U.S. GOVERNMENT PRINTING OFFICE

61–629 WASHINGTON : 2000

Y2K MYTHS AND REALITIES

JOINT HEARING

BEFORE THE

SUBCOMMITTEE ON TECHNOLOGY

OF THE

COMMITTEE ON SCIENCE

AND THE

SUBCOMMITTEE ON

GOVERNMENT MANAGEMENT,

INFORMATION, AND TECHNOLOGY

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

FIRST SESSION

NOVEMBER 4, 1999

Science Serial No. 106–61

Government Reform Serial No. 106–67

Printed for the use of the Committee on Science and the Committee on

Government Reform

(

(II)

COMMITTEE ON SCIENCE

F. JAMES SENSENBRENNER, JR., 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

RALPH M. HALL, Texas, Ranking Minority

Member

BART GORDON, Tennessee

JERRY F. COSTELLO, Illinois

JAMES A. BARCIA, Michigan

EDDIE BERNICE JOHNSON, Texas

LYNN C. WOOLSEY, California

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

BRIAN BAIRD, Washington

JOSEPH M. HOEFFEL, Pennsylvania

DENNIS MOORE, Kansas

Vacancy

(III)

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

HELEN CHENOWETH-HAGE, Idaho

DAVID VITTER, Louisiana

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

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

JANICE D. SCHAKOWSKY, Illinois

———

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

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT, INFORMATION, AND TECHNOLOGY

STEPHEN HORN, California, Chairman

JUDY BIGGERT, Illinois

THOMAS M. DAVIS, Virginia

GREG WALDEN, Oregon

DOUG OSE, California

PAUL RYAN, Wisconsin

JIM TURNER, Texas

PAUL E. KANJORSKI, Pennsylvania

MAJOR R. OWENS, New York

PATSY T. MINK, Hawaii

CAROLYN B. MALONEY, New York

EX OFFICIO

DAN BURTON, Indiana HENRY A. WAXMAN, California

J. RUSSELL GEORGE, Staff Director and Chief Counsel

MATTHEW RYAN, Senior Policy Director

BONNIE HEALD, Communications Director/Professional Staff Member

CHIP AHLSWEDE, Clerk

TREY HENDERSON, Minority Professional Staff Member

(V)

C O N T E N T S

NOVEMBER 4, 1999

Page

Opening Statement by Representative Constance A. Morella, Chairwoman,

Subcommittee on Technology, U.S. House of Representatives ......................... 1

Opening Statement by Representative James A. Barcia, Ranking Member,

Subcommittee on Technology, U.S. House of Representatives ......................... 7

Opening Statement by Representative Debbie Stabenow, Subcommittee on

Technology, U.S. House of Representatives ....................................................... 8

Opening Statement by Representative Jim Turner, Subcommittee on Government Management, Information, and Technology, U.S. House of Representatives ..................................................................................................................... 9

Opening Statement by Representative Judy Biggert, Subcommittee on Technology, U.S. House of Representatives ............................................................... 82

Opening Statement by Representative Steve Horn, Subcommittee on Government Management, Information, and Technology, U.S. House of Representatives ..................................................................................................................... 85

WITNESSES

The Honorable John A. Koskinen, Special Assistant to the President, Chairman, Y2K Conversion Council:

Oral Testimony ................................................................................................. 11

Prepared Testimony ......................................................................................... 14

Biography .......................................................................................................... 19

The Honorable Joel Willemssen, Director of Civilian Agencies Information

Systems, United States General Accounting Office:

Oral Testimony ................................................................................................. 20

Prepared Testimony ......................................................................................... 22

Biography .......................................................................................................... 73

The Honorable Barry F. Scher, Vice President of Public Affairs, Giant Food,

Inc.:

Oral Testimony ................................................................................................. 101

Prepared Testimony ......................................................................................... 104

Biography .......................................................................................................... 108

Financial Disclosure ......................................................................................... 110

The Honorable J. Patrick Campbell, Chief Operating Officer and Executive

Vice President, The Nasdaq-Amex Market Group, Inc.:

Oral Testimony ................................................................................................. 111

Prepared Testimony ......................................................................................... 113

Biography .......................................................................................................... 126

The Honorable Ronald Margolis, Representing the American Hospital Association, Chief Information Officer, University of New Mexico Hospital, Health

Sciences Center:

Oral Testimony ................................................................................................. 127

Prepared Testimony ......................................................................................... 129

Biography .......................................................................................................... 139

APPENDIX

Booklet:

Y2K and You, Prepared by the President’s Council on Year 2000 Conversion, Federal Emergency Management Agency, Federal Trade Commission ................................................................................................................. 157

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Y2K MYTHS AND REALITIES

THURSDAY, NOVEMBER 4, 1999

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON GOVERNMENT MANAGEMENT, INFORMATION, AND TECHNOLOGY, COMMITTEE ON GOVERNMENT REFORM, JOINT

WITH THE SUBCOMMITTEE ON TECHNOLOGY, COMMITTEE ON SCIENCE,

Washington, DC.

The Subcommittees met, pursuant to call, at 2:15 p.m., in room

2318, Rayburn House Office Building, Hon. Constance A. Morella

(Chairwoman of the Subcommittee on Technology) presiding.

Chairwoman MORELLA. I am going to gavel the joint subcommittees’ hearing to order.

You just heard the beeper; we’re going to have a series of about

four, probably maybe even five votes. But I thought I would give

an opening statement and then return right after the votes. There

is also a markup taking place in Government Reform, which is

where our co-chair is right now, and that is why you do not have

the members here. They will return. But I will at least comment

on what we are here today to listen to and what the topic is of the

meeting.

I want to welcome all of you to the House’s Y2K Working Group,

that is comprised of the Science Committee’s Technology Subcommittee and the Government Reform Committee’s Government

Management, Information, and Technology Subcommittee.

With the anticipated adjournment of the first session of this

106th Congress looming before us, this hearing is expected to be

the culmination of our House Y2K Working Group efforts before

the January 1, 2000, deadline.

It is sometimes hard to believe that we have focused on this

issue ever since the spring of 1996. When our two subcommittees

held the first congressional hearings 31⁄2 years ago on the then little publicized year 2000 computer problem, the millennium bug

seemed to be more suited to the realm of exterminators than Congress. But our Y2K review revealed some troubling news. At that

time, our Nation was simply not moving forward with the required

dispatch to effectively respond to the devastating effects of the

‘‘mother’’ of all computer glitches, potentially crippling vital Government functions, critical industry performance, and our robust

economy.

We in Congress attempted to step up to the plate by raising

awareness about the problem and by pushing Federal agencies and

private industry toward immediate corrective measures. We did

this through a series of comprehensive hearings, vigilantly exerVerDate 11-MAY-2000 15:00 Mar 30, 2001 Jkt 010199 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 E:\HEARINGS\61629 pfrm09 PsN: 61629
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cised our oversight authority, and enacted laws that required the

creation of a national Federal strategy and prohibited the purchase

of Federal information technology that was not Y2K compliant.

It was clear, however, that despite our congressional powers, the

legislative branch alone was ill-suited to lead our Nation’s Y2K efforts. We desperately needed the help of the President’s executive

powers. We were frustrated by what seemed to be the lack of leadership. It was clear to us that without greater urgency and aggressive agency management, Federal agencies were at risk of being

unable to provide services or to perform functions that are critical

to its mission and vital to the American public.

We spent a year urging the President to personally embrace the

need for Federal action and to appoint a Y2K czar to oversee the

Nation’s public and private sector initiatives, until he finally appointed a very capable man, who is here today, John Koskinen, to

chair the Year 2000 Conversion Council. Given the late start in his

appointment, John, who was lured out of retirement to take on this

herculean task, obviously had his work cut out for him. And while

we have not necessarily agreed on all aspects of our Nation’s Y2K

strategy, I want to say to John that your extremely competent

achievements, performed with such a high level of professional

dedication and commitment to public service, really do deserve recognition.

Since John’s appointment, we in Congress have successfully

worked together to require greater Federal and private sector disclosures, provide a special Federal appropriation solely for Y2K efforts, raise Y2K awareness throughout the country, and enact laws

to improve Y2K readiness, and to curb the number of frivolous

glitch-related law suits.

Yet, as we now move toward the remaining 50 days before the

unforgiving and immovable Y2K deadline, Americans still have a

number of questions about how, in the midst of all their millennium celebrations, they will be affected, if at all, by the year 2000

problem. We know the American people are counting on us.

This hearing is designed to respond to some of those questions.

I am pleased that we have a distinguished panel of witnesses that

seek to help us provide some of those answers today.

Finally, before I turn to our ranking member of the Technology

Subcommittee, I want to thank, on behalf of both of us including

Chairman Horn, who will be with us later, to all of our fellow colleagues on the House Y2K Working Group, I want to thank them

for their leadership, support, and participation. It is also important

to note that our Y2K efforts have been bipartisan. I want to commend our ranking members, Mr. Barcia of Michigan, who is here

with us, Mr. Turner of Texas, Mr. Gordon of Tennessee, Mrs.

Maloney of New York, Mr. Kucinich of Ohio.

And now I would be very happy to recognize the Ranking Member of the Technology Subcommittee, Mr. Barcia, for any opening

remarks before we go vote.

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

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Mr. BARCIA. Thank you, Chairwoman Morella. I want to return

the compliment and thank you for the leadership and the bipartisan nature in which you have conducted the hearings of this subcommittee, and the tremendous amount of energy and time that

you have invested in this Y2K issue and its importance to the citizens across the country.

I want to join my colleagues on the subcommittee in welcoming

our distinguished panel to this last hearing of the year 2000 computer bug.

Over the past 3 years, we have held hearings on almost every aspect of the Y2K problem; on Federal agencies’ efforts, international

issues, State and local government efforts, the impact on industry,

and liability. Although confident with the strides made by Federal

agencies, we continue to be hampered in our assessment of the impact of the year 2000 problem on State and local governments and

industry because there is still a lack of factual information on Y2K

readiness.

I urge our panelists today to provide us with as much specific information as possible about the overall level of Y2K readiness in

the United States and abroad, if you can. If we are to calm public

fears, we must provide the public with facts.

This series of hearings has served to educate the public about the

magnitude and scope of the Y2K problem. And although it has been

my experience that most people are aware of the Y2K issue, they

still do not have a good understanding of its potential impact or

lack of impact. I am concerned because, unless we get the message

out, the level of public fear could rise.

What could be the single largest public awareness announcement, a November 21st made for television movie, entitled, ‘‘Y2K:

The Movie.’’ According to news reports, this movie has the U.S.

Government grounding all airplanes, the Eastern seaboard experiencing a major power outage, and even worse problems yet to come.

In the absence of facts, what is designed to be entertainment could

achieve the saddest effect.

As this is the last hearing, I would like to commend Mr. Joel

Willemssen and the staff of GAO for the outstanding work that

they have done during the past 3 years. I would also like to commend Mr. Koskinen for the coordination role his office has provided

in the administration’s Y2K efforts. And, of course, finally, I want

to thank the witnesses for appearing before us. I look forward to

hearing your comments.

Thank you, Madam Chair.

[The prepared statements of Hon. Debbie Stabenow and Hon.

Jim Turner follow:]

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Chairwoman MORELLA. Thank you, Mr. Barcia.

As you probably know from the timing, we have got to go over

to vote. We have got about 6 minutes, if even that, before the vote.

There are going to be about five procedural votes.

Mr. Koskinen, I know you must leave here shortly. So what I will

do is go over and vote and, if there is a 15 minute interval, come

back so we can hear some of your oral testimony. Will there be

somebody else here who could also respond to any questions we

may have when you have to leave?

Mr. KOSKINEN. Well, with all these wonderful witnesses, someone will know. But there is no one else from my office.

Chairwoman MORELLA. And you have a written testimony for us,

too, which will be part of the record.

So I shall return after our first vote when we have a 15 minute

interval. For the rest of you, it will probably be about three-quarters of an hour before we reconvene fully the hearing beyond Mr.

Koskinen. Thank you.

[Recess.]

Chairwoman MORELLA. I am going to reconvene the joint hearing.

I am going to ask Mr. Koskinen and Mr. Willemssen, in the tradition of the Science Committee, if they would please stand and

raise their right hands. Do you swear that the testimony that you

are about to give is the truth, the whole truth, and nothing but the

truth?

[Witnesses respond in the affirmative.]

Chairwoman MORELLA. The record will show an affirmative response.

Mr. Koskinen, we are delighted that we will have you give us

your comments at this very last meeting of the year 1999 of the

Joint Y2K Working Group.

TESTIMONY OF HON. JOHN KOSKINEN, SPECIAL ASSISTANT

TO THE PRESIDENT, CHAIRMAN, PRESIDENT’S COUNCIL ON

YEAR 2000 CONVERSION; AND JOEL C. WILLEMSSEN, DIRECTOR, CIVIL AGENCIES INFORMATION SYSTEMS, U.S. GENERAL ACCOUNTING OFFICE

Mr. KOSKINEN. Thank you. Good afternoon, Chairwoman

Morella. I am pleased to appear before you today to discuss the

year 2000 issue, or Y2K, as it is known. Let me begin by thanking

the Chairwoman for her very kind comments which I genuinely appreciate.

The subcommittees themselves deserve great credit for their continuing interest in the Y2K issue. Your efforts have helped to increase the visibility of this important challenge within the Federal

Government and the country as a whole.

With your permission, I will submit my full statement for the

record and summarize it here.

Chairwoman MORELLA. Hearing no objections, so ordered.

Mr. KOSKINEN. In keeping with the title for this hearing, let me

begin with what I believe are some of the more important myths

and realities regarding the Y2K issue.

