Defense Computers: Year 2000 Computer Problems Put Navy Operations at
Risk (Letter Report, 06/30/98, GAO/AIMD-98-150).

GAO reviewed the Navy's program for addressing its year 2000 computer
systems problem, focusing on the: (1) status of the Navy's efforts to
oversee its year 2000 program; and (2) appropriateness of the Navy's
strategy and actions for ensuring that the problem will be successfully
addressed.

GAO noted that: (1) the Navy relies on computer systems for some aspect
of virtually every operation, including strategic and tactical
operations; sophisticated weaponry; intelligence, surveillance, and
security efforts; strategic sealift and fleet mobilization and
readiness; and routine business functions such as financial, personnel,
logistics, and contract management; (2) failure to address the year 2000
problem in time could severely degrade or disrupt the Navy's day-to-day
and, more importantly, mission-critical operations; (3) the Navy has
taken many positive actions to increase awareness, promote sharing of
information, and encourage its components to make year 2000 remediation
efforts a high priority; (4) however, it is behind schedule in
remediating systems; (5) for example, the Navy did not finish assessing
its mission-critical systems until December 1997 even though it
anticipated that this would be done in June 1997; (6) in addition, it is
still in the initial stages of assessing whether year 2000 fixes are
required for computer hardware, communications equipment, security and
building systems, and other infrastructure equipment; (7) furthermore,
the Navy lacks key management and oversight controls to enforce good
management practices, direct resources, and establish a complete picture
of its progress in remediating systems; (8) for example, the Navy: (a)
currently lacks a comprehensive departmentwide inventory of systems
requiring remediation; (b) has not been tracking component progress in
developing written agreements with their interface partners; (c) has not
developed a test strategy for the department; and (d) is not developing
contingency plans that focus on ensuring the continuity of all of its
critical military operations and business processes; (9) as a result,
the Navy lacks complete and reliable information on its systems, and on
the status and cost of its remediation efforts; and (10) it has also
increased the risk that: (a) year 2000 errors will be propagated from
one organization's systems to another's; (b) all systems, interfaces,
and equipment important to Navy operations will not be thoroughly and
carefully tested; and (c) the department will not be prepared if systems
are not corrected or replaced by the year 2000 deadline.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  AIMD-98-150
     TITLE:  Defense Computers: Year 2000 Computer Problems Put Navy 
             Operations at Risk
      DATE:  06/30/98
   SUBJECT:  Computer software
             Computer software verification and validation
             Data integrity
             Information resources management
             Strategic information systems planning
             Systems conversions
             Military systems analysis
             Logistics
             Systems compatibility
             Combat readiness
IDENTIFIER:  Navy Year 2000 Program
             
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Cover
================================================================ COVER


Report to the Secretary of the Navy

June 1998

DEFENSE COMPUTERS - YEAR 2000
COMPUTER PROBLEMS PUT NAVY
OPERATIONS AT RISK

GAO/AIMD-98-150

Navy Year 2000 Challenges

(511624)


Abbreviations
=============================================================== ABBREV

  ASD/C3I - Assistant Secretary of Defense for Command, Control,
     Communications and Intelligence
  CIO - Chief Information Officer
  IG - Inspector General
  DISA - Defense Information Systems Agency
  DIST - Defense Integration Support Tools
  DOD - Department of Defense
  LAN - local area network
  NAVAIR - Naval Air Systems Command
  NAVSEA - Naval Sea Systems Command
  NAVSUP - Naval Supply Systems Command
  O&M - operational and maintenance
  OMB - Office of Management and Budget

Letter
=============================================================== LETTER


B-279872

June 30, 1998

The Honorable John H.  Dalton
The Secretary of the Navy

Dear Mr.  Secretary: 

This report presents the results of our review of the Navy's program
for addressing its Year 2000 computer systems problem.  The problem
results from the inability of computer systems at the year 2000 to
interpret the century correctly from a recorded or calculated date
having only two digits to indicate the year.  Time is running out to
correct Navy systems that could malfunction or produce incorrect
information when the year 2000 is encountered during automated data
processing.  The impact of these failures could be widespread,
costly, and potentially debilitating to important Navy operations
worldwide. 

We performed this work as part of our review of the Department of
Defense's (DOD) Year 2000 computer systems efforts for the Chairman,
Senate Committee on Governmental Affairs; the Chairman and Ranking
Minority Member of the Subcommittee on Government Management,
Information and Technology, House Committee on Government Reform and
Oversight; and the Honorable Thomas M.  Davis, III, House of
Representatives.  During the review, we assessed (1) the status of
the Navy's efforts to oversee its Year 2000 program and (2) the
appropriateness of the Navy's strategy and actions for ensuring that
the problem will be successfully addressed.  This letter summarizes
our concerns and provides recommendations for addressing them. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

The Navy relies on computer systems for some aspect of virtually
every operation, including strategic and tactical operations;
sophisticated weaponry; intelligence, surveillance, and security
efforts; strategic sealift and fleet mobilization and readiness; and
routine business functions such as financial, personnel, logistics,
and contract management.  Failure to address the Year 2000 problem in
time could severely degrade or disrupt the Navy's day-to-day and,
more importantly, mission-critical operations. 

The Navy has taken many positive actions to increase awareness,
promote sharing of information, and encourage its components to make
Year 2000 remediation efforts a high priority.  However, it is behind
schedule in remediating systems.  For example, the Navy did not
finish assessing its mission-critical systems until December 1997
even though it anticipated that this would be done in June 1997.  In
addition, it is still in the initial stages of assessing whether Year
2000 fixes are required for computer hardware, communications
equipment, security and building systems, and other infrastructure
equipment. 

