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| **CIO PKI/SMART Card Project**                                        |
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| **Approach for**                                                      |
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| **Business Case Analysis of Using**                                   |
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| **PKI on Smart Cards for**                                            |
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| **Governmentwide Applications**                                       |
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| **final Deliverable #0003**                                           |
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| ![](media/image1.png){width="0.5458333333333333in"                    |
| height="0.7138888888888889in"}                                        |
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| **General Services Administration**                                   |
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> **Order \# T-03-00DS-F002**

**Contract \# GS00T97NSD0023**

Washington, DC

Presented to CIO Council 18 April 2001

***TABLE OF CONTENTS***

**Executive Summary ES-[1](#executive-summary)**

ES.1 Background ES-[1](#es.1-background)

ES.2 Methodology ES-[1](#es.2-methodology)

ES.3 Supporting Data ES-[2](#es.-3-supporting-data)

1\. Introduction 1-[1](#introduction)

1.1 Purpose 1-[1](#purpose)

1.2 Scope 1-[1](#scope)

1.3 Document Layout 1-[1](#document-layout)

2\. Business Case Methodology 2-[1](#business-case-methodology)

3\. Environmental Assessment, Baseline, and Alternatives
3-[1](#environmental-assessment-baseline-and-alternatives)

3.1 Environmental Assessment 3-[1](#environmental-assessment)

3.2 Establish Baseline and Set Targets
3-[4](#establish-baseline-and-set-targets)

3.3 Information Assurance Alternatives
3-[5](#information-assurance-alternatives)

3.4 Appropriate Agency to Implement PKI-enabled Smart Cards
3-[11](#appropriate-agency-to-implement-pki-enabled-smart-cards)

3.5 Other Considerations 3-[12](#other-considerations)

4\. Cost Analysis 4-[1](#cost-analysis)

4.1 Cost Structure 4-[2](#cost-structure)

4.2 Costs of PKI 4-[4](#costs-of-pki)

4.3 Incremental Costs for Increased Levels of Security
4-[5](#incremental-costs-for-increased-levels-of-security)

5\. Benefit Analysis 5-[1](#benefit-analysis)

5.1 Benefits of Implementing PKI 5-[2](#benefits-of-implementing-pki)

5.2 Benefits of Utilizing Smart Cards
5-[4](#benefits-of-utilizing-smart-cards)

5.3 Benefits of Implementing PKI-enabled Smart Cards
5-[7](#benefits-of-implementing-pki-enabled-smart-cards)

5.4 Benefits Achieved by DoD's PKI-enabled Smart Card Implementation
5-[8](#benefits-achieved-by-dods-pki-enabled-smart-card-implementation)

6\. Risk Analysis 6-[1](#risk-analysis)

6.1 Risks of Smart Cards 6-[1](#risks-of-smart-cards)

6.2 Risks of PKI 6-[4](#risks-of-pki)

7\. Impact of Investment 7-[1](#impact-of-investment)

8\. Case Studies 8-[1](#case-studies)

8.1 A Large Agency 8-[1](#a-large-agency)

8.2 The Federal Deposit Insurance Corporation
8-[12](#the-federal-deposit-insurance-corporation)

8.3 Lessons Learned 8-[19](#lessons-learned)

9\. Conclusion 9-[1](#conclusion)

APPENDIX A ACRONYMS AND ABBREVIATIONS DEFINED
A-[1](#appendix-a-acronyms-and-abbreviations-defined)

APPENDIX B GLOSSARY OF PKI AND SMART CARD TERMS
B-[1](#appendix-b-glossary-of-pki-and-smart-card-terms)

# Executive Summary

Booz∙Allen & Hamilton, under contract to the General Services
Administration, was tasked to document a business case approach that can
be utilized by Federal agencies considering an investment in Public Key
Infrastructure (PKI) on smart cards for governmentwide applications. The
Chief Information Officer (CIO) Enterprise Interoperability Emerging IT
Committee plans to use the methodology presented herein to help these
agencies build business cases that examine using smart cards in concert
with the emerging Federal PKI to provide Government employees with a
standard identification card to be used for authentication, access
control, and electronic commerce (e-commerce). The intended audience of
this report is investment decision makers of Federal agencies that are
seeking information assurance solutions for their agencies and those
practitioners charged with developing business cases.

This report was prepared as a means of helping Federal agencies
understand the components for building a sound business case for using
PKI/smart cards (cryptographic smart cards) within Federal agencies. By
following the business case methodology presented in this document,
decision makers will be able to determine for themselves whether the
investment costs for PKI/smart cards are justified and whether
investment benefits outweigh the risks. Decision makers are also given
guidance on evaluating the economic impact of alternatives, comparing
alternatives, and ultimately monitoring the investment.

## ES.1 Background

Technological advances and recent legislation like the Government
Paperwork Elimination Act have pushed Federal agencies into making
e-commerce a reality. Technology and infrastructure are in place to
support initiatives such as paperless contracting, wide-area workflow,
and the expansion of the governmentwide commercial purchase card
program. E-commerce represents a radical change to the way business has
been conducted within the Federal Government. To support this radical
change, Federal agencies are being required to increase overall network
security including providing information assurance. Electronic
authentication issues are leading many agencies to consider PKI/smart
cards as a probable solution to the security challenges presented by
e-commerce. While it is possible to use PKI without smart cards or vice
versa, this report focuses on the joint use of PKI and smart cards.

## ES.2 Methodology

A business case analysis is simply an extended form of cost-benefit
analysis that considers factors beyond financial metrics. Other factors
to be considered might include security needs, business needs,
associated risks, and qualitative benefits resulting from the
investment. At its core, however, any business case analysis is founded
on a comprehensive economic analysis; thus, the business case
methodology will examine PKI/smart cards in the context of its
investment worthiness as well as its technical and programmatic
feasibility.

The step-by-step business case methodology is shown Figure ES-1.

Figure ES-1: Business Case Analysis Methodology for PKI/Smart Cards

![](media/image2.wmf){width="5.461805555555555in"
height="2.8784722222222223in"}

To help create a persuasive business case, this report outlines salient
issues related to cost, benefits, and risks. Additionally, this report
presents as supporting data two case studies to demonstrate the business
case process for PKI/smart cards. Case studies are presented for a large
agency and for the Federal Deposit Insurance Corporation (FDIC).

## ES. 3 Supporting Data

To begin, an agency must clearly understand the need for change within
its organization and consider the full spectrum of information assurance
technology solutions that exist to meet its need. PKI/smart cards are
not the only technology that can be used for information assurance.
Because there is no one-size-fits-all security solution for Federal
agencies, an environmental assessment of the agency should be conducted
to determine whether it is a good candidate for implementing PKI/smart
cards. Ultimately, the technology selected should best respond to a
particular agency\'s threat environment. PKI/smart cards are useful to
agencies that have a mobile workforce with access to card readers
(taking advantage of the portability of smart cards), agencies placing a
high value on building access, and those that conduct business
electronically outside of their agency. The more an agency transacts
business with other organizations, the greater the need for strong
authentication and nonrepudiation. Furthermore, some agencies have a
high need for data integrity and data confidentiality. All of these
factors point to the necessity for information assurance solutions that
can be addressed through use of PKI. Relevant technology solutions are
compared in Figure ES-2 according to the cost of tokens, readers, and
infrastructure. Security and operational benefits are also scored for
each technology. The technologies are shown in ascending order of
information assurance.

Figure ES-2: Viable Alternatives for Information Assurance Solutions

![](media/image3.wmf){width="5.990972222222222in"
height="3.3673611111111112in"}

In this figure, three mediums of technology are compared: static (cannot
be changed), updateable (can be changed), and cryptographic (can be both
changed and programmed). The technologies are listed in order from least
secure (bar code cards) to most secure (PKI/smart cards with
biometrics). For each technology, the relative cost of a token, reader,
and infrastructure is scored. The color schematic uses green for most
desirable (lowest costs), yellow for desirable (modest costs), and red
for least desirable (highest costs). This matrix shows how cryptographic
technologies deliver the most security and operational benefits to
agencies, albeit at a higher cost. The full range of alternatives sought
should reflect an agency's business need and the requirements of its
funding approval body. A more exhaustive discussion of costs is found in
Section 4, Cost Analysis.

This matrix also scores the benefits of each technology. First, four
security benefits are evaluated according to each technology:
nonrepudiation, authentication, data integrity, and confidentiality.
These benefits map primarily to PKI. The second section of benefits
concerns operational and business benefits realized more through the use
of smart cards. These benefits include scalability, portability,
interoperability, efficiency, and data storage capacity. Technologies
yielding the least benefits were scored red; those with some benefit
were scored yellow; and those with the most benefit were scored green.
The security and operational benefits are presented for PKI/smart cards
in detail in Section 6, Benefits Analysis.

Planning, application enabling, and operational capability are the three
most significant costs categories associated with PKI/smart cards.
Planning costs include:

-   Policy development

-   Implementation plans

-   Test and acceptance plans

-   Bid evaluation strategy, communication, and review

-   Award negotiation.

Application enabling costs cover program management, hardware, software,
support, and include:

-   Program management

-   Toolkits

-   Application upgrades

-   Installation/modifying applications

-   Smart cards

-   Card readers

-   Card issuance workstations

-   Test and evaluation

-   Support and helpdesk

-   Upgrade/product improvement/refresh.

Operational capability costs include:

-   Program Management

-   Concept Exploration (Pilot)

-   Training -- System Administrator

-   Training -- End User

-   Documentation

-   Auditing

-   Helpdesk Support

-   System Administration

-   Vendor Relations Management.

The cost of fielding PKI/smart cards for an agency with 10,000 employees
was estimated to be approximately \$1.4 million (in constant dollars) in
hardware costs.

![](media/image4.wmf){width="5.840277777777778in"
height="1.7402777777777778in"}Figure ES-3: Illustrative Cost of
PKI/Smart Cards

PKI technology offers the benefits of authentication, nonrepudiation,
data integrity, and confidentiality. PKI enables agencies to make full
use of the Internet as a means of transacting business in a secure
environment. When PKI is implemented with smart cards, additional
operational benefits are realized, including scalability, portability,
interoperability, efficiency, and data storage capacity.

Beyond considering the costs and benefits of PKI/smart cards, risk
should be considered. It is important to consider fully each
alternative\'s risks so that these risks can be properly managed and
addressed during implementation. In fact, cost, benefits, and risks
associated with each alternative should form the basis of an agency\'s
decision criteria when selecting a preferred alternative. To compare the
cost of alternatives, return on investment is often the most effective
measure as it provides a means of comparing alternatives with different
expenditure streams. Once a preferred alternative is selected, procured,
and fielded, the investment should be monitored to ensure that it
performs as planned.

In addition to identifying the elements that must be factored into a
PKI/smart card business case analysis, Booz∙Allen performed two case
studies on PKI/smart card use. Case studies are presented for a large
agency and for the Federal Deposit Insurance Corporation (FDIC). These
case studies are provided to help decision makers and those developing
the business case analyses understand the policy implications,
technology issues, and the cost, benefit, and risk factors other
agencies have already considered in implementing their own PKI/smart
card infrastructures. The large agency was selected to represent a large
organization that is using PKI/smart cards for logical access and
personal identification. Another important factor was the way that the
large agency is using smart cards externally as a primary means of
delivering benefits to its constituency and providing other benefits
like tuition reimbursement.

![](media/image5.wmf)The large agency is deploying a large PKI/smart
card program that services users outside of the agency and expects to
spend about \$81 million on PKI/smart cards over the next two years.
This agency decided to outsource its key management function. Figure
ES-4 provides an overview of the their costs for PKI/smart cards for the
next two years.

Figure ES-4: Overview of a Large Agency PKI/Smart Card Program Costs

In contrast to the large agency, the FDIC is a smaller agency with a
very mobile workforce---namely, the more than 3,000 bank examiners who
travel the country extensively to perform audits at FDIC insured banks.
The data resident on a bank examiner's laptop is very sensitive---so
much so that the data is worth far more to the agency than the laptop
itself. In light of that fact, FDIC uses PKI technology to encrypt this
data so that its confidentiality can be ensured should the laptop be
stolen or misplaced. Furthermore, FDIC uses PKI/smart cards for logical
access, physical access, and personal identification. These two agencies
with two business models have addressed their needs through one
technology. Although the size of the agencies varies greatly, it
demonstrates one of the major benefits of PKI/smart cards: scalability.

For both case studies, the cost of developing a certificate policy,
establishing a PKI, and distributing smart cards is presented. The
relative benefits the agencies perceive they derive from the new
technology are discussed. The case studies describe two distinct
approaches. The large agency has pursued outsourcing of key management
whereas FDIC has decided to manage its own program. FDIC employed the
technology during its infancy stage and will take a little more than
four years to stand up PKI/smart card infrastructure fully---estimated
date is March 2001. On the other hand, the large agency did not begin to
build its PKI/smart card infrastructure until June 2000, but the agency
is on an accelerated plan to be fully operational in only 18 months. The
path an agency takes may be different from these, depending on security
requirements, user population, and business needs.

FDIC expects to spend almost \$7.5 million on PKI/smart card technology
over the next two years. Figure ES-5 below shows a breakdown of FDIC\'s
expenditures on PKI/smart cards for the next two years.

Figure ES-5: Overview of FDIC PKI/Smart Card Program Costs

![](media/image6.wmf){width="4.5368055555555555in"
height="3.370138888888889in"}

These case studies show that implementation of PKI/smart card
technologies is achievable, beneficial, and affordable. FDIC and the
large agency demonstrate that PKI/smart card technology is achievable in
a relatively short fielding time. The technology has improved
operations, streamlined business processes, and even reduced costs. At
FDIC the cost savings from the use of PKI and digital signature for
electronic travel vouchers almost paid for the entire PKI
infrastructure. Finally, PKI/smart card technology is affordable. The
total costs of PKI/smart card technology cost each agency on average
approximately \$425 per user each year. As an agency builds its own
business case for PKI/smart card technology, the case study information
provided and the lessons learned shown in this paper should be drawn
upon.

# 1. Introduction

## 1.1 Purpose

This report was prepared as a means of helping Federal agencies
understand the components for building a sound business case for using
PKI/smart cards (cryptographic smart cards) within Federal agencies.
This report provides decision makers with a framework to construct a
business case and provides detailed information on the costs, benefits,
and risks associated with both PKI and smart card technologies. By
following the business case methodology presented in this document,
decision makers will be able to determine for themselves whether the
investment costs are justified and whether the benefits outweigh the
risks. Decision makers are also given guidance on evaluating the
economic impact of alternatives, comparing alternatives, and ultimately
monitoring the investment.

## 1.2 Scope

This report focuses on the joint use of PKI and smart cards. It is
possible to use PKI without smart cards or vice versa, but this report
strives to show how the two can be used synergistically to benefit
agencies. This report provides an approach for determining the costs,
benefits, and risks of PKI/smart cards. This report does not actually
show a business case analysis; it explains how to conduct one. A brief
discussion of alternative technologies is also provided. Two case study
examples are provided of Federal agencies that are implementing
PKI/smart cards.

## 1.3 Document Layout

The *Business Case Analysis of Using PKI on Smart Cards for
Governmentwide Applications* comprises nine main sections.

-   **Section 1---Introduction:** Presents the purpose and scope of the
    document.

-   **Section 2---Business Case Analysis Methodology:** Describes the
    methodology an agency can use to make an investment decision
    regarding PKI/smart cards. The steps in the methodology are
    performing an environmental assessment; establishing a baseline;
    identifying alternatives; determining costs, benefits, and risks;
    evaluating economic impact; comparing alternatives and formulating
    recommendations; and finally, monitoring the investment.

-   **Section 3---Environmental Assessment, Baseline, and
    Alternatives:** Discusses the legislative changes, market changes,
    and other factors that have spurred the implementation of PKI/smart
    card solutions. A range of alternatives is presented so that the
    benefits of using PKI/smart cards can be better understood.

-   **Section 4---Cost Analysis:** Provides a sample cost element
    structure for PKI/smart cards and shows the relative equipment costs
    of magnetic stripe cards, smart cards, PKI/smart cards, and
    PKI/smart cards and biometrics.

-   **Section 5---Benefit Analysis:** Describes the security benefits
    associated with PKI and the operational benefits associated with
    smart cards.

-   **Section 6---Risk Analysis:** Explains the risks stemming from use
    of smart card and PKI technologies.

-   **Section 7---Impact of Investment:** Shows how a final investment
    decision is made by comparing the cost, benefits, and risks of
    alternatives and the baseline.

-   **Section 8---Case Studies:** Relates how a large agency and FDIC
    have implemented PKI/smart card technology within their agencies. An
    implementation timeline, costs, benefits, and risks are shown.

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-   **Section 9---Conclusion:** Summarizes the findings in the document.

Every section of this report ties back to the business case methodology
presented in Section 2. This report was designed in this fashion to help
agency personnel build a sound business case.

# 2. Business Case Methodology 

Business case analyses often help to answer the following questions:

-   Are there environmental factors that influencing the investment
    decision, such as legislation or regulation?

-   What technical, business, and regulatory factors are germane to the
    technology being investigated (i.e., PKI/smart cards)?

-   What feasible alternatives can meet the business and process needs
    of your agency?

-   What are the relevant costs associated with each alternative?

-   What is the realistic life of the technology (e.g., PKI/smart card
    project) and can costs and benefits accurately be predicted over
    this time period?

-   What are the cost risks associated with the estimates?

