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98–484 PDF 2005

FINANCIAL MANAGEMENT AT THE DEPARTMENT

OF HEALTH AND HUMAN SERVICES

HEARING

BEFORE THE

SUBCOMMITTEE ON GOVERNMENT EFFICIENCY

AND FINANCIAL MANAGEMENT

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

SEPTEMBER 30, 2004

Serial No. 108–273

Printed for the use of the Committee on Government Reform

(

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

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

TOM DAVIS, Virginia, Chairman

DAN BURTON, Indiana

CHRISTOPHER SHAYS, Connecticut

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

DOUG OSE, California

RON LEWIS, Kentucky

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

ADAM H. PUTNAM, Florida

EDWARD L. SCHROCK, Virginia

JOHN J. DUNCAN, JR., Tennessee

NATHAN DEAL, Georgia

CANDICE S. MILLER, Michigan

TIM MURPHY, Pennsylvania

MICHAEL R. TURNER, Ohio

JOHN R. CARTER, Texas

MARSHA BLACKBURN, Tennessee

PATRICK J. TIBERI, Ohio

KATHERINE HARRIS, Florida

MICHAEL C. BURGESS, Texas

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

CHRIS VAN HOLLEN, Maryland

LINDA T. SANCHEZ, California

C.A. ‘‘DUTCH’’ RUPPERSBERGER, Maryland

ELEANOR HOLMES NORTON, District of

Columbia

JIM COOPER, Tennessee

BETTY MCCOLLUM, Minnesota

———

BERNARD SANDERS, Vermont

(Independent)

MELISSA WOJCIAK, Staff Director

DAVID MARIN, Deputy Staff Director

ROB BORDEN, Parliamentarian

TERESA AUSTIN, Chief Clerk

PHIL BARNETT, Minority Chief of Staff/Chief Counsel

SUBCOMMITTEE ON GOVERNMENT EFFICIENCY AND FINANCIAL MANAGEMENT

TODD RUSSELL PLATTS, Pennsylvania, Chairman

MARSHA BLACKBURN, Tennessee

STEVEN C. LATOURETTE, Ohio

CANDICE S. MILLER, Michigan

MICHAEL R. TURNER, Ohio

KATHERINE HARRIS, Florida

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

MAJOR R. OWENS, New York

CAROLYN B. MALONEY, New York

EX OFFICIO

TOM DAVIS, Virginia HENRY A. WAXMAN, California

MIKE HETTINGER, Staff Director

LARRY BRADY, Professional Staff Member

NATHANIEL BERRY, Clerk

ADAM BORDES, Minority Professional Staff Member

(III)

C O N T E N T S

Page

Hearing held on September 30, 2004 ..................................................................... 1

Statement of:

Steinhoff, Jeffrey C., Managing Director, Financial Management and Assurance, Government Accountability Office; Keith A. Rhodes, Chief

Technologist, Center for Technology and Engineering, Government Accountability Office; and Kerry N. Weems, Acting Assistant Secretary

for Budget, Information, and Finance, Department of Health and

Human Services ............................................................................................ 2

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

Steinhoff, Jeffrey C., Managing Director, Financial Management and Assurance, Government Accountability Office, and Keith A. Rhodes, Chief

Technologist, Center for Technology and Engineering, Government Accountability Office, prepared statement of ................................................. 6

Weems, Kerry N., Acting Assistant Secretary for Budget, Information,

and Finance, Department of Health and Human Services, prepared

statement of ................................................................................................... 23

(1)

FINANCIAL MANAGEMENT AT THE DEPARTMENT OF HEALTH AND HUMAN SERVICES

THURSDAY, SEPTEMBER 30, 2004

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON GOVERNMENT EFFICIENCY AND

FINANCIAL MANAGEMENT, COMMITTEE ON GOVERNMENT REFORM, Washington, DC.

The subcommittee met, pursuant to notice, at 2 p.m., in room

2247, Rayburn House Office Building, Hon. Todd Russell Platts

(chairman of the subcommittee) presiding.

Present: Representatives Platts and Turner.

Staff present: Mike Hettinger, staff director; Larry Brady and

Tabetha Mueller, professional staff members; Nathaniel Berry,

clerk; Adam Bordes, minority professional staff member; and Jean

Gosa, minority assistant clerk.

Mr. PLATTS. This hearing of the Subcommittee on Government

Efficiency and Financial Management will come to order.

Today’s hearing continues the subcommittee’s oversight of Federal financial management and focuses on one of the most important building blocks for success: financial system implementation.

The clear goal of management reforms passed over the past two

decades is timely, accurate, useful information, financial data that

can be used to manage and make decisions. Without this information, the Federal Government cannot analyze costs and benefits or

gather an accurate assessment of program performance. In our

oversight we have seen time and time again the importance of financial system implementation and how Federal agencies must

construct the proper framework to achieve the goal of sound management.

As part of our oversight of these system implementations, we requested that the Government Accountability Office review the

multi-year effort now underway at the Department of Health and

Human Services to implement the Unified Financial Management

System. The UFMS implementation is critical to the Government’s

delivery of vital services to millions of citizens, and we look forward

to discussing both the progress that has been made and the concerns that have been raised regarding this implementation.

We are honored here today to have Jeff Steinhoff, Managing Director of Financial Management and Assurance at the Government

Accountability Office. He is joined by Keith Rhodes, Chief Technologist at the GAO Center for Technology and Engineering. We

also have Kerry Weems, Acting Assistant Secretary for Budget, Information, and Finance at the Department of Health and Human

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Services before us today. We are glad to have you back as well, and

have your knowledge as a panel shared with us again today.

Mr. Towns is not going to be able to join us today. So we are

going to move forward right into your opening statements. As a

practice of the full committee and this subcommittee, if we can

have you rise, I will swear you in and we can get started.

[Witnesses sworn.]

Mr. PLATTS. Thank you. The clerk will note that all witnesses affirmed the oath.

We appreciate the written testimony you have provided to give

us a chance to prepare for today’s hearing. As far as your opening

statements, if we can roughly be guided by 5 to 10 minutes, we are

not going to be real sticklers because it is just more of an intimate

dialog here today.

Mr. Steinhoff, if you would like to begin, then we will proceed to

Mr. Weems.

STATEMENTS OF JEFFREY C. STEINHOFF, MANAGING DIRECTOR, FINANCIAL MANAGEMENT AND ASSURANCE, GOVERNMENT ACCOUNTABILITY OFFICE; KEITH A. RHODES, CHIEF

TECHNOLOGIST, CENTER FOR TECHNOLOGY AND ENGINEERING, GOVERNMENT ACCOUNTABILITY OFFICE; AND

KERRY N. WEEMS, ACTING ASSISTANT SECRETARY FOR

BUDGET, INFORMATION, AND FINANCE, DEPARTMENT OF

HEALTH AND HUMAN SERVICES

Mr. STEINHOFF. Thank you very much, Mr. Chairman. It is a

pleasure to be here today to discuss HHS’ efforts to implement a

Unified Financial Management System. At the outset, I want to

thank you for the leadership you and this subcommittee have provided over your tenure to really move financial management ahead.

This is very important. The challenges that HHS is facing, as well

as the other CFO agencies, in working on difficult systems issues

really require oversight and understanding by the Congress. So,

thank you for all of your efforts.

The report we are releasing at today’s hearing, which was prepared at your request, includes 34 recommendations that focus on

mitigating the risks associated with this project. For eight of these

recommendations in particular, we recommended that until they

are substantially addressed, HHS should delay the October 1st

planned deployment of the new system at CDC. As you will hear

today, they have, in fact, done that.

The core concepts and goals of financial management are captured well in the 1990 CFO Act. At the heart of the act are three

provisions that require, first, the systematic measurement of performance; second, the development of cost information; and third,

the integration of systems, program budget, and financial. Good financial management is having reliable, useful, and timely information needed for day to day decisionmaking and management. This

requires first rate financial management systems that go far beyond core accounting and financial statement preparation. The systems must address the broader concepts imbedded in the CFO Act

and addressed in the President’s Management Agenda which is

moving us toward a business-centric Government.

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We support HHS’ decision to replace its five outdated accounting

systems. We are not questioning whether a new system is needed

or HHS’ commitment to making this happen. Our work focused on

whether the project was being managed in a way that best ensures

long-term success. This is a major project. All projects are difficult;

a major project, you multiply that several-fold. Full implementation

is targeted for 2007, so there is a lot of time to address issues, and

the estimated cost of this project is around $700 million. Not only

must the system ultimately replace five accounting systems, but it

must also interface with about 110 other systems.

