Government Executive - Authors - Nancy Ferris

Pulling the Plug

Nancy Ferris — Thu, 01 Apr 2004 00:00:00 -0500

Life support for unneeded veterans hospitals costs $1 million a day. Can the VA convince Congress to let some die?

eterans hospitals are among the few remaining symbols of what's good about government in communities across America. They're prized employers. They serve honorable clients. They demonstrate the concern and clout of congressional representatives. As a result, they're almost impossible to close. But the Veterans Affairs Department has come up with what it hopes is a foolproof plan to shut down nearly a dozen unneeded hospitals.

The plan also would add outpatient clinics and shift the location of many specialized services, but its true test will be closing hospitals. VA officials have spent four years collecting and crunching data to align an aging physical plant with 21st century health care needs. VA's Capital Asset Realignment for Enhanced Services initiative got under way in 2000 after the General Accounting Office found that the department probably was wasting $1 million a day maintaining unneeded buildings and land (GAO/T-HEHS-99-173).

But people in affected communities across the nation are outraged by the VA's plan to close hospitals. They are saddened by the potential loss of local hospitals and good jobs, and they're angry about what they see as high-handed decisions made far away in Washington. Veterans groups aren't happy either. Members of Congress are getting the message.

The reactions come as no surprise to anyone who has watched the Defense Department's base closing and realignment process over the years. Throughout government, agencies are struggling to offload aging buildings that serve no purpose other than to demonstrate legislators' largesse. So all eyes are on the VA: Will its painstaking four-year CARES process be enough to overcome the political pressure to keep unneeded hospitals open?

PRACTICAL MEDICINE

The Veterans Health Administration, which manages the nation's largest health care system, will spend more than $28 billion this year to provide care in its clinics and 162 medical centers, some of which date back to the 19th century. The typical VA hospital was built to care for veterans returning from World War II. Other hospitals opened in an era when mental patients and those with tuberculosis and other ailments were sent to bucolic campuses far from the polluted cities and from their families and friends. Some of the hospitals are too small by today's standards, while others have vacant wards.

When most of the medical centers were built, patient hospitalizations tended to be much longer than they are today. Over the past 35 years, the number of patients hospitalized in VA facilities on an average day plummeted from 91,878 to 14,925. The department has closed many wards and even some buildings on its medical campuses, but it has been slow to consolidate facilities and abandon locations.

The drop in hospitalizations occurred despite a significant increase in the number of veterans using VA's health services. Today, the VA treats many on an outpatient basis. Home health care is used when possible, and surgery often is followed by little or no time in the hospital. Preventive care heads off some major health crises, and new drugs reduce the need to hospitalize those with mental illnesses. The VHA has opened more than 1,300 outpatient clinics nationwide.

While the VHA was changing the way it practices medicine, the world around it was changing too. Fewer veterans remained in the big cities of the North and Midwest, and more lived in the Sunbelt. People were living longer and requiring more geriatric care. What's more, the VHA system has been strained by surging demand since 1998, when it was opened to all veterans, whether their health needs are related to military service or not. The 5.2 million patients the VA will treat in fiscal 2005 represent a 20 percent increase over the patient load in 2001. Waiting lists for medical care have exceeded 300,000 at times, although new enrollment was restricted in 2003 and other measures have reduced the backlog.

With all these trends converging, the VA's health care facilities no longer meet veterans' needs. The department spends about one-quarter of its $23 billion budget to operate, maintain and add to its real property, but 900,000 health care enrollees live too far from hospitals according to the VA's standards-60 minutes' driving time for urban areas, 90 minutes for rural areas and two hours for "very rural" areas.

These trends already were well known when the CARES program began, but by that time, Congress had lost patience with the department. Capital planning exercises had been under way for years at VA, but little change actually occurred. Robert W. Roswell, the undersecretary who heads the VHA, says that after GAO pegged the cost of unneeded buildings and land at $1 million a day, Congress vowed to hold up construction funding until the CARES process was completed. "We still have a major construction budget," Roswell says, "but it's been significantly reduced since the publication of that report."

CARES began late in 2000 with a pilot project in the Chicago area, which gathered large amounts of data about the area and veterans' health care needs, then weighed the options for meeting those requirements. VA Secretary Anthony Principi decided in February 2002 to consolidate inpatient services at the West Side Division VA hospital, and provide only outpatient services at the other Chicago-area hospital, Lakeside.

That decision foreshadowed many of the proposals that would emerge from the nationwide CARES process. Although the department is technically closing the Lakeside hospital, the building will continue to be used for VA medical services. The VA is unlikely to completely abandon locations in many cases.

Roswell says the Chicago realignment taught VA officials the importance of listening to stakeholders, such as politically powerful veterans organizations, labor unions and local officeholders, as it realigns. The Chicago experience also showed the importance of involving Defense Department officials, with whom the VA intends to collaborate more, along with the medical researchers who carry out the VA's important studies.

Principi ordered the nationwide effort to proceed, with an in-house number-crunching program as Job 1. With the data in the department's own computer systems, it could be updated, reused and sliced and diced as needed. A National CARES Program Office with a staff of eight in Washington and another 12 in the field went to work. With the Chicago area done, there were 20 remaining Veterans Integrated Service Networks-semiautonomous regional health care delivery organizations. Each network developed its own plan with help from the CARES office.

