civil Agencies Information Systems, Accounting and 
Information Management Division, U.S. General Accounting 
Office; Dennis Grabow, President, Millennium Corp.; Dan 
Steinberg, Synthesis: Law & Technology; Alan Simpson, 
President,ComLinks.Com; Bruce Webster, Chief Technical Officer, 
Object Systems Group and Washington DC Y2K Group; and Tom McCabe, 
Chairman, McCabe & Associates.
    The General Accounting Office testified that the executive 
branch of the Federal Government is extremely vulnerable to 
Year 2000 problems because of its widespread dependence on 
computer systems to process financial transactions, deliver 
vital services, maintain national security, and carry out many 
of its basic administrative operations. This challenge is made 
even more difficult by the age and poor documentation of some 
of the Government's existing systems and its lackluster record 
in modernizing them. As of May 1998, Federal agencies reported 
that only about 40 percent of their mission critical computer 
systems were prepared for the Year 2000. Unless progress 
improves dramatically, a substantial number of mission critical 
systems will not be Year 2000 compliant in time.
    Mr. DeSeve informed the subcommittee that those agencies 
still behind schedule would begin reporting on a monthly rather 
than a quarterly basis.\44\ Dennis Grabow stressed the 
importance of testing, including end-to-end testing of linked 
systems. The General Accounting Office emphasized the 
importance of independent verification.
---------------------------------------------------------------------------
    \44\ ``Year 2000: Biggest Problems and Proposed Solutions,'' June 
22, 1998, original transcript, p. 9.
---------------------------------------------------------------------------

14. August 13, 1998, field hearing (New York, NY): ``Oversight of the 
        Year 2000 Problem: Lessons to Be Learned from State and Local 
        Experiences''

    This was the first in a series of six subcommittee field 
hearings on the Year 2000 problem at the State and local level. 
Witnesses included Mr. Joel Willemssen, Director, Civil 
Agencies Information Systems, Accounting and Information 
Management Division, U.S. General Accounting Office; Mr. Joseph 
Lhota, Deputy Mayor for Operations, city of New York; Mr. Gary 
Davis, Project Director, Office of Technology, State of New 
York; Mr. Peter Sullivan, Year 2000 Program Director, State of 
Connecticut; Mr. Douglas Wipperman, Director of Data 
Processing, Nassau County, NY; Mr. Charles Adrion, Director, 
Year 2000 Project Office, Westchester County, NY; Mr. Arthur 
Thomas, Senior Vice President of Global Operations, Merrill 
Lynch (representing the Securities Industry Association); Mr. 
George Thomas, Senior Vice President and Director of 
Information, New York Clearing House; and Mr. Robert Hedlund, 
Director, Technology Services, Consolidated Edison Co., of New 
York.
    Representative Maloney noted at the hearing: ``Evidence to 
date strongly suggests that our city will face a serious 
disruption if we do not fix the millennium bug by the Year 
2000.'' She also noted that ``the interdependence of computer 
systems requires that nearly all computer systems be Year 2000 
compliant . . . [I]f a fixed Federal Government [computer] 
interfaces with a noncompliant State computer, both computers 
will fail.'' \45\
---------------------------------------------------------------------------
    \45\ ``Oversight of the Year 2000 Problem: Lessons to be Learned 
from State and Local Experiences,'' Aug. 13, 1998, original transcript 
p. 7.
---------------------------------------------------------------------------
    Mr. Willemssen alerted the subcommittee to a July 1998 
survey of the States Year 2000 readiness. It was conducted by 
the National Association of State Information Resource 
Executives. Willemssen also cited a survey of State food stamp 
programs conducted by the Food and Nutrition Service of the 
Department of Agriculture. The chief focus of GAO's testimony 
was the problem of data exchanges:

          Federal agencies reported that their mission-critical 
        systems had almost half a million data exchanges with 
        other Federal agencies, States, local governments, and 
        the private sector. To successfully remediate exchanges 
        is a very complex, time-consuming process. To 
        successfully remediate their data exchanges, federal 
        agencies and the states must (1) assess information 
        systems to identify data exchanges that are not Year 
        2000 compliant; (2) contact exchange partners and reach 
        agreement on the date format to be used in the 
        exchange; (3) determine if data bridges and filters are 
        needed and, if so, reach agreement on their 
        development; (4) develop and test such bridges and 
        filters, (5) test and implement new exchange formats; 
        and (6) develop contingency plans and procedures for 
        data exchanges.\46\
---------------------------------------------------------------------------
    \46\ Prepared testimony of U.S. General Accounting Office.

    Deputy Mayor Lhota testified as the individual responsible 
for New York City's Year 2000 efforts. New York has 706 
computer systems, of which 287 were compliant and 419 were in 
need of repair. As of August 1998, costs had reached $319 
million. As for contingency planning, the Mayor's Office of 
Emergency Management is working in coordination with 
utilities--such as gas and electric--and with telephone 
companies and hospitals, to prepare for January 1, 2000.
    The New York State government was represented by Gary 
Davis, Year 2000 Project Manager, Office of Technology. He 
testified that in April 1996, Governor Pataki established the 
Year 2000 Date Change Initiative to facilitate New York State's 
millennium compliance efforts. The State expects to spend $250 
million on Y2K efforts. The Office of Technology tracks 
compliance progress on a quarterly basis. Mr. Davis stated that 
``we have been working with our Department of Public Service to 
address utility preparedness, including electricity, gas, 
water, and telecommunications. The department has completed a 
general assessment and met with the State's major utilities. 
The utilities have reported that they understand the scope of 
the problem, have implemented a compliance plan, allocated 
resources, and are on schedule to be compliant.'' Mr. Davis 
also struck a cautious note: ``While New York State has 
accomplished a great deal, there is still a substantial amount 
of work to be done over the next 16 months.'' \47\
---------------------------------------------------------------------------
    \47\ ``Oversight of the Year 2000 Problem: Lessons To Be Learned 
From State and Local Experiences,'' Aug. 13, 1998, original transcript, 
p. 32.
---------------------------------------------------------------------------
    Mr. Charles Adrion, Director, Year 2000 Project Office, 
Westchester County, NY, testified that Westchester County 
anticipates no staff shortage problems. But he also testified 
that ``both within the municipalities and business 
organizations in Westchester County there has been less of an 
inclination to even discuss the problem of cooperation, and 
particularly status, where we are with our implementations, 
because of advice given by legal counsel.'' \48\
---------------------------------------------------------------------------
    \48\ Ibid. p. 76.
---------------------------------------------------------------------------
    Mr. Arthur Thomas, Senior Vice President of Global 
Operations, Merrill Lynch, representing the Securities Industry 
Association, testified that ``the Y2K effort represents 
thelargest-ever business and technology undertaking of the financial 
industry at a cost of somewhere between $4 billion and $6 billion.'' 
\49\ Despite the size of the task, however, Mr. Thomas expressed 
confidence at the state of preparations in the financial sector. He 
noted the industry's early start on Year 2000 repairs. He also reported 
on the successful ``test test'' conducted over the summer of 1998, 
showing that efforts to date have been effective.
---------------------------------------------------------------------------
    \49\ Ibid. p. 85.
---------------------------------------------------------------------------
    Mr. George Thomas, Senior Vice President and Director of 
Information, New York Clearing House, testified that the 
financial sector is too dependent on electric power and other 
basic support systems to make contingency plans for their 
failure. Contingency plans ``rely on mission-critical support 
systems that are so integral to payment system operations that 
without them, not only the banking industry but also business 
in general may be severely impaired.'' \50\
---------------------------------------------------------------------------
    \50\ Ibid. p. 96.
---------------------------------------------------------------------------
    Mr. Robert Hedlund, Director, Technology Services, 
Consolidated Edison Co. of New York, testified that automated 
supervisory controls are embedded in production and 
distribution systems of electricity, gas, and steam. Technology 
specifically vulnerable to the Year 2000 problem includes 
servers, routers, and switchers. Mr. Hedlund reported that Con 
Edison was communicating with supplies of critical products and 
services as well as neighboring utilities with which Con Edison 
is interconnected. Mr. Hedlund also testified that he knows of 
no Federal oversight taking place right now.\51\
---------------------------------------------------------------------------
    \51\ Ibid. pp. 102, 112.
---------------------------------------------------------------------------

15. August 17, 1998, Field Hearing (Mesquite-suburb of Dallas, Texas): 
        ``Oversight of the Year 2000 Problem: Lessons to Be Learned 
        from State and Local Experiences''

    The subcommittee's series of field hearings continued in 
the district of subcommittee Vice Chairman Pete Sessions. 
Mesquite is located in Dallas County and is a suburb of the 
city of Dallas. Representative Kevin Brady, who represents the 
8th district of Texas, including Houston, joined the panel for 
the hearing.
    Witnesses included Mr. Joel Willemssen, Director, Civil 
Agencies Information Systems, Accounting and Information 
Management Division, U.S. General Accounting Office; Shannon 
Porterfield, Year 2000 Project, Director, State of Texas; 
Judith Shaw, Assistant Director, Information Services, city of 
Dallas, TX; Ron Lewis, Assistant City Manager, city of Lubbock, 
TX; Michelle Brand, Purchasing and Telecommunications 
Coordinator, city of Mesquite, TX; and Eric Schmitt, 
Communications Support Manager, Texas Utilities.
    Representative Sessions stressed at the beginning of the 
hearing the issue of legal liability. The issue of Year 2000 
liability arises for ``an incredibly wide variety of products 
and software, including vendors of hardware or software to 
their purchasers, service providers to their customers, banks 
to their depositors and borrowers, insurance providers to their 
insured, airlines to their passengers, corporations to their 
shareholders, and stockbrokers to their accounts.'' \52\ 
Representative sessions observed the importance of 
congressional action in this area.
---------------------------------------------------------------------------
    \52\ ``Oversight of the Year 2000 Problem: Lessons to be Learned 
from State and Local Experiences,'' Aug. 17, 1998, original transcript, 
pp. 12-13.
---------------------------------------------------------------------------
    Shannon Porterfield noted she would be unable to report on 
the Year 2000 status of data exchanges at Texas State agencies 
until October. She testified that the State of Texas is 
particularly vulnerable to embedded chip failure in 
correctional institutions. The State of Texas planned to 
organize a national conference for ``correctional embedded 
systems coordinators.'' \53\ In terms of municipalities in 
Texas, Ms. Porterfield observed that city governments seem to 
be modestly ahead of county governments in preparing for the 
Year 2000 problem.
---------------------------------------------------------------------------
    \53\ Ibid. original transcript, p. 70 (testimony of Judith Shaw, 
Assistant Director, Information Services, city of Dallas, TX).
---------------------------------------------------------------------------
    Judith Shaw testified that the city of Dallas planned to 
complete its Year 2000 repairs by December 1998. But she noted: 
``There are things that we do not have control over . . . and 
that's dealing with the vendors. I think if there is a scary 
part to us, that's it.'' \54\ Ms. Shaw reported that Dallas 
expects to spend approximately $3 million on its Year 2000 
repairs. Representative Brady noted that this figure appeared 
considerably lower than other cities and organization of 
similar size. Ms. Shaw attributed the low cost to starting Year 
2000 fixes early and repairing rather than replacing equipment. 
``We have encouraged our department not to use the Year 2000 as 
an excuse to trade out computers.'' \55\ She also told the 
subcommittee that Dallas has been able to retain its technical 
personnel by giving them bonuses at the end of each 
quarter.\56\
---------------------------------------------------------------------------
    \54\ Ibid. p. 30.
    \55\ Ibid. p. 47.
    \56\ Ibid. p. 79.
---------------------------------------------------------------------------
    Ron Lewis, Assistant City Manager, city of Lubbock, TX, 
noted that Lubbock owns and operates an electric utility 
company. Mr. Lewis asserted that this responsibility had 
inspired a very ``businesslike'' approach to the Year 2000 
problem. This approach included ``incorporating the Year 2000 
problem into an emergency scenario.'' \57\ Calling it a Year 
2000 drill, Mr. Lewis described how a small group of experts 
was developing, in strict secrecy, scenarios based on potential 
Year 2000 related failures. For the sake of realism, no 
department was aware of the scenario that the control group was 
creating, and the drill was to be scheduled at night. ``This 
drill will give our elected officials and citizens the 
opportunity to see how well we perform under simulated 
circumstances . . . I believe the most important aspect when 
preparing for the Year 2000 problem is providing open and 
honest communication with our citizens and employees on a 
regular basis.'' \58\
---------------------------------------------------------------------------
    \57\ Ibid. p. 37.
    \58\ Ibid. pp. 38-39.
---------------------------------------------------------------------------
    Michelle Brand testified that the city of Mesquite does not 
have a full-time employee dedicated to the Year 2000 problem. 
Further, Mesquite had hired no consultants to work on the 
problem, although that step was under active consideration at 
least for help with assessing thecompliance of radio equipment. 
``It's been extremely difficult to devote staff time to such a large 
inventory of equipment.'' \59\
---------------------------------------------------------------------------
    \59\ Ibid. p. 45.
---------------------------------------------------------------------------
    Eric Schmitt, Communications Support Manager, Texas 
Utilities, addressed efforts to prepare hardware and software 
not supported by the IT organization: ``These systems include 
items that have traditionally been procured, developed, and 
maintained by individual business unit organizations. Typically 
heavily dependent on microprocessor based technology; these 
systems cover a variety of products such as power plant control 
and monitoring systems, gas and electrical distribution 
networks, and our transmission system. Also being addressed by 
this project are protective devices, security systems, building 
facilities (elevators, HVAC & lighting) and business unit. . . 
. We have tested a number of systems, and so far have found 
very few instances where a system functionally was affected.'' 
\60\
---------------------------------------------------------------------------
    \60\ Ibid. pp. 95-96.
---------------------------------------------------------------------------
    After listening to the testimony, Mr. Willemssen, U.S. 
General Accounting Office observed: ``I haven't heard water and 
waste water mentioned too much here. As it pertains to embedded 
chips, that would be one area that I'd be particularly 
interested in focusing on if I were in the shoes of the 
individuals here.'' \61\
---------------------------------------------------------------------------
    \61\ Ibid. p. 71.
---------------------------------------------------------------------------

16. August 19, 1998, field hearing (New Orleans, LA): ``Oversight of 
        the Year 2000 Problem: Lessons To Be Learned from State and 
        Local Experiences''

