Handling increasing service workloads is a critical challenge facing SSA. The agency is processing a growing number of claims for Social Security benefits. SSA estimates that it will face continued growth in beneficiaries over the next few decades as the population ages and life expectancies increase. The number of OASI and DI beneficiaries is estimated to increase substantially between calendar years 1997 and 2010—from approximately 44 million to over 54 million. Recognizing constraints on its staff and resources, SSA has moved to better serve its increasing beneficiary population and improve its productivity by redesigning its work processes and modernizing the computer systems used to support these processes. A key aspect of the modernization effort is the agency’s transition from its current centralized mainframe-based computer processing environment to a highly distributed client/server processing environment. IWS/LAN is expected to play a critical role in the modernization by providing the basic automation infrastructure for using client/server technology to support the redesigned work processes and improve the availability and timeliness of information to employees and appropriate users. Under this initiative, SSA plans to replace approximately 40,000 “dumb” terminals and other computer equipment used in over 2,000 SSA and state DDS sites with an infrastructure consisting of networks of intelligent workstations connected to each other and to SSA’s mainframe computers. The national IWS/LAN initiative consists of two phases. During phase I, SSA plans to acquire 56,500 workstations, 1,742 LANs, 2,567 notebook computers, systems furniture, and other peripheral devices. Implementation of this platform is intended to provide employees in the sites with office automation and programmatic functionality from one terminal. It also aims to provide the basic, standardized infrastructure to which additional applications and functionality can later be added. The projected 7-year life-cycle cost of phase I is $1.046 billion, covering the acquisition, installation, and maintenance of the IWS/LAN equipment. Under a contract with Unisys Corporation, SSA began installing equipment for this phase in December 1996; it anticipates completing these installations in June 1999. Through fiscal year 1997, SSA had reported spending approximately $565 million on acquiring workstations, LANs, and other services. Phase II is intended to build upon the IWS/LAN infrastructure provided through the phase I effort. Specifically, during this phase, SSA plans to acquire additional hardware and software, such as database engines, scanners, bar code readers, and facsimile and imaging servers, needed to support future process redesign initiatives and client/server applications. SSA plans to award a series of phase II contracts in fiscal year 1999 and to carry out actual installations under these contracts during fiscal years 1999 through 2001. Currently, SSA is developing the first major programmatic software application to operate on IWS/LAN. This software—the Reengineered Disability System (RDS)—is intended to support SSA’s modernized disability claims process in the new client/server environment. Specifically, RDS is intended to automate and improve the Title II and Title XVI disability claims processes from the initial claims-taking in the field office, to the gathering and evaluation of medical evidence in state DDSs, to payment execution in the field office or processing center and the handling of appeals in hearing offices. In August 1997, SSA began pilot testing RDS for the specific purposes of (1) assessing the performance, cost, and benefits of this software and (2) determining supporting IWS/LAN phase II equipment requirements. Agencies, in undertaking systems modernization efforts, are required by the Clinger-Cohen Act of 1996 to ensure that their information technology investments are effectively managed and significantly contribute to improvements in mission performance. The Government Performance and Results Act of 1993 requires agencies to set goals, measure performance, and report on their accomplishments. One of the challenges that SSA faces in implementing IWS/LAN is ensuring that the planned systems and other resources are focused on helping its staff process all future workloads and deliver improved service to the public. In a letter and a report to SSA in 1993 and 1994, respectively, we expressed concerns about SSA’s ability to measure the progress of IWS/LAN because it had not established measurable cost and performance goals for this initiative. In addition, SSA faces the critical challenge of ensuring that all of its information systems are Year 2000 compliant. By the end of this century, SSA must review all of its computer software and make the changes needed to ensure that its systems can correctly process information relating to dates. These changes affect not only SSA’s new network but computer programs operating on both its mainframe and personal computers. In October 1997, we reported