<DOC>
[106th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:61629.wais]
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
__________
U.S. GOVERNMENT PRINTING OFFICE
61-629 WASHINGTON : 2000
COMMITTEE ON SCIENCE
F. JAMES SENSENBRENNER, Jr., Wisconsin, Chairman
SHERWOOD L. BOEHLERT, New York RALPH M. HALL, Texas, Ranking
LAMAR SMITH, Texas Minority Member
CONSTANCE A. MORELLA, Maryland BART GORDON, Tennessee
CURT WELDON, Pennsylvania JERRY F. COSTELLO, Illinois
DANA ROHRABACHER, California JAMES A. BARCIA, Michigan
JOE BARTON, Texas EDDIE BERNICE JOHNSON, Texas
KEN CALVERT, California LYNN C. WOOLSEY, California
NICK SMITH, Michigan LYNN N. RIVERS, Michigan
ROSCOE G. BARTLETT, Maryland ZOE LOFGREN, California
VERNON J. EHLERS, Michigan MICHAEL F. DOYLE, Pennsylvania
DAVE WELDON, Florida SHEILA JACKSON LEE, Texas
GIL GUTKNECHT, Minnesota DEBBIE STABENOW, Michigan
THOMAS W. EWING, Illinois BOB ETHERIDGE, North Carolina
CHRIS CANNON, Utah NICK LAMPSON, Texas
KEVIN BRADY, Texas JOHN B. LARSON, Connecticut
MERRILL COOK, Utah MARK UDALL, Colorado
GEORGE R. NETHERCUTT, Jr., DAVID WU, Oregon
Washington ANTHONY D. WEINER, New York
FRANK D. LUCAS, Oklahoma MICHAEL E. CAPUANO, Massachusetts
MARK GREEN, Wisconsin BRIAN BAIRD, Washington
STEVEN T. KUYKENDALL, California JOSEPH M. HOEFFEL, Pennsylvania
GARY G. MILLER, California DENNIS MOORE, Kansas
JUDY BIGGERT, Illinois Vacancy
MARSHALL ``MARK'' SANFORD, South
Carolina
JACK METCALF, Washington
COMMITTEE ON GOVERNMENT REFORM
DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut ROBERT E. WISE, Jr., West Virginia
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
STEPHEN HORN, California PAUL E. KANJORSKI, Pennsylvania
JOHN L. MICA, Florida PATSY T. MINK, Hawaii
THOMAS M. DAVIS, Virginia CAROLYN B. MALONEY, New York
DAVID M. McINTOSH, Indiana ELEANOR HOLMES NORTON, Washington,
MARK E. SOUDER, Indiana DC
JOE SCARBOROUGH, Florida CHAKA FATTAH, Pennsylvania
STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland
MARSHALL ``MARK'' SANFORD, South DENNIS J. KUCINICH, Ohio
Carolina ROD R. BLAGOJEVICH, Illinois
BOB BARR, Georgia DANNY K. DAVIS, Illinois
DAN MILLER, Florida JOHN F. TIERNEY, Massachusetts
ASA HUTCHINSON, Arkansas JIM TURNER, Texas
LEE TERRY, Nebraska THOMAS H. ALLEN, Maine
JUDY BIGGERT, Illinois HAROLD E. FORD, Jr., Tennessee
GREG WALDEN, Oregon JANICE D. SCHAKOWSKY, Illinois
DOUG OSE, California ------
PAUL RYAN, Wisconsin BERNARD SANDERS, Vermont
HELEN CHENOWETH-HAGE, Idaho (Independent)
DAVID VITTER, Louisiana
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 JIM TURNER, Texas
THOMAS M. DAVIS, Virginia PAUL E. KANJORSKI, Pennsylvania
GREG WALDEN, Oregon MAJOR R. OWENS, New York
DOUG OSE, California PATSY T. MINK, Hawaii
PAUL RYAN, Wisconsin 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
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
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 3\1/2\
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
exercised 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 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.
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 3\1/2\ 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 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 post-secondary 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 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.
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 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?
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.
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
representative 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, 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 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 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 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.
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 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 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 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.
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 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.
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
end-to-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?
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 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 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 one-of-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''.
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 period 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.
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.
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.
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 transportation 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 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 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 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 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.
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
testified 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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