    The third subcommittee field hearing was held in New 
Orleans. In opening the hearing, Chairman Horn made a renewed 
plea for presidential attention to this matter: ``The President 
needs to make more speeches to alert the Nation.'' In addition 
to raising awareness of the problem, the President can calm 
fears about it. There are ``scare mongers trying to make money 
off [the Year 2000 problem and] we need to head that off.'' 
\62\
---------------------------------------------------------------------------
    \62\ ``Oversight of the Year 2000 Problem: Lessons To Be Learned 
From State and Local Experiences,'' Aug. 19, 1998, original transcript, 
p. 3.
---------------------------------------------------------------------------
    Witnesses included Joel Willemssen, Director, Civil 
Agencies Information Systems, Accounting and Information 
Management Division, U.S. General Accounting Office; Edgar 
McManus, Project Director, Year 2000 Readiness Project, USDA 
National Finance Center; Renea Austin, Division of 
Administration, State of Louisiana, accompanied by, Ms. Chris 
LaBlanc, Project Manager, Louisiana Year 2000 Coordination 
Project; Mike Walker, Director, Information Services, city of 
Baton Rouge; Mary Beth Tatar, First Vice President, Louisiana 
Parish Government Association; Theresa Comeaux Vice President 
of Regulatory Compliance, Century Solutions/Blue Cross & Blue 
Shield.
    Edgar McManus, Project Director, Year 2000 Readiness 
Project, USDA National Finance Center, testified that the 
Finance Center is in an excellent position to be compliant by 
January 1, 2000. He attributed the success to strong support 
and leadership from top management. ``I can assure you that 
this project is our number one priority, as evidenced by the 
fact that [National Finance Center Director John R.] Ortego 
made the unpopular move of putting all agency requests for 
system modifications on hold pending completion of the Y2K code 
renovation effort. . . . This proved invaluable in helping us 
meet our self-imposed deadline of June 30, 1998, to have all 
mission critical production code renovated, user tested, and 
returned to production.'' \63\
---------------------------------------------------------------------------
    \63\ Ibid. pp. 21-22.
---------------------------------------------------------------------------
    Ms. Chris LaBlanc, Project Manager, Louisiana Year 2000 
Coordination Project, testified that the Governor of Louisiana 
has set July 1, 1999 as the deadline for completion of all Year 
2000 work. This deadline was set by Executive order in January 
1998. Ms. LaBlanc also described the Louisiana Year 2000 
Coordination Project. This entity was established ``to 
coordinate the planning, administration support, progress 
monitoring and communication for the Year 2000 work effort at 
the State level.'' \64\ The Coordination Project convenes 
monthly Task Force meetings to share information on best 
practices and communicate with the State's business partners.
---------------------------------------------------------------------------
    \64\ Ibid. p. 28.
---------------------------------------------------------------------------
    Marlin Gusman, Chief Administrative Officer for the city of 
New Orleans, testified that the city's two most important 
systems handle financial management and payroll. The financial 
management system became Year 2000 compliant in September 1997; 
the payroll system is scheduled for implementation in February 
1999. Mr. Gusman was accompanied by Earl Kilbride, 
Administrator of Management and Information Systems, who 
testified that New Orleans has no Year 2000 contingency plans 
and does not intend to make any.
    Mike Walker, Director, Information Services, city of Baton 
Rouge, testified that the 911 system depends on the city's 
mainframe computers. ``When a 911 call comes into our center, 
we get an address verification, telephone numbers which feed 
into our computer-aided dispatching system that dispatches our 
fire, police, and emergency medical teams.'' Baton Rouge plans 
to have its mainframe computers fixed by the end of 1998, but 
has yet to assess the embedded chip problem: ``we still have a 
lot of question marks around, such as traffic signals, fire 
truck operations, 911 operations and things of that nature.'' 
He also testified that Baton Rouge has made no contingency 
plans for the Year 2000 problem.\65\
---------------------------------------------------------------------------
    \65\ Ibid. pp. 89-90.
---------------------------------------------------------------------------
    Mr. Walker also discussed testing the Year 2000 status of 
equipment on their fire trucks. To their dismay, it turned out 
that the water pumps, the mechanisms operating their ladders, 
and a variety of other equipment on the trucks all depend on 
embedded chips. The result is that Baton Rouge will need to 
conduct expensive and difficult testing in order to know 
whether the firetrucks will be ready for the year 2000. This is 
a fine illustration of how the Y2K problem can arise where you 
least expect it. Further, as Baton Rouge reported on its 
findings, representatives from the city of New Orleans admitted 
they had never thought to test their fire trucks. This 
illustrates yet another crucial point: the value of sharing 
information. It is essential at every level--Federal, State, 
local, non-profit, and private-sector.
    Mary Beth Tatar, First Vice President, Louisiana Parish 
Government Association, testified that parishes (counties) in 
Louisiana have not fully taken account of the Y2K problem. 
``I'm finding that Parish Government doesn't realize that there 
are three problems, they addressed only the first one, the 
software problem. They're really not looking at the hardware 
with embedded chips, and they're really not looking at the 
connectivity as a whole.'' \66\
---------------------------------------------------------------------------
    \66\ Ibid. pp. 52-53.
---------------------------------------------------------------------------

17. September 1, 1998, field hearing (Lakewood-suburb of Cleveland, 
        OH): ``Oversight of the Year 2000 Problem: Lessons To Be 
        Learned from State and Local Experiences''

    This hearing took place in the Cleveland area, in the 
district of subcommittee Ranking Member Dennis Kucinich. In 
addition to exploring the status of State and local government 
Y2K efforts, the focus was on utilities, health care, and the 
financial sector. Witnesses included Mr. Donald Mason, 
Commissioner, Public Utilities Commission of Ohio; Mr. Stanley 
Kozlowski, Year 2000 Manager, Cuyahoga County Information 
Services Center; Mr. John Gill, Senior Vice President, 
FirstEnergy Corp.; Dr. C. Martin Harris, Chief Information 
Officer, the Cleveland Clinic Foundation; Mr. Kevin Blakely, 
Executive Vice President for Risk Management, Key Corp; Mr. 
Fred Kowitz Director, Ameritech Corp.; Mr. Jeffrey Nicolet, 
Year 2000 and Contingency Planning Practice Manager, Romac 
International.
    On the issue of data sharing, Mr. Ronald Vidmar, Deputy 
Director, Computer Services Division, Ohio Department of 
Administrative Services, testified that ``the web sites from 
all States and from the Federal Government are one of the major 
tools, in my opinion, in helping us to share in good 
information from others.'' \67\
---------------------------------------------------------------------------
    \67\ ``Oversight of the Year 2000 Problem: Lessons To Be Learned 
From State and Local Experiences,'' Sept. 1, 1998, original transcript, 
p. 19.
---------------------------------------------------------------------------
    Witnesses expressed concerns about the Year 2000 readiness 
of health care payment systems, which are highly dependent upon 
electronic transfers between multiple parties. Witnesses at the 
hearing also were concerned about the Year 2000 readiness of 
medical devices health care practitioners use to gather data to 
make treatment decisions.
    Dr. C. Martin Harris, Chief Information Officer of the 
Cleveland Clinic Foundation, noted concern about data exchanges 
in the health care industry. ``[T]he billing and collection 
function for services rendered in health care is one of the 
most complex processes in our industry. . . . I believe there 
is a very high probability of failures at this billing and 
reimbursement interface.'' Further, ``fixing internal systems 
is but one leg of a multi-legged stool. It is one thing to be 
able to say that all our systems are millennium ready, it is a 
whole other thing to be able to say that after their 
conversion, they still have the ability to talk to one 
another.'' \68\
---------------------------------------------------------------------------
    \68\ Ibid. pp. 84, 87.
---------------------------------------------------------------------------
    Dr. Harris noted that while the Cleveland Clinic is using 
its best efforts to inventory and identify medical equipment 
which is most critical in the patient care process, ``it is 
impossible to make a final determination of compliance without 
well organized and definitive information from medical 
equipment manufactures.'' Dr. Harris suggested the creation of 
a mandatory national reporting program with consistent 
reporting standards. This system would greatly enhance the 
quality of provider equipment repair programs while minimizing 
risks to patients. If the Cleveland Clinic was unable to get 
adequate feedback from a medical equipment manufacturer, they 
would not use that piece of equipment. The hope of the 
Cleveland Clinic is to know what to do with 90 percent of the 
equipment and carry out an alternative program for the 
remaining 10 percent.
    According to Jeffrey Nicolet, ``[t]he health care industry 
is a mixed bag and appears to be at great risk.'' He warned 
that ``[s]ome organizations act like the proverbial deer caught 
in the headlights of an oncoming truck. They do not seem to 
realize that even the smallest steps in the right direction 
could literally save their business. They continue to under 
staff, under fund, and under prioritize the Year 2000 
project.'' \69\
---------------------------------------------------------------------------
    \69\ Ibid. pp. 102-103.
---------------------------------------------------------------------------
    It was pointed out that the Food and Drug Administration 
has established a voluntary site, however, only approximately 
30 to 40 percent of the equipment is listed on the site. 
According to Joel Willemssen, the General Accounting Office is 
in the process of preparing a report on the Year 2000 readiness 
of biomedical devices. Mr. Willemssen noted that the best 
database of biomedical devices and Year 2000 compliance is 
maintained by the Department of Veterans Affairs. This database 
is not publicly available. The VA received a greater response 
rate on the compliance of biomedical devices, than the FDA, 
because the VA is a major customer of biomedical devices.
    Mr. Donald Mason of the Public Utilities Commission of Ohio 
discussed the importance of information sharing among 
organizations--even competitors, and making sure that data 
exchanges work properly. Among utilities and other essential 
services, ``the driving force is not only becoming Y2K 
compliant themselves, but sharing that information [because] 
they have to serve their customer on January 1 and the only way 
they can do that is by making sure that those people they do 
business with are Y2K compliant.'' \70\
---------------------------------------------------------------------------
    \70\ Ibid. p. 52.
---------------------------------------------------------------------------

18. September 2, 1998, field hearing (Indianapolis, IN): ``Oversight of 
        the Year 2000 Problem: Lessons To Be Learned From State and 
        Local Experiences''

    This hearing was held in the district of Representative Dan 
Burton, Chairman of the committee. Chairman Burton was 
committed to bringing the subcommittee to Indiana to focus on 
original ideas, industry solutions, national perspectives 
brought to Indiana, and to hear from State and local 
organizations. The subcommittee was joined in Indianapolis by 
Representative Mark Souder, who represents the fourth district 
of Indiana and is a member of the committee.
    Witnesses included Steve Forbes, Chairman and Chief 
Executive Officer, Forbes Magazine; Indianapolis Mayor Stephen 
Goldsmith; Joel Willemssen, Director, Civil Agencies 
Information Systems, Accounting and Information Management 
Division, U.S. GeneralAccounting Office; Carlton Curry, 
Chairman, City-County Council Y2K Subcommittee, city of Indianapolis 
and Marion County; Laura Larimer, Director of Information Technology, 
State of Indiana; Jerry Smith, President, Sion Group; J. Gregory 
Garrison, Attorney and Host of the Greg Garrison Show, WIBC Radio.
    Jerry Smith, President of Sion Group, testified on his 
experience as a participant in the Year 2000 effort at Purdue 
University. He reported on his success with the use of the 
windowing approach to solving the Year 2000 problem.\71\ Mr. 
Willemssen addressed the data exchange issue in the context of 
windowing. ``[T]he partners in the exchange have to know how 
they are exchanging data. They should have written agreements 
on how they are exchanging data, they should test those 
agreements to make sure it works like they think it is going to 
work. That is a very time-consuming exercise.'' \72\
---------------------------------------------------------------------------
    \71\ Windowing is a Year 2000 technique that avoids converting 
technology from the two-digit year to the four-digit year. Generally, 
the first two digits of a calendar year (the century) are determined by 
the value of the two-digit year field. If the year is less than 50, for 
example, the century is assumed to be 20; if it is 50 or higher, it is 
assumed to be 19.
    \72\ ``Oversight of the Year 2000 Problem: Lessons to be Learned 
from State and Local Experiences,'' Sept. 2, 1998, original transcript, 
p. 88.
---------------------------------------------------------------------------
    Steve Forbes approached the Year 2000 problem from a 
national perspective. He suggested the United States can be a 
leader on this issue by encouraging open debate and discussions 
about problems and solutions. Other nations will look to 
America to help solve their problems. But there has been a 
management and leadership problem on the part of the 
administration, said Mr. Forbes.
    He focused his testimony on the Year 2000 liability issue, 
asserting that lawyers are preparing massive lawsuits as Y2K 
problems arise. They are behaving like ``trial lawyer sharks 
smelling blood in the water.'' It is essential that remedial 
legislation be passed to provide safe harbors for businesses to 
address the problem in advance. Proposed legislation would 
allow companies and individuals acting in good faith not to be 
subject to frivolous lawsuits.
    Internally such proposals would allow a free exchange of 
information. Externally information could be exchanged between 
suppliers and customers. Antitrust laws should not prevent 
companies from working together to exchange information to get 
industry-wide solutions. Mr. Forbes argued those companies, 
small and large, that are trying in good faith to solve this 
problem should have protection from liability. Information must 
be shared with the private sector--especially small 
businesses--about experiences and what they have been able to 
do in terms of trial runs and working with each other.
    Indianapolis Mayor Steve Goldsmith was concerned with the 
Y2K problems that can affect Indianapolis, including the prison 
system and the traffic lights. Indianapolis will spend $15 to 
$20 million to ensure that basic services are working. 
Indianapolis could raise the awareness of smaller cities and 
counties during statewide meetings by addressing the scope of 
the level of activity in Indianapolis.\73\
---------------------------------------------------------------------------
    \73\ Ibid. p. 37.
---------------------------------------------------------------------------
    No matter how well a given organization fixes its own 
system, if it has not dealt with data exchange all best efforts 
may be for naught. There are hundreds of thousands of data 
exchanges in Federal, State and local governments and with the 
private sector. Each of these exchanges need to be inventoried 
and assessed. Agreements need to be reached with partners and 
those agreements tested. Agreements with partners on data 
exchange and the testing of those exchanges is the more 
difficult issue.\74\
---------------------------------------------------------------------------
    \74\ Ibid. testimony of Joel Willemssen, Director, Information 
Resources Management, Accounting and Information Management Division, 
U.S. General Accounting Office, pp. 43-44.
---------------------------------------------------------------------------

19. September 3, 1998, field hearing (Palatine-suburb of Chicago, IL): 
        ``Oversight of the Year 2000 Problem: Lessons To Be Learned 
        From State and Local Experiences''

    This hearing was held near Chicago in the district of 
Representative Phil Crane. Mr. Crane joined the panel for the 
hearing.
    Although there was a wide range of witnesses, there was a 
particular focus on the embedded chip issue. Witnesses included 
Joel Willemssen, Director, Civil Agencies Information Systems, 
Accounting and Information Management Division, U.S. General 
Accounting Office; Mr. William Vetter, Manager, Bureau of 
Communication and Computer Services, State of Illinois, 
accompanied by Randy von Liski, Manager, Information Management 
Services; Ms. Beth Boatman, Chief Information Officer, city of 
Chicago; Mr. Michael Cassady, Acting Village Manager, Village 
of Palatine; Mr. Dave Hall, Embedded Systems Expert, Cara 
Corp.; Mr. Craig Lang, Senior Vice President, Technology 
Development, Chicago Transit Authority; Mr. Alan Ho, Y2K 
Manager, Information Services, Commonwealth Edison Utility Co.; 
Dr. Galen Crow, Director, Information Systems Technology, 
Illinois State University; Dr. Wendy Wintersteen, Director, 
Agriculture and Natural Resources Extension, Iowa State 
University.
    Randy von Liski, Manager of Information Management Services 
for the State of Illinois, noted one of the difficulties in 
assessing and repairing embedded chips: ``[Y]ou could have two 
devices that are side-by-side, same manufacturer, same model, 
that would potentially have different chips and could in fact 
have different results.'' \75\
---------------------------------------------------------------------------
    \75\ ``Oversight of the Year 2000 Problem: Lessons to be Learned 
from State and Local Experiences,'' Sept. 3, 1998, written testimony of 
Randy von Liski.
---------------------------------------------------------------------------
    Another witness, David Hall, was an expert in embedded 
systems from the Cara Corporation. He reported that ``fewer 
than ten percent of the enterprises in the world have begun 
serious embedded systems testing. . . . [E]very microprocessor-
based embedded system and equipment item must be individually 
tested to be sure of its Year 2000 status. There is 
insufficient time and trained resources to assess every 
microprocessor-based embedded system and equipment item in the 
United States, much less the world.'' He also raised concerns 
about the embedded chips in the health care industry. ``T]he 
health care industry has been very late in getting started . . 
. there are some systems that are life-sustaining that have run 
into problems.'' \76\
---------------------------------------------------------------------------
    \76\ Ibid. pp. 68-69, 94.
---------------------------------------------------------------------------
    Beth Boatman, Chief Information Officer for city of 
Chicago, stated that embedded chips are a top priority for 
their Y2K project: ``What we have decided is that we need to go 
out and touch every [embedded chip] and what we are right now 
doing is marshaling the manpower to go out and do that.''
    Dr. Wendy Wintersteen, Director, Agriculture and Natural 
Resources Extension, Iowa State University, testified in 
dramatic terms about vulnerability in the agricultural sector. 
``In Iowa, we have 14 million hogs in confined environmentally 
maintained houses. In Minnesota, they have 44 million turkeys 
in the same types of situations. . . . The important fact to 
understand here is that when we lose ventilation systems in 
these houses, we can have animals die in six hours.'' Further: 
``Power interruptions on a cold winter's day could lead to 
severe problems and animal loss, particularly for poultry and 
livestock producers.'' \77\
---------------------------------------------------------------------------
    \77\ Ibid. p. 90.
---------------------------------------------------------------------------
    Dr. Wintersteen informed the subcommittee that computers 
and other electronic control systems are used for feed 
preparation of livestock, maintaining records about fertilizer, 
seed and chemicals and other inputs related to agriculture. 
Grain stored in the United States is also controlled by systems 
that could have Y2K problems. In addition to these 
vulnerabilities, technology failure could affect the marketing 
of commodities and the records of these transactions. She 
concluded that the ``possibility exists of significant 
disruptions in the marketing channel and related business 
transactions and day-to-day recordkeeping.'' \78\
---------------------------------------------------------------------------
    \78\ Ibid. p. 91.
---------------------------------------------------------------------------