One of the more troubling Y2K myths is the notion that January

1 is a seminal date on which everything, or nothing, Y2K-related

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will occur. As you know, year 2000 challenges can happen any time

a computer that is not Y2K-compliant comes into contact with a

year 2000 date, before or after January 1. In fact, a number of

businesses and governments have already had to use year 2000

dates in their automated operations. Information technology professionals are well aware that the Y2K challenge is not limited to

January 1 and they will be monitoring systems well into the New

Year for flaws in billing and financial cycles and possible slow degradations in service.

Another important myth deals with the reporting of Y2K readiness data. It goes something like this: Self-reported Y2K information is not valid since people will not voluntarily report problems,

so virtually everything we have heard in terms of industry and

Government progress reports cannot be believed. This is not true

for several reasons. Most organizations have structures in place

whereby independent authorities have been reviewing the results

of Y2K testing. In some industries, such as electric power, Government agencies have conducted selected audits of the reported information and found no major discrepancies. And, most importantly,

the industry surveys done for the President’s Council have been

conducted pursuant to the Year 2000 Information and Readiness

Disclosure Act provisions, which the Congress passed at our urging

last year. This act guarantees individual companies that their responses to these surveys will be treated confidentially, such substantially increases the likelihood of candid responses.

In the interest of time, let me now move to a discussion of the

operation of the Council’s Information Coordination Center, or ICC,

as it is known.

The ICC will be the Federal Government’s central point for coordinating a wide range of information on system operations and

events related to the Y2K transition that will be collected by Government emergency centers and the private sector. The ICC will

gather information about system operations in Federal agencies;

among State, local, and tribal governments; in critical areas of the

private sector; and internationally.

To accomplish this task, we are relying to the greatest extent

possible on existing structures and expertise. Domestically, information on systems operations will be collected by the States and

provided through normal channels to FEMA which will review the

reports and pass them on to the ICC. In addition, the ICC will receive reports from national information centers established, many

for the first time, by the private sector. The status reports will be

provided to appropriate lead agencies. We presently have agreements with the electric power, banking, finance, telecommunications, oil, gas, airline, pharmaceutical, and retail industries to

operate information centers during the rollover period and to share

information on the status of their members with the ICC.

The ICC will receive international status reports from the State

Department, the Defense Department, the intelligence agencies,

private sector information centers, and national Y2K coordinators

around the world. In addition, the ICC will work with the National

Infrastructure Protection Center and Computer Emergency Response teams here and around the world to monitor unauthorized

intrusions into systems.

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Information gathered by the ICC will be the basis for complete,

regularly updated national and international status reports that

will be provided to all Federal agencies and organizations sharing

information with the center. These reports will help agency decision makers determine what, if any, Federal actions are appropriate in response to Y2K-related difficulties. Status reports will

also be provided on a regular basis to the Congress and to the public.

As I mentioned earlier, based on available information, we do not

believe the Y2K issue will create significant problems in the United

States. But no one can rule out the possibility that there will be

temporary disruptions in some services. This week we published

‘‘Y2K and You,’’ an information booklet on the Y2K issue as well

as a ‘‘Y2K Preparedness Checklist,’’ which I am submitting as part

of the record. Our suggestions include preparing for the long holiday weekend by having at least a 3 day supply of food and water,

keeping copies of important financial records before and after January 1, 2000, and checking with manufacturers to make sure that

home electronic equipment is Y2K ready.

Perhaps most importantly, whatever people are going to do to

prepare, they should do it early. If everyone waits until the last

moment to take even modest precautions, supply systems could be

overwhelmed.

When I appeared before you in January of this year, I closed by

saying that overreaction by the public to real or perceived Y2K

risks was in some ways our greatest challenge. I still believe that.

On the other hand, our goal is not public complacency. All of us

need to encourage the public to take the appropriate steps to be

ready for the date change. As I said in January, the way to achieve

this delicate balance is to provide people with as much information

as possible about Y2K readiness efforts, the good and the bad.

Thank you for the opportunity to continue this process of information sharing here today. I would be pleased to answer any questions you may have now or in the future.

[The prepared statement of Mr. Koskinen follows:]

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Chairwoman MORELLA. Thank you, Mr. Koskinen.

I am now pleased to recognize Mr. Willemssen. But as I do, I just

want to comment on the fact that the GAO mission is to independently audit all Federal Government agencies and we have worked

very closely with GAO over the past 31⁄2 years on the year 2000

computer problem. Just as John Koskinen has demonstrated an exemplary dedication and commitment to public service, so has Joel

Willemssen. He has always been ready to assist. His contributions

to our House Y2K Working Group’s efforts cannot be understated.

He has been very much appreciated. And while he may have been

a thorn in the side of agencies that required greater congressional

attention, he is also one of the reasons that those agencies have redoubled their efforts to comply with the Y2K computer glitch. So,

in welcoming Mr. Koskinen, I welcome Mr. Willemssen for his comments.

TESTIMONY OF JOEL C. WILLEMSSEN

Mr. WILLEMSSEN. Thank you very much, Chairwoman Morella.

Thank you for inviting us to testify today. And as requested, I will

briefly summarize our statement.

In early 1997, we identified Y2K as a high risk area for the Federal Government. Since that time, we have observed substantial

progress in the Federal Government’s Y2K readiness. While this

progress has been significant, it has not been uniform among all

Federal agencies. Some agencies have long had strong Y2K programs, others have made dramatic improvements, while still others

must continue to be monitored carefully.

For example, on one end of the spectrum is the Social Security

Administration, which started its program 10 years ago, has been

very responsive to any issues that have surfaced, and has been a

government-wide leader in such areas as contingency planning and

day one planning. Departments such as Veterans Affairs and Education have made major strides in readiness after relatively slow

starts. Other agencies and departments have also made major

progress, but still need to be monitored closely because of the criticality of information systems to their missions and the work that

remains outstanding. These agencies would include: the Health

Care Financing Administration, the Department of Defense, FAA,

and IRS. For example, DOD reports that it still has 31 mission

critical systems that are not Y2K compliant, 6 of these are not expected to be compliant until December.

Beyond the compliance of individual systems, significant progress

has also been made in improving the Government’s overall approach. For example, OMB has identified 43 high impact programs

as the Government’s top priorities. Further, agencies are performing end-to-end testing of multiple systems supporting key business functions, and they have developed business continuity and

contingency plans and day one strategies.

Regarding State governments, the available information indicates that States have greatly improved their readiness during this

year, with only 4 States now reporting less than 75 percent of mission critical systems completed compared to 40 States reporting

this status earlier this year. Nevertheless, there is still much work

to do for many of these States. For example, as we testified last

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month, many States were not planning to be compliant for some

key human services programs, such as Medicaid, Food Stamps, and

Child Support Enforcement, until last quarter of 1999.

Y2K is also a challenge for the public infrastructure and key economic sectors. Our work has identified sectors that are clearly leaders on Y2K, while others are lagging behind. For example, banking

and finance have clearly been a Y2K leader. Among the areas most

at risk, however, are health care and education.

For health care, we have testified on numerous occasions on the

risks facing Medicare, Medicaid, and biomedical equipment. We remain concerned about the overall readiness of this sector.

Regarding education, recent surveys conducted by the Federal

Department of Education show that many school districts and postsecondary institutions are not yet compliant. In September, our report on the Y2K readiness of 25 of the Nation’s largest school districts revealed that only 7 believed that all their mission critical

systems were compliant, and 9 said they didn’t plan to finish until

December.

That concludes a summary of my statement. I will be pleased to

address any questions you may have. Thank you.

[The prepared statement of Mr. Willemssen follows:]

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Chairwoman MORELLA. Thank you, Mr. Willemssen.

I know that Mr. Koskinen is going to have to leave us soon, and

we have another vote.

Mr. KOSKINEN. No, I am actually here till 3:30.

Chairwoman MORELLA. Till 3:30. Very good. I guess I will start

off with the concept that I have heard from some quarters, that

there has been a little criticism from the Y2K community, maybe

because you represent the Government, but the criticism has been

that you have been overly optimistic about your assessments and

that what you say should sort of be taken with a grain of salt. I

wonder, how do you respond to those critics? You base a lot of your

assessments on self-reporting. I wonder how much faith do you

have in these self-reported data, and picking up also on what Mr.

Willemssen had said about the areas of education and health.

Mr. KOSKINEN. Well, there are a few things to note. First of all,

there is a very small minority of people out there who are in the

activist community who do think that, in fact, we are going to confront much greater damage and challenges than the evidence supports. None of those people have any evidence that disputes any of

the surveys that have been presented, any of the information provided by the private sector or the Government.

So, at this point, our view is, and continues to be, that we have

an obligation to the public to provide them all the information we

have, the good information and the areas we are troubled about.

Those who have been concerned about whether we are too overly

optimistic have been unhappy that we think that the critical infrastructure in this country, indeed, is going to work. Power, telecommunications, banking, finance, air traffic systems, all have

been demonstrated to be ready.

But they have ignored the fact that we have in fact for some

time, certainly in the last year, have been pointing to areas where

we are concerned. We have been concerned about developing countries abroad, as Mr. Willemssen has noted, we have been concerned

about and our surveys have demonstrated the risks involved in

smaller institutions in health care and education, in small businesses, at the local government level. So that I think what you

have to do is take with a grain of salt those people who are concerned about whether we are over optimistic or under optimistic.

The real issue is what are the facts as we know them, what are

the facts as industries have them, and then people need to respond

accordingly. Our view has been all we are doing is telling you what

we know, what we have been told. I talked in my prepared statement and my oral statement about why we have reasonable confidence in the survey data that has been provided because it has

been provided confidentially. And as noted, if people were going to

make it up, they would have made up total compliance some time

ago, and the surveys have not done that.

Chairwoman MORELLA. I do notice that organizations, businesses, and even communities are coming out with their Y2K

checklists, and obviously we have yours. I received one recently

from an area that I represent. It is a little bit troublesome the list

of items that they say one must need. You must change from

standard incandescence to compact fluorescence and halogen, replace all appliances’ solar panels and wind generators, composting

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toilets, reflector-powered ovens, crank-powered radio, et cetera. It

goes on and on with a whole list of things.

Do you think, again on the other side, that there are areas or

people that are actually contributing to panic?

Mr. KOSKINEN. Well, there are clearly those from the start, over

the last 3 to 4 years, who have for one reason or another been predicting the end of the world as we know it on the ground that this

is a massive problem, which indeed it is, but their prediction has

been we will never be able to solve it. My disagreement with them

has not been that it is a massive problem, it has been with whether

we will be able to solve it.

I think there are still people pushing that if you do not buy a

lot in New Mexico and leave town, at a minimum, you ought to be

prepared with three to six months supplies, which I think there is

no evidence to support. On the other hand, there are concerned

civic groups that think that more than 3 days supplies are necessary.

Our view has been, and our brochure talks about, at least 3 days

supply. And we stress that people need to take a look at their own

circumstances. In the community conversations we have run across

the United States, when I was in Miami, there they were talking

about preparations of 7 to 10 days because that is their experience

with hurricanes. In Los Angeles, their standard is a week.

What we have said is everyone needs to take a look at what their

own personal situation is, what the situation is where they live. If

you are in a rural community and it takes longer to find you, you

will have a different approach to it. If you live in Minnesota, your

approach will be different than if you are in Florida.

And so what we think is important, again, is for everybody to decide in light of the facts as they see them what they feel most comfortable about. Clearly, we think if the whole country decided that

they wanted to at the last minute have months of supplies of food

and water, or in fact take a lot of other activities, that by itself

could create a problem where there is no basis for one.

Chairwoman MORELLA. You have been trying to create a balance,

I can see.

Mr. Wu, the gentleman from Oregon, who is on our subcommittee, may not be able to return after the next vote. So I am

going to let him ask a question.

Mr. WU. Thank you, Madam Chairwoman.

I would like to ask the panel, as you all know, the Securities and

Exchange Commission has for some time required that private

companies which are publicly held make disclosure of Y2K vulnerability in their annual statements on form 10K. How satisfied are

you that these publicly held companies have, as they say, made full

and fair disclosure of their Y2K vulnerabilities under the circumstances as warranted?

Mr. KOSKINEN. We have not made a judgement about that. We

have not reviewed those in any detail. We have been more comfortable and confident with the information we have collected

through the industry associations because, again, that is information provided with a guarantee under the statute that it is confidential, it cannot be reached by litigants or even the Federal Government.

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There is a dispute, some companies are held up as models of disclosure in the SEC filings, others are held up as models of obfuscation. I think it obviously runs across the spectrum. But the judgements about the adequacy of that I think are appropriate judgements for the SEC to make since it is their regulations and their

filings.

Mr. Willemssen may have a different view.

Mr. WILLEMSSEN. Congressman, we have not done an analysis of

those submissions. So I am not in a position to address that question.

Chairwoman MORELLA. Gentlemen, we are going to recess for

probably about 15 minutes and then we will return.

[Recess.]

Chairwoman MORELLA. The subcommittee will come to order.

I would now like to recognize Mr. Bartlett for his questioning.

Mr. BARTLETT. Thank you very much.

When you listed the items that you suggested people have in

preparation, I noticed it was food and water primarily. January 1

is in the northern part of our country very cold. It is also just a

few days after the shortest day in the year, with a lot of darkness.

A few flashlight batteries probably will not suffice. What advice do

you give relative to heat and light?

Mr. KOSKINEN. At this point, we do not advise anybody to take

power into their own hands and go buy generators, again, unless

you are out in the rural area, if you are at risk in the winter time

from long term power outages. If Y2K is the first time you ever decide to deal with that, that is important to do it. But we do not

think, in light of what we know, that there is any risk.

