U.S. GOVERNMENT PRINTING OFFICE

60–491 CC WASHINGTON : 1999

THE YEAR 2000 PROBLEM: STATUS REPORT ON

THE FEDERAL, STATE, LOCAL, AND FOREIGN

GOVERNMENTS

JOINT HEARING

BEFORE THE

COMMITTEE ON

GOVERNMENT REFORM

AND THE

COMMITTEE ON SCIENCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

FIRST SESSION

JANUARY 20, 1999

Committee on Government Reform and Oversight

Serial No. 106–40

Committee on Science

Serial No. 106–42

Printed for the use of the Committee on Government Reform and the

Committee on Science

(

Available via the World Wide Web: http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

DAN BURTON, Indiana, Chairman

BENJAMIN A. GILMAN, New York

CONSTANCE A. MORELLA, Maryland

CHRISTOPHER SHAYS, Connecticut

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

STEPHEN HORN, California

JOHN L. MICA, Florida

THOMAS M. DAVIS, Virginia

DAVID M. MCINTOSH, Indiana

MARK E. SOUDER, Indiana

JOE SCARBOROUGH, Florida

STEVEN C. LATOURETTE, Ohio

MARSHALL ‘‘MARK’’ SANFORD, South

Carolina

BOB BARR, Georgia

DAN MILLER, Florida

ASA HUTCHINSON, Arkansas

LEE TERRY, Nebraska

JUDY BIGGERT, Illinois

GREG WALDEN, Oregon

DOUG OSE, California

PAUL RYAN, Wisconsin

——— ———

——— ———

HENRY A. WAXMAN, California

TOM LANTOS, California

ROBERT E. WISE, JR., West Virginia

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

GARY A. CONDIT, California

PATSY T. MINK, Hawaii

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, Washington,

DC

CHAKA FATTAH, Pennsylvania

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

ROD R. BLAGOJEVICH, Illinois

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

JIM TURNER, Texas

THOMAS H. ALLEN, Maine

HAROLD E. FORD, JR., Tennessee

———

BERNARD SANDERS, Vermont

(Independent)

KEVIN BINGER, Staff Director

DANIEL R. MOLL, Deputy Staff Director

DAVID A. KASS, Deputy Counsel and Parliamentarian

CARLA J. MARTIN, Chief Clerk

PHIL SCHILIRO, Minority Staff Director

(III)

COMMITTEE ON SCIENCE

HON. F. JAMES SENSENBRENNER, JR., (R–Wisconsin), Chairman

SHERWOOD L. BOEHLERT, New York

LAMAR SMITH, Texas

CONSTANCE A. MORELLA, Maryland

CURT WELDON, Pennsylvania

DANA ROHRABACHER, California

JOE BARTON, Texas

KEN CALVERT, California

NICK SMITH, Michigan

ROSCOE G. BARTLETT, Maryland

VERNON J. EHLERS, Michigan*

DAVE WELDON, Florida

GIL GUTKNECHT, Minnesota

THOMAS W. EWING, Illinois

CHRIS CANNON, Utah

KEVIN BRADY, Texas

MERRILL COOK, Utah

GEORGE R. NETHERCUTT, JR., Washington

FRANK D. LUCAS, Oklahoma

MARK GREEN, Wisconsin

STEVEN T. KUYKENDALL, California

GARY G. MILLER, California

JUDY BIGGERT, Illinois

MARSHALL ‘‘MARK’’ SANFORD, South

Carolina

JACK METCALF, Washington

GEORGE E. BROWN, JR., California, RMM**

RALPH M. HALL, Texas

BART GORDON, Tennessee

JERRY F. COSTELLO, Illinois

TIM ROEMER, Indiana

JAMES A. BARCIA, Michigan

EDDIE BERNICE JOHNSON, Texas

LYNN C. WOOLSEY, California

ALCEE L. HASTINGS, Florida

LYNN N. RIVERS, Michigan

ZOE LOFGREN, California

MICHAEL F. DOYLE, Pennsylvania

SHEILA JACKSON-LEE, Texas

DEBBIE STABENOW, Michigan

BOB ETHERIDGE, North Carolina

NICK LAMPSON, Texas

JOHN B. LARSON, Connecticut

MARK UDALL, Colorado

DAVID WU, Oregon

ANTHONY D. WEINER, New York

MICHAEL E. CAPUANO, Massachusetts

VACANCY

VACANCY

(V)

C O N T E N T S

Page

Hearing held on January 20, 1999 ......................................................................... 1

Statement of:

Gershwin, Lawrence K., Ph.D., National Intelligence Officer for Science,

Accompanied by Norman Green, Deputy National Intelligence Officer

for Science and Technology, National Intelligence Council; Michael Harrington, Ph.D., principal technical staff, MITRE Corp.; Mary Walsh,

Year 2000 Issues Manager, Directorate of Intelligence, Central Intelligence Agency; and Joel Willemssen, Director of Civil Agencies Information Systems, Accounting and Information Management Division,

General Accounting Office ............................................................................ 55

Koskinen, John, chairman, President’s Council on the Year 2000 Conversion ................................................................................................................. 15

Letters, statements, etc., submitted for the record by:

Gershwin, Lawrence K., Ph.D., National Intelligence Officer for Science:

Information concerning international litigation ..................................... 115

Information concerning reactors .............................................................. 117

Prepared statement of ............................................................................... 59

Horn, Hon. Stephen, a Representative in Congress from the State of

California, prepared statement of ................................................................ 4

Koskinen, John, chairman, President’s Council on the Year 2000 Conversion:

Information concerning the Senior Advisors Group ............................... 17

Prepared statement of ............................................................................... 22

Morella, Hon. Constance A., a Representative in Congress from the State

of Maryland, prepared statement of ............................................................ 8

Ose, Hon. Doug, a Representative in Congress from the State of California, prepared statement of ...................................................................... 14

Willemssen, Joel, Director of Civil Agencies Information Systems, Accounting and Information Management Division, General Accounting

Office, prepared statement of ....................................................................... 72

(1)

THE YEAR 2000 PROBLEM: STATUS REPORT

ON THE FEDERAL, STATE, LOCAL, AND FOREIGN GOVERNMENTS

WEDNESDAY, JANUARY 20, 1999

HOUSE OF REPRESENTATIVES, COMMITTEE ON GOVERNMENT REFORM, JOINT WITH THE COMMITTEE ON

SCIENCE,

Washington, DC.

The committees met, pursuant to notice, at 11:15 a.m., in room

2154, Rayburn House Office Building, Hon. Dan Burton (chairman

of the Committee on Government Reform) presiding.

Present from the Subcommittee on Government Management, Information, and Technology of the Committee on Government Reform: Representatives Horn, Biggert, Ose, Miller, Maloney, Norton,

and Turner.

Present from the Subcommittee on Technology of the Committee

on Science: Representatives Morella, Gutknecht, and Jackson Lee.

Staff present from the Subcommittee on Government Management, Information, and Technology: J. Russell George, staff director and chief counsel; Matt Ryan, senior policy director; Bonnie

Heald, director of information and professional staff member; Matthew Ebert, clerk; Mason Alinger, staff assistant; Paul Wicker and

Kacey Baker, interns; Faith Weiss, minority professional staff

member, Committee on Government Reform; and Earley Green, minority staff assistant, Committee on Government Reform.

Staff present from the Subcommittee on Technology: Richard

Russell, staff director; Ben Wu, professional staff member; and Joe

Sullivan, clerk.

Mr. HORN. A quorum being present, the joint hearing of the

Committee on Government Reform and the Committee on Science

will come to order. We are here to receive a status report on the

effort to overcome the so-called ‘‘Millennium Bug,’’ Y2K, year 2000.

Whatever you want to call it, it has got the same problem. During

today’s hearing, administration officials will report on the efforts of

the government at the Federal, State and local levels, as well as

at the international community to remedy the year 2000 problem.

The year 2000 problem is the result of decisions made in the

1960’s and the 1970’s when many computer systems were developed. At that time, computers had limited storage capacity. In an

effort to conserve memory, programmers designated the year by the

two digits; in other words, instead of 1967, they put in a 6 and a

7.

2

Now, until recently that worked. However, when confronted by

the zero-zero of the year 2000, these computer systems and

microchips may not know if the year 2000 is up or we are back to

the year 1900.

This confusion could result in the transmission of corrupted data,

computer malfunctions, system breakdowns.

There are only 345 days left to assure the public that the computer systems which are critical to our lives and getting the job

done, whether in business or in government, are year 2000 compliant. Unfortunately, even today, many private organizations and

governmental entities are only beginning to recognize the potential

impact of this problem. Some are just starting to fix their system.

Some are leaving little, if any, time for one of the most important

aspects of the remediation effort, which is adequate testing.

The problem is real; the consequences are serious; and the deadline is unmovable.

The House Subcommittee on Government Management, Information, and Technology, which I chair, has focused on the potential

problem since early 1996. In April of that year we conducted the

first congressional hearing. In July 1996, the subcommittee issued

its first report card grading the 24 major Federal agencies on the

status of their efforts to address the year 2000 problem.

Since then, the Subcommittee on Government Management, Information, and Technology along with Congresswoman Morella’s

Subcommittee on Technology of the Committee on Science has held

numerous hearings, both in Washington and across the country, on

Y2K.

On November 23, 1998, the Government Management Subcommittee issued its sixth report assessing the executive branch’s

year 2000 status. Unfortunately, the overall grade received was a

‘‘D.’’ We hope that changes. Most Federal departments and independent agencies have responded much too slowly to this problem.

However, there are two notable exceptions: the Small Business

Administration and, as the President again noted in his State of

the Union Address last night, the Social Security Administration.

Both agencies report that their mission-critical systems are 100

percent year 2000 compliant.

It is noteworthy that the Social Security Administration spent 10

years achieving that goal. Even with that effort, the agency has yet

to perform comprehensive end-to-end testing of its system. Although Social Security calculates benefit payments, it relies on the

Treasury Department and the banking system to distribute them.

No Federal entity is an island and no Federal entity can be complacent, regardless of its Y2K status, until its partner organizations are also adequately prepared for the new millennium.

I also remain deeply concerned about the Department of Defense.

The Department reported last week that it was making great

progress on the year 2000 problem, despite the ‘‘D-minus’’ it earned

on the subcommittee’s recent report card. I look forward to today’s

testimony which will allow for elaboration on the Department of

Defense’s progress.

Much of our focus has been and will remain on the Federal Government’s year 2000 readiness. Mrs. Morella’s subcommittee will go

beyond that into many of the private areas in this country. But

3

Federal agencies do share information with State, local and international governmental agencies as well as many organizations in

the private sector.

We are unsure of the consequences on Y2K compliant Federal

systems if this shared information is corrupted by a noncompliant

system.

On December 11, 1998, the United Nations held its first conference on the international ramifications of the year 2000 problem. Over 120 nations sent representatives to discuss their countries’ approach to the problem. According to U.N. officials, many

nations had not started their efforts until this conference was announced.

In today’s hearing we will receive testimony on these and other

important Y2K issues from three key witnesses. First, John

Koskinen, chairman of the President’s Council on the Year 2000

Conversion, and Assistant to the President, will present the status

of public and private sector efforts to address the year 2000 problem. He will be followed by Dr. Lawrence K. Gershwin, National

Intelligence Officer for Science and Technology at the National Intelligence Council, who will report on the status of foreign efforts

to deal with the Y2K problem.

We are unsure of the consequences which exist abroad and one

of our perennial expert witnesses will be finally Mr. Joel

Willemssen, Director of Civil Agencies Information Systems at the

General Accounting Office, and he will provide the General Accounting Office’s assessment of the readiness of key public infrastructure and economic sectors.

So we welcome all of these expert individuals, and we particularly are delighted to see Mr. Koskinen, who has brought a lot of

order to this effort within the executive branch since he assumed

the problem in February 1998.

I now yield to the chair of the Subcommittee on Technology of

the Committee on Science, and the co-chair of this task force, Mrs.

Morella.

[The prepared statement of Hon. Stephen Horn follows:]

4

5

6

Mrs. MORELLA. Thank you, Mr. Chairman and co-chair of the

task force. I am pleased to welcome everyone to the latest in a series of ongoing year 2000 hearings held jointly with the Science

Committee’s Technology Subcommittee, that I chair, and the Government Management, Information, and Technology’s Subcommittee chaired by my distinguished colleague from California,

Congressman Horn.

It was, as you probably all know, well over 21⁄2 years ago when

our two subcommittees, which last Congress was designated by the

Speaker as the House Y2K Task Force, first began joint hearings

on the year 2000 computer problem, and that was back in the

104th Congress.

In the past, our oversight activities and legislative initiatives

have pushed for the creation of a national Y2K strategy, greater

governmental management, legal protection for Y2K information

that is exchanged in good faith within industry, and the establishment of a high-level senior administration official to lead our Nation’s Y2K efforts.

Now, as we begin the 106th Congress, facing just 345 days before

the immovable January 1, 2000 deadline, there is a greater sense

of urgency to ensure that our Nation’s public and private sectors

will be ready for the beginning of the new millennium.

It is clear that we cannot move forward to meet the priorities

and challenges of the next century if our Nation’s computers are

moving backward.

We intend to vigilantly continue our congressional oversight responsibilities, press wayward Federal agencies that are behind

schedule, and work collaboratively with the administration on industry initiatives so that we can provide the American public with

full confidence that our Nation will not suffer from any lasting catastrophic Y2K failures.

Earlier this month, the bipartisan chairs of the House Y2K Task

Force wrote the President urging him to use his bully pulpit and

to personally play a significant role in leading this effort. We asked

the President to use his State of the Union Address to emphasize

the importance of fixing the problem in order to ensure that our

Nation will take direct, effective, and timely action.

And that is why I was frankly delighted when the President said

last night that we need every State and local government, every

business, large and small, to work to make sure that this Y2K computer bug will be remembered as the last headache of the 20th century and not the first crisis of the 21st.

It seems appropriate, then, that we continue our Y2K hearings

by reviewing today the Y2K impact on State, local and foreign governments, and we have before us today a very strong panel, and

I am looking forward to hearing their testimony.

I want to welcome back to our subcommittees the chair of the

Year 2000 Conversion Council, John Koskinen, who has accomplished a great deal since he was named the Y2K Czar less than

a year ago.

I also want to welcome back Joel Willemssen from the General

Accounting Office, who has worked diligently and kept us informed

since we began our Y2K efforts.

7

I am especially interested in the issue of how American industry

in this global marketplace may be affected by the year 2000 efforts,

or the lack thereof, of our international trading partners.

I am deeply troubled by the potential for Y2K disasters in a

number of foreign countries. I am concerned that any potential

Y2K economic and social instability across the globe will ripple

through to the United States, so I very much anticipate the testimony of both the National Intelligence Council and the Central Intelligence Agency and their declassified assessment of the status of

year 2000 efforts among foreign governments.

I have looked at the testimony. It does indicate that we do have

some major international problems. And, frankly, I just returned

yesterday from Korea, Indonesia, Hong Kong, and Tokyo, and in all

instances I mentioned the year 2000 computer problem and asked

what was being done. There were times when eyes glazed over and

times when they said, ‘‘Oh it’s being taken care of.’’ There were

times when they didn’t understand what it was, and then I got an

honest appraisal in Hong Kong where they said that it was definitely going to affect the economy.

The economy. Indonesia is sort of a basket case. Korea is trying,

but not very well. And members of the Japanese Diet didn’t even

know what Y2K was. So they promised they would come up with

a resolution. That is just a sampling of the immensity of the problem, particularly because of the interoperability and connectiveness.

So we know the end of the millennium knows no international

boundaries and, indeed, Y2K is a global problem and as such it requires global coordination. America can lead the way on Y2K but

we must make sure the rest of the world follows.

So, Mr. Chairman, I yield back. I did want to mention that we

do have—and maybe they will have an opportunity to say something—Judy Biggert, who is a new member, who is here and I

think is going to be on the Science Committee. We have not totally

organized yet. And Gary Miller, who is also going to be on the

Science Committee. I welcome them. And Doug Ose, who I believe

is going to be on the Government Reform Committee.

I yield back, Mr. Chairman.

[The prepared statement of Hon. Constance A. Morella follows:]

8

9

10

11

12

Mr. HORN. I thank you for introducing those three fine individuals. They are all coming into Congress for the first time, and we

are delighted to have them because they bring to this committee

and your subcommittee a very strong background in organization

and management and caring about some of these problems. So we

welcome them all.

Now we have a new ranking member, I am delighted to say, who

we have worked with before on the full committee, and that is Jim

Turner of Texas. Mr. Turner, would you want to make some opening remarks?

Mr. TURNER. Thank you, Mr. Chairman. First I want to thank

you and Chairwoman Morella for your leadership in the technological issues that are facing us in this country, and I am honored

to be the ranking member of your subcommittee, Mr. Chairman.