Furthermore, the Navy lacks key management and oversight controls to
enforce good management practices, direct resources, and establish a
complete picture of its progress in remediating systems.  For
example, the Navy: 

  -- currently lacks a comprehensive departmentwide inventory of
     systems requiring remediation;

  -- has not been tracking component progress in developing written
     agreements with their interface partners;

  -- has not developed a test strategy for the department; and

  -- is not developing contingency plans that focus on ensuring the
     continuity of all of its critical military operations and
     business processes. 

As a result, the Navy lacks complete and reliable information on its
systems, and on the status and cost of its remediation efforts.  It
has also increased the risk that (1) Year 2000 errors will be
propagated from one organization's systems to another's, (2) all
systems, interfaces, and equipment important to Navy operations will
not be thoroughly and carefully tested, and (3) the department will
not be prepared if systems are not corrected or replaced by the Year
2000 deadline. 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
------------------------------------------------------------ Letter :2

Our objectives were to assess (1) the status of Navy's effort to
identify and correct its Year 2000 problem and (2) the
appropriateness of the Navy's strategy and actions for remediating
Year 2000 problems.  In conducting our review, we used our Year 2000
Assessment Guide\1 to assess the Navy's Year 2000 efforts.  This
guide addresses common issues affecting most federal agencies and
presents a structured approach and provides a checklist to aid in
planning, managing, and evaluating Year 2000 programs.  The guidance,
which is consistent with Defense's Year 2000 Management Plan\2 and
the Navy's own Year 2000 management approach, describes five
phases--supported by program and project management activities--with
each phase representing a major Year 2000 program activity or
segment.  The phases and a description of each follows. 

  -- Awareness - Define the Year 2000 problem and gain
     executive-level support and sponsorship.  Establish a Year 2000
     program team and develop an overall strategy.  Ensure that
     everyone in the organization is fully aware of the issue. 

  -- Assessment - Assess the Year 2000 impact on the enterprise. 
     Identify core business areas and processes, inventory and
     analyze systems supporting the core business areas, and
     prioritize their conversion or replacement.  Develop contingency
     plans to handle data exchange issues, lack of data, and bad
     data.  Identify and secure the necessary resources. 

  -- Renovation - Convert, replace, or eliminate selected platforms,
     applications, databases, and utilities.  Modify interfaces. 

  -- Validation - Test, verify, and validate converted or replaced
     platforms, applications, databases, and utilities.  Test the
     performance, functionality, and integration of converted or
     replaced platforms, applications, databases, utilities, and
     interfaces in an environment that faithfully represents the
     operational environment. 

  -- Implementation - Implement converted or replaced platforms,
     applications, databases, utilities, and interfaces.  Implement
     data exchange contingency plans, if necessary. 

During our review, we concentrated on the Navy's efforts to oversee
its Year 2000 program during the awareness and assessment phases--the
first two phases of its overall five-phased approach.  We focused our
review on Year 2000 work being carried out by (1) DOD's Office of the
Assistant Secretary of Defense for Command, Control, Communications
and Intelligence (ASD/C3I), which is responsible for promulgating DOD
guidance on Year 2000 matters and providing assistance to Defense
components, (2) Navy Headquarters, including the Offices of the Chief
Information Officer (CIO), who is responsible for overall
coordination and management and for issuing Navy Year 2000 policy and
guidance, and (3) the Navy's two largest systems commands, the Naval
Air Systems Command (NAVAIR) and the Naval Sea Systems Command
(NAVSEA), which are the central activities responsible for
developing, acquiring, and supporting aeronautical systems and ships
and related weapons and combat systems. 

Specifically, we met with the Acting Assistant Secretary of Defense
for Command, Control, and Communications and Intelligence, the
Principal Director for Information Management, the Director for
Information Technology, and other senior staff responsible for Year
2000 issues.  We reviewed Defense's Year 2000 guidance and other
documentation on Year 2000 funding, reporting, and date format
requirements.  We met with the Acting Deputy Chief Information
Officer, the Team Leader and Coordinator from the Year 2000
Coordination Office, and the NAVSEA Coordinator and the NAVAIR Deputy
CIO.  We obtained and analyzed documents issued by these offices that
describe organizational structure and responsibilities for carrying
out the Navy Year 2000 program.  We reviewed the Navy's Year 2000
Action Plan\3 to assess the level of guidance, roles, and
responsibilities, and target milestone dates for the Year 2000
effort. 

We also reviewed other pertinent Year 2000 program documentation such
as Defense and Navy guidance and management directives, working group
minutes, status reports, and cost and schedule data.  Further, we
reviewed available inventory information on the Navy's
mission-critical systems contained in the Defense Integration Support
Tools (DIST) database, which the Navy uses to help manage its Year
2000 efforts.  In doing so, we determined (1) the number of systems
reported to be owned and operated by Navy organizations and (2) the
reported status of Navy systems in their Year 2000 efforts.  We also
assessed the reliability and completeness of the Navy's Year 2000
information. 

We relied on work previously conducted at the Naval Supply Systems
Command (NAVSUP), which is the Navy's primary supply manager.  In our
report\4 on NAVSUP's Year 2000 efforts, we found that NAVSUP had made
considerable progress in meeting its Year 2000 challenges as a result
of implementing a centralized management and control approach. 

We performed our work primarily at the Navy's Year 2000 Coordination
Office and the Office of the Assistant Secretary of Defense for
Command, Control, Communications and Intelligence in Arlington,
Virginia.  We conducted our work from August 1997 through April 1998
in accordance with generally accepted government auditing standards. 
We requested comments on a draft of this report from the Secretary of
the Navy.  Comments from the department are discussed in the "Agency
Comments and Our Evaluation" section and are reprinted in appendix
II. 


--------------------
\1 Year 2000 Computing Crisis:  An Assessment Guide
(GAO/AIMD-10.1.14, September 1997); first issued as an exposure draft
in February 1997. 

\2 Version 2, January 1998. 

\3 Specifically, we reviewed the Navy's draft plan dated November
1997 and subsequent revisions issued in January and March 1998. 

