3rd Quarterly Report
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The Administration is continuing to work on averting the problems that could occur if systems are not able to correctly process the year 2000. On February 6, 1997, OMB sent a report to the Congress entitled "Getting Federal Computers Ready for 2000," which outlines the Federal government's strategy to address the year 2000 computer problem in its systems. That strategy is predicated on assuring agency accountability. To assist in that effort, OMB required agencies to report quarterly on their progress on the fifteenth of February, May, August, and November. (See OMB Memorandum M-97-13, "Computer Difficulties Due to the Year 2000 -- Progress Reports" - May 7, 1997). This report summarizes the agencies' progress and describes other actions being taken to assure success.

The Federal government's strategy is based on the five phases of the best practices for addressing the problem: awareness, assessment, renovation, validation, and implementation. With advice from the Chief Information Officers (CIO) Council, OMB sets government-wide milestones for the completion of work in each of the phases. Agencies then establish plans for when they would complete the work in each phase. While there are five phases, they are not necessarily consecutive. For example, renovation of some systems can be undertaken before the assessment of all systems is completed.

This is the third quarterly report, summarizing the progress reports the agencies sent to OMB on November 15, 1997.

Results in Brief

While all agencies have shown progress, the extent of that progress is mixed. Three agencies (DOE, HHS, and OPM) were added to the four (USDA, Education, DOT, and USAID) that were categorized as making insufficient progress in OMB's August report; two others (VA and Labor) were added to the group of agencies for which there is progress but also concerns; and, two agencies (EPA and SBA), which had been in that category were reclassified to the category of those demonstrating sufficient progress. Total estimated costs are essentially unchanged since the previous report, but OMB continues to believe that some agencies' costs may still be underestimated. In order to assure that funding is available to each agency to remedy the year 2000 problem, OMB has taken actions through the budget process that are described below in the section on agency specific progress. In addition, after considering the critical need to assure that agencies have sufficient time to test their mission-critical systems in production settings, the government-wide milestones are being accelerated from December 1998 to September 1998 for completion of renovation, and from November 1999 to March 1999 for implementation.

Government-wide Progress

This summary report shows that:

This report includes four tables which array and summarize information provided by the agencies.

Table 1, "Progress and Plans for Year 2000 Compliance of Mission Critical Systems," provides the agencies' schedules for completing the four remaining phases of the government-wide best practices. It shows that 21 of the 24 agencies were scheduled to have completed the assessment phase by November 1997. (It does not reflect the acceleration in government-wide dates discussed below.)

Table 2, "Mission Critical Systems," provides a snapshot of the size of the year 2000 problem and the results of "repair, replace, or retire" work thus far. Agencies have now identified 8,589 mission critical systems, which is slightly more than the 8,562 identified in the August report. This change occurred in part because the Social Security Administration, which previously counted modules, is now counting systems and has identified 308 mission-critical systems. Because agencies know their systems and are responsible for assuring that agency programs continue to function across the date change, OMB has given agencies discretion to define which of their systems are mission-critical. Several agencies have increased or decreased their numbers of mission-critical systems as they complete their assessments.

Table 2 also shows that agencies are still repairing the majority (55 percent) of their systems, replacing 11 percent, and retiring 4 percent. Twenty-six (27) percent of agency mission critical systems are now year 2000 compliant. In August, agencies reported that they were then repairing 62 percent, replacing 13 percent, and retiring 5 percent of their mission critical systems, and that 19 percent were already compliant. Some agencies have adjusted their figures based on applying a more rigorous definition of what constitutes compliance.

Table 3, "Mission Critical Systems Being Repaired," shows that, as a weighted percentage, the government is 95 percent complete with its assessment and 34 percent complete with renovation of the mission critical systems to be repaired. In August, the figures were 56 percent and 12 percent respectively.

Table 4, "Year 2000 Cost Estimates," shows the estimated costs for fixing the problem by agency. Agencies now estimate it will cost $3.9 billion to fix the year 2000 problem, which is $100 million more than the $3.8 billion estimated in August. That total includes estimated expenditures of $783 million in FY 1997 and $1.8 billion in FY 1998.

