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G. Edward Deseve - June 22, 1998

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June 22, 1998

Good afternoon. I am here today to discuss the Federal government's efforts to address the year 2000 problem. As you know, this seemingly simple problem is one of the great challenges confronting our nation today. Let me begin by expressing my support for the work of this Committee. You have been and are playing a key role in helping to address this critical issue.

By way of background, E.O. 13073, Year 2000 Conversion, created the President's Council on Year 2000 Conversion, chaired by an Assistant to the President, John Koskinen. The Council has a two-fold mission: to assist Federal agencies as they work to prepare their systems for the new millennium and to increase awareness of the problem among private sector entities, State and local governments, and international organizations.

We at OMB are working very closely with the Council. While OMB continues its oversight of Federal agency progress on fixing the internal year 2000 problem, the role of the Council has been to increase awareness beyond the Federal government. Therefore, today I will discuss our efforts to help Federal agencies fix their internal year 2000 problems while also touching on the national and international efforts of the Council.

The invitation letter asks that I discuss "practical solutions to high-priority activities." Accordingly, I would like to identify our top management priorities and the practical solutions that we are undertaking. This afternoon, I would like to describe five of those priorities -- mission-critical systems, data exchanges, embedded chips, continuity of business planning, and national and international readiness -- and briefly discuss the practical solutions that we have underway.

Mission-critical Systems

The first priority I would like to mention is that of fixing mission-critical systems. Overall, the Federal government continues to make progress in addressing the year 2000 problem -- but the rate of some agencies is still not fast enough. As you know, OMB has categorized agencies into one of three tiers based on evidence of adequate progress. Although 71 percent of the mission-critical systems of the tier 3 agencies are compliant, only 33 percent of those of the tier 1 agencies are compliant. It is critical that those agencies at most risk devote more management attention to the problem in order to ensure that solving it is the agency's highest priority.

We in the Administration are taking practical steps to improve the progress of these agencies. First, for all the Cabinet agencies that are not making sufficient progress, the Chairman of the Year 2000 Conversion Council and OMB staff will personally participate in monthly progress briefings with the senior management of each tier 1 Cabinet agency. This way we can provide on-the-spot practical help to Departmental management in addressing any problems that may be slowing their progress.

In addition, we have asked the tier 1 and tier 2 agencies to provide to OMB their plans for monthly progress toward making their mission-critical systems compliant, and that they provide monthly reports on their progress against those plans. The plans are due to OMB on Friday, June 26, and the monthly progress reports will be due on the tenth of each month beginning in August. This is a practical way to monitor the agencies at highest risk more closely, without imposing a substantial new reporting burden on them. We will include summaries of this information in future OMB quarterly reports.

Data Exchanges

Another priority is coordinating and managing exchanges of data with those outside the Federal government. It is essential that exchange partners agree on changes to the format of exchanges, as well as the timing of such changes. Federal agencies have more than 10,000 such exchanges with each other; with foreign, State, and local governments; and with private entities. Of particular importance are data exchanges with the States, because States operate many important Federal programs.

In response to this problem, we have developed a close working relationship with organizations such as the National Association of State Information Resource Executives (NASIRE) and the National Governors Association. As a practical first step, we directed agencies to inventory all of their data exchanges by February of this year and to begin discussions with their exchange partners by March. In their most recent reports to us, all agencies say they have inventoried their exchanges and initiated discussions with their partners. The deadline for them to update these exchanges is March 1999.

In addition, the Chief Information Officers (CIO) Council has been working with NASIRE to assure that these exchanges will work. This spring, Federal agencies provided the States with an inventory of Federal/State data exchanges. The States are in the process of verifying that the inventory is complete. Beginning in July, Federal agencies will incorporate into the inventory the status of each exchange. The status will be reported by State and will include whether the exchange is compliant, whether the fix is permanent or interim, and whether the fix has been tested. This information will be updated monthly and will provide us with useful, practical information about how well agencies are doing in preparing their data exchanges.

Embedded Chips

An additional priority is that of addressing the embedded chip problem. As you know, this is the great unknown about the year 2000 problem. People are finding embedded chip problems in a wide array of unexpected, non-computer places. Just last week, for example, I read about a number of chip problems that could affect the operation of ships. At this point it appears that virtually any large piece of machinery or any complex process needs to be assessed to see if it will be impacted by an embedded chip problem. It is important to note that in these instances the problem occurs in commercial products that rely on computers or have computer chips inside them. Therefore, unlike fixing custom software, these problems, while identified by agencies, usually need to be fixed by the manufacturers of those products.

While much of the work of identifying chip problems and contacting the manufacturers of the products must be done individually by each agency, in some cases a government-wide approach is more practical. One solution has been to establish, through the CIO Council, interagency working groups in the areas of bio-medical devices and laboratory equipment, commercial products, telecommunications, and buildings. Each interagency working group, chaired by a key program agency, is tasked with raising awareness across government and working with manufacturers to assure that products are fixed. Each group is contacting vendors on behalf of the entire Federal government, performing tests to verify the compliance of products, and sharing information through electronic databases. This information is publicly available at these websites:

FDA site on biomedical devices www.fda.gov/cdrh/yr2000

GSA site on compliant commercial products http://y2k.policyworks.gov/

GSA site on telecommunications equipment http://y2k.fts.gsa.gov/

GSA site on buildings and facilities http://globe.lmi.org/lmi_pbs/y2kproducts/

Continuity of Business Plans

The next priority that I will highlight is continuity of business planning. No matter how well Federal agencies progress between now and January 1, 2000, there is no question that there will be some problems. This is true both for agencies that complete their work on the problem as well as those that do not. Therefore, as a practical matter, agencies need to begin planning now to assure the continuity of their core business functions.