\4 Defense Computers:  Technical Support Is Key to Naval Supply Year
2000 Success (GAO/AIMD-98-7R, October 21, 1997). 


   BACKGROUND
------------------------------------------------------------ Letter :3

Most of the Navy's automated information systems and weapons systems
are vulnerable to the Year 2000 problem, which is rooted in the way
dates are recorded and computed in automated information systems. 
For the past several decades, systems have typically used two digits
to represent the year, such as "97" representing 1997, in order to
conserve electronic data storage and reduce operating costs.  With
this two-digit format, however, the Year 2000 is indistinguishable
from 1900, or 2001 from 1901, etc.  As a result of this ambiguity,
computerized systems and/or application software that use dates to
perform calculations, comparisons, or sorting may generate incorrect
results when working with years after 1999.  In addition, any
electronic device that contains a microprocessor or is dependent on a
timing sequence may be also vulnerable to Year 2000 problems.  This
includes computer hardware, telecommunications equipment, building
and base security systems, street lights at military installations,
elevators, and medical equipment. 

Should Navy computer systems fail, Navy operations at all levels
could be impacted by the incorrect processing of data as well as
corrupted databases or even massive system failures.  In turn, this
could result in such problems as delays in supply shipments, faulty
inventory forecasts, unreliable budget estimates, and erroneous
personnel-related information.  Moreover, the problem could adversely
impact critical maritime operations such as combat, communications,
command and control, intelligence, surveillance, reconnaissance,
strategic sealift, and fleet mobilization and readiness. 

Like the other military services, the Navy has adopted DOD's Year
2000 management strategy, which charges components (that is, program
managers and system owners) with responsibility for making sure that
all of their systems correctly process dates and gives them the
flexibility to implement solutions as they deem appropriate.  In
December 1995, the Navy designated the Navy Information Systems
Management Center with responsibility for (1) coordinating Year 2000
efforts being carried out by its 9 operating forces, including the
U.S.  Marine Corps, and its 17 shore establishments which include 5
major systems commands, (2) facilitating the sharing of Year 2000
information and best practices departmentwide, and (3) monitoring the
Navy's Year 2000 progress.  In August 1997, the Navy transferred this
responsibility to its newly established Office of the Department of
the Navy Chief Information Officer.  Appendix I illustrates the
Navy's organizational structure and describes the complexity involved
in carrying out Year 2000 efforts at the component level. 

To comply with DOD's current Year 2000 funding mandate, the Navy is
not providing program managers and system owners additional funds to
manage and fix the Year 2000 problem.  Rather, program managers and
system owners have been directed to use previously budgeted funds
(that is, primarily operational and maintenance (O&M) funds) or
reprogram other programmatic funds to fix Year 2000 problems.  As of
February 1998, the Navy estimated that it will cost about $421
million to successfully complete its Year 2000 program, but as
discussed later, this estimate is not reliable. 


   THE NAVY'S YEAR 2000 EFFORTS TO
   DATE
------------------------------------------------------------ Letter :4

To increase awareness of Year 2000 and to foster coordination among
its components, the Navy has taken the following actions. 

  -- In November 1995, it formally began the awareness phase of its
     Year 2000 program. 

  -- In April 1996, it established a Navy Year 2000 homepage that
     serves as a clearinghouse for Year 2000 information. 

  -- Since October 1996, it has participated in a number of Year 2000
     interface assessment workshops sponsored by Defense.  These
     workshops are designed to acquaint managers with the nature and
     extent of interface problems pertaining to 21 functional areas,
     such as finance, intelligence, logistics, communications, and
     weapons systems. 

  -- From March 1997 through May 1998, it has conducted quarterly
     reviews to keep abreast of Year 2000 problems.  These reviews
     are attended by representatives from the Secretary of the Navy,
     the CIO office, and the major Navy and Marine Corps commands and
     activities.  Since May 1998, the Navy CIO office has been
     holding weekly briefings with the commands. 

  -- In April 1997, it adopted and implemented DOD's compliance
     checklist to assist system managers in ensuring that their
     systems are compliant for the Year 2000.  The checklist focuses
     on (1) identification of systems and interfaces, (2) assessment
     of date usage by the systems, and (3) compliance testing, among
     other subjects. 

  -- In August 1997, it identified Year 2000 as its highest priority
     behind life-threatening or mission failure repairs and
     instructed components to put a higher priority on funding
     remediation efforts than on other information technology
     initiatives. 

  -- In December 1997, it tasked the Navy Inspector General to assess
     Year 2000 readiness at its commands.  The IG plans to report on
     its assessment of 12 commands in April.  At the time of our
     review, the IG had not issued any reports.  In February 1998,
     the Navy requested the Naval Audit Service to review Year 2000
     readiness at the commands not visited by the IG. 

  -- In January 1998, it formally issued its Year 2000 Action Plan. 
     The March 1998 revision of this plan sets milestones for the
     completion of major Year 2000 activities and provides exit
     criteria for each phase. 

In February 1998, the Navy reported to the Office of Management and
Budget that it had 812 mission-critical \5 and 1,575
nonmission-critical automated information and embedded systems.\6
According to the Navy, 781 mission-critical systems need to be
repaired; about a quarter of these were reported to be in the
renovation phase and over half in the validation phase.  In addition,
the Navy reported that 1,422 nonmission-critical systems need to be
repaired; about a third of these were reported to be in renovation
and half in validation.  Specific reported totals for February 1998
are shown in table 1.  As discussed later in this report, we found
the Navy's status information to be unreliable. 