CARES produced a comprehensive inventory of the VA's medical real estate, travel times to points of care, projections of the number of veterans and their medical needs for the next 20 years; conducted a "gap analysis" to identify where needs would go unmet without intervening changes; and proposed modifications of facilities. The networks also considered alternative strategies such as contracting for services and joint ventures with Defense or other health care providers.

Developing forecasts of the need for VA patient services was no easy task. The department hired CACI International Inc. of Vienna, Va., and the national actuarial firm Milliman USA, headquartered in Seattle, to build a model that compares the VA's patient population, utilization of services and other characteristics with those in the private sector. "We know veterans are sicker than the insured private sector population," says Jay Halpern, acting director of the National CARES Program Office.

The model still is being expanded and refined. This spring, Halpern says, the department will issue projections for nursing home and long-term psychiatric care, areas not included in the first round of CARES. But even in 2003, VA had collected a wealth of data, such as local construction and renovation costs, an assessment of the condition of the 5,007 VHA buildings nationwide, and the characteristics of 2,000 types of visits to primary care providers. The data enabled the regional networks to analyze different scenarios for treating their patients.

PUTTING ON THE SQUEEZE

VHA's Roswell received plans from the 20 regional networks in mid-April 2003, and he had until June 1 to compile them. "I was struck by the variability" in the way the networks chose to bridge current and future gaps in care, he recalls. Roswell discovered that the model did not require the networks to achieve cost efficiencies. Although time was short, Roswell identified places with two or more hospitals near one another and asked the network directors to consider consolidating them. Some agreed, some didn't, but the speed of this review left little room for consultation with stakeholders, prompting criticism later.

In August 2003, Roswell issued a draft national plan to eliminate inpatient services at nearly 20 hospitals. Nine would be closed outright and the rest would be converted to outpatient clinics, nursing homes or other types of facilities. In 10 cities, the draft plan called for new hospitals or major additions to existing hospitals.

The 100-page plan also recommended opening 242 outpatient clinics and proposed many changes in the mix of services offered at the VA's 162 hospitals and at other facilities. It would reduce the number of hospital beds by 600 and dispose of 3.6 million square feet of unused space. New facilities also would include two rehabilitation centers for blind veterans, four spinal cord injury centers and expanded long-term care for spinal cord injury patients in five locations.

Roswell's plan would cost $4.6 billion over 20 years, but it eventually would allow the VA to redirect $166,000 a day in operating resources-people, space, facility maintenance dollars and more-into more and better health care services.

COLD DOSE OF REALITY

In August 2003, the plan went for review to a commission the VA's Principi created to advise him on final realignment decisions. The 16 commissioners were deluged by 212,000 comments. They held public hearings in 38 locations nationwide to listen to stakeholders and see facilities for themselves. The commission took more than a month beyond its year-end target date to absorb the information and produce a report of more than 500 pages.

Commissioners cast a cold eye on CARES and the way the VA has managed its capital assets. Although Roswell and his staff described the draft national plan as "data-driven," the commissioners said the model needs more work. They called on the VA to re-examine the numbers before spending much money on closing facilities or acquiring new ones.

The commission's chairman, Everett Alvarez, a former VA official and prisoner of war, describes the CARES model as "probably the most comprehensive and uniform data set ever assembled for capital planning." But the commission sent the VA back to the drawing board to correct its understatement of mental health services demand and inconsistent planning for long-term care.

Roswell had called for delaying opening of some of the outpatient clinics, but the commission "found that VA's rationale . . . disproportionately disadvantages rural veterans and is contrary to the goal of CARES." The panel proposed that regional networks be given more say in when and where to open such clinics and that Roswell's priority scheme be scrapped.

Since VA hospitals and clinics are classic congressional pork, the department's wishes historically have been but one factor in decisions about VA construction budgets. But now, VA officials believe, they've won tacit support from authorizing and appropriating committees on the Hill and once the department completes CARES, Congress will provide the money to carry out the plan. "It's a fundamental departure," Roswell observes.

Perhaps, but even if the VA got to close, open or modify every hospital or operation Principi targets in his final CARES list (which was due in late March), legislators still retain their right to add funds for more facilities in their districts. Early this year, members of Congress already were trying to pick apart CARES. Department leaders fought back, arguing that the $1 million a day they now spend maintaining unneeded facilities should be shifted to improving veterans' care.

Nancy Ferris is a Washington journalist who has covered government for more than 30 years.

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Give and Take

Nancy Ferris — Sun, 15 Jun 2003 00:00:00 -0400

Federal agencies are outsourcing IT work at an ever-increasing rate, but they're adding their own technology jobs at the same time.

n 1972, a young Philip J. Kiviat went to work for the Air Force in Washington as a civilian automated data processing specialist. He and his colleagues designed and built computer systems specifically for federal applications. "All there was were mainframes"-the large, lumbering computers that are regarded as dinosaurs today-and "the government had most of the programmers," says Kiviat, now a consultant with a long track record in federal information technology. "A lot of people don't remember that the government was the pioneer" in computing, he says.