The power industry will operate that weekend normally at 50

percent of capacity. They will have all of the capacity or most of

it spinning that weekend. So we can lose a lot of power companies,

which we do not expect to lose any of them, before we will run out

of power. The oil and gas industry is basically at close to 95 percent done with their work. They will, in fact, have oil and gas readily available.

So, at this juncture, we do not see any indication that we are

going to have any outages, there will be glitches, that will last

more than a few minutes. So the question about what happens if

the power goes out in the winter time is a long term question people need to address regularly. We have ice storms and blizzards

and your chances of having power outages are, in fact, greater I

think because of an ice storm or a blizzard than Y2K.

And the question is ‘‘What do you do in those circumstances in

your communities?’’ There have been places in the United States

in the northeast in blizzards and ice storms that have had power

outages for days rather than hours. And the answer is whatever

their emergency plans and backup systems are for those situations

obviously would be applicable here. We do not think there is a Y2K

necessity to change to deal with those issues beyond what you normally deal with.

Mr. BARTLETT. My personal feeling is that it will come and go

and we will hardly notice it. But I also think that tonight will come

and go and my house will not burn. But still I have fire insurance

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on my house. So as a prudent person, I think it is incumbent on

us to have the equivalent of fire insurance for this possibility.

Looking at it that way, what would you say would be the equivalent of the fire insurance policy you have on your home for Y2K?

Mr. KOSKINEN. We think the equivalent of fire insurance on your

home is the checklist we have put out. Again, as I say, if you think

you are at risk of power going out, I think your greater risk is in

an ice storm and you ought to be prepared for this weekend the

same way you are prepared for the possibility of an ice storm.

What happens in ice storms is people go to shelters, power is usually not out everywhere and they go to places where there is power.

We have not had a problem from any of the great blizzards or ice

storms in this country with people suffering because of the lack of

heat or power. And whatever those processes are, the emergency

managers around the United States are prepared with their normal

precautions. We have, in fact, been in close contact with them and

they are prepared to respond as they always do in the winter time

if there are any outages.

Mr. BARTLETT. What concerns many people about the power grid

is that it tends to fall back on itself. A minor problem in one place

can, like dominoes, cause major problems in other places—the

great northeast blackout and subsequent blackouts that were supposed to be fixed and could not happen, yet they did happen.

Do we have contingency plans so that this kind of thing will not

happen?

Mr. KOSKINEN. The power industry is prepared. As I say, first of

all, we will have substantial excess capacity. In fact, if there is any

challenge to the grid, it will be lowered load demand rather than

increased load demand to make sure we have stability. They, as I

say, will have most of their systems spinning, not producing power

on the grid but basically available to fill in if need be. They will

make sure that there is room on the transmission lines to transmit

power from area to area in case there is any need for that to be

done. So they, in fact, have run two national contingency plan exercises testing how to run power plants without telecommunications,

what their other contingency plans are, and they have gone

through all of that with virtually every major power company in

the United States in April and September. They are extremely confident. Their business is reliability. Their responsibility is responding to emergencies. And they are prepared to do that.

Mr. BARTLETT. How do they simulate the embedded chip problem? I understand with computers, we should be having some problems now because of Y2K because many computers are looking

ahead several months.

Mr. KOSKINEN. Right.

Mr. BARTLETT. I am not seeing any problem, so I suspect that in

terms of the programming that has been pretty well fixed. But

what about the concern about embedded chips where there is no

way to test them ahead of time? If it is a generic chip and you are

not using the time function, that if it has a date code in it, the

chip, as I understand, could shut down anyhow. How are they testing for embedded chips? And are they prepared to wire around

these tens of thousands of embedded chips that are in components

that they really cannot test for?

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Mr. KOSKINEN. Embedded chips have been an issue that the industries generally, in addition to electric power, have been focused

on. At this point, no one has found an example even though the

web pages and the doomsayers continue to say there are functions

in there for clocks that even if you are not using them are going

to shut you down. No one yet has been able to provide a case where

functionality not being used actually shut the production down.

And in fact, the power companies have not found a Y2K problem

failure that would shut down production.

But what they are all doing is they have reviewed those chips,

they know where they are. They have reviewed them with manufacturers. Wherever they can, they have rolled the control systems

and other systems forward to see what will happen. But the bottom

line is, the reason we are all talking about nobody can guarantee

perfection, is until we actually roll through either Greenwich Mean

Time—some are set by Greenwich Mean Time, some are set on

midnight—until we roll through those, we will not be able to conclusively demonstrate there is no problem. But at this point, I

would stress no one has reported a problem where you could track

it to a system that had that hidden clock problem that you are

talking about.

Mr. BARTLETT. Greenwich Mean Time is 7 p.m. here, is that correct?

Mr. KOSKINEN. It is 7 p.m. New Year’s Eve.

Mr. BARTLETT. So if there is going to be an embedded chip problem, you will expect it at 7 p.m., and not midnight?

Mr. KOSKINEN. No. It depends on how the systems are structured

and where they take their time derivation.

Mr. BARTLETT. But for all of those chips that have Greenwich

Mean Time, it will be 7 p.m.?

Mr. KOSKINEN. It will be 7 p.m. So, 7 p.m. New Year’s Eve we

will know a lot. We will actually know a lot starting at 7 a.m., New

Year’s Eve because New Zealand will go into the Year 2000 at 7

a.m., Australia will go at 9 a.m., and we will monitor how the

world is doing. And if there are going to be systemic problems, we

will have plenty of warning in terms of whether they are systemic

and occurring.

Mr. BARTLETT. My last question. Several months ago the power

industry testified before this committee. They told us then that because of the tens of thousands of embedded chips that they probably would not be ready, but they were sure they could wire around

it. Has that changed?

Mr. KOSKINEN. All I know is what the public information surveys

from them are, and that is that they are prepared. They think that

they have done now 100 percent of their work, including looking

and working on embedded chips and being able to respond. And we

have no information that any power company is not prepared for

the rollover.

Mr. BARTLETT. Thank you very much.

Chairwoman MORELLA. Thank you, Mr. Bartlett.

I now want to ask Mr. Baird from the State of Washington if he

wants to ask any questions.

Mr. Baird.

Mr. BAIRD. Thank you, Madam Chair.

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One of the concerns I have is I sort of did a mental checklist of

my district and said what are the various potential problems. For

example, we have large chemical manufacturing plants not that far

away from residential areas. And one of the questions I had was

let us suppose the worst case scenario; let’s suppose a power outage

comes along that impairs certain procedural machines or something within the chemical processor, they begin to have a breakdown, dangerous chemicals are released into the environment, we

have got communications problems and transportation problems. I

am not a doomsdayist by any means, but if I were a local community, I would like to have run through those various scenarios.

To what extent do you believe local communities have done that?

And what should we do if they have not done it yet?

Mr. KOSKINEN. I think some communities have and, unfortunately, some communities have not. We held a White House Round

Table on chemical manufacturing. We had a press conference, it

produced a lot of information. We are trying to reach out. I have

written a personal letter to every Governor in the United States

drawing their attention to the problem, to the programs that California and New Jersey have for reaching out to the local levels.

But, clearly, it is exactly as you note, an emergency preparedness

problem at the local level. We have encouraged the companies to

be in touch with their local emergency planners. But the local

emergency managers and public officials need to make sure that

they know, they should know beyond Y2K purposes, where those

plants are, what the emergency preparedness is, and, most importantly I think, is to ensure that people are on alert over that weekend and people know immediately how to get in touch with each

other and what the plans are if there are any difficulties, whether,

again, it is from Y2K or for some other purpose.

Mr. BAIRD. I personally see Y2K as a potential benefit in the

sense that it helps us improve our emergency readiness. Are there

particular checklists or steps they should go through, for example,

a community working with the chemical industry and how would

we get hold of that for our own districts?

Mr. KOSKINEN. EPA and the chemical manufacturers produced a

manual of the items that are at risk for a smaller chemical facility

that they should be checking. That is available on the EPA web

site. I am sure you can get that through the Council web site of

www.Y2K.gov. That material has been provided to every State.

FEMA and the emergency managers have it. So I think my suggestion to a community would be their local emergency manager

should contact their State or FEMA to get any additional scenario

development or testing that should go on so they can ensure that

they are ready for that particular kind of problem.

And I think you are right, the emergency managers across the

United States think that Y2K is a great opportunity for individuals

as well as organizations to review their emergency planning and

preparedness and, in fact, to be better prepared than they may

have been generally.

Mr. BAIRD. Thank you very much. Thank you, Madam Chair.

Chairwoman MORELLA. Thank you, Mr. Baird.

Mr. Ose, do you have any questions? As a matter of fact, before

we ask that question, I was on a panel with a Red Cross representVerDate 11-MAY-2000 15:00 Mar 30, 2001 Jkt 010199 PO 00000 Frm 00085 Fmt 6633 Sfmt 6602 E:\HEARINGS\61629 pfrm09 PsN: 61629
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ative who said, and you reminded me of it, Mr. Baird, is that what

we should have on hand is what we should always have on hand.

Mr. KOSKINEN. Right.

Chairwoman MORELLA. I think that is something that makes us

take inventory.

Mr. Ose from California.

Mr. OSE. Thank you, Madam Chair.

A couple of questions. Some weeks ago we had a hearing, I think

Mr. Willemssen was there, regarding the FAA and the relative responses we have had from some of our international partners. At

that time, we were able to ferret out information about a number

of countries that had not yet responded to our Y2K circular questioning their preparedness or inquiring of it. I think the total number of countries at that time was 34 or 35. I am curious whether

or not there has been any update to that list of 34 or 35.

Mr. KOSKINEN. There has been. The Department of Transportation and the FAA both have web sites now listing the information

they have about preparedness internationally as well as domestically. I do not know what the number now is, but there has been

an increase in the response. Transportation has now been able to

categorize the nature of those responses and any concerns they

have about particular airports so that the public or travel agents

have direct access to that.

Mr. OSE. Madam Chair, the reason I bring this up is I want to

take a moment, and I hope no one falls over here in shock, I want

to take a moment to express my appreciation to Mr. Koskinen and

Mr. Willemssen and the others who work in the Federal Government because we had this hearing on like a Tuesday or a Wednesday and we were asking for this information, and the agencies of

the Federal Government, in response to the requests from Members of Congress, were able by Friday to refine the list from approximately 110 countries to 34 or 35 that had not responded.

The reason that is important is that, as with many people, my

wife and I travel a great deal, and people in the United States

travel a great deal. And the uncertainty that existed prior to the

refinement of that list relative to these 70 or 80 other countries

that were on the list were creating quite a bit of havoc relative to

people’s travel plans because they need to plan ahead, sometimes

as much as 90 to 120 days.

So I want to take this moment to express my appreciation to

these two gentlemen and to the others who could not join us today

for making that list public, for helping the American public define

where it might be safe to go and where it might not be safe to go.

They really did the people’s business and they deserve our applause, wherever you call it.

The FAA does have a web site on which this data is posted. If

I understand correctly, it is fly2K.gov?

Mr. KOSKINEN. Correct.

Mr. OSE. I would encourage everyone to visit that who is planning on traveling over the turn of the millennium.

And, finally, one little tidbit, Madam Chair, if I could. The businesses that I used to run before I came to Congress, we have any

number of security features in each of those businesses. We did a

little test of our own about our Y2K preparedness. We, in effect,

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took the calendars on our computers and rolled them forward to

where they were like five minutes prior to midnight on the 31st

and we were essentially doing our self-testing. And to those people

who have not done that, I would encourage you to do that now

rather than wait until the last week of December. We were fortunate. We were in compliance. But it is just a little self-test everybody might engage in.

With that, I yield back.

Chairwoman MORELLA. Thank you, Mr. Ose. And you reflect the

views of both subcommittees in commendation to the agencies, Mr.

Koskinen, and Mr. Willemssen, and all of the others that responded so promptly. I think we have all found that to be the case.

I am now pleased to recognize Ms. Rivers, the gentlewoman from

Michigan.

Ms. RIVERS. Thank you, Madam Chair.

I have only a very brief question. There are a number of materials that are interesting and useful here in preparation and also

the GAO information on evaluating how things are going. Most of

us have web sites that our constituents visit on a regular basis. Are

we free to link to your web sites or to use any of these materials

on our sites?

Mr. KOSKINEN. We would be delighted to have you link. We

would be delighted to have you take anything on the web site and

put it on your web site.

Ms. RIVERS. Okay. Mr. Willemssen?

Mr. WILLEMSSEN. Certainly.

Ms. RIVERS. Great. Thank you.

Chairwoman MORELLA. Thank you, Ms. Rivers.

I am now pleased to recognize Mrs. Biggert, the gentlewoman

from Illinois.

Mrs. BIGGERT. Thank you, Madam Chair.

If I might ask unanimous consent to enter my statement into the

record.

Chairwoman MORELLA. Without objection, so ordered. I am also

going to, without objection, have Chairman Horn’s opening statement included in the record.

[The prepared statements of Hon. Judy Biggert and Hon. Stephen Horn follow:]

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Mrs. BIGGERT. This has been an unusual day. I apologize for

missing your statements. I would like to ask, have you heard rumors about Y2K that you would like to dispel? Is there something

that you hear out there that you would have concern about?

Mr. KOSKINEN. I appreciate that question. In my formal statement, we have listed the myths and the rumors that generally we

are concerned about. I suppose, and it goes back to the Chairwoman’s question, the ultimate rumor I would like to dispel is that

somehow we have information in the Federal Government or in the

President’s Council that we are not sharing with the public. There

is no evidence, nobody has ever established something we know

that we have not told. And, in fact, our strategy for now going onto

2 years has been to share with the public everything we have as

we get it.