You have always been known to have one of the hardest-working

subcommittees in the Congress, and I look forward to that challenge. You are also noted for running your committee in a very bipartisan way, which we on this side of the aisle very much appreciate.

Today we are here, of course, to discuss the status of both domestic and international efforts to fix the year 2000 computer problem,

commonly known as Y2K, which occurs when computer systems or

microchips fail to recognize a four-digit date code.

We have heard from people who warned that Y2K will cause a

global financial crisis. On the other hand, we also know that 13

stock exchanges and 29 major brokerage firms have finished extensive Y2K repairs and turned their computers forward to the year

2000 in recent preliminary tests of their system. Fortunately, only

1 percent of stock trades in the tests were affected by computer

problems.

We also know that in Maryland, Montgomery County has recently simulated the century date change in a test of its traffic,

telecommunication and emergency response systems, all of which

functioned properly.

It is important to recognize that in both of these examples it took

many months of testing, repair, and preparation and hundreds of

thousands of dollars to be successful. These examples point out, as

well as many others we could cite, that early preparation, concerted efforts and testing are the answer to the Y2K problem.

Although no one knows for sure what will happen on January 1,

2000, it is important for all of us to try to separate fact from fiction, reality from media hype, and encourage rationality rather

than hysteria. Hopefully, preparations will keep disruptions to a

minimum and public health and safety and the environment will

not be put at risk. Rumors, false fears, and Internet chat can, in

fact, change imagined problems into very real ones.

The government and private sector entities that prepare adequately likely will make it through this next year without serious

disruptions in their operations and in their activities. The Federal

Government, under the leadership of Mr. Koskinen, has been working hard to make sure that it is ready for the date change. Last

night President Clinton reassured our senior citizens that Social

Security checks and direct deposits will not be disrupted. The Federal Government needs to keep pushing to assure that no Federal

13

programs are negatively affected by the Y2K problem, particularly

those Federal benefit programs that are administered by the

States.

We have the mechanisms in place now to track the Federal Government’s progress on Y2K and provide the necessary oversight.

However, many other governmental entities and private sector industries do not fall within the Federal Government’s purview and

are at greater risk of failure than are the Federal computer systems. Unfortunately, we are beginning to hear that small and medium-sized companies, and even State and local governments, may

not be preparing adequately for Y2K.

We have very little information on international preparations for

the date change, and from what we know so far, there appear to

be serious problems in many foreign countries, and in particular,

the lesser-developed countries. China and Russia may be especially

hard hit. International shipping, transportation, telecommunications and financial sectors may be particularly vulnerable to the

Y2K problem. Because of the global nature of our modern economy,

the United States may be adversely affected by their failure to prepare.

I would like to thank Mr. Koskinen for his leadership and all of

our witnesses today for providing us with the benefit of their

knowledge on this subject. Working together, I am confident that

we will be able to meet the challenge of Y2K. Thank you, Mr.

Chairman.

Mr. HORN. I thank the gentleman very much for those constructive comments.

Mrs. Morella has one more point.

Mrs. MORELLA. I wanted to thank Mr. Turner for pointing out

the extraordinary work in Montgomery County, MD, which I happen to represent. Thank you.

Mr. HORN. Any comments from our new members or any opening

remarks? Mr. Ose.

Mr. OSE. I have no idea what I am doing, Mr. Chairman. I am

afraid to say the wrong thing and, apparently, the phrase I want

to use is, I yield back my time.

[The prepared statement of Hon. Doug Ose follows:]

14

15

Mr. HORN. Mr. Miller, any comments?

Mr. MILLER. Yes, Mr. Chairman, I am honored to be here. I

thank you for holding these hearings. I also appreciate the focus

we are making on the problem we are going to deal with in the future, and I am looking forward to being an integral part of this

committee.

Mr. HORN. Thank you. Mrs. Biggert, any comments to make?

Mrs. BIGGERT. Thank you, Mr. Chairman. I am also very happy

to be here and am honored to be on this committee. I have served

in the Illinois Legislature and was the sponsor of the Y2K Task

Force in Illinois, so this is an opportunity for me to broaden my horizons to the national and the global issues that concern this. So

I am very happy to have the opportunity to participate.

Mr. HORN. Well, We are glad to have you here, and we are delighted the chairman of the full committee has designated you as

vice chairman of this Subcommittee on Government Management,

Information, and Technology. So we look forward to working with

you.

Now, Mr. Koskinen, you know the routine that we swear all witnesses that come before us, and you have taken the oath many

times, so I am sure you know it by heart.

[Witness sworn.]

Mr. HORN. Thank you very much. Please be seated. Start in. We

are going to give you as much time as we can divide between the

three of you this morning, because we want to thoroughly get into

this. So feel free to educate us.

STATEMENT OF JOHN KOSKINEN, CHAIRMAN, PRESIDENT’S

COUNCIL ON THE YEAR 2000 CONVERSION

Mr. KOSKINEN. Thank you and good morning Chairman Horn,

Chairwoman Morella. I am pleased to appear again before this

joint session of your subcommittees to discuss the activities of the

President’s Council on Year 2000 Conversion and the status of public and private sector efforts to address the year 2000, or Y2K as

it is known, computer problem.

With your permission I will submit for the record my full statement, along with the most recent OMB report on the status of Federal progress and the first quarterly report by the President’s

Council on the national assessments of progress in critical sectors.

With your permission, Mr. Chairman.

Mr. HORN. Without objection it is in the record.

Mr. KOSKINEN. I appreciate the increased visibility you have

given to the year 2000 problem through your oversight and regional hearings. The problem presents us with a management challenge unlike any we have ever seen. Businesses and governments

across the country are engaged in vigorous efforts to ensure that

systems are prepared for the date rollover. The scope of the challenge is vast, and not every system will be fixed by January 1,

2000. While progress is being made in the public and private sectors, continued efforts are necessary if we are to achieve our shared

goal of minimizing Y2K-related disruptions.

One aspect of the Y2K problem applies to every public and private sector organization. You are never really done. It is not

enough for the Federal Government or any organization just to fix

16

its own systems. Organizations also need to be concerned about the

progress of partners they exchange data with and depend upon as

well as progress among other organizations whose failure could

have a significant effect upon their operations.

The Council began its work last year using this ‘‘three-tiered’’ model. From the Federal Government’s point of view, it means first

ensuring that critical Federal systems are ready for January 1,

2000; next, working with our interface partners for important Federal services, primarily States, to ensure they are remediating their

systems; and finally, reaching out to those whose failures domestically or internationally could have an adverse effect upon the public.

To reach out beyond the Federal Government, the Council has

formed working groups focused on Y2K challenges in over 25 critical sectors such as finance, communications, transportation, electric power, oil and gas, and water supply. The working groups have

reached out to form cooperative working relationships with major

trade associations and other umbrella organizations representing

the individual entities operating in each sector.

We have also created a Senior Advisors Group to the President’s

Council which will hold its first meeting tomorrow. This group is

comprised of Fortune 500 company CEOs and heads of national

public sector organizations representing our working groups. I am

submitting for the record also the present list of group members.

Mr. HORN. Without objection it will be put in the record at this

point.

[The information referred to follows:]

17

18

Mr. KOSKINEN. The group will provide the Council with an additional perspective on Y2K challenges that cut across sector lines

and will recommend how industries can best work together in critical areas.

As noted, our first challenge is to ensure that Federal systems

are prepared for the year 2000. I am pleased to report that the

Federal Government continues to make strong, steady progress in

solving its Y2K problems.

According to the most recent OMB report released last month, 61

percent of all Federal mission-critical systems are now year 2000

compliant, more than double the 27 percent compliant a year ago.

The report also states that of critical systems requiring repair

work, 90 percent have been fixed and are now being tested.

The President has established an ambitious goal of having 100

percent of the government’s mission-critical systems Y2K compliant

by March 31 of this year, well ahead of many private sector system

remediation schedules. Although much work remains, we expect

well over 80 percent of the government’s mission-crictical systems

will meet the March goal, and monthly benchmarks for completing

the work will be available for every system still being tested and

implemented. We expect that all of the government’s critical systems will be Y2K compliant before January 1, 2000.

This does not mean that we are without significant challenges.

While the Defense Department continues to make progress in addressing its massive Y2K challenge, OMB reported that DOD’s rate

of progress indicates that not all of its systems will meet the March

goal of being 100 percent compliant. At a recent day-long meeting

at the Pentagon to review the status of all DOD mission-critical

systems, Deputy Secretary Hamre and I were advised that most

systems will either meet the March date or be in the process of implementation. And, in fact, as of January 1 of this year, 73 percent

of the Department’s mission-critical systems are now compliant.

According to the last OMB quarterly report, the Energy Department had completed testing on only 53 percent of its critical systems, below the governmentwide average. Secretary Richardson

made clear at the beginning of his tenure at the Department that

this issue will receive his personal attention, and recent progress

has the Department confident that over 90 percent of its systems

will meet the March government deadline.

HHS’s Health Care Financing Administration [HCFA] has finished renovating and testing all of its internal systems. Although

a tremendous amount of systems work and contingency planning

will remain after March, most Medicare contractors are expected to

complete renovation and testing by the governmentwide goal.

The State Department also faces a significant challenge in simultaneously managing its complex Y2K project and completely replacing information systems installed around the world. However, as I

was informed at my monthly meeting last week with the Department senior managers, the State Department expects that well

over 90 percent of its systems will meet the March governmentwide

goal.

At the Transportation Department, the FAA’s rate of progress

has improved dramatically, but the percentage of DOT’s critical

systems that have been tested and implemented continues to lag

19

behind the government-wide schedule. Nonetheless I am confident

the air traffic system will be totally compliant well in advance of

the year 2000.

Our second challenge is the work with the Federal Government’s

interface partners, primarily the States, as they work to ensure

that their systems are ready for the year 2000. As a general matter, most States are making good progress in remediating their systems. But not every State is doing well. A National Association of

State Information Resource Executives survey indicated that a

handful of States report that they have not yet completed work on

any of their mission-critical systems.

Federal agencies are actively working with the States to ensure

the Federal-State data exchanges for State-administered programs

will be ready for the year 2000. Most Federal agencies and States

have now inventoried all of those exchange points and are sharing

information with one another to ensure the exchanges will function

in the year 2000.

For the February 1999 quarterly report, OMB has asked the Federal agencies to provide assessments of each State’s Y2K progress

on key State-administered Federal programs such as food stamps

and child welfare programs.

The third challenge for the President’s Council is to reach out beyond the Federal Government and its partners to those organizations whose failures would have an adverse effect upon the public.

As noted earlier, the Council has formed over 25 working groups

performing outreach in critical sectors. The working groups, under

the leadership of their outside industry group partners, are focused

on gathering industry assessments of Y2K preparedness in critical

sectors. Earlier this month the Council issued its first quarterly

summary of this assessment information, which I have provided for

the record.

While many industry groups are just beginning to receive survey

data from their members and some report they expect to have such

information for the first time within the first quarter of the year

2000, I would like to make three points about what we know thus

far.

First, we are increasingly confident there will not be large-scale

national disruptions in key infrastructure areas. In particular, the

telecommunications and electric power industries have constructed

well-organized and comprehensive responses to the problem.

Second, banks, large and small, are well prepared for the year

2000 transition. In the most recent examination by Federal regulators, 96 percent of the Nation’s depository institutions were on

track to meet the regulators goal of completing Y2K work by June

1999.

The third point is obvious but bears repeating. Our greatest risk

lies in organizations that are not paying adequate attention to the

problem. The greatest risks therefore at this time, in our view, are

in three areas: smaller government entities, small businesses, and

internationally.

At the local level, many towns, cities, and counties are aggressively attacking the problem and are making good progress. But according to a December 1998 National Association of Counties survey done for us of 500 counties representing 46 States, roughly half

20

of the counties do not have a county-wide plan for addressing year

2000 conversion issues, and almost two-thirds of the respondents

have not yet completed the assessment phase of their year 2000

work.

Many small and medium-sized businesses are also taking steps

to address the problem and to ensure not only that their systems

are compliant but that organizations they depend upon are ready

for the year 2000 as well. However, a National Federation of Independent Businesses survey released this month indicates as many

as one-third of small businesses using computers or other at-risk

devices have no plans to assess their exposure to the Y2K problem.

Internationally, there is more activity now than there was a year

ago, but it is clear that most countries are significantly behind the

United States in efforts to prepare critical systems for the new millennium. Awareness remains especially low among developing

countries. While strong international coordination of Y2K efforts

has existed for some time in the areas of finance and more recently

has begun to take shape for telecommunications and air traffic, we

are very concerned about the lack of information and coordination

in the area of maritime shipping.

The Council has been working to improve the response among

smaller governments, small businesses, and international entities.

For smaller governments, we have been working to reach out

through groups like the National Association of Counties and the

National League of Cities. We are also encouraging State year 2000

coordinators to focus on the efforts of smaller governments within

their jurisdictions.

For small businesses, the Council joined the SBA, the Commerce

Department, and other Federal agencies in launching National

Y2K Action Week last October, to encourage small and mediumsized businesses to take action on the year 2000 problem with educational events that were held across the country. Another week is

planned for this spring. And SBA has mounted an aggressive outreach program where, through its Web page and partners in the

banking and insurance industries, it is distributing Y2K informational materials to the Nation’s small businesses.

Internationally, as the chairman noted, the Council worked with

the United Nations to organize last month a meeting of national

year 2000 coordinators from around the worlds, perhaps the most

important year 2000 meeting to date. More than 120 countries sent

representatives to New York, and I was delighted Chairman Horn

and Congressman Kucinich attended as well. The delegates at the

meeting agreed to work on a regional basis to address cross the

border issues. They also asked the steering committee we had created to help organize the meeting to establish an international

mechanism for coordinating regional and global activities, including

contingency planning. We are now working with this steering committee to create an International Y2K Cooperation Center which

will support regional activities and international initiatives in

areas such as telecommunications and transportation.

The Federal Government responds to a range of emergencies

under the direction of several agencies. One of the challenges of the

Y2K problem is that while we do not expect major national failures

in the United States, it is possible that we will have a confluence

21

of demands for assistance and response as the clock turns to January 1, 2000. Therefore, we are working with all of the major emergency response agencies to create a coordinating center to ensure

that we can respond effectively to whatever challenges we face

moving into the next century.

We will also be discussing with our partners in our varied working groups, under the leadership of the Senior Advisors Group, the

status of industry-wide plans for dealing with any emergencies

they may confront. While these responses are primarily the responsibilities of each individual enterprise and industry, we clearly will

all benefit by coordinated planning and communication.

Let me close by noting that we all continue to confront the challenge of encouraging organizations to take the Y2K problem seriously, remediate their systems, and prepare contingency plans

without causing a public overreaction that is unnecessary and unwarranted. Our strategy is based on the premise that the public

has great common sense and will respond appropriately when they

have the necessary information.

We believe, therefore, that everyone working on this problem, at

the Federal level, at the State and local level, and in the private

sector, needs to provide the public with clear and candid information about the status of their year 2000 activities. That is why we

are making the industry assessments we gather publicly available.

That is why the OMB reports on Federal progress are available to

the public. That is why we have created the 1–888–USA–4–Y2K information line for consumers. That is why we will provide details

of our contingency planning and are encouraging others to do the

same for the public.

A corollary principle is that everyone working on this problem

has a responsibility to ensure their comments accurately reflect the

factual information that is available and that they avoid overgeneralizations that will only play into the hands of those who want

to create panic for their own gain.

We remain committed to working with your subcommittees and

others in Congress on this critical issue, and I would be pleased to

answer any questions you may have at this time.

[The prepared statement of Mr. Koskinen follows:]

22

23

24

25

26

27

28

29

30

Mr. HORN. Thank you very much for that very thorough testimony. I have simply one question and then we are going to yield

to Mrs. Morella for 5 minutes, then yield to Mr. Turner for 5 minutes, then go down the line for each Member with 5 minutes, and

if more arrive we will alternate by party.

But let me ask you, one of the key things here that I think worries you as well as worries us, and that is the status of the Federal

agencies’ data which are based on self-reporting. And I think you

will recall that we had a case where the Inspector General of Defense found that—and GAO, I might add—found that the Department of Defense reported certain systems fixed when in fact they

were not.

How do you deal with that when you are getting the data and

you are not over there, and how do we handle something like that?

Mr. KOSKINEN. It is obviously an important problem across the

board. You may recall I chaired the interagency groups of Inspectors General in my prior incarnation when I was at OMB. I have

met regularly with the Inspectors General and encouraged them to

independently review the status of the agency year 2000 efforts.

And, in fact, they have done an excellent job in a number of agencies by revealing areas where there are problems.

OMB has also required all of the agencies to have independent

verification and validation. In fact, before the President announced

that Social Security was completed, we waited until the Social Security Administration had certified its systems were compliant, we

waited until the Treasury Department’s Financial Management

Service was able to certify that its systems were year 2000 compliant, and we waited until those systems had been tested and

worked together. So I think there is an ongoing need to ensure that

we continually evaluate and check the information agencies provide.