The estimates cover the costs of identifying necessary changes, evaluating the cost effectiveness of making those changes (fix or scrap decisions), making changes, testing systems, and preparing contingencies for failure recovery. They do not include the costs of upgrades or replacements that would otherwise occur as part of the normal systems life cycle. They also do not include the Federal share of the costs for state information systems that support Federal programs. The estimates provided by agencies will continue to change as work progresses.

Evaluation

Based on the reports, many agencies are making good progress in addressing the year 2000 problem. Most are on schedule and have completed their assessment of the problem; all have begun renovating systems, and almost all have completed implementation of some mission-critical systems. However, as the summary tables show, most of the work still remains to be done. As of November 15, 67 percent of the 8,589 agency mission-critical systems identified must still be repaired or replaced.

Progress has been made overall. In particular, progress on renovation (34 percent complete) and overall system compliance (26 percent complete) is encouraging. However, results are disappointing in several of the agencies, and OMB is therefore increasing its oversight of their activities. (See the agency-specific discussion below.)

As expected, our estimate of the government-wide cost ($3.9 billion) is slightly higher than the $3.8 billion estimate that OMB reported in August. The primary sources of the increase are the Treasury Department ($77 million) and the Department of Health and Human Services ($34 million). OMB expects that future quarterly reports will continue to refine cost estimates as agencies gain more experience about how much it costs to renovate their systems.

Government-wide Issues

Accelerated Goals

Although the agency reports demonstrate good progress in some areas, overall it is clear that a vast amount of work remains. The original government-wide goals did not provide much room for slippage. In addition, it is important to assure that agencies have sufficient time to run fully implemented systems in a production environment. Finally, the sense of urgency should be clear to both our private sector suppliers and to those with whom we exchange data. Accordingly, OMB has accelerated the government-wide target for completion of renovation from December 1998 to September 1998, and the target for completion of the implementation phase from November 1999 to March 1999.

Although OMB expects that agencies will make every effort to meet the March 1999 target, OMB also expects that some systems will not meet this target. Accordingly, OMB will ask agencies to identify in their February reports any mission-critical systems that agencies do not expect to be fully implemented by March 1999, along with the steps they are taking to develop contingency plans for those systems.

Independent Verification

Some of the private sector firms that have completed most of their work in fixing this problem have advocated the importance of independent verification that systems have actually been fixed. The agencies have been receptive to this advice and are requiring that systems be certified as year 2000 compliant and independently verified. In most agencies, inspectors general have taken an important and active role in assuring that agencies are performing proper verification activities. Agencies are also relying on existing processes for independent verification. OMB will ask agencies to report on their independent verification activities in their next quarterly report.

Planning for Contingencies

As stated above, OMB will ask agencies to describe in their February reports the steps they are taking to establish contingency plans for any system that is not expected to complete implementation by March 1999. In addition, agencies are to have in place a contingency plan for any mission critical system that is reported to be behind schedule in two consecutive quarterly reports and provide a summary of the plan to OMB. OMB has tasked the CIO Council to develop government-wide best practices in this area. OMB will continue to identify and summarize any such plans in future reports to the Congress.

Data exchanges with States and other partners

The Federal government exchanges data with foreign, State, and local governments, and with private entities. Of particular importance is the Federal relationship with the States, because the States operate many important Federal programs. Therefore, year 2000 compliance of data exchanges with the States is of great importance to both the Federal government and the States. To help assure compatibility, the CIO Council has established a working group specifically to focus on the exchanges between the Federal government and State governments. Already, that group has established points of contact for the States in each Federal agency. In addition, a State-Federal summit was held on October 28, 1997, to identify specific issues and develop a strategy for assuring that electronic data exchanges between the States and the Federal government will not fail.

An important piece of that strategy -- using a 4-digit contiguous format in year 2000 compliant data exchanges -- was agreed to at the summit, and recently promulgated in a joint letter from OMB and the National Association of State Information Resource Executives. In addition, policy and technical coordination groups have been established to address specific issues as they arise. These groups have set targets for when agencies will have inventoried their data exchanges with States (2/1/98), and when they will have communicated with the States regarding both the precise format of their data exchanges and the timing of their change to the new format (3/1/98). This same approach will be used for all other exchanges. OMB will ask agencies to report on progress in this area in their February reports.

