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A . S. Hrg. 104-363 THE INFORMATION TECHNOLOGY S. 946, MANAGEMENT REFORM ACT OF 1995 / 4. G 74/9: S. HRG, 104-363 2ARING I. ?Ai, The Infornation Technologg. . BEFORE THE SUBCOMMITTEE ON OVERSIGHT OF GOVERNMENT IVIANAGEMENT AND THE DISTRICT OF COLUMBIA OF THE ' COMMITTEE ON GO\?ERNMENTAL AFFAIRS UNITED STATES SENATE ONE HUNDRED FOURTH CONGRESS FIRST SESSION ON S. 946 TO FACILITATE, ENCOURAGE, AND PROVIDE FOR EFFICIENT AND EF- FECTIVE ACQUISITION AND USE OF MODERN INFORMATION TECH- NOLOGY BY EXECUTIVE AGENCIES; TO ESTABLISH THE POSITION OF CHIEF INFORMATION OFFICER OF THE UNITED STATES IN THE OF- FICE OF MANAGEMENT AND BUDGET; TO INCREASE THE RESPON- SIBILITY AND PUBLIC ACCOUNTABILITY OF THE HEADS OF THE DE- PARTMENTS AND AGENCIES OF THE FEDERAL GOVERNMENT FOR ACHIEVING SUBSTANTIAL IMPROVEMENTS IN THE DELIVERY OF SERVICES TO THE PUBLIC AND IN OTHER PROGRAM ACTIVITIES THROUGH THE USE OF MODERN INFORMATION TECHNOLOGY IN SUPPORT OF AGENCY MISSIONS; AND FOR OTHER PURPOSES. ^""mn JULY 25, 1995 Printed for the use of the Committee on Governmetii,ax.raLMm^o, —rr*. % U.S. GOVERNMENT PRINTING OFFICE 92-604cc WASHINGTON 1996 : ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,CongressionalSalesOffice.Washington,DC 20402 ISBN 0-16-052370-2 A S. Hrg. 104-363 THE INFORMATION TECHNOLOGY S. 946, MANAGEMENT REFORM ACT OF 1995 M.G 74/9;S, HRG. 104-363 CARING S. 9A6, The Infornation Technology... BEFORE THE SUBCOMMITTEE ON OVERSIGHT OF GO\nERNMENT MANAGEMENT AND THE DISTRICT OF COLUMBIA OF THE COMMITTEE ON GOVERNMENTAL AFFAIRS UNITED STATES SENATE ONE HUNDRED FOURTH CONGRESS FIRST SESSION ON S. 946 TO FACILITATE, ENCOURAGE, AND PROVIDE FOR EFFICIENT AND EF- FECTIVE ACQUISITION AND USE OF MODERN INFORMATION TECH- NOLOGY BY EXECUTIVE AGENCIES; TO ESTABLISH THE POSITION OF CHIEF INFORMATION OFFICER OF THE UNITED STATES IN THE OF- FICE OF MANAGEMENT AND BUDGET; TO INCREASE THE RESPON- SIBILITY AND PUBLIC ACCOUNTABILITY OF THE HEADS OF THE DE- PARTMENTS AND AGENCIES OF THE FEDERAL GOVERNMENT FOR ACHIEVING SUBSTANTIAL IMPROVEMENTS IN THE DELIVERY OF SERVICES TO THE PUBLIC AND IN OTHER PROGRAM ACTIVITIES THROUGH THE USE OF MODERN INFORMATION TECHNOLOGY IN SUPPORT OF AGENCY MISSIONS; AND FOR OTHER PURPOSES. mi JULY 25, 1995 ~^"^ff^^y- Printed for the use of the Committee on GovernmeM^'i U.S. GOVERNMENT PRINTING OFFICE WASHINGTON 1996 : ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-052370-2 COMMITTEE ON GOVERNMENTAL AFFAIRS WILLIAM V. ROTH, Jr., Delaware, Chairman TED STEVENS, Alaska JOHN GLENN, Ohio WILLIAM S. COHEN, Maine SAM NUNN, Georgia FRED THOMPSON, Tennessee CARL LEVIN, Michigan THAD COCHRAN, Mississippi DAVID PRYOR, Arkansas CHARLES E. GRASSLEY, Iowa JOSEPH I. LIEBERMAN, Connecticut JOHN McCAIN, Arizona DANIEL K. AKAKA Hawaii BOB SMITH, New Hampshire BYRON L. DORGAN, North Dakota Franklin G. Polk, StaffDirector and ChiefCounsel Leonard Weiss, Minority StaffDirector Michal Sue Prosser, ChiefClerk SUBCOMMITTEE ON OVERSIGHT OF GOVERNMENT MANAGEMENT AND THE DISTRICT OF COLUMBIA WILLL^M S. COHEN, Maine, Chairman FRED THOMPSON, Tennessee CARL LEVIN, Michigan THAD COCHRAN, Mississippi DAVID PRYOR, Arkansas CHARLES E. GRASSLEY, Iowa JOSEPH I. LIEBERMAN, Connecticut JOHN McCAIN, Arizona DANIEL K. AKAKA, Hawaii Kim Corthell, StaffDirector Paul R. Brubaker, Deputy StaffDirector William C. Greenwalt, ChiefInvestigator Linda J. Gustitus, Minority StaffDirectorand ChiefCounsel to the Minority Frankie de Vergie, ChiefClerk (II) CONTENTS Opening statements: Page SenatorCohen 1 WITNESSES Tuesday, July 25, 1995 Philip Howard, author, "The Death ofCommon Sense" 7 Gene L. Dodaro, Assistant Comptroller General, Accounting and Information Management Division, U.S. General Accounting Office, accompanied by Christopher Hoenig, Director, Information Resource Management, Policies and Issues Group 11 John A. Koskinen, Deputy Director for Management, Office of Management and Budget 27 RogerW. Johnson, Administrator, General Services Administration 33 Steven Kelman, Administrator, Office ofFederal Procurement Policy 35 Colleen A. Preston, Deputy Under Secretary of Defense for Acquisition Re- form, DepartmentofDefense 39 Renato A. DiPentima, Vice President and Chief Information Officer, SRA Corporation 45 John M. Kost, Deputy Director for Procurement and Information Technology, ChiefInformation Officer, State ofMichigan 47 Paul A. Strassmann, former ChiefInformation Systems Executive 50 Alphabetical List of Witnesses DePentima, RenatoA.: Testimony 45 Prepared statement 305 Dodaro, Gene L.: Testimony 