GAO has also done an excellent job not only in providing general

information about how to deal with the problem, but in conducting

independent reviews to determine whether or not there are gaps.

As the agencies and the Inspectors General understand, the goal

here is not to, in fact, find people who have made a mistake and

point that out for the sake of pointing it out. The goal is to ensure

that as many systems as possible are functioning and are able to

function as we move into the year 2000.

Mr. HORN. I thank the gentleman. And now, Mrs. Morella, the

co-chairman, 5 minutes.

Mrs. MORELLA. Thank you. Thank you for the progress you are

making Mr. Koskinen. We appreciate it and you have to be kind

of a wonder man to do it all.

Let me just reiterate the fact that last year I introduced a bill

which had three different segments, Mr. Barcia had contributed

one of his bills to part of it, and Mr. Leach in my bill, and it passed

the House. I am recrafting it because it didn’t get out of the Senate

because I want you to be involved. I want your support of the bill.

The administration appeared to be in favor of it. We have

changed it so that it doesn’t have as many requiring mandates

within it, which I think was one of your concerns. I don’t know

whether you have had a chance to look at it, but—— Mr. KOSKINEN. I have not seen any drafts.

31

Mrs. MORELLA. I would like to work with you on it very soon.

Mr. KOSKINEN. I would be delighted to review the draft and certainly to work with you and your staff.

Mrs. MORELLA. Excellent. I think something is needed. It is not

something that is going to be threatening and I think it is something that definitely will help. So I have your assurance we are

going to work together soon.

Now, when I was in Tokyo, I remember reading in the newspaper

there, the Japan Times, about the fact that China had issued a

mandate that on January 1, 2000, every plane was going to be flying. Now, I don’t want to fly on one of those planes.

Mr. KOSKINEN. Actually, the mandate is that every senior executive of the airlines be on those planes.

Mrs. MORELLA. Every senior executive will be on those planes.

Now, I don’t know quite how to respond to what that tells us. I

mean I suppose it is a good opportunity to put people on certain

planes and take care of changing the governmental leadership, but

I wonder how you feel about that, because actually that gets into

my question.

I understand that you have detailed Bruce McConnell from OMB

to spearhead the Council’s international efforts. Can you, not only

whatever response you may have to what the Chinese officials are

mandating, but also if you could give us more details regarding this

effort and then how we in Congress can best assist.

Mr. KOSKINEN. I think the thrust of the Chinese initiative is to

ensure that there is a great incentive to make sure their planes are

able to fly. As you know, the problem with the planes flying is not

safety, it is really whether in fact there are substantial delays.

And, in fact, I have been committed for some time to fly to New

York on New Year’s Eve on a commercial airliner and take the first

plane back on January 1st so that I can be in my office, because

I do think it is important for the public to understand that we are

confident these systems are going to work.

With regard to the International Cooperation Center, as Chairman Horn remembers, when we pulled the 120 countries and their

senior year 2000 executives together at the United Nations meeting, we had a couple of goals. One was to get the delegates to commit to going back to their respective countries and to work on a regional basis to address cross-border issues, whether they be in telecommunications, power, shipping, whatever. They also asked the

steering committee to set up an International Cooperation Center.

Mr. McConnell’s detail to the Council will allow him to chair and

organize that center.

The center will be a virtual organization with contributions of

senior executives from other countries. We already have offers from

Mexico, Chile and South Africa. The center will provide support to

existing regional activities. There is a major meeting coming up in

Manila the first week of March.

It will also help coordinate and support international sector activities in such areas as banking, where the central banks have

been supportive; telecommunications, under the International Telecommunications Union; and air traffic, under the International

Civil Aeronautics Organization.

32

Also, as a result of the U.N. meeting, and through the leadership

of the Coast Guard, we are creating and organizing a meeting that

will also be held the first week in March of all major shipping interests around the world—private and public—to ensure that there

is more coordination in that area.

Our goal is to support with other countries a more organized

global approach to this problem, not only by countries but by sectors. We went to try to do as much as we can, first to ensure that

countries fix as many systems as possible, and second to ensure

that there is an organized set of contingency plans and emergency

response mechanisms in place around the world.

Mrs. MORELLA. The 120 countries have all indicated that they

are going to be part of this conference and be involved?

Mr. KOSKINEN. Yes. We were overwhelmed with the response to

the United Nations meeting. We had thought we would do very

well if we could get 50 countries. But when we had 120 countries

show up and commit not only to do this work but to meet again

in June at the United Nations to review progress across the board

in great detail, I was convinced it was probably the most significant year 2000 meeting that had been held to date.

Mrs. MORELLA. It certainly is important. And, of course, the resources that are going to have to go into this, too, countries are just

not aware of that, nor do they know how to expeditiously do it,

since it is so labor intensive.

Just one final question. A number of my colleagues are very concerned about the potential of a deluge of civil litigation for possible

Y2K failures. Is the Council going to be working with industries,

consumer organizations for legislative remedies?

Mr. KOSKINEN. Liability is not totally within our domain. Our

goal, as I have told people, is to have systems function at the end

of this year. What happens after this year, once they are functioning, is not within the Council’s jurisdiction.

We have worked very closely with Congress, and we genuinely

appreciate the committee’s support of the Year 2000 Information

and Readiness Disclosure Act, because, as you noted, the disclosure

of information is critical if we are to have systems function. But

within that context we obviously have a wide range of working

groups and contacts and we are listening to their concerns about

liability. We have asked them to begin to quantify what the reality

of those concerns are. There is a lot of hype and overexaggeration

in all aspects of this problem. The art form, I think, is to try to

figure out what is the reality, or what can we really expect, and

then what is an appropriate response to that reality.

At this point, there are a wide range of industry groups focused

on this problem who have yet to come together themselves on a

common approach, but we are prepared to listen to their suggestions.

Mrs. MORELLA. We are concerned about a cottage industry of

lawyers waiting there in advance.

Thank you.

Mr. HORN. I thank the gentlewoman and now yield to the ranking minority member, Mr. Turner, 5 minutes.

Mr. TURNER. Mr. Koskinen, thank you for your report today. I

know the Internet is full of doomsday theories. One area I wanted

33

to particularly inquire about—I have a district with a lot of small

towns and rural hospitals—is the suggestion that rural hospitals

may be more vulnerable than most with some of the equipment

that you find in emergency rooms and in intensive care units that

are date-sensitive.

Is that a problem, and do you know what is going on, particularly among rural hospitals, to try to address it?

Mr. KOSKINEN. It is an important question. The rural hospitals

are no more exposed to equipment issues than large hospitals. The

concern we all have is that in rural areas, or smaller towns and

communities, there may not be the same level of attention and

focus on this problem or there may not be the same resources available.

We have been working in our health care outreach area with the

American Hospital Association, and other health care groups to

provide them and encourage them to provide technical information

and resources to all of their members and to nonmember hospitals

many of which are in rural areas so that they can take advantage

of the experience and information that has been gained by large

hospitals and major research centers who have been dealing with

this problem.

The FDA, the VA, and the Department of Defense have all banded together to provide a Website with updated information on the

status of medical devices. Fortunately, it turns out a very small

percentage of those devices have a year 2000 problem. For those

that do, the problem is generally not that they don’t function but,

as you noted, that they provide erroneous or incorrect data information, which can be critically important.

These are systems over which we have no direct control, but our

goal is to try to do everything we can to increase the amount of

information that is available to every rural hospital in this country

on how to deal with the problem. Obviously, it is their responsibility to use that information, but our goal is to make sure that no

one is unaware of the problem and without access to the best information that we and our working group partners can provide.

Mr. TURNER. I have been told that there are one or more dates

during 1999 that could provide opportunities to know whether or

not systems will fail on January 1, 2000. Is that the case, and, if

so, would you explain that to me a little bit?

Mr. KOSKINEN. There are a range of issues that software programs will confront as we move through this year. First, any system that has to look forward into the year 2000 will obviously be

challenged. We have all had experience with credit cards that have

expiration dates that for a long time said 1999. Now, many cards

expire in the year 2000 or beyond and most card processing systems are able to deal with the year 2000. If you have to make an

airline or hotel reservation, if you order inventory and need to

track it in the year 2000, the systems have been made to be compliant.

As we noted in December, unemployment insurance is the first

major Federal program to encounter the year 2000 problem because those benefits are calculated on a look-forward of 12 months.

So starting the first week of January 1999, the State systems running that program had to be able to deal with the first week of

34

January 2000. Some of the State systems are not yet compliant

but, fortunately, those States have good contingency and backup

plans so no one is missing an unemployment check while those

States are finishing the work.

There are other dates people have focused on, particularly those

that involve the number 9. A nonstandard programming practice

was to use numbers like 99 to end a program operation. Fortunately, it was not an acceptable practice. But people originally focused on September 9, 1999 to see whether that date would work.

People were also interested whether just rolling into the year 1999,

whether January 1, 1999 would trigger defaults. Thus far there are

only a handful of anecdotal reports from around the world that

anyone had a problem with January 1, 1999. Another date will be

April 9, 1999, which will be the 99th day of 1999.

Our expectation is that these dates will not cause major problems first, because everybody is aware of them and, second, because it was not a standard programming issue. But countries, governments, and businesses with fiscal years that start before the

end of this year, will have fiscal year 2000 issues to confront. Many

States have fiscal years starting in April, June or July. The Federal Government’s begins on October 1, 1999, and will be operating

against a fiscal year 2000 issue.

So all of those dates are important and all of them will give us

some indication as to how successful year 2000 remediation has

been. But I will tell you that even if you meet the September 9,

1999 and other challenges, it does not necessarily mean that you

will not have a problem with the year 2000 transition.

Mr. TURNER. Thank you. I know the Federal Reserve has re- quested the Treasury Department print an extra $50 billion in cash

for potential use at the end of the year. There are a lot of people,

I noted in a town meeting I had a week ago, who seem to be aware

that it might be important for them to withdraw cash from their

bank accounts before January 1, 2000. I assume that someone determined that the $50 billion in cash

would be a sufficient amount, but is that a real problem and should

the public be concerned about being able to get cash?

Mr. KOSKINEN. No. As I have said on numerous occasions, we

have an obligation to be very candid with the public and tell them

what works and what doesn’t work, what has been completed and

what has not been completed, so they can respond accordingly.

Initially, when people started talking about this and the Fed

made that announcement some months ago, there was a concern

about whether the ATM machines would work, whether you would

have access to your cash, whether the banks would be able to function. The good news is that, at this point, as I noted, 96 percent

of the banks are at the highest rating of preparedness in terms of

dealing with the year 2000, according to the independent Federal

regulators. So we expect the banks will be able to function.

The reason for ensuring that people are confident that the cash

is there is not to combat fears that they won’t get access to it, but

to allay concerns about banks running out of cash if everyone decides to take out some extra money. The calculation was made

that, on any basis, it is reasonable that the public should not be

concerned about cash availability. And like anything in banking, if

35

people are confident the cash is going to be there, obviously they

will be less likely to actually use it.

It is a long weekend; our general advice is that people, as they

normally would, should have cash for that long weekend. What we

are anxious to do is to not have the public unnecessarily decide

that they need a month’s cash or 2 months’ cash, which would be

a very different problem.

Mr. TURNER. It seems that the public information challenge that

you have is enormous. You could make a judgment that to talk

about it makes the problem worse. You could say, no, we have to

talk about it because people need to know the facts. I find that people are very uneasy about it.

In this town meeting I referred to, we went through a litany of

things that I knew from service on the committee were taking place

to try to prepare for the year 2000. The group listened, obviously

with some skepticism, and at the end they said, ‘‘Congressman,

what are you going to do on January 1st?’’ And in a moment of candor I said, ‘‘Well, I probably won’t fly that day.’’ Mr. KOSKINEN. I was just going to invite you to join me. But that

is an issue. As I said when I testified last spring, if nobody gets

off an airplane in Hawaii for 2 weeks, just to be careful, and if that

is not necessary, we will have created a very major economic problem for the airlines and for Hawaii. Again, my view is I don’t want

the public to do anything that is risky. On the other hand, I think

it is important for the public not to unwittingly create a problem

even if the systems are running fine; that we have a problem with

financial markets, we have a problem with banks, or we have our

problems with a sector of the economy.

So I think what you are saying, the high wire act from the start

has been on the one hand to be able to get people to understand

this is a real problem, it is a serious problem that needs to be dealt

with without, on the other hand, unnecessarily having them take

unnecessary action. So we have an obligation to inform the public,

and we are going to work on that. That is why we have the hotline,

to provide the public with all the information we have and to give

them our best advice as to what they ought to be doing to prepare

for whatever the eventualities are.

My bottom line is we are concerned about preparedness at the

local level and we are anxious in small and medium-sized cities

and counties, to have people asking their governments to discuss

with them where they are and what steps they have taken to deal

with this problem.

Mr. HORN. I thank the gentleman. And now the gentlewoman

from Illinois, the vice chairman of the Subcommittee on Government Management, Information, and Technology, Mrs. Biggert, 5

minutes.

Mrs. BIGGERT. Thank you, Mr. Chairman. Last year I understand that the chairman, Mr. Horn, did meet with the staff in Illinois, the Year 2000 Task Force, to talk about the year 2000 compliance. And out of this meeting came assurances that the Illinois

utilities will be prepared for the year 2000, and particularly the

systems that depend on power, such as water and sewer and things

that we think of applying to municipalities, and they will continue

to function effectively.

36

Is this true of other States? Are they far along in planning for

these, dealing with utilities and things that cross really municipal

lines but really are the functions that will go across the State?

Mr. KOSKINEN. As I noted, we are in the process with our working groups of reaching out and asking organizations to provide information on progress at the State and local level to us. That is

where the National Association of Counties survey came from. As

a general matter, I think the vast majority of States are doing a

very good job. They are well organized and prepared to deal with

the program. There are a few that are starting slower and have

had a lower priority, but I think that is changing.

Our concern, even in the States doing very well, is at the local

level. As you know, there are thousands of counties and cities out

there that States do not directly manage those and, in fact, oftentimes do not have regular communication with them. So the challenge I have given to the States, as well as to Federal agencies, is

to do whatever we can to reach out to make sure that every mayor,

every city manager, and every county executive has this problem

as a priority. If they have it off on the side, if they say somebody

else is taking care of it; or, as we increasingly hear, ‘‘We will fix

it when it breaks.’’ I think that there is great risk in those communities to their emergency response system, their local hospitals,

their local power plants, their local telephone companies.

Mrs. BIGGERT. What are you doing, then, to increase that awareness; are there meetings?

Mr. KOSKINEN. We have had meetings. We are working with the

associations of counties, of cities, of States. We are providing information to them. We are encouraging them to provide information

to them. The National League of Cities and the National Association of Counties have an organization, Public Technology, Inc.

[PTI], which has been providing information to local governments.

Ultimately it is the responsibility of the local communities and

the local governments are responsible for fixing their own systems,

but our goal is to make sure nobody can say, ‘‘Gee, I didn’t know

about it.’’ They may have to explain why they didn’t do anything

about it, but we are making sure that we are doing everything we

can to make sure it is on their radar screen. It is up to them to

make sure it is their priority.

Mrs. BIGGERT. It is their responsibility, but do you have any contingency plans in case the State systems should fail?

Mr. KOSKINEN. Yes. Our concern, as I noted, is that I think we

will end up with no major national problems, but without work

done locally, we could have a whole series of local problems, of local

power outages or other local challenges. And it will all happen at

once, as we go into the year 2000.

So FEMA is now engaging in starting a series of regional meetings with State and local emergency managers and their year 2000

coordinators to look at that problem, because I think that will be

the real challenge for the emergency response system. We can handle a localized hurricaine or a tornado or whatever it might be. The

question is how do the State systems and the Federal systems respond to what may be not necessarily guaranteed, but what may

be a wide number of, local outages or problems.

37

If you have 20 such problems in a State and you have 50 States,

you could have 1,000 communities all across the country saying,

‘‘Gee, we should have done more and now we have a problem, what

help can you give us?’’ And we need to have a system capable of

responding.

Mrs. BIGGERT. Just one other question, then. As far as the Department of Defense, you said that they were probably not moving

as fast as some of the other agencies. Can we be really assured

that they will meet those goals that have been set?

Mr. KOSKINEN. Yes. The Defense Department, obviously, is the

largest Federal department. It has, in many ways, the most challenging systems because it has a lot of embedded chips or integrated circuits built into all their weapons systems. If you look at

the structure in response to this problem over the last 12 months,

you will see major changes in the way the Department has organized with it.

In August, the Secretary made it clear that this was on his agenda; that every commander in chief had to have it on their agenda.