Other Government-wide Systems

OMB has identified and is working on three government-wide areas where the year 2000 problem occurs in other than computer systems: telecommunications, bio-medical devices and laboratory equipment, and facilities. In these areas, the problem occurs in commercial products that have computers or computer chips inside them, and, at least for newer systems, needs to be fixed by the manufacturers of those products. OMB has established interagency working groups, each chaired by a key program agency in each of these three areas, to raise awareness and to work with manufacturers to assure that products are fixed. Each group has developed a work plan and set concrete objectives for the coming months. The bio-medical devices and laboratory equipment group, for example, plans to establish a web site populated with compliance information about such products early next year. The approach used for these three government-wide areas will be used for others as they are identified.

Agency-Specific Progress

Agency Evaluation

While many agencies appear to be making good progress in addressing this problem, some are not. As part of monitoring agency progress, OMB has categorized agencies into one of three tiers based on the sufficiency of the evidence of adequate progress in their reports.

The following criteria were used in OMB's evaluation of the information received from the agencies:

The first tier consists of agencies in which there is insufficient evidence of adequate progress. The agencies in the first tier are: the Departments of Agriculture, Education, Energy, Health and Human Services, and Transportation, as well as the U.S. Agency for International Development and the Office of Personnel Management.

Agriculture. The Secretary of Agriculture and the Chief Information Officer have dramatically increased senior management attention to this issue and taken strong management action. The Secretary has established a Senior Executive level position for managing year 2000 issues Department-wide. In addition, each bureau-level Administrator has also appointed a Year 2000 Senior Executive who reports directly to the Administrator and has established year 2000 project teams. During FY 1997, the Secretary issued a procurement moratorium requiring CIO approval of any IT procurements over $25,000; under this moratorium, purchases will only be approved on an emergency basis or when the acquisition is directly related to year 2000 remediation. This moratorium will remain in place throughout FY 1998 and FY 1999 to assure that the year 2000 is the Department's number one information technology priority. Although the Department has completed the assessment phase, the pace on renovation, validation, and implementation continues to be slower than necessary to meet the Department's schedule.

Education. The Department of Education has begun making progress in addressing its year 2000 problem. It has established a schedule for its year 2000 work, developed a detailed plan for fixing its mission critical systems, and has hired a consultant to assist with key project management and technical tasks to assure that the problem is adequately addressed. However, the Department remains behind the government-wide schedule, having just completed the assessment of its mission critical systems and only having begun renovating code.

Energy. The Department has just completed its assessment of mission-critical systems at all of its government and contractor sites. In its November report, the Department identified 69 new mission critical systems. Renovation is 13 percent complete, and progress in the other phases is minimal. In response to these concerns, the Department will require program officials to certify to the CIO that adequate progress is being made in achieving year 2000 compliance prior to receiving IT funds. In its February report, the Department plans to provide OMB a detailed breakout of progress at each site.

Health and Human Services (Health Care Financing Administration). Although the Department of Health and Human Services (HHS) as a whole is making progress, the Health Care Financing Administration (HCFA) has concerns about the 74 mission-critical systems of its external contractors, such as Medicare fiscal intermediaries and carriers. A little more than half of these contractors have completed their Year 2000 assessments. Furthermore, HHS and HCFA have limited ability under current law to influence these contractors. HHS is developing specific actions, including a legislative proposal, that can be taken to assure that these systems will work smoothly through the year 2000.

Transportation. Although the Secretary of Transportation has greatly strengthened senior management attention to this problem, the Department of Transportation continues to be at high risk of system failure in the year 2000, in large part because of poor progress by the Federal Aviation Administration (FAA). The FAA has completed assessments on only 38 percent of its systems. This does not include an additional 245 systems the FAA has just identified as mission critical, but has not assessed. Moreover, it is likely that additional mission critical systems will be identified. The rest of the Department is also behind schedule, having completed only 91 percent of its assessment. Progress within the other phases has been minimal since the last report, and DOT is unlikely to meet its milestones. Because the Department has not completed its assessment, it is likely that it has underestimated its costs.