When all is said and done, how does one define success? In 2007,

in addition to basic accounting and financial reporting, we think of

it in terms of three results. First, a system that routinely provides

the day to day management information envisioned by the CFO Act

and the President’s Management Agenda; second, a system that operates efficiently, meaning, it does not require a whole lot of manual processing to make up for shortfalls in design or implementation; and third, a system that does not require expensive rework.

All systems require some. The real goal is to control any rework.

By any measure, the implementation of a new information system, whether in Government or the private sector, this is not a

government-centric issue, is difficult and brings with it a degree of

risk. As I said before, for a major project the risk is much greater.

While risk cannot be avoided, it can be managed and reduced to

acceptable levels through the use of disciplined processes, which, in

short, represent best practices that have proven their value in the

past.

Our experience is that serious implementation problems are generally the result of not effectively implementing disciplined processes. It is easy to forego, shortcut, or delay key steps, especially

when your project is date-driven; you have pressures to meet

schedule, to meet budget. We have seen this in our work at other

agencies and it has had serious repercussions for them.

At HHS we found that some best practices were adopted. For example, the project had strong support of senior officials, as well as

verification and validation oversight by independent experts, commonly called IV&V. We also view HHS’ decision to follow a phased

implementation to be a sound approach.

At the same time, at the time of our review, the project demonstrated some of the classic symptoms of schedule-driven efforts

for which disciplined processes, such as requirements management,

and testing had not yet been effectively implemented. In addition,

compounding the project-specific risks were department-wide weaknesses in information technology management, enterprise architecture, and information security. Finally, staff shortages and limited

strategic work force planning resulted in the project not always

having the needed resources.

For these reasons, we concluded that HHS had not yet reduced

its risk to an acceptable level. Among our 34 recommendations, as

I mentioned at the outset, we called for HHS to delay deployment

at CDC until certain actions had been completed to reduce the risk

to an acceptable level. Last week, HHS advised us that it had decided to defer full deployment of the system at CDC for 6 months.

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This additional time provides HHS the opportunity to address our

concerns as well as similar concerns raised by its IV&V contractor.

Keith Rhodes will now highlight what we think are some of the

things that need to be done, and done now, to take full advantage

of this 6 month period. He will focus on four key areas.

Mr. RHODES. Thank you, Mr. Chairman. HHS will face a number

of challenges in the upcoming 6 months. The key challenge being,

as Mr. Steinhoff stated, to move from a schedule-driven project to

an event-driven project. This will be critical to address problems

that both we in GAO and the IV&V contractor have identified. I

will focus my comments on four areas: First, requirements management; second, testing; third, quantitative measures; and fourth,

data conversion and interfaces.

We view requirement managements and testing as two of the pillars of successful efforts, while quantitative measures are critical

to understand the risks that are being undertaken and whether the

project is ready for deployment. Finally, good data conversion and

interfaces are critical to being able to provide the kind of management information that will be needed to meet the goals of the CFO

Act and the President’s Management Agenda.

Regarding requirements, requirements must one, describe the

functionality needed to meet user needs; two, be defined in a way

that is clear and unambiguous; and three, support an effective testing process, meaning that compliance with the requirement can be

validated through quantitative means. Once you have the good requirements, HHS will be in a position to conduct effective testing

activities.

The foundation of an effective testing program is a documented

testing plan that describes how testing will be carried out and controlled. For example, HHS will need to implement effective functional testing and user acceptance testing which will enable HHS

to know what the system can and cannot do, and whether the system meets the users’ needs, including being user friendly. In the

private sector, you are doing the user acceptance testing to figure

out what the take-up of the system is going to be.

Quantitative measures. HHS will need to use quantitative measures to evaluate the success of the events that are used to measure

project progress in order to help ensure that it is adopting eventdriven processes. Without reliable and rigorous quantitative measures, it is impossible to see where you are on the playing field. Intuitively, you might think that you are moving ahead and making

progress. But how far and in what direction is the bigger question.

Finally, HHS’ ability to convert data from its legacy systems to

the new system will be critical to the success of the project, as will

the ability to interface the system with, as Mr. Steinhoff stated,

110 other information systems that support key functionality, such

as grant accounting. For example, HHS expects that UFMS will

need to support about 30 system interfaces for the CDC deployment alone.

This does not mean that by successfully addressing these four

areas alone HHS will have reduced its risks to acceptable levels.

Rather, relatively speaking, we view these areas as being critical

and needing to be fully addressed between now and the planned

April 2005 full deployment.

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In closing, if the past is prologue, taking the time to effectively

implement the disciplined processes discussed in our report and

called for by HHS’ IV&V contractor will pay long-term dividends,

and to do otherwise has proven to be counter-productive and costly

in the long term.

Mr. Chairman, this concludes our summary comments. We would

be pleased to respond to any questions that you may have.

[The prepared statement of Mr. Steinhoff and Mr. Rhodes follows:]

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Mr. PLATTS. Thank you, Mr. Steinhoff and Mr. Rhodes.

Mr. Weems.

Mr. WEEMS. Mr. Chairman, thank you for the opportunity to appear before you today. It is probably rare that somebody sincerely

thanks the subcommittee when asked to appear in response to a

GAO report. However, I believe we have a strong story to tell, so

my thanks are sincere. I am here to discuss the HHS Unified Financial Management System. When completed in 2007, we believe

it will be the largest integrated financial management system in

the world.

In 2001, HHS was engaged in replanning and budgeting for our

five major financial management systems. Secretary Thompson, believing that current technologies would allow for consolidation of

the five systems into a single system, producing lower cost and better financial outcomes, challenged us to plan, procure, and implement a single system. I direct the committee’s attention to my first

chart, which is a reproduction of the Secretary’s memorandum directing us to begin that endeavor.

Looking just briefly at the goals that this memorandum looked

for, it looked for consolidation, it looked for better management reporting, and lower administrative cost. This was very early in the

Secretary’s tenure, as you can see from the date, and this is how

long this charge has been with us.

To illustrate what the Secretary gave us in this charge, this next

chart illustrates how we moved from our former decentralized environment to a new business intelligent shared services environment.

Currently, Mr. Chairman, we struggle every year to be able to get

a clean opinion because of the nature of our financial systems. We

looked for a financial system to provide that information in an integrated way and to make that essentially a slam-dunk every year.

We look forward to going to a shared services environment where

a single service center can, for instance, pay bills for the entirety

of the agency rather than having separate service centers. That is

the vision. And also, to be able to provide us reliable, business intelligent information about the direction of program activity and

about the direction of HHS overall.

The scope of the undertaking is breath-taking. HHS has the largest budget of any cabinet agency, projected to be nearly $580 billion

in the fiscal year that starts tomorrow. Within that budget is an

extremely complex array of spending arrangements, including mandatory spending, discretionary spending, loan programs, the Government’s largest grant portfolio, single and multiple year appropriations, buildings and facilities account, Medicare payments, user

fees, revolving funds. The list goes on. The task of implementing

a single system to manage those various business arrangements

and to provide HHS leadership with meaningful financial information for decisionmaking is a monumental task.

I am happy to report to this subcommittee that HHS has

achieved a number of successes and stands on the cusp of achieving

more. In doing so, I would like to acknowledge the Government Accountability Office and their efforts to better help us manage this

undertaking. Before I review those successes with the committee,

I would like to discuss the draft GAO report.

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The thrust of the GAO report was that certain management

practices increased the risk of the UFMS project, and the report

contained a number of recommendations to mitigate the risks. HHS

has accepted and implemented a number of those recommendations. From our perspective, the GAO comments can be distilled

into five main areas of concern: Requirements management and

traceability; testing and data conversion; concept of operations; information technology infrastructure; and project management. I

would like to discuss each one of these in turn.

HHS chose an off-the-shelf software package, Oracle Federal Financials. The effect of making such a choice is to say HHS will

mold its business practices to the software. That is very different

than a ground-up software development effort where all requirements are identified at the finest level of detail and the new software is coded to meet the demands of the business practices. For

HHS, the choice of molding our business practices to the software

means that we can have uniformity of business practice, exactly

what the Secretary envisioned in standardizing our business practices across the 12 operating divisions in HHS.

The managerial benefits of standardization are immense. A bill

to be paid can be booked and paid exactly the same way in FDA

as it is in CDC, or, indeed, a payment for all agencies can be made

from a single center. Since many of the requirements are contained

in the software, requirements can be managed at a higher level of

granularity.