This issue was moved out of being an issue or CIO issue and into

an operational force readiness issue. And, as I said, a week ago

Saturday we spent the entire day reviewing the progress of every

service and every function. And I think that while not every Department of Defense system will make the governmentwide compliance goal, I think the Department will have close to 90 percent of

its systems done by March 31, which is an amazing accomplishment in light of where they were 9 months ago.

Mrs. BIGGERT. Thank you. Thank you, Mr. Chairman.

Mr. HORN. You have still got 30 seconds or so.

Mrs. BIGGERT. Well, in the words of Mr. Ose, I yield back my

time.

Mr. HORN. We will go right to the top of the ladder. Sheila Jackson Lee is with the Subcommittee on Technology of the Committee

on Science, 5 minutes for questioning.

Ms. JACKSON LEE. Mr. Chairman, thank you very much. I appreciate the opportunity for this hearing. Let me say to the public, if

you wanted to know who that singular member was, it was my

good friend, Connie Morella, last night standing up. And I am sure

Chairman Horn was nearby on the Y2K issue, a very important

issue.

In fact, let me say to Mr. Koskinen that I am being asked these

questions in my district, so people are really concerned about the

Y2K.

Not hearing all your presentation, and I apologize for being in

other meetings and also apologize for having to leave, but would

you take a stab at a question that has been posed on various news

magazine shows and various sort of expose news magazine, television programs of people running to the hills and preparing?

Since the government has the responsibility of setting the tone

and giving comfort to our citizens that we are aware of this issue,

that we are moving expeditiously to ensure that civilization as they

know it remains, can you speak to limiting hysteria about the issue

that we are dealing with?

I know the questions were asked earlier, but I do want to have

you just state for me succinctly, in looking at Congressman Horn’s

38

assessment of the government efforts. I think I heard you say

March 31st, but can you say to me why you think that is going to

happen with what they have in place? With respect to the public

and its general concern about us not being prepared, do you have

a response to that?

Mr. KOSKINEN. Yes. And there is a longer response in my formal

statement. But I think the bottom line is, what we are saying is

in a context in which we have an obligation to provide real information to the public, and I think that is important. At this point,

there is no indication that there will be any major national problem

resulting from the year 2000 and, therefore, there is no indication

that people need to disrupt their lives in preparation for it.

We will continue to provide the public information. I am confident—and Congressman Horn and I continue to discuss this— that the Federal Government is not only making great progress,

but the vast majority of systems will meet the March 31 deadline

and all systems will meet the January 1, 2000, deadline. So the

Federal Government will not be the source of any difficulties that

the public or the economy confront as we move into the year 2000.

On the other hand, there are areas we are concerned about. We

are concerned about issues internationally. We are concerned about

ensuring, to the extent we can, that State and local governments

and smaller businesses all pay attention to this problem. And ultimately our commitment to the public is that they should know everything about this problem that I know; and we are doing everything we can to share information with them. Because I think what

the public needs and what is an obligation in the private sector, as

well as the public sector, is to provide information. The public

needs to know about the state of preparedness.

The Federal Government is now acknowledged as the most transparent organization in the world on this issue. There is no one that

provides as much information about its year 2000 progress, and as

much discussion about it, as the Federal Government. And a lot of

that is the result of an ongoing, constructive dialog between these

committees and the executive branch. But we need to have that

happen more often, because I think people are uneasy when they

have no information about what the facts are, and they don’t know

what is going to happen.

So our goal over the next 6 months is to provide that information

to the public. But at this stage in time, I can state confidently

there is no evidence that there are going to be major dislocations.

But people need to be engaged in a dialog with their county executives, with their mayors, with their city managers to ensure they

are paying attention to this problem.

Ms. JACKSON-LEE. On that, might I followup very briefly?

Last evening the President acknowledged that all Social Security

checks would be on time. This computerized problem probably will

impact most decidedly those who are least advantaged, primarily

the beneficiaries, if you will, of government programs. And when

I say ‘‘government programs,’’ AFDC, and you mentioned local governments, but Veterans, et cetera.

We mentioned Social Security. Where are we on those other

kinds of issues, and would you also comment—and forgive me if it

is in your speech as to whether or not—in your remarks, there are

39

internal task forces, I imagine, in each of the departments and the

agencies that correlate with your work.

Mr. KOSKINEN. Yes, there are. Benefit programs run by the Federal Government are basically—to all intents and purposes, are

none, not only Social Security, but Veterans Affairs and those benefits. Our challenge is that most Federal benefit programs are actually administered by State and local governments; food stamps, unemployment insurance, Medicaid are all State-run programs.

As I noted, we are concerned about this because it won’t do us

any good if 45 out of 50 States do a wonderful job. In those five

States, the answer cannot be that beneficiaries do not receive benefits. So in the next OMB quarterly report, we have asked the Federal agencies to report the status of each State in each of the major

Federal programs in terms of their progress, and we will monitor

that progress as we go forward, because we need to ensure that

those programs operate.

Because you are exactly right, the people most in need will oftentimes be Social Security beneficiaries, veterans beneficiaries and

local people benefiting from programs like food stamps; and we

have to ensure that jointly, working with the States, those programs operate.

Mr. HORN. Thank you very much.

Ms. JACKSON-LEE. Thank you.

Mr. HORN. We now have, first, the Government Management, Information, and Technology Subcommittee and then we are going to

yield to the Technology Subcommittee. And eventually, we will

cover everybody here.

Mr. Ose, the gentleman from California.

Mr. OSE. Thank you, Mr. Chairman.

First, may I pass a compliment, noting the subject matter that

we are on, I walked in the room this morning at 11:14 and promptly at 11:15 this committee meeting started. So I think that is a

great standard to adhere to. And I want to compliment you, Mr.

Koskinen, I have a couple questions.

Is the Fed prepared?

Mr. KOSKINEN. Yes.

Mr. OSE. Treasury?

Mr. KOSKINEN. The Fed and the Treasury not only began work

on their own systems, but have been major leaders not only domestically but internationally in trying to ensure that the financial systems around the world and the banks around the world operate.

The Fed is a leader with the world’s central banks; the Fed

acutally chairs the joint Year 2000 Council which the banks set up.

The Fed has already been testing its interfaces with several

thousand banks to make sure they work. And the Fed is one of the

most active participants on the President’s council. So I think,

while we have issues and a lot of work going on in the other areas,

the financial institutions area is in the best shape of any business

area in the United States.

Mr. OSE. So when the check-clearing process hopefully doesn’t

stop, if it does stop, we know where to come?

Mr. KOSKINEN. That’s right. I think at this juncture, that won’t

be the problem, at least from the Federal Government. I can’t guarantee that every company’s financial management and payroll sysVerDate 11-MAY-2000 09:49 Mar 13, 2001 Jkt 010199 PO 00000 Frm 00045 Fmt 6633 Sfmt 6602 E:\HEARINGS\60491 pfrm02 PsN: 60491
40

tem will function, but the clearinghouses will function, and the

Federal checks will be issued.

Mr. OSE. All right. I want to followup on my colleagues’ comment

or question earlier, am I right, the question about insurance. Any

of the interface partners, the contractors that we deal with here,

many of them cannot provide service when asked to bid, because

they cannot obtain insurance on any actuarially sound basis, because there is no way of quantifying the exposure.

With respect to Mrs. Morella’s question about the liability exposure, is there any way we, as the Federal Government, can set a

standard for quantifying that exposure that would then allow insurance companies to set a policy for potential service providers in

this area?

Mr. KOSKINEN. Well, it is the kind of a transition challenge in

the legal issue. There is the issue in terms of how do we ensure

that people can continue to work on systems. And there is a warranty and a patent and copyright problem; if the manufacturer

doesn’t exist or can’t help you, can you work on this system, without violating copyright and patent laws? So those areas fit into my

concern about what do we do to make sure the systems operate.

At this juncture, while there has been a lot of talk over the last

6 to 9 months about the insurability or noninsurability with people

doing the work, it does not appear to have been a major impediment—certainly, from the Federal Government, where we monitor

it carefully—to getting the work done.

It doesn’t mean that there aren’t companies out there that are

having difficulty; there was a recent article about some service providers who have been negotiating in that area. So I think it is

worth considering. But at this juncture, and even in our working

groups, we have not found significant parts of the economy or the

government that have said, we cannot get people to work on the

problem because they cannot get insurance.

Mr. OSE. Mr. Chairman, if you will indulge me, I don’t quite

know if this is the context, but in the course of our deliberations,

I think this is one of the critical issues that we are going to deal

with is finding a way to open the door for providers to come and

provide assistance, not only to the Federal Government, in our

world here, but also to private industry.

With that, I yield the rest of my time.

Mr. HORN. You have made a very good point, and I thank you

for making it. Now, long-suffering Mr. Gutknecht has 5 minutes

and then Ms. Norton, Mr. Miller, and that will round out the 5-

minutes.

Mr. GUTKNECHT. Thank you, Mr. Chairman. I couldn’t help observe as I came into the room that about—almost 4 years ago we

had our first hearing on this matter, at least in the technology

committee. And at that hearing, I think we had three experts,

maybe half a dozen staff, maybe two people who wondered in off

the street. But there was almost no interest in this matter. And it

is interesting how it has now finally, I think, dawned on the American people, this is a serious issue.

And I remember that first hearing and almost no one showed up.

And, in fact, I sort of wondered why I was there when I looked at

41

the audience. But I do congratulate the Chairs. And I congratulate

you, I think we have made significant progress.

More for the benefit of some of the other Members here, I would

encourage other Members—all Members should consider doing

what my staff and I did about a month and a half ago, back in our

district, in fact, I hope we can do another one. That is, have a town

hall meeting just about this subject.

And we invited some people from the financial institutions, a

couple of large banks. We invited people from State and local government. We invited people from the utilities. We were fortunate

enough to get the top person from Northwest Airlines to come in

and speak. And it was a very, very interesting hearing. And the

only regret that I had is, we didn’t publicize it quite enough. So we

should have had a little better public attention, but it did get pretty good press.

I think what was great about that, really is twofold, first of all,

it opened up my eyes—and I will get to a question. The problem

in some respects is even bigger than some of us had thought before

the meeting.

And you raised the issue of embedded chips, and I want to come

back to that.

But it was also very impressive to me how much is being done

in the private sector. I sort of kept a little running total of the companies and, as I say, these were—well, we had a couple of major

utilities and a major airline, and obviously it is an important issue

to them. But I think of the private concerns that testified that day

at this town hall meeting that we had, they were committing somewhere north of $100 million to this effort. So they take it extremely

seriously, and I think that was the good news.

But the bad news—I want to come back to this—one of the utilities had testified, I think, if I remember correctly, they had discovered that they have somewhere in the area of 312,000 embedded

chips somewhere in their whole system. And you touched on that.

How serious do you believe that problem is?

They are confident that they have enough backup systems, or

even if one should cause a problem somewhere, that it will not

cause a major disruption. From your perspective, do you have any

idea how big the embedded chip problem is for the Federal Government and are things being done about it?

Mr. KOSKINEN. Well, fortunately, from sampling the Federal Government, the embedded chip problem is primarily an operational

issue, and other than the Defense Department and running a few

power plants, the government is primarily engaged in information

and data exchange and, the financial exchange software side of the

issue. But it is a major issue. Depending on who you ask, there are

40 to 50 billion chips out there, loose or tied down, in the world.

Last week, the North American Electric Reliability Council

issued its second assessment of the electrical power industry, and

they are obviously, as noted, focused on this. They had a lot of concerns in their first assessment, released last fall, about the scope

of the embedded chip problem. The report last week revealed that

fortunately it turns out the number the chips that actually have

the problem in power production or distribution is relatively small,

and most of them would not shut down the power plant; they

42

would create problems in bookkeeping and recordkeeping and other

issues. And the NERC is confident that information is now available and is being shared within the industry.

So that in the power industry, while there are a large number

of chips out there—in terms of thousands per company and probably billions in the industry generally—companies are beginning to

address the problem effectively. And at this point, the industry

does not view it as being an insurmountable obstacle or a major

threat to them, although it is going to take a lot of work.

Mr. GUTKNECHT. Let me just come back to one last point before

my time expires here.

You have stated you will be in crisis management in 1999?

Mr. KOSKINEN. Right.

Mr. GUTKNECHT. Judging by your general demeanor, I find that

hard to believe, or I should say, I am not certain anyone will really

know, and I think thats good. I appreciate the fact that you are approaching this with a very calm demeanor.

Have you developed a crisis management strategy and, if so, how

will you implement that? I mean, I am not really clear on what you

mean by that.

Mr. KOSKINEN. Yes, I have been—I said we would go through

and the council would go through a proselytizing, organizing phase

into a monitoring and assessment phase, which is where we are

now, and into a contingency planning, crisis management phase.

We need to be prepared as we move through this year, and certainly as we move into January 1st to be prepared for whatever

happens, domestically and internationally.

Our strategy across the board is to buildupon existing infrastructures and organizations and experiences. So we are forming a coordinating center for the Federal response to this issue, whatever

it might be, which will build on the existing work of FEMA domestically, the State Department and the Treasury and the Defense

Department internationally, along with the intelligence community,

and that would be built into the Federal level. We are working

with State and local governments. Tomorrow, with the Senior Advisors Group, will begin discussing with them the status of industrywide plans, industry by industry, for their own emergency responses.

All of that will be integrated, so we will know if somebody has

a water treatment problem or a power plant problem where the resources are in the private sector, to deal with that issue. There will

be data bases available and inventories of the resources done, and

with a little luck, we will have a very effective structure that won’t

have much of a challenge.

But what we have to be prepared for in terms of dealing with

those crises and what the public needs to have confidence in is, in

the fact that we are prepared for whatever will happen.

Mr. GUTKNECHT. Thank you.

Mr. HORN. I thank the gentleman, and now call on the delegate

from the District of Columbia, Ms. Norton.

Ms. NORTON. Mr. Chairman, I want to—despite the fact that I

have been delayed in getting here, I certainly want to commend

and thank you for starting this session off right with a Y2K Federal Government hearing.

43

I just want to say to my colleague, John Koskinen—who has always been unflappable ever since we were in law school together,

so I am not surprised he remains unflappable in the wake of this

problem—that under his leadership, I am absolutely confident it is

being solved.

I do want to thank the Federal Government, as well, for its assistance to the District of Columbia, which is going to be receiving

some assistance as it readies itself for the Y2K problem. It is particularly important because the District government itself is being

rebuilt and the District doesn’t want to build into the Y2K problem,

but just the opposite.

The question on crisis management, I think, is the one that is

really in the—that you have just heard is Sputnik is in the back

of everybody’s mind that, yeah, all the big fellows do their jobs, but

then somebody else doesn’t, and there is some ripple effect and we

all end up, God knows where.

I have two questions, and one is, I don’t quite understand how

anybody who does her job can control people who are not doing

theirs when it comes to this problem. I just do not understand how

that occurs. And I take it you could only safeguard yourself in case

those who ripple down the line haven’t done theirs. I would just

like to get a few words on that. I apologize for being tardy; I might

have missed something in that regard.

And, second, I would like to know how the government, whether

the government has any posture it wants to take with respect to

how ordinary citizens should respond to the independent operator

analysts who are out there, some predicting the end of the world;

and unfortunately, Y2K corresponds with the millennium, so there

is a bunch of fools running around as well, and whether there is

any—and any thought has been given to some kind of sane, reliable

voice that people could turn to who aren’t in this hearing, who

haven’t heard all the facts, so that as the time approaches, you

won’t have people hunkered down in their basements or—and

please tell me now if you should have that—or gathering their food

for the next year.

In other words, have you taken into account that a crisis mentality may be building up unless somebody hears from somebody

they can trust?

Mr. KOSKINEN. All right. Well, the first question. Clearly that

has been a challenge for us from the start. We are working with

and trying to raise the level of awareness, activity, and compliance

within organizations internationally, as well as domestically, over

whom we have no authority at all. In fact, most of the people I

spend my time with don’t have to listen to me at all, and our goal

and challenge has been to set up cooperative working relationships

with them internationally and domestically.

And the good news is, thus far, certainly in the United States,

we have had wonderful cooperation and response from every critical sector in the country and the major trade organizations. You

are exactly right, this problem reveals the growing interconnectiveness of everything. That is why we started out saying

even if we could get all the Federal systems done, it doesn’t necessarily come close to solving the problem.

44

The reason I am spending all this time in all these other areas

is because it is, in fact, an increasingly seamless web. And no one

is an island unto themselves, either as an individual or a country

or a city. And so we all have a great stake in everybody else’s ability to deal with this problem. And the crisis management issue and

the contingency planning we are asking all Federal agencies to engage in and encourage everybody in is to first take a look at doing

the best they can to fix their problems, and second to have a

backup program. If your systems don’t all work, what will you do

to keep your business operating, your government agency functioning; and what is your backup system if others you depend upon

have systems that don’t work.