Agency for International Development. USAID is taking the correct management action in addressing its Year 2000 problem. It has delayed its modernization effort pending year 2000 work and plans to reprogram at least $16.9 million in FY 1998 for year 2000 costs, mostly from the funds that were intended for the modernization effort. AID remains a concern pending demonstrated progress as a result of these steps.

Office of Personnel Management. The Office of Personnel Management (OPM) completed its assessment in February 1997, but has only renovated 9 percent of its mission-critical systems and has not validated or implemented fixes to any of them. In August OPM issued a contract for the renovation of 79 mission-critical systems that support its retirement programs. That contract is expected to produce substantial progress in the Spring of 1998.

Other Agencies

For agencies in the second category, we see evidence of progress, but also have concerns. Many have strong year 2000 programs that we expect will continue to show progress. The agencies in the second category are: Commerce, Defense, Interior, Justice, Labor, Treasury, VA, FEMA, and NASA. A summary of progress and concerns for these agencies appears below.

Agency

Progress

Continuing Concerns

Commerce

Overall, appears to be on-schedule; assessment of telecommunications is underway.

Need for progress in Census, NOAA and PTO; need for centralized management oversight; need for greater attention to bureau level detail.

Defense

Substantial progress toward completing assessment and renovating mission-critical systems.

Assessment not yet complete; has a tight schedule for meeting a massive Year 2000 challenge.

Interior

Ahead of schedule for renovation of mission-critical systems; has program to find non-IT problems.

Little improvement in renovation of systems since previous report.

Justice

Named senior non-IT officials responsible for Year 2000 in components; hiring IV&V contractor.

Need greater progress in renovating mission-critical systems.

Labor

Plans to accelerate implementation of late systems; completed documentation of all external interfaces.

Need greater progress in renovating mission-critical systems.

Treasury

Increased management oversight; significant progress on renovation phase. Good management oversight at IRS.

Assessment is still incomplete at FMS, OCC, and OIG.

Veterans Affairs

Good progress on renovation, validation, and innovation; schedule is on target; some progress on assessment of bio-medical systems.

Assessment still incomplete at VHA, but expect completion by 1/98 with substantial proportion of assessed systems turning out to be compliant.

FEMA

Ahead of schedule for renovating mission-critical systems.

Little progress in renovation since previous report.

NASA

Senior management attention; accelerating its schedule; has detailed plan in place.

Size and complexity of systems requires continued close scrutiny; modest progress since previous report.

The remaining agencies -- HUD, State, EPA, GSA, NSF, NRC, SBA, and SSA -- appear to be making satisfactory progress.

OMB Action

The previous report indicated that OMB would take budget action to assure that agencies are devoting adequate resources to fixing the year 2000 problem. In particular, OMB announced that FY 1999 funding for non-year 2000-related information technology investments would be contingent upon agency progress on the year 2000 problem. The FY 1999 President's Budget, which will be transmitted in February, will reflect that policy. In addition, using OMB's apportionment authority in accordance with the Clinger-Cohen Act (the Information Technology Management Reform Act of 1996), OMB is apportioning information technology funds for some agencies in FY 1998.

OMB will continue to monitor agency progress on a quarterly basis and use appropriate budgetary and management tools to assure continued progress.

Exception Report on Systems

OMB requires agencies to report on any mission-critical systems for which year 2000 efforts have fallen more than two months behind schedule.

The Department of Defense reports 23 of its 2,741 non-compliant systems are behind schedule. The Department will provide more detailed explanations of the mission-critical systems behind schedule in a separate report in December.

The Department of Health and Human Services reports that the Health Care Financing Administration's external Medicare local carriers, fiscal intermediaries, and shared systems are behind schedule and in some instances have provided unrealistic schedules.

The Department of Transportation has not completed the assessment phase for a number of its mission critical systems, including the FAA's Air Traffic Control (ATC) systems. Since the last report, the FAA identified 245 mission critical systems that must still be assessed. For those systems other than ATC, the Department had completed a preliminary assessment, but on September 19, 1997, the Department issued more stringent criteria for measurement of completion of work. Those systems are now being re-assessed under the new criteria. The Department expects to complete this reassessment by December 1997.