                                Table 1
                
                Reported Status of the Navy's Year 2000
                                Efforts

                                           Mission-      Nonmission-
                                           critical        critical
                                           systems         systems
                                        --------------  --------------
                                                Percen          Percen
Status                                  Number     t\a  Number     t\a
--------------------------------------  ------  ------  ------  ------
======================================================================
Total systems                              812           1,575
Compliant                                    0       0       0       0
To be replaced before 2000                  19     2.3      26     1.7
To be retired before 2000                   12     1.5     127     8.1
To be repaired                             781    96.2   1,422    90.3
Reported status of systems to be
 repaired
======================================================================
Total systems                              781           1,422
In awareness phase                           0       0       0       0
In assessment phase                          0       0      33     2.3
In renovation phase                        191    24.5     459    32.3
In validation phase                        441    56.5     712    50.1
In implementation phase                     14     1.8      20     1.4
Corrected\b                                135    17.3     198    13.9
----------------------------------------------------------------------
\a Percentages do not total 100 percent due to rounding. 

\b In late 1997, the Office of the Secretary of Defense established
this reporting category to indicate those systems that have completed
all five Year 2000 phases.  NAVAIR, for example, plans to require the
system sponsor to certify its systems as Year 2000 compliant before
it can report it as "corrected."

Source:  Navy information reported to the Office of Management and
Budget.  We did not independently verify this information. 

In its February 1998 report, the Navy provided the following
information on personal computers and communications and facility
equipment. 



                                     Table 2
                     
                       Information Reported by the Navy on
                                 Other Equipment

                                                  Number     Percent      Number
               Total      Number     Percent         not         not      Status
           inventory   compliant   compliant   compliant   compliant     unknown
--------  ----------  ----------  ----------  ----------  ----------  ----------
Personal
 compute     313,781     111,114        35.4     164,241        52.3      38,426
 rs/
 servers
Communic
 ation        13,105       3,428        26.2       2,213        16.9       7,464
 devices
 (includ
 ing
 telecom
 municat
 ions
 equipme
 nt)
Facility       3,113       1,925        61.8         471        15.1         717
 devices
 (includ
 es such
 items
 as
 elevato
 rs,
 securit
 y
 systems
 , and
 medical
 equipme
 nt)
================================================================================
Total        329,999     116,467       35.3%     166,925       50.6%      46,607
--------------------------------------------------------------------------------
Source:  Navy information reported by components.  Only compliant
systems were reported to the Office of Management and Budget.  We did
not independently verify this information. 


--------------------
\5 For Year 2000 purposes, the Navy defines a mission-critical system
as "a system that when its capabilities are degraded, the
organization will realize a resulting loss of a core capability."

\6 These figures reflect only those systems entered into the DIST
database. 


      NAVY PROGRESS IN EARLY YEAR
      2000 PHASES HAS BEEN SLOW
---------------------------------------------------------- Letter :4.1

The Navy is behind schedule in completing the early phases of its
Year 2000 program.  For example, although Defense required that all
systems be assessed by June 1997, the Navy reported that it did not
finish assessing its mission-critical systems until December 1997,
and, as of February 1998, reported it was still assessing about 2
percent of its nonmission-critical systems .  In addition, it did not
issue an approved Year 2000 program management plan until January
1998.  Our guide recommends that this be done early in the assessment
phase.  Further, it is still assessing whether corrective actions are
needed for other equipment such as computer hardware, communications
equipment, and security systems.  In April 1998, the Navy issued a
draft assessment guide to evaluate these assets. 

Technology experts like the Mitre Corporation and the Gartner Group
estimate that organizations should spend less than 30 percent of
their effort in the first two phases and reserve 70 percent for the
renovation, validation, and implementation phases of the Year 2000
program.  Because the Navy has spent about 60 percent of the time
available completing the first two phases, it will be difficult to
complete the more complex and time-consuming tasks of renovating,
testing, and implementing its systems in the time remaining. 

Navy officials acknowledge that the assessment phase is taking longer
than expected.  They attribute this delay to difficulties associated
with developing a complete systems inventory and the lack of skilled
field people to perform Year 2000 tasks.  Before its Year 2000
effort, the Navy did not have a comprehensive servicewide system
inventory nor did many of its components.  Therefore, it could not
readily determine the magnitude of the Year 2000 problem servicewide
or the cost to fix it. 

Even though Navy CIO officials acknowledged that the department is
behind schedule, the Navy has recently moved up its target completion
dates for its mission-critical systems for the remaining three
phases. 



                                Table 3
                
                  Navy's Accelerated Year 2000 Target
                 Completion Dates for Mission-Critical
                                Systems

                                         November 1997
                                          draft action      March 1998
Phase                                             plan     action plan
--------------------------------------  --------------  --------------
Awareness                                      12/1/96         12/1/96
Assessment                                     6/30/97         6/30/97
Renovation                                      8/1/98       6/30/98\a
Validation                                    12/30/98       10/30/98\
Implementation                                  5/1/99      12/31/98\a
----------------------------------------------------------------------
\a OMB's governmentwide target completion date for renovation is
September 1998; the target completion date for implementation is
March 1999. 

Under the accelerated schedule, the Navy plans to complete the
renovation phase for mission-critical systems about 1 month sooner
than it originally anticipated and the testing phase 2 months earlier
than originally anticipated.  It also plans to complete the
implementation phase 4 months earlier than anticipated and 3 months
before OMB's recommended completion date.  Based on the latest
reported component data, the Navy estimates that only seven
mission-critical systems will not meet its new dates. 

As the following sections of this report discuss, the Navy is at risk
of not meeting its new schedule because it has not yet established
key management and oversight controls needed to successfully complete
the next phases.  Specifically: 

  -- At the time of our review, Navy headquarters as well as some
     components did not have strong program offices to guide them
     through the more complex and difficult phases of remediation. 

  -- The Navy still does not have complete and accurate information
     on systems, the status of remediation efforts, and costs. 

  -- The Navy has not yet identified all system interfaces nor
     ensured that interface partners are effectively working together
     to correct interfaces. 

  -- The Navy has not developed an overall strategy for testing its
     systems. 