So, as I say, I think the rumor that there is this secret information that we are somehow afraid to release is just that, a rumor.

Our goal in life is to have the American public feel they know everything I know and can then decide how to respond appropriately.

Mrs. BIGGERT. Okay. Mr. Willemssen?

Mr. WILLEMSSEN. I would also echo Mr. Koskinen’s comment.

Obviously, we come at this from an audit and evaluation perspective. We have seen all the data as best as I know that Mr.

Koskinen has available. To the extent that we identify that data,

we take the opportunity to publicize it in our reports and testimonies. That is why one thing we wanted to do today in our testimony was reflect the broad nature of everything we have done and

the kind of progress that has been made, while at the same time

pointing out some residual risks.

Mrs. BIGGERT. Certainly, we have spent a lot of time, had a lot

of hearings. I would like to commend the two chairmen of these

two committees for everything that they have done, and certainly

started long before I got here this year, working on this.

Is there anything that you think we as the Congress have missed

doing that we should have done on the Y2K problem?

Mr. KOSKINEN. I do not think so. We have had, I think the

Chairwoman was right, this has been a very bipartisan issue. We

have not had any concern in either house of Congress about any

kind of political issues entering into this. We have had great support. We have obviously had a very good working relationship with

GAO as well working on behalf of the Congress. So if we had to

do it again, there is nothing that we have asked of the Congress

that has not been granted to us. I think it has been a very good

example of the cooperation between the legislative and the executive branch dealing with what is a serious national challenge.

Mrs. BIGGERT. Mr. Willemssen?

Mr. WILLEMSSEN. Looking forward, I would say the one thing

that the Congress can still be of great benefit to the citizenry is reminding the citizens what the facts are. I think as we are into November and we turn into December, there is going to be the opportunity for some to view this in survivalist terms, if you may, that

it really is going to be much worse than it actually will be. So I

think the Congress can still serve a very useful role in informing

the public of what the facts are, what the readiness is, where we

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do have some risks, but the overriding fact is we are in a much better prepared state today than we have been.

Secondly, to the extent that problems do occur, major Federal

agencies and most private organizations are planning detailed day

one strategies to be prepared in the event that disruptions occur.

Mrs. BIGGERT. I think there was something in the paper the

other day that everyone should not get on the phone at 12:01 to

say everything is okay because it is going to jam the telecommunication lines.

Mr. KOSKINEN. That is right. We refer to it in our checklist, too.

There is likely to be Mother’s Day by multiples if everybody both

celebrating the millennium and also just checking in does that at

one time. At a minimum, what people should understand, if you do

not get a dial tone immediately or you get a rapid dial, it is very

likely not to be a Y2K problem but to be the fact that your neighbors and everybody else have joined you on the phone at the same

time.

Mrs. BIGGERT. Right. Thank you very much for all your hard

work. Thank you Madam Chairman.

Chairwoman MORELLA. Thank you, Mrs. Biggert.

Mr. KOSKINEN. Madam Chairman, I am afraid I have over 50

people on this conference call that I noted I need to join. I hate to

deprive your co-chair here of his chances—— Mr. HORN. I do not think you are going to deprive me.

Mr. KOSKINEN. But I am going to have to leave. I would be happy

to take a question or two, and then I am going to have to go.

Mr. HORN. Fine. All right. If you had to do it over again, when

you were appointed in February 1998 and you started in April

1998, what would you advise Congress and a President to do in

terms of the type of structure or communications or whatever? Say

we had something similar to this where all of our computers were

crashing because of people that were using sort of economic terrorism, if you will, how would you deal with that, and would you

deal any differently than you have done?

Mr. KOSKINEN. I would not change, certainly for the Y2K issue,

anything that we have done. I think, again, we have had great cooperation with the Congress. I think our basic approach has been

validated by the amount of progress that has been made. I think

there is no way, as some suggested, that we could legislate our way

out of this problem, to in fact start telling everybody how to do it.

What we needed to do was marshall the expertise and the energy

of the people in the private sector as well as the public sector.

I think your point is well taken in terms of going forward; and

that is, we are going to become more reliant, rather than less, on

information technology in the future, which means we will be more

vulnerable, rather than less, to terrorists, to hackers, to others who

want to in fact disrupt our systems. And, therefore, I think we do

need to be prepared for that. But at this juncture, I do not have

a proposal as to how we ought to move from this issue to that in

terms of structuring to deal with it. All I can tell you is I think

the structure worked very effectively for the crisis we knew we

were facing when I took on this role.

Mr. HORN. Well, in terms of getting the work done in a timely

way, do you think February 1998 was a little late? And shouldn’t

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the early Clinton Administration and the Bush Administration

been involved in this? After all, Social Security showed the way

and they did 100 percent.

Mr. KOSKINEN. Well as I said when you asked me that question

over a year ago, we will know the answer to that in terms of how

we get through this process effectively. As I say, at this point, the

Federal Government is over 99 percent done. I do not think there

are any risks in the Federal processes that would have been avoided otherwise.

As you know, when I was in the Government before, we started

a cross-government issue dealing with this in 1995. So that hindsight is always interesting, but at this point we do not have a view

that we would be in a whole lot different shape. It might have been

a little less hectic if we could have gotten people’s attention. But

you have to understand, as you remember when you were one of

the lone voices raising this issue back when we were working on

it——

Mr. HORN. April 1996. And nothing much happened until February 1998.

Mr. KOSKINEN. Yes, 1998. Well, what we both had, and I had

that same experience, is in 1995 and 1996, even for people who

should have known better, the year 2000 seemed like a long way

off. And it was our biggest challenge, even when we all started

working together in February 1998, the biggest challenge was getting people to understand they needed to pay attention to this, not

just as another issue, but as their top priority in terms of the

threat it made to their ability to operate. And I think you started

early, the Government started early, but I think it is human nature not to focus on things any earlier than you can make people

do that.

Mr. HORN. Well I know a lot of Government operates just like

universities do—your neck has to be in the guillotine or you are

pushed against the wall and then finally something happens.

Mr. KOSKINEN. A lot of people in the private sector still have not

even gotten there yet. So it is not just a Government or university

problem.

Mr. HORN. That is my next question to you.

Mr. KOSKINEN. This will have to be the last one. I really am late.

Mr. HORN. All right. In August, you reported confidence and concerns in various public and private sectors. For example, the Council expressed ‘‘High degree of confidence’’ in major domestic areas

like financial institutions, electric power, and the Federal Government. However, the Council expressed concerns with local governments, health care, education, and small businesses.

The President’s Council plans to issue its final Y2K report next

Wednesday. I guess I would ask you, in foreshadowing your forthcoming report, what domestic and international areas are you still

concerned with?

Mr. KOSKINEN. Again, we are pulling that report together and we

still have some information being provided by some—— Mr. HORN. Just whisper me——

Mr. KOSKINEN. Just whisper any. Basically, we do not have new

sectors that we are now any more concerned about than we were.

What is hardest for us to measure is how much progress is being

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made in the areas we are concerned about. Last week, we had an

event with the Department of Education in which it was noted that

educational institutions, for instance, have made substantial

progress. They have gone from about a third readiness of the organizations to two-thirds, which is the good news. The bad news is

that still means a third of them are not prepared at this time, both

higher education and elementary and secondary.

So that I think the best way to summarize the difference between August and November will be that progress continues to be

made but there are still going to be organizations that are at great

risk because they are going to be talking about finishing their work

in December and that does not give them any margin for error.

Which means that they, of all people, need to have contingency

plans and backup plans because, if you are planning to finish your

work in December, there is a reasonable chance something will not

work well, you will not have time to test adequately, you need to

be prepared with a backup plan.

Mr. HORN. Will the Council be pushing for that right up to December 31st?

Mr. KOSKINEN. We will push testing. Our view is you need to

keep working on remediation, on testing, re-testing, and on contingency plans with every day and every hour you have left in this

year, even if you think you are done today.

Mr. HORN. I think you will recall a couple of months ago I sent

a letter to the Secretary of Education, copied you, and talked to you

about it. I have not heard much action. Is anything happening? I

heard some press release or something the Secretary did that, gee,

it is tough with K–12.

Mr. KOSKINEN. We have written, the Secretary and I, to every

superintendent of education, every State department, we have written to local superintendents. We have had meetings since then. We

have provided technical information. The Department since then

has done another telecommunication to sites all around the United

States. Again, at some point it is a little like our problem with

some small businesses—you can lead them to water, but you cannot make them fix their systems.

Mr. HORN. Well, I was looking for the Secretary to say, look, it

is going to take X amount to help K–12. Let me reprogram the

money. I think Congress would have permitted him to reprogram

the money. So that is what has bothered me. It just seems like a

little bit of drift.

I will let you off on that happy note.

Mr. KOSKINEN. Thank you. Thank you all very much. I apologize.

Mr. HORN. We appreciate your work.

Chairwoman MORELLA. Mr. Turner will be asking his question of

Mr. Willemssen.

Are you going to be the media spokesperson in the ICC?

Mr. KOSKINEN. I am going to be the media spokesperson. I will

be there.

Chairwoman MORELLA. You will be the one that will contact us.

We will be in touch. Thank you very much.

Mr. KOSKINEN. I get all the good jobs. Thank you all very much,

and I apologize for having to leave.

Mr. HORN. Thank you, John.

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Chairwoman MORELLA. Thank you for the good work that you

have done. We look forward to staying in touch with you now.

Mr. Willemssen, do you mind staying here with the next panel?

Would that be all right?

Mr. WILLEMSSEN. Certainly.

Chairwoman MORELLA. Excellent. Thank you. You have been

very patient from the beginning to the end. Great.

I am going to ask the next panel if they would come forward. We

have Mr. Campbell, Mr. Scher, Mr. Margolis. Mr. Robert Kringley,

unfortunately, could not be joining us today.

And so, leading off on the second panel is Mr. Pat Campbell, the

chief operating officer of the NASDAQ stock market, the largest

stock market in the world in terms of dollar value of shares traded,

and whose composite index hit an all time high, cresting at over

3,000 just yesterday. Mr. Campbell is going to discuss with us some

of the concerns affecting investor confidence in the stock market.

Next on our panel is Mr. Barry Scher, who is the vice president

of Giant Food, the largest retail food/pharmacy chain serving the

mid-Atlantic region. We have asked Mr. Scher to talk about Y2K

marketing and what Americans can expect as they go to the stores

before and after January 1, 2000.

And rounding out our second panel is Mr. Ronald Margolis, the

chief information officer of the University of New Mexico Hospital

in Albuquerque. Mr. Margolis is also speaking on behalf of the

American Hospital Association that represents nearly 5,000 hospitals, health systems, networks, and other providers of care. Mr.

Margolis will discuss with us some of the strong Y2K collaborations

with hospitals, emergency services, and the government that he

helped to create in Albuquerque. He will also help us to review

some of the concerns dealing with hospitals and whether Americans can expect to receive necessary medical treatment as we begin

the new millennium.

Additionally, the American Medical Association has submitted

written testimony. I seek unanimous consent to insert it into the

record. Hearing no objections, so ordered.

[The prepared statement submitted by the American Medical Association follows:]

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Chairwoman MORELLA. Gentlemen, will you also rise and raise

your right hands and I will administer the oath. Do you swear that

the testimony you are about to give is the truth, the whole truth,

and nothing but the truth?

[Witnesses respond in the affirmative.]

Chairwoman MORELLA. Again, the record will show an affirmative response.

What we traditionally do is allow about 5 minutes for any opening statement that you may have, recognizing the fact that any

written statement you have given us in its entirety will be included

in the record.

So we will then start off with, if you have no particular preference, Mr. Scher.

TESTIMONY OF BARRY S. SCHER, VICE PRESIDENT, GIANT

FOOD, INC., WASHINGTON, D.C.; J. PATRICK CAMPBELL,

CHIEF OPERATING OFFICER AND EXECUTIVE VICE PRESIDENT, THE NASDAQ-AMEX MARKET GROUP, INC.; AND RONALD MARGOLIS, CHIEF INFORMATION OFFICER, UNIVERSITY OF NEW MEXICO HOSPITAL, HEALTH SCIENCES CENTER, REPRESENTING THE AMERICAN HOSPITALS ASSOCIATION

TESTIMONY OF BARRY S. SCHER

Mr. SCHER. Thank you very much. My name is Barry Scher and

I am vice president for Giant Food. We operate 175 stores in Virginia, Maryland, the District of Columbia, New Jersey, and in

Delaware. We are also a part of the Royal Ahold family—— Chairwoman MORELLA. Mr. Scher, I think that we had already

said that Mr. Campbell would go first. I was simply looking at the

manner in which we were seated.

Would you prefer to go first, Mr. Campbell?

Mr. CAMPBELL. No. Let him go.

Mr. SCHER. Either way.

Chairwoman MORELLA. Thank you very much. He is a good

friend; he understands. Thank you.

Mr. SCHER. Giant is a part of the Royal Ahold family, a Netherlands-based international food retailer. In the United States alone,

Ahold owns, aside from Giant Food, Stop & Shop based in Boston;

Tops based in Buffalo; BI–LO from Maulden, South Carolina; and

Giant Food Stores in Carlisle, Pennsylvania.

Our preparations for Y2K at Giant have been going on since

1996. We have been checking our numerous systems, one-by-one, to

certify them as Y2K compliant. Although our administrative tests

have given us a very high level of assurance that we will enter Y2K

without system failures, our certifications test could not test how

the systems would work together, as they do every day at Giant,

when we enter the new year.

These early Y2K certifications were performed on system environments that were virtually identical to those that we use every

day.

In August, these Y2K workhorses took on a new role at Giant.

