SSA Customer Service: Broad Service Delivery Plan Needed to Address
Future Challenges (Testimony, 02/10/2000, GAO/T-HEHS/AIMD-00-75).

Pursuant to a congressional request, GAO discussed the Social Security
Administration's (SSA) efforts to prepare to meet its future service
delivery challenges, focusing on: (1) the extent and seriousness of
these challenges; (2) SSA's strategy to meet them; (3) the status of the
agency's efforts to use information technology to cope with the
challenges; (4) the agency's efforts to prepare its workforce for the
future; and (5) the implications of SSA's plans and efforts for its
readiness to meet future challenges.

GAO noted that: (1) SSA will be challenged to maintain a high level of
service to the public in the next decade and beyond; (2) demand for
services is expected to grow significantly, with applications for one of
SSA's already-burdened disability programs projected to increase by 54
percent by 2010; (3) moreover, the expectations and needs of SSA's
customers are changing; (4) some are expecting faster, more convenient
service, while others may require additional assistance from staff with
more diverse skills; (5) at the same time, SSA's ability to cope with
these changes will be challenged, since the number of SSA employees
retiring is expected to peak at the same time that large increases will
occur in applications for benefits, according to SSA's Actuary's
estimates; (6) SSA is only now beginning to develop a broad vision for
customer service for 2010; (7) this broad vision, as well as a more
detailed plan spelling out who in the future will be providing what
service and where, is needed to help the agency focus its efforts to
meet its future challenges; (8) in the meantime, to cope with pending
workload increases, the agency is relying in large part on technology to
achieve increased efficiencies; (9) however, SSA has had mixed success
in implementing information technology initiatives, and the benefits
from its technology investments have largely been unclear; (10) on the
other hand, SSA's efforts to prepare for the increasing number of
retirements from its own workforce and changing customer needs and
expectations have shown more promise, although many initiatives are
still in their early stages and much work remains; (11) SSA will need to
fully assess the skills its workforce will need to serve its future
customers, particularly its growing population of disabled beneficiaries
and the high proportion of those with mental impairments; (12) SSA will
also need to ensure continuity in leadership through ongoing succession
planning efforts; (13) finally, without a vision for future service
followed by a more detailed service delivery plan, SSA cannot be sure
that its investments in technology and human capital--that is, its
workforce--are consistent with and fully support its future approach to
service delivery; and (14) it will be important for the agency to
complete this plan to guide its investments and better position itself
to cope with its future challenges.

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

 REPORTNUM:  T-HEHS/AIMD-00-75
     TITLE:  SSA Customer Service: Broad Service Delivery Plan Needed
	     to Address Future Challenges
      DATE:  02/10/2000
   SUBJECT:  Income maintenance programs
	     Customer service
	     Human resources utilization
	     Social security benefits
	     Claims processing
	     Information resources management
	     Reengineering (management)
	     Strategic planning
IDENTIFIER:  Old Age Survivors and Disability Insurance Program
	     Supplemental Security Income Program
	     SSI

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   * For Release on Delivery
     Expected at 11:00 a.m.

Thursday,

February 10, 2000

GAO/T-HEHS/AIMD-00-75

SSA CUSTOMER SERVICE

Broad Service Delivery Plan Needed to Address Future Challenges

        Statement of Cynthia M. Fagnoni, Director

Education, Workforce, and Income Security Issues

Health and Human Services Division

Testimony

Before the Subcommittees on Human Resources and Social Security, Committee
on Ways and Means, House of Representatives

United States General Accounting Office

GAO

Messrs. Chairmen and Members of the Subcommittees:

We are pleased to be here today to discuss the Social Security
Administration's (SSA) efforts to prepare to meet its future service
delivery challenges. As you know, SSA is one of only a few federal
government agencies with which most American families will have regular
contact. In fiscal year 1999, SSA provided benefits of over $400 billion to
more than 48 million individuals through its retirement and disability
programs, and the agency maintained records on the earnings of the vast
majority of U.S. workers. Because of SSA's broad reach, the quality of its
customer service can affect the public's view of government overall, and SSA
has committed itself to providing world-class service to the American
public.

While SSA has generally been viewed as one of the better-run federal
agencies and has been recognized for its service to the public, the agency
faces a number of challenges that could adversely affect its ability to
provide world-class service in the future. Today, we are here to discuss (1)
the extent and seriousness of these challenges, (2) SSA's strategy to meet
them, and, more specifically, (3) the status of the agency's efforts to use
information technology to cope with the challenges, (4) the agency's efforts
to prepare its workforce for the future, and (5) the implications of SSA's
plans and efforts for its readiness to meet future challenges. The
information we are providing is based on both published and ongoing work
(see the list of related GAO products at the end of this statement).

In summary, we found that SSA will be challenged to maintain a high level of
service to the public in the next decade and beyond. Demand for services is
expected to grow significantly, with applications for one of SSA's
already-burdened disability programs projected to increase by 54 percent by
2010. Moreover, the expectations and needs of SSA's customers are changing.
Some are expecting faster, more convenient service, while others, such as
non-English speakers and the large population of beneficiaries with mental
impairments, may require additional assistance from staff with more diverse
skills. At the same time, SSA's ability to cope with these changes will be
challenged, since the number of SSA employees retiring is expected to peak
at the same time that large increases will occur in applications for
benefits, according to SSA's Actuary's estimates.