In addition, Navy operations are at risk because the Navy has not
developed contingency plans to ensure that mission functions can be
performed if mission-critical systems are not corrected in time. 


   THE NAVY HAS NOT BEEN
   EFFECTIVELY OVERSEEING AND
   MANAGING YEAR 2000 REMEDIATION
   EFFORTS
------------------------------------------------------------ Letter :5

In view of the magnitude of the Year 2000 problem, our Assessment
Guide recommends that agencies plan and manage their Year 2000
programs as a single large information system development effort and
promulgate and enforce good management practices at the program and
project levels.  The guide also recommends that agencies appoint a
Year 2000 program manager and establish an agency-level Year 2000
program office. 

The Navy took a decentralized approach to the Year 2000 effort but it
did not initially establish a strong Year 2000 program office to
manage it effectively.  For example, during our review, the Navy had
assigned only five full-time personnel in the office of the CIO to
oversee and monitor the Year 2000 progress of more than 2,000 systems
and 300,000 personal computers and servers owned by five major
systems commands, 17 shore establishments, and 9 operating forces,
including the U.S.  Marine Corps.  By contrast, the Air Force
assigned 27 staff to the Year 2000 problem--3 to oversee and
implement program and policy changes across the service and 24 to
execute the program.\7 According to Navy CIO officials, the office
had not managed Year 2000 remediation efforts effectively, and most
of the staff's time had been spent reporting the status of component
efforts to top managers in the Navy, DOD, and external entities, such
as the CIO Council and OMB.  For example, at the time of our review,
the staff was not validating information being reported by Navy
components for completeness and accuracy; assessing component efforts
to prioritize systems; or tracking component progress in completing
important Year 2000-related activities, such as contingency planning
and testing. 

Some of the Navy's components also did not support their own efforts
with a strong program office.  For example, at the time of our
review, NAVSEA did not have any dedicated full-time Year 2000 staff
at the command level, even though it is responsible for managing more
than 350 systems involving 138 major acquisition programs and 345
ships--all of which are susceptible to Year 2000 problems.  NAVAIR,
which is responsible for about 870 systems involving over 200
aeronautical-related programs and over 4,600 aircraft, assigned only
three full-time staff to work on the command's Year 2000 problem. 

The Navy has recently responded to this problem by assigning three
additional staff to the CIO Office to help coordinate Year 2000
activities and by establishing a new Year 2000 Project Office for
Navy Operations, comprised of 15 staff.  As shown in appendix I, the
Chief of Naval Operations is responsible for operating forces across
all Navy commands and shore activities as well as key functions, such
as intelligence, logistics, and training.  The office, which will
begin operating in June 1998, will be responsible for coordinating
the testing efforts of NAVAIR, NAVSEA, the Space and Warfare Systems
Command, and fleet commands.  However, there are no plans to have
either the CIO Office or the new project office validate data
reported by the components or assess component progress in
prioritizing systems, identifying and correcting interfaces, and
developing contingency plans. 


--------------------
\7 The three staff assigned to oversee the program work at the Air
Force Communications and Information Center (AFCIC), which reports to
the Office of the Chief Information Officer.  The 24 personnel
assigned to execute the program work at the Air Force Year 2000
Program Office at Scott Air Force Base, Illinois, which reports to
AFCIC. 


   THE NAVY DOES NOT YET HAVE
   COMPLETE AND ACCURATE YEAR 2000
   INFORMATION
------------------------------------------------------------ Letter :6

According to our Assessment Guide, a key part of the assessment phase
is to identify business areas that are critical to the enterprise
and, for each area, critical business processes and supporting
information systems.  In constructing the inventory of information
systems, it is important to assess the potential impact on business
processes if systems are not fixed on time, to estimate the cost of
remediation, and to monitor the progress components are making toward
correcting their systems.  This provides the necessary foundation for
Year 2000 program planning.  The Navy, however, does not yet have a
complete and accurate inventory or reliable status and cost
information.  As a result, it does not have a clear picture of its
Year 2000 remediation efforts and it cannot reliably prioritize
systems for correction, determine what resources it needs, or
identify problems that require greater management attention. 

Until recently, the Navy's primary source of Year 2000 system
inventory information was the Defense-wide database of automated
systems, known as the Defense Integration Support Tools (DIST)
database.\8 The Navy was using this database to help oversee its Year
2000 efforts and prepare its quarterly status reports to the
Department of Defense, which, in turn, submits the information to the
Office of Management and Budget. 

In February 1998, due to concerns that extensive and detailed
information on all of the Department's mission-critical systems was
available on the Internet, ASD/C3I removed DIST from the Internet and
classified it as "secret"--meaning that it can only be accessed by
personnel with a valid security clearance, job-related
"need-to-know," and access to secure computer and communications
equipment.  As a result, the Navy has no readily accessible central
repository of system information to help oversee system fixes or
respond to ad hoc requests for Year 2000 information from OMB or
Defense.  According to the CIO office, the secret classification
given DIST has "gravely hindered" its ability to manage the Year 2000
effort. 

The Navy plans to resolve this problem by creating a separate
unclassified Year 2000 database and making it available by June 1998. 
As the Navy implements this new database, it will be important for it
to correct the data problems we identified in our discussions with
command and headquarters officials as well as in our review of
selected information from DIST on the Navy's mission-critical
systems\9 provided to us by the Defense Information Systems Agency
(DISA) database administrator.  These problems include the following. 

  -- Of 819 mission-critical systems in the database, 6 systems
     failed to identify which stage of remediation they were in, 23
     did not provide the name of the system or describe its function,
     and 118 failed to show an expected compliance date. 

  -- In providing the data, DISA did not include cost information
     because the Office of the Assistant Secretary of Defense for
     Command, Control, Communications and Intelligence concluded that
     the data were unreliable.  For example, ASD/C3I noted that in
     some cost estimates, the decimal point was misplaced,
     overstating some estimates by millions of dollars. 

