STATEMENT OF
DEIDRE A. LEE
ACTING DEPUTY DIRECTOR FOR MANAGEMENT
OFFICE OF MANAGEMENT AND BUDGET
BEFORE
THE SPECIAL COMMITTEE
ON THE YEAR 2000 TECHNOLOGY PROBLEM
UNITED STATES SENATE
April 14, 1999
Good morning, Mr. Chairman. As you know, I have been serving as
Acting Deputy Director for
Management since April 1. Although I am still somewhat new to this issue,
I have been working
closely with OMB staff to come up to speed. I am pleased to appear before
your Committee to
discuss the government's progress on the year 2000 problem, and I will do
my best to answer
your questions. Chairman Bennett, I would like to start by thanking you,
Senator Dodd, and the
other members of the Committee for your ongoing interest in the Y2K problem
and its potential
implications for our country.
Today I would briefly like to address the progress that has been
made in the Federal arena, our
challenges and next steps, and funding.
As you know, the Administration has been working for more than three
years on this problem.
Agencies have been working through the phases of awareness, assessment,
renovation, validation,
and implementation. Each phase has been a challenging one, as Federal
agencies worked through
the process of systematically identifying and prioritizing mission critical
systems; addressing the
implications for systems and equipment containing embedded chips, such as
security systems,
heating and air conditioning units; working with data exchange partners;
testing and retesting
systems; and working with service delivery partners, such as contractors,
banks, vendors, and
State, local, and tribal government to the ensure the readiness of programs
supported by the
Federal government.
Last year, former Director Franklin Raines established the ambitious
goal of having 100 percent
of the Federal government's mission-critical systems Y2K compliant by March
31, 1999 -- well
ahead of many private sector system remediation schedules. I am pleased to
report that the
Federal government nearly achieved that goal. As John Koskinen and former
Deputy Director for
Management Ed DeSeve noted at the National Press Club on March 31, 92
percent of the Federal
government's mission critical systems met the government wide goal of being
Y2K compliant by
March 31, 1999. These systems have been remediated, tested, and are back
in operation.
This represents dramatic improvements from the progress of the
Federal government a year ago,
when in February of 1998, only 35 percent of agency mission critical
systems were compliant.
Overall progress in the Federal government is a tribute to the hard,
skillful, and dedicated work of
thousands of Federal employees and contractors. And while much work
remains to be done, we
fully expect that all of the Government's mission critical systems will be
Y2K compliant before
January 1, 2000.
Thirteen of the 24 major Federal departments and agencies now report
that 100 percent of their
mission critical systems are Y2K compliant. These agencies are: the
Departments of Education,
Housing and Urban Development, Interior, Labor, and Veterans Affairs; the
Environmental
Protection Agency, the Federal Emergency Management Agency, the General
Services
Administration, the National Science Foundation, the Nuclear Regulatory
Commission, the Office
of Personnel Management, the Social Security Administration, and the Small
Business
Administration.
In addition, three agencies report that between 95 and 99 percent of
their mission critical systems
are compliant and that they expect to be finished soon. These agencies are
the National
Aeronautics & Space Administration, the Department of Energy, and the
Department of
Commerce. Four agencies report that between 90 and 94 percent of their
mission critical systems
are compliant: the Department of Justice, the Department of Agriculture,
the Treasury
Department, and the Department of Health and Human Services. Finally,
three agencies report
that between 85 and 90 percent of their mission critical systems are
compliant: the Department
of Defense, the State Department, and the Department of Transportation.
The U.S. Agency for
International Development has not yet completed implementation of its seven
mission critical
systems.
Based on monthly agency reports received April 10, 93 percent of
mission critical systems are
now complete -- an increase of one percent within the last two weeks. From
a base of
approximately 6,400 mission critical systems at this time, 408 mission
critical systems remain to
be finished. Excluding the Department of Defense, 163 mission critical
systems are working
towards dates that are beyond the March 31, 1999, government wide goal.