In those days, the government was where the action was for anyone interested in information systems. Not only did federal agencies-principally the Defense Department-buy the latest and best equipment, but also they influenced the course of its development by specifying how it should be built and by writing advanced computer programs. That naturally attracted some of the best and the brightest engineers and computer scientists.

This scenario seems unimaginable today. For some years now, the government's ability to operate and manage its vast stable of computers and networks has been in doubt. Agencies are criticized for being slow to buy current technology and too insistent on buying the cheapest gear. They hang onto their mainframes and their equally ancient software. Federal employees are said to lack up-to-date technical skills and the management savvy needed to keep agency systems in good shape. Of course, some federal IT employees excel, observers agree, but too few. Even smart, proficient employees have difficulty navigating the swamp of laws and rules that complicate every agency action. The rule-bound, out-of-date IT environment makes it difficult to attract bright new employees.

At least, that's the prevailing view. It is cited to justify the use of contractors for all kinds of IT work, whether maintaining desktop systems or building the latest governmentwide Web portal. But is it true?

As with most bits of conventional wisdom, there is some truth to the prevailing view. Recruiting new IT employees has been tough for many federal agencies, and the number of rules and laws governing federal operations continues to increase. But that doesn't mean that the ranks of IT specialists in government are dwindling. In fact, during fiscal 2002, agencies added 1,500 employees to the ranks of federal IT specialists, according to the Office of Personnel Management.

"If you go to any Department of the Navy command and go to their HR shop, you're likely to find announcements for IT personnel on the board. We're looking for IT people," says Navy Capt. Chris Christopher, staff director for the enormous Navy-Marine Corps Intranet (NMCI) program. At the same time, the Navy is spending nearly $10 billion during this decade to turn over a major portion of its IT work to contractors through NMCI.

What's going on here? Federal agencies, prodded by the White House, are using both in-house and contractor personnel to rev up their electronic government programs. IT continues to increase as a percentage of federal spending, according to Federal Sources Inc., a market research firm in McLean, Va. But undertaking new initiatives and improving existing systems during a time of budget constraints is a tricky business. To do it, agencies are in effect reviewing their IT activities and placing them into one of several categories:

Managing the development of unique new systems that help the agency carry out its mission or achieve its goals.
Operating existing mission-critical systems and developing new systems.
Maintaining and expanding the IT infrastructure, including desktop computers, local and wide-area networks, telephone systems and Web sites.

For the most part, only the first category requires skilled federal IT professionals, in the view of the Bush administration and many senior federal managers. They want to hand off the other work, especially the infrastructure piece, to service contractors and systems integrators. That, the thinking goes, will free up federal employees to do the important work of creating an IT-enabled government for the 21st century.

Mark Forman, the Bush administration's senior IT official, puts it this way: "Government's not in the business of developing applications. We want to use commercial solutions to the maximum extent we can." Forman, the e-government and IT administrator at the Office of Management and Budget, says there is a tremendous need for people who can turn a concept into a plan for a new system, manage contractors and keep IT projects on track, as well as decide how best to consolidate and modernize the government's thousands of existing systems and get them to work together better.

WORLD'S BIGGEST OUTSOURCING

Consolidation and upgrades are the objective of the Navy-Marine Corps Intranet program, the world's largest outsourcing effort. It's replacing a hodgepodge of desktop systems and more than 1,000 networks with a single Web-enabled pipeline to connect Navy facilities worldwide. Besides streamlining data communications, it will be more secure than the networks it replaces, and it will ensure that everyone is using the same software for basic functions such as e-mail.

The Navy adopted an outsourcing strategy that includes long-term maintenance and support instead of simply having new networks installed. It is buying a service rather than just a set of hardware and software. That means the Navy won't need to have its own employees perform maintenance functions. "What we want to do," Christopher says, "is take those people who were doing those tasks, which are sort of commodity tasks in our view now, and move them over to working on developing software for weapons systems, developing things that are core competencies of the Department of the Navy."

The Navy does not know how many jobs will ultimately be eliminated under the outsourcing effort, Christopher says. The NMCI contract, awarded to Electronic Data Systems Corp. in 2000, called for EDS to hire any displaced Navy employees who wanted to work for the contractor. EDS has hired 159 former Navy employees, Christopher says, but no one knows how many other Navy employees who used to provide help desk services, maintain networks and so forth have moved to other jobs in the Navy or elsewhere in the government. Some no doubt retired, but the Navy doesn't know how many.

Most of the displaced employees already were working for contractors, Christopher says, explaining that even before NMCI's launch, "a minority of the Navy's IT stuff was actually being done by federal employees." The lack of an exact count of Navy employees who were handling desktop and network support is a symptom of a problem that NMCI is designed to cure. The program is allowing the Navy to find out what it really is spending on IT. "Before, the network and the IT support was being done by each base, post or command locally and we really didn't have visibility from the Department of the Navy level down to what we were spending everywhere," Christopher says. "What we're gaining with NMCI is we're saying, OK, everybody's got to get their support from the NMCI contract, and as we start to transition, now we're understanding what was being spent where."

Although NMCI is huge in scope, it is not fundamentally different from recent IT outsourcing programs undertaken by agencies such as NASA and the General Services Administration. The Transportation Security Administration is taking a similar approach with its $1 billion effort to create an IT infrastructure. Under the program, a contractor team headed by Unisys Corp. is providing a broad spectrum of technology and telecommunications services for TSA. The contract is structured so that services are provided as needed on a task-order basis.