  -- Our discussions with headquarters and command officials further
     revealed that the cost estimate was incomplete.  For example,
     NAVSEA officials told us that the Navy was missing cost
     information for about 95 percent of NAVSEA's 138 major
     acquisition programs.  NAVAIR also indicated that many of its
     system managers were not reporting costs. 

  -- The reliability of cost information is also questionable because
     some Navy components are still using a cost formula derived from
     the Gartner Group and the Mitre Corporation, which recommends
     multiplying the number of lines of code by $1.10 for automated
     information systems and by $8 for weapons systems.  Defense
     recommended that components use this formula early in their Year
     2000 efforts, but it also recommended that a more detailed cost
     analysis based on more than 30 cost factors be conducted as
     components progressed through the assessment phase and learned
     more about their systems and the resources that would be
     required to fix them.  The difference between the Gartner/Mitre
     formula and a more reliable analysis of data collected during
     the assessment phase can be significant.  For example, based on
     the Gartner/Mitre formula, the Navy estimated that it would cost
     $4.3 million to correct a mission-critical ordnance management
     system.  Based on a detailed cost analysis of data collected
     during its assessment, the Navy estimated that remediation costs
     would actually be about $1.75 million--a 59 percent decrease
     over the original estimate. 

In addition, as the new database is implemented, it will be important
for the Navy to routinely validate the information submitted by its
components.  While it was using DIST, the Navy did not validate the
data.  Consequently, it had no assurance that the information on its
systems, remediation progress, and cost was correct and complete. 


--------------------
\8 At the beginning of its Year 2000 effort, Defense designated DIST
as the primary departmentwide Year 2000 tracking tool.  Some
components, such as the Air Force and the Army, also built their own
databases and used them in managing their Year 2000 programs.  The
Navy decided to rely solely on DIST and did not build a separate
database. 

\9 In conducting our review, we were not provided access to the
database.  However, in response to a request from the House Committee
on National Security that we report on the Year 2000 status of
Defense's mission-critical systems, DISA provided us with information
from the database on the Navy's mission-critical systems, including
the name and description of the system, status of remediation,
planned versus actual date of compliance, and status of contingency
plans.  Because this information was generated after the Navy
submitted its February 1998 report to OMB, it reflects seven more
mission-critical systems than the February status report. 


   NAVY MANAGEMENT OF INTERFACE
   CONVERSIONS HAS BEEN
   INEFFECTIVE
------------------------------------------------------------ Letter :7

Navy systems interface with each other as well as with systems
belonging to contractors, other federal agencies, and international
entities, such as the North Atlantic Treaty Organization and foreign
military sales customers.  Therefore, it is essential that Navy
components ensure that all interfaces are Year 2000 compliant and
that noncompliant interfacing partners will not introduce Year
2000-related errors into compliant Navy systems.  Our Assessment
Guide and DOD's Year 2000 Management Plan recommend that agreements
with interface partners be initiated during the assessment phase to
determine how and when interface conflicts will be resolved. 

The Navy has not managed the identification and correction of its
interfaces effectively.  First, although the Navy set the goal of
completing renovation of its interfaces by June 30, 1998, many
components, including the nine NAVAIR and NAVSEA weapon system
program offices we contacted during our review, were still in the
process of identifying interfaces and assessing whether they need to
be corrected.  Second, as of February 1998, the Navy reported to OMB
that it had fixed only 5 of the 1,051 interfaces already identified. 
For the rest, it had not yet determined whether data bridges would be
required,\10 negotiated who was responsible for installing and
funding the bridges, or developed agreements documenting the method
and schedule for correcting the interfaces.  Third, the Navy was not
using DIST (before it was classified) or any other information tool
to track component progress in completing these activities. 

The Navy recently asked its Inspector General and the Naval Audit
Service to review the completeness of memorandums of agreement as
they conduct their Year 2000 assessments at the commands.  However,
these reviews will be performed on a limited basis--they are not
designed to ensure that all mission-critical program managers and
system owners have identified their interfaces, taken appropriate
measures to fix them, and documented these agreements with their
interface partners. 


--------------------
\10 Bridging involves receiving information in one format, modifying
it, and outputting it in another format, such as receiving the year
in a two-digit format, adding century information through the use of
an algorithm, and writing the output with a four-digit year. 


   THE NAVY IS NOT PREPARED FOR
   THE TESTING PHASE
------------------------------------------------------------ Letter :8

The validation (testing) phase of the Year 2000 effort is expected to
be the most expensive and time-consuming.  Experts estimate that it
will account for 40 to 60 percent of the entire effort.\11 As DOD's
Year 2000 Management Plan notes, organizations "must not only test
Year 2000 compliance of individual applications, but also the complex
interactions between scores of converted or replaced computer
platforms, operating systems, utilities, databases, and interfaces."

To mitigate the risks associated with testing, our Assessment Guide
calls on agencies to develop validation strategies and test plans. 
Validation strategies are developed at an organizationwide level to
ensure that common test requirements are followed by all locations. 
Specifically, they describe the test organization's and its
components' roles and responsibilities, system/project priorities, a
master schedule of high-level test activities for each
system/project, and the test resources to be used in carrying out
these activities (people, tools, facilities, and contractors).  The
plan should be sufficiently detailed to allow system/project-specific
planning to occur as well as to permit program office tracking of
high-level test activity progress.  For example, it should have
milestones, including completion dates, for application/system
acceptance tests, specify project progress metrics, and allocate
common test facilities and other resources among system renovation
projects competing for these facilities and resources.  Since
agencies may need over a year to adequately validate and test
converted or replaced systems for Year 2000 compliance, our
Assessment Guide recommends that this planning begin in the
assessment phase. 