Treasury listed two systems that have fallen behind agency milestones; both systems are on schedule with respect to the government-wide guidelines. The initial schedule for all the components of the Automated Commercial Service (ACS) indicated that the system would be completed by June 1999. Although some non-mission-critical components of the system will not meet that schedule, all 142 mission-critical components of ACS are on schedule to be renovated, validated, and implemented with respect to the year 2000 problem by October 1, 1998. The same holds for the Treasury Enforcement Communications System (TECS). The initial TECS schedule indicated completion for all (mission-critical and non-mission-critical) components of the system by May 1999. For TECS, all 48 mission-critical components are expected to be renovated, validated, and implemented by October 1, 1998.

The Environmental Protection Agency has two systems that are being repaired and are more than two months behind the agency's milestone for assessment completion. Both systems have completed draft assessments and are on a schedule to complete final assessments by the end of November and to meet the remaining agency milestones. The systems have been proceeding under a schedule that preceded the establishment of the agency milestones. The agency does not anticipate any problems in meeting the remaining milestones, but will continue to closely monitor these systems.

Changes in required reporting

OMB will work with the agencies and the Congress to assure that the right information is being provided for oversight purposes and to keep the public informed. This effort will be designed so as to keep the reporting burden at the minimum level necessary, so as to avoid unnecessarily diverting agency resources from fixing the problem. In addition to the reporting changes mentioned above, additional information may be requested on progress on non-mission -critical systems and on other government-wide systems. In addition, some other reporting requirements will be clarified.

TABLE 1

Progress and Plans for Year 2000 Compliance of Mission Critical Systems

(As of November 15, 1997, and before any adjustments for accelerated milestones)

 

Assessment

Renovation

Validation

Implementation

Gov't-wide Goal

6/97

12/98

1/99

11/99

Agriculture

11/97

9/98

9/99

9/99*

Commerce

3/97

12/98

1/99

10/99

Defense

12/97

12/98

6/99

11/99

Education

11/97

12/98

9/98

3/99

Energy

1/97

9/98

2/99

7/99

HHS

6/97

9/99

10/99

12/99

HUD

6/97

12/98

7/99

11/99

Interior

3/97

12/98

1/99

11/99

Justice

6/97

7/98

10/98

1/99

Labor

6/97

12/98

1/99

11/99

State

6/97

9/98

10/98

8/99

Transportation

12/97

12/98

7/99*

10/99*

Treasury

7/97

12/98

12/98

11/99

VA

1/98

11/98

1/99

10/99

AID

11/97

6/99

8/99

9/99

EPA

6/97

12/98

1/99

11/99

FEMA

6/97

12/98

1/99

11/99

GSA

6/97

12/98

1/99

10/99

NASA

8/97

12/98*

1/99*

11/99*

NSF

6/97

12/98

1/99

11/99

NRC

9/97

12/98*

1/99*

4/99*

OPM

6/97

12/98

1/99*

6/99*

SBA

9/96

12/98

12/98

12/98

SSA

5/96

9/98

12/98

1/99

Note: Bold dates are later than dates shown in the August 15, 1997, report; dates with asterisks are earlier than the dates shown in the August report.

TABLE 2

Mission Critical Systems

 
Total
Number
Number
Compliant		 Compliant
as Percent
of Total		 Number
Being
Replaced		 Number
Still Being
Repaired

Number Being Retired

Agriculture

1341

210

16%

58

947

126

Commerce

513

273

53%

83

119

38

Defense

3143

672

21%

203

2140

128

Education

19

7

37%

6

5

1

Energy

468

137

29%

157

161

13

HHS

487

159

33%

126

194

8

HHS

487

159

33%

126

194

8

HUD

195

62

32%

35

77

21

Interior

92

26

28%

10

51

5

Justice

192

51

27%

13

125

3

Labor

61

10

16%

27

24

0

State

69

27

39%

30

12

0

Transportation

516

36

7%

29

149

5

Treasury

296

49

17%

23

220

4

VA

11

1

9%

0

10

0

AID

65

7

11%

8

31

19

EPA

61

36

59%

5

18

2

FEMA

48

21

44%

11

14

2

GSA

58

29

50%

17

11

1

NASA

459

211

46%

51

194

3

NSF

16

0

0%

4

12

0

NRC

7

1

14%

3

3

0

OPM

124

17

14%

12

94

1

SBA

40

10

25%

0

30

0

SSA

308

244

79%

4

59

1

TOTAL

8589

2296

27%

915

4700

381

TABLE 3

Mission Critical Systems Being Repaired
(Percentage Complete)