WHEN IS IT OUTSOURCING?

The classic definition of outsourcing is taking work done by an organization's employees away from them and turning it over to contractors. But in the case of TSA, no work was taken away from employees because the agency was brand new. As for NMCI, little of the work apparently was being done by Navy employees, although employees were responsible for making sure it got done.

Even before the current push to outsource, contractors were doing at least three-quarters of the federal government's IT work, according to the market research firm INPUT in Chantilly, Va. But in most cases, the relationship between the federal agency and the contractor technically is not an outsourcing relationship because most projects involve developing a new system or other IT work that was not being done by federal employees.

The government has contracted out much of its IT development work for many years. For example, when the Internal Revenue Service wanted to begin using imaging technology to process certain tax returns filed on paper, it awarded a contract to Northrop Grumman Corp. for development of the Service Center Recognition Image Processing System in 1993. Under subsequent contracts, the company has maintained and upgraded the system for the IRS.

That's a common scenario throughout both the military and civilian sides of the federal government. The only remarkable thing about it is the quantity of contracts for what INPUT labels commercial services. They account for 39 percent of the $45.4 billion that INPUT researchers say the government will spend on IT products and services this fiscal year. What's more, commercial services spending is growing faster than the other two major categories-computer systems (primarily hardware and software acquisitions) and telecommunications.

Within commercial services, outsourcing is the fastest growing category, predicts Payton Smith, manager of federal market analysis at INPUT. "The government has a certain level of IT requirements that are increasing," Smith says. "At the same time, the government does not have enough people" to accomplish its IT objectives.

Rather than pushing pure outsourcing, the Bush administration has embraced "competitive sourcing," under which federal employees compete against private firms for the right to perform a service. But there have been relatively few competitions under OMB Circular A-76 in federal IT offices and operations. Most of them have been at the Defense Department. For example, in 2002, TDF Corp. of Naperville, Ill., competed against the IT employees at the Army's Rock Island Arsenal and won a $33 million contract to do their work for five years, displacing 86 employees. TDF is a woman- and Hispanic-owned small business.

THE NEXT WAVE

In one major outsourcing effort, the Army's Logistics Modernization program, the Army got a waiver from using A-76 and barred hundreds of employees at facilities in Chambersburg, Pa., and St. Louis from competing for their jobs. The Army wanted a massive overhaul of its logistics systems, with commercial-style software and real-time information for managing its supply chain.

In 2000, the $680 million "Log Mod" contract was awarded to Computer Sciences Corp., a major systems integrator, after Army officials determined that the employees lacked the skills needed and that realistically not all of them could be retrained. Under the contract, CSC began operating the Army's outmoded systems while building new ones. As part of the deal, CSC hired more than 200 Army employees when they were laid off as the contractor began work.

The employees' battle to hold onto their jobs and the Army's firmness in the face of political pressure might have obscured the most important aspect of the Log Mod program. The Army chose to turn over its entire logistics support function-not just the computer and communications operations-to a contractor. CSC is providing logistics services rather than information systems.

Logistics is a mission-critical function for the Army. Its importance was illustrated this year when the U.S. drive to Baghdad in the invasion of Iraq had to pause briefly to wait for supplies to catch up with the soldiers. Meals, motor fuel and other essentials lagged behind the vanguard of American forces.

Outsourcing the logistics support activity was a revolutionary move, one born of desperation after it became clear that the Army's old logistics systems were unreliable and far too slow. But other agencies are beginning to do likewise with other functions. In fact, the Log Mod program embodies a hot trend in IT contracting: business process outsourcing. Under this approach, a contractor takes over an entire function, not just its underlying IT systems.

For example, after an A-76 competition, ACS Government Services of Rockville, Md., won a Defense Finance and Accounting Service contract to handle payments to the Defense Department's 2.5 million retirees and annuitants. ACS (a subsidiary of Affiliated Computer Services Inc. of Dallas) not only does the automated processing of monthly checks but also handles paperwork, mail room and customer service work that used to be done by 535 DFAS employees.

State and local governments appear to be ahead of federal agencies when it comes to this form of outsourcing. They have awarded contracts to run child support programs, parking enforcement, benefits disbursement and many other functions once thought to be inherently governmental. But many observers expect federal agencies to do more business process outsourcing. Thomas Burlin, who heads the federal practice for IBM Business Consulting Services, calls it "the new frontier" for companies seeking federal business. "What has really changed today in this market is . . . that line where the traditional IT services and best practices are blended with the mission," Burlin says.

IBM has labeled the new environment the "on-demand" market, because it calls for more flexible and scalable service providers-ones that can provide services to troops in Iraq as well as at a U.S. base, or help an agency reorganize on short notice. "That space is more fluid and volatile than traditional IT outsourcing," Burlin says. "Companies that respond to that need will be the most successful, and the organizations within government which recognize that need and design their business processes around that need will be the most successful organizations."