-   What are the relevant benefits associated with each alternative
    \[e.g., enhanced security, productivity improvements, uniformity of
    process, and future applications (e.g., PK-enabled applications)\]
    and have all those associated benefits been quantified/assessed?

The three-phased business case methodology shown in Figure 2‑1
represents a composite of the best practices found in government and
industry which are applicable to PKI/smart card technology. As agencies
build their own business cases for PKI/smart card programs, the steps
identified below will help document the business rationale for these
investments.

Figure 2-1: Business Case Analysis Methodology for PKI/Smart Cards

![](media/image7.wmf){width="5.461805555555555in"
height="2.8784722222222223in"}

This PKI/smart card business case methodology is simply an extended form
of cost-benefit analysis that considers factors beyond financial
metrics. Other factors to be considered might include security needs,
business need, associated risks, and qualitative benefits resulting from
the investment. At its core, however, any business case analysis is
founded on a comprehensive economic analysis; thus, the technical
approach presented in the following paragraphs is organized according to
each of the steps in the business case analysis.

#### Step One: Analyze the Current Environment and Assess Affected Areas

The first step is to conduct an analysis of the current environment and
an assessment of affected areas. It is critical to understand the
current business processes and technologies in place and to determine
the shortfalls or deficiencies associated with the current environment.
Environmental assessments can include reviewing technology inventories,
architectures, business processes, etc. Almost every investment, either
in facilities, personnel, technology, or knowledge affects numerous
parts of the organization. Organizational implications (costs and
benefits) must be assessed. Understanding how a potential organizational
change impacts the current environment is critical to evaluating the
return on investment and the expected short and long-term values of the
project.

Data needed for this and all other steps of the business case analysis
can be collected through a number of mechanisms including:

-   Financial analysis of program data

-   Documentation review

-   Survey responses from the stakeholders

-   Market research

-   Interviews.

#### Step Two: Establish a Baseline and Set Targets for Improvement

To obtain the relevant costs and associated benefits of implementing
PKI/smart card within an agency, a baseline for comparison must be
established. This can be done by comparing the findings concerning the
current environment with stated objectives for an agency or program. The
outcome of the comparison enables shortfalls of the current environment
to be determined and opportunities for change to be identified. By doing
this, an agency demonstrates why it needs PKI/smart cards rather than
other technologies. The discussion should point to business drivers,
security drivers, and technology drivers that led to the conclusion to
pursue this solution. For example, the use and applicability of
PKI/smart cards across the Federal Government for physical access,
logical access, and digital signatures as it relates to an agency's
business needs should be addressed. This information is often collected
by interviewing business process owners and functional proponents of the
business units potentially affected by the use of PKI/smart cards.
Investment objectives should be stated to define the goal of the
investment and how it is an improvement over baseline operations.

#### Step Three: Identify Viable Alternatives

In this step, all options to achieve an agency\'s stated information
assurance goals should be captured. At this stage, many alternatives can
be considered, from the low-end technology solutions (e.g., bar codes)
to the high-end smart cards with biometrics to multiple combinations in
between. Cost and feasibility should not preclude an alternative from
consideration.

Once all potential alternatives have been identified the agency must
follow a process to narrow the realm of possibilities down to a few
viable alternatives. Using the data collected previously, alternatives
can be evaluated on their ability to fill the gaps between where an
agency is now and where it wants to be in the future. Asking whether the
organization can absorb the change and gauging the probable long-term
success of the investment are critical actions before starting to
calculate costs and benefits. Other factors used to determine viability
include technical or programmatic feasibility, cost, regulatory
compliance, etc. This first analysis can reduce the range of
alternatives to a manageable number that can then be more fully
quantified. The remaining alternatives always include baseline
operations (e.g., status quo alternative) in addition to at least one
potential investment alternative.

#### Step Four: Determine the Costs

The costs of continuing the current process (status quo) and each of the
viable alternatives need to be calculated for a determined period of
time (e.g., 10 year life cycle). To do this, a cost element structure
needs to be created as a framework for equitable comparisons. This
structure should be designed specifically for PKI/smart card
initiatives. Section 4, Cost Analysis, provides an illustration of costs
associated with PKI/smart cards. When the cost element structure is in
place, you need to collect appropriate cost data for each alternative. A
cost model should be built to calculate costs. Sometimes, verifiable
cost data are not available, and costs need to be derived by proxy or
estimation. It is a good business practice to mitigate cost risk so your
cost estimate is not skewed as a result of poor assumptions.

#### Step Five: Determine the Benefits

Benefits and cost savings/avoidance need to be identified for continuing
current operations (the status quo alternative) and for each of the
viable alternatives. The business case assumes varying levels of
benefits for each alternative in addition to varying costs. To the
fullest extent possible, an agency must identify and quantify benefits
that will be derived from alternative investments made in implementing
PKI/smart cards. Section 5, Benefit Analysis, provides an explanation of
some probable benefits. Keep in mind that many benefits realized through
a particular alternative will be qualitative and will not lead directly
to dollar savings. Improvements in customer service, regulatory
compliance, security, and accountability are certainly recognized as
benefits, but they rarely can be included in the dollar-valued benefits
stream or return on investment (ROI) measures. These qualitative
benefits can be numerically scored by assigning a value to fully
meeting, partially meeting, or not meeting stated business or functional
drivers. These benefits should be highlighted in the final report and
should be considered in selecting the preferred alternative.

#### Step Six: Determine the Risk

The purpose of a risk analysis is to focus the decision maker's
attention on the financial, technical, and schedule risks associated
with the alternative under study and to counter-balance positive
financial indicators with real-world factors that could keep the
alternative from reaching its estimated potential. Taking a proactive
management approach to risk is consistent with industry best practices
of instituting a risk management process and employing best-of-class
risk management methodologies to ensure that appropriate risk mitigation
strategies are implemented and project goals are achieved.

Because any look into the future involves an inherent level of
uncertainty, business case analyses are subject to risk. Identify the
risks associated with the PKI/smart card investment so that they can be
managed and controlled. Use cost risk analysis tools to account for any
cost risk associated with your estimates.

#### Step Seven: Evaluate the Economic Impact of the Investment

When all of the cost components have been identified, the status quo
should be compared with the viable alternatives. The most useful
financial results in a business case appear in a time-based cash flow
summary.

Economic impact indicators can be used by decision makers to evaluate an
investment based on absolute dollar impact and dollars over time, as
well as how quickly the investment dollars are recovered. Examples of
economic impact indicators include cost savings, cost avoidance, return
on investment, payback period and cost benefit ratios.

It is important to remember that the specific financial measures used to
evaluate the investment are simple calculations based on complicated
assumptions. For example, in estimating the costs, are desktop system
upgrades that were needed for other purposes included? Or the
implementation of a new directory service that has value for
applications other than PKI? It is often very difficult to isolate the
costs of PKI per se. Given this, every effort should be made to ensure
that estimates fully state the assumptions on which they are based.

#### Step Eight: Compare and Recommend an Alternative

After the economic impact of each alternative has been established, the
alternatives can be compared with one another as well as with the status
quo, and an investment recommendation can be presented. The comparison
of alternatives is completed by calculating the net present value for
each, comparing the ROI, and identifying which alternative benefits the
organization the most. This comparison should include a thorough look at
the intangible benefits and increases in effectiveness that cannot be
assigned a dollar value. The preferred alternative can then be used to
support the budgeting process as dictated by Office of Management and
Budget (OMB) Circular A-11 and can provide the basis for managing
results as stated in the Government Performance and Results Act.

#### Step Nine: Monitor the Investment

When the preferred alternative has been selected, approved, funded, and
fielded, the agency\'s job is not over. The investment should be
monitored to ensure that it is achieving stated cost and performance
goals (e.g., that the investment continues to provide value to your
organization.) Some agencies set up performance measures or information
assurance security metrics that provide on-going assessments of the
value and performance of the investment. Often, failure to monitor the
investment carefully leads to less than expected returns. Therefore, it
is extremely important to review the investment\'s performance over the
life of the project.

# 3. Environmental Assessment, Baseline, and Alternatives

Figure 3-1: Phase I Business Case Analysis Methodology for PKI/Smart
Cards

![](media/image8.wmf)

## 3.1 Environmental Assessment

During Phase I of a business case, an environmental assessment should be
performed by mapping representative current processes to the operating
environment. These maps will be used to demonstrate how PKI/smart cards
are needed for your agency vice other technologies. The discussion
should point to business drivers, security drivers, and technology
drivers that led to the decision to pursue PKI/smart cards. For example,
a case for change may be based on:

-   Need to improve security posture within your agency

-   Requirement to comply with legislative, executive, and agency
    guidance

-   Ability to accomplish mission

-   Participation in e-government initiatives.

Some agencies conduct security audits and/or vulnerability assessments
to assess their present security posture. This provides the impetus for
change that decision makers often require and should be described in
great detail in the business case.

Security breaches are very damaging to an agency\'s reputation as they
receive signficant media attention. For example, in October 1999, U.S.
officials revealed that hackers had systematically penetrated the
security mechanisms of the Department of Defense (DoD) computers for
more than a year and had downloaded vast amounts of proprietary
information. The National Aeronautics and Space Administration (NASA)
and the Department of Energy were affected as well as the Pentagon.
According to the *Washington Post*, an FBI-led inquiry code named
"Moonlight Maze" has not been able to identify the cyber-attackers or
whether espionage was the motive. Although no classified data is known
to have been stolen (some of the files apparently downloaded include
bidding documents and contracts), this incident highlights the need for
greater information assurance capabilities within the Federal
Government.

In response to this incident, the DoD ordered \$200 million in new
encryption technology, and upgraded intrusion-detection devices and
computer firewalls to prevent unauthorized use of its networks. It is
believed that the widespread use of the Internet has created enormous
new opportunities, as well as frightening vulnerabilities, for agencies
around the world. While firewalls protect infrastructure and
communication lines, encryption capabilities like PKI protect the actual
transmission of data.

A primary reason why information security has become elevated in
importance to agencies is that e-commerce has grown exponentially over
the past few years, with business-to-business e-commerce reaching \$43
billion and business-to-consumer e‑commerce reaching \$8 billion in
1998. It is predicted that these totals will exceed \$108 billion and
\$1.3 trillion respectively by 2003 (Forrester Research). As a result,
Government agencies must implement technology that will electronically
enable their services in a secure fashion.

### 3.1.1 Improve Security Posture

Agencies must improve their security posture by ensuring the integrity
and confidentiality of their data, validating all users who wish to
access data, and by providing a means for digital signatures that cannot
be repudiated at a later date. For example, digital signature provides
an audit trail which allows one to determine which user performed a
specific action, and under whose authority that action was performed.
The security improvements realized through the use of digital signature
provide agencies and their stakeholders greater confidence in the
integrity of their systems and the accuracy of their data. Further,
agencies will be confident that their data is being used as intended.
Without these improvements in security posture, agencies will not be
able to become a true competitor in the new e-commerce economy by
participating in e-government initiatives.

### 3.1.2 Comply with Legislation, Executive, and Agency Guidance

The use of PKI/smart cards is being prompted by recently enacted
legislative, executive, and agency policies. For example, PKI
certificates can be used to comply with the Government Paperwork
Elimination Act (GPEA, Public Law 105-277). This act requires Federal
agencies to accept electronic signatures, including digital signatures.
Further, GPEA asserted that electronic signatures would not be denied
legal validity simply because they are in electronic form (and this
point was reinforced through the enactment of the Electronic Signatures
in Global and National Commerce Act in June 2000, covering transactions
between private parties, such as businesses and consumers). GPEA
required agencies to submit plans to OMB by October 2000 as to how they
would comply with the act. Using PKI is one way agencies can comply with
GPEA. Subsequent presidential administration directives reinforced the
need for acceptance of electronic forms with electronic signatures. OMB
has issued guidance (Federal Register May 2000: Volume 65, Number 85,
page 25508) for the use of electronic signatures to facilitate adoption
by Federal agencies.

Digital certificates provide a means for authenticating transacting
parties over the Internet, and thus conducting business with confidence
over the Internet. Public key technology enables digital signature
functionality that provides authentication of electronic data for a wide
variety of applications. The use of digital signature without public key
technology may compromise authentication and lack nonrepudiation
capability. Further, a single infrastructure provided by PKI supports
both digital signatures and confidentiality (preferably using two
different key pairs and certificates). As a result, many agencies are
inclined to use public key technology as a solution. Although the
deadline for compliance with the mandates of GPEA is three years away,
the passing of the act and the OMB requirement for an implementation
plan have encouraged Federal agencies to consider seriously digital
signatures.

Furthermore, agencies must also comply with the provisions of
Presidential Decision Directive (PDD) 63, which mandates that critical
infrastructures of the United States must be protected against terrorist
attack. Certain information systems are identified as a critical
infrastructure, as is the continuity of government operations.
Information assurance is often a key component of an agency's critical
infrastructure plan. The encryption of data via PKI/smart cards is one
way agencies can comply with PDD-63 requirements to protect critical
infrastructure against terrorist attack.

Some agencies are also issuing guidance that is driving promulgation of
PKI/smart cards. In the DoD, for example, a memo from Dr. John Hamre
requires that PKI-enabled via a common access card be issued to all
active duty military, reservists, and civilians and contractors employed
at the DoD by the end of 2002.

### 3.1.3 Accomplish Mission 

Improving your agency's security posture is consistent with the mission
of the Federal Government. Providing high-quality customer service is a
top priority for many agencies. Agencies can vastly improve the level of
customer service they provide by:

-   Providing a means for completing forms over the Internet

-   Ensuring the integrity of the data provided to customers

-   Guaranteeing that confidential data will not be compromised

-   Validating that users attempting to gain access to systems are
    authorized users.

Many agencies responsible for national security, including the DoD, can
accomplish their mission more effectively by implementing technologies
that will greatly enhance their security posture. For example, it is
imperative for agencies with national security missions to guarantee the
confidentiality of classified data, protect engineering secrets, and
prohibit unauthorized users from gaining access to data. However, all
agencies can meet mission objectives more effectively by providing a
means to complete transactions securely over the Internet, ensuring the
integrity and confidentiality of the data, and properly authenticating
all users.

### 3.1.4 Participate in E-Government Initiatives

As Federal agencies use the Internet to transact business, effective
user authentication, confidentiality, data integrity, and nonrepudiation
become critical security objectives. The widespread use of the Internet
necessitates information assurance improvements, These include the
ability to verify that communicating parties are who they claim to be
and the ability to accept forms that have been digitally signed and will
be legally binding. Further, organizations must be able to ensure the
confidentiality of business transacted over the Internet and to protect
this data from tampering. PKI facilitates e-commerce in that it can
provide security services for electronic communications and the
electronic exchange of information between parties, including those who
do not have a previously established relationship. Public key technology
helps organizations to accomplish all of these things, thereby becoming
a catalyst for the e-government marketplace.

## 3.2 Establish Baseline and Set Targets

Interviews should be conducted throughout your agency and baseline
processes mapped. In addition to determining existing business
processes, baseline costs associated with the business process should
also be collected. Baseline costs will be the basis against which ROI
will be determined.

Before embarking on any investment path, performance targets should be
set. These targets may be expressed in the form of goals. Any number of
goals might be developed, and the potential opportunities derived from
the use of PKI/smart cards can be grouped into categories, such as:

-   Information integrity, security, tracking, and accountability

-   Authorization and access control

-   Process improvement and standardization

-   Customer service and quality

-   Cycle and processing time.

When the opportunities for change have been identified, potential
solutions to implementing PKI/smart cards for governmentwide
applications should be developed. These solutions eventually become the
investment alternatives and typically arise from extensive group
brainstorming sessions and interviews.

## 3.3 Information Assurance Alternatives

Although this report focuses on PKI/smart cards, it is possible to
achieve aspects of authentication, data integrity, confidentiality, and
nonrepudiation using other technologies. Other security protection
alternatives include bar code cards, magnetic stripe cards,
PIN/password, non-PKI-enabled smart cards, and biometrics. Although all
of these alternatives provide some means of information assurance, only
PKI provides a high degree of assurance in all areas. When technologies
are layered by using the technologies in combination (e.g., PKI,
PIN/password, and biometrics), a greater degree of assurance can result.
Figure 3-2 shows the relative costs, benefits, and potential
applications of each (potential) alternative.[^1] The technologies
introduced in Figure 3-2 to help agencies build a broad range of
information assurance alternatives into their business case.

![](media/image3.wmf){width="9.014583333333333in"
height="5.066666666666666in"}Figure 3-2: Viable Alternatives for
Information Assurance Solutions

In Figure 3-2, three mediums of technology are compared: static (cannot
be changed), updateable (can be changed), and cryptographic (can be both
changed and programmed). The technologies are listed in order from least
secure (bar code cards) to most secure (PKI/smart cards with
biometrics). For each technology, the relative cost of a token, reader,
and infrastructure is scored. The color schematic uses green for most
desirable (lowest costs), yellow for desirable (modest costs), and red
for least desirable (highest costs). A more exhaustive discussion of
costs is found in Section 4, Cost Analysis.

In addition to cost, Figure 3-2 scores the benefits of each technology.
First, four security benefits are evaluated according to each
technology: nonrepudiation, authentication, data integrity, and
confidentiality. These benefits map primarily to PKI. The second section
of benefits concerns operational and business benefits realized more
through the use of smart cards. These benefits include scalability,
portability, interoperability, efficiency, and data storage capacity.
Technologies yielding the least benefits were scored red; those with
some benefit were scored yellow; and those with the most benefit were
scored green. The security and operational benefits are presented for
PKI/smart cards in detail in Section 6, Benefits Analysis.