In the Washington, DC area, in the last few days a lot of people

obviously had to exercise backup plans when power that they relied

upon was not available. With regard to public panic and public response, I think over time we will continue to provide the public

with information and advice.

The Red Cross now has a very good Website that basically says

that if you are worried about the year 2000 transition you should

think of preparing as you would normally be prepared in the wintertime for a long weekend or a winter storm, and have a couple

of days and water and food. But our view is that, at this juncture,

there is no indication that you should disrupt your life.

And one of the things we need to do is to ensure the public is

confident about our ability to deal with the problem. As you said,

if we thought you ought to be hunkering down, we would be the

first people to tell you, because I think the Federal Government

has an obligation to give the people its best advice.

So on our hotline, as we move forward, we will continue to update the information we have and to provide advice to the public

on what we think is an appropriate response. At this juncture our

advice to the public is not to panic, not to go to New Mexico and

buy a lot, and, in fact, primarily to be informed consumers of information, to pay attention, call our hotline, look at our Website.

There will be plenty of time as the spring unfolds for all of us jointly to review that information and respond accordingly.

And we will be providing the public with updated information

about what we think are the appropriate responses.

Mr. HORN. I thank the gentlewoman.

And now I yield to the gentleman from California, Mr. Miller,

who has been long-suffering, waiting to get his questions in. And

we finally made it, Gary.

Mr. MILLER. Well, thank you, Mr. Chairman.

It is a good feeling to be a new member and a freshman on a

committee. And it is especially refreshing when you ask all the

questions last, and all the good ones have been asked, and you are

left with the other ones. But I look back at this and I have to

praise the technology companies over the past years for getting this

message out and creating the panic. You did a great job in driving

the stock prices up. It really did; I invested in some of those companies.

And then the press further took those concerns and expanded

upon them because they sell newspapers. And then I have listened

to the questions presented by the knowledgeable and experienced

45

members on this committee, and they create more questions. I hate

to fall into the category of those crazies we refer to out there, who

look at panic and comply with that and become a part of it.

But there are some questions I guess I have never thought of

until I listened to the questions asked today and the questions answered. One was the Y2K problem, many have said is going to be

the end of the world as we know it; and the press did a good job

of playing that up very well.

But I look at what we have done. Welfare reform is a good example. When the Federal Government enacted welfare reform, they

turned it over to the States; and the States’ and our job at this

point is we turned it over to many counties. And counties also are

responsible for Medicaid distribution and others.

And I guess I am concerned on the flow of technology to the

States and substates who are fiscally impacted currently and counties, and most of our counties are fiscally impacted, especially California, and how the flow of technology gets to those counties, because now the counties are distributing the welfare funds that we

provide to the States and the Medicare checks that are—Medicaid

checks that are being given to them.

How do we ensure that there is an adequate flow not only to the

States, but to the counties? Because by the time the flow of information gets to the States, they are dealing with their issues. How

do we ensure that information also flows to the counties, who are

actually providing most of the services that are being delivered

today?

Mr. KOSKINEN. That is and has been one of our biggest challenges. I spent last summer at the National Association of Counties

executive meetings, because in many ways the hardest people to

get a hold of in this country are counties. They don’t have a regular

line of communication directly with the Federal Government, and

in fact, the States told me when I started working with them last

spring, counties don’t want to hear anything from the Federal Government and they don’t want to hear too much from the States. So

there aren’t regular, as you say, lines of communication.

We hope in response to your earlier question that we have done

everything we can think of, but we are going to continue to work

on it to get the information to the counties about the importance

of the problem and ensure that they have access to technical information. With regard to State-run Federal programs, we are now

going State by State to get assurances from the States as to the

status of their preparedness; and to the extent they rely upon counties, information they have on county preparedness and what work

they have been doing with counties.

And California has done a very good job. California held statewide meetings of county executives in major cities last year to start

dealing with this problem. And, in fact, they and several other

States have done that, Texas and others, we encouraged States to

have that as a benchmark to follow.

There are some States where there is very little communication

going on with their counties. And as I noted, I am concerned about

that.

Again, I don’t think we can mandate compliance across the

board, but we can be very focused on at least the administration

46

of Federal programs. There are 160 Federal programs that are run

by States and localities, and we need to continue to focus on them.

And I think, as we go through the spring, that is going to be a

growing problem for us, which is why I am delighted when there

are regional and local hearings and town meetings. Because while

we need to keep paying attention to how the Federal Government

is doing, and it was an appropriate place to begin the dialog 3 or

4 years ago, it is increasingly clear to me that the problem is going

to be at the State and local level if we are going to have a problem.

Mr. MILLER. Mr. Ose touched on an issue that has become a concern, and that is, we are asking people to share technology. The

minute you do that there is liability risk associated with that sharing of technology. And I guess this question can be for the chairman, although, I think, more for him to think of in the future:

What are we doing to cap the liability risk to encourage sharing of

technology? I mean, I am sure in many cases organizations or

groups will have the technology available, but they understand

that clearly by them sharing that with others, they are at risk if

there is a problem that occurs through that sharing of technology.

Are we doing anything in that fashion?

Mr. KOSKINEN. Yes. In my earlier discussions with the major industries, including telecommunications and securities, they were

concerned about this issue. And, as I noted, last October the President signed into law legislation passed by Congress that protects

not only companies, but trade associations who voluntarily disclose

technical or other information about how they deal with this problem. It does not deal with the issue of those who are selling that

service, and whether they can get insurance, but we have now removed the legal obstacles to information sharing. The interesting

problem is—we are working with about 170 trade associations— many lawyers are still advising their clients not to say anything on

the grounds that it will get them into trouble.

Mr. MILLER. That is where the problem is?

Mr. KOSKINEN. Yes. So in our working relationships with industry groups we are trying to figure out exactly how to break that

barrier down, because you are exactly right, the exchange of that

information is critical not only for large companies to compare test

results, but it is critical information available to smaller and medium-sized organizations in the public and private sector, who can

then go to that information and say—I haven’t got a lot of time left,

but I am told by those people that this is where I ought to spend

my time and money and that is what I am going to do, and if they

are wrong, at least I am better off than I would be otherwise.

Mr. MILLER. A closing question about maritime. And this is a

question I hate to ask because maybe it is a little farfetched. Listening to the rumor, watching the press and the panic that could

be created, we talked about printing available cash, but what impact might that have on our banks that have cash reserve requirements they have to meet, minimum requirements of standards? If

this thing is blown out of perspective, that might impact that.

Are we doing anything to alleviate that impact?

Mr. KOSKINEN. Yes. We have—one of the reasons to have cash

available is to ensure the banks don’t run into difficulties. But

again it goes into the balancing act I talked about and we have all

47

worried about for the last year. This is a serious problem, people

have to pay attention, and we have to solve it. But on the other

hand, if 200 million Americans decide to do anything very different

economically than they normally do, that has the potential of being

a self-fulfilling prophecy of a major problem, even if all the systems

run fine.

So all of us have to try to deal with that problem. I am trying

to make sure people address that problem, and understand the seriousness of it. But on the other hand, I do not want people to gratuitously decide, ‘‘Well, I think what I am going to do is not necessarily buy a lot in New Mexico, I will just take some money out

of the markets, some money out of the bank, and go out and buy

some extra supplies.’’ Mr. MILLER. We are going to address the reserve problems if that

does occur?

Mr. KOSKINEN. If there is a reserve problem, the Fed is focused

on it.

Mr. HORN. I thank the gentleman.

I see Mrs. Maloney, former ranking member of this Subcommittee on Government Management, Information, and Technology.

Would you have any questions to pose to our witnesses?

Mrs. MALONEY. Of course, Mr. Chairman, I congratulate you on

your chairmanship, and I see you are on the case. We just got organized yesterday and you are already holding hearings.

And I just wondered—I thought it was very important that the

President mentioned very, very strongly the Y2K problem and the

attention that he and the Vice President and the administration

are giving the problem in making sure that we are ready for the

21st century.

And I just want to know, in a brief oversight or review, do you

think we are going to be ready? Do we have reason to be concerned? Could you just respond?

Really, I am sure you heard the President’s speech last night,

and I am sure you heard him talk about year 2000. I would just

like to know in a general sense, where do we stand in the Federal

Government?

I know you say some of the smaller governments are having

some problems. What about internationally? Would you like to just

give us a broad, brief overview of, do you think we are going to be

ready? Are we going to meet the President’s challenge of being

ready and making sure that everything is working?

Mr. KOSKINEN. That is more than a 5-minute answer. My testimony is designed to deal with those issues. As a general matter,

I think the Federal Government will be ready; I am confident of

that. I think that the vast majority of States are doing a good job.

I am concerned about local communities that may not be focused

on the problem, but a lot of them have done that.

I am concerned about the risks of overreaction by the public, and

internationally, I am concerned about the countries that have not

yet paid enough attention to this problem and have the potential

to create difficulties for the American economy and the American

public.

Mrs. MALONEY. Well, since you seem to think that domestically

we are all right, could you talk about the international problems

48

that you expect would possibly be the most problematic to the

United States?

Mr. KOSKINEN. The most problematic to us and the largest challenges, I think, are in maritime shipping; and I think that not because I know there is a problem, but because I don’t know what

the information is, because there is no organized attack on that

problem in that area yet.

I think that international financial transactions are generally in

good shape. It will not be a problem for us. We are concerned about

ensuring that in a lot of countries there are power supplies, particularly that those provided by Russian-made nuclear plants are

safe and can operate as we go forward.

I think we will have, in some countries, difficulty getting telephone or other services. So I think, while it may not affect the

American public generally, we will have an obligation to advise

travelers about what they can expect in some countries and to

work with American businesses operating abroad. At a minimum,

we have to worry about how to run embassies and consulates in

areas that may have difficulty with their infrastructure.

Mrs. MALONEY. Well, the chairman has had numerous—— Mr. HORN. That is panel 2, you know, on the international situation.

Mrs. MALONEY. Well, since he is here and he mentioned shipping, if I could ask him a brief question on that.

Mr. HORN. Sure.

Mrs. MALONEY. And I know, Mr. Chairman, you have had many,

many hearings, and I congratulate you for being on the case.

But you express some concern on international shipping and that

95 percent of all goods that enter the United States are transported

by ship. And specifically what are your concerns and why hasn’t

there been enough focus on this area, given the fact that 95 percent

of all goods come by ship; and what can we do to change that so

that the shipping or maritime industry will not be disrupted during

this date change?

Mr. KOSKINEN. The U.S. Coast Guard has done an excellent job

on their statistics for me, and they have been working very actively

with American shipping interests in American ports. As I noted,

there has been no organized global effort in this area. We are trying to solve that by, in fact, starting that effort in March, in London, with all the major international port and shipping associations

dealing with this problem.

Certainly, when you look at oil or any other thing we rely on that

comes from abroad you have to figure out, how do you get it out

of the ground or out of the production mode to the port? How do

you get it through the port and onto the ships? How do you get it

across the oceans and into U.S. ports? That is a complicated supply

chain, and we hope to have more attention paid to it.

The individual companies and major shippers, and certainly U.S.

ones, have been paying attention to this, but again they do not control foreign port operations and often they do not control foreign

production sources. We all need to see what we can do about that

in the next 344 days.

Mrs. MALONEY. Well, my time is almost up. But I want to make

sure the electricity is working on that day. I mean, we are going

49

to all need it. And the Secretary of Energy, Bill Richardson, publicly raised concerns earlier this month about electric utilities falling behind the Y2K repairs. A recent industry poll indicates that

a number of utilities will not meet their June 30th deadline for

compliance systems. And Secretary Richardson indicated that he

may name specific firms if sufficient progress is not achieved.

Should other Cabinet secretaries follow this approach for vital industry sectors and businesses that are not on track for the Y2K,

compliant with public health and safety, and does the Y2K Council

have any plans to release the names of companies that are likely

to miss Y2K deadlines?

Mr. KOSKINEN. We do not have that information. In fact, the act

that was passed allows us to collect industry association information and industry information by protecting individual companies

from having anybody reach that data, so that companies will be

candid about it. But one of the reasons the North American Electric Reliability Council has 96 or 98 percent participation is that

they have listed everybody who participated in their survey, which

drove a lot of people to participate. We are going to encourage

other industry groups to do that. This way the public will know

which companies are actually providing the information and participating in the surveys.

With electric power, I think it is important to note that what the

Secretary is concerned about is a small percentage of the power

companies. The industry has a June 30 goal to have everything

done; it is not a question of those companies not meeting the January 1, 2000 goal. And I think it is appropriate for all of us, as I

say, to know as the Secretary said, there are no show stoppers and

there will not be national issues. But it is also appropriate for us

to be concerned about our local power companies. And we in Washington are concerned about, how will Pepco and Virginia Power

deal with it, and we won’t find that out from the national assessment.

We need to find that out, and those companies need to be forthcoming across the countries locally. We are going to try to do what

we can to encourage that.

Mrs. MALONEY. I thank you for your testimony and for your public service. I can see why the President called you back into public

service to work on this critical problem for the country. And I appreciate your willingness to serve and for being here today. Thank

you.

Mr. KOSKINEN. Thank you.

Mr. HORN. In rounding this out, I am going to yield myself 5

minutes, which I have not taken. And let me just ask three fast

questions.

During our staff research, we found that the police departments

have not been too proactive on assessing the Y2K status of the 911

systems.

Do you have any information? Have any of your staff taken a

look at that problem?

Mr. KOSKINEN. Yes. In the Emergency Services Working Group

we are reaching out to—there is a group of people who run 911 systems, there is an association, and our Emergency Services Working

Group is reaching out to get an assessment from them of that probVerDate 11-MAY-2000 10:33 Mar 13, 2001 Jkt 010199 PO 00000 Frm 00055 Fmt 6633 Sfmt 6602 E:\HEARINGS\60491 pfrm02 PsN: 60491
50

lem. FEMA and the Justice Department are working with State

and local emergency managers to get people to understand they

need to look at it.

The 911 systems are at risk. They are generally increasingly sophisticated computer operations that have problems, and we are

concerned about that.

Mr. HORN. In terms of your plans with reference to Federal agencies, are you assured in your mind that all of them will meet the

January 1, 2000, deadline?

Mr. KOSKINEN. I am.

Mr. HORN. You are?

Mr. KOSKINEN. Yes.

Mr. HORN. What makes you so optimistic?

Mr. KOSKINEN. I don’t view it as optimism. I have actually spent

since May——

Mr. HORN. I know you are a happy personality.

Mr. KOSKINEN. I am a very happy person. I should start frowning more when I say we have big problems. I have been meeting

with all of the OMB tier 1 agencies and their senior managers on

a monthly basis since May and monitoring their progress, as OMB

has been doing and ensuring. I am confident at this juncture, and

have been for some time, that the Secretaries of each of those agencies is personally committed to dealing with that problem.

I met yesterday at the Energy Department with Secretary Richardson and his senior staff as part of my monthly surveys, and

they are making strong progress. I am confident that the information is generally accurate, because as I have said, if agencies wanted to make up the numbers, they would have figured out how to

do that a couple of years ago, and they wouldn’t have had either

negative reports from you or OMB.

It has taken a lot of work. It is a great tribute to phenomenal

efforts by Federal employees in all of those agencies. And I am, as

I say, confident on the basis of the progress they are making and

the reports that are coming out—and I think you are going to see

in, as I noted in my testimony, the major agencies we are all concerned about by the time we get to the March 31 deadline, that

substantial progress has been made over the last 6 to 9 months.

And it has come with a lot of prodding and encouragement from

all of us.

And as I have said in my prepared testimony, I think we all have

to be prepared to acknowledge that accomplishment, just as we

have been prepared to encourage them to move forward. Because

a lot of employees are working around the clock, they are working

weekends, they are dedicated to making sure that their agencies

can perform their missions.

Mr. HORN. What legislation do you feel the administration

should be recommending and Congress acting on that relates to

Y2K? What is needed now to be helpful in the next phase?

Mr. KOSKINEN. We have asked the President’s Council and the

agencies to provide us any legislative needs they have, either for

expanded authority or limited authority in particular areas. At this

juncture, we do not have a major legislative request or initiative

that we can see.

51

The emergency funding has been a significant help for us and a

major issue. We are listening and trying to learn more about what

the concerns are in the private sector on liability, but at this point,

there is not a coordinated industry response in that area. But in

terms of specific agency responsibilities, the only issue we are looking at that may require legislation is what, if anything, should we

do around the January 1 weekend.

There have been issues raised about whether or not to move the

holiday and whether we can allow people to move payments from

the first week in January to the last week in December to take

pressure off systems. If you do that and want to keep it as year

2000 income, you need a tax policy or a tax change. We have a task

force, led by the Federal Reserve actually and all the agencies,

looking at that. I think we will not recommend a holiday change,

but we have other recommendations in terms of technically allowing companies and certainly Federal agencies to try to take pressure off their systems and that may take legislation. But other

than that, I think our problem is primarily management and administration.