11 Prepared statement 216 Howard, Philip: Testimony 7 Johnson, RogerW.: Testimony 33 Prepared statement 245 Kelman, Steven: Testimony 35 Prepared statement 254 Koskinen, John A.: Testimony 27 Prepared statement 237 Kost, John M.: Testimony 47 Prepared statement 308 Preston, ColleenA.: Testimony 39 Prepared statement 279 Strassmann, PaulA.: Testimony 50 Prepared statement 313 (III) IV Page APPENDIX TextofS.946, The InformationTechnology ManagementReform Act 53 Prepared statements ofwitnesses inorderofappearance 216 Charts' 1995 Federal ComputerSpending = $27 Billion (Source: GAO, 0MB) 336 Major Provisions of the Information Technology Management Reform OGM Act. (Source: Subcommittee) 337 IRS Computer Systems Modernization: Third Time's a Charm? (Source: GAO) 338 The Cohen Bill: Keeping Pace With Technology. (Source, OGM Sub- committee) 339 Current Information System Life Cycle: Little Attention to Capital Plan- ning (Source: 0MB) 340 Computer Chaos: Billions Wasted Buying Federal Computer Systems, an investigative reportofSenatorWilUam S. Cohen, October 12, 1994 341 THE INFORMATION TECHNOLOGY S. 946, MANAGEMENT REFORM ACT OF 1995 TUESDAY, JULY 25, 1995 U.S. Senate, Subcommittee on Oversight of Government Management, and the District of Columbia, Committee on Governmental Affairs, Washington, DC. The Subcommittee met, pursuant to notice, at 9:32 a.m., in room SD-342, Dirksen Senate Office Building, Hon. William S. Cohen, Chairman ofthe Subcommittee, presiding. Present: Senators Cohen, Grassley, and Glenn. Staff present: Kim Corthell, Staff Director; Paul Brubaker, Dep- uty Staff Director; Frankie de Vergie, Chief Clerk; Andrea Gerber, Staff Assistant; Marty Grenn, Congressional Brookings Fellow; Chris Condon, Legislative Fellow; Peter K. Levine, Minority Coun- sel; and Scott Parr, Minority Legislative Fellow. OPENING STATEMENT OF SENATOR COHEN Senator Cohen. The Subcommittee will come to order. The subject of todays hearing is the Information Technology Management Reform Act of 1995, legislation I introduced along with Senator Levin to improve the way the Government approaches and acquires information technology. I might point out that Senator Levin is now on the floor managing the lobby and gift disclosure bill and is unlikely to be here. But in the event that he should come, obviously he will join in welcoming all of our witnesses. The Federal Government is the largest information manager in the world. The IRS, for example, collects more than 200 million tax forms a year. The Social Security Administration has hundreds of millions ofrecords dealing with disability claims, educational benefits, and payments. In addition, these agencies and others have records dealing with personnel, travel, and supply expenses. The list is endless. The ability of Government to manage this information has a profound effect on the daily lives of all of us. Government computers keep track of benefit payments, patents. Government-insured loans, contractor payments, criminal records, and Medicare and Medicaid billings. In short, the Government keeps track ofinforma- tion that ensures our financial well-being and is also critical to our public safety and national security needs. But these Government information systems are headed for catastrophic failure ifwe fail to address the challenge ofmodernization. (1) The FAA, for example, relies on 1950's vacuum tube technology to monitor the safety ofmillions ofairline passengers on a daily basis. Occasionally this antiquated technology fails. As many of you might be aware, last evening ABC and others ran a news item pointing out another failure at the FAA control center in Aurora, Illinois. It marks the third time this week that that system has broken down, the fifth time this year. They are now relying upon a backup system, and in the event that backup system does not prove to be effective, they are going to rely upon controlling the air traffic system by using paper strips, something that dates back prior to the 1950's technology. Other Government computers fail to detect fraud in the Federal student loan program and excess inventories at the Department of Defense. Because of inadequate information systems, the Justice Department fails to collect millions in civil penalties, the IRS fails to collect billions in overdue taxes, and the Department of Health and Human Services fails to detect fi'aud in the Medicare program. Poor information management is, in fact, one of the biggest threats to the Government treasury because it leaves Government programs susceptible to fraud, waste, and abuse. Focusing