The columns entitled "Applications" at the top right of Figure 3-2 show
the potential uses of the technology for logical access to networks,
physical access to buildings, and electronic commerce. \'N\' denotes
limited, if any, application and \'Y\' denotes extensive application.

### 3.3.1 Bar Code Card

A bar code card is a standard credit-card-sized device with a printed
code used for recognition by a bar code scanner. The scanner reads bar
codes and converts them into either the ASCII or EBCDIC digital
character code. Bar code cards are used for applications that require
personal or product information. Although bar code tokens are
inexpensive and highly portable, they do not offer security benefits
(e.g., authentication, and data integrity).

### 3.3.2 Magnetic Stripe Card

A magnetic stripe card is a standard credit-card-sized device that
adheres to standards approved by the International Standards
Organization (ISO) to encode digital data on a magnetic strip that is
embedded on the card. Data is written on and read from the stripe by a
number of types of readers at the time of transaction. Currently,
magnetic stripe cards are used for applications such as banking, retail,
telephone systems, access control, airline ticketing, and transit fare
collection. The life span of a card will vary depending on its intended
use. For example, a card may be intended for one-time use (e.g., a
subway pass) or for thousands of transactions; however, the typical
magnetic stripe card must be replaced in less than two years.

### 3.3.3 PIN or Password

PIN and password technologies are commonly used for numerous Internet
and intranet applications due to the fact that these technologies are
relatively inexpensive and easy to implement. However, PIN and password
technologies are considered to offer only a weak form of authentication.
Most users select passwords that are common words and thus susceptible
to dictionary attacks. If the PIN or password is either meaningless or
really long, it will be harder for the user to remember. As a result,
users will write it down or store it on their computer making it easier
for imposters to obtain. Users also tend to use the same PIN or password
for different applications. Therefore, if an imposter obtains a user\'s
PIN or password, the imposter can gain unauthorized access to multiple
applications. Good PIN and password policy can mitigate some of these
problems, but enforcement is still difficult at the user level.
Passwords phrases are becoming more commonly used as they are easier to
remember but more difficult to decipher. Additionally, policies can
mandate frequent updates to PINs or passwords.

### 3.3.4 PKI

PKI is the use of public key cryptography, which employs an algorithmic
function to create two mathematically related or complementary "keys."
Federal agencies can use public key technology to deliver functionality
such as authentication, data integrity, confidentiality, and
nonrepudiation. Public key technology uses a public key and a private
key to mathematically scramble data. The private key cannot be
determined from the public key. One key is used to encrypt the data,
while the other key is used to decrypt it. The key itself is actually a
series of numbers/bit strings. One key is public and made available to a
trading partner, and the other is kept private and is maintained only by
the user.

As an infrastructure, PKI comprises Certificate Authorities (CA),
Registration Authorities (RA), PKI-enabled applications, policies and
procedures, certificate management services, and directories that
provide security features such as message integrity, key recovery, data
privacy, signature verification, and user authentication (see Figure
3-3.). Each public key is made public in the form of a digital
certificate where a trusted party, a CA, cryptographically binds the
public key to one's identity by digitally signing the certificate, thus
ensuring any attempts to alter the data will be detected.

A CA manages the following:

-   Certificate life cycle (which involves issuing the keys)

-   Key revocation when a private key may have been lost, stolen, or
    made public

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-   Notice as to which key pairs have been revoked.

Registration authorities register subscribers into a particular CA's
domain. Directories are established that contain the public encryption
keys and certificates that are used in verifying digital certificates,
credentials, and encryption.

Figure 3-3: Components of PKI

![](media/image9.wmf){width="3.375in" height="2.548611111111111in"}

PKI supports digital signature functionality that provides integrity of
electronic data for a wide variety of applications. A "digital
signature" is derived from the data in combination with the private key
and is normally appended to the data that is digitally signed. To verify
the signature, the signer's public key is applied to the digital
signature. The signing operation is a two-step process: First, the
signer hashes the data to a fixed size value. The signer then subjects
this value to a private-key operation. Verification is also a two-step
process: The verifier hashes the data to the fixed size value. The
verifier then examines the value, the transmitted signature, and the
signer's public key. If the signature matches the hash value and key,
the signature is "verified." Digital signatures provide both proof of
authenticity and verification of data integrity.

### 3.3.5 Smart Cards 

Smart cards are credit-card-sized devices that carry an embedded
microprocessor and memory that can store and process information. When
inserted into a card reader, the smart card transfers data to and from
applications. It is more secure than a magnetic stripe card and can be
programmed to cease functioning if an incorrect password is entered more
times than the preset limit. Smart cards have a wide range of
applications including electronic purse, logical and physical access
control, health care, telecommunications, and transportation. To date,
approximately 700,000 smart cards have been issued within the Federal
Government. Figure 3-4 illustrates a typical smart card and its
components.

Figure 3-4: Typical Smart Card

![](media/image10.wmf){width="3.941666666666667in"
height="2.6416666666666666in"}

Smart cards can be integrated in both physical and logical access
control systems. A physical access control system is an automated system
that controls an individual's ability to access a physical location,
such as a building, parking lot, office, or other designated physical
space. A logical access control system is an automated system that
controls an individual's ability to access one or more computer system
resources, such as a workstation, network, application, or database.
Smart cards may use three levels of logical access control:

-   The association of a set of privileges with a user's password, and
    the ability to control access to files on the card based on those
    privileges (also called file access security)

-   The ability to detect and respond to a sequence of invalid access
    attempts with a self-locking mechanism

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-   The "logical channel"---a logical link between the host system and a
    file on the smart card.

The use of smart cards for logical access augments the traditional
PIN/password logon process, which was described by Microsoft Chairman
and Chief Software Architect Bill Gates in the following manner:
"Passwords are the weak link in Internet security. The use of smart
cards will become the major way for corporate users to authenticate
themselves to the network." (May 9, 2000.)

PKI/smart cards offer an enhanced level of security that includes
authentication, confidentiality, data integrity, and nonrepudiation.
Files may be readable but not writable or vice versa and only accessible
within the card. Files may be protected by one or several passwords
(PIN) or biometrics.

Also, PKI/smart cards offer an enhanced level of security because
public/private keys can be generated, stored, and used to make digital
signatures or encrypt data all on the card. This provides a much higher
level of security than non-PKI enabled smart cards that store keys on a
floppy disk or hard drive and are, therefore, more susceptible to
tampering, removal, or duplication. Additionally, the portability of the
public/private key pair and digital certificates enables users to take
advantage of the benefits of PKI at any location where they are an
authorized user.

## 3.4 Appropriate Agency to Implement PKI-enabled Smart Cards

A profile of characteristics that would indicate if a particular agency
is a good candidate for PKI/smart cards is presented below. If an agency
possesses these characteristics, in part or in whole, it should
investigate how this technology could benefit the agency as well as
consider the applications that could be enabled by the smart cards.
Agencies that deal with sensitive data and therefore have a great need
for a high level of security are prime candidates for cryptographic
smart cards. Examples include agencies that ensure national security,
deal with large amounts of money, or maintain substantial databases
holding private information on the public.

-   **Data Integrity.** If an agency's performance relies on the
    accuracy of its data, PKI/smart cards should be considered because
    they enhance the data integrity. Data integrity relates to the
    reliability of data and ensures that data has not been tampered
    with. An agency depending on reliable data would benefit from using
    PKI/smart cards.

-   **Confidentiality.** An agency that maintains confidential data
    (including financial and medical data) is a good candidate for
    implementing PKI/smart cards. The large agency in the case study is
    an example of an agency where maintaining confidential data is
    crucial to delivering high-quality customer service to its millions
    of beneficiaries.

-   **Authentication.** Most agencies have a significant need for
    authentication or the verification of the identity of a user who is
    logging onto a computer system.

-   **Internet-Based Transactions.** The amount of business transacted
    over the Internet also is a factor for agencies considering the use
    of PKI/smart cards. The use of electronic signatures is surging. The
    *Electronic Signatures in Global and National Commerce Act* gives
    electronic signatures the same legal weight as hand-written
    signatures and recognizes e-commerce as a legally binding
    transaction. As electronic signatures are used to submit forms over
    the Internet, the need for a higher level of security is greatly
    increased.

-   **Need for Interfacing with Other Federal Agencies.** An agency that
    has a high level of interaction with other Federal agencies should
    explore the use of PKI/smart cards. These are agencies that
    interface with many other agencies and in doing so, exchange large
    amounts of data. The Federal Bridge Certification Authority (FBCA)
    provides a means for connecting diverse PKI.

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-   **Mobile Workforce.** An agency with a significant part of its
    workforce at multiple locations would benefit substantially from the
    use of PKI/smart cards. Possible functionality that would benefit
    this user group includes logical access and physical access.
    Additional benefits are gained by the PKI-enabled encryption of data
    on laptops, making them inaccessible to unauthorized personnel.

## 3.5 Other Considerations

When an agency has decided to implement PKI/smart cards, it must seek
answers to the following questions:

-   What functionality should be included?

-   How will the keys be managed?

-   How will the infrastructure be structured and maintained?

-   How will the cards be maintained?

# 4. Cost Analysis

Figure 4-1: Phase II Determine Costs-

Business Case Analysis Methodology for PKI/Smart Cards

![](media/image11.wmf)

A business case is incomplete without a well-documented section on
costs. Most investment decisions rely on the cost analysis as a
significant factor in the final decision. Therefore, a life cycle cost
estimate should be calculated for each alternative. This total cost
should be expressed in constant dollars---meaning *uninflated*
dollars---and used to measure the value of purchased goods and services
in terms of the price level in a given base year. This is the most
appropriate way to evaluate dollars from year to year because the value
of the dollar changes over time. Constant year dollars are typically
used in economic analyses for estimating purposes and are measured in
terms of stable purchasing power on a specific base year. By comparison,
current dollars are the cost shown in the dollar value of goods and
services in terms of the prices and estimated inflation at the time of
purchase.

Current dollars are often used by Federal agencies for budgeting
purposes. This view takes into account the effects of inflation and the
price levels expected to prevail during the year at issue. Current
dollars are used when fiscal year amounts include all increases needed
to cover inflation and those price increases expected to occur in a
program over the duration of the program at the appropriate outlay rate.
The term current dollars may also be referred to as *budget dollars*,
*fully inflated dollar*s, and *then-year dollars*.

Discounted dollars (also called present value dollars) are used to
compare the costs of different alternatives or to compare costs from
different years. Discounted dollars take into account the time value of
money that reflects the fact that money in hand today is more valuable
than an identical amount of money received in the future. Present value
costs are calculated by applying a discount factor to constant year
dollars. The discount factor (real rate) translates the expected
benefits or costs of the future years into terms of today's dollars. OMB
Circular A-94 provides guidance on the use of discount rates. The
relationship between these three views is shown in Figure 4-2.

Figure 4-2: Views for Expressing Total Cost

![](media/image12.wmf){width="4.774305555555555in"
height="1.2430555555555556in"}

To compare alternatives equitably, agencies should use a net present
value (NPV) calculation of the life cycle cost. NPV discounts all costs
back to a base year so that alternatives can be appropriately compared.

## 4.1 Cost Structure

This section identifies the cost elements associated with PKI and smart
cards. Each agency must determine its actual requirements to forecast
the specific cost of PKI/smart cards for the agency. Illustrative
examples of costs are provided in Section 8\'s two case studies. General
cost information is provided here.

Figure 4-3: Standard Cost Element Structure

![](media/image13.wmf){width="3.65in" height="4.815277777777778in"}

### 4.1.1 Decreasing Cost

As technologies mature, their costs often drop. This is true of smart
card technology, where costs are decreasing rapidly (see Figure 4-4). As
usage and acceptance of smart cards have increased, the cost of
implementation has decreased. Many agencies buy their cards in bulk to
create economies of scale that further reduce the unit cost. One source
is GSA\'s Smart Access Common ID Program. Also, smart cards can be
updated without having to reissue the card, creating tremendous cost
savings in card stock for issuing organizations.[^2]

In recent years, the storage capacity of the card has increased from 2 K
to 32 K. Sixty-four Kilobyte cards have been fielded and are expected to
be used widely over the next 12 months. In fact, storage capacity on the
card has been doubling every 12 to 18 months over the last three years.
Additionally, the cost per card has dropped. When initially fielded,
many cards cost more than \$10; but by the time they were used widely,
the price had dropped to less than \$6.

Figure 4-4: Decreasing Costs of Smart Cards

![](media/image14.wmf){width="4.263194444444444in"
height="2.4631944444444445in"}

The addition of a cryptographic coprocessor can increase the cost of
today's smart cards by 50 to 100 percent. Costs will likely drop as
coprocessors become more widespread. In spite of the increased cost, the
benefits to computer and network security of including the cryptographic
coprocessor are great because the private key can be generated on the
card and never leave the smart card.

## 4.2 Costs of PKI

Figure 4-5 depicts the main stages in the life cycle of PKI
implementation. Costs for each stage need to be captured.

Figure 4-5: The Life Cycle Phases of PKI Implementation

![](media/image15.png){width="1.9743055555555555in"
height="1.9743055555555555in"}

Because there are both subtle and large differences among agencies, a
uniform formula for determining cost of implementing PKI in every agency
cannot be recommended. Certain agencies will have the capacity to
include the cost of PKI in their IT budgets, while others may not. Some
will have the capacity to implement and maintain the PKI with their
existing IT personnel, while others will have to outsource such
expertise. This will alter the cost of PKI for an agency as well. Some
agencies may have the secure facilities that house a CA, while others
will have to construct such a facility.

All of the foregoing considerations will alter costs; however, certain
common factors have to be considered in computing the cost. For example,
the number of Registration Authorities (RA), CAs, and directories that
will be required will have to be determined. The factors that affect
this decision are the geographical footprint of the agency, the size of
the target population, the degree of autonomy of the departments within
an agency, etc. The software upgrades and purchases that will have to be
made as a result of this implementation also factor into the overall
cost.

Another common factor is to decide whether existing IT resources can be
leveraged for the PKI implementation and maintenance or whether these
will have to be purchased or contracted for. The resource requirements
associated with the planning, deployment operation, and on-going
maintenance of the infrastructure must be defined. Policies and
procedures necessary to support external users or external organizations
must also be defined. The results of these and other analyses can help
agencies budget for new PKI infrastructure costs as part of the normal
IT upgrade budget.

If the PKI is meant to be interoperable, it is essential that a
standards-based product and vendor be selected. Without the use of
standards, interoperability problems may arise later and would be costly
to correct. Liability protection is essential in many cases, especially
when interoperability is required with external users or other PKI
domains. The need for interoperability with other agencies

Training costs for both end users and administrators may be substantial
and will be an on-going cost that declines as the PKI knowledge within
the user community increases. Other administrative costs like helpdesk
and end entity registration procedures will be on-going and should be
included in the cost.

## 4.3 Incremental Costs for Increased Levels of Security

This section presents a notional example of an agency that is trying to
decide what level of security it needs, what are the costs, and what
level of benefits can be achieved at each level of security. Four
options are presented. This example is based on certain assumptions.
They are as follows:

1.  Notional agency has 10,000 employees.

2.  Physical access requires 1,000 readers and all employees will use
    cards for logical access. Therefore, 11,000 readers will have to be
    purchased under Options A, B, and C, which provide physical and
    logical access. The cost of a physical access reader is \$200 under
    all four options.

3.  Cost of infrastructure in this example includes the cost of standing
    up PKI, the cost of issuing stations, cost of purchasing kiosks,
    etc.

4.  If an agency requires a commercial off-the-shelf (COTS) middleware
    package, an additional licensing fee of approximately \$75 per seat
    will be incurred.

5.  Overhead and program management costs are assumed to be the same for
    all agencies.

6.  The cost of readers, tokens, and infrastructure is based on vendor
    cost data collection.

### 4.3.1 Option A---Agency Opts for Magnetic Stripe Cards

Table 4-1 shows the costs of purchasing a magnetic stripe card solution
only. Because magnetic stripe cards can be used only for physical
access, just 1,000 readers need to be purchased.

![](media/image16.wmf){width="5.840277777777778in"
height="1.56875in"}Table 4-1: Total Cost of Magnetic Stripe Cards for
Notional Agency

As shown in the table, magnetic stripe cards are relatively inexpensive;
however, they have a significant drawback in that network access is
impossible with this option. Moreover, magnetic stripe cards offer no
security features such as nonrepudiation, authentication, data
integrity, and confidentiality. Also, the magnetic stripe cards are not
upgradeable and are not a highly scalable medium.

### 4.3.2 Option B---Agency Purchases Smart Cards without PKI

From a functional standpoint, smart cards are better than magnetic
stripe cards in many ways. For example, smart cards can store up to 100
times more information in them than a magnetic stripe card. Smart cards
lend themselves to a wide range of operations, including financial,
healthcare, and transportation. Both physical and logical access are
possible with smart cards.

The major drawback relative to this option is that these cards do not
have the added level of security that PKI provides. PKI benefits such as
nonrepudiation, authentication, data integrity, and confidentiality are
very limited with this option. Table 4-2 shows the costs an agency would
incur in implementing smart cards without PKI.