Within the
Department of Defense, 245 systems are working towards dates beyond the
government wide
goal. We are preparing to issue guidance to agencies, asking agencies to
report, beginning May
15, on their remaining mission critical systems by name and to include a
timetable for completing
the work. Agencies will report monthly on their progress.
Agencies have set realistic goals for the completion of their work
and are working hard to finish
fixing these systems. We are confident that every mission critical
system will be ready for the
year 2000. Detail on the status of systems behind schedule as of
February 15, including projected
completion dates, was provided in OMB's last quarterly report to Congress.
As I have just related to you, we are confident that systems will be
ready. However, the critical
task is to make sure that not just systems, but the programs they
support, will be ready. In
response, we are taking a look at the Federal government from the
individual's point of view to
determine what programs have the most direct and immediate impact on the
public.
Accordingly, on March 26, 1999, OMB issued guidance to the agencies
that identified 42
"high impact" Federally supported programs and directed Federal agencies to
take the lead on
working with other Federal agencies, State, Tribal, and local governments,
contractors, banks, and
others to ensure that programs critical to public health, safety, and
well-being will provide
undisrupted services. Examples include Medicare and Unemployment
Insurance. Agencies have
also been asked to help partners develop year 2000 plans if they have not
already done so to
ensure that the program will operate effectively. Such plans are to
include end-to-end testing,
developing complementary business continuity and contingency plans, and
sharing key
information on readiness with partner organizations and with the public.
Agencies have been
asked to report to OMB on their work. Our goal is to publicly
demonstrate that these programs
will function.
By April 15, 1999, agencies have also been asked to provide to OMB a
schedule and milestones
for key activities in each plan, a monthly report of progress against that
schedule, and a planned
date for an event or events to announce that the program, as a whole, is
year 2000 ready. Clearly,
this initiative requires a great deal of cooperation and hard work, but
success is in everyone's
interest.
And while these programs are critical to the work of government, the
smooth operations of
government also rely on functions that may not have an immediate and direct
effect on the public
at large, but are nevertheless essential to sound management of the agency,
such as financial
management systems or personnel systems. These functions, which include
high impact
programs, have been identified as core business functions.
Agencies are developing Business Continuity and Contingency Plans
(BCCPs) to assure that their
core business functions will operate. While agencies are confident that
the measures taken for
Y2K compliance are sound, the chance remains that, despite testing, a bug
may still slip through.
In addition, every manager realizes that elements beyond the agency's
control will remain. For
example, a temporary power shortage, bad data from a data exchange partner,
or the inability of a
vendor to provide key supplies could disrupt work at an agency. Many of
these scenarios could
happen - and have happened - independently of the Y2K problem. An
essential requirement for
sound management of the year 2000 problem is to plan and prepare for the
unknown effects of
Y2K within the agency as well as for issues that are beyond the control of
the agency.
We have directed agencies to use the General Accounting Office's
(GAO) guidance on this
subject in preparing their plans. Additionally, many agencies are working
closely with their
Inspectors General and/or expert contractors in the development of these
plans. While it is
expected that BCCPs will continue to change through the end of the year as
agencies update and
refine their assumptions and as they continue to test and modify systems,
we have asked agencies
to submit their initial BCCPs to us no later than June 15. We will work
with the agencies to
assure government wide consistency of their basic assumptions surrounding
the year 2000
problem.
As you know, over the last few years, OMB, in partnership with the
Congress and the agencies,
has worked hard to ensure that the Federal Government has adequate
resources to address the
Y2K challenge. The President's fiscal year 1999 budget requested
approximately $1.1 billion in
appropriations for Y2K, and also included an allowance of $3.25 billion to
cover emerging and
potential costs for Bosnia, natural disasters, and Y2K. In September 1998,
consistent with
Senate action to that point, the Administration formally requested an
emergency supplemental
appropriation of $3.25 billion for Y2K. The Omnibus Consolidated and
Emergency
Supplemental Appropriations Act for fiscal year 1999 (P.L. 105-277)
included contingent
emergency funding for Y2K computer conversion activities: $2.25 billion
for non-defense
activities and $1.1 billion for defense-related activities. P.L. 105-277
makes the Director of the
Office of Management and Budget responsible for allocating non-defense
funding, and the
Secretary of Defense responsible for allocating defense-related
funds.