We ran our systems in a computer lab that simulated all the computer systems in a real store environment. There, our team moved

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the test systems’ clocks to December 31st. As the minutes and hour

ticked away, the systems were used and monitored as they would

be in a real store to see how they would operate as we entered the

new year. We also wanted to see how they would handle the leap

year day, February 29, 2000.

In the lab, everything worked just fine. We could place orders,

ship, select, receive, weigh, and scan product, keep track of everyone’s time and attendance, process prescriptions, and so on. Yet,

there still loomed a larger question: Would all of these systems—

stores, security, non-store environments—work together when the

clock struck midnight and the new millennium began?

We decided that what we needed at Giant was a fully integrated

test, doing exactly what we did in the lab; that is, advance the

clock to the end of the year in an actual working store, while all

of the systems were being used. Our concern was the potential impact that we would have on our business and the inconvenience to

our customers if we field tested as customers shopped. Then, as so

often happens, out of adversity, opportunity knocked.

In early September, we closed a store in Valley Forge, Pennsylvania. With no buyers available, the store was vacated and all the

remaining product was shipped to a neighboring store. But before

tearing out the computer systems and scales, our Y2K team was

able to utilize this empty, but fully operational store to test our

company’s IT systems.

On September 28th, Giant put the computer systems to the ultimate Y2K test. They all passed. All of them, from EBT to DSD to

POS, and these are food industry terms meaning such things as

electronic benefit transfer, direct store delivery, and POS, which is

point of sale or the front-end checkouts. The whole alphabet passed

with flying colors.

While we are very confident in our own IT systems, we realize

that there is always a chance that something could go wrong on

January 1, 2000. As a result, we have developed a very comprehensive set of Y2K contingency plans that have been distributed just

today, as a matter of fact, to all of our store and non-store management associates.

Now, in anticipation of peaks in consumer demand for certain

products, we are also developing specific merchandising plans that

include buying and distribution strategies. The focus will be on

spreading the expected increased demand across the next few

months by offering exciting promotions for certain products prior to

the holidays. And when the holidays arrive, Giant’s support system

will not go on vacation. An expanded team of support associates

will be on hand at Landover, where we are headquartered, and others will be on-call to address any and all issues that might arise

come January 1, 2000.

We have also developed an internal and external communications

plan. Our objective has been to inform and educate a number of

stakeholders about our Y2K readiness. Just to cite some of the examples of our educational and informational activities:

We have developed a Y2K brochure, you should have it in front

of you, I will hold it up in the event you do not. This brochure was

given to all of our stores and distributed free to our customers. We

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have also been asked to send it to area schools and other institutions. We have done so.

We have also placed newspaper advertisements in the Washington Post and Baltimore Sun. This is a copy of one. This was also

placed in other major weekly newspapers throughout our marketing area.

We also decided to send personal letters to business, civic, and

government leaders to inform them about our Y2K readiness. And,

finally, we addressed business and civic groups, as we were often

requested to do.

Plus we have done a great deal more—all with the objective of

informing our customers and the general public that at Giant Food

we are ready for Y2K.

And I mentioned earlier, Mrs. Morella, that I am speaking on behalf of the Ahold companies. All of the other Ahold companies are

also ready. We are a member of the Food Marketing Institute,

which is an international association representing food retailers.

They have also testified before Congress. The food industry is, indeed, ready. Thank you.

[The prepared statement of Mr. Scher follows:]

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Chairwoman MORELLA. Thank you very much, Mr. Scher. I do

think this is an excellent pamphlet. It is colorful, it is accessible,

it is understandable. And I commend you for it.

I am now pleased to recognize Mr. J. Patrick Campbell, chief operating officer of the NASDAQ stock market. Thank you, Mr.

Campbell.

TESTIMONY OF J. PATRICK CAMPBELL

Mr. CAMPBELL. Thank you, Madam Chair. I am pleased to be

here.

The SEC, the National Association of Security Dealers, the securities industry associations, and other firms, exchanges, and utilities have been leading the way in an industry-wide effort to be Y2K

ready. The NASD and each of its companies are prepared to transition successfully into the 21st century, along with the rest of the

securities industry. We are confident that our business systems, infrastructure, vendors, contingency plans, and transition command

centers are ready. Investors should know that we have invested

heavily to ensure that we are ready for the year 2000. In fact, the

U.S. Senate and the GAO has given our industry its highest rating

for Y2K preparedness.

The NASD began in 1996 to ensure that the business systems of

the NASD companies will transition to the year 2000 successfully.

We believe that our capital markets in the United States, our national treasures, and their integrity is paramount. The NASD has spent $55 million, dedicated more than 100 staff

to the effort. The NASD’s year 2000 program has remediated over

300 applications, 11 million lines of code in mainframe, mid-range,

and desktop systems. The securities industry has treated the problem just as seriously and has spent billions of dollars to meet the

challenges that it poses.

Our programs have been focused in three areas: The readiness

of NASD internal and market systems, the readiness of our 5,600

member broker-dealers, and, as important as anything, keeping investors well informed.

The first aspect of the NASD’s year 2000 program deals with its

internal systems, especially its market systems. The NASDAQ

stock market and the American Stock Exchange, as well as all the

other exchanges, participated in a series of successful Year 2000 industry-wide tests conducted over four weeks in March and April of

this year. These full-cycle tests simulated the securities transactions process for the dates of December 29, 30, and 31, 1999, and

for January 3, 2000.

The NASD tested its services with other participants, all the way

from our NASDAQ workstation terminals through our network into

our data center and back, end-to-end. The systems executed more

than 170,000 simulated transactions for nine different security

products over the tested dates. After this rigorous testing, we are

confident that there will be no serious disruptions in our services

and our markets, and that investors will be protected.

In addition to systems testing, we have also made extensive contingency plans to ensure business as usual, and to protect our computing and communications systems as well as our physical facilities. As part of these efforts, the NASD has established corporate

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and business line command centers that will operate from late December through the first week in January 2000. We will pre-position staff, resources strategically in each of these centers, as well

as around the country, to ensure rapid, fast response to protect investors’ interests. These centers will be linked to the SEC and

other industry organizations.

A second major area of NASD focus has been on its broker-dealer

members. In 1998, the Securities and Exchange Commission adopted a rule requiring all broker-dealers to report their readiness

through two successive filings. We use this information to help our

firms meet the Y2K challenge.

We have held over 90 educational workshops, coordinated with

extensive update materials. A year 2000 help desk has responded

to member questions, approaching 20,000 in the last 2 years. We

also have allowed firms to post letters dealing with their readiness

on our web site to assure their investors that they can keep their

money and assets safe.

The third major area of NASD Y2K focus has been on investor

education. A comprehensive investor education program has resulted in a coordinated campaign with all the major markets, the

SEC, the Securities Industry Association, and the President’s

Council on Year 2000. This coordinated campaign has communicated the readiness of the industry, as well as practical tips for

investors preparing their personal finances for the transition.

Examples of these effort include a year 2000 investor kit, which

has been made available to the members of the committee, and is

also posted on our world-wide web, as well as an open investor letter, that ran today, by coincidence, in the Wall Street Journal. We

will continue to run these letters by all the markets in the country

basically expressing our Y2K position. This open letter outlines the

industry’s preparations and repeats the advice to investors found

in our investors kit.

We appreciate this opportunity to testify. And you should take

comfort that we have since 1996 exercised I think our fiduciary responsibility to the Nation and the people who are investors in our

capital markets. Thank you.

[The prepared statement of Mr. Campbell follows:]

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Chairwoman MORELLA. Thank you, Mr. Campbell, for your testimony and for what has been done. And thank you for being such

a great constituent.

Mr. CAMPBELL. Thank you.

Chairwoman MORELLA. I am now pleased to recognize Mr. Ronald Margolis, chief information officer at the University of New

Mexico Hospital in Albuquerque, and also representing the American Hospital Association.

Mr. Margolis.

TESTIMONY OF RONALD MARGOLIS

Mr. MARGOLIS. Thank you, Madam Chair. I am Ron Margolis,

chief information officer at University of New Mexico Hospital in

Albuquerque. I am here on behalf of the American Hospital Association and their 5,000 hospitals, health systems, networks, and

other providers.

I would like to focus on four questions about year 2000 and hospitals: Will hospitals be ready? How have hospitals been preparing

over the past few years? What if something goes wrong? Finally,

how are hospitals reassuring the public at this last 55 days?

Will hospitals be ready? In a word, the answer is, yes. An AHA

survey last spring found that 95 percent of hospitals expected that

their medical devices, computerized information systems, and infrastructure to be Y2K compliant or to operate without a problem on

December 31st. A report issued last month by the Health and

Human Services Office of Inspector General also indicated high

confidence in hospitals’ Y2K readiness.

For example, in New Mexico, our State Hospital Association survey very recently found that all systems directly related to patient

care were expected to be compliant by the year’s end, and right

now are greater than 96 percent prepared. It is reasonable to infer

that since these surveys were conducted earlier in this fall season,

readiness among all hospitals has increased.

How are hospitals preparing? Hospitals have taken inventory of

all of our equipments—that’s medical devices, computer systems,

hardware and software. From that inventory, a remediation or repair plan was developed and is now being completed. We have tested, using rigorous means, all of our computer systems with a special priority toward patient care systems to ensure that they will

work well into the next millennium. We have developed and acquired software that allows us to warp the time ahead so that we

were able during the summer to test systems for the period December 27th through April 1st, which includes the leap year which is

unusual this next year as well as January 1st.

Also, through manufacture and vendor contact, we have determined other systems in medical devices which may be affected and

how they will be affected. We are following up as required, which

could mean anything from repairing a device, loading new software, or taking a device out of service for the period of the date

change.

Also, all hospitals plan to increase the level of staffing during the

days surrounding the millennium date change. Hospital personnel

will be on hand during the date change to make sure equipment

is safe and working properly before being used on any patients.

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Let me point out that hospitals are somewhat unique in their use

of technology. It is used as a clinical efficiency aide. Clinicians, of

course, are fully able to perform nearly every function that patient

support devices provide. We do not under any circumstances hook

patients up to computers and then ignore their humanness; we certainly will not on December 31st. To paraphrase the slogan of a

telephone company: In the medical world of technology, people

make a difference, and we truly believe that is a major

differentiator.

Nationally, the American Hospital Association is working with

the President’s Council on Y2K Conversion and with other associations to make sure the availability of drug products, pharmaceuticals, and medical supplies will continue as needed into the

new year. In New Mexico, hospitals are working closely with the

two major drug houses to assure uninterrupted distribution of

pharmaceutical supplies.

What if something goes wrong? Here in Washington, members of

the District of Columbia Hospital Associations have pledged to back

each other up in case of any kind of trouble or high demand for

patient services. A Memorandum of Understanding provides a blueprint for inter-hospital support. This kind of cooperation is happening in communities all across America.

In my State, hospitals are sharing information on medical devices, contingency plans, and performing readiness drills. We have

emergency preparedness procedures in place at the State, county,

and the local levels. We have emergency power generation capabilities that support all of our critical care and emergency care facilities.

Finally, how are hospitals reassuring the public? As hospitals

continue to perform their inside preparations, they are also reaching out to the communities. They are holding town meetings to ensure the people they serve are aware of what is being done. For example, New Mexico hospitals are taking part in Y2K community

conversations. In Albuquerque, local hospitals are participating in

the Mayor’s Millennium Committee which has provided a public

forum for citizens’ concern and input.

In summary, the AHA distributed to all of its members ‘‘Health

Care and Y2K: What You Need to Know About Health Care and

the Year 2000.’’ This booklet was developed jointly by the President’s Council with the help of the American Hospital Association

and other affiliated organizations to focus on consumer questions

about Y2K. We encouraged all our members to make this easy to

read booklet available to their communities.

To conclude, Madam Chairperson, the year 2000 issue will affect

every aspect of American life, but few, if any, are as important as

health care. What I have outlined today is merely a snapshot of a

much more in depth and thorough and united effort to ensure patient safety at midnight on January 1st and beyond. Hospitals and

health care systems, their State associations, and the AHA are

working together toward a smooth and healthy transition into the

new millennium. Thank you.

[The prepared statement of Mr. Margolis follows:]

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Chairwoman MORELLA. Thank you, Mr. Margolis.

I am going to turn for questioning now first to a gentleman who

has not had a chance to ask questions, the distinguished Ranking

Member of the Government Management, Information, and Technology Subcommittee of the Government Reform Committee, Mr.

Turner, the gentleman from Texas.

Mr. TURNER. Thank you, Mrs. Morella.

I want to commend each of our three witnesses on this panel. I

can tell you have invested many hours and many dollars in trying

to be ready for Y2K. I have always held the opinion, at least after

our many months of study on this committee, that it is the myths

about Y2K that could hurt us rather than the realities.

I did not get the chance to ask Mr. Koskinen a question that I

really think I will direct at Mr. Willemssen. He in his work with

the GAO probably knows the answer as well as Mr. Koskinen. The

Council that Mr. Koskinen has an Information Coordination Center

which, as I understand it, is designed to be a place that is kind of

a central point for coordinating all information about Y2K problems, about events that surround the new year.

It seems to me that our emphasis at this point, after months of

preparation, which I feel very good about, both in the public and

the private sector, that we need to rethink a little bit about what

we are doing to prepare to address the rumors and the myths that

may surround the New Year. At one of our recent meetings, I even

suggested that perhaps Mr. Koskinen’s council should bring aboard

some high profile, credible personality to be a spokesperson, someone who could answer press inquires and someone who could pass

along the realities and dispel the myths, someone of the caliber of

Walter Cronkite.