![](media/image17.wmf){width="5.840277777777778in"
height="1.56875in"}Table 4-2: Total Cost of Smart Cards without PKI for
Notional Agency

### 4.3.3 Option C---Agency Procures PKI/Smart Cards

With this option, this agency will accrue all the benefits of using
smart cards (physical and logical access,portability, upgradeable, and
scalability) with the added layer of protection that PKI provides. PKI
provides strong data integrity and confidentiality compared with smart
cards without PKI. This feature is important because data integrity is
critical if sensitive data is stored on smart cards. Of the technologies
considered in this report, PKI provides the highest degree of data
integrity. Information on the card will remain secure so long as no one
has access to the private key. Table 4-3 shows the total costs (in
constant dollars) the same notional agency would incur if it chose
PKI/smart cards to address business and security needs.

![](media/image18.wmf){width="5.840277777777778in"
height="1.7402777777777778in"}Table 4-3: Total Cost of PKI/Smart Cards
for Notional Agency

### 4.3.4 Option D---Agency Purchases PKI/Smart Cards with Biometrics 

Biometrics is the automated procedure for recognizing a person based on
a physiological or behavioral characteristic. Examples of biometric
identifiers include fingerprints, speech, face, retina, iris,
handwritten signature, and hand geometry.[^3] Biometrics can be used to
either identify an individual as part of a known group or verify an
individual against a single biometric. Biometric technology provides a
much stronger level of security than PKI without biometrics because it
introduces another secure form of authentication. This higher level of
security is the advantage this option would provide; otherwise,
PKI/smart cards offer like benefits.

Table 4-4 shows the cost a notional agency would incur if it implemented
a PKI/smart card and biometrics solution.

![](media/image19.wmf){width="5.840277777777778in"
height="1.7402777777777778in"}Table 4-4: Total Cost of PKI/Smart Cards
and Biometrics for Notional Agency

### 4.3.5 Summary

Magnetic stripe cards are the least expensive option; however, they
provide no network security. Because a computer is valuable for the data
it stores, logical (network) access is important. Clearly, the option
with PKI-enabled smart cards is more expensive than either option A or
B. However, representatives of many agencies have clearly stated that a
high degree of data integrity is required for the information that they
plan to carry on their smart cards. In those cases, PKI/smart cards are
the best option. The additional protection afforded by biometrics may be
required for some agencies within certain departments that require a
higher degree of authentication. For other agencies, however, the cost
of biometric technology would outweigh the benefits. Given that there
are several viable options, an agency has to assess its security needs
thoroughly before it can choose which is best given its specific
requirements.

# 5. Benefit Analysis

Figure 5-1: Phase II Determine Benefits---\
Business Case Analysis Methodology for PKI/Smart Cards

![](media/image20.wmf)

Benefits and cost savings/avoidance need to be identified for continuing
current operations (the status quo alternative) and for each of the
viable alternatives. The business case assumes varying levels of
benefits for each alternative in addition to varying costs. To the
fullest extent possible, an agency must identify and quantify benefits
that will be derived from alternative investments made in implementing
PKI/smart cards. Benefits can be expressed as both quantifiable and
nonquantifiable (also referred to as qualitative).

-   Quantifiable benefits are those that can be assigned a numeric
    value, such as dollars, physical count of tangible items, or
    percentage change. Dollar valued benefits comprise cost reductions,
    cost avoidance, and productivity improvements.

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-   Nonquantifiable benefits include enhanced information security,
    consistency and compatibility throughout the enterprise, improved
    quality, enhancement of best practices, adherence to statutory and
    regulatory requirements, and enhanced modernization.

Quantifiable benefits are calculated by subtracting the cost of an
alternative from the cost of baseline operations. The difference is the
"savings" that is often referred to as ROI. Three ways to maximize an
alternative\'s ROI include are minimizing costs, maximizing returns, and
accelerating returns. A relatively small improvement in any of the three
may have a major impact on the overall rate of return. A sensitivity
analysis can be performed to identify the major cost drivers and
assumptions and their affect on the alternative\'s estimated benefits.
The sensitivity analysis ensures that all potential improvements and
costs associated with using PKI/smart cards within a Federal agency have
been captured.

Keep in mind that many benefits realized through an investment will be
qualitative and will not lead directly to dollar savings. Improvements
in customer service, regulatory compliance, security, and accountability
are certainly recognized as benefits, but they rarely can be included in
the dollar-valued benefits stream or ROI measures. PKI/smart cards may
be difficult to reliably and validly quantify in dollar units, so
intangible benefits are vital to understanding the total implementation
outcome. These qualitative benefits can be numerically scored by
assigning a value to fully meeting, partially meeting, or not meeting
stated business or functional drivers. The purpose of this section is to
identify the potential benefits of implementing PKI as compared with the
potential benefits of implementing smart cards both with and without
PKI.

## 5.1 Benefits of Implementing PKI

PKI permits an enterprise to take advantage of the speed and immediacy
of the Internet while protecting business-critical information from
interception, tampering, and unauthorized access through secure
transactions. Proper management and use of public keys enable PKI to
provide information assurance and an enhanced operating environment
through authentication, data integrity, nonrepudiation, and
confidentiality. PKI also offers significant benefits in its
interoperability and scalability.

### 5.1.1 PKI Provides Security Benefits Through Secure Transactions

PKI allows users to communicate securely by offering them controlled
access to the intranet for all corporate information, such as human
resource data, secure e-mail, and various applications. Unlike other
information assurance solutions, PKI does not secure the network or
communication link but rather secures the actual transaction through
encryption. PKI facilitates the exchange of confidential data with
business partners by enabling the creation of secure extranets and
virtual private networks (VPN) that give select partners easy access to
business-critical information stored on internal networks. Additionally,
PKI allows the user to take advantage of secure e-commerce capabilities
and helps organizations and companies instill confidence in their
customers that they can safely purchase goods and services over the
Internet.

**5.1.1.1 Authentication.** Authentication is the process of reliably
determining the identity of a communicating party, or in other words,
verifying that a user actually is the one it/he/she claims to be. In the
physical real world, a common method of confirming identification is to
check a passport, driver's license, ID-card, or similar item. From an
e‑commerce perspective, it must be possible to verify the identity of
the user remotely.

Authentication enables the recipient to determine who actually sent the
message and whether that person is authorized to commit his or her
organization to the transaction. Additionally, it grants network access
to authorized personnel only. Authentication will facilitate a single
sign-on capability to access multiple services. Electronic signatures
will provide for authentication of online documents for purposes ranging
from routing downloads to e-commerce transactions.

**5.1.1.2 Data Integrity.** Data integrity is protecting against and
preventing unauthorized modification of data. Implementing PKI
technology will provide for enhanced data integrity. As a result,
customers can be certain that data received is accurate and complete,
and has not been altered or modified in any manner.

**5.1.1.3 Nonrepudiation.** Nonrepudiation is the act of verifying the
origin and/or issuance of a transaction or action. It ensures that the
sender of data is provided with proof of delivery and the recipient is
provided with proof of the sender's identity, so neither can later deny
having processed the data. It ensures that transactions over the
Internet can meet minimum legal standards for electronic commerce and
certifies the participants in the transaction.[^4]

**5.1.1.4 Confidentiality.** PKI can be used to encrypt confidential
data. Confidentiality ensures that information (e.g., customer data and
intellectual property) is not disclosed to unauthorized persons,
processes, or devices. Communicating parties can have confidence that
data is not viewed, intercepted, or modified by anyone other than the
party the message was intended for. Confidentiality is especially
important when considering medical data and financial information.

### 5.1.2 Interoperability

Interoperability can be achieved between two agencies when PKI policies
are defined. The security of the PKI technology relies on the protection
of the subscribers' private keys. Therefore, recommended PKI solutions
will be capable of distributing both certificates and public/private key
pairs in a variety of media. Recommended PKI solutions will utilize a
single certificate, one that is trusted by all entities, and may be used
for multiple agencies or multiple applications thus alleviating the
problem of distributing secret keys. This process also simplifies the
users registration by decentralizing the registration function. Users
who may be strangers to each other can use the CAs to establish a "chain
of trust" and interact securely with each other. Building PKI on
standards will further promote interoperability.

**5.1.2.1 Bridge Certification Authorities.** Bridge CAs permit
different PKIs to be linked. The bridge CA is a nonhierarchical hub
between several participating CAs. All CAs that choose to interoperate
with a bridge CA will have the ability to interoperate with each other.
The proper use of a bridge CA can demonstrate interoperability on
several levels: between CAs, between directories, and between e-mail
users. Perhaps the most useful benefit of a bridge CA is that it offers
policy interoperability in addition to technical interoperability.
Further, agencies can circumscribe risks by excluding certain subtrees
that they do not want to interoperate with.

### 5.1.3 Scalability

The use of PKI technology facilitates "many to many" relationships. PKI
enables the use of the same technology for a wide range of applications.
PKI creates a trustworthy environment for  e-commerce transactions and
secure communications over the Internet for both individuals and
organizations. The standards-based directory structure can grow as the
user base grows.

## 5.2 Benefits of Utilizing Smart Cards

PKI certificates can be stored on smart card tokens. Smart cards have
become widely accepted due to the high level of security the card
provides compared with PKI certificates stored on a hard drive.
Additionally, smart card applications are developed based on standards
and using advanced and proven technology. Like PKI, smart card
technology also offers significant benefits in its interoperability and
scalability, but unlike PKI, also offers portability.

### 5.2.1 Portability

The small size of the smart card allows for people to carry large
amounts of pertinent information on an updateable medium with relative
ease. Portability is an important benefit that the small size of the
cards facilitates.

### 5.2.2 Interoperability

Systems can be designed so that a single smart card has the ability to
access multiple services, networks, and the Internet. Smart cards have a
wide range of applications including, but not limited to, electronic
purse, logical and physical access control, healthcare,
telecommunications, and transportation. Using a single card to access
all of these applications greatly simplifies the logon process for users
and administrators alike. Additionally, using the smart card for
multiple applications enables cost efficiency to be realized and
implementation costs to be shared across the applicable departments.

One way Federal agencies can achieve interoperability with other Federal
agencies is through the use of the GSA Smart Access Common ID Program
Contract. This contract vehicle can be used by all Federal agencies to
acquire a standard, interoperable employee identification card from one
or more vendors. In addition to serving as an identification card, the
card can also be used for physical and logical (network) access. The
Smart Access Common ID card employs several technologies and
applications on one card like an integrated circuit chip, magnetic
stripe, and digitized photo. In the future, biometrics and other media
can be added.

### 5.2.3 Scalability

Applications can be scaled using smart cards. Smart cards are scalable
with regard to the number of users, number of applications, and the
number of certificates. This feature permits organizations to expand
their smart card usage as necessary without incurring significant
additional expenses. Additionally, because some data is shared by
applications (e.g., name, social security number, employee ID, address,
phone number), these data elements are written once, but read many
times. This overlap of data enables organizations to make efficient use
of chip space.

**5.2.3.1 Users.** As the user base grows, more cards and card readers
are purchased on an as-needed basis without substantial additional
investment expenses. This is due to the fact that the infrastructure is
already in place to support the smart card technology and applications.
Additional costs will be incurred incrementally and directly related to
the number of additional users.

**5.2.3.2 Applications.** Additionally, smart cards are scalable with
regard to the number of applications that can be executed. If there is
sufficient chip space available on the smart card, additional
applications/functionality may be added. For example, a smart card that
is initially being used for stored value and logical access may be
expanded to include physical access functionality, chip space
permitting.

**5.2.3.3 Biometrics.** The scalability of smart cards also permits
organizations to move from a *two*-factor authentication solution to a
*three*-factor authentication solution through the use of biometrics.
Smart cards can be used with biometrics to provide a verification
capability that matches live biometrics scans against a single template
that is stored on the chip. Various forms of biometrics can be used for
authentication including:

-   Facial recognition

-   Voice pattern recognition

-   Iris scan

-   Hand geometry

-   Fingerprint recognition

Fingerprint recognition is the most commonly used and cost-effective
biometrics solution.

Traditionally, smart cards have been used as part of a *two*-factor
authentication system. The first factor is the actual "card," which
serves as a token you possess. Secondly, the PIN/password serves as
something you know that can unlock secure information stored on the
card. A biometrics solution can be used in conjunction with a
*two*-factor smart card and PIN/password solution to provide a
*three*-factor authentication solution, as demonstrated in Figure 5-2.

Figure 5-2: Greater Information Assurance Through Use of More Factors

![](media/image21.wmf){width="5.993055555555555in"
height="2.798611111111111in"}

### 5.2.4 Efficiency

Smart cards can be used to complete digital forms (through the
population of required data elements stored on the chip) in a more
streamlined fashion than their paper-based counterparts, as shown in
Table 5-1. A smart card stores pertinent, data such as name, address,
social security number, and date of birth, all of which can be used when
accessing multiple applications. Using a single card to record and store
this data reduces paperwork, eliminates redundant data entry, and
improves data accuracy as transcribing and data entry errors are
eliminated. Also, ease of use is achieved by using a single smart card
for multiple applications. Finally, smart cards enable a higher level of
throughput to be achieved because they can process information
succinctly and quickly but can also operate in an off-line environment.

Table 5-1: Greater Efficiency via Electronic Forms vice Paper Forms

  ----------------------------------- -----------------------------------
  **Paper Forms**                     **Electronic Forms**

  Increased potential for spelling,   Core data correctly transmitted
  transcribing, or readability errors from Smart Card

  Increased processing time to        Reduced processing time to complete
  complete the form                   the form

  Increased time to handle, file, and Form processed and filed
  copy the form                       immediately
  ----------------------------------- -----------------------------------

### 5.2.5 Data Storage Capacity

The data storage capacity of smart cards is far superior to that of
magnetic stripe cards and bar code cards. Most smart cards have a 32
Kbyte chip on which data can be stored compared with a magnetic stripe's
storage capacity of about 1000 bits. This capacity permits smart cards
to store more than 100 times as much data as magnetic stripe cards. As a
result of their large storage capacity, smart cards working in
conjunction with a terminal can execute complex tasks.

## 5.3 Benefits of Implementing PKI-enabled Smart Cards

Although it can be argued that a smart card is not needed to implement
PKI, there are some compelling advantages to this security approach.
First, it should be noted that all of the benefits attributed to
implementing PKI or smart cards also apply to PKI/smart cards. These
benefits include:

-   Nonrepudiation

-   Authentication

-   Data integrity

-   Confidentiality

-   Scalability

-   Portability

-   Interoperability

-   Efficiency

-   Data storage capacity.

For the purposes of this analysis, however, the focus is on incremental
benefits achieved by implementing PKI/smart cards.

### 5.3.1 Enhanced Level of Security

The enhanced level of security that can be achieved by implementing
PKI/smart cards can be attributed to several factors. One is that the
private keys and digital certificates are stored on the smart card.
Another is that it provides authentication and encryption capabilities.

**5.3.1.1 Private Key Stored on Smart Card.** The use of PKI on a smart
card can offer an enhanced level of security because private keys can be
generated and stored on the card. The much higher level of security is
achieved because the non-PKI-enabled smart cards store keys on a floppy
disk or hard drive. PKI-enabled smart cards contain an operating system
that prevents the keys from being exposed outside the card. Therefore,
they cannot be read, removed, or tampered with by anyone.

**5.3.1.2 Authentication Using Digital Certificates.** PKI/smart cards
incorporate cryptographic authentication capabilities that ensure the
highest degree of security. PKI/smart cards store digital certificates
on the card itself rather than on the certificates on a floppy disk or
hard drive, as is the case with other PKI implementations. If stored on
a disk or hard drive, a certificate can be copied; but that is more
difficult to do if the certificate is stored on a smart card unless the
smart card is exploited. A smart card carrying a PKI certificate makes
authentication and nonrepudiation[^5] possible by utilizing built-in
functionality to accomplish digital signatures. The user carries the
card and has a PIN to enable access to use the signature, which is akin
to a written signature.

**5.3.1.3 Encryption.** Encryption capability is a key concern when
dealing with sensitive data. Encryption is the transformation of data
into a form unreadable by anyone without the proper decryption key.
Encryption ensures privacy by keeping the information hidden from anyone
for whom it is not intended, even from those who can see the encrypted
data.

Public key encryption involves a public key and a private key to
mathematically scramble data. While the private key must be kept secure,
the public key may be widely distributed. One key is used to encrypt the
data, while the other key is used to decrypt it. Encryption enhances the
security of data in the following ways:

-   Restricts access to your computer to only those users with
    registered certificates on the workstation

-   Verifies the identity of the communicating party through digital
    signatures

-   Ensures that data is stored securely on your computer

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-   Ensures that files are accessible only by intended parties.

### 5.3.2 Portability

The portability of private keys and digital certificates is a
significant benefit derived from using PKI/smart cards. Because the
private keys and digital certificates are stored in the smart card, the
user can access the benefits of PKI at any location where he or she is
an authorized user.

### 5.3.3 Scalability

PKI/smart cards are beneficial when they provide a scalable solution.
Scalability is advantageous because a public and a private part of keys
are involved, and this makes deployment and maintenance of a PKI/smart
card easier.

## 5.4 Benefits Achieved by DoD's PKI-enabled Smart Card Implementation

One of the largest fieldings of smart cards will begin in December 2000
as the Department of Defense (DoD) begins to implement its PKI/common
access card (CAC) on a smart card token to 3.1 million people over the
next 2 years. DoD anticipates that smart cards will improve the
accuracy, timeliness, security, and cost effectiveness of source data
entry and retrieval. The card will be used to improve identification and
secure access into physical areas and information management systems.