HHS has a central repository of over 2,100 requirements for

UFMS, which includes the requirements specified by the Joint Financial Management Improvement Program. Those requirements

not met by the software underwent a business change process to

conform business practices to Oracle Federal Financials, or, in a

few limited instances, an extension was written for the software.

HHS has also built a requirements traceability verification matrix

to verify that all requirements are met by the system and to demonstrate to HHS and outside parties that we have satisfied the system requirements.

At the time of GAO’s review, full test plan and test scripts were

not available for review. So, understandably, GAO raised concern.

Since that time, a full test plan has been developed and implemented. Testing is appropriate to Oracle Federal Financial’s mature product. Therefore, our testing is unit testing, integration testing, and user acceptance testing. These tests focus on items such

as interfaces developed specifically from, as I say, user and feeder

systems. Testing continues to this day.

As GAO notes, data conversion is a difficult task. HHS originally

planned two mock conversions, essentially dress rehearsals for

final data conversion. We now intend to conduct four. This demonstrates that our project management was flexible enough to accommodate difficulties outside of the plan but still stay on course.

The GAO report urges HHS to adopt a concept of operations; that

is, what operations must be performed, who must perform them,

and where and how they must be performed. Our own independent

verification and validation contractor, Titan Corp., has also urged

us to do so.

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In July 2002, HHS developed and adopted a target business

model, a description of business operations and how a design of

those operations will be performed at HHS. We believe that this

business model provides a suitable concept of operations while

maintaining flexibility required by our rapidly changing business

environment, including changes to travel, acquisition, grants management, financial management, and information technology. Let

me give you an example. The idealized concept of operations would

say how bills get paid in HHS and who will do it. Our business

model has the ‘‘how’’ but not the ‘‘who.’’

The implementation of the unified financial management system

will foster a significant organizational transformation for HHS, a

department that has traditionally followed a decentralized approach to financial management. Although this initiative relies on

technology at its core, it is a business transformation initiative, emphasizing the importance of standardization across our business

units.

For a number of business functions, we have asked our operating

divisions to prepare business plans and bid to be a service provider.

This produces internal competition for business and produces a better result than a pre-determined ‘‘who.’’ So our divisions are essentially competing to be one of the providers of the services.

Finally, we have a governance structure, which we illustrate

here, that allows us the flexibility to adopt our concept of operations to changing business needs. GAO also noted our governance

structure as a best practice, the department from top to bottom is

heavily invested in this program, from the users of business systems to our leadership. Changes are run through this model. Also,

this model and this structure is used to implement other business

changes in HHS, for instance, the recent changes that we have

made to e-travel. Because UFMS is the central architecture to

these things, we use this structure as a means of decisionmaking

for those items. Users, managers, and leaders all share a voice.

GAO noted several deficiencies in HHS information technology

infrastructure, especially security. I am happy to report that HHS

has greatly increased security for its systems. Right now, of the

175 systems, 96 percent have completed a risk assessment, 95 percent have security plans, and 93 percent have been certified and

accredited for security. Eighteen of the nineteen systems that interface with UFMS have been certified and accredited.

As the accrediting official for UFMS, I expect to accredit UFMS

in the next several days. UFMS will run on a new secure network

recently implemented in HHS, called HHS-net, which is slated for

certification and accreditation in October 2004, making 19 of 19

systems. In fact, UFMS will be the first enterprise-wide system deployed over HHS-net.

In the area of program management, we found a number of areas

where we agree with GAO. We agree we were prematurely closing

identified risks. And we have modified our risk management accordingly. We agree that the management of human capital has

been and continues to be a significant risk. And we agree that our

project status monitoring could be strengthened further.

Where we do not agree is in the overall management strategy.

GAO believes that the project should be event-driven and the

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project should be governed by the achievement of objectively measured milestones. In a perfect world I would agree with GAO. However, we are a schedule-driven project, even though that means increasing risk.

The legend about Federal employees and Federal executives is

that they are not risk-takers and they seek the path of least risk

and least resistance. In HHS we are undergoing a tremendous metamorphosis in the way that we do business. Our employees want

to be very much a part of that, and my job as a manager is to harness that enthusiasm and to translate it into real outcomes for

HHS. I believe we have succeeded. Through outreach, demonstration, and training, there have been nearly 6,000 experiences for

HHS employees with UFMS. Awareness and expectation exceed

even those levels.

So, what are the consequences of being schedule-driven? In February of this year a sober, objective, hard review of where we stood

on CDC implementation revealed that perfect execution would be

required to meet full implementation in October. Understanding

the consequences of that, our team was excited because they believed perfection to be within their reach.

By May, our assessment was that a heroic effort would be required, but we pressed on. For members of the team it meant workdays that extended to 12 or 14 hours, workweeks that extended

into 6 days or more, and limited or no leave during this period. The

amount of personal sacrifice on the part of our employees was tremendous. The amount of sacrifice on the part of our contractor, the

systems integrator, BearingPoint, was tremendous also. And I am

grateful for all of their sacrifices.

On August 20, I received an alert from our independent verification and validation contractor asking me, among other things, to

obtain a briefing from the project team on systems readiness. I met

with the project team here and in Atlanta and conducted a systems

readiness review. At the conclusion of those reviews, and using objective, quantifiable measures of readiness and completion, we decided to deploy UFMS in October for CDC and FDA. The deployments would include general ledger and payroll for both, and

grants for CDC later that quarter. Other functionality for CDC is

phased to April to match that of FDA, and we have completed a

project plan accounting for that phasing.

In conclusion, I believe that UFMS continues to succeed. We

were able to capture the enthusiasm and know-how of a remarkable group of Federal employees and contractors to complete two

implementations of UFMS. We are proud of the milestones that we

have achieved. The implementation at NIH will have functioned for

a year. This year’s financial reports for NIH will come from that

implementation.

The October deployment of general ledger, payroll, and grants remains a tremendous accomplishment. The overall schedule for

UFMS remains the same. We still plan to have full implementation

across HHS by the end of 2007, a date that seems less distant all

the time. The work that has been accomplished is valuable and has

been preserved by the phased implementation strategy. Participants can look back with pride on their accomplishments and forward to even more successes in the future.

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Finally, Mr. Chairman, in the days when Federal managers are

being urged to take risks and Federal employees are criticized as

being risk-averse, we took a calculated risk by being schedule-driven. We believe it to have been a necessary risk and one in the best

interest of the project. I want to publicly thank the members of the

UFMS team across the department for their dedication and diligence. I would also like to thank GAO for their comments, and this

committee for your oversight and for having this hearing today.

Thank you.

[The prepared statement of Mr. Weems follows:]

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Mr. PLATTS. Thank you, Mr. Weems. Again, my thanks to all

three of you for your testimony here today and your written testimony.

Let me start, Mr. Weems, maybe where you left off in talking

about risk-taking and the decision and approach you are taking

being schedule-driven. In your testimony I think or your response

to GAO, you suggest that the title of their report should have been

better titled, ‘‘Aggressive Schedule Increases Risk of Implementation of HHS’ Financial Management System.’’ In making a decision

for risk-taking, there is a cost-benefit analysis.

What is the substantive benefit to be achieved? I assume it is

getting the system in place quicker. But what was the cost-benefit

that was done in taking what you acknowledge to be greater risk

to be schedule-driven as opposed to event-driven?

Mr. WEEMS. Thank you for the question, Mr. Chairman. In making that calculation, I think we looked at several things. First, we

had a coalition of the willing who were ready to sit down and work

enthusiastically on a project whose concept had already been proven at NIH. We had a group of people who were willing to work very

hard in making this implementation happen. Our contractor,

BearingPoint, uses a schedule-driven model as their best practice

in implementing these systems.

Now, I would not say that we are exclusively schedule-driven,

Mr. Chairman, and Mr. Steinhoff and I had the opportunity to discuss this beforehand. If we were purely schedule-driven, we would

have not considered the empirical data we were getting from testing. We would have gone ahead with an October implementation.

Instead, we were able to accomplish a tremendous amount of work.

All of that work is still preserved.

Much of the system that will be implemented in April, that work

is done. We are in the testing phase. I would say we simply ran

out of runway to be able to achieve what we were going to achieve.

We had a good test plan. We simply were not able to complete testing on time. Given that, we decided to pull back certain pieces of

our implementation and implement what we were rock hard solid

on.

So I would say the calculation that we made was to leverage the

enthusiasm and know-how that our employees were willing to put

to it. And frankly, Mr. Chairman, after 23 years in the Federal

Government, I have seen projects that are not schedule-driven

stretch out and become careers for people.