Mr. HORN. Well, I agree with that, with over the years, and my

own feeling was, last fall, as you know, I was not keen on any legislation relating to liability at this point. I wanted everybody to get

out there, provide leadership, get the job done and quit worrying

about it. And I felt a lot of people had been misadvised by saying,

Don’t say anything, Chief; then they can’t sue you.

Well, it seems to me if you don’t say anything and don’t provide

the leadership, they will sue you.

Mr. KOSKINEN. Exactly.

Mr. HORN. So we are now, though, into another era, and the

question is, should liability legislation be developed to either get a

specialized court that would really know something about computing and the whole history of it, or do some other things that

would limit the liability if good-faith efforts have been made.

Do you have any reaction to that?

Mr. KOSKINEN. At this point we do not have a position. As I say,

at this juncture, we do not have any proposals or any view that

there is a need for legislation. But we are—we are cognizant of the

fact that a wide range of people are focused on it, and we are prepared to listen to what they have to say.

Mr. HORN. OK. I am going to yield back the rest of my time, so

if Mr. Turner, as ranking member, has any questions—feel free—

Mrs. Morella, as co-chair, has any questions, fine.

Or we can send him down and have the staff and you answer

them and put it in the record at this point.

So whatever your wishes are. We have two more witnesses and

two major topics to go into.

Mrs. MORELLA. Just briefly. You are going to love the legislation

that I am going to ask you to look at. It is not liability, because

I recognize the difficulty of coming up with something, particularly

at this point, that is going to cover the liability system, but it

would help to provide for the acceleration of business continuity

plans, et cetera, and for more openness.

I want to ask you, have you thought about doing any PSAs, because another part of this bill would have to do with letting conVerDate 11-MAY-2000 10:33 Mar 13, 2001 Jkt 010199 PO 00000 Frm 00057 Fmt 6633 Sfmt 6602 E:\HEARINGS\60491 pfrm02 PsN: 60491
52

sumers know what they should be asking, kind of reaction plans.

But it just seemed to me it would just be a great opportunity to

do some PSAs to alert the public, as well as the businesses, about

the——

Mr. KOSKINEN. We for some months have been looking at what

the appropriate Federal role should be in that area. The Advertising Council early on told us the programs they generally work

with have a 5-year time horizon and, therefore, the short-term nature of the Y2K problem didn’t fit within the 5 year timeframe.

The other problem with PSAs, by themselves, if they are free,

they usually run late at night and at odd times. We have actually

talked with public relations and advertising firms about, what it

would take if you mounted a full-scale program; and in some detail,

we have had proposals to spend $50 to $100 million. As I said, I

am not quite sure how to explain to you or the public that I spent

$100 million on an advertising program, as opposed to giving the

money to people locally to solve their problems.

One of the things we hope to explore with our Senior Advisors

Group and the working groups is to see what the private sector is

doing in terms of both research about the problem and their media

campaigns, and take a look at what the appropriate integration of

a Federal response to that ought to be.

In the meantime, we are spending a lot of time with the press

responding to all of the inquiries. We have yet to turn anybody

down. But it is a very important point, and we are trying to figure

out what is the most effective way to get information into the

hands of the public. And to the extent that it—and we can find an

effective role for the Federal Government and even the expenditure

of some money integrated into the messages that others are providing, we will do that and be pleased to share it with you.

But at this juncture no one has been able to convince me yet that

it is the right of priority for us to independently be spending phenomenal amounts of money.

Mrs. MORELLA. No, but you know, PSAs, as you say, they have

to do it, the media; and I just think that you can get television and

radio—it won’t all be at 2:30 a.m. Besides, there are a lot of people

who listen at this time and watch anyway. But I think they would

use it at various other times during the day.

I think you should consider that in other ways also of communicating this. Don’t be an alarmist, but don’t be a Pollyanna, you

know, I mean that kind of thing.

I know that—I don’t want to take more time, because we have

got two more panels. But I think it is always a shame that a person like you can’t be there when the other two panelists are talking

so you can respond, because I have already read much of that testimony. And, you know, we are talking about trade, we are talking

about commerce, a suggestion from Mr. Willemssen that maybe we

prioritize, your council prioritize what the United States needs, in

terms of oil, in terms of food and commodities; and then have plans

to make sure that we are going to receive it, the early warning system, that this is from the National Intelligence Council. Mr.

Gershwin talks about Russia and China and early warning systems.

53

And then I also wonder about, in the United States, our own—

the money we transmit for Medicare, Medicaid, for all kinds of

things, student loans and all—have we, have we traced any of that

money to the States and the localities to find out whether they are

compliant? What I am saying is, a steady stream—the hip bone

connected to the thigh bone connected to the knee bone—have we

made these agencies that dole out this money find out from their

recipients whether they are ready?

In other words, say you are part of our food chain of the line; do

you see what I am getting at?

Mr. KOSKINEN. Yes. Let me first say to your general concern, Mr.

Gershwin is an active member of the President’s Council. We are

working very closely with the National Intelligence Council on this

matter, so I think I am very well versed on where he is. And Mr.

Willemssen and I show up in a lot of places together. And actually,

once a month GAO, Mr. Willemssen and Mr. Dodaro and others

and I sit down and spend an hour or two reviewing where we are

and their recommendations on what we are dealing with. So I

think I am well advised about what their suggestions are.

And, as always, we have found that GAO’s suggestions are particularly helpful. And as you will note, over time, a lot of those suggestions have been accepted and integrated into either the OMB

work or our work.

Mrs. MORELLA. The recommendation is great. But I mean in

terms of the action beyond the recognition. I know you are working

very hard; I commend you for what you are doing. It is just, I do

think they offer some good recommendations that need some action. Thank you.

Thank you, Mr. Chairman.

Thank you, Mr. Koskinen. I look forward to meeting with you.

Mr. HORN. Mr. Turner, any questions?

Mr. TURNER. Mr. Chairman, maybe just a couple.

Chairwoman Morella expressed an interest in PSAs, and I was

just looking at the latest report from OMB to this committee regarding the estimated cost to the Federal Government of complying

with Y2K, and I believe it says it is close to $6.5 billion.

Mr. KOSKINEN. Correct.

Mr. TURNER. Maybe $100 million, if it would be profitable and

helpful, might not be that large a sum in the scheme of things.

My concern, as I shared with you earlier, is that I certainly want

to be very careful about what PSAs we are airing, because it is

hard, I am sure, to judge whether PSA’s are going to increase public comfort or discomfort with the problem.

One of the things that I wanted to ask you about is that a year

ago people were saying there just aren’t enough computer programmers out there to help us comply with this problem, and we are

going to have to figure out how to find some folks and get them

trained. You don’t hear a lot about that anymore.

What is the status of the necessary personnel to solve Y2K?

Mr. KOSKINEN. It is a problem we are all concerned about; as a

potential problem, we have been monitoring it very carefully with

the Federal Government. One of the first things we did when I

started was to have OPM authorize the agencies to bring back anVerDate 11-MAY-2000 10:33 Mar 13, 2001 Jkt 010199 PO 00000 Frm 00059 Fmt 6633 Sfmt 6602 E:\HEARINGS\60491 pfrm02 PsN: 60491
54

nuitants, retirees, who knew about these kinds of issues without

forcing them to give up their retirement benefits.

What has happened, while the cost has gone up in the private

sector, to some extent for services, which generally happened, I

think, as we monitored—and the reason there hasn’t been a national shortage is that the tools and the techniques for dealing with

this problem have increased at about the same rate as the demand,

so that the original assumptions—where you would have to take

each line of code and change it—and people then started multiplying out how long it took and how many billion lines of code

there were, it turned out there have been a lot of what are called

‘‘windowing techniques’’ that allow you to adjust for the problem

without necessarily changing all the programmatic codes.

Also, while there is no silver bullet, there are a wide range of

tools that, depending on the software programs and the operations,

that have speeded up the process for either finding out where the

problems are or testing against them.

There have been some anecdotal reports of shortages. GAO again

did a review of the agencies and found some specific areas and

pockets of concern. But as a general matter, the Federal Government has not found that it or its contractors have had trouble getting enough personnel. And even in the private sector, we have not

yet seen major shortages occur.

And I think it is primarily not because people are wrong in the

concern; I think it is because everybody has gotten a lot better at

figuring out how to get the work done efficiently.

Mr. TURNER. Thank you.

Thank you, Mr. Chairman.

Mr. HORN. Vice Chair Biggert, any last questions?

Mrs. BIGGERT. No.

Mr. HORN. OK. We will now move to the second panel.

And we thank you very much for spending the time with us. I

never—I know you will never not answer a question. You answer

it eloquently. You answer it very speedily.

Mr. KOSKINEN. Thank you, Mr. Chairman, and Chairman

Morella. I do appreciate your ongoing support.

Mr. HORN. If you can stay a little, we would welcome anything

you want to say.

Mr. KOSKINEN. Thank you, but as you can imagine what my life

is like, right now I am almost late for my next meeting.

Mr. HORN. If panel 2 would come forward, please.

We have, on panel 2, Dr. Lawrence Gershwin, National Intelligence Officer for Science and Technology of the National Intelligence Council. This is Dr. Gershwin. And then you are accompanied by Norman Green, Deputy National Intelligence Officer for

Science and Technology. So can we have him take a seat also?

I am going to swear you all in, since one of you will be talking

probably somewhere along the line. Dr. Michael Harrington, principal technical staff—and tell me how to pronounce it; is it the

MITRE Corp., is that the best way——

Dr. HARRINGTON. Yes.

Mr. HORN [continuing]. And Mary Walsh, Year 2000 Issues Manager, Directorate of Intelligence, Central Intelligence Agency.

55

Come on up, get chairs here. Will the staff make sure that we

have enough chairs or just grab one. And Joel Willemssen, our favorite witness here, Director of Civil Agencies Information Systems, Accounting and Information Management Division, General

Accounting Office.

So have we got everybody a seat?

[Witnesses sworn.]

Mr. HORN. The clerk will note that all five witnesses have affirmed the oath.

And we are now going to begin with Dr. Lawrence Gershwin, National Intelligence Officer for Science and Technology at the National Intelligence Council. You might tell us the formation of the

National Intelligence Council, just for the record.

STATEMENTS OF LAWRENCE K. GERSHWIN, Ph.D., NATIONAL

INTELLIGENCE OFFICER FOR SCIENCE, ACCOMPANIED BY

NORMAN GREEN, DEPUTY NATIONAL INTELLIGENCE OFFICER FOR SCIENCE AND TECHNOLOGY, NATIONAL INTELLIGENCE COUNCIL; MICHAEL HARRINGTON, Ph.D., PRINCIPAL TECHNICAL STAFF, MITRE CORP.; MARY WALSH,

YEAR 2000 ISSUES MANAGER, DIRECTORATE OF INTELLIGENCE, CENTRAL INTELLIGENCE AGENCY; AND JOEL

WILLEMSSEN, DIRECTOR OF CIVIL AGENCIES INFORMATION

SYSTEMS, ACCOUNTING AND INFORMATION MANAGEMENT

DIVISION, GENERAL ACCOUNTING OFFICE

Dr. GERSHWIN. Sure. The National Intelligence Council works for

the Director of Central Intelligence as an interagency intelligence

mechanism. And our purpose is to bring together the work of all

of the intelligence agencies into one unified set of analyses for the

purpose of serving the Director of Central Intelligence in his overall role as manager of the entire intelligence community.

And as such, I am 1 of the 12 National Intelligence Officers on

the council. And our job is, of course, to work certain areas, and

in my case, science and technology issues, for the Director of Central Intelligence.

Mr. Chairman, Mrs. Morella, I am pleased to be able to discuss

today the understanding that the intelligence community has about

foreign efforts to deal with the Y2K problem. I will give you our

current assessment of where we see the problems as most likely to

occur. But we are not yet in a position to make a confident assessment of the global impacts of the likely Y2K failures or the implications for U.S. interests.

The Y2K situation is very fluid, and our assessments could

change significantly over the next several months as more information becomes available, as countries become more aware of and

deal with Y2K issues, and as incidents of Y2K failure increase. I

will highlight for you today those areas that we think have a significant chance of affecting U.S. interests.

All countries will be affected to one degree or another by Y2Krelated failures, and problems in one country sector can have widespread consequences because of interdependence between sectors

worldwide. The consequences of Y2K failures abroad will range

from the relatively benign, such as a localized inability to process

credit card purchases, to problems within systems across sectors

56

that will have humanitarian implications, such as power loss in

midwinter.

We have few indications that countries are today undertaking

contingency planning for recovery from Y2K failures. Foreign countries trail the United States in addressing Y2K problems by at

least several months and, in many cases, much longer.

Y2K remediation is underfunded in most countries, and time and

resource constraints will limit the ability of most countries to respond adequately by 2000. Governments in many countries have

begun to plan seriously for Y2K remediation only within the last

year, some only in the last few months; and some continue to significantly underestimate the costs and time requirements for remediation and, importantly, testing.

Because many countries are way behind, testing fixes will come

late and unanticipated problems typically arise in the testing

phase. The largest institutions, particularly those in the financial

sectors, are the most advanced in Y2K remediation. Small- and medium-sized entities trail in every sector worldwide.

Most countries have failed to address aggressively the issue of

embedded processors. And while recent understanding is that failures here will be less than previously estimated, it is nevertheless

the case that failure to address this issue will still cause some

highly dependent sectors with complex sensor and processing systems to have problems centered right around the January 1st date.

The lowest level of Y2K preparedness is evident in Eastern Europe and Russia, in Latin America, in the Middle East, and Africa

and several Asian countries, including China. But global linkages

in telecommunications, financial systems, air transportation, the

manufacturing supply chain, oil supplies, and trade mean that Y2K

problems will not be isolated to these individual countries, and no

country will be immune from failures in such sectors.

Regarding Russia and Ukraine, the coincidence of widespread

Y2K-related failure is likely to occur in the winter of 1999 to 2000.

With continuing economic problems and food shortages, already difficult conditions for the population could have major humanitarian

consequences for those countries. While the Russian Government

initiated centralized guidance to ministries and agencies in May

1998, the State committee responsible for initiating overall guidance has stated that there is not enough time or money to resolve

the Y2K problem. We think they are right.

Russian estimates of the cost of remediation of their government

system seem considerably less than Western estimates for comparable systems in other countries or what we regard as what it

will cost in Russia. Thus far, both Russia and Ukraine have exhibited a low level of Y2K awareness and remediation activity. While

Russia possesses a talented pool of programmers, they seem to lack

the time, organization and funding to adequately confront the Y2K

problem.

Concerns include problems with computer-controlled systems and

subsystems within power distribution systems and nuclear power

generating stations leading to reactor shutdowns, or improper

power distribution resulting in loss of heat for indeterminate periods of time in the dead of winter in Russia and Ukraine. IndicaVerDate 11-MAY-2000 09:49 Mar 13, 2001 Jkt 010199 PO 00000 Frm 00062 Fmt 6633 Sfmt 6602 E:\HEARINGS\60491 pfrm02 PsN: 60491
57

tions point toward a slow, reactive mode of operations on the part

of, for instance, the Russian Atomic Energy Ministry.

Although Western Europe is in relatively better shape than some

of the regions I have cited earlier, European awareness of and concern about the Y2K problem is uneven, and they do lag the United

States in fixing their problems.

I should point out that none of the countries that we are dealing

with seem to have anything like the level of government-led activity, as we heard earlier from John Koskinen. And frankly it is that

level of government activity and leadership on it that I think is required worldwide in all of these countries, including some of the

more advanced countries in order to make this stuff work.

European attention was focused on modifying computer systems

for the European Monetary Union conversion, which was implemented successfully on January 1, but this was done, in many

cases, by postponing coming to grips with Y2K problems. For example, the Netherlands has expressed concern that the EU members

are not working together to solve Y2K problems and has threatened to cutoff its own power grid from the rest of Europe in order

to protect domestic power distribution from external problems.

The Asian economic crisis has hampered the Y2K remediation efforts of all of the Asia-Pacific countries except Australia. While the

lines of authority for China’s Y2K effort have been established, its

late start in addressing Y2K issues suggest Beijing will fail to solve

many of its Y2K problems in the limited time remaining and will

probably experience failures in key sectors such as telecommunications, electric power and banking.

We are focusing increasingly in the intelligence community, in

our own study of foreign Y2K problems, on those critical sectors

that directly affect U.S. interests. These include, among others, foreign military systems, trade, and oil production and distribution,

all of which I will elaborate on.

First, regarding military systems, military systems and their

command and control are particularly information-technology dependent, and thus potentially vulnerable to disruption if Y2K problems are not adequately addressed. We have been especially attentive to the issue of foreign strategic missile systems, and particularly those in Russia and China, to experience Y2K-related problems. United States and Russian officials have been discussing

these issues for some time now, and we do not see a problem in

terms of Russian or Chinese missiles automatically being launched

or nuclear weapons going off because of computer problems arising

from Y2K failures.