### 5.4.1 Background

The CAC will replace the DoD Identification Card and be made available
to Active Duty, Selected Reserve, National Guard, DoD civilian
employees, and eligible contractors. The smart card will contain an
Integrated Circuit Chip (ICC) that is read-writable/tailorable as well
as any data, applications, PKI certificates, and keys contained on the
ICC. The smart card will also include:

-   Visual identification (facial photo)

-   Printed personal data

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-   Passive technologies, such as magnetic stripes and bar codes, which
    carry read-only data or can only be written to a limited number of
    times.

The CAC will be used to store PKI certificates that provide secure
access to web-based, local area network-based, and wide area
network-based applications. The credentials stored on the card will
replace user login and passwords for individual applications. Private
keys and certificates will be used for authentication, digital
signature, and e-mail encryption/decryption capabilities.

Smart cards issued in fiscal year (FY) 01 and FY 02 will contain Class 3
PKI certificates. Beginning in October 2002, Class 4 PKI will be put on
the card.

### 5.4.2 Physical Access Control

DoD also plans to use the CAC for access control to facilities. The CAC
will provide positive visual verification of the cardholder's identity.
The card will be used for proof of identity under all circumstances that
a Geneva Convention identification card would be used. The card will
provide identification and authentication data that interfaces with
existing and future physical access control systems for both secure and
nonsecure facilities and spaces.

### 5.4.3 Logical Access Control 

CAC cardholders will be able to securely access public key enabled DoD
computer systems and applications at authorized assurance levels. The
CAC will be used as a hardware token in combination with a PIN,
password, or biometrics so that users can authenticate their identity to
public key enabled applications. The card will be an important component
of the DoD information assurance vision.

### 5.4.4 Automated Process

DoD will use the CAC to move from a paper-based, manual process, to a
paperless, automated, secure electronic one. This will translate into a
higher level of data integrity. Using a single card to record and store
this data eliminates paperwork and redundant data entry, and improves
data accuracy as transcribing and data entry errors are eliminated.

### 5.4.5 Cost Reduction

DoD believes the use of smart cards will reduce administrative and
logistical support costs as a result of the elimination of paperwork and
associated processing time (i.e., labor hours). Documents requiring
signature (e.g., travel vouchers) will be digitized, and digital
signature will be applied, making the transaction entirely paperless,
and yielding tremendous cost savings in processing fees and time.

# 6. Risk Analysis

Figure 6-1: Phase II Determine Risks---\
Business Case Analysis Methodology for PKI/Smart Cards

![](media/image22.wmf)

The purpose of the risk analysis is to focus the decision maker's
attention on the financial, technical, and schedule risks associated
with PKI/smart cards. When documenting your business case, it is
necessary to counter-balance positive financial indicators with
real-world factors that could potentially undermine your investment and
keep it from reaching its estimated potential. This section will help
you better understand the risks associated with both smart card and PKI
technologies. Risks are inherent to any investment but can be managed to
achieve a favorable return on investment.

## 6.1 Risks of Smart Cards

A smart card is a relatively secure device compared to bar code and
magnetic stripe cards. It is a safe place to store valuable information,
such as private keys, account numbers, passwords, or valuable personal
information such as medical records. It is also a secure platform for
performing processes that you do not want exposed to the world, for
example, performing an encryption using a public key, or a signature
using a private key. Nonetheless, smart cards themselves have inherent
drawbacks and risks. These include the high cost of readers, algorithm
replacement, lack of standards, loss or theft, and the fact that smart
cards are susceptible to many kinds of attacks.

### 6.1.1 Cost of Readers

One challenge is planning for the cost of card readers. Readers are an
essential part of smart card infrastructure as they provide interface
between the token and the network. Smart cards can be the basis of trust
for secure interaction in PKI for many agencies and their customers. For
this to be achieved, a cost effective and acceptable level of risk must
be achieved for all who depend on the associated certificates and keys.
Achieving an efficiency of scale between volume of shared PKI-enabled
services that use certificates and keys stored on a common token is the
desired trade-off. An important element to consider is the high cost of
readers. If the smart cards are being used for physical access,
contactless smart card readers cost between \$200 and \$300, whereas
contact smart card readers cost between \$200 and \$400. Acquiring and
deploying readers can be challenging, especially where there is
substantial legacy equipment lacking that capability. Many computer
manufacturers do not outfit computers with card readers; as a result,
the additional cost will have to be absorbed by the implementing
organization. Targeting incremental deployment of readers associated
with the largest evolution of PKI-enabled services has become the key to
phased smart card success. Coordination activities with DoD and other
agencies may create opportunity to achieve a greater buying power.

### 6.1.2 Algorithm Replacement

Algorithm replacement is inevitable and as such these replacements and
the associated costs will have to be considered at the outset. Algorithm
replacement costs and operational impacts to applications and associated
smart cards that generate keys should be accommodated through a modular
design of algorithm related functions. Every algorithm will inevitably
require replacement due to the increasing computer processing capacity
(although algorithm useful life can be extended through the use of
larger keys. For example, an RSA modulus of 1024 bits is considered
secure today; but if it can be attacked within the next 10 years, one
solution is to convert to longer key lengths, such as a modulus of 2048
bits). The careful planning for replacement before the anticipated time
when an algorithm cannot protect data satisfactorily should be planned
into smart card maintenance schemes.

### 6.1.3 Lack of Standards

Lack of accepted standards within the smart card industry is another
drawback. Although smart card readers are standardizing on the ISO 7816
based interface standards, that does not guarantee interoperability with
all smart card vendors. Numerous standards exist, and many of them
target certain verticals or a certain layer of communications. This
leaves out many players. This problem is being mitigated as PKI-enabled
Web browsers and other mainstream applications gain the capacity to
accept the smart cards and a consensus on basic PKI-based service
requests to the smart card. The development of smart card standards,
however, is trailing the demands for greater processing and storage
capacity on smart cards. By the time standards are developed, the next
generation of smart cards is being fielded. To facilitate the ease of
use of smart cards in the Federal Government, GSA is assiduously working
to establish an interoperability standard. The previously stated buying
power that GSA can represent will influence its impact on U.S.
Government-unique interoperability standards.

### 6.1.4 Loss or Theft

Irrespective of the use of the smart card, a primary risk that users
face is physical loss or theft of the token. This risk is countered with
the inevitable acknowledgement of a missing token and associated
revocation procedures to prevent further misrepresentations of the
individual's certificate-based trust among associated PKI-enabled
applications. A more dangerous risk is theft of keys and discovery of
the associated PIN or password used to unlock the keys, without damaging
or removing the smart card. This risk poses a far greater threat to the
associated trusting PKI-enabled applications and breaches are usually
discovered and mitigated only after serious harm occurs, or the
certificate is revoked or expires. Regardless of the protections that
are built into the system, if the card is not physically protected, laws
and security measures will not be effective. This protection is evolving
into a combination of user responsibility for physical
possession/compliance with associated policies for use and card
protection of the keys during generation and/or use.

### 6.1.5 Attacks on Smart Cards

Smart cards are susceptible to attack by bad actors. An attack is
defined simply as an attempt to steal or compromise data on the smart
card. There are two classes of attackers---those who are parties to the
system, and those who are interlopers. Attacks by participants could be
a cardholder trying to cheat a terminal owner, a card issuer trying to
cheat a cardholder, or similar behavior. Attacks by outsiders could be
mounted via card theft, card misuse, or replacement of terminal software
or hardware. Attacks by outsiders are often similar to attacks on
protocols involving general-purpose computers; however, they may take
advantage of various properties of the system created by the separation
of roles. Four kinds of attacks can be made on smart cards: logical,
physical, trojan horse, and social engineering.

**6.1.5.1 Logical Attacks.** One type of attack is logical attack. A
logical attack does no physical harm to smart card, rather, some
sensitive information on the card is obtained by examining the bytes
being transmitted to or from the card. If successful, this attack
creates one of the greatest threats (i.e., potential undetected use
increases until substantial damage occurs and is noticed). This attack
is difficult to achieve because it involves capturing both the private
key and associated PIN to perform private key operations. If the byte
level I/O operations are monitored, and processing of PKI functions is
not performed on the card, both the keys and PIN are exposed.

**6.1.5.2 Physical Attacks.** Physical attacks are carried out, usually
using special equipment, by varying temperature, voltage, or clock
frequency, etc., to gain access to sensitive information on the card, or
by monitoring card parameters (such as power consumption or the timing
of certain card processor operations). Most smart card operating systems
write sensitive data to the EEPROM area in a proprietary, encrypted
manner so that it is difficult to obtain cleartext keys by directly
hacking into the EEPROM. Other physical attacks that have proven to be
successful involve an intense physical fluctuation at the precise time
and location where the PIN verification takes place. When this happens,
sensitive card functions can be performed even though the PIN is unknown
to the perpetrator of the attack. A combination of a physical attack
with a logical attack will reveal the private key.

**6.1.5.3 Trojan Horse Attacks.** A trojan horse attack involves
planting malicious code on a user's workstation without the user\'s
knowledge. When the user submits a valid PIN, the trojan horse presents
rogue data to be signed using the private key. The user is never aware
that the rogue data has been signed. There are two ways of
counter-attacking the trojan horse. The first is to use "single-access
device driver" architecture. The operating system allows only one
"trusted" application to have access to the smart card (if that one
application can be compromised, of course, then even this approach can
be circumvented). Not using a multiapplication smart card both reduces
the number of parties involved and creates a simpler operating
environment with less complexity and potential for bugs. Although this
reduces the possibility of attack, the benefits to be derived from
multifunctionality are, of course, lost. Another way to prevent this
type of attack is to require one private key entry per PIN entry; the
user must then use the PIN every time the private key is to be used,
thereby disallowing the trojan horse access to the key.

**6.1.5.4 Social Engineering Attacks.** This kind of attack exploits the
vulnerabilities inherent in human beings. For example, a hacker could
pose as a network technician and request PIN and passwords in order to
hack the system. This attack is not as effective when smart cards are
involved because people are less likely (or even able) to share their
smart card than a PIN or password.

When a decision to proceed with smart cards is made, it is essential to
understand that "eternal vigilance" is not only expensive, but
impossible. The risks associated with smart card tokens must be
understood and bound and balanced against associated benefits. The
benefit of cost savings from increased efficiency or compliance should
be weighed against the associated threats resulting from the fact that
data will be exposed to remote access by users who hold the appropriate
PKI credentials. Incremental steps to cost effectively control and
leverage the demand for smart cards should be undertaken. The most
appropriate system needs for PKI-enabled security services are unique to
each set of specified security requirements of an agency.

## 6.2 Risks of PKI

PKI has recently become a popular solution for achieving electronic
security and digital-based trust, but it does engender risks that vary
in accordance with how the PKI is implemented and what user community it
serves. Among the key risks are concerns over the maturity of PKI
technology as well as key management itself.

### 6.2.1 Value Definition

Any PKI implementation should commence with an assessment of what data
would benefit from increased exposure that PKI-enabled security services
could address. The assessment includes evaluating the monetary or other
value of the information and the associated savings that can be realized
by allowing remote access. The determination of appropriate PKI-enabled
security services is derived from the associated agency processes and
data interchange that could be run cheaper and/or faster, or must comply
with Federal mandates (i.e., paperless processes). It is essential to
bear in mind that the implemntation of PKI could result in additional
exposure of associated data which may not always be desirable.

### 6.2.2 Lack of Standards

Although in existence for more than 10 years, commercial products
implementing PKI technology, have had limited use. Because of its
limited use, standards have been slow to emerge. Some PKI standards are
not mature or remain defacto because vendors must differentiate their
products to justify procurement and the additional cost associated with
implementing PKI. Fortunately, this situation is improving due to the
efforts of vendor-sponsored organizations like the PKI Forum
(http://www.pkiforum.org). However, PKI standards that apply to
enterprisewide use of PKI are quite stable. Standards that apply to PKI
interoperability are still evolving and have been demonstrated to be
sufficient for many applications that require interoperability; but they
are not yet ubiquitously or consistently implemented, and thus are
likely to evolve further.

### 6.2.3 Certificate Authority Issues

Among the most critical components of a good PKI is a reliable CA.
Without proper certificate authority, the entire PKI process can be
compromised. The CA and associated certification practices/policies are
the root of trust by which PKI technology is currently deployed.
Credibility, represented through the issuance, revocation, and
management of certificates, is supplemented by the good will of the
issuing agency or service (i.e., how firmly the issuer is willing to
stand behind the product). A lack of credibility resulting from poor
certicate authority can break the trust necessary for an effective PKI
as the CA component provides the trusted binding between a subscriber's
public key and his or her identity through the issuance of a
certificate.

### 6.2.4 Registration Authority Issues

The introduction of human error in the RA process presents a risk to
PKI. The RA works in conjunction with the issuance process to securely
transmit the X.509 data about the individual and validate the identity
of the individual when generating certificates, but is not an authority
on the contents of the certificates. A human being is required for
identity proofing. Sometimes, due to timing constraints, the verifying
person may not always be as vigilant as he or she should be. A
recommended solution is to require the maintenance of a log of every
person identified, recording their name, identification credentials, and
time of verification.

### 6.2.5 Relying Party/Subscriber Issues

-   **Root certification substitution**---The root certificate is a
    certificate self-signed by a CA, containing the CA's public key. The
    root certificate is usually placed into a browser's trust list of
    CAs, that is, a list of CAs whom the user wants to trust. Careful
    management of this trust list is very important because if a
    malicious party can surreptitiously place a new root certificate
    into the list (for a CA that should not be trusted), the user will
    be relying upon it inappropriately. Thus, centralized management of
    such a trust list is usually required. In an enterprise PKI,
    however, only a single root certificate is required---that of the
    enterprise's "trust anchor" or highest level CA. Managing this
    approach is much easier because the single root certificate can be
    placed into the enterprise users' software in such a fashion that
    malicious alteration of that certificate would be very difficult.

-   **Malicious digital signatures**---If a malicious party is able to
    insert code in a user\'s computer, he or she can get the user to
    digitally sign documents or material that the user did not intend
    to. This can be done without stealing or seizing control of the
    private key. The malicious code would appear to the user as if he or
    she is digitally signing something he or she intended to sign. In
    actuality, the document or material provided to the software that
    makes the signature occur is actually different from that appearing
    on the user's screen. However, if a malicious party can insert code
    in a computer, there is no security approach that will protect the
    user. Generally, the best way to guard against this type of attack
    is to protect the user's computer from insertion of malicious code.
    This however can be difficult to achieve. Furthermore, users should
    require receipts to be sent for each transaction. Such a protocol
    makes it very difficult for malicious parties to respond in a timely
    and effective manner.

-   **Name space control**---Certificates contain a public key and the
    name of the subject to whom the certificate is issued. If that name
    is ambiguous, such as only a common name, there are opportunities
    for malicious parties to impersonate the putative holder of the
    certificate. Additionally, it can be difficult to disambiguate
    (i.e., distinguish among) the many people who may have the same
    names as the person cited in the certificate. To minimize the
    potential for problems, certificates generally should express names
    using a distinguished naming convention such as that prescribed in
    the X.500 standard, or that set forth using Internet domain
    components. An example of the former is "C=US, O=USGovernment,
    OU=AgencyX, OU=AgencyXsubordinateoffice, CN=Joseph.Smith." An
    example of the latter is "DC=gov, DC=agencyX, DCN=subordinateoffice,
    PN=name.agency.gov"

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-   **Theft of private key and PIN**---If a malevolent party can steal
    the user's private key (which is usually encrypted) and the PIN or
    password or other identifier used to decrypt the private key, the
    user can be impersonated. Doing this, of course, may be very
    difficult, especially if the private key was generated on and
    protected on hardware tokens like a smart card. Moreover, such an
    attack is effective only against the targeted individual---it is not
    a more generalized attack effective simultaneously against a wide
    variety of users.

### 6.2.6 Potential Risk of Implementing PKI

Essentially there are two methods of implementing a PKI; one is to
contract for the service and the other is to implement the operation
in-house. Both approaches have potential risk, however, these risks are
managable. Deciding whether to outsource the service or implement it
in-house must be done not only by comparing costs, but most important,
by considering the implementing organization's overall security policy
and its requirements. That is, should the agency retain full control of
its PKI, or should the agency let someone else execute that aspect of
its security? Additionally, an agency must decide if this function is
critical to its mission. Government mission critical functions can not
be outsourced. Other considerations include the degree of control
desired by the agency, the availability of trained staff to implement
and maintain the technology, etc.

Although neither way is inexpensive, many companies, lacking sufficient
knowledge of security principles, firewalls, and network topologies,
find that contracting the implementation is easier. Specialized network
engineering firms with trained resources can help setup the network
elements and recommend reputable CA firms to handle the PKI
authentication process. In any case, a carefully thought-out PKI
implementation can help ensure satisfactory operation of a virtual
private network (VPN) that assists the business with its goals.

PKI provided in-house from vendors, such as Entrust Technologies,
Baltimore Technologies, and Xcert, give an agency greater control. The
agency can set its own certificate and key management policies and
engineer infrastructure to comply with these policies. In addition,
in-house PKI products are more feature-rich, and thus more flexible,
than outsourced PKI services.

Outsource PKI services from vendors such as VeriSign, Thawte, and GTE
also offer advantages. Costs and schedules are more predictable because
the agency can leverage existing expertise. The agency is subject to an
outsource PKI service provider's policies but can gain improved
interoperability by joining the provider's trust network.

Cost is obviously a concern as well. In-house PKIs cost less per user
than outsource PKIs, but overall support costs are higher. Usually, it
is expected that an agency will have to issue a significant number of
certificates before in-house PKI investment begins to pay off.

A third method of implementing PKI involves procuring services that are
customized for the user. The user owns the PKI, but services are
provided by a contractor that tailors services to the needs of the
owner. This is similar to Government Owned Contractor Operated (GOCO)
methodology.