Mr. PLATTS. Let me follow that up. I certainly believe the accuracy of your statement—of the team you have and being committed

to your efforts, and I am also grateful for their efforts and believe

you and all involved in moving this daunting task forward should

be commended, and I certainly share that. In your testimony,

though, when you were making the decision up front, you talk

about the team and the confidence and the enthusiasm, but in your

testimony you said, ‘‘Three years ago most HHS employees impacted by this business transformation had little confidence in the

system. Today, many employees have already learned how to use

it.’’

It does not seem like there was that level of confidence when you

were making that risk assessment and decision up front. It seems

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like there was not yet a buy-in other than at the senior management level. Can you expand on that?

Mr. WEEMS. Sure. And that is a very good question. I think that

at the initial inception of almost any change people are very skeptical. The Secretary himself is a leader of boundless enthusiasm

and that enthusiasm is highly infectious. I think what we did—and

if I could have that chart—one of the things that we have done on

this project is to make sure that we went out and we touched people with this.

We had rapid early adoption where and when it was time to

start selling this project, my predecessor and then, later, I went out

on the road, met with every operating division head, met with each

one of the agency CFOs and CIOs and said this is the direction

that we are taking. I think that we were able to make a case that

as they looked at their financial systems, which I think they would

readily admit are held together with duct tape and baling wire,

that they said this is the way to go and get me there now.

Mr. PLATTS. The other aspect of my question on the risk assessment or cost-benefit analysis is, again, not what resources or

strengths you had going in, but why take higher risk? What will

we see in the end be the benefit of greater risk, assuming we can

avoid those risks?

Mr. WEEMS. Well, the benefits of the project, first of all. And I

think those benefits have been clear from the outset. Right now, we

pay bills all over HHS. We do not need that redundancy. We need

to get to those benefits as quickly as we can. And it is not paying

bills or booking accounts receivable. Those are things that I have

functional responsibility for.

The thing that I have direct responsibility for, providing the Secretary, Members of Congress, and others information about the financial condition of HHS, I find that to be a very frustrating experience right now where we are. I want to get to the end. I want

to be able to inform this committee, the President, the Secretary

about some simple things about our programs and others more

complex about the condition of finance in HHS.

Mr. PLATTS. Was there, I know some of this is really in relation

to your predecessor, and I am asking you——

Mr. WEEMS. I am still responsible, sir.

Mr. PLATTS. I am asking you to draw from your predecessor. But

I agree, the sooner we can achieve your ultimate goal, the better

for everybody, and most importantly for you and all at the department making day-to-day decisions, and that serves then all of our

citizens that your department works with.

Was there a calculated decision that if we take this approach to

implementing the system, which is not what we are really focused

on but how we are ensuring the implementation goes well, was

there a decision in taking a schedule-driven approach we have

higher risk than if we take an event-driven approach, but we can

do it in 2007 instead of 2009? There must have been a timeframe,

that if we take a more cautious, less risky way, it is going to take

longer. That is my assumption.

Mr. WEEMS. I do not have a lot of insight into where that process

would have driven us. I am afraid that is one thing that I do have

to say that I probably do not know precisely how the decisionVerDate 11-MAY-2000 13:33 Mar 01, 2005 Jkt 000000 PO 00000 Frm 00069 Fmt 6633 Sfmt 6633 D:\DOCS\98484.TXT HGOVREF1 PsN: HGOVREF1
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making was done. But I would say, and, again, something for

which I stand responsible, those alternatives have been presented

to me as I have managed this project.

In February, when we knew that it would require perfect execution, I asked what the alternatives were. Those were clear—we

would have to delay certain things, it would stretch out the time

when HHS would be fully JFMIP-compliant. I took a decision that

I did not want to do that, that I wanted to stick with schedule. The

same thing in May. When we got to August, we had pushed the

project I think as far as we could. We had gone through testing and

the empirical metrics at that time said there are some things we

can do and some things we cannot.

So we are going to do those things that we can do. Those things

that we cannot, we have completed substantial work on. That is

done. I think if we had pulled the project back, we would be in the

same place we are today except for those things being done. We

could do general ledger and payroll for CDC except we would not

have all of the other functionality that we have virtually ready to

go in the test phase right now. We would be working that through

until April. So I would say we are much farther ahead of the game.

Mr. PLATTS. I want to followup on that a little bit. But I want

to give Mr. Steinhoff a chance to comment on the decision. In your

experience with various agencies, the additional risk, that HHS acknowledges in taking this approach, is your experience that taking

a less risky event-driven decision would have added a great

amount of time into the expected completion?

Mr. STEINHOFF. No. Basically, what we find are things fairly

similar to what we saw at HHS—the folks are very committed to

the project, they work very hard. There is no question about that.

What we find is that there is such a desire to go on line with a

new system that people do. And what typically occurs, they have

problems in developing all of their requirements and they have

testing problems.

And that is what happened basically at Interior a few years ago,

that happened at NASA. They did not have metrics, they did not

have ways to really look at their performance in specific terms.

They had not defined every requirement.

HHS has I think something like 2,100 requirements. Many, probably most, are defined. Some are not. You have to define well what

environment the system is going to be in, configuration management, integration. You have to test to try to find defects, and have

very clear measures as to how many defects are acceptable. What

we typically find when someone is date-driven, and oftentimes the

beginning of the fiscal year is that magical date so the agency can

have a complete fiscal year, they make that choice to roll out the

system to meet the date.

And, typically, the problem falls into two areas; and that is, properly defining all the requirements and testing. A COTS package

will do a lot for you, but there are other things one would need.

One needs to know how the system is going to be applied in their

environment, how it is going to be implemented, how is it going to

be used by the user, what is the expected performance.

This is a huge endeavor. Mr. Weems stated it was one of the biggest ever. You are talking about three-quarters of a billion dollars

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based on the present estimate. Basically, in our view, event-driven

is really the way one should go. That does not mean you do not

have a schedule, that you do not try to hold people’s feet to the fire,

but you assure you do not consider a step completed until that

event has been proven to be successful, that you have determined

that you have satisfactorily defined all of your key requirements,

you have determined that you understand how the system is going

to work, and that, whatever the environment the system is in, you

have determined how interfaces with other systems will work. And

to us, that is the way to approach these projects, especially one of

this magnitude.

If you look at the views that we have, they are very similar to

the IV&V. They have questioned requirements. Certainly along the

way the IV&V has found requirements are better defined, but they

have questioned the specificity of many requirements, whether they

are ambiguous or not. It is hard to test against that. The IV&V had

a fairly extensive critique of the testing, not just that the system

was not quite ready to pass the test, but it raised concerns with

planning for the test, how the test was conducted; it was really

soup to nuts. They talked about the deterioration of some of the

documentation in the latter stages before October 1st. That typically happens when people are under tremendous pressure to push

something out by a given date. Short-cuts occur and you end up

having problems.

What is difficult to say at this time, Mr. Chairman, is ultimately

what will happen. No one has a crystal ball. And there are folks,

I will acknowledge, that maybe do not follow a disciplined process

and things work out for them. Others might follow disciplined processes but some things go awry later on.

But our belief is, and a very strong belief, that you should always

be safe on these projects and that disciplined processes have been

proven to be the way to go, and event-driven is what people really

have found gives you the best chance for success.

We have a chart on page 15 of our report, a figure that shows

what typically happens when all the key disciplines are not followed, or not followed substantially. You have a lot of visible

progress in the beginning—again, you cannot always tell what your

progress is because you have not really had the metrics in place to

measure it well. Where you run into the problem is when you get

to the end. And the real proof of the pudding for HHS will come

sometime in 2007.

The goal that we have is really to provide our best thinking at

this stage in looking at this project, given the fact that HHS has

more time before project completion, and say here is what we think

you should be doing now and here is what you should do to go to

that next step. So, we feel strongly that event-driven is the way to

go. But, again, only time will tell how this will turn out.

Mr. PLATTS. Let me expand on that approach. Mr. Weems, in

talking about your decision to delay the October implementation

plan, you said that in February there were kind of some early

warning signs I guess.

Mr. WEEMS. Yes.

Mr. PLATTS. And your team said you would have to be perfect,

but you think you can be perfect and go forward. Then in May, it

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is going to take a heroic effort, but we are going to make that heroic effort to get it done. In August, IV&V comes back with I guess

some more concerns about the ability to really do what you are

planning. And then here in late September you make a final decision to not go forward.

I guess two aspects. One is, what is the likelihood you would

have gone forward and tried to fix the process as you went forward

if the GAO report was not coming out which added some pressure

or scrutiny? And I would appreciate a frank dialog on that. And

second, if you had back in February 20/20 hindsight, I openly acknowledge that, would the delay—right now you are looking at a

6-month delay is my understanding.