20. September 9, 1998, news conference on Year 2000 report card

    In releasing a new set of grades based on the August 15, 
1998 quarterly reports from Federal departments and agencies, 
subcommittee Chairman Horn made the following statement:

    We are here to offer a new assessment of Federal efforts to 
combat the Year 2000 technology problem. The grades released 
today take into account the latest data from the Executive 
departments and the major independent agencies. These data 
report on the quarter ending August 15, 1998.
    Overall, the Executive branch of the Federal Government has 
earned a ``D.'' This is an improvement from the ``F'' earned on 
the June report card. We should be cautious, however, about 
using the word ``improvement'' in the context of a ``D'' grade. 
As a former professor, I have seen students flunk out of 
college by earning too many ``Ds.'' This is not a grade you 
take home to your parents; and it is definitely not a grade to 
take back to the voters and taxpayers.
    Underlying this ``D'' is deep concern that the Federal 
Government will be unable to fix a substantial number of 
systems before January 1, 2000. Based on current projections, 
more than one-third of the Government's mission critical 
systems will not be ready on time. Also, many agencies are 
planning to replace rather than repair some of their non-
compliant computer systems. This is a high-risk strategy. When 
was the last time you heard of the Government putting a new 
computer system in place on schedule? This time, the Executive 
branch faces a deadline that cannot be extended. There is no 
room for the usual slippage. There is no margin for error.
    The cost of the Federal Y2K effort continues to rise. The 
24 departments and agencies listed on this report card each 
submitted a cost estimate, and the total of those estimates is 
now $6.3 billion. I note that this is almost $1 billion more 
than the estimate released by the Office of Management and 
Budget last week. And both staff at OMB and the subcommittee 
did read the same documents. OMB claims that the total cost to 
the Government will be $5.4 billion. But the General Accounting 
Office has carefully calculated the total of all specific 
agency estimates to be $6.3 billion. OMB has yet to offer a 
satisfactory explanation for the $1 billion discrepancy.
    Several specific agency grades are especially discouraging. 
The Department of Justice and the Department of Education have 
each gone from a ``D'' in June to an ``F'' now. The Department 
of Defense earned a ``D'' and simply is not on track to 
complete Y2K compliance efforts before January 1, 2000. We are 
encouraged, however, by the strong leadership demonstrated 
recently by Defense Secretary Cohen and Deputy Secretary Hamre. 
They are making Y2K a top priority, and the importance of this 
kind of leadership cannot be overstated.
    The Department of Transportation merited a ``D.'' The 
Federal Aviation Administration (FAA) is part of this grade. I 
noted three months ago that the Nation's air traffic could face 
serious disruptions for an extended period after December 31, 
1999 unless there are dramatic improvements in FAA's Y2K 
effort. I have great faith in FAA Administrator Jane Garvey, 
but faith is not enough when it comes to grading progress on 
the Year 2000 problem. Unfortunately, this is just as true 
today. The Department of Health and Human Services earned an 
``F'' for the second quarter in a row, as did the Department of 
Energy.
    It is important to look beyond Federal agencies and their 
internal computer systems. State and local governments as well 
as private and large non-profit organizations must also be 
prepared for the date change on January 1, 2000. The 
Subcommittee on Government Management, Information, and 
Technology has just completed a series of six field hearings 
around the country on the Year 2000 problem. After hearings in 
New York, Dallas, New Orleans, Cleveland, Indianapolis, and 
Chicago, it is clear that the news in our towns, cities, and 
States is not much better than it is here in Washington.
    We found in our field hearings that while some 
organizations are on the right track, many have concerns about 
identifying and repairing embedded systems located in such 
critical equipment as nuclear plants, water and sewer 
processing systems, and even traffic signals. There are 
approximately 25 billion embedded chips in use throughout the 
world and as many as 50 million of them depend on date 
calculations.
    The delivery of basic services--from utilities to public 
safety--is a major issue, and this raises an obvious question: 
What is the Executive branch doing to facilitate repairs in 
this area? Where do we stand? The Federal Government must reach 
out to the State, local, and private entities that have 
responsibility for the delivery of basic services.
    Many people in the Federal Government are working hard on 
the Year 2000 problem. Progress is being made-but it is not 
being made fast enough. We need to redouble our efforts and we 
need to make more progress faster if the Executive branch and 
the Nation are going to be ready for a smooth transition into 
the new millennium.

21. September 24, 1998, Oversight hearing: ``Year 2000: Issues Facing 
        the Consumer'' (held jointly with the House Science 
        Subcommittee on Technology)

    This hearing was convened to consider the Year 2000 status 
of consumer products and services. The subcommittees hoped that 
information uncovered at this hearing would help consumers make 
informed decisions as January 1, 2000 approached.
    Witnesses included: Robert Holleyman, Chief Executive 
Officer, Business Software Alliance; Gary J. Beach, Publisher, 
CIO Magazine; Paloma O'Riley, Executive Director, the Cassandra 
Project; Dr. Michael S. Hyatt, Author, ``The Millennium Bug: 
How to Survive the Coming Chaos'' and Gary Shapiro, President, 
Consumer Electronics Manufacturing Association.
    At the hearing, subcommittee Chairman Horn stated: ``while 
great strides have been made in raising awareness and inspiring 
action, still more has to be done by the Executive branch.'' 
The President needs to work the Year 2000 problem into other 
speeches he makes around the country, said Mr. Horn. The Year 
2000 problem ``is a global Management problem that will only be 
successfully resolved by effective management and the active 
involvement of citizens in nearly every country.'' \79\
---------------------------------------------------------------------------
    \79\ ``Year 2000: Issues Facing the Consumer,'' Sept. 24, 1998, 
original transcript, pp. 8-9.
---------------------------------------------------------------------------
    The importance of Executive leadership was emphasized by 
several of the panelists as well. It was cited as a crucial 
element in preparing consumers for the possible ramifications 
of the century date change. Paloma O'Riley argued that `` . . . 
by being silent or equivocal, the administration is hampering 
essential grassroots efforts . . . [I]nformation given to the 
public will not cause a panic, but the continued lack of solid 
factual information of rumors and misstatements and a clear 
lack of leadership will.'' \80\ Mr. Hyatt quoted a verse in the 
Bible to make the same point: ``if a trumpet sounds an 
uncertain sound, then how shall the people prepare themselves 
for battle?'' \81\
---------------------------------------------------------------------------
    \80\ Ibid. pp. 40-41.
    \81\ Ibid. p. 78.
---------------------------------------------------------------------------
    There are a variety of consumer products that need to be 
checked for Year 2000 compliance, including software 
applications on personal computers. Problems with personal 
computers are more likely to cause inconvenience than 
significant harm.\82\ A more significant concern lies in 
embedded chips.
---------------------------------------------------------------------------
    \82\ Ibid. p. 19.
---------------------------------------------------------------------------
    Gary Shapiro discussed traditional consumer electronic 
products. Most products do not suffer Year 2000 vulnerability 
and in fact do not even have a date function. A small 
percentage of these products-mainly those over 10 years old-may 
be affected. The problems normally are easily fixed simply by 
resetting the product, such as TV sets, VCR's, camcorders. 
``[I]f you take the over 1 billion products that are in 
American homes, we estimate that there may be some impact for 
some very old products. But based on the information from our 
members, it will be a relatively small impact.'' \83\
---------------------------------------------------------------------------
    \83\ Ibid. p. 28.
---------------------------------------------------------------------------
    Witnesses also discussed actions consumers can take to 
prepare themselves for the century date change. Robert 
Holleyman suggested that consumers ask questions. Owners of 
personal computers, for example, need to determine how old the 
computer is, what is the likelihood of a problem with the 
software or hardware, and then find solutions available through 
businesses. Gary Shapiro suggested that the best way for 
consumers to find out if their products have a Year 2000 issue 
is to contact the manufacturer to try to get the information.
    Paloma O'Riley and Michael Hyatt discussed potential 
preparations consumers can take to prepare for disruption of 
services in January 2000. Paloma O'Riley noted that ``people 
across the U.S. and Canada are now taking steps to prepare for 
potential worse case Y2K scenarios. They are making reasoned 
and appropriate decisions as how they may best take 
precautions.'' \84\ She recommended that citizens should be 
developing contingency plans of their own by talking to their 
neighbors, learning among them who may be vulnerable, and 
together attempting to create a safety net for those who may 
need it.
---------------------------------------------------------------------------
    \84\ Ibid. p. 40.
---------------------------------------------------------------------------
    Michael Hyatt expressed that consumers ultimately have very 
little influence over whether the organizations they depend 
upon get their systems repaired in time, but that, `` . . . 
this does not mean that they have to become victims, but it 
does mean that we must become proactive, take the initiative to 
make contingency plans, and engage in a little old fashion 
emergency preparedness.'' \85\ He describes this as life 
continuity plans. He states, ``they must determine how they 
continue to meet their own needs and those of their loved ones 
in the face of possible disruption of basic services . . . 
especially as it relates to food, water, shelter, and 
especially heat.'' \86\
---------------------------------------------------------------------------
    \85\ Ibid. p. 47.
    \86\ Ibid. p. 48.
---------------------------------------------------------------------------
    Each of these panelists also conveyed that information is 
essential to solving the Year 2000 problem and recommended to 
the committee that legislation is needed to facilitate 
information disclosure. Mr. Holleyman stated that the Year 2000 
liability issue is a problem, `` . . . but it is a problem for 
which there are solutions. And the solution is information.'' 
\87\
---------------------------------------------------------------------------
    \87\ Ibid. pp. 21-22.
---------------------------------------------------------------------------
    Gary Shapiro believed that if Congress moved quickly to 
provide limited liability protection legislation, then it would 
encourage manufacturers to share all information and thus it 
would be quite helpful to the industry as well as to the 
consumer. He added that ``. . . we think everyone would be a 
little more comfortable if there weren't all these lawyers 
hovering around,ready to file lawsuits.'' \88\ Mr. Beach 
concurred: ``I believe the bills are a step in the right direction, but 
I would encourage more action.'' \89\
---------------------------------------------------------------------------
    \88\ Ibid. p. 29.
    \89\ Ibid. p. 60.
---------------------------------------------------------------------------

22. September 29, 1998, Oversight hearing: ``Aviation Year 2000: Will 
        We Get There In Time?'' (held jointly with the Committee on 
        Transportation and Infrastructure and the House Science 
        Subcommittee on Technology)

    This hearing focused on the Year 2000 preparations of the 
aviation industry. Experts with experience across the 
government and private industry addressed what specific actions 
industry officials have implemented to ensure compliance by the 
year 2000.
    Witnesses included Jane F. Garvey, Administrator, Federal 
Aviation Administration; Jack Kelly, Administrator, National 
Weather Service, Department of Commerce; Carol Hallett, Chief 
Executive Officer, Air Transit Association; Bruce Webster, Co-
Chair, Washington, DC Y2K Group; David Sullivan, Zonar Corp.; 
Richard C. Cullerton, Metropolitan Washington Airports 
Authority [MWAA]; Walt Coleman, President, Regional Airline 
Association; and Dwight Greenley, Wichita Airport.
    One of the most frequently asked questions on the Year 2000 
problem is whether it will be safe to fly on January 1, 2000. 
The aviation industry faces numerous issues related to the 
readiness of navigational systems, airline maintenance, 
reservation systems, and airport security, among others. 
Airlines depend heavily on computer systems for almost all 
aspects of their operations including flight planning and 
routing, crew scheduling, capacity planning, pricing, 
ticketing, and billing. The day to day operations of a major 
air carrier require hundreds of individual systems to work in 
concert so that the airlines and airports can deliver quality 
service to their customers. The systems vary from large 
mainframes handling millions of transactions involving flight 
operations and reservations, to simple personal computers 
handling staff planning for small airports with just a few 
gates.
    The joint committees heard first from former Congressman 
William F. Clinger, Jr., who served as chairman of the 
Government Reform and Oversight Committee in the 104th 
Congress. Mr. Clinger testified as a private citizen but also 
as a board member of the Aviation Safety Alliance, a non-profit 
group of aviation professionals. Mr. Clinger set the tone for 
the hearing by observing: ``Of the many critical issues before 
the aviation industry, and therefore the traveling public, none 
has more far-reaching implications than those associated with 
the Year 2000 problem.'' \90\
---------------------------------------------------------------------------
    \90\ ``Year 2000: Will We Get There on Time?'' Sept. 29, 1998, 
written statement of former Congressman William F. Clinger, Jr., p. 1.
---------------------------------------------------------------------------
    Administrator Jane Garvey assured the joint committees that 
the FAA had made considerable progress on Year 2000 repairs 
since the February 4, 1998 hearing. ``I have given my 
commitment to the American public, and now commit to you, their 
representatives, that aviation safety will not be compromised 
on January 1, 2000.'' \91\ She noted that by September 30, 1998 
(the OMB deadline for renovations), the agency would complete 
renovation of 99 percent of its mission critical systems. 
Administrator Garvey emphasized that the FAA was ``on schedule 
to have the majority of [its] systems compliant [by] March 31, 
1999 [and full compliance] by the end of June 1999.'' \92\
---------------------------------------------------------------------------
    \91\ ``Year 2000: Will We Get There on Time?'' Sept. 29, 1998, 
written statement of Jane F. Garvey, Federal Aviation Administrator, p. 
1.
    \92\ Ibid. pp. 2-3.
---------------------------------------------------------------------------
    Administrator Garvey also addressed the issues of regional 
and international air travel. She was concerned that many 
smaller airports lack the resources to conduct the necessary 
Year 2000 work. She believed that the FAA was working hard to 
raise international awareness of the Year 2000 problem, 
particularly through the International Civil Aviation 
Organization [ICAO]. The FAA cosponsored a resolution that 
would require ICAO to develop and publish international Year 
2000 assessment criteria as well as status information. In 
response to a question from Representative Constance Morella, 
Chair of the Science Subcommittee on Technology, Ms. Garvey 
stated that the FAA has the authority, if necessary, to suspend 
flights to international destinations if those destinations are 
not fully Year 2000 compliant. The FAA is closely monitoring 
the compliance of foreign airports and will make safety 
judgments as the year 2000 approaches.
    John Kelly testified on the Year 2000 efforts of the 
National Weather Service [NWS]. He observed that the Weather 
Service has more than 170 data exchanges with other Federal 
agencies, private meteorological firms, research institutions, 
and other nations. Many of these data exchanges involve 
thousands of hourly weather observations that are put into 
complex mathematical weather models. The data in these models 
is not, itself, Year 2000 sensitive, but the data exchanges 
could be. ``Aviation operations at all U.S. airports are 
heavily dependent on these hourly and special surface weather 
observations, as well as airport terminal forecasts produced by 
NWS.'' \93\
---------------------------------------------------------------------------
    \93\ ``Year 2000: Will We Get There on Time?'' Sept. 29, 1998, 
written statement of John J. Kelly, Jr., Assistant Administrator for 
Weather Services, National Oceanic and Atmospheric Administration, U.S. 
Department of Commerce, p. 2.
---------------------------------------------------------------------------
    Speaking on behalf of the Washington, DC Y2K Group, Bruce 
Webster pleaded that the Clinton administration must make the 
Year 2000 problem the No. 1 priority for the next 16 months, 
even ahead of Social Security and education reform. Mr. Webster 
raised concern over polls that suggest two-thirds of Americans 
know little about the Year 2000 problem. He also asserted that 
``there has been a profound lack of leadership from the 
Administration'' on the Year 2000 problem.
    Mr. Sullivan informed the joint committees of a specific 
technological approach to preparing computers for the year 
2000. This approach involves in effect postponing the Year 2000 
problem by changing the value for the two digit years that 
exist now, rather than going through the effort of changing 
those two-digit years to four-digit years. Mr. Sullivan argued 
that this approach is in fact much safer than the conversion to 
the four-digit year because such a massive conversion will 
inevitably involve numerous unintended mistakes. ``The current 
plan requires changing hundreds of billions of lines of old, 
reliable program code into new, improved, untested code. Based 
on computer industry statistics, hundreds of millions of errors 
will be made in this process, and a large percentage of these 
errors will not be repaired before these new programs must be 
put in service to handle Y2K.'' \94\
---------------------------------------------------------------------------
    \94\ ``Year 2000: Will We Get There on Time?'' Sept. 29, 1998, 
written statement of David E. Sullivan, President, Zonar Corp., p. 2.
---------------------------------------------------------------------------
    Richard C. Cullerton of the Metropolitan Washington 
Airports Authority described contingency capabilities at the 
Ronald Reagan Washington National Airport and Dulles 
International Airport. In terms of temporary power generation, 
Washington National is more advanced than Dulles and could 
operate indefinitely at 80 percent of normal electrical usage 
indefinitely. Dulles could only generate enough power to 
operate at ``a very diminished level of services.'' Mr. 
Cullerton pointed out, however, that functions such as airfield 
lighting are deemed ``critical load'' and would continue even 
in the event of a power outage.