The Navy lacks an overall validation strategy that specifies the
common criteria and processes components should use in testing their
systems.  As such, it has no assurance that all systems and
interfaces will be thoroughly and consistently tested.  For example,
in the absence of a validation strategy: 

  -- There is no guidance on who, when, and how tests of the Navy's
     estimated 10,000 local area networks (LANs) should be conducted. 
     As a result, the Navy Computer and Telecommunications Command,
     which manages these networks, is relying solely on its vendors
     to ensure that Navy LANS are Year 2000 compliant.  It does not
     plan to perform end-to-end tests\12 on shore-based LANS or
     ensure that vendor tests are adequate.\13 One Navy command has
     found that relying on vendors to ensure that systems are
     compliant is not enough to mitigate Year 2000 risks.  When
     NAVSUP tested products that vendors claimed were compliant, it
     found that many were not. 

  -- The Navy does not know how much testing capacity is needed by
     its components and how much is available even though it has
     acknowledged that these resources will be in demand.  As our
     Assessment Guide notes, agencies may have to acquire additional
     facilities in order to provide an adequate testing environment. 
     The longer the Navy waits to begin assessing the need for these
     facilities, the less time it will have to acquire additional
     facilities or otherwise ensure that all mission-critical systems
     can be tested before the Year 2000 deadline. 

In addition to lacking a departmentwide validation strategy, we found
that two major components--NAVAIR and NAVSEA--had not developed
strategies nor were they ensuring that the organizations reporting to
them did so.  In fact, NAVAIR did not require its program managers
and system owners to develop individual Year 2000 test plans. 


--------------------
\11 According to Mitre Corporation and Gartner Group. 

\12 The purpose of end-to-end testing is to verify that a defined set
of interrelated systems, which collectively support an organizational
core business area or function, interoperate as intended in an
environment which faithfully represents the operational (i.e., live
production) environment.  These interrelated systems include not only
those owned and managed by the organization, but also those external
systems with which they interface.  Generally, end-to-end testing is
conducted when one major system in the end-to-end chain is modified
or replaced and attention is rightfully focused on the changed or new
system.  In the case of Year 2000 testing, however, most if not all
of the systems in the end-to-end chain will have been modified or
replaced.  As a result, the scope and complexity of the testing is
dramatically increased, as is the difficulty of isolating,
identifying, and correcting problems. 

\13 The Navy estimates that shipboard LAN end-to-end testing will
begin in the spring of 1999. 


   BUSINESS CONTINUITY AND
   CONTINGENCY PLANNING IS
   INADEQUATE
------------------------------------------------------------ Letter :9

To mitigate the risk that Year 2000-related problems will disrupt
operations, our recently issued guide on business continuity and
contingency planning\14

recommends that agencies perform risk assessments and develop
realistic contingency plans during the assessment phase to ensure the
continuity of critical operations and business processes. 
Contingency plans are important because they identify the manual or
other fallback procedures to be employed should systems miss their
Year 2000 deadline or fail unexpectedly in operation.  Contingency
plans also define the specific conditions that will cause their
activation. 

The Navy is not developing contingency plans that focus on ensuring
the continuity of all of its critical military operations and
business processes.  Instead, it is developing plans for only a small
portion of its mission-critical systems--specifically those systems
that (1) are scheduled for implementation beyond January 1, 1999, (2)
do not complete renovation by June 30, 1998, or (3) fail integrated
platform testing.  The Navy reported that, under these criteria, only
7 of the 812 mission-critical systems currently require a contingency
plan.  Three of these plans have been completed.  The Navy is taking
this approach because it believes that it should spend its resources
on identifying and fixing Year 2000 problems early and then
concentrate its energy on contingency plans for systems for which
renovation is going to be delayed. 

Preparing contingency plans on this basis is not judicious.  First,
even if the Navy's mission-critical systems are replaced or renovated
in time, there is no guarantee that they will operate correctly. 
Second, the risk of Year 2000 failures is not limited to the Navy's
internal systems.  In fact, the Navy depends on information and data
provided by other Defense and federal agencies, international
organizations, and private contractors whose systems can introduce
Year 2000 problems into Navy's systems.  It also relies on services
provided by the public infrastructure, which are susceptible to Year
2000 problems that could disrupt operations
--including power, water, and voice and data telecommunications. 
Until its contingency planning focuses on this chain of critical
dependencies, the Navy will not be able to ensure that it can
maintain the basic functionality of its critical operations and core
business processes. 


--------------------
\14 Year 2000 Computing Crisis:  Business Continuity and Contingency
Planning (GAO/AIMD-10.1.19, Exposure Draft, March 1998). 


   CONCLUSIONS
----------------------------------------------------------- Letter :10

Navy operations may be severely disrupted if the Navy does not
successfully remediate its mission-critical computer systems before
the Year 2000 deadline.  While the Navy has taken a number of actions
to address this issue, many critical tasks remain to be done in a
relatively short period.  At this point, the Navy does not know
whether it has identified all systems and interfaces; it lacks
reliable data on the status and cost of remediation efforts; and it
does not know if it has the capacity to handle the demanding task of
testing systems, networks, operating platforms, and databases. 
Despite the fact that these weaknesses have greatly increased the
chances that it will not correct its mission-critical systems in
time, the Navy is not adequately prepared to respond to unforeseen
problems and delays. 


   RECOMMENDATIONS
----------------------------------------------------------- Letter :11

We recommend that you direct the Department of the Navy Chief
Information Officer to ensure that the Navy Year 2000 Coordination
Office is provided with sufficient staff and authority to implement
the following recommendations. 

  -- Establish a complete and accurate inventory of its information
     systems.  Ensure that the data problems identified in this
     report are corrected and routinely validate the information
     submitted by components to the database. 

  -- Ensure that components have identified and corrected interfaces
     and developed written memorandums of agreement with interface
     partners. 

  -- Develop a departmentwide testing strategy that describes program
     manager and system owner roles and responsibilities,
     system/project priorities, a master schedule of high-level test
     activities for each system/project, and the test resources to be
     used in carrying out these activities (people, tools,
     facilities, and contractors).  Ensure that Navy components
     develop their own test strategies and require their program
     managers and system owners to develop individual test plans. 