OMB's Forman agrees that it's not just about IT anymore. "It's e-business. It's the mesh between IT and a streamlined, more effective way of getting business done," he says. And it's winning new respect for IT in business and government. "For many years, IT [departments have] had trouble explaining their relevance to the folks who are actually running the line of business," he says. "But as we went through the last few years of a more collaborative business model, there's been much more alignment between IT and the lines of business, and IT has moved from a cost of operation to an enabler."

Asked whether it is getting more difficult to distinguish between IT and other kinds of outsourcing, Forman applauds the increasingly blurred line as a means of getting the best value for the taxpayer. In addition, he notes that OMB is requiring agencies "to look at different, more innovative, more productive business models" before settling on an IT project and seeking funds for it.

More often than not, he says, agencies choose a traditional approach. "It will be interesting to see how the new A-76 affects those decisions," Forman adds. "Over the last year and a half we have seen an increase in the types of outsourcing solutions that we've been talking about, the nontraditional outsourcing. But the norm has continued to be, look at that, do the analysis, and then the decision is to keep it in house and hire a contractor to help build and run it."

He says OMB will keep pushing agencies to evaluate the alternatives through a business case analysis and choose the approach that offers the best value to the government.

HELP WANTED

Forman is certain, however, that strong business cases and shedding operations that are not "core competencies" of agencies are not the complete solution to the government's IT problems. "The big gap we see is the ability to effectively manage projects to cost, schedule and performance objectives," he says. Although agencies might be quite capable of figuring out how to apply IT to solve a problem, Forman says they have deficiencies in areas that are not just technological-"things like enterprise architecture, solutions architects, capital planning and IT strategy, and especially project management."

"We have literally thousands of IT projects, and most of those are now modernization or management of more than just IT," Forman says. They involve changing the way agencies do their jobs, reengineering processes and restructuring organizations. "We feel we need that capacity within government," he adds. "You can't really hire somebody outside to change you. You can hire an IT project manager to manage the IT components, but the overall project manager has to be a government person."

The shortage of experienced project managers and enterprise architects is so severe that Forman says it might be necessary to hire such people from outside government. OMB was working this spring to determine how many otherwise viable IT projects across government lacked qualified managers and whether existing training programs can turn out enough managers fast enough.

Executives of Robbins-Gioia LLC, a project management consulting firm in Alexandria, Va., question whether a training program really can equip federal managers to manage the government's most complex and expensive programs. Program management is a series of disciplines, says the company's CEO, Jim Leto, a federal IT veteran. He suggests that agencies consider outsourcing program management support in a separate contract from the main outsourcing program. Sometimes, the outsourcing contractor is hired to provide program management support services as well, but under that model, some problems might not be reported to the agency, Leto says.

As the idea of outsourcing the outsourcing oversight shows, there's no end to what is proposed for contracting out these days. Earlier this year, the governmentwide CIO Council's committee on workforce issues reviewed the status of federal IT recruitment, training and retention. The report was written by consultants.

Some agencies even are outsourcing development of their enterprise architectures, the frameworks that spell out the linkages among their business operations and their various IT programs. That's not a good idea, says John A. Weiler, co-founder and executive director of the Interoperability Clearinghouse, a nonprofit consortium in Alexandria, Va., that assists agencies with architecture, program design and related IT issues. "If you don't have control of the architecture, it can become a bottomless money pit," Weiler says. At the very least, he says, hire another contractor to keep a management eye on the architecture effort.

Excessive outsourcing can be a problem, as some agencies found in the 1980s when they lost control over certain IT activities. And it's generally agreed that IT outsourcing is a one-way street. Once an agency turns work over to the private sector, getting the equipment, facilities and personnel slots back into its budget is out of the question.

For now, though, it seems that agencies are adding nearly as many IT jobs as they are outsourcing, while trying to make the transition from IT performer to IT manager. The Navy's Capt. Christopher explains it this way: "We're trying to put ourselves sort of in the same position that Wal-Mart has gotten in, where IT has been fundamental to its being the dominant retailer on the planet. . . . They have leveraged their IT investment in order to achieve that competitive advantage. Well, from a military perspective, we're wanting to do all those same things." And, Christopher adds, if you look at what the U.S. military accomplished in Iraq, you can see that it's working.

After three decades in federal IT, Phil Kiviat isn't so sure. "We really don't know how to specify what we really want," he says. Agencies find it difficult to set performance goals, and they are not comfortable with uncertainty. Outsourcing, he says is "an attempt to solve a problem that nobody has really come to grips with"-the overlapping and conflicting rules and laws that keep government managers from getting on with what needs to be done. "The government wants to behave like the private sector, but they can't," he ruefully concludes.

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Housing Renovation

Nancy Ferris — Thu, 01 Aug 2002 00:00:00 -0400

Mel Martinez and his team are giving the Housing and Urban Development Department a facelift. Whether they are doing enough to provide housing is another question.

hen President Bush named Mel Martinez his secretary of Housing and Urban Development, the first question asked in Washington was, "Who's Mel Martinez?" The answer: He was the top elected official for Orange County, Fla., and had chaired the Orlando Housing Authority. A Cuban native who arrived in America as a teen-age refugee speaking no English and without his family, Martinez had become a lawyer and community leader.