While we have recommended since 1993 that SSA prepare a service delivery
plan, SSA is only now beginning to develop a broad vision for customer
service for 2010. This broad vision, as well as a more detailed plan
spelling out who in the future will be providing what service and where, is
needed to help the agency focus its efforts to meet its future challenges.
In the meantime, to cope with pending workload increases, the agency is
relying in large part on technology to achieve increased efficiencies.
However, SSA has had mixed success in implementing information technology
initiatives, and the benefits from its technology investments have largely
been unclear. On the other hand, SSA's efforts to prepare for the increasing
number of retirements from its own workforce and changing customer needs and
expectations have shown more promise, although many initiatives are still in
their early stages and much work remains. SSA will need to fully assess the
skills its workforce will need to serve its future customers, particularly
its growing population of disabled beneficiaries and the high proportion of
those with mental impairments. SSA will also need to ensure continuity in
leadership through ongoing succession planning efforts. Finally, without a
vision for future service followed by a more detailed service delivery plan,
SSA cannot be sure that its investments in technology and human capital-that
is, its workforce-are consistent with and fully support its future approach
to service delivery. It will be important for the agency to complete this
plan to guide its investments and better position itself to cope with its
future challenges.

Background

To meet its customer service responsibilities, SSA operates a vast network
of offices distributed throughout the country. These offices include 1,343
field offices, which, among other things, handle application in-take; 132
Offices of Hearings and Appeals (OHA); and 36 teleservice centers
responsible for SSA's national 800 number operations. The agency's policy is
to provide customers with a choice in how they conduct business with SSA.
Options include visiting or calling a field office, calling the 800 number,
or contacting SSA through the mail. To conduct its work, SSA employed 63,000
staff in 1999: 13,000 at its headquarters offices and 50,000 in the field
offices and at other facilities. In addition, to make initial and ongoing
disability determinations, SSA contracts with 54 state disability
determination service (DDS) agencies. While federally funded and guided by
SSA in their decision-making, these agencies hire their own staff and retain
a degree of independence in how they manage their offices and conduct
disability determinations.

SSA relies extensively on computer technology to support its large volumes
of programmatic and administrative work. Since the 1980s, SSA has taken
numerous steps to modernize its computer systems in an effort to better
serve its increasing beneficiary population and improve its productivity. A
key aspect of the modernization effort has been the agency's transition from
a centralized mainframe-based computer processing environment to a more
highly distributed processing environment. SSA has also taken other steps to
improve its service delivery capability, such as enhancing its electronic
payment services and implementing direct access customer service on the
Internet.

SSA Faces Significant Customer Service Challenges Over the Next 10 Years

Customer Demand for Services Is Likely to Grow and Change

Note: SSA's Office of the Chief Actuary does not have estimates of
applications for OASI and DI beyond 2010. Also, these estimates reflect some
double-counting of those individuals who apply for both DI and SSI-a group
that is expected to grow from about 480,000 in fiscal year 1999 to 640,000
in fiscal year 2010.

Source: Data provided by SSA's Office of the Chief Actuary.

Increased customer demand for services has serious implications for SSA's
workforce. For example, if SSA did not change the number of staff currently
handling initial applications for benefits, worker productivity would need
to increase by 27 percent-whether through technology enhancements, process
improvements, or other changes-to manage increases in applications predicted
by SSA's Office of the Chief Actuary. Table 1 shows the increased level of
productivity that would be needed to manage predicted levels of applications
in 2010.

Table 1: Productivity Needed to Manage Estimated 2010 Workloads
                 Initial                                Initial
 Fiscal year     applications        Work-years         applications
                                     required           processed per
                 Processed                              work-year
 1999 (actual)   6,177,723           16,714             370
 2010
 (predicted)     7,855,800           16,714             470

Note: SSA's accountability report used slightly different data in
calculating fiscal year 1999 applications than did SSA's Office of the Chief
Actuary; the difference amounted to about 66,000 cases.

Source: Fiscal year 1999 data are from SSA's Accountability Report for
Fiscal Year 1999. Fiscal year 2010 data were calculated from Office of the
Chief Actuary data.

Increases in disability applications are particularly worrisome for SSA
because of its complex process for determining whether an applicant is
disabled. The process spans a number of offices and can take a long time.
First, an applicant contacts a field office to file a claim for benefits.
This information is forwarded to one of the state DDS offices to determine
whether the individual is disabled. To make this determination, DDS staff
must often collect a number of documents, including medical records and
other evidence. The decision itself requires difficult judgments. If the
applicant is dissatisfied with the original decision, the process provides
for several opportunities for appeal: a reconsideration of the decision at
the DDS, a hearing before an administrative law judge at an OHA, and a
review by SSA's Appeals Council. Finally, after exhausting all these
remedies, the applicant may file a claim in federal court.

Even as SSA expects increases in the number of disability applications, the
agency is experiencing difficulty managing its current workload effectively.
In 1999, over 500,000 people initially denied disability benefits appealed
the decision, and it took an average of 316 days to reach a final decision
for these cases. Reducing the lengthy period that the disability claims
process takes at both the initial and hearings levels has become one of
SSA's priorities for improving customer service. SSA has been attempting for
a number of years to streamline, or redesign, the disability claims process
and has counted on these efforts to help absorb some workload growth.
However, as we testified before you in October 1999, SSA's past progress has
been slow and disappointing. The agency is now conducting a test of some
proposed changes and has also begun a new initiative to speed decisions at
the hearings level. It will be challenging, but necessary, for the agency to
achieve significant improvements in processing times in order to handle the
impending workload increases. Otherwise, the predicted growth in
applications could further erode customer service in this area.

In addition to the expected increase in customer demand for SSA services,
the demands that customers place on SSA are changing, presenting SSA with a
dual challenge. Changing customer expectations are pushing the need for
faster, more convenient service from SSA, such as by phone or computer. For
example, the volume of calls handled by SSA's national 800 number's
automated menu grew by over 1.6 million (13 percent) between 1997 and 1999.
More dramatically, during a recent 6-month period, requests for individual
estimates of future Social Security benefits via the Internet increased by
45 percent. At the same time, some aspects of SSA's customer service
workload have become more time-consuming and labor-intensive. For example,
SSA is hiring more staff with bilingual skills and spending more time
serving an increasing number of non-English or limited-English speaking
customers. In addition, since 1986, the proportion of disabled beneficiaries
with mental impairments has increased-by 18 percent for SSI and by over 30
percent for DI-and these beneficiaries can be challenging and even more
time-consuming to serve successfully. Moreover, SSA's efforts to help
disabled beneficiaries join or rejoin the workforce could require some
additional time and new skills.