Rather, the problem that we are more focused on is whether the

Russians will manage to locate and fix problems in their early

warning systems that they use to monitor foreign missile launches

and how their leadership is preparing to deal either with the prospect of incorrect information being provided by such systems or

with system outages. The level of concern in Russia is growing on

these issues as awareness of the nature of the Y2K problem grows.

Turning to world trade and oil, some of our most important trading partners have been documented by, among others, the Gartner

Group, as behind the United States in fixing their Y2K problems.

And China and Japan will be good examples. Significant oil exportVerDate 11-MAY-2000 09:49 Mar 13, 2001 Jkt 010199 PO 00000 Frm 00063 Fmt 6633 Sfmt 6602 E:\HEARINGS\60491 pfrm02 PsN: 60491
58

ers to the United States and the global market including a number

of countries—Venezuela, Saudi Arabia, Mexico, Nigeria, Angola

and Gabon—that are lagging in their Y2K remediation efforts.

Oil production is largely in the hands of multinational corporations in the oil-producing countries, but this sector is highly intensive in the use of information technology and complex systems

using embedded processors, and is highly dependent on ports,

ocean shipping and domestic infrastructures.

The oil industry is fraught with potential Y2K problems. Embedded microprocessors are found throughout the oil industry in drilling, pumping, transportation, processing and refining operations. A

typical offshore platform or onshore gas plant reportedly uses 50 to

100 embedded systems, each containing up to 10,000 individual

microchips.

While the industry has been actively involved in remediation,

planning for remediation of a single offshore platform can reportedly involve up to 60 different vendors. We are concerned about the

shipping of oil products, because ocean shipping and foreign ports

have both been flagged as among the least prepared sectors.

One additional issue I want to raise is that many foreign officials

and companies who are aware of Y2K problems are looking to the

West, and particularly the United States, for help, and to western

suppliers for technical solutions. In some cases, foreign companies

or governments may blame the United States and other foreign

vendors for problems in this equipment and thus seek legal redress

for their failures. And worldwide litigation issues are quickly becoming a part of the Y2K international scene.

In closing, let me note that today we can list all the issues that

concern us worldwide in terms of the impact of Y2K failures on infrastructures, economies, countries and regions, national security,

trade and so on. But today we cannot yet provide good answers or

predictions that would be meaningful on the consequences. We

have cast a wide net for information on Y2K developments and are

working very closely through the President’s Council on Y2K Conversion, with the rest of the Federal Government. As the time for

greater likelihood of failures comes nearer, awareness of and reporting of Y2K problems abroad should increase dramatically and

we thus expect to have a much better handle on the type and extended failures we are likely to see around the world.

But the incredible complexity of global interconnectivity and

interdependence, and the effects when some parts of the information technology baseline start to fail, is a daunting challenge to interpret and analyze. There will be many analysts in both public

and private sectors here and abroad trying to make reasonable

judgments about the consequences and implications. The problem

is formidable, but we will do our best to support the U.S. Government in assessing these consequences. Thank you.

[The prepared statement of Dr. Gershwin follows:]

59

60

61

62

63

64

65

66

67

68

69

70

Mr. HORN. We thank you for that very helpful statement, and we

will now go to Mr. Willemssen.

Mr. WILLEMSSEN. Thank you, Mr. Chairman, Chair Morella,

Ranking Member Turner, Congresswoman. Thank you for inviting

us here to testify today on Y2K.

I will briefly summarize our statement on, one, where the Federal Government stands, issues confronting State and local governments, and the readiness of key infrastructure and economic sectors. And in doing so, I will focus on suggestions we have for Mr.

Koskinen and OMB to improve its oversight of these areas.

First, regarding the Federal Government. While the most recent

November quarterly reports show improvement in addressing Y2K,

many agencies still have a long way to go. We have a number of

suggestions for Mr. Koskinen and OMB to consider in this area.

First, on reporting of Y2K progress. OMB’s draft guidance to

agencies for the upcoming February quarterly reports asks agencies to identify and report on their core business functions that are

to be addressed in their business continuity and contingency plans.

We endorse this initiative. In fact, OMB could go a step further

and use this information to ask agencies to report on their end-toend testing and contingency plans for these critical functions.

For example, with the time available for end-to-end testing diminishing, OMB should consider for the government’s most critical

functions setting target dates and having agencies report against

them for the development of end-to-end test plans, the establishment of test schedules, and the completion of those tests.

For business continuity and contingency plans, OMB could consider setting a target date such as April 30th for the completion of

those plans, and a date such as September 30th for completing

testing of those plans.

Another key task that could be aided by identifying the government’s core business functions is setting priorities. Having this information in hand provides an opportunity to ensure that the most

important areas will be addressed; namely, those affecting health

and safety, national defense, adverse financial impact to the citizen

and adverse economic impact. This would enable agencies and

OMB to report in 1999, after March 31, on the Y2K compliance of

business functions, not individual systems. And, really, that is the

bottom line of what we are trying to accomplish here, is business

functions being Y2K compliant, not individual systems.

Another key element of a business continuity and contingency

plan is the development of a zero day, or day one strategy for the

period in late December 1999 and early January 2000. The Social

Security Administration, a recognized Federal leader on Y2K, has

developed such a strategy. Among the features of that strategy is

a moratorium on software changes for the last few months of 1999

and first few months of 2000. Because this type of action can reduce agencies’ risks, we think OMB may want to consider requiring

other agencies to also take this kind of initiative.

Turning next to State and local governments. They face a major

risk of year 2000-induced failures to the many vital services they

provide. The report we issued in November on State systems used

in Federal welfare programs revealed that the majority of those

71

systems were not compliant. For example, States told us that only

about 16 percent of Medicaid systems were compliant.

The extent of information available to the public on State and

local year 2000 readiness, however, varies considerably. For example, while some State and local governments provide detailed year

2000 readiness information on their Websites, others provide very

limited data. We think that States that are providing detailed data

are doing their citizens a service in letting them understand what

kind of progress is being made.

Accordingly, we think another initiative that Mr. Koskinen’s

council could undertake is developing and distributing to State and

local governments a template that identifies the types of year 2000

information that the entity could disclose to the public. Disclosure

of such information could reduce the public’s concern and potential

panic over potential disruptions caused by Y2K.

Turning last to the key infrastructure and economic sectors, we

believe Mr. Koskinen and his council are to be commended on the

strides they have made over the last several months in this area.

However, to enhance the further availability of information on sector Y2K readiness and to further reduce likelihood of major disruptions, we offer some additional suggestions for Mr. Koskinen.

First, the Council must continue to aggressively pursue readiness

information in the areas in which it is lacking, such as the health

sector and local law enforcement. If the current approach of using

associations to voluntarily collect information does not work, the

Council may have to consider other legislative remedies such as requiring such disclosure, especially where it is important in certain

infrastructure areas.

Second, to encourage the reporting of more complete information,

the Council should consider requesting that all the national associations publicly disclose, at a minimum, those companies that

have responded to surveys.

Third, for the next report of the Council scheduled in April, we

would urge the Council to include key data to help evaluate the

readiness of sectors and to identify each sector’s major components

and its readiness.

And last, since the international arena, as we have heard, carries

some of the greatest risks and uncertainties, the Council could consider prioritizing those trade and commerce activities that are most

critical to our Nation’s well-being and identify alternative options

to obtain needed materials, should the need arise.

That concludes a summary of my statement, and I would be

pleased to address any questions that you may have.

[The prepared statement of Mr. Willemssen follows:]

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

100

101

102

103

104

105

106

107

108

109

Mr. HORN. Thank you very much. I yield 5 minutes to the cochairman of the Task Force, Mrs. Morella, chairman of the Subcommittee on Technology.

Mrs. MORELLA. Thank you, Mr. Chairman. I want to commend

both of you for your excellent, succinct and candid testimony. I

must say to GAO, Mr. Willemssen, you have certainly done a tremendous number of reports that all deal with Y2K. I remember, I

think it was 3 years ago, under the issues at risk, at-risk issues,

Y2K was mentioned then with computer security on it, which continues to be mentioned.

Mr. Gershwin, I certainly again value the statement you made

about other countries and what they haven’t done, what they have

done, and the leadership that we must show.

I asked Mr. Koskinen kind of the question in sort of a roughhewn verbiage to try to find out what is being done under his direction to coordinate the concerns that both of you have expressed.

And you have expressed a series of recommendations throughout.

You have expressed the problems with some ways that maybe we

can look at it.

Would you tell us, these two committees, subcommittees, how

you work with Mr. Koskinen; what more needs to be done to push

forward that kind of action that we need? Either of you can answer

first.

Mr. WILLEMSSEN. I will start first. As John mentioned up front,

when he was here earlier, we do meet with him on a monthly basis

and we share issues that we have, and he does likewise.

In addition, as issues come up on individual agencies where we

are doing reviews, we will give him a heads-up as soon as we have

the available data, to let him know of our concerns and that we

will be reporting on those.

Similarly, with some of the suggestions we have offered here

today, we have let him know of those suggestions, and also OMB,

and I think it is accurate to say they, in general, agree with those

suggestions. They also added we might be a little ahead of them;

that they were considering these types of actions anyway. But we

do have general concurrence.

So we have found the working relationship to be working pretty

well. Not to say that we haven’t always wanted a little more aggressive action in some of these areas. But if you look back at some

of the major recommendations we made to Mr. Koskinen as soon

as he took the job, most of those recommendations now have been

implemented, although some of them not as quickly as we would

have liked.

Mrs. MORELLA. Would you like to comment, Mr. Gershwin?

Dr. GERSHWIN. Yes. I am the intelligence community’s representative on the President’s Council on the Y2K Conversion, so I regularly attend the meetings. But much more than that, we are heavily involved, my deputy Norm Green and I, in the international

working group that is part of the Council. We have been actively

involved with State Department, who chairs that working group,

and in providing briefings to people in State Department about our

information on the foreign Y2K efforts. We will be doing the same

thing with the Department of Energy, because I have been meeting

with those folks.

110

We are very actively engaged with the Defense Department’s

work in the President’s Council. In fact, Norm Green and one of

the DOD people chairs a subgroup that has to do with international issues. So I think we are extraordinarily involved in the

work of the President’s Council, as well as doing our own independent analysis of this. But it is essentially all being provided to

not only John Koskinen but other members of the Council.

Mrs. MORELLA. Too bad we cannot clone both of you in terms of

what you know needs to be done.

My concern is that these governments have so many other problems, like the Asian financial crisis, that Y2K is still, regardless of

your international group, still at the bottom of the list; and in

terms of putting money into it and the expertise that they don’t

have.

Mr. Willemssen, I am interested in, too, is the suggestions are

made, they are listened to, affirmative response in terms of we

agree with what you are saying. Do you, the next month when you

meet, followup and say, these are some recommendations that it

would have been far better had you done something with it; or

would you tell us what you have done? What kinds of accountability is there other than these are some suggestions?

Mr. WILLEMSSEN. We do followup with them. I will give you one

example. The recommendations that we had made early in 1998

was for John Koskinen to take a sector-based approach and conduct

detailed assessments of those sectors. He eventually did that. I

wish he would have done it 6 months earlier. And he knew that

we were pushing him to do that, and I am glad that he has done

it.

The type of rich detailed data that we need on many of those sectors still isn’t there. And I think when the next quarterly report

comes out from John in April, if we still continue to see the dearth

of rich detailed data, then we have to start looking at other alternatives to get that information.

Mrs. MORELLA. It is a tremendous frustration, from my point of

view, in terms of so many things need to be done. I am convinced

we are not going to be ready, and yet I am not one who panics. I

tell everybody, ‘‘Don’t worry, critical-mission systems will be taken

care of.’’ I am not really even sure of that. And I am really worried

about, what did you call it, ‘‘business connections,’’ when I talk

about making sure about how one group links with one another.

Oh, ‘‘business continuity points.’’ Whatever, you know exactly what

I mean. The kind of connection I think we need to do more evaluating and working on that.

So I look forward to continuing to work with both of you and

with your very capable staffs to make sure that it is incorporated

soon.

Thank you, Mr. Chairman.

Mr. HORN. Thank you. Now Mr. Turner, the ranking member, 5

minutes for questioning.

Mr. TURNER. Dr. Gershwin, one of the concerns you addressed

was the lack of preparation in Russia by the Russian Atomic Energy Ministry. If I were to ask you what are the greatest threats

or problems that could occur, what national security problems

111

would be on your top list of concerns? What kind of things would

you list for us?

Dr. GERSHWIN. As far as Russia is concerned?

Mr. TURNER. Russia and, in general, national security concerns.

Dr. GERSHWIN. OK. National security in a broad sense is more

than military issues, obviously, and we are really quite concerned

now, as we see it, about world trade issues, which are essentially

U.S. and global economic security.

The potential for there to be enough disruption of the global

economy that, as we have seen in the last 6 months, the United

States is certainly tied into the global economy in a serious way.

So I would probably put that as the top issue I would raise as far

as the international implications.

Another one, which I think is really quite important, is the fact

that these disruptions, particularly in places like Russia and

China, will be taking place in the middle of winter. And we have

had a little taste of that in our area here in the last few days.

Mrs. MORELLA. My area, as a matter of fact.

Dr. GERSHWIN. Particularly in Montgomery County. But Russia

is likely to experience some serious power outages. Their nuclear

reactors, some of their nuclear reactors may shut down.

One of the issues on their nuclear reactors is simply the vital

role that Russian nuclear reactors play in the overall power distribution in that country and the difficulty they might have in getting them back up again, leading to serious power outages, which

would hurt an already hurting economy.

In addition, a worry that we have, and that we are working on

rather hard to get more information on, is the potential for nuclear

reactors in places like Russia to have safety problems in their shutdowns. If the nuclear reactors experience failures, if the back-up

diesel generators experience failures, there could be electrical problems that interfere with the safety mechanisms in those nuclear reactors.

While we don’t want to raise the specter at this point of huge

problems in terms of safety of nuclear reactors worldwide, the fact

is that in Russia itself that is a concern to us, and we are going

to be studying that in a lot more detail over the next few months.

So I would certainly raise that, then, as an important national security concern because of nuclear power problems.

Taking that a little further, I think just the electric power grids

in many of these key countries are susceptible to some sort of failures, because I don’t think most of these countries we are talking

about, such as China and Russia, have done nearly the work done

in North America. All of these countries are extremely dependent,

frankly, on their electric power for many, many things.

So, again, in terms of major domestic disruptions in those countries, leading to all kinds of economic difficulties, possible needs for

United States and western humanitarian assistance to those countries in the middle of winter, I see some of those as the critical national security issues.

Mr. TURNER. I have seen a lot of efforts being made by our domestic utility companies to comply and be ready for Y2K, and I am

sure many efforts are being made with regard to nuclear power

plants within our own country. Have we made any efforts to offer

112

international assistance, or would that be an appropriate response

to what appears to be a very serious potential problem?

I assume you are talking about that it is not beyond the realm

of possibility that there could be another Chernobyl as a result of

Y2K in Russia or some other country where they have not prepared

their nuclear reactors.

Dr. GERSHWIN. That would be the issue obviously we ought to be

worried about, although at this point I think it would be premature

to raise that flag, but I think it is something that we are watching.

The Department of Energy is certainly in a position to discuss

nuclear power issues with other countries. You would really have

to ask them where they stand in terms of those kinds of discussions. But I think there is a fair amount of information shared

from one country to another; various mechanisms to discuss nuclear power problems.

One of the issues is simply that countries like Russia do not easily welcome advice from the West on their Y2K problems. There

has been some discussion, but they have been very slow to react

in many areas, and that would be one of them.

Mr. TURNER. Thank you, Mr. Chairman.

Mr. HORN. Thank you. Vice Chairman Biggert, 5 minutes.

Mrs. BIGGERT. Thank you, Mr. Chairman.

Dr. Gershwin, you mentioned that there are many of these countries in the infancy stage of awareness. What is kind of the cutoff

date? If they haven’t done anything, is there a time that it really

is too late, and then what do we do?

Dr. GERSHWIN. As John Koskinen told me sometime back, when

we start to go through these, there are countries that are 24

months behind the United States, 36 months behind. It is never too

late to do something. And part of the purpose of the U.N. meeting

in December was to make it clear to countries that, as behind as

they are, they can do an awful lot in 1999 to help themselves out.

They may not, and in fact they won’t be as well prepared as the

United States, but they can do a heck of a lot better and avert a

lot of the problems by doing some serious contingency planning and

the like.

So it is really hard to put a firm cutoff date; but, frankly, if a

country is 24 months behind the United States, and the United

States will be prepared without a lot of time to spare, then I would

say a lot of the countries, particularly in the developing world, are

going to have failures that they have not prepared for and are

going to have to deal with the consequences afterward.