23. October 2, 1998, Oversight hearing: ``The Status of the District of 
        Columbia's Year 2000 Compliance Effort'' (held jointly with the 
        Subcommittee on the District of Columbia and the House Science 
        Subcommittee on Technology)

    The subcommittee held a joint hearing on the preparations 
for the year 2000 in the District of Columbia. Witnesses 
included Jack Brock, Director, Accounting and Information 
Management Issues, General Accounting Office; Constance B. 
Newman, Vice-Chairman, DC Financial Responsibility and 
Management Assistance Authority; Camille Barnett, Chief 
Management Officer, District of Columbia; and Suzanne Peck, 
Chief Technology Officer, District of Columbia.

                          c. the federal level

1. The Federal Year 2000 problem

    The Federal Government is confronting the Year 2000 problem 
on two levels. The first is the Federal effort to prepare its 
own technology for January 1, 2000. The second is the Federal 
effort to play a leadership role in the United States and 
throughout the world. The subcommittee has conducted extensive 
oversight of Federal efforts in each of these areas. This 
section of the report will address first the various aspects of 
Federal Year 2000 repairs, and second the Federal leadership 
role.
            a. Mission critical systems
    The subcommittee first raised concerns about the Federal 
Government's computer systems in the spring of 1996. Although a 
few agencies, most notably the Social SecurityAdministration, 
were aware of the problem and already at work on it, most were 
oblivious to the Year 2000 problem. The Year 2000 problem has been 
closely associated with the kind of large, customized, mainframe 
computer systems used in Federal agencies such as the Internal Revenue 
Service, the Social Security Administration, and the Federal Aviation 
Administration. Similar systems are in use in institutions throughout 
the country.
    Appearing before the House Appropriations Subcommittee on 
Treasury, Postal Service and General Government on March 11, 
1997, the Director of the Office of Management and Budget 
responded to subcommittee concerns by committing to furnish 
Congress with a quarterly report on Federal progress toward 
correcting the Year 2000 computer problem.\95\ As the year 2000 
approached, subcommittee Chairman Horn called on the Executive 
branch to switch to monthly or even weekly reporting. Beginning 
in the summer of 1998, the Office of Management and Budget 
finally required monthly reports from lagging agencies.
---------------------------------------------------------------------------
    \95\ The first quarterly report was transmitted to Congress on June 
23, 1997. It was based on data provided to OMB by all major departments 
and agencies on May 15, 1997.
---------------------------------------------------------------------------
    Since September of 1997, the subcommittee has issued four 
report cards on the basis of the quarterly reports. Although 
these reports cards have increasingly taken into account 
factors such as contingency planning, data exchanges, and 
embedded systems, the primary issue reported on and the primary 
basis for the grades has been the status of repairs of mission 
critical computer systems.
    There are approximately 7,300 mission critical systems in 
the executive branch of the Federal Government. As of August 
15, 1998, 50 percent of these systems were Year 2000 compliant. 
At the current rate of progress, the percentage compliant would 
climb only to 66 percent by March 31, 1999. This date is the 
President's deadline for fixing noncompliant systems.
    It is of deep concern that about one-third of all Federal 
mission critical systems will not be compliant by March 1999, 
only 9 months before January 1, 2000, and only 6 months from 
the beginning of the Federal Government's new fiscal year on 
October 1, 1999. This is troubling in part because even once 
these systems are ``compliant,'' they need to be independently 
verified, implemented (returned to operation), and then put 
through a rigorous end-to-end testing process involving all 
related systems. Testing and verification can take at least 9 
months, and often requires even more time than that.
    A further concern is that virtually all data on Federal 
Year 2000 status are self-reported. Questions have been raised 
about the reliability of these data. On June 5, 1998, the 
Defense Department's Inspector General published a highly 
critical audit of Defense's Year 2000 remediation. The purpose 
of the audit was to ``determine whether the year 2000 
certification process is adequate to ensure that mission 
critical technology systems will continue to operate properly 
after the year 2000'' and to evaluate ``the year 2000 
certification process'' through a random sample of systems 
already certified as compliant by the individual managers in 
charge.\96\
---------------------------------------------------------------------------
    \96\ Department of Defense, Office of the Inspector General, Audit 
Report 98-147, p. i.
---------------------------------------------------------------------------
    The audit uncovered two separate but related problems in 
DoD implementation of the Management Plan. First, many systems 
were certified as compliant when in fact no adequate 
justification for such assertions existed. The Inspector 
General estimated that only 109 of the 430 systems reported as 
compliant by November 1997 were in fact adequately validated 
according to the five-phase process.
    These inconsistencies were in turn traceable to a second 
problem: the vagueness and ambiguity of definitions and 
procedures outlined by the first version of the ``DoD Year 2000 
Management Plan.'' Much was left to the individual discretion 
of officials on the spot. Also, the ``oversight requirements or 
processes'' for the Assistant Secretary of Defense for Command, 
Control, Communications, and Intelligence were not clearly 
defined. This unfortunately has led to many dubious reports of 
positive progress to the OMB and Congress in the past, although 
the specificity and rigor of reporting requirements and the 
visibility of the Secretary of Defense in the whole process 
have been improving.
    This ambiguity extends even to the central concepts and 
terms utilized in the Year 2000 remediation community, 
including statements given to Department of Defense project 
managers by the relevant private vendors. For instance, it has 
been hard in practice to determine precisely what is meant by 
the terms ``certification'' and ``compliance.'' As General 
Accounting Office representative Alan Rhodes recently argued: 
``What I would say is that the data that are out there are 
suspect. The numbers that are presented are not uniform. [The 
General Accounting Office is] having trouble finding clear 
definitions. . . . You say tomato, I say tomato. There's a 
great deal of people who say four things you can hear from a 
vendor. One you probably will never hear, and that is certified 
Y2K compliant. . . . Second point would be just Y2K compliant. 
That's going to come to you from the General Counsel. And it 
will be a large document, and I promise you won't understand it 
when you're done. Third thing's Y2K ready. I have no idea what 
that means. The fourth one is, we don't foresee a problem; and 
if you have one, call us.'' \97\
---------------------------------------------------------------------------
    \97\ Comments at a roundtable on the Year 2000 problem sponsored by 
the Center for Strategic and International Studies, June 2, 1998, 
transcript, pp. 9-10.
---------------------------------------------------------------------------
    In addition, there has been much uncertainty about the 
criteria for naming a system ``mission critical.'' \98\ As the 
Year 2000 program has proceeded, many mission critical systems 
have disappeared from the central database not because of 
successful completion of the five managerial phases and final 
certification, but because they were re-identified as ``non-
critical'' to Defense's ``core capabilities.'' Thus, an 
agency's ``progress'' may be predicated on a reshuffling of 
cards rather than timely completion of Year 2000 technical 
objectives.
---------------------------------------------------------------------------
    \98\ Department of Defense, Office of the Inspector General, Audit 
Report 98-147, pp. 11-12.
---------------------------------------------------------------------------
            b. Testing
    Testing is a major aspect of the Year 2000 problem. 
According to many experts, testing is also the hardest, most 
expensive, and most time-consuming aspect of fixing the 
problem.\99\ The concern is that many Federal agencies will not 
have sufficient time to thoroughly test their systems. Evidence 
so far suggests that this is a major problem. The General 
Accounting Office described the state of Federal testing as 
``one of the more alarming problems we have come across.'' 
\100\
---------------------------------------------------------------------------
    \99\ One witness before the subcommittee articulated the importance 
of testing this way: ``[S]ince there is currently no requirement for an 
objective measurement of date testing or reporting, the answer to the 
question about where we stand on remediation today is that nobody 
knows. This is quite unacceptable and, I might add, very, very 
dangerous.'' He went on to say that testing is ``between 50 and 70 
percent of the total conversion effort.'' Tom McCabe, Sr., chairman, 
McCabe & Associates, testifying at ``Year 2000: Biggest Problems and 
Proposed Solutions,'' June 22, 1998, original transcript pp. 46, 48.
    \100\ ``Year 2000: Biggest Problems and Proposed Solutions,'' June 
22, 1998, original transcript p. 19 (testimony of Joel Willemssen).
---------------------------------------------------------------------------
    Agencies need a significant amount of time for essential 
end-to-end testing of multiple systems that have individually 
been deemed Year 2000 compliant. Such end-to-end testing seeks 
to ensure that systems collectively supporting a core business 
function operate as intended. Without such testing, systems 
individually deemed as compliant may not work as expected when 
linked together with other systems in an operational 
environment. These systems include not only those owned and 
managed by the organization, but also any external systems with 
which they interface.
    For example, the Federal Aviation Administration's Enhanced 
Traffic Management System monitors flight plans nationwide, 
controlling high-traffic situations and alerting airlines and 
airports to bring in more staff during times of extra traffic. 
Since it must exchange data with airlines' flight planning 
systems in order to accomplish this, end-to-end testing is 
essential, and would include systems for all entities involved, 
as well as their supporting telecommunications.
    It is particularly important that the testing process 
involve verification by an outside source, called Independent 
Validation and Verification. The General Accounting Office has 
voiced the concern that most of the data available on the Year 
2000 status of Federal agencies is self reported. It is crucial 
that these data are subjected to independent review. GAO points 
to two known instances of inaccurate reporting. The Inspector 
General at the Department of Defense found that the Department 
had no adequate basis for reporting about 320 Year 2000 
compliant mission critical systems in November 1997. And in May 
1998, the Department of Agriculture reported as Year 2000 
compliant 15 replacement systems that were still in the 
planning stages.\101\
---------------------------------------------------------------------------
    \101\ Ibid.
---------------------------------------------------------------------------
            c. Embedded chips
    Only a small percentage of embedded chips keep track of the 
year (many operate on a 24-hour clock or on a 7 day week, 
ignoring longer measures of time), and many of those that do 
are Year 2000 compliant. Nevertheless, there are billions of 
embedded chips in operation throughout the world and in the 
Federal Government and they all need to be tested for Year 2000 
compliance. It is extremely difficult to identify and to locate 
all of the embedded chips in any given system or piece of 
equipment. Even once located, it is difficult to test the chips 
for compliance.
    The problem is exacerbated by the fact that identical 
pieces of equipment--two fax machines made by the same 
manufacturer, for example--will often use different embedded 
chips. This is because manufacturers frequently switch chip 
suppliers based on the best available price. Sometimes 
suppliers will use chips that keep track of the date even 
though the piece of equipment does not need that particular 
function. This means that organizations cannot eliminate 
potential Year 2000 failures simply by asking whether a 
particular system or piece of equipment relies on a date 
function. The chip may fail even if its date function is unused 
in a particular piece of equipment.
    The Department of Defense is especially susceptible to the 
embedded chip problem. The Office of Management and Budget 
conceded the seriousness of the embedded chip problem when 
Deputy Director for Management Edward DeSeve observed that 
``this is the great unknown about the Year 2000 problem. . . . 
At this point, it appears that any large piece of machinery 
could have an embedded chip problem.'' \102\ Defense has 
focused on fixing ``Commercial-Off-the-Shelf'' embedded chips. 
Since creating chips from scratch is prohibitively expensive, 
many Defense weapons and systems have traditionally relied on 
these cheap and readily available mass-produced chips. Some 
generic chips are suspected of having time functions that might 
effect operations even though the system does not utilize date 
fields in everyday operations. Thus, the absence of direct date 
functions in a communications network or weapons system is not 
necessarily an accurate indicator of future success in 
weathering the change to year 2000.
---------------------------------------------------------------------------
    \102\ Ibid. p. 10. Edward DeSeve is Deputy Director for Management 
at the Office of Management and Budget.
---------------------------------------------------------------------------
    Deputy Secretary of Defense John Hamre graphically defined 
the risks while briefing Senate Armed Services Committee on 
June 4, 1998. In his remarks, Secretary Hamre stated: ``The 
failure of an embedded microchip in a discrete, localized 
computer or machine, such as a wristwatch or the air-
conditioning system in a building, can be merely inconvenient. 
However, failure of a microchip in a critical, large, or 
dangerous piece of machinery--loss of air pressure in an F-15 
or a submerged submarine--can be devastating and even life-
threatening.''
    The Chief Information Officers Council has created 
interagency working groups in areas such as biomedical devices 
and laboratory equipment, commercial products, and 
telecommunications. Each interagency working group, chaired by 
a key program agency, is tasked with raising awareness across 
government and working with manufacturers to assure that 
products are fixed. Each group is contacting vendors on behalf 
of the entire Federal Government, performing tests to verify 
the compliance of products, and sharing information through 
electronic databases.\103\
---------------------------------------------------------------------------
    \103\ See the list of these and other web sites in Additional Views 
of Hon. Stephen Horn.
---------------------------------------------------------------------------
            d. Data exchanges
    As computers play an ever-increasing role in our society, 
exchanging data electronically has become a common method of 
transferring information among Federal, State, and local 
governments, as well as nongovernmental organizations 
throughout society. The Social Security Administration 
exchanges data files with the States to determine the 
eligibility of disabled persons for disability benefits. The 
National Highway Traffic Safety Administration provides States 
with information needed for driver registrations. As computer 
systems are converted to process Year 2000 dates, the 
associated data exchanges must also be made Year 2000 
compliant. If the data exchanges are not Year 2000 compliant, 
data will not be exchanged or invalid data could cause the 
receiving computer systems to malfunction or to produce 
inaccurate computations.
    Federal agencies have more than 10,000 data exchanges with 
each other, foreign governments, State and local governments, 
and private entities.\104\ The subcommittee was informed by the 
Office of Management and Budget that the executive branch is 
working closely with the National Association of State 
Information Resource Executives as well as the National 
Governors' Association. OMB has directed Federal agencies to 
report on their inventory of data exchanges, State by State, 
and to ensure that they are all Year 2000 compliant by March 
1999.\105\
---------------------------------------------------------------------------
    \104\ Testimony of Edward DeSeve, Deputy Director for Management, 
Office of Management and Budget, at subcommittee hearing ``Year 2000: 
Biggest Problems and Proposed Solutions,'' June 22, 1998, original 
transcript p. 9.
    \105\ Ibid. pp. 9-10.
---------------------------------------------------------------------------
    For example, agencies that administer key Federal benefits 
payment programs, such as the Department of Veterans Affairs, 
exchange data with the Department of the Treasury which, in 
turn, interfaces with various financial institutions to ensure 
that benefits checks are issued. In addition, Department of 
Defense systems interface with thousands of systems belonging 
to foreign military sales customers, private contractors, other 
Federal agencies, and international organizations such as the 
North Atlantic Treaty Organization.
            e. Cost
    The cost of the Federal Y2K effort continues to rise. The 
24 departments and agencies listed on this report card each 
submitted a cost estimate, and the total of those estimates is 
now $6.3 billion. This is almost $1 billion more than the $5.4 
billion estimate released by the Office of Management and 
Budget.
    The subcommittee and committee strongly believe that 
Federal agencies are responsible for conducting Y2K efforts 
without delay. In terms of funding, that means primarily 
reprogramming the resources necessary to fund all Y2K projects. 
If reprogramming is insufficient, the committee expects Federal 
agencies, through the Office of Management and Budget, to 
request all necessary additional funding through the 
appropriations process. The committee considers the Year 2000 
problem a top priority. The Speaker of the House of 
Representatives has repeatedly stressed to executive branch 
officials that they have full congressional support for 
reprogramming, additional appropriations, or whatever else they 
need to get the job done.
    On July 10, 1997, subcommittee Chairman Horn had the 
following exchange with Sally Katzen, then Administrator, 
Office of Information and Regulatory Affairs, OMB: ``I gather . 
. . you feel you have sufficient authority from the Congress in 
order to deal with the use of resources at the right place at 
the right time. And if you don't, you're going to ask us for 
it?'' Ms. Katzen replied, ``Absolutely.'' \106\
---------------------------------------------------------------------------
    \106\ July 10, 1997, p. 41.
---------------------------------------------------------------------------
            f. Personnel
    The subcommittee heard testimony that raised serious 
concerns about the ability of the Federal Government to retain 
and to afford the technological talent necessary to carry out 
Year 2000 repairs. ``I believe that we are going to see an 
exodus of Government programming talent into the private 
sector,'' predicted one witness.\107\ He went on to say, ``I 
don't believe that I can overstate the challenge that the 
Federal Government will face over the next two years to 
actually find and maintain the staff it needs to fix its 
problem.'' \108\
---------------------------------------------------------------------------
    \107\ Testimony of Dr. Michael Harden, president, Century 
Technology Services, joint hearing on the Oversight of the Government's 
Year 2000 Efforts, Mar. 18, 1998, original transcript p. 46.
    \108\ Ibid. pp. 47-48.
---------------------------------------------------------------------------
    OMB Deputy Director for Management Edward DeSeve testified 
that the Department of Defense has created a number of 
department-wide Y2K teams that move from one problem to the 
next, regardless of organizational boundaries. Further, these 
teams will be made available to domestic agencies if DOD 
eventually has surplus technical capacity.\109\ Similarly, FAA 
Administrator Jane Garvey noted that her agency would make 
available five or six technical experts to help small airports 
with limited resources to prepare for the Year 2000 
problem.\110\ John Callahan, Assistant Secretary, Management 
and Budget, Department of Health and Human Services, urged: ``I 
think governmentwide, as . . . each day passes, it certainly 
would make good common sense inside the government for there to 
be some sharing of critical computer personnel.'' \111\
---------------------------------------------------------------------------
    \109\ Testimony of Edward DeSeve, June 22, 1998, original 
transcript p. 70.
    \110\ ``Year 2000: Will We Get There on Time?'' Sept. 29, 1998, 
Jane F. Garvey, Federal Aviation Administrator.
    \111\ ``Year 2000: Biggest Problems and Proposed Solutions,'' June 
22, 1998, original transcript, p. 96.
---------------------------------------------------------------------------
    Obtaining and retaining adequate and skilled staff for the 
Year 2000 challenge has been an increasing concern. 
Representatives of agencies and departments have described 
problems that they or their contractors have encountered in 
obtaining or retaining information technology personnel. 
However, no governmentwide strategy has existed to address 
recruiting and retaining information technology personnel with 
the appropriate skills for Year 2000-related work.
    On April 30, Assistant to the President Koskinen stated 
that the President's Council on the Year 2000 Conversion would 
be working with several agencies, including the Office of 
Personnel Management [OPM], to examine options for ensuring an 
adequate number of qualified people to perform Year 2000 work. 
On March 30, the OPM issued a memorandum that the Year 2000 
problem was an ``unusual circumstance'' and agencies grant 
waivers to allow them to rehire retired Federal personnel on a 
temporary basis without financial penalty to the retiree 
involved. The memorandum also advised that agency heads could 
make exceptions to the biweekly limitation on premium pay if a 
determination was made that an emergency involving a direct 
threat to life or property exists. In addition, the Council has 
formed a Year 2000 workforce issues working group chaired by 
the Deputy Secretary of Labor.
            g. Contingency planning
    The General Accounting Office has found that contingency 
planning by Federal agencies has been inadequate. ``Without 
[contingency] plans, when unpredicted failures occur, agencies 
will not have well-defined responses and may not have enough 
time to develop and test alternatives. Because Federal agencies 
depend on data provided by their business partners and services 
provided by the public infrastructure [including] voice and 
data telecommunications, it's imperative that contingency plans 
be developed for all systems supporting critical core business 
processes, regardless of whether these systems are owned by the 
agency.'' \112\
---------------------------------------------------------------------------
    \112\ Ibid. p. 18.
---------------------------------------------------------------------------
    In March 1998, OMB clarified its contingency plan 
instructions, stating that plans should be developed for all 
core business functions. Further, on April 28, 1998, OMB asked 
agencies to describe their processes and activities for 
developing contingency plans. Although these are positive 
steps, much work on contingency planning remains to be 
completed.