Retirements of SSA Staff Will Affect Agency's Ability to Meet Challenges

Table 2: SSA Employees Eligible to Retire Between 1999 and 2009
                                      Number of
 Grade level      Number of           employees eligible Percentage
                  employees                              eligible to retire
                                      to retire
 GS-1 to 11       47,983              23,848             50
 GS-12            8,617               5,518              64
 GS-13            4,395               3,245              74
 GS-14            1,568               1,298              83
 GS-15            479                 414                86
 SES              117                 98                 84
 Total            63,159              34,421             54

Source: SSA, Office of Human Resources.

Retirement eligibility figures, while useful, do not show the actual
challenge an agency will face in replacing its staff. To get a better idea
of the challenges it will face, SSA has developed estimates of how many
staff it will lose each year to retirement and other factors. Figure 2 shows
SSA's predicted workforce losses over the next 20 years. As the figure
shows, peak losses occur in fiscal years 2009 and 2010. This peak generally
coincides with the time period for which SSA's Office of the Chief Actuary
predicts large increases in applications for benefits. In addition, the
largest number of retirements will most likely occur in job positions that
provide direct service to the public; for example, over 7,500 of the
agency's approximately 16,500 claims representatives-those who accept and
process claims for benefits-are expected to retire by 2010. Retirements can
especially affect SSA's small offices around the country, where the loss of
just a few experienced staff or managers can seriously undermine customer
service and effective operations.

Source: SSA, Office of Human Resources.

Service Delivery Plan Is Needed to Focus Efforts to Address Future
Challenges

SSA has begun taking some long overdue steps to better plan for its future
service delivery; however, much work remains. In 1998, SSA established its
Market Measurement Program to improve and consolidate its approach to
assessing customer expectations. When this program is fully developed, SSA
will monitor and measure the needs, expectations, priorities, and
satisfaction of customer groups, major stakeholders, and its workforce.
However, collecting complete data on the needs, expectations, and
satisfaction of these various groups is a multiyear project, and as of
January 2000, SSA was about midway through its initial wave of data
collection, analysis, and reporting. SSA has a separate initiative under way
to assess future customer needs and expectations.

In addition, the agency has recently begun to develop a service vision for
2010. This vision, according to SSA officials, will be based on future
customer and stakeholder needs and expectations and will provide a
high-level summary of the principles on which SSA plans to base its service
provision and the various delivery options available. The agency plans to
incorporate this vision into its strategic plan, which will be updated this
year. However, to be useful for making information technology and human
capital decisions, this vision should be followed by a more detailed service
delivery plan. According to SSA officials, the agency does not have plans to
go beyond this vision statement to issue a more detailed plan at this time.
Without a well-developed plan, SSA cannot be assured that its investments in
human capital and technology, as well as any related decisions regarding the
use of its many field offices and other facilities, will fully support its
vision of service delivery. Nor can the agency be comfortable that it has
taken the necessary steps to meet its future challenges.

SSA's ability to develop a detailed service delivery plan is hampered by
weaknesses in the agency's complex systems for measuring workloads,
productivity, and quality. These weaknesses make it difficult both to
monitor current customer service performance and to use the data to develop
and support planned changes. For example, SSA has the capability to monitor
and measure only service provided at the national and regional level, not by
its various offices located around the country. As a result, line managers
and planners do not know the efficiency or quality of service provided by
individual offices, or even the level of service provided by phone as
opposed to face-to-face, and therefore cannot plan for improvements
accordingly. SSA recognizes that its workload and quality data have
limitations. The agency is in the early stages of piloting alternative
workload measurement systems and also just recently let a contract to review
its quality assurance systems.

In the absence of a service delivery plan, SSA has a number of information
technology and workforce initiatives under way to try to prepare for its
future challenges. The following sections provide specific information on
agency progress on these initiatives.

SSA Is Pursuing Various Information Technology Initiatives, but Impact on
Service Delivery Cannot Yet Be Determined

According to a 1999 independent audit of SSA's systems environment, the
agency must also contend with the challenge of further strengthening
controls over the information contained in its computers. The
vulnerabilities identified could lead to unauthorized access to, and
modification or disclosure of sensitive SSA information. In turn, this could
result in the loss of data and resources, and compromised privacy of
information associated with SSA's key business processes.

SSA's Computer Modernization Benefits Are Not Yet Known

One of SSA's most significant initiatives is its computer modernization
effort known as the Intelligent Workstation/Local Area Network (IWS/LAN).
SSA considers this initiative to be the linchpin for both its customer
service program and its entire business approach. It is expected to provide
the automation infrastructure to support redesigned work processes and
improved availability and timeliness of information throughout SSA and state
DDSs. SSA began acquiring the IWS/LAN equipment in December 1996. As of
January 30, 2000, the agency reported that it had installed more than 75,600
intelligent workstations and about 1,900 local area networks in most of the
approximately 2,000 SSA and state DDS sites included in the initiative.

Despite its progress, however, the benefits of SSA's investment in IWS/LAN
remain uncertain because the agency has not yet assessed the initiative's
actual contribution to improving productivity and service delivery. While
SSA should be able to claim some work improvements from various desktop
management tools that are integral to IWS/LAN, such as on-line guides and
directories, standardized notices, and electronic mail, it has not completed
the evaluations needed to fully assess the efficiencies achieved through
implementing IWS/LAN and its impact on providing higher quality and more
effective service.

During our testimony before the Social Security Subcommittee last July, we
expressed concern that SSA lacked target goals and a defined process for
measuring IWS/LAN performance-two ingredients essential for determining
whether this investment will yield expected improvements in service to the
public. We noted, in particular, that SSA had not conducted
postimplementation evaluations to determine actual project costs, benefits,
risks, and returns, as required by the Clinger-Cohen Act of 1996 and Office
of Management and Budget guidelines. During a meeting held in December 1999
to address our concerns, SSA's chief information officer acknowledged the
need to measure IWS/LAN's performance, stating that the agency had begun
formulating plans and studies to evaluate the investment in and actual
benefits resulting from the initiative. On February 8, SSA told us that it
is now conducting studies to assess the benefits of IWS/LAN.