### 6.2.7 Risks of Digital Signatures

The risks of using digital signatures are broadly covered under three
areas: fraud, service failure, and liability.

-   **Fraud.** If a person defrauds an agency and a paper signature was
    used, it is possible in a court of law to prove or disprove that
    signature. This is not possible with a digital signature. If applied
    properly, however, the use of digital signatures reduces the risk of
    fraud. Safety can be assured only if the private key is safe and not
    subject to compromise. Creating and storing private keys on hardware
    tokens (like smart cards) that meet FIPS standards make it more
    difficult for malicious code to remain undetected.

-   **Service failure.** It is important to incorporate electronic
    services using digital signatures within the scope of an agency's
    disaster recovery plans. Agencies should also consider establishing
    backup sites for their CA, RA, and directories that supply the
    services necessary for applications programs to use certificates.

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-   **Liability.** As with other interactions that an agency has with
    outside parties, it has to consider how its actions make it legally
    liable to affected parties.

### 6.2.8 Barriers Faced by Agencies in Implementing PKI

In addition to the risks associated with the lack of maturity of the
technology and the fact that use of PKI/smart cards represents a culture
shock to some agency employees, there are some other barriers to entry
that an agency faces.

**6.2.8.1 Infrastructure.** Public key infrastructure follows a
three-step path to functionality. Step one involves ascertaining that
directories are consistent, compatible, and integrated. Step two is the
development of procedures to issue certificates that meet accepted
standards. Building this infrastructure usually takes a long period of
time. Depending on the size of the agency, several RAs may have to be
created because they could be distributed. This means procedures have to
be taught and certified. Step three is the deployment of the
certificates. The complexity of the proccess and length of time required
to put the infrastructure in place is often a significant challenge that
may be a discouraging factor to agencies.

**6.2.8.2 Software Compatibility.** In the final analysis, building a
PKI provides only an infrastructure but challenges may still exist when
trying to interface PKI with existing and future planned applications.
How that infrastructure is used is ultimately what interests agency
program personnel. Determining how applications programs employ
certificates and access the infrastructure to determine whether to trust
the certificates requires that applications programs be enabled to
accept and use certificates. The process of enablement can be very
difficult, depending on which application programs are being enabled,
how the agency's directory infrastructure is designed and deployed, and
other factors. It is not uncommon that the cost of using a PKI---making
applications PKI-aware---can exceed the cost of implementing the PKI
itself; although the more applications that are enabled, the greater the
utility of the PKI and the long-term savings that are realized.

# 7. Impact of Investment

Figure 7-1: Phase III Business Case Analysis Methodology for PKI/Smart
Cards

![](media/image23.wmf)

Economic impact can be expressed in one of several ways including cost
savings, cost avoidance, return on investment (ROI), payback period or
cost benefit ratios. *Cost savings* are reductions in costs compared to
those resources actually budgeted for the activity. Realized cost
savings are available for reallocation to other activities. *Cost
avoidance*, on the other hand, is reductions in costs on activities that
were not budgeted therefore the \"savings\" realized are not available
for realloction. In the financial community, the strict meaning of *ROI*
is really return on invested capital. ROI may mean simply the
incremental gain from an investment, divided by the cost of the
investment. In this sense, an investment that costs \$1,000 and pays
back \$1,500 after a short period has a 50 percent ROI. Additonal terms
used when conducting a cost benefit analysis includes payback period and
cost benefit ratios. *Payback period* is the time period required to
fully recover investment expenditures. *Cost benefit ratios* are the
ratio of benefit which flow from the original investment compared to the
investment expenditure.

The economic impact of an alternative is determined by comparing the
total cost of the alternative to the baseline (status quo). When
comparing alternatives, it is important to use discounted dollars so
that cash flows occurring in different years can be normalized for
comparison. Discounted dollars take into account the time value of money
that reflects the fact that money in hand today is more valuable than an
identical amount of money received in the future. Table 7-1 contains an
illustrative example of a cost comparison using cost data presented in
Section 5.

![](media/image24.wmf){width="5.999305555555556in"
height="1.2131944444444445in"}Table 7-1: Cost Comparison Among
Technologies for a Notional Agency

Additionally, it is recommended that a sensitivity analysis be performed
to identify the major cost drivers and assumptions for the alternatives.
Conducting a sensitivity analysis also ensures that all potential
improvements and costs have been captured.

After the economic impact of each alternative has been established, the
alternatives can be compared with one another as well as with the status
quo, and an investment recommendation can be formulated. This comparison
should include a thorough look at the intangible benefits and increases
in effectiveness that cannot be assigned a dollar value. It is often
useful to score the alternatives across these criteria so that an
objective decision can be made. Alternatives should be compared with one
another as well as the baseline. After a thorough comparison of these
primary factors, an investment decision can then be made.

Figure 7-2 is a matrix an agency could use to compare benefits across
alternatives.

![](media/image25.wmf){width="5.998611111111111in"
height="2.7270833333333333in"}Figure 7-2: Benefit Comparison Among
Technologies for a Notional Agency

Ultimately, the business case will serve as the rationale for the
selection of a preferred alternative and will contain all of the
necessary supporting data and documented assumptions. The business case
can then be used to support the budgeting process as dictated by OMB
Circular A-11 and provide the basis for managing results for the
preferred alternative, as stated in the Government Performance and
Results Act (GPRA).

When the preferred alternative has been selected, approved, funded, and
fielded, the agency\'s job is not over. The investment should be
monitored to ensure that it is achieving stated cost and performance
goals (e.g., that the investment continues to provide value to your
organization.) Some agencies set up performance measures or information
assurance security metrics that provide on-going assessments of the
value and performance of the investment. Often, failure to monitor the
investment carefully leads to less than expected returns. Therefore, it
is extremely important to review the investment\'s performance over the
life of the project.

# 8. Case Studies

The path to implementation of PKI/smart cards by the a large agency and
the Federal Deposit Insurance Corporation (FDIC) shows the use of
technology, timelines, and reflect the costs that these agencies have
incurred. Furthermore, lessons learned are provided at the end of this
section to assist agencies as they build their business cases. The two
case studies were selected because these agencies have moved beyond the
planning phase and are actually implementing PKI/smart card technology.
The large agency was selected to represent the path taken by a larger
agency with thousands of users. The FDIC was selected to demonstrate an
implementation approach taken by a smaller agency with a much smaller
user base.

## 8.1 A LARGE AGENCY 

The large organization has three administrations serving approximately
240,000 employees and a large external constituency. The agency has set
up an aggressive timeline to implement smart card technology. An
internal smart card is meant to be the standard identification card
within the agency when interacting with various administrations and
offices. The agency\'s PKI project officially began in 1999 with the CIO
Council's endorsement and joint funding by its internal administrations.

The infrastructure is now in place for PKI pilots that support secure
e-mail and Web enabled applications for staff and external customers.
The agency has outsourced its PKI operations to VeriSign with
PKI-enabled Microsoft e-mail and browser clients at the desktop. They
use CygnaCom Solutions as the contractor to provide help desk and
management support. The agency has issued approximately 1,000
certificates thus far that are in use in various pilots. They will
receive 100,000 free certificates from the Customer Advisory Board in FY
2001. In FY 2002, they plan to issue 134,000 additional certificates.

Costs are estimated at \$9.1 million in FY 2001 and \$72.6 million in FY
2002. The agency hopes to accrue the benefits of cost and time savings
and use PKI as a test environment for e-government activities such as
those required to comply with the Government Paperwork Elimination Act.
Relatively new technology and an aggressive timeline are some of the
risks that the agency is facing with regard to this endeavor.

### 8.1.1 Mission

The implementation of PKI/smart cards promotes the agency mission by:

-   Ensuring the confidentiality of highly sensitive information is
    maintained, especially with regard to medical data

-   Providing a means for the constituents to transport core
    registration data, thus enabling a higher level of service by
    improving processing time and data accuracy

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-   Providing strong authentication and digital signature capability to
    ensure secure data transmission.

Also, smart cards fall within the agency\'s overall strategy to improve
its information security position through strong centralized policy and
management and enterprisewide infrastructure capability.

### 8.1.2 Smart Cards Within the Agency

The agency is in the midst of a plan to implement smart card technology.
The smart card will be issued to its employees as well as constituents.
For the constituents, this smart card will be the standard
identification card for the purposes of interaction with all
administrations within the agency.

The agency is currently preparing specifications for the smart card and
finalizing the strategy for procuring the necessary software, hardware,
and firmware. It is anticipated that a vendor will be selected in late
2000. Other significant milestones include the development of Phase
1--Proof of Concept Demonstration (August 2000); an implementation of a
smart card at select sites (January 2001); and finalization of the smart
card configuration for the nationally fielded version (January 2002).

There is a smart card management team in place that will guide
development of the project and ensure that implementation goals are met
and are consistent with stated requirements. The team will guide the
life cycle management of the card, develop technical requirements, and
determine the budget for smart card use. Also, the agency hopes to
implement a tool for the agency to use in re-engineering their
respective business practices.

**8.1.2.1 Smart Card.** The agency is currently in the midst of
deploying a smart card. The following are the goals:

-   Promote health care versus hospital care

-   Seamlessly improve services to constituents

-   Reduce data entry errors on records

-   Encourage use of electronic business methods

-   Implement only one card across the entire agency

-   Be honored by all facilities, and all employees

-   Will be a scalable card

-   Enhance business services and bring inherent value to their mission

-   Be network-centric and not card-centric

-   Be interoperable across the Federal government and have digital
    certificate for  e-commerce and e-government participation

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-   Store clinical and administrative data on one card, and be able to
    change information with ease.

As the card matures, it will be capable of more applications such as:

-   Interaction with kiosks

-   Prescription refills

-   Other administrative purposes.

**8.1.2.2 Implementation Plan.** The implementation plan covers the
management concept of operations, a methodology for requirements
planning, a broad communications plan, and an overview of configuration
management.

**8.1.2.3 Assumptions.** The effectiveness of the card is based on the
following assumptions:

-   Financial resources to obtain hardware and software will be
    available at the appropriate times.

-   Training will be included as part of the initiative.

-   Personnel using smart cards are proficient in the use of Windows
    software and computers.

-   Site and implementation managers will work closely to achieve the
    goals set up for installation and training in the implementation
    plan.

-   Approval of centralized purchase of hardware will be available.

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-   There will be strong management buy-in and support.

**8.1.2.4 Project Strategy.** The card will be deployed in three main
phases, which are described on the next page.

-   Proof of Concept Demonstration

-   Initial Implementation

-   National Rollout.

**Proof of Concept Demonstration**. A proof of concept demonstration was
performed on August 31, 2000. It demonstrated smart card technology as a
viable approach to improving the systems, processes, and data management
capability of supporting delivery of care to constituents.

The demonstration was successful, and it was decided to proceed with
full implementation of the smart card throughout the agency. The
following implementation approaches were adopted as a result of the
successful proof of concept demonstration:

-   Initial mail-out of cards to avoid long smart card issuance lines at
    facilities

-   Initial implementation at a few sites to begin January 2001

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-   National rollout to begin no later than January 2002.

**Initial Implementation**. This phase expands the proof of concept to
actual use of smart card technology at two implementation sites. It is
expected that business processes, technology configuration, training and
communications activities, and support infrastructure will be developed
and deployed during the initial implementation phase.

Because the primary goal of the smart card endeavor is to make it easier
for constituents to obtain services from the agency, the following
factors should be considered in the appraisal of the initial
implementation:

-   Constituent and staff satisfaction with the administrative and
    emergency data set

-   The card's success in enabling electronic service delivery using
    public/private key technology

-   The success of initial interfaces with existing systems

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-   Card issuance stations.

**Future Plans for a National Rollout**. The goal of this phase is to
coordinate and support the rollout of smart card technology, including
prerequisite hardware and infrastructure verification, software
installation, testing, and coordination of training activities and site
closeout. Ultimately, PKI/smart cards will be used nationwide.

**8.1.2.8 Timeline.** The agency timeline is aggressive. The main focus
of the smart card project is that it should be an interoperable and
integrated solution that can support future uses by the agency and the
three administrations. Plans include issuance of smart cards to the
target population during calendar year 2001 and to the national target
population no later than January 2002. The major milestones of the
timeline are depicted in the Table 8-2.

Table 8-2: Major PKI/Smart Card Implementation Timeline

  ----- ------------------------------------- -------------- --------------
        **Task**                              **Start Date** **Finish
                                                             Date**

  1     Start Smart Card Project              06/27/2000     10/13/2000

  2     Workgroup Activities                  07/03/2000     04/12/2001

  2.1   Express Registration/Eligibility      09/06/2000     02/14/2001

  2.2   Emergency Medical Information         08/31/2000     10/18/2000

  2.3   Card Issuance and Updating            07/03/2000     10/18/2000

  2.4   Physical Design                       07/03/2000     10/18/2000

  2.5   Communication, Education, Public      07/03/2000     03/02/2001
        Relations                                            

  2.6   Digital Certification                 07/03/2000     11/15/2000

  2.7   Architecture                          07/03/2000     10/01/2000

  2.8   Funding and Procurement               07/03/2000     04/12/2001

  3     Phase 1 - Proof of Concept            07/03/2000     08/31/2000

  4     Phase 2 - Initial Implementation      09/19/2000     10/31/2001

  4.1   Pre-Implementation Phase              09/19/2000     11/02/2000

  4.2   Site Implementation                   01/01/2001     10/31/2001

  5     Phase 3 - National Implementation     01/01/2002     02/28/2002

  5.1   Pre-Implementation Phase              01/01/2002     02/28/2002

  5.2   Implementation Phase                  01/01/2002     01/01/2002

  6     Closeout                              03/01/2002     03/29/2002
  ----- ------------------------------------- -------------- --------------

### 8.1.3 PKI Initiative

The agency's PKI project officially began in 1999, with the CIO
Council's endorsement and joint funding by its divisions. The
infrastructure is now in place for PKI pilots that support secure e-mail
and Web enabled applications for staff and external customers. It can
expand to accommodate new electronic service delivery initiatives now
under development and to accommodate the growing need within the agency
to communicate more securely.

The PKI certificate policy has been published. Though this policy will
change over time, it is the cornerstone of PKI that will enable orderly
expansion, migration to new technologies, and interoperability inside
and outside the agency. Information technology and information security
professionals were among the first to enroll for PKI certificates, in
part to learn what the technology can do and how to use it.

Currently, PKI is used exclusively for secure electronic mail and to
provide secure socket layer (SSL) services for some Web servers. PKI
subscribers include personnel, contractors, and a few business partners.

A VeriSign on-site CA issues PKI certificates. An LDAP directory managed
by VeriSign provides directory services for certificates. Individual
certificates may be retrieved from this LDAP directory or shared
subscriber to subscriber, and stored in each individual user's e-mail
contact list.

Identity proofing is accomplished centrally by personnel and passed
through Cygnacom Solutions, Inc. serving as the PKI national
registration authority. Cygnacom Solutions, Inc. also provides
documentation and help desk services for PKI subscribers. A Web site is
available for PKI subscribers and is updated periodically by the PKI
project management staff. This Web site is the portal through which PKI
subscribers apply for and retrieve certificates.

Two types of certificates are issued:

-   User certificates are attributed to individuals and can be used for
    secure electronic mail, Web-based applications and remote access
    services.

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-   Server certificates are attributed to web servers to provide server
    authentication and encrypted sessions.

Approximately 350 user certificates and 10 server certificates have been
issued through since January 1999. Each certificate is intended for use
by employees or contractors and provides secure communication and
transactions for internal business processes.

**8.1.3.1 Assumptions.** The PKI is based on certain strategic
assumptions:

-   Integrate with security infrastructure

-   Outsource CA services for now, but research options further

-   Make user certificate repositories publicly accessible

-   Keep the number of certificates individuals need to perform business
    to a minimum---ideally two (one for encryption and the other for
    signature)

-   Use a single source for certificates---and a single policy

-   Leverage common Microsoft computing base, but do not wait for
    release of WIN 2000 to implement

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-   Coordinate closely with the Enterprise NT effort.

**8.1.3.2 Decision to Outsource.** The agency currently does not have
the required technical expertise to implement and manage a PKI and smart
card program. Because this expertise is not the core mission function of
the agency, they decided to outsource its PKI and smart card program.
Essentially, the agency has placed the liability of key management in
the hands of the contractor. The agency wanted to use the GSA ACES
contract because it wanted the interoperability that the contract
provided. The availability of this contract vehicle reinforced the
decision to outsource. The only in-house activities were the bidder
communications and some program management.

### 8.1.4 Costs

Costs of the PKI/smart cards are detailed in the following paragraphs.
The cost of the program is expected to be \$9.1 million in FY 2001 and
\$72.6 million in FY 2002.

The agency has deployed some PKI/smart card pilots but most of the
implementation will take place in FY 2001 and FY 2002. Therefore, all of
the costs shown in this analysis are subject to change and are unfunded
as of the publishing date of this report.

Bidder communications and review costs are expected to be \$309,101 in
FY 2001. Costs of tokens, readers and issuance stations are expected to
be \$4.2 million in FY 2001 and increase to \$60.9 million in FY 2002.
Associated costs for testing and evaluation are expected to be \$400,000
in FY 2001, and support costs are expected to be \$218,510 in FY 2001
and will increase to \$700,000 in FY 2002. The upgrades that are
expected to occur in FY 2002 are anticipated to cost \$2.0 million.