In order to determine how to best allocate all available non-defense
funding for Y2K -- both base
appropriations and emergency funding -- OMB has worked with agencies to
evaluate Y2K
requirements. First, OMB made certain that agencies received funding for
activities that were
requested in the President's fiscal year 1999 Budget, but that Congress
directed be funded from
the Y2K contingent emergency reserve. These activities totaled
approximately $590 million.
Then, to determine which requirements should be addressed with
emergency funding, OMB has
reviewed agency requests on an as-needed basis and made recommendations
regarding which
activities were to be funded at a given time. To date, OMB has approved
the release of $1.2
billion in emergency funding for unforeseen Y2K-related requirements. In
total, $1.8 billion has
been allocated in six separate emergency releases, with $14 million being
returned to the
emergency fund pursuant to a Congressional request. Therefore, $505
million remains available
for non-defense agencies to address emerging requirements. The Department
of Defense has
allocated $935 million of the $1.1 billion made available for
defense-related activities, and $135
million (15 percent) remains in reserve for contingent needs.
Additional transfers from the contingent emergency reserve will be
made as needs are identified
to ensure that all agencies have sufficient resources to achieve Y2K
compliance, complete
contingency planning, and execute those plans where necessary. OMB has
notified agencies that,
as they identify unforeseen funding requirements, they should forward these
requirements to
OMB for evaluation.
The most recent allocation of Y2K emergency funding, transmitted on
April 2, 1999, provides a
total of $199 million to 20 Federal agencies. Fourteen of these agencies
have received emergency
funding in earlier allocations. Funds will be used for various Y2K
compliance activities,
including testing to ensure that systems are Y2K compliant, replacement of
embedded computer
chips, creation and verification of continuity of operations and
contingency plans, and cooperative
activities with non-Federal entities in support of the President's Council
on Year 2000
Conversion.
Agencies have benefitted greatly from access to emergency funds, and
much of their progress can
be credited to this. Continued access to emergency funding is essential to
continued progress on
the Y2K problem. However, the Senate version of the FY 1999 Emergency
Supplemental
Appropriations Bill would reduce the non-defense Y2K emergency fund by $973
million. I urge
the conferees to strike this reduction, which is unwise at this time. Not
only would it eliminate
the remaining balance in the emergency fund, but it would also force
agencies to stop planned and
ongoing procurements for Y2K-related activities. It would also force
agencies to terminate
contracts, where this can be done without penalty, in order to recapture
the remaining $468
million.
You also asked for legislative recommendations. At this time, we
are not aware of any legislative
needs for the Federal agencies. We are continuing to work closely with the
Federal agencies on
this issue, and as particular legislative needs arise, we will keep you
informed. More importantly,
however, resources must remain available for agencies to carry out
aggressive strategies to
achieve compliance and to develop and implement contingency plans that will
ensure
uninterrupted operations and service delivery. In recent
months, the pace towards achieving
government wide compliance has quickened considerably. Much of this
improvement can be
attributed to the emergency fund, which has ensured that adequate resources
remain available to
agencies as they develop and refine effective strategies for achieving full
Y2K compliance. With
the year 2000 approaching, we should be building on our success, not taking
steps that could
undermine it.
In conclusion, during the 261 days remaining before the year 2000,
we plan to:
- Complete work on remaining mission critical systems and on other
Federal systems.
- Conduct end-to-end testing with the States and other key partners,
placing special emphasis on
ensuring the readiness of programs that have a direct and immediate impact
on public health,
safety, and well-being.
- Complete and test business continuity a
Thank you for the opportunity to allow me to share information with
you on the Administration's
progress. OMB remains committed to working with the Committee and Congress
on this critical
issue. I would be pleased to answer any questions you may have.
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