SSA Has Initiated a New Technology Strategy to Support Its Disability Claims
Process

As part of its efforts to reengineer the disability claims process, SSA
intended to achieve many of its benefits from programmatic software that was
to operate on IWS/LAN. To accomplish this, SSA spent most of the last decade
designing and developing the Reengineered Disability System to serve as part
of the enabling platform for its modernized disability claims process.
Specifically, this system was to automate SSA's disability claims
process-from the initial claims-taking in the field office to the gathering
and evaluation of medical evidence in the state DDSs, to payment execution
in the field office or processing center, and include the handling of
appeals in hearing offices. However, after approximately 7 years and more
than $71 million reportedly spent on the initiative, SSA discontinued the
effort due to software development and performance problems.

SSA is now pursuing a new technology strategy to address the needs of its
disability claims process. This new strategy is expected to incorporate
several key components, including: (1) an electronic disability intake
process, (2) enhanced state DDS claims processing systems, and (3) a
technology approach to support new business processes within OHA. The
components are to be linked to one another through the use of an electronic
folder that is being designed to transmit data from one processing location
to another, and to serve as a data repository, storing documents that are
keyed in, scanned, or faxed. SSA began testing the electronic disability
intake component and electronic folder in July 1999, with the overall
objective of automating the disability interview process in the field
office, storing data collected through the interview in an electronic
disability folder, then passing key data elements to a DDS system. SSA
believes that automating the field offices' disability intake process will
expedite the movement of the disability case to the DDS, and will provide
for earlier adjudication and claimant notification.

To date, SSA has tested the electronic folder concept on two versions of the
electronic disability software. Based on the test results, it now plans to
test the software and electronic disability folder in a limited production
environment in May 2000 at its Delaware field offices and the Delaware state
DDS. However, according to SSA's preliminary plans for the effort, the
agency does not expect to be able to identify anticipated benefits or return
on investment from the electronic disability intake component until fiscal
year 2001, after the project has undergone additional testing at other
sites.

One of the keys to SSA's success in developing the electronic disability
intake process is avoiding the kinds of development and performance problems
that caused the Reengineered Disability System to be discontinued. As part
of its evaluation of that development effort, SSA identified a number of
lessons learned that it is now applying in its development of the electronic
disability intake component. For example, SSA is taking an incremental
approach to developing the electronic disability software application, and
is using proofs-of-concept to evaluate design options before pursuing full
development. SSA also is managing the development by (1) requiring a
contract between software developers, customers, and end users to ensure
that all parties agree to the scope of the project; (2) performing risk
assessments and developing risk mitigation and project management plans; and
(3) regularly monitoring the status of the project during weekly management
meetings chaired by the Deputy Commissioner for Systems.

Beyond the electronic disability intake process, SSA has agreed to have
several state DDSs participate in pilot projects to determine the technology
required to support a fully electronic (that is, totally paperless)
disability process, and help assess costs and benefits of the electronic
folder. For example, the California DDS has been selected to explore whether
a public key infrastructure can be used to test digital signatures and
encryption for medical consultative examination reports. One challenge
associated with this is that, by regulation, some medical evidence used to
make disability determinations must contain an original signature. In New
York, the DDS has been approved to test the management and operational
feasibility of an electronic disability folder as it moves through all
stages of SSA's processes. Further, a pilot being undertaken by the
Wisconsin DDS will use the electronic folder concept to measure the impact
of an electronic claim on the DDS' internal operations. The results of this
pilot are expected to provide SSA with information needed to interface a
fully paperless DDS case processing system with an electronic folder, and
allow the agency to study the ergonomic effects of paperless processing upon
DDS case adjudicators.

Various Initiatives are Being Implemented to Support OHA, but Long-Term
Efforts Have Not Been Defined

SSA also considers information technology crucial for improving the
capabilities of OHA. Therefore, in August 1999, the Commissioner of Social
Security launched a hearings process improvement initiative to create a more
customer-focused and efficient hearings process. The initiative, combined
with related activities such as the expanded use of videoconferencing, aims
to further reduce processing times and yield higher quality decisions
without additional resource expenditures. OHA implemented the first phase of
this initiative in January.

While the hearings process improvement plan relies mostly on innovative
management and reengineered processes to achieve dramatic improvements in
the process, it also emphasizes the use of various technologies and
automation to help support the workload management needs of the hearing
offices. For example, SSA is exploring the use of videoconferencing as a
means to potentially reduce OHA's hearings processing times, travel time and
travel-related expenses, and to increase time available for in-office
case-related work. Currently, in order to provide customers with
face-to-face hearings and to correct imbalances in workloads among various
hearing offices, administrative law judges can spend a large percentage of
time (for example, about 2 weeks out of every month) traveling to remote
sites. However, the use of videoconferencing equipment to conduct hearings
has the potential to reduce travel and processing times, while increasing
productivity.

In February 1996, OHA began piloting the use of videoconferencing equipment
at two sites-West Des Moines, Iowa, and Huntington, West Virginia. SSA
estimates that, to date, a total of about 3,000 hearings have been held via
videoconferencing at the two pilot sites. According to SSA, an evaluation of
the initial pilot results cited a reduction in processing time of 38 days in
one of the pilot offices. OHA has been granted permission to expand the use
of videoconferencing to nine additional sites. Once the equipment has been
installed at these sites and the users become comfortable with the
technology, OHA plans to collect data to quantify the benefits of expanding
the use of videoconferencing at additional sites.