2. The Federal leadership role

    In addition to preparing its own technology for the year 
2000, the Federal Government must play a leadership role, both 
within the United States and internationally. This would be 
appropriate for any wide-spread problem, but is particularly so 
in light of the fact that technology is highly interdependent 
and the United States relies on technology more than any 
country in the world. Furthermore, the Year 2000 problem has 
the potential to cause excessive anxiety and even panic in 
people who fear the worst. As noted earlier in the report, this 
kind of fear is allayed by access to information and confidence 
in elected leadership. For these reasons, the subcommittee has 
repeatedly called on the President of the United States as well 
as the departments and agencies of the executive branch to take 
a strong leadership role in addressing the Year 2000 problem.
    The importance of Federal leadership has also been stressed 
repeatedly at subcommittee hearings. Subcommittee Ranking 
Member Dennis Kucinich stated that the Federal Government, in 
particular, must take a leadership role. ``It's not enough that 
the Federal Government fix its own systems, the Government must 
also facilitate private sector conversion.''\113\ One witness 
asserted that ``[w]e need a broad public acknowledgment of the 
nature, scope, and difficulty of the Year 2000 problem, 
starting with President Clinton and followed by other leaders 
in the Administration, in Congress, in the military industry, 
and elsewhere.'' \114\
---------------------------------------------------------------------------
    \113\ ``Oversight of the Government's Year 2000 Efforts,'' Mar. 18, 
1998, original transcript p. 15.
    \114\ ``Year 2000: Biggest Problems and Proposed Solutions,'' June 
22, 1998, original transcript, p. 40 (testimony of Bruce F. Webster, 
Director, Washington, DC Year 2000 Group).
---------------------------------------------------------------------------
    At the subcommittee's joint hearing on July 10, 1997, 
Chairman Horn told Sally Katzen, then Administrator of the 
Office of Information and Regulatory Affairs at the Office of 
Management and Budget, that the Year 2000 problem is worthy of 
Presidential attention. Chairman Horn asked: ``Have you or the 
Director of OMB recommended to the President that he speak in 
this area in a radio address or by other means of 
communication?'' Sally Katzen replied that they had not.\115\ 
She also argued against the idea of a governmentwide 
coordinator or ``Y2K Czar,'' saying ``[t]his is not an area, in 
particular with the Year 2000 issue, where a silver bullet or a 
dose of medicine administered at a centralized point is going 
to solve the problem.'' \116\ Fortunately, the White House 
eventually changed its position and the President appointed a 
coordinator, Assistant to the President John Koskinen, who 
chairs the President's Council on the Year 2000 Conversion. 
This action was taken on February 4, 1998.\117\
---------------------------------------------------------------------------
    \115\ ``Will Federal Government Computers be Ready for the Year 
2000?'' July 10, 1997, p. 40.
    \116\ Ibid. p. 47.
    \117\ See Appendix C.
---------------------------------------------------------------------------
    But establishing the President's Council on the Year 2000 
Conversion was not, by itself, enough. There are further steps 
the President and his administration should take. For example, 
the General Accounting Office testified before the subcommittee 
on prioritization within the Federal Government: ``We have 
recommended the [President's] Council [on the Year 2000 
Conversion] Chairman [John Koskinen] establish governmentwide 
and agency-specific priorities based on criteria such as 
adverse health and safety impacts, national defense, adverse 
financial impact and economic repercussions. The Chairman 
disagreed with this recommendation, stating that agencies have 
already established priorities.'' \118\
---------------------------------------------------------------------------
    \118\ June 10, 1998, original transcript 14.
---------------------------------------------------------------------------
    In terms of international leadership, trade is especially 
vulnerable to the Year 2000 problem because it is highly 
dependent on technology. Every import and export transaction 
involves a number of sequential steps and several companies, 
including transportation companies, ports, freight forwarders, 
banks, warehouses, and government agencies. All these entities 
rely on information technology systems and embedded systems. 
Furthermore, it is actually impossible to test the systems 
until January 1, 2000, due to the sheer number of discrete 
technologies and enterprises that make up a foreign trade 
transaction. One witness put the international picture in 
dramatic terms: ``[W]e come to the conclusion that foreign 
trade, unfortunately, is going to decline very rapidly and very 
quickly as we move into next year.'' \119\
---------------------------------------------------------------------------
    \119\ ``Year 2000: Biggest Problems and Proposed Solutions,'' June 
22, 1998, original transcript, p. 24 (testimony of Dennis Grabow, 
president, Millennium Corp.).
---------------------------------------------------------------------------
    In addition to trade, the same civilian and military 
mission critical systems at risk of failure in the United 
States--such as command and control systems in the defense 
context--are also at risk of failure in other nations. The 
global nature of this problem may become increasingly apparent 
in telecommunications networks. This is an area of 
vulnerability that has so far received very little attention. 
It illustrates both the expanding nature of the problem and the 
difficulty in coming to a detailed understanding of the 
specific consequences we face. All nations, especially those 
with nuclear arsenals and other sophisticated satellite and 
weapons systems, must understand the potential impact of the 
Year 2000 problem.
    OMB Deputy Director for Management Edward DeSeve testified 
on the international outreach effort at the subcommittee's June 
22nd hearing.\120\ He also noted that the President raised the 
Year 2000 problem at the G-8, and that the executive branch is 
working with the United Nations,\121\ the World Bank, the 
International Monetary Fund, and other organizations.\122\ 
These steps are just the beginning of effective leadership. The 
President needs to take a more visible role, especially with 
our own residents.
---------------------------------------------------------------------------
    \120\ Ibid. pp. 56-57.
    \121\ See Appendix A for correspondence between Subcommittee 
Chairman Horn and U.N. Secretary General Annan.
    \122\ ``Year 2000: Biggest Problems and Proposed Solutions,'' June 
22, 1998, original transcript, pp. 80-81.
---------------------------------------------------------------------------
    The Federal Government also needs to exert leadership 
through effective management. The executive branch Year 2000 
effort unfortunately is indicative of the general state of 
executive branch management problems. Federal managers often 
lack the basics--strategic plans, missions, goals, objectives, 
benchmarks, performance measures for outcomes and results, and 
most important the will to use the tools that must be available 
to management if it is to succeed. Dealing with the Year 2000 
problem is a very good example of the lack of management 
capabilities available to the President.
    There is a great need to resolve long-standing financial 
management problems that plague the Federal Government. 
Billions of dollars of taxpayers money are being lost each year 
to fraud, waste, abuse, and mismanagement in hundreds of 
programs. One of the root causes of this loss is poor financial 
management systems and practices that are obsolete and 
ineffective and do not provide complete, consistent, reliable, 
and timely information to congressional decisionmakers, the 
President, and senior department and agency management. 
Financial losses can be identified and significantly reduced by 
improved management. So can the loss of effective and timely 
administration of program resources. Parallels with the Y2K 
compliance effort are clear.
    Congress enacted a series of laws designed to ensure that 
agency management problems were fixed. In fact, the Chief 
Financial Officers Act of 1990, as expanded by the Government 
Management Reform Act of 1994 and amended by the Federal 
Financial Management Improvement Act of 1996, provided the most 
sweeping reform of Federal financial management in over 40 
years. However, agencies have yet to implement these laws 
fully. And now with the Y2K crisis, all citizens are at risk 
because of these long term management failures. Congress needs 
to provide the incentive to get it right.
    On March 31, 1998, the General Accounting Office released 
its audit report on the financial status of the Federal 
Government. This report provided, for the first time, a concise 
accounting for the myriad problems faced by the Federal 
Government. The first-ever Governmentwide financial audit and 
balance sheet demonstrated that there are serious problems with 
financial management in the majority of Federal agencies.
    GAO's audit report provided a synopsis of the significant 
financial systems weaknesses, problems with fundamental 
recordkeeping, incomplete documentation, and weak internal 
controls, including computer controls, that prevent the Federal 
Government from accurately reporting a large portion of its 
assets, liabilities, and costs. According to the GAO, these 
problems ``affect the [Federal] government's ability to 
accurately measure the full cost and financial performance of 
programs and effectively and efficiently manage its 
operations.''
    The subcommittee held a hearing on April 1, 1998, to 
examine the results of the Governmentwide audit and then held a 
series of hearings examining the results of the audits of the 
Internal Revenue Service, Department of Defense, Social 
Security Administration, and Health Care Financing 
Administration. Oversight by the subcommittee and efforts by 
others are having an effect. On May 26, 1998, the President 
issued a memorandum to the heads of executive departments and 
agencies directing the Office of Management and Budget and the 
heads of certain agencies to take steps to resolve issues 
preventing a clean opinion.
    Congress must continue to take steps to rid the Federal 
Government of pervasive financial management problems. Not only 
do these problems preclude an audit opinion, they undermine the 
confidence of the American people. The Federal Government needs 
to manage the funds entrusted to it efficiently and 
effectively. To do otherwise is a violation of the trust 
citizens and taxpayers place in their government. These 
problems are severe and we cannot allow them to persist.
     The Year 2000 problem has served to highlight poor 
management in the Federal Government. With rare exceptions over 
the last 77 years, management has been de-emphasized relative 
to budget within President's Bureau of the Budget and its 
successor, the Office of Management and Budget.
    Management's third class status is no secret. Today, 
experts agree that the ``M'' in OMB has been in steady decline 
and now barely exists. Presidential advisory groups have 
recommended strengthening management within the Executive 
Office of the President. Two Congressional Research senior 
specialists noted that ``whether by intention or neglect, 
recent Presidents have, arguably, been ineffective managers, 
and the negative results have been cumulative.'' \123\
---------------------------------------------------------------------------
    \123\ ``Creating an Office of Management,'' May 12, 1998, joint 
statement of Harold C. Relyea and Virginia A. McMurtry, Specialists in 
American National Government, Congressional Research Service.
---------------------------------------------------------------------------
    As the Year 2000 problem has illustrated, the ``M''--
management must be put back into the Presidency. The solution 
is to give management a powerful profile within the Executive 
Office of the President. Legislation would create an Office of 
Management on equal footing with the Office of Budget. There is 
little debate over whether the executive branch of the Federal 
Government needs better management. There is virtually 
universal agreement that it does. The question is how to bring 
about substantial, enduring improvements. Rather than focus 
solely on today's particular set of problems, we would be wise 
to prepare for the long term. We must look to the larger 
picture of organizational structure.
    There are two basic alternatives for management in the 
Federal Government: to leave general management 
responsibilities in the Office of Management and Budget, where 
they currently reside, or to move general management 
responsibilities to a new Office of Management in the Executive 
Office of the President with a Director reporting to the 
President. OMB would become the Office of Budget with its 
Director continuing to report to the President.
    This is not a question of theory; it is a question of 
practicality. Certainly it is within the power of the President 
and the Director of the Office of Management and Budget to 
bring about serious management improvements within the present 
structure. They are free to treat management as a top priority. 
But, knowing that in practice management is not always made a 
top priority, we must set a structure that endures.
    When President Nixon put a stress on the ``M''--
Management--component and renamed the Bureau of the Budget the 
Office of Management and Budget, the presumption was: ``At last 
the management needs of the Executive Branch will get 
attention. With budget clout, those in Cabinet departments and 
independent agencies will improve their orientation so the 
clients--the taxpayers--will have better service. The 
presumption was wrong. Senior civil servants and political 
appointees in the 1970s, 1980s, and the early 1990s kept saying 
``it is not working.'' Experts have repeatedly argued that 
budget deficit pressures and management of a $5-$6 trillion 
national debt have driven out management issues.
    The Federal Government is the largest, most complex 
organization in the world. Federal management is not practiced 
well. Management has always been the third-cousin behind 
politics, programs, and budgets. By the time these have been 
addressed there is little left for effective organizational 
structure and strategic plans, personnel development, cost 
accounting, financial management, integrated computer systems, 
and results-oriented program administration. For generations 
there have been myriad complaints about the symptoms of poor 
management, even some recognition that poor management is a 
major cause of program failure, but management itself has not 
improved.
    Although there are lessons to be learned from the private 
sector, nobody is suggesting that the Federal Government should 
be run like a commercial corporation. It is different. 
Politics, programs and budgets are the big kids on the block. 
However, management must be improved; it is the vehicle for 
effectively and efficiently implementing the big issues. 
Management does not and should not drive politics, but neither 
can it be ignored.
    There are few places in the Federal Government where staff 
is dedicated to improving management. A tiny, tiny piece of OMB 
focus is management but it is overwhelmed with the budget 
burden and unfortunately is regularly ignored because short 
term policy and budgeting issues drive out longer term 
management initiatives.
    Historically Federal management has received little 
attention. The Bureau of the Budget was created in 1921. 
Virtually no attention was given to management in the early 
years. Accounts agree that, during 1921 to 1939, BOB conducted 
no organization or management studies. Over the years the BOB/
OMB has assumed responsibility for various management 
functions--administrative, intergovernmental, personnel 
utilization, procurement, paperwork/information, statistical, 
regulatory, financial, among others. Since the 1950s, when 
performance budgeting was first used in the Federal Government, 
the BOB/OMB has been required by successive administrations to 
adopt and adapt to a variety of changing of arrangements for 
planning and budgeting.
    The only solution that has not been tried is splitting 
Budget and Management into separate offices. The notion that 
only the clout of the budget can force management reforms has 
proven false. The empirical evidence proves just the opposite. 
In the Federal Government, budget does not help management; 
budget drives out management. Legislation is needed to create a 
separate Office of Management and to transfer to it all 
existing management responsibilities such as the Government 
Performance and Results Act and Year 2000 computer problems. 
The bulk of OMB is unaffected except for a name change to 
Office of Budget and Office of Management.
    Presidents deserve better. As Chief Executive, the 
President needs to have a small group of experts on management 
that can work with members of the Cabinet and other senior 
officials in an administration to improve management 
capability.