Mr. WEEMS. Yes.

Mr. PLATTS. So talking next April I guess, maybe May.

Mr. WEEMS. April.

Mr. PLATTS. Would it be April or May to be where you think you

can go forward if you had not been driven by the October date, the

schedule being October? I think I am paraphrasing this well, that

if it was event-driven, you would say we are not worried about October, worry about just dealing with what we need to do right, and

so we would have made changes back in February. Do you think

you would have been delayed until April if that had been the case?

Mr. WEEMS. Sure. But let me take your first question first, and

that is the events leading up to the decision that we took. I got the

alert from the IV&V contractor. I get reports from them every 2

weeks, but from time to time they will issue a special alert, and

that is what this was. It was outside of the normal process. It is

something that says, Mr. Weems, you need to go pay attention to

this now.

Obviously, I knew that our friends at GAO were looking at us.

Though their engagement with us had ended at that point, I certainly was cognizant of their presence. But I would say that alert

itself had some very discreet recommendations in it. We had just

finished our readiness review, so there were some objective measures.

I sat with the team leaders down there, spent a good part of the

day with them going through at a very granular level where are

we, where are we, where are we. And as they looked at the

empirics coming out of testing, as they looked at the amount of

testing being done, there were a couple of things for which they

could not offer me assurance. And I would say that in my mind

those were the things that made up my mind.

I was not offered complete assurance of funds control by the time

that we would turn the system on. That as somebody with delegated responsibility of CFO, I knew at that point we could not do

it until I had that assurance.

The second piece was there was some question as to whether or

not we would be able to pay bills timely. Causing consternation

among our community to which we pay bills is not something that

I was looking forward to. We had already, I would say, engaged

that community to start telling them that there would be a 2-week

delay in bill paying as we switched the system. Well, I was not

going to let 2 weeks stretch into 3 weeks, stretch into 4 weeks.

69

And so I would say at that time I stepped back and I said, OK,

we cannot go forward with full functionality. What can we do? And

the team quickly came up with those things that had been rock

hard in implementation and testing, general ledger, payroll, and we

could get to grants. So those are the things that we decided to implement. So we went forward with an implementation, but those

things that were not rock solid we pulled back.

To answer to your second question, sir, in talking to my team in

February and in May about, OK, if we have to do something here,

what would we do, a good deal of the advice that I was getting

would say that we would have delayed for a year from October

rather than to April. So I think taking the steps that we took, we

got a lot of work done between February and September. The step

that we took at the end of August and beginning of September now

allows us to reflect on that work, to subject that work to testing,

to implement it in April.

Mr. PLATTS. OK. Clearly, the empirical data associated with the

testing played a big role in your decision.

Mr. WEEMS. Yes.

Mr. PLATTS. That would seem to make a strong case for what

GAO argues of the importance of having more clearly defined

standards, the requirements management up front, a tighter approach up front than a more flexible plan. It seems like you have

had an example of that now. Is that going to cause you, along with

the report in total, to look at maybe the need to revise some of your

requirements now before you keep going forward?

Mr. WEEMS. Well, I think we are going to try and do both at the

same time. We have accepted a number of the recommendations

from GAO, and certainly we are grateful for their help in that regard. So with those revisions, I do think we are positioned to continue the project, continue pace and tempo, and to continue to

measure how we are doing with objective measures, but to keep

that April date in front of us, too.

Mr. PLATTS. Maybe a followup that kind of relates to how defined

your standards are up front, your requirements up front. As I read

the testimony in preparing for today, a big part between HHS and

GAO is the different mindset with using a commercial off-the-shelf

product. And your contention is that because you are using that

COTS, you necessarily cannot be as defined as if it was a customized plan or product. GAO, your history with other departments

and things, yours is that even with using a COTS system, there

still needs to be more specifics than HHS is approaching.

Mr. STEINHOFF. Yes.

Mr. PLATTS. Mr. Steinhoff, if you want to expand on that, and

I guess, specifically, you mentioned Interior. In your review of

other departments and agencies that have undergone these efforts,

I guess one thing is maybe address the difference in your belief

that it should be more defined even though it is a COTS; and then

second, is there a history of other agencies that have used a COTS

product and thus thought they had to be less specific, but then in

the end they had problems and we get into the rework and the cost

of that?

Mr. STEINHOFF. Yes. Let me kind of talk a little bit about the

philosophy behind COTS, and to say at first that I serve on the

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JFMIP steering committee. I had chaired the committee for several

years and I am now a member, been on it for many years.

What this process is about, this certification process, is the Government was buying commercial packages, working with vendors,

doing a lot of customization. And the Government stepped back and

said let us lay out what our requirements are, our core requirements. There may be A to Z specific requirements, and for an entity such as HHS there may well be many others. There are also

mandatory requirements and value-added requirements, more

value-added are becoming mandatory as time goes on.

But what the government basically said was let us have a process in place to look at commercial packages and to really make

those packages meet a certain level, certain standards. We will define the requirements and we will test against those requirements.

And at each step of the way, I think the testing itself has become

more robust and more complete.

You have 331 requirements that are now tested by JFMIP and

they are tested in a controlled environment, one environment,

1,500 transactions. COTS packages are not tested in HHS’ environment, or Interior’s environment, or NASA’s environment. They

might be configured differently. The systems might work a little

differently and have different functionality you can turn off and on.

The issue of how precise you have to be in your requirements

really comes after you purchase the package. As you are making

your decision on purchasing the package, you can be I think more

general; what does this do for me, and how does it roughly do it.

And then the key, as Mr. Weems said correctly, is to then adjust

your own processes to meet that system. There may be some areas

where you do not. And there is probably no COTS package that is

not customized in some manner. I am not sure exactly how many

of these are going to be applied later one, but I think HHS had

something like 2,100 requirements identified at the time of our

work and the core functionality tested in the COTS package was

331, or about 15 or 16 percent.

So, once you have purchased the package, you have to sit down

and really define exactly how it is going to be configured, you are

going to have to look at the suitability, you are going to have to

define how you want that requirement to work for you. And that

is pretty much accepted practice. The JFMIP makes very clear on

its Web page that these are things that you have to do. You have

to test this in your own environment. You have to determine how

you are going to use the functionality and determine the requirements.

And really looking at the methodology selected by HHS—and I

will add that our differences with HHS is not so much with their

methodology, it is in how far they have gotten along in the methodology; you know, the metrics or the rigor to it. HHS’ methodology

spoke about reviewing and updating requirements for design process workshops, establishing baselines, performing fit and gap analysis, developing gap closure alternatives, creating final baseline requirements.

We think those are proper things to do. What we and the IV&V

contractor found were a number of requirements that were not yet

specific enough to really even know what you were going to get

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from that requirement, to actually develop a test script to test it.

So it was really a matter of more needed to be done.

But regardless of whether you have a custom system, which we

do not recommend people develope, the way to go is to buy the

COTS packages, or whether you buy a COTS package, you still

have to work hard on the requirements or you will get to the end

and the system will not be able to do some things that are essential

for you. I will give you an example at an agency that had really

struggled with a COTS package because of the liability to readily

process the transactions it has.

GSA, which has a high volume of transactions, found that the

number of steps the software went through took too long. It is

called scalability. And the way the software was designed, it was

not set up to operate efficiently in GSA’s environment. GSA found

that out once it turned on the switch. The agency spent a lot of

time and effort to work through that. The key is to identify problems before you turn on the switch, long before, and make those

changes early on so you do not face the rework later on. Rework

is where you spend a lot of money.

Mr. PLATTS. Mr. Rhodes, did you want to add anything regarding

the approach and those standards or the specificity of some of the

standards for which you have asked for more?

Mr. RHODES. I guess I would get back to the discussion on risk

that you were having earlier. Mr. Weems is revolutionary. He is

wanting to completely change. He is wanting to enact what the

Secretary wants, which is to transform Health and Human Services. By definition, that is risk. As he stated, largest budget, widest

and most diverse portfolio, etc.

I do not think, based on my having looked at the JFMIP requirements, I do not view that as a revolution template. That is ultimately a partial calibration of an accounting system. What Mr.

Weems wants to do is revolutionize financial management at HHS.

That is the correct thing to do.

But, with that in mind, then if I am going to establish cost as

an independent variable and I am going to say there is $700 million and I am not going to break this budget, and I have the constraints of making certain that I pay the contractors and pay the

bills of HHS on time, I have the operational requirement, and I

have 110 systems that I have to interface, the concern that I have

is that when words of perfection or heroic or Herculean effort and

things like that are brought in, then I have to view it as risk.