SSA is also evaluating whether speech recognition software can be used by
OHA's administrative law judges and other staff involved in writing
decisions to dictate their casework directly into a computer. SSA initiated
this effort in December 1999 and is currently testing the dictation
performance of speech recognition software on computers of various
processing speeds. This technology is still being evaluated; therefore, the
agency has not determined the costs and benefits associated with the
initiative, or whether it will actually be implemented.

In collaboration with the Office of the Deputy Commissioner for Systems, OHA
has also identified four automation efforts to support the goals of the
hearing process improvement initiative. These projects, as shown in table 3,
primarily involve the use of automated tools to aid in scheduling hearings
and to monitor and track case progress throughout the hearing process.

Table 3: OHA Automation Initiatives to Support HPI Goals
                                     Anticipated effect on
 Initiative    Objective                                   Status
                                     workload

                                     Allow users to track  Modifications
                                                           completed in
 Hearings      To make software      incoming HPI work,    January 2000;
 Process       modifications to the  work assigned to      system currently
 Improvement   Hearing Office        processing groups,    being used by
 (HPI) softwareTracking System that  and the date a case   the 37 hearing
 modifications will support HPI      is certified and      offices
                                     generate two new case
                                     tracking reports      participating in
                                                           phase I.
               To replace the
               existing Hearing      Enable OHA to provide System currently
               Office Tracking       timely reporting      being designed
                                     nationwide and        and a prototype
 Consolidated  System with a new     locally and reduce    scheduled to be
 Hearing Officeapplication           the duplicate data    implemented at
 Tracking      compatible with       entry currently       OHA's
 System        IWS/LAN and to        required to track     headquarters in
               consolidate the over
               140 separate          cases during the      Falls Church,
               databases into a      various levels of OHA Va., by
               single database       appeals               September 2000.
               To provide                                  Pilot testing
               automation support                          began at OHA
               in the scheduling of                        headquarters in
               hearings that will                          Falls Church,
               record and share                            Va., during
 Hearing Officecurrent information   Reduce the manual     January 2000 and
 Scheduling    on resource           aspects of the        will be deployed
 System        availability within   hearing scheduling    at hearing
               the hearing office    process               offices in
               and electronically                          Johnstown, Pa.,
               notify the                                  in February 2000
               administrative law                          and Morgantown,
               judge that a hearing                        W.V., in March
               has been scheduled                          2000.
                                     Provide the means for
                                     generating and
               To provide users      subsequently editing
 Document      with a system that    decisions and         System
 Generation    generates decision    supporting            implemented in
 System        notices and routine   correspondence, with  November 1999.
               correspondence        an automated
                                     interface to the
                                     Hearing Office
                                     Tracking System

Source: SSA.

It is too early to know whether these four automation projects will
successfully support the goals of the hearings process improvement
initiative. To date, only two of the four have been developed and integrated
into the phase I process modification now under way, and the ability of
these systems to adequately support the modified

hearing processes has not yet been determined. Further, according to the
acting director of OHA's Office of Management, these efforts do not
represent all of the information technology that will be required to help
OHA increase its productivity and provide better service to its customers.
SSA is currently in the process of preparing a statement of work for the
development of an information technology strategy to support OHA's business
processes. Until this strategy is defined, SSA will not be in a position to
identify all of the technologies that will be required to meet OHA's needs.
SSA expects to finalize OHA's information technology strategy by late 2000.

SSA Is Exploring Other Technologies to Enhance Service Delivery

To its credit, SSA has long recognized the potential value in exploring
alternative technologies to enhance its service delivery. Since at least
1997, SSA has included an electronic service delivery strategy in its
planning documents to support the agency's strategic direction in dealing
with self-service communication technology and access delivery alternatives.
Moreover, it has explored a number of technology options, ranging from
Internet/electronic commerce applications to document imaging and scanning.
SSA is currently in various stages of designing, developing, and
implementing these technologies. In doing so, however, it faces the
continual challenge of ensuring that the technologies are implemented in a
manner that is cost-effective and that does not compromise the security and
privacy of beneficiaries' personal information. In addition, a technological
challenge that SSA must address before some of its interactive Internet or
electronic commerce initiatives are implemented is upgrading its network
infrastructure, including IWS/LAN, to provide the capabilities to support
the new applications.

Internet service is a major project under SSA's electronic service delivery
initiative. SSA is pursuing the use of Internet applications to increase the
number of electronic transactions available to the public and to help absorb
workload increases expected as aging baby boomers become eligible for
benefits. Over the past 3 years, SSA has explored various options for
deploying Internet applications on its web site without violating privacy
issues. As a result, it now uses Internet applications to assist customers
in conducting business with the agency. For example, customers can download
or access the ten most frequently requested SSA forms, such as an
application for a Social Security card, and they can use on-line
applications to determine the location of a Social Security office and to
request statements of benefits.

SSA has now developed an Internet services tactical plan, which includes a
framework for identifying and approving future electronic service delivery
efforts. However, it has not finalized a strategy that identifies and
prioritizes the applications that will be deployed. Further, because it has
not developed a service delivery plan, SSA does not yet know what efforts
will be required to meet its future service delivery needs. Moreover,
according to the framework, before SSA launches its future efforts, it needs
to determine (1) what electronic services make sense to its customers, (2)
how the new line of service delivery will affect the agency's workload, (3)
whether the agency has the available resources (staff and technology) to
implement these actions, and (4) whether the technology needed to
authenticate the electronic customer is available. Furthermore, sound,
disciplined processes such as business case analyses; cost/benefit analyses;
and requirements, technology, and risk assessments must drive these
decisions. Some of these processes are already being applied to various
projects under the direction of SSA's Software Process Improvement Program,
which is responsible for serving as a focal point to the agency's Office of
the Deputy Commissioner for Systems. The objective of the Software Process
Improvement Program is to create an environment that encourages continuous
improvement in software development activities that will result in the
ability to develop high-quality software products and to deliver those
products to the customer as promised.