The best bet, I think, for these countries is to identify where

their problems are most likely to occur and start making plans for

how to work around those problems.

Mrs. BIGGERT. Have you seen evidence of these countries identifying these problems since December and since that meeting?

Dr. GERSHWIN. It is probably a little too quick to be able to tell.

Some of them just appointed national coordinators for this to get

ready for the meeting in December, and a lot of their plans are only

going to start rolling in over the next 2 or 3 months. And, frankly,

one of the problems we have in trying to assess this is the lack of

information, certainly publicly available from abroad, compared to

113

what is going on in this country, makes it difficult for us to gather

a lot of key information about sectors and countries and so on.

In the intelligence community we have other ways to get information, other than what people declare, but the fact is that openly

available information would be extremely helpful to us. A lot of

countries are simply not providing that at this point because I don’t

think they themselves even know.

Mrs. BIGGERT. Well then, can you say there really is no problem

that there might be an automatic missile launch from China and

Russia?

Dr. GERSHWIN. Fortunately, countries like China and Russia are

countries that we have for years, for decades, we have studied very

carefully their missile systems. I used to do that for a living, before

I got into the Y2K business here. And so we know enough about

the Russian strategic weapons, the Chinese strategic weapons to be

quite confident that those systems should not experience the kinds

of failures that would lead to anything automatically launched.

The worry we do have, and as I expressed in my testimony, and

particularly for the Russian early warning system, that the Russian early warning system needs some serious scrutiny by the Russians so that they understand the potential failures they could

have there, and that they don’t misinterpret the information. But

in terms of automatic anything, we don’t think automatic launches

of missiles are conceivable.

Mrs. BIGGERT. I think that Mr. Koskinen stated that the international financial transaction markets were in good shape, and we

certainly have been working on that at a domestic level, for example, in Illinois. But what about the Asian financial markets; could

this cause a problem there? And then how would that affect other

international transactions?

Dr. GERSHWIN. Well, the issue from countries in the Asian area

is, since they have been heavily preoccupied with the financial

problems over the last many months, it tends to detract from their

attention on the Y2K problem. And one thing we have learned

about the Y2K problem is, you have to be consistent and energetic

in working the problems and then good things will happen.

So, frankly, we are not yet in a position to evaluate on a kind

of a regional basis just how well Asian financial solutions will take

place. But certainly the countries that have been experiencing

problems, it is a real flag that would go up. I indicated in my testimony that we think at least some of the Chinese financial institutions could have some problems. I would certainly worry as well

about Japan, just because of the enormous difficulty they have had

in the last many months.

Any country experiencing global financial disruptions is going to

focus so heavily on that that it could detract from their Y2K fixes.

Mrs. BIGGERT. Have there been any international lawsuits filed

over this issue?

Dr. GERSHWIN. Yes, there have, and I don’t know if any of my

colleagues have any specifics on that. I know there have been already some international litigation being filed. Anybody know? No.

Mrs. BIGGERT. Do you know what the type or nature of the litigation is?

114

Dr. GERSHWIN. I think it has to do with western information

technology companies that have been involved in these countries,

and whether they have essentially provided technology and services

which warrant Y2K compliance and, hence, are undermining the

economies and technologies and companies and so on.

But we do have some specifics on that, not a lot, but it has been

building. We could certainly get that for you.

Mrs. BIGGERT. Could you supply that for the record?

Dr. GERSHWIN. Certainly.

Mrs. BIGGERT. Thank you.

Mr. HORN. Without objection it will be put in the record at this

point.

[The information referred to follows:]

115

116

Mrs. BIGGERT. Then a question for Mr. Willemssen. Do you agree

with Mr. Koskinen that the traffic control system will be totally

compliant well in advance of the year 2000?

Mr. WILLEMSSEN. No, I wouldn’t agree with that statement, especially well in advance. FAA’s air traffic control system still has a

lot of risks.

FAA, its Administrator, Administrator Garvey, the Program

Manager Ray Long, have done a tremendous job over the last year.

Unfortunately, FAA got a very late start on this issue, and they are

heavily automated. In some cases that automation is fairly archaic,

and it will take a tremendous effort, continued tremendous effort

for them to be fully compliant and to test those systems from an

end-to-end perspective and have a full understanding of their data

exchanges and data flows with other partners, such as airports,

airlines, National Weather Service, Department of Defense.

So am I optimistic that they will complete all of that well in advance? No.

Mrs. BIGGERT. They have also put in new computer systems in

some of the regions, too, and there has been some downside to that;

there have been some failures. You suggested having a moratorium

on software changes and other things. How is that going to affect?

Mr. WILLEMSSEN. You have just pointed out another reason for

why it is so difficult for FAA. They have multiple locations

throughout the country. We are not talking about one system in

one place. That increases the complexity that much more. And to

the extent they continue installing new systems or modifying existing systems, every time you open up the software, you increase the

risk of additional Y2K-related problems. And, therefore, that is

something that FAA is going to have to look at as they near the

end of 1999.

Once they have certified, for example, a system is compliant, if

they go in and modify the software, well, essentially, that is not

really compliant anymore, if you have made a lot of adaptive

changes or made major modifications to the software. So that is

something for them to consider.

Mrs. BIGGERT. Thank you. Thank you, Mr. Chairman.

Mr. HORN. Thank you. Good questions.

Let me just ask a few wind-up questions, although if my colleagues have other questions, fine.

But, No. 1, on the reactors—and the vice chairman comes from

a State where much of their electric power is from nuclear reactors

in Illinois—what do we know about the types of reactors that we

have around the world and the extent to which there can be a malfunction there of some sort that would affect the power grid and

power coming out of those reactors?

And if you had to look from the Moon down at the United States

and then at Russia and then at France, because the competition on

reactors over 30 years has been the United States reactors or the

French reactors, what would you be able to tell us as to where is

the highest risk that a power grid can go out just because of something that is built into any of those reactors?

Dr. GERSHWIN. I think Russia is the No. 1 problem.

Mr. HORN. How many Chernobyl-type reactors do they still have,

or did they change that?

117

Dr. GERSHWIN. No, they still have roughly the same number they

had before because they really have not modernized their reactors.

Mr. HORN. That is about 11 or so?

Dr. GERSHWIN. No, I think there are more than that.

Mr. GREEN. In the mid-fifties.

[The information referred to follows:]

The Number of active Chernobyl-type reactors in Russia, Lithuania, and Ukraine

that pose a potential moderate to high risk of radioactive release is 14. There are

some 20 reactors of other types in Russia and East Europe that also present a potential moderate to high risk.

Dr. GERSHWIN. There are a number not only in Russia but actually in some of the other countries, in Eastern Europe, Lithuania,

places like that.

Those particular reactors are worrisome to us. We have studied

in the intelligence community, with the support of the Department

of Energy, what we call the most dangerous reactors in the world,

apart from just Y2K issues. Russia and its former allies just lead

that list.

Those are dangerous in the sense of we didn’t think their safety

enhancements were very good. These are the very same reactors

that have not really received enough Y2K attention in terms of

Y2K remediation. And they are, obviously, extremely connected to

the electric power grids in Russia and some of the other countries,

which can work both ways: failures in electric power grid, causing

reactor problems; failures in the reactors, causing overall reduction

in the electric power available to run the country.

So when you look at all that, I think the Russian reactor problem

and those of some of the other nearby countries is serious, a serious problem.

I should just mention in France, and it is an area obviously we

are interested in as well, French reactors are pretty much all of the

same design. If there were a Y2K problem in French reactors, it

might affect a large number of reactors in France, and that could

cause France to have some serious problems.

This is something we will be looking into. I am not raising the

issue right now that we are worried about France, but just the nature of nuclear reactors is such that we ought to look particularly

carefully at nuclear reactors around the world. And we will be

doing that.

In fact, we have a study under way at Pacific Northwest Laboratories in the State of Washington under the Department of Energy

guidance, which I asked them to do, to look specifically at reactors

and the implications of reactor failures in terms of what could happen in those countries, both from a safety point of view and an energy point of view. So we will be looking very closely at that particular subject area.

Mr. HORN. Is there a problem with the embedded chips within

these reactors, or to what degree do they operate on sort of an

automatic flow-through; that that power can be shut off under certain circumstances or permitted to go into the distribution system

or what?

Dr. GERSHWIN. There are certainly embedded processors in a lot

of those systems. We don’t necessarily have the exact designs of all

those things, so in some cases we have to estimate it. But they are

118

very complex indeed, in many cases largely because of the safety

mechanism and how those are implemented. So nuclear reactors

are certainly an area where the embedded processor problem could

become significant.

Mr. HORN. If you looked at American reactors the same way you

look at Russian reactors—and you know we have had a blackout

in the central States, we had a blackout in New York, we had a

recent blackout in San Francisco—anything we can learn from

what is going on elsewhere? Are we in that danger?

Dr. GERSHWIN. Well, of course, we in the intelligence community

don’t really study the United States as such, so I can’t really say

about that.

Mr. HORN. Well, I always felt you should. And when I was in

strategic intelligence, we looked at a lot of stuff to see what other

people could find. And all you did was go to the Government Printing Office and there was the plans usually for everything.

Dr. GERSHWIN. I know there has been quite a bit of scrutiny already of U.S. nuclear reactors. In fact, when I was at Pacific Northwest Labs last month, one of their experts, who was a nuclear reactor designer, had in fact been visiting some U.S. reactors and had

learned how they are dealing with the Y2K problem. And the message he gave me was you have to really know an awful lot about

these reactors to identify places where there could be a Y2K problem, and then it is quite fixable.

He was quite optimistic that the U.S. reactors would do well in

this Y2K remediation. But he, as a result of that, became more concerned about foreign reactors because he knows how complicated it

is to take a look at these things and figure out what to do.

Mr. HORN. Moving to refining and to these huge tankers, to what

extent do they pose a problem in terms of embedded chips, microprocessors?

Dr. GERSHWIN. They are very heavily dependent on embedded

processors and processor systems for many, many key functions,

because they do a lot of monitoring, status monitoring, looking at

recent maintenance to make sure that things are being maintained

on a proper schedule. So there is quite a bit of date sensitivity in

the oil industry and the shipping associated with it.

So that throughout the oil industry, from extraction, refining,

shipping and so on, there are just many, many places where Y2K

problems can emerge. So that it is a very complicated business, in

fact, to take a look at this. And our concern is because of that complexity, the potential for failure is significant. And we know enough

about this to know that there is quite a bit of concern being raised

about some of the foreign oil companies, particularly located in

some of these foreign countries, as to how well they are going to

do. It is an area of high interest, obviously now by the President’s

Council, by a number of folks.

Mr. HORN. To our knowledge at this point, would there be any

chance of an environmental spill as a result of something going

wrong?

Dr. GERSHWIN. I would just hazard a guess that, yes, that could

possibly happen. We haven’t specifically looked at that, but that

would certainly be within the realm, I would think. Somebody else

119

might disagree, but I will just give you my top-of-the-head impression.

Mr. HORN. Who will look at that question? Is it EPA, is it the

Department of the Interior? Who is going to take a look at the

environmental—— Dr. GERSHWIN. I think the Department of Energy and the Environmental Protection Agency would seem like naturals for that

issue.

Mr. HORN. We are going to have them in in a couple of weeks.

We are going at the laggards that were pretty far behind and trying to find out what the problem is, as well as some of the success

stories which we ought to be sharing with the others.

Do any of my colleagues have any other points here they would

like to make?

Mrs. MORELLA. This has been excellent testimony. With regard

to the prioritizing, what should happen after that is done? You suggest prioritizing in terms of oil, trade, food, pharmaceuticals. I

guess you would add nuclear reactors to that.

Dr. GERSHWIN. Yes, and military systems generally.

Mrs. MORELLA. Military systems. What actions would you suggest following prioritizing?

Dr. GERSHWIN. Well, our role, at least in the intelligence community, is to try to assess the likelihood of failures in some of these

key infrastructure areas and then assess the implications for the

United States, which should, hopefully, lead to ideas for actions the

United States could take to reduce the impact on the United

States.

If you look at sort of the oil industry example, as we get closer

to understanding this, we should be able to have a better sense of

a scope of the magnitude of the potential failures. And that should

help lead to an assessment of whether that will have a small effect

on the United States’ interest or a big effect.

Mrs. MORELLA. Have we done anything in terms of prioritizing,

or is that just a suggestion?

Dr. GERSHWIN. We are just moving in that direction now. We

have a lot of work to do. We are still gathering data, and we have

not done a lot of assessment yet, frankly.

Mrs. MORELLA. Right. One of our problems is that we don’t have

the opportunity to have a continuing resolution when it comes to

January 1, 2000. So I do hope you move. It is a great idea. I do

hope you get the Council to move very fast on that.

Dr. GERSHWIN. I think we are doing—there is a lot of energy

being put into this at this point, by not only the President’s Council

but by the U.S. intelligence community.

Mrs. MORELLA. Mr. Willemssen, do you have any other comments

you want to make?

Mr. WILLEMSSEN. No, other than glad to hear the comments Dr.

Gershwin made that there is an increasing focus in this area. We

need data in order to make some decisions and understand where

our risks are so that we can take appropriate actions.

Mrs. MORELLA. I hope you will both keep us posted, and I look

forward to working with you. Thank you. Thank you, Mr. Chairman.

Mr. HORN. Thank you.

120

Mr. Willemssen, I have just one short question. Months ago I

suggested to Mr. Koskinen that he ought to have some people on

a weekly report to keep the heat on them. Do you know if they are

doing that at all at this point, and are the laggards being separated

out from the people that do know what they are doing?

Mr. WILLEMSSEN. Those in the bottom two tiers are reporting

monthly to OMB and Mr. Koskinen. One thing you may want to

consider is, obviously, the March 31 date is fairly important. It may

be something useful for OMB and Mr. Koskinen to report shortly

after that date so that we know where indeed we stand as a Federal Government.

And then we have to start shifting the focus away from compliance of individual systems and thinking more about compliance of

key business functions and whether they are going to operate as

intended; multiple systems, again working together, often across

agency boundaries, often involving our State and local governments. That is where a lot of the attention is going to have to be

paid in the latter part of 1999.

Mr. HORN. Well, those are helpful suggestions. I share Mrs.

Morella’s praise for both of you and your testimony and your colleagues that have helped with that.

Today’s compelling testimony, I think, further provides evidence

that the Federal, State and local governments are striving to identify and solve their problems, but as Mr. Willemssen suggests,

there are a lot of ways to go about that, and we can’t just make

it an afterthought as we concentrate solely on the Federal Government because we have found numerous connections between agencies and the State and county governments, for that matter, that

have administered many of these programs for 40 or 50 years. Still,

we in Congress are deeply concerned that much work remains. And

as the President said last evening, Y2K must not become the first

crisis of the 21st century.

In the very near future we will hold hearings to review the status of Y2K efforts at the Departments of Defense and the Postal

Service. We have not been involved with the Postal Service, but our

understanding is that a report of the Inspector General there

seems to require us taking a look at it in conjunction with the Subcommittee on the Postal Service of Government Reform. In addition, we will be delving into the muddy area of Y2K litigation.

As a government and as a Nation we must continue to be industrious and vigilant in these efforts so that we can zap this so-called

computer bug that some people still don’t believe in. Some think it

is a hoax. Some think it is a way to sell books. We have heard

every excuse you can think of, but most of us know that, in most

situations, we have got a problem, and we ought to deal with it in

some managerial, efficient and effective way.

Let me now thank the staff that prepared this hearing, starting

with J. Russell George, the staff director and chief counsel of the

Government Management, Information, and Technology Subcommittee; Matt Ryan, who we are glad to have back with us, sitting right behind me, a senior policy adviser for the subcommittee;

Bonny Heald, who is out there somewhere, and our director of communications and professional staff member, who has been very

helpful; Matthew Ebert, our clerk, who puts most of this work toVerDate 11-MAY-2000 09:49 Mar 13, 2001 Jkt 010199 PO 00000 Frm 00126 Fmt 6633 Sfmt 6602 E:\HEARINGS\60491 pfrm02 PsN: 60491
121

gether; and Mason Alinger, the staff assistant for the subcommittee; and then Paul Wicker and Kacey Baker, our interns.

We appreciate their help.

And for the Subcommittee on Technology, Richard Russell, the

very able staff director of that committee; and Ben Wu, the professional staff member; and Joe Sullivan, is it? Am I reading that

right? I have a problem with some people’s penmanship, even

though I am a former college professor and can read almost anything, who is the clerk on the Technology Subcommittee.

And then for the minority, Faith Weiss is the professional staff

member. And Earley Green, staff assistant.

And then our overworked—and we should have taken a recess if

we had known we were going to go this long—court reporters, Pam

Garland and Cindy Sebo. Thank you both.

With that, this hearing is adjourned.

[Whereupon, at 1:55 p.m., the hearing of the joint subcommittees

was adjourned.]

Æ