In looking at it through risk, day 1, event-driven or scheduledriven, there is a great deal of rigor and specificity required for

success. The fundamental difference between event-driven or

schedule-driven is emphasis. The date is more important than the

function, or the function is more important than the date. That is

really the only distinction.

So, if I take Oracle’s view, or PeopleSoft, or SAP, or whomever,

I take Oracle’s view of the universe, well, their having a marketcentric view to get the JFMIP compliance, but they may not know

anything at all about HHS. Fine. That means the onus is on HHS

to do the gap analysis between how do we do things now and what

does this bring to the table so that we can get the delta in place

so that we can understand what we have to test for. As Mr.

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Steinhoff said, what is critical, what is not critical, what can be deferred, what cannot be deferred.

The real challenge that I see for them is making certain that

there is that, as I described for you last time when we were talking

about the Department of Defense, that crimson thread of salvation

that runs through this requirement set. It leads from concept of operations directly to large scale requirements bounced against the

system that we are procuring, then you start getting down into the

detailed requirements, and from that, we are building the test case

that comes back and proves that the system actually does this. If

that is in place and supports the schedule, then being scheduledriven is not bad because your requirement set is strong enough

to say I believe my schedule. If it requires perfection, then I better

have perfect requirements.

I am not trying to be tautological here. But the onus, the pressure is on to be absolutely correct and be correct the first time out

of the can. And when your effort is already heroic because you are

trying to transform something as large as the financial management at Health and Human Services, then the requirements had

better be strong and they had better be precise, because there is

going to be some work you have to do and if the ultimate changes

you make to the system are greater than 25 percent, then you have

just expended the same amount of energy you would if you had

started from scratch.

And those are the things that need to be understood and you

have to be collecting the metrics that let you know where you are.

For example, it is not a matter of defect tracking, it is a matter

of trend analysis—what problems am I encountering in this development cycle and am I getting better, is the number going down,

are they able to bundle together, things like that. That is the kind

of quantitative measures that provide you the trend analysis to

know where you are headed. But they all come back to the stability, veracity, clarity, lack of ambiguity in your requirement set.

Mr. PLATTS. The fact that we have the five legacy systems and

the 110 or so interfaces, and just the breadth of the whole transformation is part of that argument of why the greater detail up

front?

Mr. RHODES. Absolutely.

Mr. PLATTS. Mr. Weems, I want to reemphasize if I did not say

it earlier, we want you to have great success by 2007 so we can

move you over to Defense and then replicate the success there.

[Laughter.] Because a $400 billion budget will be nothing after we succeed with $580, right?

Mr. WEEMS. That is right.

Mr. PLATTS. I had a number of points to followup on. I want to

have everyone engaged in the dialog here. Mr. Weems, earlier you

talked about, in taking the approach you have, a schedule-driven

model, that it was BearingPoint’s approach, that is their best practice. Was that a big part of the decision to go this way versus the

approach that GAO has recommended, because BearingPoint being

your contractor and you are trusting them once you make that decision that they are who you are in the battle with and their belief

that this is best practice?

73

Mr. WEEMS. That certainly did bear on it that our partner was

also engaged in this effort. I would also say the Oracle model follows the same type model as best practice for implementation. That

was important, but I think the thing that makes us look to schedule is the benefits of the system, is having Federal managers across

HHS look at what they have now, believe in the possibility of the

future and say Kerry, get me there now, get me there sooner, I

need that. I think that is the thing that drives us.

Capturing those benefits, having Federal managers understand

where they are financially in an enterprise that is over half a trillion dollars a year is absolutely essential, and that is where our

managers want to be. That is why they are saying get me there

now.

Mr. PLATTS. I would think you would agree that enthusiasm is

great and that buy-in is so critical. But part of your role is to see

the whole picture and, you know, we want to get you there but

maybe—and I will say it in the way as a parent might sometimes

with kids. We could be going to the park and they want me to

hurry and get them there because they want to get playing. But

I have to stay within the speed limit, because getting them there

as quickly as I can but safely is something that is my responsibility. And part of your role is to take all that excitement, enthusiasm, buy-in, but make sure it is still going to be at the end of

the day truly the most responsible approach.

Mr. WEEMS. Absolutely, Mr. Chairman. I think that was the role

that I and my leadership team played at the end of August and

early September is that we stepped in, looked at where things

were, and said we are not ready. We took an affirmative management action.

And when I took that decision, I immediately conferred with my

leadership team and then we went right down that pyramid that

I had up earlier. We talked to the managers, we told them where

they were, and they were very accepting. So we took the decision

that was appropriate at the time. If I and my team had taken no

action, we would right now be hurtling toward full implementation

starting tomorrow.

Mr. PLATTS. You certainly have appropriately emphasized the

importance of all personnel buying-in and being part of this team

effort. Can you address the issue of your staffing, that is one issue

GAO has raised, and your having staffing that you need to move

the ball forward in an appropriate fashion?

Mr. WEEMS. Yes. And that I certainly will admit from the beginning has been a particularly nettlesome issue because of the predicate from which we began, and that is that we were not going to

build permanent Federal bureaucracy to implement this. That we

were going to bring in a few key people, the rest of the Federal effort has been comprised of folks who have been detailed in from the

agencies to fill roles.

Those details work for 6 months, in some cases a year, and then

the agency needs them back. Other roles, especially in the site implementations, have been filled by people doing double duty, where

they do their day job and then at 6 in the evening they go do their

UFMS work. That is sort of a test of some of the dedication of the

staff. They have worked very hard to do that.

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Looking back, we probably should have opened up a couple of

more permanent positions, if I had to say what would I have done

differently. For the positions that we have that have been opened,

we have offered temporary positions—why not come in, we will give

you 2 years’ worth of work, after that we are not sure what happens. We have not had particularly good luck in filling those positions. So I would say, as GAO notes, our overall human resources

strategy is something that we need to take a step back to look at.

We need to make sure that we have those positions filled with

good, competent people.

One of the benefits though that we think that this strategy of

using detailees and folks from the agencies is it cuts down substantially on our training costs. If somebody comes and works on the

project for 6 months, for a year, and then goes back to the agency,

they not only going to be fully trained, they are going to be a super

user. When the system comes up they are going to say, hey, I

worked on this project, I know how to do this. We think that is one

of the benefits. We understand that we have some key vacancies

and that certainly is something that we are going to have to spend

some time working on. Hiring a Federal employee is very hard and

the process is not particularly nimble.

Mr. PLATTS. I am glad to hear that acknowledgement—that you

are actively looking at your human resource issue and how to address the challenges you are facing there. When I hear the heroic

efforts and dedicated effort being put forth as you try to move forward to your October deadline, that is great.

But when I look and think we are basically on a 5-year plan and

3 years more to go, the ability to maintain that tempo without

burning out key people and in the end losing that wealth of knowledge is something that we need to be careful of. And the fact that

you are looking at how to correct that is good. And in this case I

imagine you would like to have what DoD has, which is some hiring flexibility so that you can more quickly fill spots that you need

as opposed to the bureaucratic process that takes a while.

Mr. WEEMS. I am also worried, though, about creating a permanent bureaucracy. Having three or four people, five people, a nucleus around which we can work I think is important. But in my

23 years in Government, sir, I have seen a lot of project offices turn

into things that live well beyond their useful life and draw resources from the Government that they should not be drawing. And

that is one of the things that we have tried to be careful to avoid.

Mr. PLATTS. Yes. Because once we create a position, it stays.

Mr. WEEMS. Yes.

Mr. PLATTS. Create a program, it stays, even if it out-lasts its appropriate use.

We have been joined by Mike Turner, a member of the committee. Mike, I appreciate your being with us. Did you have anything

you wanted to say?

Mr. TURNER. I just appreciate the chairman’s continued work on

this issue.

Mr. PLATTS. Thank you. Let me talk about maybe some of the

cost issues. With that three-quarters of a billion dollar estimate out

there, I guess the testimony had information about the CDC pilot

implementation, that NIH pilot, and that was about a $100 million

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cost using the same COTS system and about $12 million to migrate

that system over to the UFMS.

Mr. WEEMS. Yes.

Mr. PLATTS. I guess the first question would be, why the $12 mil- lion cost to migrate it over? And is that $100 million part of the

$700 million?

Mr. WEEMS. Yes.

Mr. PLATTS. OK. That is good. I was hoping it was. [Laughter.]