In addition to its electronic service delivery initiatives, SSA intends to
support its future workload demands with projects that rely on technologies
such as imaging and scanning. One such initiative, which has been ongoing
since September 1993, is SSA's Paperless Processing Center project to begin
to turn SSA into a paperless agency and position its resources and processes
to meet emerging workloads. Based on its initial analysis of the paperless
processing concept, SSA estimated that 95 percent of a clerk's workday and
10 percent of a manager's workday are occupied with paper-related
activities, such as locating a folder and the associated case material.
Accordingly, the project's objective is to implement document imaging and
paperless technologies to improve SSA's intensive paper folder processing in
program service centers and the Office of Central Operations. Paperless
processing will be used to eliminate SSA's reliance on paper records by
building and storing comprehensive electronic client records. The new
technology is expected to increase productivity and quality, which in turn
should reduce backlogs and improve public service.

SSA has thus far spent about $35 million to implement and maintain the
necessary hardware and software to pilot paperless processing at three
program service center sites. According to the project manager, about $69
million in total will be required to complete the paperless processing
effort at all six program service centers and the Office of Central
Operations by 2001. SSA projects savings attributable to the paperless
processing initiative of about $161 million, or about 5,600 work years, once
fully implemented. However, the agency considered this to be a conservative
estimate, given that additional savings may be realized from being able to
redirect program service center staff to other activities such as assisting
the telephone service staff in responding to 800-number telephone calls.

SSA's Efforts to Prepare Its Workforce for Future Challenges Are in Early
Stages, and Much Work Remains

SSA Is Making Progress in Workforce Planning Initiatives, but Some Lack
Future Focus

To link workforce planning to an agency's strategic vision, human capital
principles call for identifying current and future human capital needs.
Recognizing that it will shortly be facing the prospect of increasing
retirements, SSA conducted a study that predicts staff retirement and
attrition by year, from 1999 to 2020, as well as by major job position and
agency component. In making these predictions, SSA went beyond identifying
the dates that its employees first become eligible to retire by also
factoring in 10 years of historical retirement data to make more realistic
projections. SSA also conducted focus groups with recent retirees and
current employees eligible for retirement to identify factors that might
affect their decisions to retire once eligible. SSA expects the focus group
and retirement study will help its managers in their workforce planning, and
the agency intends to update the retirement data on an ongoing basis.
However, aspects of the retirement study might not provide sufficient detail
to be useful for some line managers. For example, the study lumps all
supervisors from the GS-7 to SES levels into one supervisory category,
whereas planners and managers might have a better idea of how to prepare for
the imminent retirement of upper-level managers if the supervisory data were
broken out into further detail. SSA officials told us they plan to break out
these data in their next update. Even with this additional information, the
agency will still need to develop a concrete plan to clarify what staff,
where, and with what skills will be needed to replace the retirees.

To ensure that staff are well-prepared to do their jobs, agencies need to
compare the competencies-that is, the knowledge, skills, and
abilities-employees need, both now and in the future, with the knowledge,
skills, and abilities they possess. As part of its draft workforce
transition plan, SSA has already identified core competencies that its
leaders and employees need to possess today, and the agency is taking steps
to evaluate and update the competency levels of its existing staff. The
agency has developed automated self-assessment tools that supervisors and
nonsupervisors can use to evaluate whether they need improvement in any of
the core competencies identified by SSA. When the individual completes the
assessment, the tool identifies areas where the individual needs additional
training and provides a list of courses related to that competency area. The
self-assessment tool is currently being piloted at a number of SSA offices.
Through these steps, SSA is making some progress in identifying and
developing core competencies, but its efforts to date reflect today's
workforce needs rather than tomorrow's. SSA recognizes the need to identify
competencies that reflect its future workforce needs so that it can more
effectively recruit and train staff to handle more complex customer needs
and new technology tools. Once these future competencies are identified, SSA
will need to develop new training programs, including ones to help current
and new staff adapt to new technologies.

To ensure continuity of leadership, human capital principles call for
identifying leadership traits that support an agency's mission and goals,
and building and sustaining a pool of leaders through recruitment, hiring,
development, retention, and succession planning. We have long stressed the
importance of succession planning and formal programs to develop and train
managers at all levels at SSA. As early as 1993, we recommended that SSA
make succession planning a permanent aspect of its human resource planning
and evaluate the adequacy of its investments in management training and
development. SSA has recently created three 2-year national development
programs to help prepare selected staff to assume mid- and top-level
leadership positions at the agency. Each of these programs accommodates
between 35 and 40 staff. Because of the large number of expected management
retirements, SSA hopes to regularly repeat these national programs over the
next 10 years. It will be important for the agency to do so. In addition to
these formal development programs, SSA is also taking steps to provide
leadership training for all its current supervisors, managers, and
executives. Also, SSA regional and headquarters offices are providing
additional leadership development opportunities to their staff.

\SSA Recognizes Need to Improve Hiring and Investments in Human Capital

Maintaining positive working conditions is another key to human capital
management. The draft workforce transition plan contains a number of action
items to provide a work environment that supports employees. These items
include opening or expanding child care facilities and fitness centers and
making improvements to SSA facilities from a environmental health or
security standpoint where necessary. For certain action items, such as
expanding telecommuting, it will be difficult for SSA to be receptive to
employee preferences for telecommuting because employees' responsibilities
for customer service often require an on-site presence.

Another essential human capital principle involves investing in training and
development to build and sustain critical staff competencies, such as
customer service skills. This would include appropriate investments in
education, training, and other developmental opportunities to help employees
build the competencies needed to achieve the agency's strategic mission and
goals. To meet the challenge of SSA's significant training needs,
particularly with respect to the large number of anticipated new staff, SSA
has been making a major investment in Interactive Video Teletraining (IVT).
SSA currently provides IVT at 78 percent of its sites around the country and
is considering expanding IVT to all sites. In the past, staff generally
received classroom training, often away from their home units-an approach
SSA recognizes will be costly to sustain given the large numbers of new
staff it expects to hire. In contrast, SSA's new IVT training modules are
transmitted live to staff in their home units, thus avoiding travel and per
diem costs. However, to be effective for new hires, IVT sessions are to be
supplemented with on-the-job training by a mentor at the work site.
Providing for mentors will be challenging for SSA given the large number of
experienced staff expected to retire and the growing customer service
demands being placed on remaining staff. SSA officials told us that having
the ability to bring new staff on board before the experienced staff retire
would facilitate the mentoring process. SSA plans to evaluate the relative
effectiveness of IVT, which is important, because IVT is new to SSA.