But it seems to me that is our real fear. I can sense, Mr. Campbell, that you and the securities market would be particularly sensitive to the rumors and the myths that may float around the new

year. I come from a small town and in a small town we used to

all understand that there were a lot of rumors that started at the

bridge clubs and at the coffee shops, and if you circulated in the

right groups you could pick up on those rumors, and they would

pretty quickly get around town.

With the advent of mass media, television, radio, obviously, information spreads much faster all across the country. But at least

there, there is responsible journalism to kind of screen the information that comes across the airwaves. But on the Internet, you can

put anything on there you want to and spread that story to tens

of thousands of people in a matter of hours. Most of us on this committee have experienced in our own offices receiving large volumes

of mail on subjects that our constituents heard about over the

Internet that we turn around and have to write letters back to

them and tell them what they read is absolutely false, there is no

such proposal in Congress to tax the Internet, or whatever the

issue happens to be.

And I am fearful that Y2K offers the opportunity for pranksters

and for outright frauds to run rampant on the Internet, and that

we need to be very careful about how we structure Mr. Koskinen’s

Information Coordination Center to be sure that it is going to not

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only be able to process all of the myths that may surround the new

year, but be able to speak with credibility to dispel those myths.

Mr. Willemssen, do you know what Mr. Koskinen has done to ensure that we are going to have that kind of response in place?

Mr. WILLEMSSEN. I was over at the Information Coordination

Center on Monday. They are located on about 18th and G. We got

a tour, my staff did, of the facility. They do have a press briefing

room set up I think for about 60 people. And as I recall, General

Kind, the head of the ICC, mentioned to me that the plan was for

Mr. Koskinen to provide press briefings approximately every 4

hours during that rollover period.

Secondly, echoing back to one of the comments you made earlier,

as one of the ideas that we have suggested before, especially now

that we are in November and entering into December, is the executive branch may want to look at opportunities to use public service

announcements now and in December rather than waiting for just

the rollover period, especially to the extent that some may start to

view Y2K as entertainment opportunities, as opportunities to show

worst case scenarios. I think given that, it is best to combat those

kinds of announcements with facts, the facts that we have discussed here today. So I think there still is an opportunity prior to

that rollover period to come out with those kind of announcements.

Mr. TURNER. Mr. Campbell, do you have similar plans for the securities industry to be able to speak with credibility to dispel rumors?

Mr. CAMPBELL. Congressman Turner, yes, we do. We expect fully

to have our command centers staffed from the 28th of December

on. We have hot links, hot lines, satellite communication, et. cetera,

with our vendors, with the news media, with the President’s working group, with the Securities and Exchange Commission. We have

a broadcast facility at which we expect to have Frank Zarb, our

chairman, available.

We will close our markets on December 31st at 1:00 in the afternoon. We have that afternoon, that evening, and the entire weekend. The way we dispel the myths is that Monday at 9:30 a.m. the

capital markets in the United States open and they trade.

Mr. TURNER. Thank you.

I think we might could sustain a run on the grocery store, Mr.

Scher, but I do not think we could sustain a run on the banks or

the security market.

Mr. SCHER. Well, as I said earlier, on behalf of the food industry,

we have been in an offensive manner of working with our customers and our vendors ever since earlier this year. The food industry has done a very good job of communicating to the consumer

that there is no need to panic. We are saying in ads and in a brochure, and the whole food industry is, if you are really worried, we

advise you to stock up as if it were going to be a snowfall, no greater, no less. But if you are worried, get items like batteries and perishable and non-perishable items. Of course, the perishable items

the day or so before, the non-perishable, we are telling people if

you are really worried, you can stock up now. But we are telling

people there is no reason to do so. We think we have done a good

job of informing the public that you do not have to panic.

Mr. TURNER. Thank you. Thank you, Mrs. Morella.

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Chairwoman MORELLA. Thank you, Mr. Turner.

Mr. Scher, you spoke on behalf of Giant Food. But how about

other food distributors, are they in the same situation, do you

know?

Mr. SCHER. The Ahold family, I mentioned earlier all the companies that are part of the Ahold family, over 1,000 stores along the

East Coast. Dr. Tim Hammonds is president and CEO of the Food

Marketing Institute, he has appeared before Congress, and I know

that other food chains have also appeared. And the message has

been one of that the industry has worked on the issue, that we are

ready for Y2K, and we will, indeed, be ready. I might add that also

goes for the vendors, the companies that supply the food retailers.

We at Giant have contingency plans, but we also know that they

have worked with other food chains around the country. So the

manufacturers, the vendors, the people that supply us within the

food industry, they are also ready.

Chairwoman MORELLA. Mr. Campbell, in your testimony you outlined some categories of potential Y2K events. I am curious about

an example that you might want to give with regard to Y2K problems that would affect business processing and be visible to the

public.

Mr. CAMPBELL. We start off with protecting our infrastructure

and our technology with very basic starts, where all of our computer facilities, including the one in Rockville, are fully self-contained entities starting with the electric power. Our generator facilities have the capability of operating our operations stand alone.

Our biggest concern has always been the fear that people will

make decisions about economics and buying or selling their securities based on a rumor. And it is our hope that our education has

really been at the forefront and that people should not make economic decisions based on non-economic rumors or baseless fact.

We expect fully that all of our systems, we have done the endto-end testing, we have contingency plans that have addressed

every area that we can humanly comprehend or think up, we have

prepositioned technology response teams across the country, and

will do so. To our way of thinking, the worst part of any of the Y2K

issues that we confront is the lack of investor education. And we

continue to do that every day.

Chairwoman MORELLA. Where are you going to be on January 1,

2000?

Mr. CAMPBELL. I will be in my command center at K Street here.

We will have a lot of our folks in Washington as well as both our

primary and backup computer facilities in Connecticut and in

Rockville.

Chairwoman MORELLA. Mr. Scher, are you going to be walking

through the grocery store at that time?

Mr. SCHER. We will be ready.

Chairwoman MORELLA. Mr. Margolis, you mentioned that an inventory that had been done had something like 95 percent of the

hospitals were compliant, but you assume there would now be

more. Do you want to speculate on how many more? And of those

that are not compliant, are they rural hospitals? And what will you

do about that?

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Mr. MARGOLIS. Thank you. I think they would not be differentiated as being just rural or just urban hospitals. The process of remediation with the thousands of medical devices is a process of

working with vendors and testing equipment. And I feel confident

that process continues to go on. Many vendors early on, and this

is back in the spring of this year, were not even certain about their

equipment and what impact it would have on Y2K. So that it took

them some period of time to check with their own chip processors

that made the embedded chips and the other circuitry contained

within the equipment.

The remediation efforts are nearly complete. That 95 percent,

which is actually more recently in our State of New Mexico 96 percent, is that equipment which has completely been remediated. And

it is for that reason that I am confident that the remaining 4 percent is in the last few days of checking out and finally getting its

Y2K compliance sticker, or that pieces of equipment that should

not be used because it questionably may fail, it will be locked in

a closet as not Y2K compliant and then could be pulled back out

after January 1st.

Chairwoman MORELLA. And where are you going to be on January 1st?

Mr. MARGOLIS. Well, we have a command center in the hospital.

It is a conference room with about 25 telephone lines in it which

connects to the various departments. So I will not be partying.

Maybe we will have some non-alcoholic punch available for 1 a.m.

But in the Mountain States Time Zone we will be watching closely

what happens here on the East Coast, and, of course, jointly with

the AHA and the President’s Y2K task force, we will be watching

what happens to medical institutions and health care facilities in

New Zealand, which is about 19 hours earlier than the Mountain

States, should specific pieces of equipment be affected.

Chairwoman MORELLA. Thank you.

Mr. Willemssen, you have been very patient. I know that my

time personally has elapsed, but I just wanted to quickly mention

that I was alarmed when I read that in education 56 percent of the

elementary and secondary schools in the United States were not

compliant. I am just wondering what that can mean and what is

it that we can do about it. This was like heating, security, telecommunications.

Mr. WILLEMSSEN. The education sector is one that you should be

concerned about. Education has gotten a late start. As Mr.

Koskinen mentioned, they have made excellent progress. But when

your starting point is relatively so late, there really is reason for

concern.

And one of the things that we have been emphasizing is the need

for contingency plans for those educational institutions. Our survey

of 25 of the largest school districts found many of them planning

on December compliance dates. And as you know as well as anyone, information technology-related projects are often late. So that

when you are planning on a December compliance date, it is going

to be very difficult probably to make that date for all of those

school districts.

So I think there is reason for concern. And I think it is therefore

incumbent upon all of us to continue sounding the alarm for this

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particular sector, as Mr. Koskinen and the Department of Education have done in the very recent past. That needs to continue.

Mr. MARGOLIS. Madam Chair.

Chairwoman MORELLA. Yes, Mr. Margolis?

Mr. MARGOLIS. Thank you. I just wanted to comment on higher

education particularly as it pertains to medical schools. One issue

has been, and we have talked about it collaboratively, the safeguarding of research projects, research specimens that are refrigerated that could be affected if power is lost. At most major academic centers, which certainly includes the University of New Mexico at this point, emergency power is in place to assure that both

clinical laboratory specimens as well as long term research specimens, such as tumors, are under emergency power for continued

refrigeration.

Chairwoman MORELLA. That just shows the tremendous implications that one has to think of. You cannot take anything for granted.

I am now pleased to recognize Mr. Bartlett.

Mr. BARTLETT. Thank you very much.

I do not know what the estimates are of the total amount that

it has cost our country to get ready for Y2K. My question is, we

knew a long time ago that this problem was coming. We started

very late. Had we started in 1990 rather than in 1997 or 1998 or

1999, whenever we started, how much less in your judgement

would we have paid to solve this problem? Obviously, the longer we

waited, the more technology was there that needed to be fixed and

assessed and it was going to cost more. How much less would it

have cost us, you may give it as a percentage, in your judgement,

if we had started this in 1990 rather than when we did?

Mr. MARGOLIS. Mr. Bartlett, I believe that the costs would probably be insignificantly less because in the case of hospitals, and I

am sure in the case of financial institutions, there are so many

interdependencies with other trading partners. Hospitals themselves could very well have upgraded their systems, checked their

devices. But without input from the manufacturers of certain components, they would have been waiting until the present time until

a lot of information was made available.

I think it is human nature to think of things in the future when

the future gets a little closer. I speak from my own personal experience. I started out in computer programming and development myself in the 1970s and we talked many years ago about Y2K and no

one believed that the computer programs that we were writing

then would even be remembered by the time 1999 came along.

Mr. BARTLETT. But they have been remembered and we still use

them. And when did we stop using a two-digit code in programming, which would tell you when the cost of fixing would be stabilized.

Mr. MARGOLIS. I could not answer that question directly. I know

that at our hospital we stopped during the development of our current generation of client information systems. But I do know we

have heard from other sectors that other software manufacturers

have even introduced operating systems as recent as this year

which had year 2000 defects. But they are easily correctable because they are upgraded with a later version of the software. That

145

is not to dispute why they were introduced as being deficient to

begin with though.

Mr. BARTLETT. Which is the basis for my question. If starting in

1990 we had produced no programs with a two-digit date code,

would not the problem have been a simpler fix?

Mr. MARGOLIS. I think it would have, but the interfaces between

the systems would still be at issue. And in hospitals, that is the

largest issue that we have. In our specific hospital, we have 80-

some systems that speak to one another, that transfer data between one another. So it is not only the interface programs that

hand off that data, but each of the programs that have to be Y2K

compliant in the same way or in a way that you can understand

so that the data is properly translated.

So that what you suggest would be the ideal. I am not sure that

the cooperation of all the trading partners would have been

achieved until the pressure of Y2K, the President’s Council, and

the Congress had been felt.

Mr. BARTLETT. Of course, if we had started with a four-digit date

code, there would have been zero fix; is that correct?

Mr. MARGOLIS. That is absolutely correct.

Mr. BARTLETT. Okay. Mr. Campbell, our procrastination has cost

us nothing?

Mr. CAMPBELL. Whenever you procrastinate, it costs you something. I would say that the greatest time that we have spent has

been on our legacy systems, our older systems. As you build a oneof-a-kind computer system in the world and you start back many

years ago, it is the legacy systems that take so much time to recertify. We would have also, Congressman Bartlett, had to certify all

new systems that we put in place also. While it has cost us something, I think it is very difficult to place a percentage on it, and

I do not think that percentage is a big percentage because of the

integration testing and the certification of all systems across all

vendors, across all different legacy and new systems. So even the

systems that we put in today, we still make sure that we certify

them as Y2K.

Mr. BARTLETT. Mr. Scher?

Mr. SCHER. Within the food industry, most major retailers started working on the problem 2 or 3 years ago. We do not believe

there would have been significant cost-savings. Time is money, as

they say, and there probably would have been some better flexibility with time scheduling in advance. But 3 years back the industry looked at the situation and worked aggressively, and the retail

industry is ready.

Most people think of the food industry as a rather simple business—you go in, you buy groceries, you go home. Looking at what

we have developed as far as contingency plans, it is mind-boggling.

Things that we within the food industry, not just Giant Food, have

had to be cognizant of include such things as advertising, direct

store delivery, front-end operations, fuel operations, gas, getting

products to our stores from our various vendors, perishables, areas

of payroll, what happens if there is a power failure, if we cannot

get store supplies, transportation, water and sewage. These are

major issues that most people say, ‘‘Gee, I had no idea that is what

was necessary to run a food store’’.

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Again, I do not think it would have saved a great deal of money.

Time, yes, if the industry would have worked a few years earlier.

But, again, most retailers that I am familiar with have tackled the

problem starting about 3 years ago in 1996.