Mr. WEEMS. So is the $12 million.

Mr. PLATTS. And the $12 million is?

Mr. WEEMS. Yes, sir.

Mr. PLATTS. Why, if it is the same COTS? Kind of educate this

lay person to understand that.

Mr. WEEMS. It is an excellent question. When we started back in

June 2001, the five systems that we were looking to replace were

not in the same place. NIH was much farther along. Also, NIH’s

system brought to the table other administrative functions beyond

financial management.

Our choice at the time was to use the NIH system as a model

for the rest of the department. But their work was not scaled right

for the rest of the department, their effort was not scaled right. So

that did not seem like a viable alternative. Our other alternative

was to stop NIH from what they were doing, delay the benefits of

their implementation, and let the rest of the department catch up.

The third way was to let NIH proceed, let the rest of the department catch up, and at some later point merge the two implementations. That latter choice is the choice that we made. The $12 million cost, that is an estimate right now of what it will take. But

the NIH implementation proceeded in a way to meet NIH’s needs,

not the needs of the broad HHS. That $12 million is the cost of

bringing those two things together.

We think we made the right decision. Right now, we closed the

books today. NIH is going to do financial reporting this year on its

system. We did not want to delay that. NIH has a very efficient

and effective e-travel system, way ahead of the rest of the department. We did not want to delay that. They are going to have other

administrative functions like supply chain management. We did

not want to delay the benefits of those things.

So, the short answer is, NIH developed an implementation for

NIH. We allowed them to proceed. It meets their business needs.

We will catch up with them this next year as we bring their business needs into UFMS and align their project with UFMS.

Mr. PLATTS. Mr. Steinhoff, in your assessment of that approach

and kind of the focus on the cost issue, is that $12 million estimate

of integrating it over something that seems viable, or is it going to

actually be more?

Mr. STEINHOFF. We did not actually look at that at all. I would

say though, Mr. Chairman, it gets back to our earlier discussion

about COTS packages. Mr. Weems said it very well, that package

was taken and configured for NIH. So, for every COTS package, it

is very important that you configure it for your use and you determine how functionality is going to be employed.

So it is not surprising that HHS would have to make some

changes to take the NIH package into the broader parameters here.

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Also, as the department better defines its requirements, it may find

other things are needed to assure that the NIH system is in fact

meeting the broader needs. For example, the COTS package is primarily core accounting, whereas the vision is much broader.

So, we did not look at the estimate. But these are the kinds of

costs that one would have, and it is not surprising to incur a cost

to convert the same COTS package to another environment.

Mr. PLATTS. Mr. Weems, in talking about where you were with

NIH, you touched on something that I was going to raise about the

legacy systems. In June 2001, when the Secretary’s memorandum

came forward that HHS was basically going to have one—great vision and commendable effort that is going on—various components

of HHS were already moving forward, like NIH. What is the status

of those others? Have we continued to spend money elsewhere? Or

were the other ones pretty much put on hold and are part of the

big picture?

Mr. WEEMS. That is right.

Mr. PLATTS. OK.

Mr. WEEMS. In fact, Mr. Chairman, I remember this meeting

very, very clearly with the Secretary. In February, just after he

was confirmed, we sat down and we started working through the

budget with him. And in CDC, in FDA, in PSC, in NIH, there were

budget requests to build five different accounting systems. He

looked at us and essentially said why are we doing this. Let us

have one.

And that led to that memorandum. That budget meeting in February led to that memorandum. So since then we have done maintenance costs on the legacy systems to keep them going. But we are

not building systems outside of UFMS. We absolutely put an end

to that.

Mr. PLATTS. That is great and glad to hear that. Do you by any

chance remember, ballpark, what those estimates were if you had

gone forward with those independent efforts to rewrite them?

Mr. WEEMS. No, I do not remember the total project costs of each

incremental budget cost or what we were looking at at that moment. I do not recall. But the thing that they were doing were simply buying new of what they had. There was not the vision in the

agencies of being able to go to a shared service environment and

say we are going to have one place in HHS that pays bills, and

guess what, guys, we are going to compete to see who gets to do

that. We are going to have one place that maintains the system,

we are going to have one place that has a Help Desk for all of

UFMS. That vision was not present in those budget requests. That

vision was present in June.

Mr. PLATTS. And that is something with your vendors, all the

private sector, that has to be something that they look forward to,

I would think, that there is one place that pays bill so they know

who to go to between the various entities.

Mr. WEEMS. I am sure our partners look very much forward to

that, and certainly those of us who have to track financial transactions across the institution do too.

Mr. STEINHOFF. Mr. Chairman, if I may add.

Mr. PLATTS. Yes.

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Mr. STEINHOFF. I will add that concept is one that we support

strongly. I think Mr. Weems got to the bottom line of the issue in

actually making that happen when the Secretary said you are not

going to spend the money. You probably remember when we testified on DOD, we said part of the problem is the military services

and other commands still have their own budgets and still have

their own constituencies through appropriations and are building

away. You have to control the money. You have to provide that discipline. And this approach is one we strongly support.

Mr. PLATTS. And it is a good model for other entities like DOD

to follow.

Mr. STEINHOFF. Yes.

Mr. PLATTS. And for Mr. Weems, for you at the department headquarters and ultimately for the Secretary to have that knowledge.

In our hearing in this room not too long ago with NASA, the CFOs

are dedicating their efforts, but those independent NASA Centers

are kind of going their own ways.

Mr. WEEMS. If I might make a point there, Mr. Chairman. We

did not create a single budget for UFMS. The budget for UFMS is

in every one of our operating divisions. They have a stake in the

success of this project and they have not gone off with that budget

and hired somebody else and said this is crazy. They have seen the

benefits, they have stayed with us, they are using dollars appropriated to them, and we bring it all together through a Memorandum of Understanding in a central pot to expend it. But those dollars are appropriated to them and they have stewardship of those

dollars.

Mr. PLATTS. Good approach. How about on the issue, as you

move forward with your implementation, the need for manual efforts to really address shortcomings in the program that were not

envisioned? What do you expect with CDC as you go forward?

What is likely to be the level of manual operations or processes

that are going to be required to make up for something that was

not envisioned?

Mr. WEEMS. Well, the short answer is, a few. There will be some.

But that I think follows the rule that you have to give a little to

get a lot.

Mr. PLATTS. Are there some specifics, some examples that maybe

you envision?

Mr. WEEMS. Oh, yes. Most of these actually have to do with existing interfaces that are going to be manual transactions now that

will not be automated in the initial implementation. International

invoices, how we pay our partners internationally, that is a fairly

small workload, one that we did not think was worth writing an

extension for. E-mail notification of purchase order exception processing, this purchase order did not work so we are going to send

you an e-mail and tell you, we will have to have a manual workaround for that. CDC has an interactive voice recognition system

that they use for some vendor payments, and we will have a manual work-around for that in this implementation too.

So there will be a few. We think that actually these will be taken

care of in subsequent releases of UFMS. But there will be a few,

and I am afraid I do not have any example with me, where writing

an extension to the software just was not worth it and so we are

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going to adopt the business change that using Federal Financials

brought to us without writing an extension to do something manually. These will be small things where it just was not worth the

dollars to write the extension for the software.

Mr. PLATTS. Mr. Steinhoff, is that something, I am not sure how

much detail you looked at, that likely manual work-arounds are

going to be required? Anything you want to add?

Mr. STEINHOFF. Well, they had not actually rolled out the system

so you could not really see exactly what would be entailed there.

It has been a problem with other agencies who have found that

their system does not provide them what they need. So the staff

immediately goes off and develop an ad hoc system or end up with

1,000 Excel spread sheets and they pull down data, or at times people find that the information is there but it is not there in a form

that is easy for them to use it. So the performance of the system

and the ability to meet the users’ needs is lacking. But HHS was

not yet in a position that we could tell what would happen. And

you really tell that oftentimes when these things go live. And when

the activities or entities that are using the systems find that it

does not provide them the agility and the quality of information

they need, they themselves will start developing those ad hoc systems.

Mr. PLATTS. Mr. Weems, it sounds like for those work-arounds

that you purposely did not write an extension, you really are going

to be looking to learn from that with CDC for the subsequent implementation efforts so to try to diminish the number of manual

work-arounds.

Mr. WEEMS. Yes. And in some cases, for instance, the voice recognition system that CDC uses, we did not write an extension to

that. CDC has found that a very useful functionality and it may

actually be an instance where we want to pick up that functionality

and look at it for the rest of the department. So, for instance, if

CDC were to become our bill payer, that functionality would be

very, very important and that would be the kind of thing that we

would write an extension for or make sure that meshed with the

software, because its value at that point, if CDC were our bill

payer, would be very high.