Although his saga was inspiring, many in Washington doubted Martinez' ability to succeed in the footsteps of his dramatic Democratic predecessor, Andrew Cuomo. No matter who's in the White House, HUD can be one of the most challenging Cabinet posts. Regarded by some as a government backwater, HUD has the fourth largest operating budget-$31.5 billion of all Cabinet agencies. HUD's actions are politically sensitive, since the real estate, home building and financial industries it works with are among the country's largest political campaign donors. Moreover, the local officials who get HUD's money for housing and community development projects are savvy political players.

The HUD secretary can count on being castigated by the department's inspector general and the General Accounting Office for poor controls over the distribution and disbursement of more than $39 billion annually in housing and community development funds. And he'll be lucky if he can escape more severe criticism for failing to halt the fraud and corruption that have bedeviled the department over the years. The secretary also inherits a legacy of poor program management.

Martinez is a friend of the president's brother, Florida Gov. Jeb Bush, and an appointee certain to please Hispanic voters. He has been active in Catholic Charities in the Orlando area and is enthusiastically moving to implement President Bush's policy of relying more on "faith-based organizations" to deliver social services. As Orange County chairman, he took unexpectedly bold steps to manage growth. But even after Congress approved his nomination, few knew much about his ability to head a Cabinet department.

Today, 20 months after Martinez moved into the 10th-floor secretary's office at HUD's Southwest Washington headquarters, little more is known about him. He gives few press interviews, and when he meets with official visitors or addresses industry groups, he sticks to such safe themes as the importance of homeownership or the need to simplify mortgage applications and procedures. However, the consensus among HUD watchers is that Martinez is a well-meaning man who might well have what it takes to keep the department on the right track. In view of the number of land mines lurking within the department's complex operations, few predict that he'll escape without some kind of scandal or major controversy. But they say he could be the rare HUD secretary who leaves the job with a better reputation than when he arrived, and with the department in better shape.

Cleaning House

Today the department is trying to improve the effectiveness and efficiency of its programs. It is using modern computer systems to determine rent subsidies and check on tenants' incomes and eligibility for housing aid. It has consolidated Federal Housing Administration processing of loans for commercial apartment buildings in four centers nationwide, rather than in dozens of local offices, so specialists can handle these complicated transactions. It is pushing its grantees to spend funds and report back promptly. Cuomo began some of the initiatives, but Martinez and his team are treating them as their own.

In an early departure from the norm, Martinez spent his first year resisting requests to propose new programs. Instead, he said, the department needed to do a better job of managing the programs it already had. "My first priority will be for HUD to continue to put its own house in order, so we have the institutional fortitude to provide the housing and community renewal opportunities needed by so many families and so many neighborhoods," he told the Senate Banking Committee at his confirmation hearing in January 2001. "There are a great many areas of institutional weakness that must be addressed," he added.

Indeed, HUD's operations long have been a favorite target of GAO and the department's inspector general. The department was singled out for special attention in President Bush's year-old management agenda, which consists of five governmentwide initiatives focused on performance improvement and nine targeted programs. The section on HUD says in part, "Subsidized families are sometimes trapped in substandard, poorly maintained housing; home buyers are exposed to fraudulent practices; and some families receive excessive subsidies that could have been used to aid others in need."

Several HUD programs were on GAO's list of "high-risk" federal activities for most of the 1990s, but last year, congressional auditors removed all but two from the list: the Federal Housing Administration's single-family mortgage insurance program and the department's rental housing assistance programs. In both cases, the department relies on outsiders to accept and process applications, inspect properties and carry out other program functions. HUD hasn't done enough to monitor the performance of these contractors or to ensure program quality and financial integrity, GAO reported again last year (GAO-01-248).

HUD's largest endeavor is its housing voucher program, which accounts for about $18 billion a year of the agency's spending. This program, also known as Section 8, lets 2 million low-income families or individuals rent moderately priced apartments from private landlords. HUD pays the difference between the tenants' rent and 30 percent of their income. Excess tenant subsidies, which result when tenants' incomes are higher than what they've told HUD, may be costing taxpayers three-quarters of a billion dollars each year, GAO says. In addition, some private apartments rented to voucher holders are in substandard condition. For their part, landlords complain that inspections of these apartments, required before each Section 8 lease takes effect, can take weeks-a delay that discourages landlords from accepting Section 8 tenants. That, in turn, may be contributing to the difficulty tenants have in using scarce vouchers in tight rental markets, particularly in big cities. Because of budget limitations, only half the families eligible for vouchers can get them. Some families wait years for vouchers, only to have trouble finding an apartment once vouchers are available.

For all the problems with vouchers, they are regarded as generally successful. Many Republicans like them because they rely on the private sector to build and operate apartments and because voucher recipients choose where they will live. Democrats appreciate the flexibility of the voucher program and have been able to expand it slowly but steadily. It was budgeted at $11.4 billion in fiscal 2000; the administration is requesting $18.3 billion for fiscal 2003.

The Stigma of 'the Projects'

The general high regard for Section 8 is important in view of the unpopularity of public housing, the program that for years was HUD's mainstay. Public housing first was built in the Depression and expanded after World War II. The program served families, many of them with two parents-one a breadwinner-that were viewed as deserving help. Today's public housing is home to about 1.3 million low-income families and individuals, down at least 63,000 from the program's peak. The units were built with federal dollars and are operated by local government agencies called public housing authorities. The authorities get operations and capital improvement subsidies from HUD because rents, which average $229 a month, don't cover all costs. Public housing residents generally have lower incomes than Section 8 voucher holders.