                      D. THE STATE AND LOCAL LEVEL

1. The State and local government Year 2000 problem

    The Year 2000 problem has broad ramifications at the State 
and local level. State, county, and city governments must 
prepare their own technology. In many ways this is a problem 
even more challenging than that faced by the Federal 
Government. State and local governments deal with a vast array 
of equipment that depends on embedded chips, for example. This 
equipment includes everything from fire trucks and paramedic 
equipment to railroad crossing signals to traffic lights to 
police radios and 911 equipment. Furthermore, the critical 
public safety functions of local government must not lapse even 
temporarily as the date changes. This means these governments 
have to do careful and comprehensive contingency planning.
    This section of the report divides the State and local 
level into two broad areas: the efforts of governments to 
prepare their own technology, and the basic infrastructure 
services that these governments oversee and in some cases 
operate. The first area is organized according to the level of 
government (State, county, city); the second area is organized 
according to four basic services: electricity, sewage, 
telecommunications, and water.
    As noted above, the subcommittee held a series of six field 
hearings to examine the State and local aspects of the Year 
2000 problem. The first was held on August 13, 1998, in New 
York, New York. The last was held on September 3, 1998, in a 
suburb of Chicago, IL. In between, the subcommittee stopped for 
hearings in a suburb of Dallas, TX; New Orleans, LA; a suburb 
of Cleveland, OH; and Indianapolis, IN. These geographically 
diverse areas offer an important sample of Year 2000 
preparations at the State and local government level across the 
United States.
            a. State governments
    The subcommittee heard testimony from a total of seven 
State governments. There was great variation among these States 
in terms of the extent of their Year 2000 challenges, the level 
of preparation achieved so far, the costs involved, and-perhaps 
most important--the data available.
    Mr. Peter Sullivan testified on behalf of the State of 
Connecticut. He is the director of the Year 2000 Program within 
the Connecticut Department of Information Technology. This 
department was created by statute in July 1997. Connecticut 
reported that 69 percent of its 800 mission-critical systems 
require remediation, upgrade, or replacement. The State 
reported completing 35 percent of its conversion efforts and 20 
percent of its testing efforts. Connecticut has adopted a 
completion goal of March 1999. In April 1998, Connecticut 
budgeted $95 million for the Year 2000 effort. According to 
current reporting, ``agencies have completed 35 percent of 
their conversion efforts and 20 percent of their testing 
efforts overall.'' \124\
---------------------------------------------------------------------------
    \124\ ``Oversight of the Year 2000 Problem: Lessons To Be Learned 
From State and Local Experiences,'' Aug. 13, 1998, original transcript, 
p. 37.
---------------------------------------------------------------------------
    Mr. William Vetter, Manager, Bureau of Communication and 
Computer Services, State of Illinois, noted that many Illinois 
agencies ``began to address the Y2K challenge several years 
ago, even in the 1980s.'' 125 The State's target 
completion date for Year 2000 repairs is January 1, 1999.
---------------------------------------------------------------------------
    \125\ ``Oversight of the Year 2000 Problem: Lessons To Be Learned 
From State and Local Experiences,'' Sept. 3, 1998, original transcript, 
p. 23.
---------------------------------------------------------------------------
    Laura Larimer, Director of Information Technology for the 
State of Indiana, reported that Indiana agencies are divided 
into those that have used central contractors for their Year 
2000 assessment and remediation and those that have not. 
Although Indiana did not report on its current status, it 
reported that agencies using the central contractors are on 
track to complete analysis, remediation, and testing of custom 
software by June 1999.
    Ms. Larimer also reported that two significant agencies 
that did not use the central contractors, the Department of 
Transportation and the Department of Workforce Development, are 
progressing in accordance to plan. She did not provide current 
status or anticipated completion dates. Indiana also reported 
that, with the exception of medical devices (which were 18 
percent complete), it has completed the inventory of hardware, 
software, telecommunications equipment, and facility 
processors. Indiana expects to have all vendor compliance 
information by November, 1998.
    Louisiana did not report any Year 2000 status information. 
Renea Austin, Division of Administration, State of Louisiana, 
who was accompanied by Ms. Chris LaBlanc, Project Manager, 
Louisiana Year 2000 Coordination Project State, noted that 
Louisiana agencies were asked to submit remediation status 
reports in June 1998. Also, the State plans to coordinate with 
colleges and universities around that State to provide a 
downlink for this broadcast and distribute videotapes for those 
unable to attend.
    Mr. Ronald Vidmar, Deputy Director, Computer Services 
Division, Ohio Department of Administrative Services: ``The 
State of Ohio began assessing this problem in early 1996. . . . 
We determined that from a funding standpoint, we had a $61 
million problem. . . . To date, we have not increased that 
amount.'' 126 Mr. Vidmar reported that Ohio agencies 
were approximately 60 percent complete at the end of August 
1998, according to self reporting. ``[I]deally we would have 
all of our agencies through remediation by the end of this 
year. I honestly do not believe that will be 
possible.''127
---------------------------------------------------------------------------
    \126\ ``Oversight of the Year 2000 Problem: Lessons To Be Learned 
From State and Local Experiences,'' Sept. 1, 1998, original transcript, 
p. 18.
    \127\ Ibid. pp. 45-46.
---------------------------------------------------------------------------
    Ohio is not having a problem keeping technology personnel 
on the payroll: ``[T]oday we have found that our retention rate 
is very high, we have lost probably less than 10 percent as far 
as the State government is concerned. . . . Now that is today. 
I will be equally concerned three months from now because I 
agree that at some point this pool is likely to dry up.'' 
128
---------------------------------------------------------------------------
    \128\ Ibid. p. 60.
---------------------------------------------------------------------------
    Mr. Gary Davis, Project Director, Office of Technology, 
testified for the State of New York. He observed that Governor 
Pataki had recognized the problem early on and the ``Year 2000 
Date Change Initiative'' was established in April 1996. The 
State decided to prioritize early in the project, identifying 
40 ``top priority'' systems ``that have a direct impact on 
public health, safety, and welfare.'' 129 Systems in 
this category include child welfare, criminal history, inmate 
population, and tax processing.
---------------------------------------------------------------------------
    \129\ ``Oversight of the Year 2000 Problem: Lessons To Be Learned 
From State and Local Experiences,'' Aug. 13, 1998, original transcript, 
p. 27.
---------------------------------------------------------------------------
    As of the August 13, 1998 hearing, New York State had 6 of 
its top 40 systems Year 2000 compliant; the remainder were 
scheduled to be competed by January 1999. New York also 
reported that 19 percent of its 900 data exchanges were 
compliant. The State put its cost estimate at $250 million. 
``We have implemented numerous strategies to recruit, retain, 
and compensate staff.'' 130 Mr. Davis also noted 
that his State is actively participating in Federal-State Year 
2000 coordination meetings and working with other State and 
local governments on the issue.
---------------------------------------------------------------------------
    \130\ Ibid. p. 29.
---------------------------------------------------------------------------
    Texas reported that it believes that most mission-critical 
systems will be ready for the Year 2000. All coding changes are 
targeted to be completed by December 31, 1998. All agencies 
with embedded systems are supposed to report to the Texas Year 
2000 Project Office in October 1998.
    In October 1997, Pennsylvania hosted the first State-
Federal Chief Information Officers' Summit. Participants at 
this summit made significant decisions on how to proceed in the 
Year 2000 challenge, including: (1) to use a four-digit year 
standard for data exchanges between States and Federal 
agencies; (2) to establish a national policy group, co-chaired 
by the Office of Information and Regulatory Affairs in the 
Office of Management and Budget and the president of the 
National Association of State Information Resource Executives; 
and (3) to create a joint State/Federal technical group, co-
chaired by the chair of the Federal Chief Information Officers' 
Council Year 2000 Committee and the chair of the National 
Association of State Information Resource Executives' 
Subcommittee on the Year 2000.\131\
---------------------------------------------------------------------------
    \131\ See ``Year 2000 Computing Crisis: Potential for Widespread 
Disruption Calls for Strong Leadership and Partnerships,'' U.S. General 
Accounting Office Report to Congress, GAO/AIMD-98-85, p. 17.
---------------------------------------------------------------------------
    Despite this positive effort, the ability of State 
governments to prepare for the year 2000 remains in doubt. As 
January 1, 2000 approaches, time for thorough testing will run 
short for States trying to do too much at the last minute. 
Costs will rise, and the technical expertise necessary to 
implement and test sophisticated systems will be increasingly 
scarce. ``Texas, Missouri, California, and a number of others 
have already cited the fact that they are unable to attract and 
retain the resources that they need to fix their problems.'' 
\132\
---------------------------------------------------------------------------
    \132\ ``Joint Hearing on the Oversight of the Government's Year 
2000 Efforts,'' Mar. 18, 1998, original transcript p. 47 (testimony of 
Dr. Michael Harden, president, Century Technology Services).
---------------------------------------------------------------------------
            b. County governments
    The subcommittee took testimony from four county 
governments. They were generally less prepared than the State 
governments. For example, the 1st Vice President of the Police 
Jury Association of Louisiana reported that many of Louisiana's 
smaller rural parishes (Louisiana's equivalent of counties) 
have not addressed the Year 2000 problem and some have not even 
realized that they may have a problem. This was a disturbing 
revelation. The county level is crucial since many basic 
services, including public safety, police protection, welfare 
administration, and utilities, are provided by this level of 
government.
    Cuyahoga County of Ohio reported that, as of July 30, 1998, 
its implementation phase (which includes coding and testing) 
was 53 percent complete and 3 weeks behind schedule. The county 
estimated its Year 2000 costs at approximately $9.8 million.
    Nassau County, NY was represented by Douglas Wipperman, 
Director of Data Processing for the county. He reported that 
the County discovered the problem early on and decided to 
approach it through full remediation of expanding to the four-
digit year rather than through windowing. ``Many of the 
consultants approached us suggesting that [windowing] was the 
way to go, but what happens is, we are left holding the bag 
after they are gone.'' \133\
---------------------------------------------------------------------------
    \133\ ``Oversight of the Year 2000 Problem: Lessons To Be Learned 
From State and Local Experiences,'' Aug. 13, 1998, original transcript, 
pp. 53-54.
---------------------------------------------------------------------------
    Nassau's mainframe applications are expected to be Year 
2000 compliant by December 1998. However, Nassau County did not 
report on an expected completion date for its mini-computer and 
PC applications. Nassau County expects its Year 2000 costs to 
be between $28 and $35 million. Mr. Wipperman informed the 
subcommittee that Nassau used the Year 2000 problem as an 
opportunity to replace some aging systems.
    Westchester County, NY reported that 71 percent of its Year 
2000 project would be completed by the end of 1998 and that all 
applications would be complete by September 1999. The County 
has budgeted $15.75 million for its Year 2000 efforts. The 
county is using the windowing technique to prepare for 2000. 
Westchester was represented by Mr. Charles Adrion, Director of 
the county's Year 2000 Project Office. He told the subcommittee 
that the county executive required every department to assign a 
Year 2000 coordinator.
    Mr. Adrion also testified that ``[a]t present, there is no 
reason to believe that staff shortage will affect our ability 
to complete [preparations] on time.'' \134\ He did, however, 
express concern over legal liability, saying fear of liability 
has led to a decline in cooperation between public and private 
organizations. ``[W]e highly recommend consideration by 
Congress of legislation which would hold harmless local 
governments for problems both of our own creation and those 
outside our control.'' \135\ Mr. Adrion was pessimistic about 
his county's ability to finish all Year 2000 preparations on 
time.\136\
---------------------------------------------------------------------------
    \134\ ``Oversight of the Year 2000 Problem: Lessons To Be Learned 
From State and Local Experiences,'' Aug. 13, 1998, original transcript, 
p. 46.
    \135\ Ibid. p. 47.
    \136\ Ibid. p. 72 (``I have managed a number of projects over the 
years, and it's unusual that . . . our projects finish on time'').
---------------------------------------------------------------------------
            c. City governments
    City governments expressed more concerns about both funding 
and hiring and retaining qualified personnel to deal with the 
Year 2000 problem. Several of the cities hoped to get some 
funding assistance from the Federal Government.\137\
---------------------------------------------------------------------------
    \137\ New York City's deputy mayor, for example, stated that 
Federal aid to State and local governments to help pay for Year 2000 
work would allow them to continue to provide current, new, or expanded 
services.
---------------------------------------------------------------------------
    The Mayor of Baton Rouge, LA announced a ``call for 
action'' to enhance local government and community awareness of 
the Year 2000 problem. Coinciding with this announcement, Baton 
Rouge has hosted governmental and community Year 2000 seminars. 
Baton Rouge reported to the subcommittee on the Year 2000 
readiness of 130 hardware and software items. Of these, about 
one third were scheduled to be replaced or repaired. Many of 
these items were scheduled to be implemented by the first 
quarter of 1999, however, several items had no implementation 
date.
    Baton Rouge, LA stated that the initial process of 
identifying what devices have embedded systems is cumbersome 
and that a central repository of equipment and devices would be 
useful. Also, Mike Walker, Director of Information Services for 
the city of Baton Rouge, testified: ``It has been extremely 
difficult for us to recruit new employees.'' \138\
---------------------------------------------------------------------------
    \138\ ``Oversight of the Year 2000 Problem: Lessons To Be Learned 
From State and Local Experiences,'' Aug. 19, 1998, original transcript, 
p. 105.
---------------------------------------------------------------------------
    Ms. Beth Boatman, Chief Information Officer for the city of 
Chicago, reported that their Year 2000 Project had been active 
since late 1996 and that the city is aiming to complete mission 
critical systems remediation during the first quarter of 
1999.\139\ She reported two major concerns: personnel and 
embedded chips. ``We particularly are having trouble finding 
skilled workers. * * * We have chosen to privatize almost the 
whole year 2000 project, for a couple of reasons. One is our 
attrition is up near 20 percent and we are constantly seeing 
people turn out of our technology department.''\140\ Regarding 
embedded chips, Ms. Boatman asserted that her ``biggest concern 
right now is probably the embedded systems piece.'' \141\
---------------------------------------------------------------------------
    \139\ ``Oversight of the Year 2000 Problem: Lessons To Be Learned 
From State and Local Experiences,'' Sept. 3, 1998, original transcript, 
p. 29.
    \140\ Ibid. p. 57.
    \141\ Ibid. p. 41.
---------------------------------------------------------------------------
    Indianapolis, IN reported that the third quarter of 1998 
marked the beginning of its intensive renovation and concurrent 
testing phases. Specific status information or completion dates 
were not provided. Indianapolis reported that it expects its 
Year 2000 costs to be about $13 million. Indianapolis also 
stated that the Congress can assist municipalities by directing 
grant funds toward a more timely replacement of some outdated 
Year 2000 noncompliant hardware.
    Lubbock, TX plans to distribute a Year 2000 newsletter to 
its recreation and senior centers, libraries, and municipal 
facilities. Lubbock also plans to distribute a bilingual insert 
in its city-owned utility company's October utility bills. 
Lubbock reported that it was planning a Year 2000 ``drill'' for 
an unannounced night in September 1998. As part of this drill, 
Lubbock was designing scenarios of possible items that may fail 
due to the Year 2000 as well as ``normal'' scenarios (such as 
inclement weather) that may occur on December 31, 1999. This is 
an excellent approach to testing and the committee hopes other 
entities will emulate it.
    New Orleans, LA reported that its computer infrastructure 
had been updated and its biggest applications completed. The 
remaining Year 2000 work (including the completion of its 
mission-critical Human Resources System) is scheduled to be 
completed in the first quarter of 1999.
    New York City reported that as of August 4, 1998, 287 of 
its 706 priority systems were in the process of being tested 
and certified as Year 2000 compliant. Work was continuing on 
the remaining 419 systems, but no projected completion date was 
provided. Mr. Joseph Lhota, Deputy Mayor for Operations, 
reported that New York has spent or appropriated $319 million 
for Year 2000 repairs already, and ``unfortunately that number 
will only go up.'' \142\
---------------------------------------------------------------------------
    \142\ ``Oversight of the Year 2000 Problem: Lessons To Be Learned 
From State and Local Experiences,'' Aug. 13, 1998, original transcript, 
p. 19.
---------------------------------------------------------------------------
    Mr. Lhota indicated that New York has an ambitious approach 
to the Year 2000 problem: ``Generically, anything that goes 
wrong in New York is always blamed on the Mayor, so it's 
important that he make sure we know what's going [throughout 
the City].'' \143\ In terms of a technical workforce, New York 
City implemented a technology training and mentoring program. 
New York City reported that it has trained over 300 people in 
this fashion. Also encouraging is that the New York sewer 
system is not vulnerable to the Year 2000 problem.\144\
---------------------------------------------------------------------------
    \143\ Ibid. pp. 21-22.
    \144\ Ibid. p. 82.
---------------------------------------------------------------------------