Mr. PLATTS. That is something that will be down the road, that

decision?

Mr. WEEMS. Yes. Yes.

Mr. PLATTS. Right. A couple more areas maybe to touch on. One

is, actually when we were talking about the cost, and I realize that

you are putting your best estimate out there on the whole cost, but

one aspect of it is the integration of UFMS with your HIGLAS

Medicare program. Is that something that is still in the works or

not included in that estimate of $700 million?

Mr. WEEMS. Integration at the reporting level is included at the

$700 million. The HIGLAS and the UFMS components will be able

to produce consolidated financial reports within the $700 million

plan.

Mr. PLATTS. As part of the $700 million, it really does include

how to integrate the two then? I am not sure I am understanding

you.

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Mr. WEEMS. I think it depends on what we mean by integration.

We will be able to produce integrated reports. They will not be, for

a number of very good and proper reasons, integrated systems.

Handling the Medicare workload is just so different both in volume,

complexity, and just by its very nature is different from a good deal

of the rest of what HHS does. So we are not going to integrate that

at the systems level.

Mr. PLATTS. OK. So other than reports, you really do not envision that level of integration?

Mr. WEEMS. That is right. At least at this stage of the technology, we do not envision what a layman would call, and I certainly consider myself that, a full integration.

Mr. PLATTS. Is that a change from the initial memorandum of a

single HHS system, the original vision?

Mr. WEEMS. I think even when this was written we knew that

the volume and nature of things at CMS would mean that we

would still need something separate at some level—at the machine

level, at the code level, some level—where it just would not be fully

integrated. The Medicare processing workload is immense. It is

nearly a billion Medicare bills that are processed a year, and that

is before Part D of the new prescription drug program.

Mr. PLATTS. And that is prior to all the baby-boomers retiring,

right?

Mr. WEEMS. That is right. That is before I start submitting my

bills. [Laughter.]

Mr. PLATTS. Mr. Steinhoff, do you have any thoughts about keeping those systems separate, that being good, bad, or it is hard to

say at this point?

Mr. STEINHOFF. We really have not looked at that in particular.

We noted that in pulling the plan together HHS had not stated

how it was going to integrate those systems. So I think we have

gotten the answer today. But that is something that we did not

cover as part of our review.

Mr. PLATTS. OK. As we move toward a wrap-up here, we have

talked about the interaction between GAO and HHS, the GAO report and its recommendations, 34 specific recommendations I believe, 9 that were more pressing, and then some others to work

through. Maybe you would comment on how those sifted out; the

ones you have embraced and you already have addressed, ones you

are addressing, or ones that you disagree on. Is there a consensus

of how you are going to go forward with those recommendations

and what you are going to do in response to them?

Mr. WEEMS. I think that in HHS we have adopted a good number of them, and I think we have informed our friends at GAO of

those that we have adopted. For others, such as requirements and

testing, at the time of the engagement GAO’s comments were proper. But things have changed since then and I think our requirements traceability matrix is much more defined. I think the testing

that they have been put through reveals that. Also at the time of

their engagement, we did not have a complete or good test plan.

I think since that time those things certainly have changed.

So we, on balance, considered their comments very useful. We

will continue to work on our management of human capital, for instance. That is something that was pointed out. Obviously, it had

80

been a concern of ours, but it is something that we need to do. We

will use clear metrics in defining where we are going, but we are

still going to continue to keep dates in front of people and to drive

to those dates while maintaining the quality and integrity of the

program.

Mr. PLATTS. Mr. Steinhoff, maybe if you could address any specific recommendations you have made where you have had dialog

and maybe there is not agreement. Is there one or two or whatever

number that you think are critical that HHS take a further look

at?

Mr. STEINHOFF. I think the four things that Keith Rhodes talked

about up front are really the most important areas now. Testing is

critical, and testing is driven by the requirements. I am encouraged

that the requirements issues have been resolved as Mr. Weems

stated today because they were a concern to us when we were

there. The question will be how effective has that been.

Mr. PLATTS. And on the testing, it sounds like your testing is

more defined today than when GAO was reviewing.

Mr. WEEMS. Absolutely.

Mr. STEINHOFF. There were a number of recommendations made

in the most recent IV&V report, both that special report Mr.

Weems mentioned as well as the report the IV&V contractor issued

on September 10th which covered their August activity. There were

really a litany of issues surrounding testing and they are a variety

of important tests. So I think HHS has a roadmap on what to do.

But it will be very important to assure you have the requirements in hand, and you have the test in a manner that is disciplined. It is seeking to find deficiencies because you want testing

to be as rigorous as you possibly can have it. You want to be able

to truly pass that test. You want to make sure the system is useable by the user. I read about a system the other day where I guess

the users started crying when they turned on their computer

screens. That is the last thing one wants.

Mr. PLATTS. Especially after $700 million.

Mr. STEINHOFF. Yes. You are going to have to work really hard,

as Mr. Rhodes stated, when you get down to the ability to actually

convert the information you now have to the new system as well

as integrate with the other 110 systems, in the case of CDC the

30, and then the metrics are very key. We continue to believe that

event-driven is the way to go. Our hope is that HHS will have both

event-and date-driven. Have a date in front of people but assure

that things have moved through certain events successfully and

have the metrics to show that. Because we feel without that the

risk is very, very high. And none of us want to be here in 2007 revisiting this.

Mr. PLATTS. We want to be here celebrating.

Mr. WEEMS. That is right.

Mr. PLATTS. Mr. Rhodes.

Mr. RHODES. I would just echo Mr. Steinhoff’s points of what we

consider key to their success. Just taking one example of the interfaces, for example, it is not the number, it is that as we have seen

at HHS, which we have seen at DoD, which we have seen at

NASA, which we have seen at Bureau of Indian Affairs and DeVerDate 11-MAY-2000 13:33 Mar 01, 2005 Jkt 000000 PO 00000 Frm 00084 Fmt 6633 Sfmt 6633 D:\DOCS\98484.TXT HGOVREF1 PsN: HGOVREF1
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partment of Interior, the systems to which they are trying to interface are not necessarily well-defined in and of themselves.

And so trying to figure out what that interface is both at a data

level, at a process level, and then at the actual physical, electrical

level is very complicated. That is extremely important because that

is going to be their data source and that is really the pathway they

move to the transformation that the Secretary and Mr. Weems are

talking about. As long as the requirement leads to the test and it

is being measured, they will be able to get there. But that is the

challenge for them.

Mr. PLATTS. I think your feedback certainly has been well reviewed and is being weighed in good faith by the department. With

Government in general, the joke sometimes is, I am from the Government, I am here to help. I imagine the departments sometimes

view GAO that way, we are from GAO and we are here really to

help, there is some skepticism. I hope that is not the case here because I think there is a wealth of knowledge and good faith effort

to help HHS to be part of the team of this transformation.

The one thing I would add, and I think, Mr. Weems, you appreciate it, is that Mr. Steinhoff and Mr. Rhodes personally and GAO

in a broad sense has a wealth of knowledge and historical perspective with other agencies and departments who have gone through

similar efforts. The counsel they are sharing is not based on just

some theory, but based on real practices, experiences elsewhere. So

I appreciate you and your staff in your efforts in giving great

weight to their input.

Thank you all for your great insights today and for helping to

better educate this lay person on where we stand. I want to thank

you each individually for your work and please convey to your respective staffs back in your offices my sincere thanks for theirs.

I think being a public servant is a very admirable profession.

Earlier this week I had the pleasure of recognizing a postal service

employee in my district, in Gettysburg, in fact, who, after 30 years

of service and 1 million miles of safe driving delivering mail, was

recognized and welcomed into the Million Mile Club. As one who

commutes daily, drives about 30,000 miles a year in my commute

from my district I think, I have to be here 33 years to catch up.

[Laughter.]

But as I commended him, I commend each of you and your staffs

for your work. We know you are truly looking out for the best interest of your fellow citizens, especially in important areas like NIH

and CDC, and Medicare, because I want it to be there too when

I get there.

I look forward to our committee and staff continuing to work

with your offices as we move forward in this truly great vision that

we want to become a reality. And I certainly thank committee staff

on both sides for their legwork and also helping to educate and prepare this lay person. So, thanks for your testimony. We will keep

the record open for 2 weeks for any additional information that

needs to be shared.

This hearing stands adjourned.

[Whereupon, at 3:45 p.m., the committee was adjourned.]

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