that while SSA had made significant progress in its Year 2000 efforts, it faced the risk that not all of its mission-critical systems will be corrected by the turn of the century. At particular risk were the systems used by state DDSs to help SSA process disability claims. Our objectives were to (1) determine the status of SSA’s implementation of IWS/LAN, (2) assess whether SSA and state DDS operations have been disrupted by the installations of IWS/LAN equipment, and (3) assess SSA’s practices for managing its investment in the IWS/LAN initiative. To determine the status of SSA’s implementation of IWS/LAN, we analyzed key project documentation, including the IWS/LAN contract, project plans, and implementation schedules. We observed implementation activities at select SSA field offices in Alabama, Florida, Georgia, Minnesota, South Carolina, Texas, and Virginia; at program service centers in Birmingham, Alabama, and Philadelphia, Pennsylvania; and at teleservice centers in Minneapolis, Minnesota, and Fort Lauderdale, Florida. In addition, we reviewed IWS/LAN plans and observed activities being undertaken by state DDS officials in Alabama, Georgia, and Minnesota. We also interviewed representatives of the IWS/LAN contractor—Unisys Corporation—to discuss the status of the implementation activities. To assess whether SSA and state DDS operations have been disrupted by the installations of IWS/LAN equipment, we reviewed planning guidance supporting the implementation process, such as the IWS/LAN Project Plan, and analyzed reports summarizing implementation activities and performance results identified during pilot efforts. We also interviewed SSA site managers, contractor representatives, and IWS/LAN users to identify installation and/or performance issues, and observed operations in select SSA offices where IWS/LAN equipment installations had been completed. In addition, we discussed IWS/LAN problems and concerns with DDS officials in 10 states: Alabama, Arkansas, Arizona, Delaware, Florida, Louisiana, New York, Virginia, Washington, and Wisconsin, and with the president of the National Council of Disability Determination Directors, which is a representative body for all state DDSs. To assess SSA’s management of the IWS/LAN investment, we applied our guide for evaluating and assessing how well federal agencies select and manage their investments in information technology resources. We evaluated SSA’s responses to detailed questions about its investment review process that were generated from the evaluation guide and compared the responses to key agency documents generated to satisfy SSA’s process requirements. We also reviewed IWS/LAN cost, benefit, and risk analyses to assess their compliance with OMB guidance. We did not, however, validate the data contained in SSA’s documentation. We performed our work from July 1997 through March 1998 in accordance with generally accepted government auditing standards. We requested comments on a draft of this report from the Commissioner of Social Security or his designee. The Commissioner provided us with written comments, which are discussed in the “Agency Comments and Our Evaluation” section and are reprinted in appendix I. Using a strategy that includes installing workstations and LANs in up to 20 sites per weekend, SSA, through mid-March 1998, had generally met its phase I schedule for implementing IWS/LAN. However, the contractor installing IWS/LAN has expressed concerns about the availability of the workstations specified in the contract, raising questions as to whether they can continue to be acquired. In addition, the pilot effort that SSA began in August 1997 to assess the performance, cost, and benefits of RDS and identify IWS/LAN phase II requirements has experienced delays that could affect the schedule for implementing phase II of this initiative. Under the phase I schedule, 56,500 intelligent workstations and 1,742 LANs are to be installed in approximately 2,000 SSA and state DDS sites between December 1996 and June 1999. The schedule called for approximately 30,500 workstations and about 850 LANs to be installed by mid-March 1998. According to SSA records, the agency generally met this schedule with the actual installation of 31,261 workstations and 850 LANs by March 15, 1998. These installations occurred at 753 SSA sites and 20 DDS sites (covering 12 states and the federal DDS). SSA reported in its fiscal year 1997 accountability report that the number of front-line employees using IWS/LAN increased to 50.2 percent—exceeding by 2.2 percent the fiscal year 1997 Results Act goal. The standard intelligent workstation configuration includes a 100-megahertz Pentium personal computer with 32 megabytes of random access memory, the Windows NT 4.0 operating system, a 1.2-gigabyte hard (fixed) disk drive, 15-inch color display monitor, and 16-bit network card with adaptation cable. Last year the contractor, Unisys, submitted a proposal to upgrade the intelligent workstation by substituting a higher speed processor at additional cost.