Most of the end user training and system administrator training are
expected to occur in FY 2001 and will be \$256,000 and \$368,000
respectively. Program management costs will be \$56,000 in FY 2001, and
as the PKI/smart card program expands, program management costs will
increase to \$2.1 million in FY 2002. Documentation costs are expected
to be \$450,000 and \$1 million respectively in FY 2001 and FY 2002.

Help desk support is referred to as call centers. This support will cost
\$300,000 and \$4.0 million in FY 2001 and FY 2002 respectively. These
numbers are consistent with the fact that while some of the program will
be implemented in FY 2001, most of it will be implemented in FY 2002.

The agency also has the advantage of being able to use 100,000 free
certificates provided by the GSA Customer Advisory Board. Therefore,
costs of certificate lifecycle management is expected to be low
(\$300,000) in FY 2001 and is expected to increase to \$1.5 million in
FY 2002, when 134,000 additional certificates have to be issued.

The agency decided to outsource all of its activities related to this
program except some minimal support activities. Therefore, most costs
are outsourcing costs. Table 8-3 shows the costs allocated to the
PKI/smart card program over 2 years.

Table 8-3: Total Cost of the Large Agency\'s PKI/Smart Cards in Constant
Dollars

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### 8.1.5 Perceived Benefits from PKI

The anticipated benefits of the PKI program can be grouped into three
main categories.

-   **Supports Business Applications.** The project will support real
    business applications that deliver services electronically over open
    networks, in particular, the Internet. The benefits of PKI accrue
    from the delivery of electronic service applications, rather than
    from the use of PKI in those applications. In other words, PKI
    creates a trusted environment that promotes the use and growth of
    all electronic service applications.

-   **Cost and Time Savings.** Secure transmission over open networks,
    for example, could eliminate some requirements for dedicated lines.
    Electronic forms promise savings from faster processing times, less
    staff involvement, increased agency responsiveness, and an overall
    reduced burden on the person submitting the form. One important
    aspect of the project will be to permit the quantification of the
    costs and benefits of using PKI for electronic service applications.

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-   **E-government Test Environment.** The project provides a controlled
    test environment within which matters such as customer registration,
    proofing of identity, mail confirmation, fraud prosecution,
    liability limitations, compliance with Federal encryption mandates,
    and Government Paperwork Reduction Act conformance may be addressed.

### 8.1.6 Risks Related to Successful Smart Card Implementation

The best technology in the world is useful to organizations only if the
technology is successfully implemented. The following risks could
prevent the successful implementation of smart cards:

-   **New Technology.** Compounding the fact that the smart card
    technology as such is relatively new, is the fact that this is the
    first smart card project. This factor makes the project risky. Staff
    and constituents will require extensive end user training.

-   **Change.** This relates to change associated with replacing
    existing business processes and capabilities. To facilitate an
    effective transmission, clear and definitive guidance must be
    provided and unilaterally implemented throughout the agency. Also,
    cultural change and end-user expectations must be managed to include
    process change, user acceptance, training, etc.

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-   **Aggressive Timeline.** The agency is trying to implement the smart
    cards in a very tight timeline (refer to timeline shown previously).
    This timeline could prove to be difficult to adhere to as it is a
    relatively new technology, and the concepts have not been fully
    tested within the agency. The trade-offs however, are cost savings
    and an improved security posture. The agency decided to proceed with
    a significant investment in PKI/smart card technology in a rapid
    fashion so that other electronic commerce solutions could be
    pursued.

### 8.1.7 Risks of PKI 

Although PKI will be invaluable to the agency, there are some associated
risks. Implementing PKI can be an inherently complex undertaking for the
reasons explained in the following paragraphs.

**8.1.7.1 Extensive Coordination Requirements.** The PKI project
requires that program, technology, and legal/policy support offices
collaborate on a agency-wide approach. Without close coordination across
the agency, duplication, gaps and inefficiencies can evolve. Legal,
policy, and oversight involvement should also be considered when
standing up a PKI/smart card infrastructure.

**8.1.7.2 Inexperience With PKI Technology.** Although PKI has a firm
theoretical underpinning and a growing spectrum of applications, its use
represents unexplored territory for most of the agency. The policy and
technology framework for PKI does not exist, so it must evolve from a
pilot experience. Customer registration and proofing, liability, fraud
protection and prosecution, and record privacy and preservation are
among the issues that need to be addressed. There is also the need for
flexibility as the underlying technologies evolve and become more
standardized.

**8.1.7.3 Internet Self-Service Context.** Self-service over the
Internet requires an agency to understand customer demographics and
preferences, and revisit the rules and traditions that apply to
in-person and mail contacts. Certain policies and procedures must
uniformly govern all electronic service applications.

-   The requirement to provide for a customer to "opt in"

-   Notification by mail of all updates to an individual's record

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-   Procedures to notify customers of agency\'s and the customer's
    respective responsibilities and limitations on liabilities.

## 8.2 The Federal Deposit Insurance Corporation

The Federal Deposit Insurance Corporation's mission is to maintain the
stability of and public confidence in the nation's financial system.
FDIC has about 7,800 employees.

FDIC generated its first certificate policy and certification practices
statement in 1998. The FDIC's Electronic Travel Voucher (ETV) system was
its pilot program. ETV currently makes use of encryption and digital
signature technology. FDIC has issued 3,500 certificates in FY 2000 and
plans to issue about 5,000 more in FY 2001 to complete the PKI enabling
within the corporation.

In addition, FDIC is using Entrust profiles on Datakey 320 smart cards.
FDIC is currently using smart cards, combined with photo ID proximity
badges, to perform PKI administration. FDIC also implemented secure
extranet applications using digital certificates for FDIC external
clients. This is a low assurance PKI used for authentication purposes
only. FDIC maintains the PKI in-house because it will be used for the
core functions of the agency. FDIC spent \$5.0 million in FY 2000 and
plans to spend \$2.5 million in FY 2001.

FDIC is currently working on developing a high level Application
Programming Interface (API) to make it PKI consistent irrespective of
which PKI product is used. This will facilitate the development and
wide-deployment of PKI-enabled applications. This is explained in detail
in Section 8.2.4.

Table 8-4 provides the FDIC mission and vision statements. The FDIC has
insured deposits and promoted safe and sound banking practices since
1933.

Table 8-4: FDIC's Mission and Vision Statements

  -------------- --------------------------------------------------------
  **FDIC         "The FDIC, an independent agency created by Congress,
  Mission**      contributes to stability and public confidence in the
                 nation's financial system by insuring deposits,
                 examining and supervising financial institutions, and
                 managing receiverships."

  **FDIC         "To assure that the FDIC is an organization dedicated to
  Vision**       identifying and addressing existing and emerging risks
                 in order to promote stability and public confidence in
                 the nation's financial system."
  -------------- --------------------------------------------------------

The implementation of PKI/smart cards promotes both the FDIC mission and
vision by:

-   Addressing potential risks due to security breaches

-   Ensuring only authorized personnel gain access to sensitive data

-   Improving the ability to track and detect suspicious activity across
    FDIC systems

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-   Ensuring the confidentiality, integrity, and availability of its
    information are maintained.

### 8.2.1 Background

FDIC has successfully combined picture identification badges with smart
card chips mounted on the badge. The badges, controlled by the security
office, are issued after an employee has participated in the FDIC
personnel security program. Unlike a generic token, these are registered
to a specific user. To implement these badges, a product search was
undertaken that was limited to those devices capable of operating within
the FDIC's PKI. Datakey 320 smart card chips were selected and have been
tested. FDIC is currently using smart cards, combined with photo ID
proximity badges, to perform PKI administration.

Following pilot testing, it is expected that FDIC will begin using smart
cards for all high-risk electronic transactions that require a digital
signature. A new Datakey 330 smart card chip is expected to be available
after it has undergone Federal Information Processing Standards (FIPS)
140-1 level 2 verification. When this technology is combined with a
picture badge, the FDIC will be able to satisfy user cryptographic
requirements associated with General Accounting Office (GAO)
authorization.

### 8.2.2 Low Assurance PKI

FDIC uses a low assurance PKI for a number of SSL Web-based applications
on its extranet with its member institutions and other parties that are
external to the agency, such as other state or Federal agencies. Browser
certificates are used to control access to the extranet Web server. The
extranet PKI uses a 128-bit RSA encryption via SSL, and employs Entrust
WebCA software. The extranet PKI currently has about 2,000 certificates
issued and is from the medium assurance PKI. The extranet uses
software-based protection mechanisms (Web browser certificates). It
provides authentication only.

### 8.2.3 Electronic Travel Voucher System Pilot

FDIC has approximately 3,500 field representatives with laptops. All
field representatives will have to use ETV to get reimbursed. The
electronic system is interfaced with the National Finance Center (NFC).
Previously, it took up to two months for field employees to be repaid,
but after the implementation of smart cards it now takes two days for a
direct deposit to reach the employee's account. The paper reimbursement
process used to cost about \$50 a transaction to process, whereas the
new process costs less than \$10. FDIC processes about 80,000 to 100,000
vouchers every year. This results in savings of about \$3.2 to \$4.0
million.

In addition to quantitative advantages such as cost savings, qualitative
advantages to using the ETV include:

-   Quality of data check

-   Expedience of service

-   Reimbursement is a direct deposit to the checking account.

ETV uses digital signatures and some encryption. Although the transition
to PKI was a significant change for the employees, the expedience with
which they are reimbursed has led to this technology being welcomed by
the field representatives. As a result of the success of the ETV pilot
program, FDIC has expanded the program to a fully operational, on-going
cryptographic smart card endeavor.

### 8.2.4 PKI Enabling Within FDIC

FDIC generated its first certificate policy (CP) and certification
practices statement (CPS) in 1998. Development of the version 1 policy
took approximately 1 month and underwent OIG review. FDIC is planning
plans that future development and revisions should last no more than 3
months. A single CP[^6] is being generated to address four assurance
levels. This will use the DoD CP as a template. FDIC is reviewing the
Federal Bridge Certificate Policy for cross certification purposes. Each
CA will have a Certification Practices Statement (CPS).[^7] Each of the
assurance levels will have a separate certificate profile. Specifically,
the approach is to use Federal Information Processing Standards (FIPS)
140-1 validated hardware cryptographic modules for the CA. High
assurance digital signatures will also become part of the smart card
capabilities.

Through a competitive bid process, FDIC selected the firm Entrust as its
PKI provider. Within FDIC, the PKI is run internally (not outsourced)
and managed by the people who manage the issuance of passwords. The
current architecture consists of an Entrust Manager (version 3.0c1) and
an ICL X.500 version 7B Directory Service. The client software that is
deployed to the user is the Entrust Client v3 for desktop users and
Entrust Entelligence v4.2a (with Entrust ICE/ True Delete/ Secure
Delete) for the laptop users. The infrastructure is currently being
upgraded to Entrust Manager v4, with the hopes of increasing it to
Entrust Authority (version 5) very soon. Additionally, the hosting CA
platform will support a FIPS 140-1 level 4 cryptographic module to
contain the CA signature keys, once upgraded.

Entrust provides free toolkits that enable the Secure Communication
Manager (SCM) to interface with high level cryptographic Application
Programming Interface. SCM is an FDIC developed middleware application
that is intended to reduce the complexity of the underlying mechanisms
while facilitating service requests through simple service calls. The
SCM was modified to recognize hardware tokens.

The FDIC is working with other government agencies in defining a
high-level API that would work with developed government off-the-shelf
(GOTS) applications. This interface will be PKI consistent regardless of
which PKI product is used. This will facilitate the development and wide
deployment of PKI applications and will make support across multiple PKI
products less difficult. FDIC has established links with the Department
of Energy, Department of Treasury\'s Financial Management Services
Division, NIST and GAO. FDIC has also had some contact with the
Environmental Protection Agency and feels that the Department of Army
may show interest.

Certain client software upgrades need to be made before migrating to
Entrust 5.0 Manager. FDIC is testing the build for a corporate desktop
upgrade that will bring everything up to version 4.X. FDIC is also
procuring the software necessary for establishing a full PKI for the
Extranet. FDIC will shadow the internal directory to the extranet Border
Directory and cross certify with customers. FDIC expects to cross
certify with the Federal Bridge CA at the low assurance level using this
interface.

Phase 1 of the PKI enabling will involve 2,500 examiners who are in the
field most of the time. These examiners need assurance that there is
only one key set, but this cannot be accomplished with a floppy disk
that can be copied, whereas it can be accomplished by a smart card. The
issuance of smart cards will be coordinated with the badge issuance
office. The badge issuance vehicle will also be the issuer of smart
cards.

Phase 2 will include the rollout of PKI on all desktops. Currently, this
phase is expected to commence in early 2001.

The smart card will also be used for physical access except in places
where office space is leased and it may not be possible. In other
staffed access controlled areas where the badge is presented to the
reader, it actually scans the image of the bearer of the card and
provides physical verification to the guard. Although there is no secure
compartmented information facility (SCIF)-like secure area within FDIC,
FDIC personnel feel that one should be created where the CA is housed.
There are still areas within the FDIC where five-button security (cypher
locks) will continue to exist.

### 8.2.5 Program Management and Support

Program management and support are on-going throughout the lifecyle of
the project. These program management activities include the following:

-   Training

-   Help desk

-   On-going maintenance

-   Audit

Training within the FDIC is an on-going process based on a "train the
trainer" model. FDIC has numerous help desk facilities. The Entrust
specific help desk is located at the large agency and is staffed with
contractors from Computer Associates. Users, information security
officers, and field office representatives are given a toll free number
to contact if any operational issues arise with the Entrust environment.
The on-going maintenance contract FIDC has with Entrust is its Silver
program, which costs 18 percent of the contract value per year.
Administrators and government oversight personnel perform auditing to
ensure contract compliance.

### 8.2.6 Certificate Life Cycle Management

The on-going certificate lifecycle management process is clearly defined
within the FDIC and is explained in detail below.

**8.2.6.1 Certificate Issuance.** The core users have been issued
certificates. The FDIC opted to develop an automated registration tool
to support the ETV rollout. In contrast, the use of smart cards will
eventually require a human in the loop to issue a key because FDIC will
use High assurance cards that require a human validate the cardholder.

**8.2.6.2 Certificate Renewal.** Certificate renewal is automated within
Entrust. The certificate policy specifies the validity period. When the
certificate nears expiration, it is automatically renewed unless
explicitly denied.

**8.2.6.3 Certificate Distribution.** Certificates are distributed
within the Entrust product to the client. Encryption certificates
populate the X.500 directory and the signature certificates are
concatenated with the signature of the CA.

**8.2.6.4 Certificate Backup and Recovery.** The Entrust Manager is
backed up daily. Recovery requires RA intervention. The RA must
establish that the user is whom they claim to be. There is also an
information security officer reporting system that is used to make
recovery requests.

**8.2.6.5 Testing and Maintenance.** New software versions must be
tested in lab and test environments. Older versions of the software are
not supported by the vendor and therefore need upgrading.

### 8.2.7 FDIC Timeline

FDIC was able to successfully complete PKI enabling of its pilot project
at the scheduled time. It plans to roll out PKI/smart cards to all its
employees and some contractors by March or April 2001. FDIC had planned
to complete the rollout by January 2001, but a delay in deploying
Windows 2000 software had delayed the full implementation by a few
months. As explained earlier, FDIC has decided to keep the PKI endeavor
in-house and has not contracted out any portion of it. FDIC has
established the tentative timeline shown in Table 8-5 for implementing
PKI/smart cards.

Table 8-5: Major FDIC PKI/Smart Card Implementation Timeline

  ----- ------------------------------------ -----------------------------
        **Task**                             **Timeframe**

  1     Needs Study                          January 1997

  2     Low Assurance PKI                    January 1998

  3     Certificate Practices                August-September 1998

  4     ETV Decision                         Early 1998

  5     ETV Cut Over                         December 1999

  6     Issuance of 3,500 Smart Cards        November 2000

  7     Full rollout of Smart Cards          March-April 2001
  ----- ------------------------------------ -----------------------------

### 8.2.8 Decision to Not Outsource

The crux of FDIC\'s decision to not outsource relates to the future
vision for PKI/smart cards. FDIC will use smart cards for its high
dollar value obligations in the future. Such a critical and core
function should not be outsourced to an outside vendor because the
potential for significant losses is high. By keeping this function
in-house, FDIC retains control of the function and can take appropriate
steps to protect against losses.

The other deciding factor was that a GAO sanction will not allow for
this core function to be outsourced, and FDIC is obtaining this GAO
sanction. Because many financial obligations will be made with digital
signatures, it can be expected that the GAO will become involved. The
concern is that data integrity could be compromised. GAO will sanction
only a high level of assurance that will require a person in the loop
for face-to-face identification.

### 8.2.9 Costs

Thus far, the cost of PKI enabling within FDIC has been \$1 million for
the program management of the infrastructure alone. The \$1 million does
not include CA contract support, FDIC contract support or government
personnel time.

The costs of planning and project review were not assigned to the
PKI/smart cards endeavor. Rather they were subsumed in the overall
operations cost of the agency.

As an agency, FDIC had the advantage of being able to roll up the costs
of hardware with its enterprisewide laptop upgrade. Only the costs for
the tokens and the readers were assigned to the PKI/smart cards project.
This meant that the only costs were those for standing up the PKI, which
was \$1 million in program management costs. FDIC created the middleware
called SCM, so it did not incur the license fee (approximately
\$75/seat) that can substantially add to the costs.