on reforming how the Government approaches and acquires information technology can have a profound impact on the way Government does business in much the same way it has changed corporate America. The Government's current approach to bu5ring computers is outdated and takes little account of the competitive and fast-changing nature ofthe global computer industry. Markets and prices change daily, yet Government often gets locked into paying today^s prices for yesterday's technology. When the Brooks Act was written back in 1965, the Federal Gov- ernment was the dominant computer buyer in the world, and it purchased over 60 percent of the industrys entire output. Today, the Federal market comprises only 3 percent of industry sales. While Government is still the largest single buyer, it no longer moves the market. Over the past 3 decades, the Brooks Act has produced a process that has become too bureaucratic and too cumbersome. It has spawned hundreds of pages of regulations and caused agencies to be primarily concerned with conformit—y to the process. What the process fails to addre—ss are the results more efficient and less ex- pensive Government and fairness to the taxpayers. In addition, an adversarial culture has developed between Gov- ernment and business. Many companies believe they will not get a fair shake. Federal employees are suspicious of companies because of a fear ofbeing second-guessed and having the procurement itself protested. In short, it is a culture of little trust, less communication, and no incentive to use information technology to improve the way Gov- ernment does business and achieve the savings that we so des- perately need. It is time to move the Government's use of information technology into the 21st century, and that is the reason I introduced S. 946 to significantly alter how the Government approaches and acquires information technology. The legislation would repeal the Brooks Act and establish a framework that will respond more effi- ciently to the needs of Government now and in the foreseeable fu- ture. Among its many provisions, the bill would eliminate the Delega- tion of Procurement Authority at GSA and establish a Chief Infor- mation Officer at 0MB and ChiefInformation Officers at the major Federal agencies. The CIO's job will be to emphasize up-fi-ont plan- ning, monitor risk management, and work with the contractors to achieve workable solutions to the Government's information needs. The legislation will also discourage the so-called megasystem buys. Following the private sector model, agencies will be encour- aged to take an incremental approach that is more manageable and less risky. By replacing the current system with one that is less bureaucratic and process driven, the bill is designed to enable agencies to buy technology faster and for less money. More importantly, the bill is designed to make sure that before investing a dollar in information technology, Government agencies will have carefully planned andjustified their expenditures. Similar to managing an investment portfolio, decisions on whether to invest in information technology will be made based on poten- tial return. Decisions to terminate or make additional investments will be based on performance. Much like an investment broker, agency management and contractor performance will be measured and rewarded based on managing risk and achieving results. The legislation will fundamentally shift the Government's focus on information technology from a technical issue to a management issue. Information technology procurements under the current system have focused on features like the speed of the computer and the type of processor. Rarely, if ever, have they focused on whether the system was going to enhance the agency's mission by, for example, reducing benefit processing time or realize savings by reducing overhead expenditures. A failure to recognize information technology as a management issue has cost taxpayers billions of dollars in inefficiency and abuse. The bill establishes a reasonable goal of reducing overhead by 5 percent per year, which would save more than $175 billion over 5 years. I believe this legislation can help transform the way Government does business. If Government is going to regain the confidence of taxpayers, it has to successfully modernize. As we all know, we cannot successfully modernize unless we can buy the tools which enable us to automate. But we also have to understand that statutory change is only part of the battle. The other half of that battle involves changing the management