Mr. BARTLETT. Madam Chair, I would like to ask Mr. Willemssen

just a simple question.

Do you concur, sir, that the major liability that we have in starting late is that we might not finish rather than it cost us more?

Mr. WILLEMSSEN. I think the major liability is exactly that, that

we may not finish in time. But I would also add that because we

did get a late start, the pace, for all intents and purposes, was

more frantic than it would have otherwise been. And you have to

pay for that more frantic pace.

Speaking from the Federal Government perspective, the most recent estimate we have, the 24 major Federal departments and

agencies, is about $8.9 billion that it will cost overall. One could

argue that if that had been stretched out over a longer period of

time, it may have been less. Indeed, there was a $3.35 billion emergency supplemental that was just for Y2K. One could argue that

if the effort had been stretched out over time, agencies could have

funded these activities through their normal budgeting process.

Mr. BARTLETT. Thank you all very much. Thank you, Madam

Chair.

Chairwoman MORELLA. Thank you, Mr. Bartlett.

I am pleased to recognize Mrs. Biggert.

Mrs. BIGGERT. Thank you, Madam Chairman.

One of the rumors that I have heard lately, and I do not know

if it is rumor, but so many of the hotel rooms in major cities have

been booked, not for the celebrations of the turnover on New Year’s

Eve, but the fact that so many companies are having so many staff

having to man the offices that they actually are having their families come into the cities and celebrate there because they will be

involved with the turnover. Is that true, Mr. Campbell, from your

standpoint?

Mr. CAMPBELL. We have scheduled, in Washington, 10 rooms at

the Mayflower. We have scheduled rooms across the country because our staff needs to be there prior to the date, as well as the

holiday traffic. So we have booked a considerable amount of room

in the hotel industry around this country. You are absolutely right.

Mrs. BIGGERT. I think it will certainly be well-spent if we have

those glitches that somebody will be there.

I would also like to commend you on your brochure and I guess

this postcard. Is this something that was put into store bills, or is

this something that was sent out through information?

Mr. CAMPBELL. It was sent out by our member broker-dealers

across the country in the statements which they send to their customers every month.

Mrs. BIGGERT. Have you had response from the customers?

Mr. CAMPBELL. We have had quite an active session on our web

sites with customers. And many of those customers would directly

ask the broker-dealer that they deal with on a day-to-day basis

many of the questions that they would ask us, and then we would

respond either directly or to the member firms themselves. But our

help desk has responded to over 20,000 requests over the last peVerDate 11-MAY-2000 15:00 Mar 30, 2001 Jkt 010199 PO 00000 Frm 00152 Fmt 6633 Sfmt 6602 E:\HEARINGS\61629 pfrm09 PsN: 61629
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riod of time. So it has been very active, which is why we have really thought that education was probably the most important thing

that we do.

Mrs. BIGGERT. I know one of the concerns about this has been

fraud and that people were coming out with schemes to try and

make money from this or take away money from people, particularly seniors, with scare tactics. Have you heard of anything where

people have called your offices saying that somebody has tried to

perpetrate something?

Mr. CAMPBELL. Not that I am aware of. The one issue that we

have heard about is inducing people to withdraw money from their

bank in cash form and then defraud them of that in one form or

another. By and large, the securities industry is either book entry

or by certificate, and the ability for somebody to walk into an office

and demand ready cash is generally not the same as a bank.

Mrs. BIGGERT. And then Mr. Scher, I know that we have had

concerns that there will be people who will decide at the last

minute that they need to ensure that they have those supplies that

they had not thought about until the last day or so. Do you think

that still is going to happen? I do know that in a snow storm, coming from an area where we do have a lot of snow at that time of

the year usually, that this happens—even in a major snow storm—

where people rush to the grocery store at the last minute.

Mr. SCHER. We have extra merchandise that will be available in

the stores and in our warehouses, both perishable and non-perishable, to ship. And we can do that in a matter of hours if need be.

I do not think you will be seeing that. Early in 1999, the news

media was hyping this, and there was, indeed, a lot of interest on

the part of consumers about what is going to happen. People were

worried. We were getting dozens of media calls and consumer inquiries. Let’s advance to November 1999. We are getting about six

customer calls or letters a month, which is nothing, and all the

news media calls to date have died down significantly. I think they

will probably heighten slightly the last week of December.

But the message has changed from the news media’s perspective,

because of good reporting, to there is no need to panic. The message today is that the industry is ready. And that includes the

banking industry that I have read about, the food industry, the airlines. So I think the apprehension on the part of the consumer is

a lot less today than it was at the beginning of this year.

Mrs. BIGGERT. Good. Great. Thank you very much.

Thank you, Madam Chairman.

Chairwoman MORELLA. Thank you, Mrs. Biggert.

I am now pleased to recognize Mr. Ose.

Mr. OSE. Thank you, Madam Chair.

I first want to commend Mr. Scher’s organization for this helpful

pamphlet which on the back lists any number of web sites down

at the bottom that folks can visit for additional information, and

if they do not have access to the Internet, there is a phone number

that they can call for information on this, a toll-free number, 888–

USA–4Y2K. So my compliments to your organization for putting

this together.

Mr. SCHER. Thank you.

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Mr. OSE. I cannot let the occasion pass, Mr. Campbell, without

expressing my compliments to you and your organization.

Mr. CAMPBELL. Thank you.

Mr. OSE. If I understand correctly from listening to each of you,

the manner in which your business transacts is an increasing

amount of its commerce is electronically. The hospital folks are ordering supplies electronically, you are exchanging shares electronically, you are buying food and produce electronically, probably paying your people electronically with direct deposit, et cetera. Each

of those transactions goes over the telephone lines, in effect. It is

a telephone conversation. Which brings me to my question, and I

regret we do not have the opportunity to visit with someone today

on that.

Mr. Willemssen, as far as the telephone companies, it is my understanding they are perhaps the most ready of all the various organizations in the country for this rollover.

Mr. WILLEMSSEN. I would probably not go along with they are

the most ready. I am much more optimistic today than when I testified in the summer of 1998. I would continue to say that the

banking and finance sector is probably the most ready. Within the

telecommunications area, I think among some smaller local exchange carriers there is still some level of concern about their readiness. So bottom line for me on telecom, much more optimistic, but

I would not put them at the absolute top of the heap.

Mr. OSE. Well, that brings me exactly to my question, and it relates primarily to Mr. Campbell’s area of commerce. On Friday, December 31st, at 1 p.m., the exchanges are going to close, and at

9:30 a.m. on Monday, January 3rd, they are going to open. What

is plan B if on Monday the 3rd there has been a problem?

Mr. CAMPBELL. Essentially, we operate one of the largest private

communications networks that there is. We have paired T–1s to

every server that we have across the country and across the world.

All of those private, secure T–1 lines have been tested and tested

and tested. The servers which they interface with have been tested.

We have not only had physical on site presence to those servers,

but the end-to-end testing that we have been involved in for quite

some time leads us to believe that we know that our telephonic

lines are operable in a Y2K environment.

We also have the ability to do many tests over that weekend,

which we will. We do not quit testing. We do believe that the communications that transact share volume in the NASDAQ stock

market are ready and operable, and will be, as they have throughout all of our end-to-end testing. We have transacted business coming in, we have compared trades, the clearing organizations have

vented the transparency of that trade back out at the price that it

took place. We have gone through the order entry, to the transaction, all the way through the settlement and clearing process in

a year 2000 environment, having rolled on numerous times our calendars forward.

We believe that we are ready. If we have issues to deal with, we

will deal with them. But we believe that with the integrated testing end-to-end that we have done, we are ready and we will be

ready.

Mr. OSE. Thank you.

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Chairwoman MORELLA. Thank you, Mr. Ose.

It is now my pleasure to recognize the co-Chair of the House

Working Group on Y2K, the gentleman from California, Mr. Horn.

Mr. HORN. Thank you, Madam Chairman.

Let me start with NASDAQ. It established a record high, as we

all know, surpassing 3,000 in closing yesterday. And technology

stocks really dominate that board. Last week, IBM announced that

mainframe computer customers are waiting to buy new equipment

until after January 1st as they grapple with their own Y2K problems.

What is the danger that Y2K could adversely affect the stock exchanges and investors’ interests?

Mr. CAMPBELL. First of all, I think that whenever you approach

year end, you either speed up your purchasing or you delay your

purchasing, depending upon where you are with your budgets or

the issues that you are dealing with. We do that at NASDAQ and

I know the Federal Government does that. Essentially, in IBM’s

case, I believe that it was a postponement, obviously, is what you

said, and deferral of major purchases while they concentrated on

making sure they were Y2K compliant.

The SEC has been very diligent in requiring the disclosure of the

Y2K risk that firms have. They have gone back and back, and

those firms they felt had not been as forthcoming as they would

have desired, they have gone back to them and asked them for

more specificity with respect to their risks. I think that the technology companies are more aware of Y2K and as sophisticated in

the remediation because they are either the problem or they have

been the solution. So relative to the damage that it would pose

across the country, I think that it will be very limited in scope.

Mr. HORN. In terms of contingencies, what things do you have

on Y2K problems that affect businesses? What is the contingency

plan?

Mr. CAMPBELL. Our contingency plan deals with many different

levels of issues; whether or not somebody has telephone issues,

whether or not they have order entry issues, whether or not they

can operate their systems. We have it tiered in many layers. We

have very specific reporting requirements over the weekend from

December 31st to January 3rd. Those very specific reporting requirements go to the different capital markets and the regulators.

The Securities and Exchange Commission has very specific reporting requirements over that weekend. We will be, and have been,

linked in terms of all the communications that will take place.

So there are checklists for as many contingencies as our creative

minds have been able to think up over the last couple of years.

They are quantified, they are in books, they are in our command

centers. We practice, we will continue to practice, and we will have

basically triaged as many different contingencies and unexpected

kinds of issues that we know how to create.

Mr. HORN. A number of us have said from the very beginning

that this is a management problem, not just a technological problem. What have you learned out of this experience that might be

useful should some similar circumstance ever occur? It might be

the encryption bit and how little bright kids break through computer security and all the rest of it.

150

Mr. CAMPBELL. We deal with security issues every day. From a

management perspective, my best training is probably as an Air

Force pilot and knowing what to expect that nobody has ever

trained you for. Essentially, not only from our web sites, but our

private communications systems, to our computers, to our people

issues, I think that it has continued to make us more aware that

it has to be done on every facet every day from a security perspective. So I think that it has been, at least from my perspective, a

very broadening experience. Hopefully, I have learned something

from it.

Mr. HORN. Would any of you other witnesses like to comment on

that? What have you learned from this that might be worthwhile

knowing as a management problem when we ever get into something like this again? It obviously will not be this particular thing,

hopefully, but it could be other things that relate to computers.

Mr. SCHER. That is a very good question, Mr. Horn. We are looking at Y2K as an opportunity. We think we will not miss a heartbeat; it will pass us by. But your question is a good one. In the

event of a natural disaster within the food industry, let’s take just

one segment, people on welfare, people who receive Government

benefits from the State and Federal levels, if the phones go down,

for example, people that are on the electronic benefit transfer program, which is almost throughout the United States today, they

would go into a food store and not be able to access their benefits.

So what have we learned? We have learned that, aside from

Y2K, we should indeed have good contingency plans in the event

of, for example, telephones go out. A large segment of our customer

base would not be able to shop for something they need to survive—food. So we have to look at alternative plans to handle a situation if, for example, the telephone lines go down again, how do we

serve that customer. It is a question that we discuss today with one

of our other owners, one of the other members of the Ahold family,

Giant Food Stores of Carlisle, and we do not have the answer. It

is a very good question. Aside from Y2K, if the phone lines go

down, how do we serve this important segment of our business. We

are going to be addressing that also.

So it has widened our horizons. It has opened our eyes to look

at possible other disasters that could occur within a retail business,

how do we solve those problems. Some of those solutions are inherent with what we have found out with Y2K. Others we will be exploring over the next few months. But it has, indeed, opened our

eyes to potential other disasters that could occur.

Mr. HORN. Would cellular phones be one of the options for your

major customers, a direct line?

Mr. SCHER. Possibly. If phone lines go down and a welfare individual or family is in a food store, they are at the checkout, we

would have—currently, if the computer does not work today, we

have a number that we can call within the State government to

make sure that the benefits or their so-called account has funds in

it. A cellular line would work perfectly for that. It is a little cumbersome, but we would have to resort to something other than telephone lines and that is what we would use.

Mr. HORN. Mr. Scher, in terms of the food situation, is there a

concern within the food retail distribution industry about transporVerDate 11-MAY-2000 15:00 Mar 30, 2001 Jkt 010199 PO 00000 Frm 00156 Fmt 6633 Sfmt 6602 E:\HEARINGS\61629 pfrm09 PsN: 61629
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tation being available to get the products you need on a regular

basis? I assume a lot of the stores use what we call the Japanese

inventory approach; on a timely basis, it gets there based on the

demand. Is there going to be stockpiling in some cases in the back

of particular stores if they do not have the space?

Mr. SCHER. Mr. Horn, for certain commodities within the food industry, yes, the food stores, to the best of their ability, have small

back rooms that they will stock up with extra merchandise. Our

warehouses will also have certain items that we know that, for example, if there is a snow storm, people would normally buy, including such items that are non-perishable like batteries, candles. We

will have our truck fleet standing by. In the event that we see

panic buying occurring, we will be able to ship merchandise to the

stores. But with certain commodity groups, we will have excess

product in the store just to be safe.

Mr. HORN. Let me ask the gentleman from New Mexico. I have

long admired the medical school at the University of New Mexico.