Most public housing consists of low-rise apartments rather than the teeming inner-city high-rises that spring to mind when the term is mentioned. Some public housing is well maintained. But most of it is outdated and dilapidated, and too many projects were built close together in already unstable neighborhoods. Designs are poor, and construction was sometimes shoddy. Federal policies for many years kept rents down, provided too little maintenance and modernization money, and discouraged two-parent families. The result: a $20 billion modernization backlog. Local housing authorities also did a poor job of managing the federally constructed projects. Recent administrations have labeled public housing a failed program, and no public housing has been built for about two decades. Many units, particularly the infamous big-city high-rises, are being torn down and replaced by mixed-income developments built by public-private partnerships.

But public housing's stigma lingers. When the congressionally chartered Millennial Housing Commission reported in May that the government should at least stimulate the construction of more subsidized apartments, an incredulous reporter at the press conference asked: "Are you actually proposing the expansion of public housing in places like New York City, that new projects be built?"

The answer was yes, with some qualifications. But it's clear that the construction of public housing will be limited. Proposals for subsidized housing of almost any kind, including housing for the elderly, evoke opposition from neighbors who fear concentrations of crime, poverty, antisocial behavior and slum conditions. Recently, some communities have been objecting to construction of any apartments, subsidized or not.

Buyers, Not Renters

That's not all bad, in the view of President Bush, Secretary Martinez and other administration officials. They have made increasing home ownership their top priority. "Home ownership gives families a stake in their communities and creates wealth," Martinez told the Senate in February.

The administration's programs include help with down payments for first-time home buyers, tax credits for developers of afford-able single-family houses, a commitment to work with sweat-equity house-building programs, such as Habitat for Humanity, and a program that will allow Section 8 voucher holders to bank their rent toward a down payment. The administration also has pledged to crack down on predatory lenders who take advantage of novice homebuyers.

But some housing activists say the emphasis on home ownership is misplaced. They believe the poorest Americans have the most severe housing problems, and the poorest people are unlikely to be able to buy and maintain houses. Rental housing serves these families better, in the view of the National Low Income Housing Coalition and others, and rental housing is where HUD should be concentrating its efforts if it is to achieve its mission of delivering "a decent, safe, and sanitary home and suitable living environment for every American."

What's more, the Washington-based National Apartment Association/National Multi Housing Council point out, there's evidence that families that can choose where to live increasingly are opting for apartments. One-third of all American households rent. The fastest-growing segment of this group is high-income renters, and some data suggests that they are squeezing lower-income families out of the market.

The nation's stock of subsidized rental housing has been declining. Because HUD's often-criticized information systems don't serve up reliable data and because states and charities build some affordable housing without HUD's help, no one knows for sure how many units are available nationwide. But there is widespread agreement that the supply is no match for the need, which appears to be growing. Among the lowest-paid workers, wages are not increasing, while rents and house prices are soaring beyond the rate of inflation in much of the United States.

Too Few Units

"There is simply not enough affordable housing," the Millennial Housing Commission reported in May. "The challenge is most acute for rental housing in high-cost areas, and the most egregious problem is for the very poor." The commission found there are "significant societal costs" when people can't find adequate housing.

he nation's affordable housing crisis should be on everyone's radar screen right now, but it is not"

- Thomas Menino,
Boston mayor

"The nation's affordable housing crisis should be on everyone's radar screen right now, but it is not," says Boston Mayor Thomas Menino, president of the U.S. Conference of Mayors. "The Bush administration and Congress need to pay attention to the housing crisis and do something to relieve the financial hardship of the millions of Americans living in substandard housing, struggling to pay rent, or denied even the dream of owning a home of their own." Venerable Washington Post columnist David Broder backs up Menino's claim that housing is a nationwide crisis. Broder wrote in June that "in almost every city I've visited this year, from Sacramento to Tallahassee to Boston, the shortage of affordable housing is close to the top of people's concerns." However, he added, for federal policy-makers, "housing is a chronically neglected subject."

Martinez does not seem interested in making fundamental changes to address the lack of affordable housing. He told the Conference of Mayors in May, "the solution to meeting this nation's affordable housing needs will not come out of Washington." Although the federal government has a "a role in helping to address housing affordability" through tax credits, block grants to states and localities, rental assistance, and insurance and guarantee programs, Martinez told the mayors that the Bush administration is committed to the philosophy that housing issues are primarily local issues.

he solution to meeting this nation's affordable housing needs will not come out of Washington."

- Mel Martinez

The secretary told the mayors about several initiatives, but didn't mention two that could be stimulating more production of affordable apartments. In February, HUD reduced the cost of Federal Housing Administration insurance for mortgages on affordable multi-family housing. Last year, the FHA made these insured loans more widely available by increasing loan limits.

Complex System

Whether the public understands such actions is questionable. The complexity of federal housing programs hampers public understanding and debate, in the view of observers such as Cushing Dolbeare, the dean of low-income housing activists in Washington and a member of the Millennial Housing Commission. Likewise, the authors of the president's management agenda wrote that "many overlapping, complicated and poorly designed programs burden HUD" in carrying out its mission.