As a practical solution to this problem, the CIO Council's Year 2000 Committee and the General Accounting Office are developing a draft guide on continuity of business planning. Such planning is to address, in addition to the risk of failure of the agency's internal systems, the implications of the year 2000 problem that are outside of the agency's control, such as the inability of suppliers to provide products or the failure of critical infrastructures. In addition, we will shortly require agencies to provide us with more detailed information on both their continuity of business plans as well as contingency planning for those systems that are expected to miss the March 1999 deadline for implementation.

National and International Preparedness

A final priority of the Council is to promote national and international preparedness. Because of the interconnected nature of our technology dependent world, the Council has realized how important it is that our country as a whole be prepared -- and that the world is ready, too.

The Council implemented a practical solution to the problem of reaching out to so many complex constituencies and groups by building on existing organizational relationships among agencies and outside groups. The Council has identified roughly 30 economic sectors and enlisted agencies who have policy interests in, or connections to, these areas to serve as "coordinators," to increase awareness of the problem and to offer support. The list of sectors includes energy, telecommunications, and financial institutions. These areas are critical because everyone is dependent on them. Thus, the energy sector group is co-chaired by the Department of Energy, which is looking at electric power, and the Federal Energy Regulatory Commission, which is looking at oil and gas. The telecommunications sector group is co-chaired by the Federal Communications Commission and the General Services Administration, and the financial institutions sector group is chaired by the Federal Reserve Board.

In many cases, agencies have a natural constituency. In other cases, agencies have been tasked with reaching out to groups that the Federal government doesn't traditionally do business with. While some agencies have a regulatory role, all agencies have a responsibility to make sure that they groups they are in contact with are ready and to ensure that there are no gaps in coverage.

In the international arena, the Chairman of the Council has met with the United Nations Informatics Working Group on this issue; he has also met with the Chair of the World Bank, who subsequently issued a letter to the leaders of all member nations on this subject. We have met with the year 2000 representatives from a number of nations, including Mexico, South Africa, England, and Canada.

Meanwhile, the State Department is taking the lead overall on raising awareness internationally. For example, Secretary Albright recently sent to all U.S. ambassadors a cable that designates them as U.S. year 2000 coordinators in their host countries and instructs them to determine the year 2000 readiness of those countries' basic infrastructures. The Federal Aviation Administration has met with its international counterparts, while the Federal Communications Commission has been working with the International Telecommunications Union.

While the Federal government is reaching out to a large number of organizations, both domestic and international, it is important to note that it has no authority to directly intervene in most of these areas. Therefore, the most practical approach for the Council to take is to raise awareness and to facilitate the flow of information help organizations fulfill their responsibilities to make sure their systems work.

Year 2000 Funding

OMB will continue to assist all agencies in ensuring that adequate resources are available to address this critical issue. In the FY 1999 Budget, the President has requested more than $1 billion for Y2K computer conversion. In addition, the Budget anticipated that additional requirements would emerge over the course of the year, and included an allowance for emergencies and other unanticipated needs.

At this time, we believe that the resource levels included in the President's budget will fully address Y2K computer conversion requirements government-wide. However, as we learn more about how to address this problem, we expect that ensuring Government-wide compliance will require flexibility to respond to unanticipated requirements. To the extent such unanticipated requirements are identified, it will be essential to make that funding available quickly. It will truly be emergency funding.

The emergency mechanism recently approved by the House Appropriations Committee provides such flexibility. We are encouraged to learn that the Senate Appropriations Committee is also expected to approve such a mechanism. As action on the various appropriations bills proceeds, we urge Congress to leave as much as possible of the emergency contingent reserve unallocated so that funds are available to address emerging needs.

It is our understanding that when the House Rules Committee meets on Tuesday to take up the Defense and Treasury/General Government Appropriations bills they will report rules that will strip the emergency funding mechanism from both bills. This regrettable action will not help agencies move forward in addressing this problem.

The value of the emergency mechanism approved by the House Appropriations Committee is the flexibility it provides in the event that we determine that additional resources are required. We have only 557 days until January 1, 2000. We want to solve this problem as soon as possible. By delaying approval of emergency funding and reopening the issue of the use of the emergency spending authority, the House will create controversy and delay. We hope the House will reconsider.

Moving Forward

There is no doubt the year 2000 problem poses a significant challenge to Federal agencies and to our nation as a whole. But I am confident Federal agencies will live up to their end of the bargain, both in fixing their internal year 2000 problems and in increasing awareness beyond the Federal Government.

I thank the committee for its continued interest in the year 2000 problem. You are making a valuable contribution to the public dialogue about this matter. I look forward to working with you, and I would be happy to answer any questions that you may have.

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