2. Basic infrastructure: electricity, telecommunications, water

    ``Frankly, we as a nation do not know where we stand on key 
infrastructure areas like power, water, and telecom . . . 
There's a lot of talk but when you get beneath that talk there 
is no underlying data.'' \145\
---------------------------------------------------------------------------
    \145\ ``Oversight of the Year 2000 Problem: Lessons To Be Learned 
From State and Local Experiences,'' Sept. 2, 1998, original transcript, 
p. 126 (testimony of Joel Willemssen, Director, Information Resources 
Management, Accounting and Information Management Division, U.S. 
General Accounting Office).
---------------------------------------------------------------------------
            a. Electricity
    The importance of electricity is almost too obvious to 
merit discussion. Without power, the Year 2000 readiness of 
virtually all technology will be a moot point. But as a 
society, we rely on electricity for much more than computers. 
One witness before the subcommittee discussed the importance of 
power in the context of agriculture. ``In Iowa, we have 14 
million hogs in confined environmentally maintained houses. In 
Minnesota, they have 44 million turkeys in the same types of 
situations. . . . The important fact to understand here is that 
when we lose ventilation systems in these houses, we can have 
animals die in six hours.'' And: ``Power interruptions on a 
cold winter's day could lead to severe problems and animal 
loss, particularly for poultry and livestock producers.'' \146\
---------------------------------------------------------------------------
    \146\ ``Oversight of the Year 2000 Problem: Lessons To Be Learned 
From State and Local Experiences,'' Sept. 3, 1998, original transcript, 
p. 90 (testimony of Dr. Wendy Wintersteen, director, Agriculture and 
Natural Resources Extension, Iowa State University; see also Dr. 
Wintersteen's prepared testimony, p. 1).
---------------------------------------------------------------------------
    Unfortunately, experts are raising grave concerns about the 
preparedness of the power industry. The production and 
distribution of power rely to a great extent on embedded 
technology. Furthermore, the ``power grid'' is highly 
interconnected. Failure in one region of the country could 
precipitate failures elsewhere. ``[I]t's very likely that we 
will have brownouts in this country, and possibly some 
intermittent blackouts . . . only because if you look at the 
entire grid it's . . . basically an end-to-end system that has 
to be tested. There are 6,000 power plants out there that all 
have to be remediated; and unfortunately, as we look at the 
work from our analysis, we don't see that [remediation and 
testing] is being done in every case.'' \147\
---------------------------------------------------------------------------
    \147\ ``Year 2000: Biggest Problems and Proposed Solutions,'' June 
22, 1998, original transcript p. 23 (testimony of Dennis Grabow).
---------------------------------------------------------------------------
    The Consolidated Edison Co. of New York reported that its 
critical systems were either renovated or in the process of 
being renovated, with an expected completion date in the fourth 
quarter of 1999. Other systems of lesser importance are 
expected to be completed by June 1999. The Consolidated Edison 
Co. of New York also reported that it is researching the 
embedded systems in its control systems components to determine 
if they are Year 2000 compliant. The company reported that it 
has not identified any fatal flaws that would have a 
catastrophic effect on its operations. Renovation of these 
embedded systems is expected to be completed by mid-1999.
    The Texas Utilities Co. reported that more than 90 percent 
of inventory and assessment activities are complete and 25 
percent of its testing. The utility company reported it is 
examining 291 software products and approximately 300 client-
server applications. Additionally, the company reported that 
its Year 2000 project was on schedule and that 25 percent of 
the inventoried applications are compliant. Software conversion 
and testing was in progress and would continue through 1998 
with full integrated testing and implementation in 1999. 
Assessment of its information technology infrastructure was 
scheduled for completion by the end of the summer and work was 
scheduled to be complete by the end of the year. Inventory of 
the utility companies embedded systems (about 11,000) has been 
in progress since last year and conversion is expected to be 
mostly completed by the end of 1998, with some work extending 
into 1999. The Texas Utilities Co. reported an expected Year 
2000 cost between $28 and $31 million.
    FirstEnergy reported that it was nearing the completion of 
a full-scale inventory and assessment of all computer hardware, 
software, and embedded systems and is identifying which systems 
need to be renovated and which need to be replaced. This phase 
of FirstEnergy's Year 2000 project is expected to be completed 
by the end of 1998. In particular, the FirstEnergy is (1) 
assessing its power generation function, which was projected to 
be completed in the fall, (2) evaluating its nuclear power 
plants, and (3) assessing its fossil plants (its largest ones 
are currently undergoing an inventory). FirstEnergy expects to 
complete Year 2000 remediation by the first quarter of 1999 and 
testing by the third quarter of 1999. Mr. John Gill, Senior 
Vice President, FirstEnergy Corp., observed that ``power 
generation is probably the most complicated area to assess 
because of the number and complexity of the systems.'' \148\
---------------------------------------------------------------------------
    \148\ ``Oversight of the Year 2000 Problem: Lessons To Be Learned 
From State and Local Experiences,'' Sept. 1, 1998, original transcript, 
p. 75.
---------------------------------------------------------------------------
            b. Telecommunications
    With almost half of the world's computer capacity and 60 
percent of its Internet assets, the United States is the 
world's most advanced--and most dependent--producer and user of 
information and telecommunications technologies. Such 
technologies have helped fuel the growth of the U.S. economy 
and have enabled major improvements in the Nation's 
infrastructure. The Year 2000 readiness of these 
telecommunications technologies is therefore of great concern.
    The telecommunications infrastructure is comprised of the 
public telecommunications network, the Internet, and the 
millions of computer systems for government, defense, 
commercial, and personal use. The telecommunications network 
includes communications and information transmissions via a 
complex web of interconnected networks operated by local and 
long-distance telephone carriers, cellular networks, and 
satellite services. Significant portions of the Internet rely 
on services provided by the public telecommunications networks.
    The array of reliable telecommunications services is made 
possible by a complex web of highly interconnected networks 
supported by switches and other telecommunications devices. 
Along with national and local carriers and service providers, 
important links in the chain include the equipment 
manufacturers and suppliers and customers. The key is 
connectivity: all of the pieces must work together.
    All telecommunications network components--including 
switches, routers, PBXs, and Internet servers--must be assessed 
and tested to ensure compliance with the Year 2000 computer 
problems. The potential problems are further compounded by the 
global nature of today's telecommunications systems, which rely 
on seamless connections among widely scattered and widely 
diverse networks.
    Telecommunications systems are critical to the operations 
of nearly every public and private sector organization 
including financial services and brokerage institutions; 
health, safety, and emergency services; transportation; 
utilities; and manufacturing and small business. Disruption in 
the service provided by the public telecommunications network 
can affect millions of users and cause massive financial 
losses.
    The Federal Government depends heavily on the 
telecommunications infrastructure. Many agencies, including 
those in the Department of the Treasury and Department of 
Health and Human Services [HHS], rely on both their private 
networks and on the public telecommunications network to 
conduct mission-critical business. An electronic Medicare 
payment, for example, may traverse several networks: those 
operated by HHS, computer systems and networks at the 
Department of the Treasury, and the Federal Reserve's Fedwire 
electronic funds transfer system.
    Businesses and financial institutions rely heavily on 
telecommunications networks to participate in the global 
payments system, to exchange information with trading partners 
and regulatory agencies, and to manage their internal control 
systems and sophisticated computer equipment.
    Year 2000 failure in the telecommunications infrastructure 
would bring potentially disastrous consequences. Financial 
institutions would be unable to process financial transactions 
and trades. Major disruption in the service provided by the 
public telecommunications network can affect millions of users 
and cause massive financial losses. The cost of disruptions and 
outages caused by noncompliant computer or telecommunications 
systems was discussed in a recent study of the potential impact 
of Year 2000-related foreign exchange settlement failures. 
According to the study, the market costs of a single major 
bank's inability to settle its trades could reach $3.3 billion 
in a single week. Other basic services are also vulnerable. Air 
traffic control communications systems would fail; some 
consumer credit card transactions would fail; and 911 emergency 
service transmissions could not be processed.
    Most major carriers expect to achieve Year 2000 compliance 
of their network services by December 1998. Most major carriers 
also plan to be fully compliant, including support services and 
systems, by mid-1999. At a June 1998, House Ways and Means 
subcommittee hearing, the General Accounting Office testified 
that it will be a ``massive challenge'' to bring the 
telecommunications industry into compliance on time. With less 
than 19 months remaining, the GAO was concerned that no one 
currently had an overall assessment of the degree of year 2000 
risk in the telecommunications infrastructure. There may not be 
time to ready all systems, but there is time to concentrate on 
the most important ones affecting health, safety, national 
defense and economic concerns.
    Ameritech reported that it will come close, though not 
quite achieve, its goal of having its mission critical systems 
ready by January 1, 1999. As of the end of the second quarter, 
1998, Ameritech had remediated over 80 percent of Ameritech-
owned code and certified and deployed over one half of its 
applications. In addition, Ameritech reported that, by the end 
of the second quarter of 1998, it had tested and completed the 
deployment of Year 2000 upgrades in over 50 percent of its 
network switches requiring upgrades. Assessments of Ameritech's 
facilities and product management is on-going (and expected to 
be completed during the third quarter of 1998).\149\
---------------------------------------------------------------------------
    \149\ ``Oversight of the Year 2000 Problem: Lessons To Be Learned 
From State and Local Experiences,'' Sept. 1, 1998 (see testimony of Mr. 
Fred Kowitz Director, Ameritech Corp.).
---------------------------------------------------------------------------
    Ameritech is participating in the Year 2000 Telco Forum 
Interoperability Testing. This testing, which was due to start 
in July 1998, will cover a broad cross-section of services, 
from voice to high speed data circuits to complex 911 emergency 
services. It will use a laboratory to simulate peak traffic 
loads and analyze actual network performance. Ameritech also 
reported that it is participating with the Alliance for 
Telecommunications Industry Solutions [ATIS] which is planning 
additional nations, and possibly international, 
interoperability testing of the telecommunications network.
            c. Water
    To power and telecommunications, a third essential service 
must be added: the water supply. Water is essential for not 
only for human consumption, but for sanitation as well. A 
failure in the water supply could very quickly lead to 
dangerous conditions, including a lack of potable water and 
sewage backups.
    Water and sewer companies rely on computers as well as 
equipment operated by embedded chips for a wide range of 
functions. These include electronic pressure recorders, 
generators, collection systems monitoring, flow monitoring, 
mobile equipment, meter reading, and routing. They also include 
laboratory analysis, industrial compliance determinations, and 
geographic information systems.\150\ If their technology fails, 
a variety of malfunctions could result.
---------------------------------------------------------------------------
    \150\ This list is derived largely from the Association of 
Metropolitan Sewerage Agencies.
---------------------------------------------------------------------------
    The Public Utilities Co. of Ohio sounded an optimistic note 
when testifying before the subcommittee. ``I would say every 
utility in Ohio, primarily due to I think the initial Federal 
efforts but then obviously subsequent State efforts, have gone 
through the process of awareness and assessment. They have all 
inventoried, they have all gone fairly well through remediation 
and testing.'' \151\
---------------------------------------------------------------------------
    \151\ Ibid. p. 74 (testimony of Mr. Donald Mason, commissioner, 
Public Utilities Commission of Ohio).
---------------------------------------------------------------------------
    David Hall, an embedded chip expert and Senior Engineer, 
CARA Corporation, reported on his discouraging observations of 
Year 2000 preparations at water treatment plants: ``Every 
municipality I have worked with said that their wastewater 
treatment and wastewater flow is the most critical item, bar 
none, even electricity. And I have yet to see anybody from a 
national level or even a state level start looking or trying to 
get everybody together to determine whether the water and the 
wastewater flow and the other things can come together.'' \152\ 
The General Accounting Office made a similar observation: 
``[T]here is increasing evidence of a great number of embedded 
chips in water and wastewater systems that must be dealt with 
quickly.'' \153\
---------------------------------------------------------------------------
    \152\ ``Oversight of the Year 2000 Problem: Lessons To Be Learned 
From State and Local Experiences,'' Sept. 3, 1998, pp. 188-189.
    \153\ Ibid. p. 120 (testimony of Joel Willemssen).
---------------------------------------------------------------------------