Even though individual elements of SSA's workforce transition plan are
consistent with principles of human capital management, to date the agency
is undertaking these initiatives in isolation from a comprehensive vision
and plan for future service delivery. It is vital that SSA's workforce
efforts be well integrated with any future service delivery plans. If they
are not, actions taken now could prove counterproductive. For example, SSA
is now considering the expansion of its IVT equipment and facilities to all
SSA offices. SSA officials told us that while IVT equipment is not very
expensive, renting or otherwise securing appropriate facilities to support
IVT training can be. However, such investments may ultimately prove
unnecessary if SSA's service delivery plan calls for adjustments in the
number of field offices, other facilities, or the types of services offered
at these facilities. Similarly, SSA's current policy to replace each staff
person who retires might result in the deployment of staff in locations or
positions inconsistent with the agency's future vision.

State Disability Offices Face Similar Workforce Challenges

Implications of SSA's Current Plans and Efforts for Its Future Readiness

Even if SSA is able to carry out all of its planned initiatives, however, it
is not clear that the agency is adequately prepared for the future. SSA is
relying heavily on its information technology to meet the demands of its
growing workload. However, until the agency has identified the benefits from
its various information technology investments, it will not know whether it
will need to take other steps, such as adding staff or contracting out some
of its services, in order to cope with its future challenges.

Given the serious challenges facing the agency, you asked us to address the
possible implications of removing SSA's administrative expenses from the
caps that are used to limit discretionary spending in the federal budget
overall. If this were done, SSA would no longer have to compete directly
with other federal agencies for funding of its administrative expenses,
which could potentially result in increased administrative funding. However,
most of SSA's administrative budget is financed from the OASI and DI Trust
Funds. An increase in SSA's administrative budget, unless paid for through a
separate appropriation of general funds, would not provide any new source of
funding but would instead draw additional resources from the Social Security
Trust Funds. This would reduce the Trust Fund surpluses and somewhat
exacerbate the Social Security program's long-term financing problems. In
addition to the effect on the Trust Funds, there are technical implications
of removing SSA's administrative expenses from the discretionary spending
caps. (We provide additional information on this issue in app. II.)

Because of the uncertainty over whether SSA's current plans are adequate, it
will be important for SSA and the Congress to closely monitor the agency's
performance. Also, before future financing needs can be determined, SSA will
need to complete a number of important planning activities. To help ensure
that SSA makes optimal use of its resources and places itself in the best
position to cope with its future service delivery challenges, the agency
will need to complete its 2010 service vision and use it to develop an
overarching service delivery plan. This plan would then provide the
framework to guide SSA's future information technology and workforce
decisions and investments. In addition, the agency will need to

   * complete assessing the benefits (that is, work-year savings,
     productivity increases, and improved service delivery) expected from
     its information technology initiatives and then closely monitor whether
     these benefits are being realized;
   * monitor service delivery measures for degradation in quality,
     satisfaction, and timeliness and to look for early warnings of work
     backlogs; and
   * more aggressively pursue all possible options to better position itself
     for the future, such as developing cost-saving electronic service
     delivery options or altering the agency's network of facilities to more
     closely align it with projected customer needs and demographics.

This concludes my formal statement. I will be happy to answer any questions
that you or other Members of the Subcommittees may have.

GAO Contacts and Acknowledgments

Appendix I

Selected Human Capital Principles Key to Meeting Future Challenges Faced by
SSA

In reviewing SSA's efforts to prepare its workforce for the future, we
applied the following human capital principles.

Treat human capital management as fundamental to strategic business
management. Integrate human capital considerations when identifying the
mission, strategic goals, and core values of the organization as well as
when designing and implementing operational policies and practices.
Establish measures that provide meaningful data on the full range of human
capital policies and practices and how these practices promote mission
accomplishment.

Implement an explicit workforce planning strategy. Link workforce planning
to the agency's strategic and program planning efforts to identify its
current and future human capital needs, including the size of the workforce;
its deployment across the organization; and the knowledge, skills, and
abilities needed for the agency to pursue its strategic mission and goals.
Include information on attrition rates, retirement rates, and projected
eligibility by pay level and ratios of managers to employees. Identify roles
and core competencies needed to support the agency's strategic mission and
goals, and develop an inventory of current and future skills needs and gaps.

Integrate employee input into the design and implementation of human capital
policies and practices. Incorporate the first-hand knowledge and insights of
employees and employee groups to develop responsive human capital policies
and practices. Empower employees by making them stakeholders in the
development of solutions and new methods of promoting and achieving high
performance of organizational missions and goals.

Hire, develop, and sustain leaders according to leadership characteristics
identified as essential to achieving specific missions and goals. Define the
kind of leaders the agency wants (that is, their roles, responsibilities,
attributes, and competencies) and the broad performance expectations it has
for them in light of the agency's shared vision. Ensure continuity through
succession planning; investments in development programs; selection criteria
linked to the agency's shared vision, competencies, and broad expectations;
and information on attrition rates, retirement eligibility, and retirement
rates of executives.

Hire, develop, and retain employees according to competencies. Develop a
recruiting and hiring strategy that is targeted to fill short- and long-term
human capital needs and, specifically, gaps identified through the agency's
workforce planning efforts. Make appropriate investments in education,
training, and other developmental opportunities to help employees build the
competencies needed to achieve the agency's shared vision, and encourage
continuous learning and improvement.