The ETVS pilot, which has been described in detail previously in this
report, cost approximately \$2.75 million to stand up. All of these
costs were incurred in FY 2000. The cost of issuing cards and readers
was \$357,000 for approximately 3,000 tokens and is expected to be
\$678,300 in FY 2001 for approximately 5,700 tokens. A one-time testing
cost of \$100,000 was incurred in FY 2000.

Ongoing help desk support that is staffed by contractors from Computer
Associates is expected to be approximately \$300,000 for the first two
years when the PKI/smart cards are being put in place. When proficiency
has increased, helpdesk costs are expected to decline. System
administration, including auditing and training, is expected to require
three FTEs and have a recurring cost of approximately \$300,000 per
year. Ongoing maintenance is provided under the Entrust Silver program,
which is 18 percent of program management costs or approximately
\$200,000 each year throughout the life cycle of the project.

Table 8-6: Total Cost of FDIC's PKI/Smart Cards in Constant Dollars

![](media/image27.wmf){width="6.343055555555556in"
height="7.395138888888889in"}

## 8.3 Lessons Learned 

These two case study candidates demonstrate that it is possible to
implement PKI/smart cards irrespective of the size of the agency.
Although there is currently no uniform methodology of implementing
PKI/smart cards, there are three different methods that an agency can
use. An agency can either outsource the activities as the large agency
did with VeriSign or decide to conduct all the operations in-house like
FDIC decided. The advantages and drawbacks of both have been discussed.
A third method involves a government-owned/contractor operated type
ownership, where a user owns the PKI, but a contractor provides
customized PKI services. This method was not used by either case study
candidates.

### 8.3.1 Benefits Versus Risks 

Both the large agency and FDIC were aware of the general risks posed by
use of PKI and smart cards and the obstacles to successful
implementation. However, these agencies believe that the benefits
outweigh the risks and have, therefore, proceeded with the
implementation of cryptographic smart cards. In fact, discussions with
agency personnel from both the large agency and FDIC reveal that they
believe there is no better option for security available and that
implementing PKI/smart cards is an inevitable decision.

### 8.3.2 Costs Versus Benefits

Both the large agency and FDIC incurred substantial costs in
implementing PKI/smart cards. The incremental costs of each added layer
of security should be analyzed against the extra benefit that the added
security feature provides. Both the large agency and FDIC used PKI to
enhance their security and realize higher levels of authentication, data
integrity, nonrepudiation, and confidentiality. These agencies also
purchased smart cards due to the added benefits of portability,
scalability, and interoperability. Although biometrics technologies
offer a higher level of security, both agencies felt that the currently
high costs of biometrics readers makes this option not feasible for now.

### 8.3.3 Preparing for Implementation

The implementation of PKI/smart cards infrastructure requires
significant planning and consideration throughout your agency. Below is
a checklist of some of the important factors that your agency should
consider before implementing cryptographic smart cards. This checklist
is distilled from literature review and is based on lessons learned from
case studies and interviews with both PKI and smart card subject matter
experts.

1.  **Prepare a Certificate Policy and a Certificate Policy Statement**

A certificate policy is a bare minimum requirement that has to be
prepared before operating a PKI infrastructure in a disciplined
environment. A certificate policy will provide the map for your agency's
business model for electronic transactions. Additionally, a certificate
policy statement should be prepared if your agency is going to operate
its own certificate authority (CA) or have a contractor operate the CA
on behalf of the agency. This certificate policy statement defines the
operating procures for your CA, namely, key management.

2.  **Determine Your Agency's Need for Interoperability**

If your agency has a high need to transact business with other agencies,
the Federal Bridge Certification Agency (FBCA) is a very efficient
mechanism to provide the interoperability required for this interface.
The advantage of linking with the Federal Bridge is that you enter into
one certificate management arrangement with the bridge and have access
to all other Federal Bridge users rather than having to draft bilateral
agreements with every agency with which you conduct business. If your
agency chooses to operate with the FBCA, it should consider the
certificate policy of the bridge in framing your own certificate policy.
Additionally, the GSA Smart Access Common ID Program contract is a means
of obtaining interoperable smart cards that can used between agencies.

3.  **Consider Phasing In Implementation**

Discussions with agencies about their PKI enabling efforts indicate that
it is more practical to adopt a phased in approach to PKI. This
incremental implementation allows your agency to learn from and deal
with any mistakes you may make in the pilot process and allows for the
scaling up of such activities as program management and helpdesk
capabilities. It also allows the cost of implementation to be spread
over more than one fiscal year, which could prove beneficial in securing
necessary funding.

4.  **Departmentwide Implementation and Policies**

The substantial infrastructure investment and on-going certificate
issuing costs of PKI suggest that a departmentwide approach be taken to
achieve centralization of infrastructure and economies of scale. The
substantial marketing efforts that will be required to establish
incentives and to encourage adoption of PKI digital signatures by users
and constituents suggest that a centralized marketing campaign would be
more effective and economical. A number of commonalities could exist
among agency functions and users that will have to be established.
Although each agency has a different mission, the commonalities would
suggest that a unified approach could be taken to meeting information
security requirements. Several PKI solutions are being tested in pilot
projects within specific departments that use certificates from several
vendors. It is possible that any PKI applications going forward can be
met by an enterprise approach to PKI within each department. The same is
true of smart cards, as all agencies within a department could issue the
same smart card with the same amount of memory.

5.  **Define the Registration Process**

Your agency may decide to incorporate your certificate registration
process into the existing personnel or facility office business practice
of issuing identification cards. For most agencies, the smart card will
replace identification cards; so this step is really streamlining PKI
into an existing business process, resulting in a nominal cost impact to
your agency. For example, when a new employee is hired, the subscriber
agreement that is required to obtain a digital certificate and a smart
card can be part of the rest of the hiring package. The smart card can
be issued as part of the normal in-processing.

6.  **Establish a Certification Revocation Policy and Validation
    Procedures**

Several options are available to establish certification revocation
policy that disables certificates if the smart card is stolen or
inoperable, or when an employee terminates. The revocation of
certificates ensures that security remains intact. Two common
certificate revocation approaches are Certificate Revocation Lists
(which is the most common today) and the Online Certificate Status
Protocol (OCSP) approach of "Validation Authority." One key decision
that should be made in establishing the revocation policy is how
stringent the policy will be. A very stringent policy leads to a number
of revocations, while a less stringent policy results in fewer
revocations. It is extremely important for your agency to put in place
validation procedures, expired certificates procedures, and Certificate
Revocation Lists. Also, your agency should decide who has the
responsibility of providing long-term signature validation services.

7.  **Forecast Liability Issues**

Your agency should determine up front what liability, if any, it will
assume for failures in the certificates it issues and under what
conditions it will assume such liability. It may be better for your
agency to posit the use of PKI as a method of preserving trust rather
than creating trust.

8.  **Determine Use of Smart Card**

A smart card has several potential uses, including physical access,
logical access, electronic purse, transit cards, and medical information
storage. Every agency will not require every one of these functions.
Therefore, an agency needs to consider how the smart card is to be used
in support of its mission and vision. An agency could first implement a
card with a few applications and add additional applications after the
intial set of applications are deemed stable; however, it is important
at the outset to develop a vision for how the card will be used both in
the near-term and long-term. This allows agencies that plan multiple
applications to buy smart cards with the appropriate amount of memory at
the beginning so that new cards will not have to be issued later.
Rather, the new application can simply be added to the existing card
thereby reducing reissuance costs.

# 9. Conclusion

PKI/smart cards are a sound business investment when they are used to
satisfy security and business needs as they provide the means for secure
online transactions. Compared to other technologies, PKI/smart cards
offer tremendous security benefits through the encryption of
transactions using PKI to offer nonrepudiation, authentication, data
integrity, and confidentiality. By placing PKI certificates on a smart
card, scalability, portability, interoperability (via the Federal
Bridge), efficiency, and data storage capacity are possible. PKI/smart
cards can be used for logical access to computer networks as well as
physical access to buildings.

This report was prepared as a means of helping Federal agencies
understand the components for building a sound business case for using
PKI/smart cards within Federal agencies. By following the business case
methodology presented in this document, decision makers will be able to
determine for themselves whether the investment costs for PKI/smart
cards are justified and whether the benefits outweigh the risks.
Decision makers are also given guidance on evaluating the economic
impact of alternatives, comparing alternatives, and ultimately
monitoring the investment.

An environmental assessment will demonstrate whether PKI/smart card
technology is well suited to improve the security posture of an
organization; to achieve legislative, executive, and agency guidance
compliance; to enable an agency to accomplish its mission; and to
support e-government initiatives. Many baseline business processes in
use today include identification cards, magnetic stripe cards used for
physical access, and PIN or password technology for logical control. The
use of PKI/smart cards will change these processes. Several technologies
that can address an organization's security and operational needs
include static, upgradeable, and cryptographic smart cards. However,
PKI/smart cards offer a tremendous benefit compared to other
technologies. In fact, only PKI yields a high benefit in the security
areas of authentication, nonrepudiation, data integrity, and
confidentiality. Agencies that require this level of security benefit
are most suitable candidates for this technology.

In a notional agency of 10,000 users, the cost of PKI/smart cards
hardware is shown to only be about \$142 per user (excluding the
operational and maintenance costs required to operate these systems).
PKI/smart cards can complement planned IT upgrades as part of an overall
IT investment rather than assigning the full cost of implementation to
the PKI/smart card project. ROI calculations help to make equitable
comparisons of alternatives to the status quo by evaluating their
individual economic impact. Cost alone should not be the sole basis of
an investment decision but rather a composite of factors like benefits,
risks, and costs should be evaluated. When an alternative is selected,
it should be fully documented in a business case that details the entire
selection process. After the investment is made and the preferred
alternative is fielded, the investment should be monitored for actual
performance against targets.

Two case studies illustrate two separate but successful paths Federal
agencies have taken to implement PKI/smart cards. The case study example
is of a large agency that will use PKI/smart card technology to service
both internal and external users. Being relatively inexperienced in key
management, large agency decided to outsource its PKI management. FDIC
is a smaller agency that will use PKI/smart card technology to interface
with other agencies and corporations. FDIC has decided to manage its own
PKI. Both agencies used pilots to test proof of concepts before
deploying. These "real world" examples help to demonstrate that
PKI/smart cards can be a sound investment for secure transactions.

# APPENDIX A ACRONYMS AND ABBREVIATIONS DEFINED

ACES Access Certificates for Electronic Services

API Application Programming Interface

ASCII American Standard Code for Information Interchange

BCA Business Case Analysis

CA Certificate Authority

CAC Common Access Card

CIO Chief Information Officer

CP Certificate Policy

CPS Certification Practices Statement

CRL Certificate Revocation List

DoD Department of Defense

EBCDIC Extended Binary Coded Decimal Interchange Code

e-business Electronic Business

e-commerce Electronic Commerce

EEPROM Electrically Erasable Programmable Read-Only Memory

e-government Electronic Government

e-mail Electronic Mail

ETV Electronic Travel Voucher

FBCA Federal Bridge Certification Authority

FBI Federal Bureau of Investigation

FDIC Federal Deposit Insurance Corporation

FIPS Federal Information Processing Standards

FY Fiscal Year

GAO Government Accounting Office

GOCO Government Owned, Contractor Operated

GOTS Government off the Shelf

GPEA Government Paperwork Elimination Act

GTE General Telephone & Electronics

IA Information Assurance

ICC Integrated Circuit Chip

IRR Internal Rate of Return

ISO Industry Standards Organization

IT Information Technology

LDAP Lightweight Directory Access Protocol

NASA National Aeronautics and Space Administration

NCA National Cemetery Administration

NFC National Finance Center

NIST National Institute of Standards and Technology

NPV Net Present Value

OCSP Online Certificate Status Protocol

OIG Office of the Inspector General

OMB Office of Management and Budget

PIN Personal Identification Number

PKI Public Key Infrastructure

RA Registration Authority

ROI Return on Investment

RSA Rivest, Shamir, & Adleman

SCIF Secure Compartmented Information Facility

SCM Secure Communications Manager

SSL Secure Socket Layer

VPN Virtual Private Network

# APPENDIX B GLOSSARY OF PKI AND SMART CARD TERMS

  --------------------- -------------------------------------------------
  Access                Ability to make use of any information system
                        (IS) resource.

  Access control        Refer to logical access control and physical
                        access control.

  Access Certificates   ACES provides secure electronic access to the
  for Electronic        Public for privacy protected Federal services and
  Services (ACES)       information through the use of public key
                        technology

  Authentication        Security measure designed to establish the
                        validity of a transmission, message, or
                        originator, or a means of verifying an
                        individual's authorization to receive specific
                        categories of information.

  Availability          Guaranteed service on demand assurance

  Biometrics            Refers to authentication techniques that rely on
                        measurable physical characteristics that can be
                        automatically checked. Examples include computer
                        analysis of fingerprints or speech.

  Byte                  8 bits

  Certificate           A digital representation of information that at
                        least (1) identifies the Certificate Authority
                        issuing it, (2) names or identifies its
                        subscriber, (3) contains the subscriber's public
                        key, (4) identifies its operational period, and
                        (5) is digitally signed by the Certificate
                        Authority issuing it.

  Confidentiality       Assurance that information is not disclosed to
                        unauthorized entities or processes.

  Cryptographic key     A parameter used in conjunction with a
  (key)                 cryptographic algorithm that determines the
                        transformation of plaintext data into ciphertext
                        data; the transformation of ciphertext data into
                        plaintext data; a digital signature computed from
                        data; the verification of a digital signature
                        computed from data; or a data authentication code
                        (DAC) computed from data.

  Cryptographic module  The set of hardware, software, firmware, or some
                        combination thereof that implements cryptographic
                        logic or processes, including cryptographic
                        algorithms, and is contained within the
                        cryptographic boundary of the module.

  Data Integrity        Provides absolute verification that data has not
                        been modified or tampered with.

  Digital signature     A method of encryption that provides
                        authentication, nonrepudiation, and data
                        integrity.

  Efficiency            In this analysis, efficiency includes
                        productivity gains realized from automation, time
                        savings, and convenience.

  Encryption            The translation of data into a secret code.

  Form factor           The physical size and shape of a component.

  Government Paperwork  GPEA allows citizens to use electronic
  Reduction Act (GPEA)  technologies when filing information with, or
                        retrieving it from the Federal Government. GPEA
                        provides the legal framework for agencies to
                        accept electronically submitted forms and
                        documents. Electronic signatures and other
                        measures will be used to authenticate citizens as
                        they transact business with the Government.

  Government            GPRA requires agencies to define missions, set
  Performance and       goals, measure performance, and report on their
  Results Act (GPRA)    accomplishments. As such, an agency\'s IT
                        investments should directly support the
                        accomplishment of these goals.

  Hardware              The physical equipment used to process programs
                        and data in a cryptographic module.

  Integrity             Refer to data integrity.

  Interface             A logical section of a cryptographic module that
                        defines a set of entry or exit points that
                        provide access to the module, including
                        information flow or physical access.

  Interoperability      The ability of software and hardware on different
                        machines from different vendors to share data.

  Kilobyte              1,024 bytes (abbreviated Kbyte)

  Logical Access        Process of granting access to information system
  Control               resources only to authorized users, programs,
                        processes, or other systems.

  Non-repudiation       Nonrepudiation is the act of assuring the origin
                        and/or issuance of a transaction or action.

  Password              A string of characters used to authenticate an
                        identity or to verify access authorization.

  Personal              A 4- to 12-character alphanumeric code or
  identification number password used to authenticate an identity,
  (PIN)                 commonly used in banking applications.

  Physical access       Refers to access to buildings.
  control               

  Portability           Can be carried or moved with ease.

  Privacy               State in which data and system access is
                        restricted to the intended user community and
                        target recipient(s).

  Private key           A cryptographic key used with a public key
                        cryptographic algorithm, uniquely associated with
                        an entity and not made public.

  Presidential Decision PDD-63 required Federal agencies to secure
  Directive (PDD) 63    critical infrastructures against terrorist
                        attacks.

  Public key            A cryptographic key used with a public key
                        cryptographic algorithm, uniquely associated with
                        an entity, and which may be made public.

  Public key            A cryptographic algorithm that uses two related
  (asymmetric)          keys, a public key and a private key; the two
  cryptographic         keys have the property that given the public key,
  algorithm             it is computationally infeasible to derive the
                        private key.

  Public Key            Framework established to issue, maintain, and
  Infrastructure (PKI)  revoke public key certificates.

  Scalability           Refers to how well a hardware or software system
                        can adapt to increased demand.

  Token                 The cryptographic module associated with a given
                        user for PKI and common access card functions. It
                        includes private keys and associated public key
                        certificates, identification data, and other
                        information relevant to these functions. This is
                        not to be confused with a token device such as a
                        smart card, which may contain a token but is not
                        in itself considered a token.
  --------------------- -------------------------------------------------

[^1]: Source: Booz∙Allen & Hamilton

[^2]: Based on historical data from major manufacturers in 1997-98 and
    projected quantities of \>1,000,000

[^3]: Biometric Security: Government Applications and Operations
    (CardTech/SecurTech Government 1996).

[^4]: Digital signatures provide both nonrepudiation and data integrity.

[^5]: The importance of authentication and nonrepudiation is detailed in
    Section 5.1.

[^6]: A Certificate Policy is a registered set of rules on the
    applicability of a certificate.

[^7]: A Certification Practices Statement details and controls the
    certification process from the initial verification of the
    institutional requestor and the request for certificate process,
    through the issuing, acceptance, using, suspending, revoking, and
    renewing of certificates.