 

Number

Assessment

Renovation

Validation

Implementation

Agriculture

947

100%

12%

6%

7%

Commerce

148

100%

30%

23%

22%

Defense

2140

93%

44%

16%

2%

Education

5

100%

20%

0%

0%

Energy

168

100%

13%

11%

4%

HHS

194

81%

36%

21%

16%

HUD

157

100%

45%

27%

22%

Interior

64

94%

20%

20%

20%

Justice

125

100%

18%

11%

6%

Labor

24

100%

16%

12%

7%

State

12

100%

25%

25%

0%

Transportation

154

80%

9%

5%

2%

Treasury

240

80%

44%

8%

8%

VA

10

90%

61%

38%

25%

AID

34

95%

9%

9%

9%

EPA

30

100%

50%

40%

40%

FEMA

14

100%

 

29%

21%

GSA

11

100%

25%

18%

17%

NASA

218

100%

14%

11%

11%

NSF

12

100%

50%

42%

0%

NRC

4

100%

25%

25%

25%

OPM

94

100%

9%

0%

0%

SBA

30

100%

63%

60%

59%

SSA

289

100%

80%

74%

69%

TOTAL

5124

95%

34%

17%

10%

TABLE 4

AGENCY YEAR 2000 COST ESTIMATES
(Dollars in Millions, by Fiscal Year)

Agency

1996

1997

1998

1999

2000

TOTAL

Agriculture **

4.8

18.4

50.0

26.2

9.7

109.1

Commerce *

2.6

12.4

32.9

28.6

6.9

83.4

Defense **

14.6

370.8

711.6

274.7

30.8

1402.5

Education

0.1

0.6

3.4

4.4

0.2

8.7

Energy**

1.6

24.2

42.1

44.3

17.9

130.1

HHS*

9.0

29.5

72.3

20.1

0.0

130.9

HUD **

0.7

6.2

19.5

15.0

6.2

47.6

Interior *

0.2

2.8

10.6

3.0

0.7

17.3

Justice

1.5

7.3

12.5

3.5

0.3

25.1

Labor

1.7

5.3

6.9

3.4

1.1

18.4

State

0.5

47.6

56.4

29.1

1.6

135.2

Transportation [1]

0.4

17.2

109.8

109.6

29.5

267.7

Treasury * [1]

7.1

174.8

581.3

287.7

122.4

1182.7

VA *

4.0

22.0

71.0

67.0

2.0

166.0

AID*

1.1

3.0

7.7

1.9

0.0

13.7

EPA

0.8

3.3

6.8

5.6

2.3

18.8

FEMA

3.8

4.4

3.0

3.2

1.2

15.6

GSA

0.2

1.0

1.0

0.1

0.0

2.3

NASA *

0.1

8.2

20.9

13.5

2.3

45.0

NSF

0.0

0.5

0.8

0.1

0.0

1.4

NRC

0.0

2.6

2.9

2.9

0.9

9.3

OPM

1.7

2.1

0.3

0.3

0.3

4.7

SBA

1.7

3.3

2.0

0.0

0.0

7.0

SSA

2.2

15.4

9.5

6.0

0.1

33.2

 

 

 

 

 

 

 

TOTAL

60.5

782.8

1835.2

950.2

236.5

3875.8

 

 

 

 

 

 

 

Notes:

These estimates do not include the Federal share of the costs for State information systems that support Federal programs. For example, the Agriculture total does not include the potential 50 percent in Federal matching funds provided to States by Food and Consumer Services to correct their Year 2000 problems. Similarly, the HHS total does not include the Medicaid baseline costs for the Federal share of state systems. And, while Labor's FY 1998 appropriation includes $200 million for States to correct Year 2000 problems in State unemployment insurance systems,x that amount is not included in this estimate.

* Agencies for which total estimate increased by more than $1 million from the August 1997 report.

** Agencies for which total estimate decreased by more than $1 million from the August 1997 report.

[1] Treasury total includes $9.4 million in FY 2001. Transportation total includes $1.7 million in FY 2001.


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