I am curious, they were the ones that in the freshman year of medical school mixed the students studying medicine with actual patients, and not just the dull bio-chem or whatever courses, anatomy, so forth, but relating them to real human beings. Is that still

going on at New Mexico?

Mr. MARGOLIS. Yes, sir, Mr. Horn, it does. It is the encounter or

problem-based medical training. They were pioneers in that area.

Mr. HORN. Well they were No. 1, but Harvard got the publicity

because it is Harvard.

Mr. MARGOLIS. I am glad that story has travelled back east.

Mr. HORN. And having headed a State university and been a

head of a lot of those people, but you never get publicity because

you do not have 35 people on your staff.

Mr. MARGOLIS. That is right.

Mr. HORN. So I was just wondering if that kept going, because

I have had a great respect for that institution for 20 years.

Mr. MARGOLIS. I will let the dean know. He will be very glad to

hear that.

Mr. HORN. Well, it is a very interesting situation. Let me ask

you, with the AHA, when we were in Cleveland the representative

of the Cleveland Clinic, a very distinguished group of hospitals,

was our witness and noted that there was a common web site

where you could check out the equipment as to machine number,

patent, and all of the rest of it and you did not have to reinvent

the wheel if you were checking your various pieces of equipment

in the emergency room. Has that worked pretty well? And has the

hospital profession been able to get and share information with

each other so they do not have to reinvent the wheel?

Mr. MARGOLIS. Yes, that has worked very well. Actually, through

the leverage of the State Hospital Associations and the American

Hospital Association, we have shared a lot of information like that.

The FDA, as you know, has a site for medical devices where you

can check serial number, manufacturer, and other information to

rely upon the piece of equipment being tested by the manufacturer,

which is often the safest reliance you can have.

In addition, the American Hospital Association has put together

a monthly telephone conference line, one for rural hospitals and

152

one for large urban hospitals, where on a monthly basis for the last

11 months we have shared information regarding what we have

found with our vendors, what we have found in our own institutions, and how our remediation plans have been going, which has

been an excellent forum for learning from one another and avoiding

that issue of reinventing the wheel. So, although in many ways we

are competitive with other hospitals in our community, it is important to share certain levels of data because we are community service-based providers and it is critical that we be able to respond as

a team and not as a single hospital island.

Mr. HORN. Now a lot of the manufacturers of some of that emergency equipment probably were out of business. Did you find there

were ways to get replacements for some piece, or did you just have

to go and let’s buy something new?

Mr. MARGOLIS. In some cases. I can think of three or four pieces

of equipment, and that was I believe EKG pieces of equipment,

that had to be replaced because the manufacturer had in fact been

out of business for something more than 10 or 12 years and there

was no successor to that manufacturer that could provide the upgrade. The reality is a piece of equipment like that has a useful life

of 8 to 10 years. So, on the one hand, it was probably time to replace it, but, as you know and commented about New Mexico, we

probably did not have the money to budget to replace it and so we

would have liked to have kept it running. But, for the most part,

there has been successor companies who are able to provide the upgraded software, and in many cases the upgraded computer processing board, which will allow that piece of equipment to operate

beyond January 1st. Most of that was done under warranty or

maintenance service agreements that we have.

It is a large challenge for hospitals to have identified all that.

But that is part of their remediation plan and, as you pointed out,

much of that information has been shared over various web sites.

Mr. HORN. Now in going through this exercise, which nobody

wanted obviously to do, but you had to do it for your own computer

systems, have you learned something that will help you in better

arranging new computers which are needed in terms of a new generation? We are always out; the minute we have bought one, it is

3 years out of whack anyhow. But what have we learned from that

in terms of did we need all those programs, could you get rid of

some, could you merge some? Did anybody use that as an exercise

to say why are we doing this?

Mr. MARGOLIS. I think a valuable lesson that we have learned is

the compatibility between equipment and the need when procuring

equipment or software, which is mostly what hospitals do rather

than develop their own software, to use common standards in data

communication to insist that vendors can provide that common

interface. There are committees of HCFA I believe that have defined something called HL–7, which is a standard of data interface,

and that has become very popular in the last 2 years, to insist that

vendors provide software that can communicate using this HL–7

interchange. I think that is probably the most valuable lesson because that will ensure not only for year 3000, which is quite a distance off, but for various things that happen in terms of Federal

programs and insurance programs, that various pieces of the data

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process share the same codes for the same meaningfulness of the

data.

Mr. HORN. The way you are getting the new replacements for

some of us, we might be around in the year 3000.

Mr. MARGOLIS. I hope I am.

Mr. HORN. You gentlemen really did a great job and in your written presentations. I think it is one of the best panels we have ever

had before us. It was very useful as to what you have gone

through.

I am going to ask Mr. Willemssen, who has followed us everywhere in the United States, overseas, you name it, and we usually

ask him, because he has got all this knowledge, to say what have

we missed. And what would you suggest? Ask some questions that

make sense to you.

Mr. WILLEMSSEN. I think you have really touched on some of the

key points that you would want to hear from these witnesses. The

only thing that I might add from a lessons learned perspective that

maybe these sectors have learned, that we have definitely learned

in the Federal Government, is going into this, and going into future

information technology problems such as this, you need to focus on

the business function first and the system second, instead of thinking systems and then how do they work for the business. That is

one lesson learned in the Federal Government is focusing on the

programs and then looking at the supporting systems rather than

the other way around.

Mr. HORN. Anybody want to add something that came to mind

that we did not ask you? This is your chance.

[No response.]

Mr. OSE. Mr. Chairman, I have one thing I want to make sure

that Mr. Scher addresses, because come January 1st, if there is not

an adequate supply of Oreo cookies in his store, he is going to have

trouble.

Mr. SCHER. They will be there, I promise you.

Chairwoman MORELLA. You are talking to a Marylander, we believe in the Oreos, however you spell it.

Mr. HORN. Well, if the Chair would indulge me, there is a few

closing remarks I would like to make that I did not make because

I was not here. I was in a markup of my subcommittee earlier.

Chairwoman MORELLA. Mr. Chairman, before you make the closing remarks, may I just ask one other question. We are also going

to open it to members of the committee of both subcommittees to

be able to present any other questions to you, if that is amenable.

But I just had a question that dealt with an article that I saw

in USA Today. It was an article that indicated that a number of

companies have failed to comply with SEC regulations requiring

full disclosure of a company’s vulnerability to Y2K. I just wondered

if any of you wanted to comment on is this a widespread problem?

Does this imperil investor confidence? Because I think it would affect all of you and I just wondered if you wanted to make any comment on that.

Mr. CAMPBELL. It is my understanding, Madam Chair, that it is

a very small contained group of companies that the SEC has gone

back and asked for further information. Obviously, the most important thing that the management of a company can do is maximize

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and protect their shareholder value. And those companies that do

not have full disclosure obviously risk that.

Chairwoman MORELLA. Anyone else, because it actually would

affect all of you.

Mr. SCHER. No problem.

Chairwoman MORELLA. Are you okay with, I know NASDAQ is

going international, but the Asian markets, the interoperability

concept?

Mr. CAMPBELL. We are moving forward relative to globalization

of our markets. The links at this present time do not provide major

risk to the U.S. capital markets. Essentially, we will know early

whether those markets operate, how they operate. But the connection between the markets is not there at this point in time. So at

least to U.S. citizens, the issue relative to their domestic securities

is not at issue, it is their foreign owned securities. We have not had

any direct conversation with the foreign markets except in terms

of exchanging information about Y2K from a technology perspective. So I really cannot address that.

Chairwoman MORELLA. If there were a run on the Asian markets

and you found out before it happened here, how would you react?

Mr. CAMPBELL. I think our reaction would be to address the confidence issue in our domestic markets. I think all of our markets,

all the regional markets, the national exchanges would address

those in concert along with the SEC. The most important facet, we

believe, of our markets is there is confidence in them; they are

well-regulated, they are transparent, and they do protect the investor. That happens no where else in the world like it happens here.

So we would address that very openly and very directly and we

would share with the investing public exactly what is happening.

Chairwoman MORELLA. Mr. Willemssen, do you want to comment

on that issue at all?

Mr. WILLEMSSEN. We have not done an analysis of that particular issue, so I am not in a position to comment.

Chairwoman MORELLA. Thank you. I want to thank all of you,

too.

Now I am going to defer to Chairman Horn, the co-Chair.

Mr. HORN. Thank you very much, Madam Chairman.

No one really knows what is going to happen on January 1 and

December 31 in terms of what happens when we switch over. We

have got predictions that are springing up like wild flowers about

this. We have eager entrepreneurs promoting their year 2000 survival kits. We have some of the people in the county jail have already talked to the warden and the captain of the guard to say

could you let me off for December 31st and January 1st because

they think everybody will take money out of the bank and put it

in their homes. That is the stupidest thing an American citizen or

anyone here could do is take money out of the bank and put it in

their homes because that is just where the robbers and burglars

and all the rest of them will be looking.

Already, I read into one hearing a letter to Ann Landers on the

scams already happening to elderly citizens. And all I can say is

it needs to be ‘‘buyer beware’’ in those last few days in terms of

people selling you things you really do not need. A lot of them just

might collapse on you anyhow. I have been looking at probably 100

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different magazines over the last couple of weeks and have seen

these ads that are the kinds of things you would see in the National Inquirer or something that want to scare your wits out of

you. But we do have some real problems.

Of course, some of this is just amusing in a way, but it certainly

is upsetting people. For example, in 1993, Minnesota officials instructed 104-year old Mary Bandar to report to kindergarten. Now

it turned out that the State computers had misread Ms. Bander’s

1889 birth date as 1989, placing her at age 4. Recently in Maine,

several hundred car owners were dismayed to find the titles to

their new year 2000 model vehicles categorized as ‘‘horseless carriages.’’ State computers has misread the year 2000 as 1900.

Well, we can get by those things. But some of the more serious

ones obviously worry us; and that is, how you get gas from Russia

to Eastern Europe, Central Europe, would that affect the United

States in any way? Will the electricity fail? So forth. Now both the

administration and the Congress have looked at a number of these

questions around the country and I think people have been very

prepared. When we had a problem on nuclear reactors, we asked

the Nuclear Regulatory Commission to look at all of them, not just

10 percent; they were only going to look at 10 percent. They have

looked at all of them and presumably that situation which generates electricity is okay. But we really will not know until you get

it all in an operational sector where you have all of these different

factors coming together in a typical operational day. And that is

the main thing we really have to care about.

We will have two more things in terms of these two subcommittees. One, we will hold the final grade release to the press on November 22nd, a Monday, and the staffs and the GAO team that has

worked very closely with us will be doing the work of analysis that

week. We think that should tell us a little bit about at least the

executive branch. I think Mr. Koskinen and his team have done a

fairly good job. The question is could it all have been done earlier,

and would it have cost less. We still have shades of panic even in

the executive branch as well as in private industry when a lot of

their talented people have been bought out from under them by

other industries who want talented people. The question will be did

we have enough human resources in the right place at the right

time. Again, that is a management question.

So, Madam Chairman, I think we hope you will be there on November 22nd. And then your committee and mine, after this is all

over, we will have a retrospect summing up, and if something has

gone wrong, what could we have done to get the administration to

do it the right way then. I was worried for several years over the

procrastination. I think they have played catch-up and I hope they

make it. That is what we need. We should not have to do things

that are just fouled up and not run on a steady track of some sort

of management approach to solving the problem.

And so that is where we are. We do not know what is going to

happen on January 2nd and December 31st. But you certainly give

us some heartening hope in major industries that you represent,

the hospitals, the grocery industry, the stock markets. I know the

stock markets were one of our first witnesses when we started and

I think they have done a splendid job. So thank you all for coming.

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Mr. HORN. Mrs. Morella, I think we have the tributes to the

staff.

Chairwoman MORELLA. And as he gives the tributes, I want to

indicate that I would agree that the cost has escalated, maybe it

would not have had we started earlier. I remember the first submission by the President was $2.3 billion. Remember that, Mr.

Willemssen? Now it is $8.9 and probably continuing. But we will

be continuing to monitor, and we appreciate very much your being

here and for your patience for being here all afternoon.

Mr. HORN. I might add that the GardnerGroup, when they testi- fied before our subcommittee, said it will be about a $30 billion cost

in the case of the Federal Government. We think, and we thought

as it went along, and we simply pulled it out of the air, but that

is the way they sometimes build budgets around here, we thought

it would be $10 billion. And that is about where it is I believe.

So we are going to thank our staff that has stuck with this now

since 1996. Russell George, the staff director and chief counsel, is

standing against the wall there. Don’t worry, we are not some

Latin American banana republic where people that stand by walls

are in trouble. You are in good shape. Matt Ryan, senior policy director, is right behind me here. Bonnie Heald, communications director, is probably working with the press. Chip Ahlswede, our

clerk, is right there with them. Rob Singer, the staff assistant; P.J.

Caceres, intern; Deborah Oppenheim, intern. That is all of our

staff.

And then Mrs. Morella’s staff of the Subcommittee on Technology

of the Science Committee: Jeff Grove, the staff director; Ben Wu,

behind us, counsel; Joe Sullivan, staff assistant.

The minority staff on the Government Management, Information,

and Technology Subcommittee team is Trey Henderson, minority

counsel; Jean Gosa, the minority staff assistant. On the Technology

Subcommittee, Michael Quear, the professional staff member; and

Marty Ralston, staff assistant. And the court reporter is Ruth Griffin.

We thank them all for all they have done. They have worked

overtime many a night, many a weekend to get the job done, and

we appreciate it.

Chairwoman MORELLA. We will now adjourn the committee

meeting.

[Whereupon, at 5:07 p.m., the subcommittees were adjourned, to

reconvene at the call of their respective Chairs.]

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