Deploy the agency's workforce in a way that is appropriate to mission
accomplishment. Ensure that workforce deployment-both geographically and
organizationally-supports organizational goals and strategies and is keyed
to efficient, effective, and economic operations.

Measure the effectiveness of human capital policies and practices. Evaluate
and make fact-based decisions on whether human capital policies and
practices support high performance of mission and goals.

Implement an information technology plan. Ensure that employees are making
the best use of information technology to perform their work and to gather
and share knowledge. Emphasize the alignment of the agency's information
technology programs with its mission, goals, and strategies. Obtain employee
feedback to ensure they have the opportunity, incentives, support, and
training to make the appropriate use of technology to do their work and to
acquire and share knowledge.

Take the necessary steps to help employees effectively, economically, and
efficiently pursue their work. Establish appropriately tailored
organizational structures, job processes, workplace facilities, tools, work
arrangements, and other resources and opportunities.

These human capital principles represent a subset of principles from two
recent GAO reports that are relevant to our review of SSA's efforts to
address its future challenges. The first report is a checklist of human
capital issues we developed for agencies to use to self-assess and improve
their human capital management. The values found in the checklist were
derived from various sources, including 32 leading organizations in the
private sector and governments at the state and local levels and abroad; the
Malcolm Baldridge National Quality Award Program and the President's Quality
Award Program; relevant parts of title 5 U.S.C., "Government Organization
and Employees," and 5 C.F.R., "Administrative Personnel"; and the Government
Performance and Results Act, along with agency guidance contained in OMB
Circular No. A-11. The second report identifies common principles underlying
the human capital strategies and practices of nine private sector
organizations recognized as innovative or effective in strategically
managing their human capital: Federal Express Corp.; IBM Corp.; Marriott
International, Inc.; Merck & Co., Inc.; Motorola, Inc.; Sears, Roebuck and
Company; Southwest Airlines Co.; Weyerhouse Co.; and Xerox Corp., Document
Solutions Group.

Appendix II

Technical Implications of Removing SSA's Administrative Expenses From the
Discretionary Spending Caps

Currently, SSA's administrative expenses are controlled by an obligation
limitation contained in the agency's appropriation act and are considered to
be subject to the discretionary caps set forth in the Deficit Control Act
(DCA). This means SSA's administrative expenses must compete for funding
with most of the other discretionary programs in the budget.

We contacted OMB regarding the implications of removing SSA's administrative
expenses from the discretionary spending caps. According to OMB, under the
DCA, if this funding was moved out from under the discretionary caps by
redefining it as "mandatory"-that is, not subject to appropriation act
control-this would be a "change in concepts and definitions." The DCA
requires adjustments to the caps for such changes in concepts, but the
timing of the adjustment would depend on how the change was made. Further,
OMB indicated that if the change was the result of technical discussions and
agreement among the scorekeepers and was not related to making room for
additional spending by other agencies under the existing discretionary caps,
OMB would lower those caps by the baseline amount of SSA's administrative
funding. If the change was made by direction in legislation, the
administrative funding would not be scored as discretionary and more room
would be available under the caps for 1 year. However, OMB would most likely
reflect the change by lowering the caps in subsequent years, thus putting
more pressure on the following year. As a result, in OMB's view, shifting
SSA's administrative expenses to mandatory spending would create, at the
most, additional room under the caps for 1 year for funding other programs.

Administrative expenses are typically viewed as controllable and thus fit
into the discretionary category of spending. Questions might be raised about
considering them mandatory. If SSA's administrative expenses are not
controlled by obligation limitations in an appropriation act, the locus of
control would shift to SSA's authorizing committees, and some mechanism
would be required to limit the amount of Social Security trust funds that
could be spent on administrative expenses.

It is important to note that the shift in the locus of control would not
provide any new source of financing, because administrative funds come out
of the trust funds that pay Social Security benefits. Therefore, any
increase in the administrative budget would reduce the trust funds unless a
general fund appropriation was made. However, such an appropriation would be
discretionary and would have to compete with other programs for the limited
funding under the discretionary caps.

Related GAO Products

Human Capital: Key Principles From Nine Private Sector Organizations
(GAO/GGD-00-28. Jan. 31, 2000).

Social Security Disability: SSA Has Had Mixed Success in Efforts to Improve
Caseload Management (GAO/T-HEHS-00-22, Oct. 21, 1999).

Human Capital: A Self-Assessment Checklist for Agency Leaders, Discussion
Draft (GAO/GGD-99-179, Sept. 1999).

Social Security Administration: Update on Year 2000 and Other Key
Information Technology Initiatives (GAO/T-AIMD-99-259, July 29, 1999).

SSA Disability Redesign: Actions Needed to Enhance Future Progress
(GAO/HEHS-99-25, Mar. 12, 1999).

Social Security Administration: Technical Performance Challenges Threaten
Progress of Modernization (GAO/AIMD-98-39, June 19, 1998).

SSA's Management Challenges: Strong Leadership Needed to Turn Plans Into
Timely, Meaningful Action (GAO/T-HEHS-98-113, Mar. 12, 1998).

Social Security Administration: Software Development Process Improvements
Started, but Work Remains (GAO/AIMD-98-39, Jan. 28, 1998).

Social Security Administration: Significant Challenges Await New
Commissioner (GAO/HEHS-97-53, Feb. 20, 1997).

Social Security Administration: Effective Leadership Needed to Meet Daunting
Challenges (GAO/HEHS-96-196, Sept. 12, 1996).

Social Security Administration: Risks Associated With Information Technology
Investment Continue (GAO/AIMD-94-143, Sept. 19, 1994).

Social Security: Sustained Effort Needed to Improve Management and Prepare
for the Future (GAO/HRD-94-22, Oct. 21, 1993).

Social Security: Status and Evaluation of Agency Management Improvement
Initiatives GAO/HRD-89-42, July 24, 1989).

Social Security Administration: Stable Leadership and Better Management
Needed to Improve Effectiveness (GAO/HRD-87-39, Mar. 18, 1987).

(207068/511805)

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