culture at agencies that have traditionally focused on technical performance and bureaucratic process. We have to en- sure that the top levels of agency management understand how information technology can change and improve their agencies. Cul- tural change is critical to changing the way the Government approaches its information technology needs. Based on preliminary responses fi"om both industry and Govern- ment, the legislation has been enthusiastically received. I would point out there is not, however, universal agreement. Most notably. the establishment of a strong operational National CIO has drawn the concern of Government respondents, and some in the industry have expressed concerns regarding automatic termination and the elimination ofthe GSBCA bid protest process. These are the issues that are going to be discussed today. We are looking forward to hearing from the witnesses and working with all of you in the coming weeks to pass and implement this needed reform. As I have indicated in the past to virtually all of you who are in this room, this proposed legislation does not purport to be a pan- acea. It is not designed to be rushed through the legislative process. But I must say that I do intend to see that this is brought to the floor and completed and acted upon by the Senate before this session is up. As you know, the House has taken some action on the defense authorization bill. I think it has made some needed improvements, but it is moving in the wrong direction, which we will discuss dur- ing the course ofthe hearings. PREPARED STATEMENTOFSENATORCOHEN The subject oftoday's hearing is the Information Technology Management Reform Act of1995 (S. 946), legislation I introduced with Senator Levin to improve the way the government approaches and acquires information technology. The Federal Government is the largest information manager in the world. The IRS, for example, collects more than 200 million tax forms a year. The Social Secu- rity Administration has hundreds of millions of records dealing with disability claims, educational benefits and payment records. In addition, these agencies and others have records dealing with personnel, travel and supply expenses. The list is endless. The ability of government to manage this information has a profound affect on the daily lives of all ofus. Government computers keep track ofbenefit payments, patents, government insured loans, contractor payments, criminal records, and Med- icaid and Medicare billings. In short, the government keeps track of information that ensures our financial well being and is also critical to our public safety and national security needs. But these government information systems are headed for catastrophic failure if we fail to address the challenge of modernization. The FAA, for example, relies on 1950's vacuum tube technology to monitor the safety of millions of airline passengers on a dailybasis. Occasionally this antiquated technology fails. Other government computers fail to detect fraud in the federal student loan program and excess inventories at the Department ofDefense. Because ofinadequate information systems, the Justice Department fails to collect millions in civil penalties, the IRS fails to collect billions in overdue taxes, and the Department of Health and Human Services fails to detect fraud in the Medicare program. Poor information management is, in fact, one ofthe biggest threats to the government treasury because it leaves government programs susceptible to waste, fraud and abuse. Focusing on reforming how tide government approaches and acquires information technology can have a profound impact on the way government does business in much the same way it has changed corporateAmerica. The government's current approach to buying computers is outdated and takes little account of the competitive and fast changing nature of the global computer industry. Markets and prices change daily, yet government often gets locked into paying today's prices foryesterday's technology. When the Brooks Actwas written in 1965, the Federal Governmentwas the dominant computer buyer in the world and purchased over 60 percent ofthe industry's entire output. Today, the federal market comprises only three percent of industry sales. While government is still the largestsingle buyer, it no longer moves the market. Over the last three decades, the Brooks Act has produced a process that has become too bureaucratic and cumbersome. It has spawned hundreds ofpages ofregu- lations and caused agencies to be primarily concerned with conformity to the proc-