  -- Ensure that Year 2000 contingency planning focuses on the
     continuity of all of the Navy's critical military operations and
     business processes rather than on only a small portion of
     mission-critical systems. 


   AGENCY COMMENTS AND OUR
   EVALUATION
----------------------------------------------------------- Letter :12

In written comments on a draft of this report, the Department of the
Navy Chief Information Officer (CIO) concurred with all of our
recommendations to improve the Navy's Year 2000 program.  In response
to our recommendations, the Navy agreed to establish a complete and
accurate inventory of its information systems, ensure that components
have identified and corrected interfaces and developed memorandums of
agreement with interface partners, develop a departmentwide test
strategy, and ensure that contingency planning focuses on the
continuity of critical military operations and business processes. 
The Navy also stated that it has increased staff in its Year 2000
Coordination Office to 10 full-time employees to help carry out these
activities. 

In addition, the Navy noted that its new Year 2000 database, which is
expected to be on-line in June 1998, will include additional data
elements not contained in DIST, such as actual and programmed costs,
planned and actual dates that memorandums of agreements are signed
with interface partners, the dates that test plans are prepared, and
the status of testing activities.  As part of the validation process,
the CIO Office plans to conduct weekly reviews of the data for
completeness and accuracy.  The Navy also stated that, in addition to
requiring that contingency plans be prepared on the continuity of
business operations and to ensure mission capability at the user
level, it is now requiring contingency plans to be prepared for
all--rather than a select few--mission-critical systems no later than
December 1998. 


--------------------------------------------------------- Letter :12.1

This report contains recommendations to you.  The head of a federal
agency is required by 31 U.S.C.  720 to submit a written statement on
actions taken on these recommendations to the Senate Committee on
Governmental Affairs and the House Committee on Government Reform and
Oversight not later than 60 days after the date of this report.  A
written statement also must be sent to the House and Senate
Committees on Appropriations with the agency's first request for
appropriations made more than 60 days after the date of this report. 

We are providing copies of this report to the Chairmen and Ranking
Minority Members of the Senate Committee on Governmental Affairs, the
Subcommittee on Oversight of Government Management, Restructuring and
the District of Columbia, Senate Committee on Governmental Affairs,
the Subcommittee on Defense, Senate Committee on Appropriations, the
Senate Committee on Armed Services, the Subcommittee on Government
Management, Information and Technology, House Committee on Government
Reform and Oversight, the Subcommittee on National Security, House
Committee on Appropriations, and the House Committee on National
Security.  We are also sending copies to the Honorable
Thomas M.  Davis, III, House of Representatives; the Deputy Secretary
of Defense; the Acting Assistant Secretary of Defense for Command,
Control, Communications and Intelligence; the Navy Chief Information
Officer; and the Director of the Office of Management and Budget.  If
you have any questions on matters discussed in this report, please
call me at (202) 512-6240.  Major contributors to this report are
listed in appendix III. 

Sincerely yours,

Jack L.  Brock, Jr.
Director, Governmentwide and Defense Information Systems


NAVY YEAR 2000 ORGANIZATIONAL
STRUCTURE
=========================================================== Appendix I

As figure I.1 indicates, the size and complexity of the Department of
the Navy's organization structure poses a significant management
challenge.  Year 2000 management and oversight efforts will have to
be coordinated among 17 major Navy shore establishments including 5
major systems commands and 9 operating forces, such as the U.S. 
Marine Corps, the Naval Reserve Forces, the Military Sealift Command,
and the Atlantic and Pacific Fleets. 

Figure I.2 provides an example of just one command's field structure. 
To understand the complexity involved in carrying out Year 2000
efforts at the command level, consider the following. 

  -- The Naval Sea Systems Command's fiscal year 1998 budget accounts
     for about 19 percent (or $15 billion) of the Navy's total
     budget. 

  -- The Naval Sea Systems Command, which is the largest of five Navy
     systems commands, employs about 55,000 personnel. 

  -- The command currently manages 138 acquisition category programs
     assigned to six program executive offices, including Carriers,
     Littoral Warfare, and Auxiliary Ships; Mine Warfare; Surface
     Combatants/AEGIS Program; Submarines; Theater Air Defense; and
     Undersea Warfare. 

  -- The command is responsible for 345 ships, including 92
     submarines and 14 aircraft carriers, assigned to 24 home ports
     in the United States and overseas. 

  -- The command manages about 1,275 foreign military sales cases. 
     Because the command's systems interface with the systems
     belonging to its foreign military sales customers, it will need
     to develop interface agreements with its customers. 

  -- The Naval Sea Systems Command alone has about 56 Year 2000
     points-of-contacts. 

   Figure I.1:  Department of the
   Navy Organization Structure

   (See figure in printed
   edition.)

   Figure I.2:  Example of the
   Field Structure at One Navy
   Command

   (See figure in printed
   edition.)




(See figure in printed edition.)Appendix II
COMMENTS FROM THE DEPARTMENT OF
THE NAVY
=========================================================== Appendix I



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix III

ACCOUNTING AND INFORMATION
MANAGEMENT DIVISION, WASHINGTON,
D.C. 

John B.  Stephenson, Assistant Director
Ronald B.  Bageant, Assistant Director
Cristina T.  Chaplain, Communications Analyst
Alicia L.  Sommers, Senior Information Systems Analyst

CHICAGO/DAYTON FIELD OFFICE

Steven M.  Hunter, Senior Evaluator
Robert P.  Kissel, Jr., Senior Evaluator
Robert G.  Preston, Senior Evaluator

ATLANTA FIELD OFFICE

Christopher T.  Brannon, Senior Evaluator
Teresa F.  Tucker, Senior Evaluator

*** End of document. ***