                            III. Conclusions

    Based on the findings of the subcommittee's investigation, 
the Year 2000 problem requires one of the most massive and 
coordinated repair efforts in human history. An enormous amount 
of progress has been made, but at least as much remains to be 
done and, unlike virtually every other major challenge, the 
Year 2000 problem presents an absolute deadline. Both because 
of the enormity of the challenge and because of the 
extraordinary potential for fear and panic, this problem calls 
for strong leadership. The committee hopes that the President 
of the United States, as well as executive leadership in 
organizations throughout the country and the world, will rise 
to this challenge in the months to come.
    [Additional information may be found in the appendix.]
                          A P P E N D I X E S

                              ----------                              


                       APPENDIX A. CORRESPONDENCE

    1. April 29, 1996 Oversight Letter from Subcommittee 
Chairman Stephen Horn and then Ranking Member Carolyn Maloney 
to Major Federal Departments and Agencies Asking for Details of 
Year 2000 Awareness and Planning.
    2. March 26, 1997 Oversight Letter from Subcommittee 
Chairman Stephen Horn, then Ranking Member Carolyn Maloney, and 
Science Subcommittee on Technology Chair Constance Morella and 
Ranking Member Bart Gordon to Major Federal Departments and 
Agencies Asking for Awareness, Planning, and Oversight of 
Embedded Chip Problem.
    3. May 22, 1997 Letter from Subcommittee Chairman Horn to 
U.N. Secretary General Kofi Annan; together with September 18, 
1997 response.
    4. July 16, 1997 Letter from Subcommittee Chairman Stephen 
Horn, then Ranking Member Carolyn Maloney, and Science 
Subcommittee on Technology Chair Constance Morella and Ranking 
Member Bart Gordon to President Clinton.
    5. December 11, 1997 Letter from Subcommittee Chairman 
Stephen Horn to Office of Management and Budget Director 
Franklin Raines on Agency Year 2000 Quarterly Reports.
    [The information referred to follows:]





                 APPENDIX B. SUBCOMMITTEE REPORT CARDS

                              ----------                              

    1. July 1996 Report Card Based on Responses to April 29, 
1996 Oversight Letter.
    2. September 1997 Report Card Based on August 15, 1997 
Quarterly Reports.
    3. December 1997 Projections Based on November 15, 1997 
Quarterly Reports.
    4. March 1998 Report Card Based on February 15, 1997 
Quarterly Reports.
    5. June 1998 Report Card Based on May 15, 1998 Quarterly 
Reports.
    6. September 1998 Report Card Based on August 15, 1998 
Quarterly Reports.
    [The information referred to follows:]





  APPENDIX C. EXECUTIVE ORDER 13073, ``YEAR 2000 CONVERSION,'' ISSUED 
                            FEBRUARY 4, 1998

                              ----------                              

    [The information referred to follows:]





           APPENDIX E. COMMITTEE FINDINGS AND RECOMMENDATIONS

                              ----------                              

Findings:
    1. The Federal Government is not on track to complete 
necessary Year 2000 preparations before January 1, 2000.
    2. Some State and local governments are lagging in Year 
2000 repairs and in many cases lack reliable information on 
their Year 2000 status.
    3. The Year 2000 status of basic infrastructure services, 
including electricity, telecommunications, and water, is 
largely unknown.
    4. Embedded microchips are difficult to find, difficult to 
test, and can lead to unforeseen failures.
    5. Strong leadership from senior management is necessary to 
address the Year 2000 problem.
    6. Organizations are dependent on the Year 2000 
preparedness of their data exchange partners.
    7. Data exchanges, testing, and contingency planning have 
received far too little attention.
    8. Fear of legal liability has made some organizations 
reluctant to share the Year 2000 status of their products and 
internal systems with other businesses and data exchange 
partners.
    9. Resource problems center around hiring and retaining 
skilled workers and attaining the needed funding to perform the 
Year 2000 fixes.
Recommendations:
    1. The President and the Executive Branch of the United 
States Government must approach the Year 2000 problem with 
greater urgency.
    2. Public and private organizations as well as Federal, 
State, and local governments must all work in partnership to 
prepare for the date change.
    3. Congress and the President should establish Federal 
liability protection for organizations that share information 
in order to facilitate Year 2000 repairs.
    4. Year 2000 problem managers should develop goals that are 
linked to readiness measures.
    5. Citizens should demand information on Year 2000 
readiness from their State and local governments, their utility 
companies, and other organizations upon which they are 
dependent.

                 ADDITIONAL VIEWS OF HON. STEPHEN HORN

    As this report highlights, information is essential to 
solving the Year 2000 problem. Senior management must have all 
the information necessary for understanding the significance of 
the problem and for allocating resources to address it. 
Technical staff must have access to information in order to 
avoid duplicating research into Year 2000 compliance that 
others have already done and to keep abreast of the best 
solutions available. Furthermore, organizations must coordinate 
closely with all data exchange partners. The essence of this 
coordination is sharing information.
    The web sites listed below reflect the central role that 
the Internet is playing in the Year 2000 problem. These are 
Federal sites only, but through them people with access to the 
Internet can locate a vast range of private as well as public 
sites.
Congressional Year 2000 Web Sites:
    Government Reform and Oversight Committee, Subcommittee on 
Government Management, Information, and Technology: http://
www.house.gov/reform/gmit/y2k.
    House Majority Leader Richard Armey: http://freedom.gov/
y2k.
    Representative Pete Sessions: http://www.house.gov/
sessions/Y2K.
    House Small Business Committee: http://www.house.gov/smbiz/
leg/y2k.
    House Science Committee: http://www.house.gov/science/y2k.
    House Banking Committee: http://www.house.gov/banking/
year2000.
    The General Accounting Office: http://www.gao.gov/y2kr.
    United States Senate Special Committee on the Year 2000 
Technology Problem: http://www.senate.gov/y2k.
Executive Branch Year 2000 Sites:
    President's Council on the Year 2000 Conversion: 
www.y2k.gov.
    Chief Information Officers Council Committee on Year 2000 
Information Directory (this site is a clearinghouse for 
information on the Year 2000 problem, with links to sites on 
best practices, contingency planning, testing, commercial off-
the-shelf product databases, and many others): 
www.itpolicy.gsa.gov/mks/yr2000/cioy2k.
    The Federal Year 2000 Commercial Off-the-shelf (COTS) 
Product Database: y2k.policyworks.gov.
    The Small Business Administration: www.sba.gov/y2k.
    The Food and Drug Administration, including a database on 
the Year 2000 status of biomedical equipment: www.fda.gov/cdrh/
yr2000/year2000.
                                                        Steve Horn.

ADDITIONAL VIEWS OF HON. HENRY A. WAXMAN, HON. DENNIS J. KUCINICH, HON. 
    TOM LANTOS, HON. ROBERT E. WISE, JR., HON. MAJOR R. OWENS, HON. 
   EDOLPHUS TOWNS, HON. PAUL E. KANJORSKI, HON. GARY A. CONDIT, HON. 
CAROLYN B. MALONEY, HON. THOMAS M. BARRETT, HON. ELEANOR HOLMES NORTON, 
HON. ELIJAH E. CUMMINGS, HON. ROD R. BLAGOJEVICH, HON. DANNY K. DAVIS, 
 HON. JOHN F. TIERNEY, HON. THOMAS H. ALLEN, AND HON. HAROLD E. FORD, 
                                  JR.

    The Subcommittee on Government Management, Information, and 
Technology has held a series of oversight and legislative 
hearings related to the Year 2000 (``Y2K'') computer problem 
and its impacts on the government and the private sector. These 
hearings were reviewed in the report approved by the full 
Committee on October 8, 1998. The report found that the federal 
government was lagging in its efforts to prepare for the Year 
2000, and that, if not fixed, the Y2K problem presents the risk 
of interruption of key government services. The report also 
indicated that state and local governments and the private 
sector face significant challenges from the Y2K problem.
    While we support the findings of the report approved on 
October 8, we submit these views to provide additional 
information that was not included in the report.

                        administration progress

    While we agree with the findings of the report that more 
progress needs to be made, President Clinton and Vice President 
Gore have demonstrated significant leadership on these issues, 
and are making substantial efforts to ensure that the federal 
government does not experience significant disruption due to 
the Y2K problem.
    In February 1998, President Clinton named John Koskinen, a 
respected former OMB official, to head the White House Y2K 
Council. Under Mr. Koskinen's leadership, the Y2K Council is 
actively engaged in many activities to increase awareness of 
the problem in and beyond the federal government. For example, 
the Council has created 35 working groups to address Y2K 
activities in key economic sectors. Through these working 
groups, and via other avenues, the Y2K Council and executive 
agencies are reaching out to private sector organizations, 
state and local governments, and key international 
institutions.
    The President made a major speech about the Year 2000 
problem before the National Academy of Sciences in July 1998. 
This speech highlighted the risk of the problem and the need to 
focus on solutions. The majority report described this speech 
as merely ``preaching to the choir,'' implying that the speech 
was directed at and heard by only the scientific community. 
This is not the case. The speech was directed at the American 
people and received significant coverage in the popular print 
and electronic media.
    The President, through the Y2K Council, continues to 
educate and inform the public about the Y2K problem. The 
Council, working with over 100 private-sector organizations, 
has declared October 19-23, 1998, to be National Y2K Action 
Week. The core focus of the week will be hundreds of 
educational events hosted by federal government field offices, 
including the Small Business Administration, the Department of 
Commerce, the Department of Agriculture, the Social Security 
Administration, and the Department of Transportation. The 
events will focus on assisting managers of small- and medium-
sized businesses to assess and remediate Y2K problems.
    The Administration is also working closely with agencies 
that appear to be having compliance problems. On June 19, 1998, 
OMB directed all so-called ``Tier 1'' agencies (agencies 
showing insufficient evidence of adequate progress), as well as 
``Tier 2'' agencies (agencies that have demonstrated progress, 
but still have significant concerns), to provide monthly plans 
and progress reports to OMB. Mr. Koskinen is actively engaged 
in planning activities of Tier 1 agencies, and on September 2, 
1998, Vice President Gore met with senior officials in the 
seven Tier 1 agencies to stress the importance of the Y2K 
problem.
    Although the staff report focused on the government 
agencies that are not performing well, many agencies are ahead 
of schedule. Chairman Horn's August 15 report card identified 
eight Federal agencies that received grades of B or better for 
their progress on Y2K conversion.1 The report also 
found that 20 of 24 agencies were making progress toward 
solving external data exchange problems, and 12 of 24 were 
focusing on embedded systems. OMB's 6th Quarterly Report on 
Progress on Year 2000 Conversion as of August 15, 1998, 
highlighted the progress made by the federal government:
---------------------------------------------------------------------------
    \1\ The Social Security Administration, the National Science 
Foundation, the Small Business Administration, the General Services 
Administration, the Department of Commerce, the Environmental 
Protection Agency, the Department of Veterans Affairs, and the Federal 
Emergency Management Agency.
---------------------------------------------------------------------------
     Of the governments 7,343 mission critical systems, 
3,692, or 50%, are now Y2K compliant, up from 40% in May.
     Of the remaining 3,651 mission critical systems, 
2,910 are being repaired, 650 are being replaced, and 91 are 
being retired.
     Only two agencies--AID and HHS--are working toward 
dates that are beyond the Government-wide milestones 
(renovation by September 1998, validation by January 1999, and 
verification by March 1999) for the completion of Y2K work. 
Several agencies, including Justice, Treasury, GSA, OPM, the 
Small Business Administration, and the Social Security 
Administration, are ahead of schedule.
     Agencies are also taking steps to assess embedded 
chips and to assess the status of non-mission critical systems.

                        y2k and consumer issues

    The federal government has been the focus of the 
Committee's Y2K oversight hearingsfor the last two years. As a 
result, the Committee has held only one hearing on consumer issues, on 
September 23, 1998. Although the witness list for that hearing included 
authors, software publishers, and organizations that sell products to 
consumers, it did not contain representatives from any organization 
that actually represents consumers. Despite this lack of attention, 
consumers will be affected by numerous aspects of the Y2K problem, and 
Congress must address these issues.
    The Committee report correctly notes that a lack of 
information is a serious problem and indicates that the lack of 
information complicates efforts to solve Y2K problems, and may 
cause panic on the part of individuals, making minor problems 
even worse. The report also recommends that consumers should 
demand information from state and local governments, utilities, 
and other organizations. However, the report does not address 
the issue of whether utilities, software developers, and 
producers of electronic equipment will provide the public with 
the required information voluntarily.
    To date, consumers have been provided with minimal 
information. For example, most software companies are not 
sending out program upgrades to all their customers. Instead, 
they are posting notices of Y2K problems, and providing 
solutions for these problems, via their web sites. Only those 
consumers that have the time and knowledge to actively seek out 
information via the Internet or other purposes have been able 
to obtain any sort of information. Even federal government 
agencies have had little success obtaining information. For 
example, when the FDA sent letters to manufacturers requesting 
information on the Y2K compliance status of medical equipment, 
they received answers from less than one-half of these 
companies. There is presently no provision of law which would 
require that manufacturers inform consumers of potential 
problems. Providing accurate and timely information about their 
products is the responsibility of the businesses that sell 
them. If these organizations will not accept this 
responsibility, Congress must ensure that consumers receive 
adequate information about Y2K problems.

      Congress Must Provide Adequate Y2K Funding in Timely Fashion

    The majority report indicates the federal government did 
not begin fixing Y2K problems on their computers in a timely 
fashion. However, Congress shares responsibility for this lack 
of action because Congress was slow in approving funds for 
agencies to address Y2K problems.
    At the Administration's request, the House Treasury, 
Postal, and General Government Appropriations Bill (H.R. 4104) 
initially included $2.25 billion, and the House Defense 
Appropriations Bill (H.R. 4103) initially included $1.6 billion 
in emergency spending to assist the federal government in its 
efforts to make all computer systems Y2K compliant. 
Unfortunately, because of disputes over offsets, opposition 
from Republican members of the House of Representatives caused 
this funding to be cut before the legislation reached the House 
floor. Although it appears that this critical Y2K funding may 
be included in the final omnibus appropriations bill that is 
expected to be signed by the President, this funding has not 
yet been approved. This delay and uncertainty has complicated 
efforts by senior management to address Y2K problems within 
their agencies and departments.
    Just as federal government agencies have a responsibility 
to fix Y2K problems, Congress must meet its responsibility to 
provide adequate funding for these agencies.

             H.R. 4756, ``The Year 2000 Preparedness Act''

    On October 13, 1998, the House of Representatives passed 
H.R. 4756, ``The Year 2000 Preparedness Act.'' This legislation 
contains two key provisions, originally contained in 
legislation sponsored by Rep. James A. Barcia, that will help 
consumers and small businesses.
    The legislation directs the Department of Commerce to 
develop a consumer awareness program to help inform consumers 
of the implications of, and solutions to, Y2K-related problems. 
This program will include the development of self-assessment 
checklists, resource lists, Y2K-approved products, and a series 
of public awareness announcements. The legislation also directs 
the Small Business Administration and the National Institute of 
Standards and Technology to develop a similar Y2K outreach 
program for small- and medium-sized businesses. While these 
provisions will not solve Y2K problems for all consumers and 
small businesses, they represent the first step taken by 
Congress to protect these key constituencies.
    At the time these additional views were filed, it was not 
clear if the Senate would pass this legislation.

                                   Henry A. Waxman.
                                   Dennis J. Kucinich.
                                   Tom Lantos.
                                   Robert E. Wise, Jr.
                                   Major R. Owens.
                                   Edolphus Towns.
                                   Paul E. Kanjorski.
                                   Gary A. Condit.
                                   Carolyn B. Maloney.
                                   Thomas M. Barrett.
                                   Eleanor Holmes Norton.
                                   Elijah E. Cummings.
                                   Rod R. Blagojevich.
                                   Danny K. Davis.
                                   John F. Tierney.
                                   Thomas H. Allen.
                                   Harold E. Ford, Jr.

                                
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