HUD no longer builds housing, nor even pays for most construction. Instead, it helps out with the financing to reduce costs. The government also offers tax credits for the production of low-income housing. Most new housing for low-income people is built with the help of several relatively small subsidies from different federal and state programs that are layered atop one another. This complexity makes it difficult to measure the effect of any one program or to quantify the total impact of federal housing aid. It also leaves the door open to waste, fraud and abuse-ills to which HUD has been subject more than most departments. Each layer is managed by a different part of HUD or a partner agency, and only the few people in charge of the project know the big picture.

The complexity of its programs has meant that over the years, HUD has been slow to dispose of houses it came to own after foreclosures on FHA loans. The houses sat empty and deteriorating while costing money to board up and repair. Lately, the FHA has been selling its excess inventory more quickly. But that's been accompanied by a series of inspector general and GAO reports about sales that were fraudulent or didn't follow the rules. In June, HUD's IG reported that prospective owner-occupants who had not bought other HUD houses recently were supposed to be given a head start over investors in purchasing HUD-foreclosed dwellings. However, 29 percent of the sales under this program did not observe these rules. "These abuses likely . . . undermined the initiative's intent to increase home ownership," the IG's report said.

HUD has the difficult job of handling large amounts of credit, money and property. Historically, its information systems haven't been up to the task of supporting careful and efficient stewardship of its resources. Even with first-rate information systems, however, its stewardship job would be tough because it depends on a host of outside parties-real estate agents, lenders, state and local governments, inspectors, maintenance companies, and nonprofit organizations with varying levels of business savvy-to carry out its mission. These third parties maintain, inspect and sell HUD-owned houses, originate FHA loans, build and renovate houses, care for homeless people, operate public housing, and play other roles in housing and community development at the local level. The public housing and voucher programs are operated by 4,535 state, local and tribal agencies.

HUD hands out nearly $5 billion in Community Development Block Grants to state and local governments each year for housing and community development projects. Many kinds of expenditures are permitted, including housing loans, services for the homeless, jobs programs and improvements to public facilities and parks, but more than two-thirds of the spending must benefit low-income people. HUD requires governments receiving the grants to prepare elaborate plans for spending the money and to submit accounts of the actual spending, but few people believe HUD employees review all these reports carefully. The department relies instead on local activists and other interested parties to check for irregularities and blow the whistle when necessary.

Not Enough People

An official of the HUD Council of the American Federation of Government Employees confirms that staffing is too thin to allow for monitoring of each grant, contract and transaction. "We don't have the people to check on" homebuyers and other recipients of HUD money or property, says Irene Facha, an attorney in HUD's Philadelphia regional office. Facha says that AFGE members are disheartened because they had hoped for more improvement when Martinez and his team took over. Martinez' official biography mentions his commitment to high ethical standards, and the secretary often mentions ethics when discussing how to improve HUD's credibility.

Facha acknowledges there have been some improvements. "They [HUD managers] are trying to address some of the problems with contracting out," she says. But Facha is critical of what she calls the department's failure to prosecute or punish employees involved in episodes of fraud and conflict of interest. "It's going to take forever to correct the problem if people think they can continue to get away with what they are doing," she says. Facha says Martinez means well but he should back up his statements about ethics by cracking down on ethical lapses. "There's the sense that there is no accountability," she complains. "You can beat your chest about accountability, but actions speak louder than words."

In another case where the depth of HUD's commitment has been questioned, advocates for homeless people were disappointed by the president's 2003 budget. Although the administration called for an end to "chronic" homelessness in 10 years, it didn't propose any new or expanded shelters, supportive housing, or other assistance. Instead, Martinez said, HUD would make more efficient use of existing resources in its own budget as well as those of other departments, such as Health and Human Services. The budget, not yet approved by either house of Congress, calls instead for combining existing programs serving the homeless and increasing the program coordination staff.

But many observers say the lack of housing is a major cause of homelessness. The bipartisan Millennial Housing Commission is among those calling for creation of a substantial amount of new "supportive housing"-housing with support services-for the nation's 2 million homeless people. The commission called for increasing supportive housing units nationwide from today's 50,000 units to 200,000 over the next decade.

Although HUD and Office of Management and Budget officials had issued unmistakable hints that HUD's 2003 budget would be flat at best, given the need to fight terrorism and pay for wars, HUD's bottom line in the president's fiscal 2003 budget proposal actually grew by 7 percent, more than most other domestic spending. Martinez is proud of getting the increase, but some analysts say the budget remains essentially flat, paying for only tiny increases in programs and services.

That it is growing at all indicates that the drive to abolish HUD, part of the conservative agenda a decade ago, is all but dead. One HUD critic, Howard Husak, a research associate with the John F. Kennedy School of Government at Harvard University, still says, "I don't particularly like the idea of subsidized housing programs," but acknowledges, "I do think that they've made progress" in management, beginning with the Clinton administration and continuing today. His opinion is echoed by others. Martinez "is focused on trying to make the place work better," says low-income housing advocate Dolbeare. FHA loan processing is working more smoothly than in the past, says Mortgage Bankers Association Vice President Stephen O'Connor. "There's no doubt that they're improving," says Christine Pelosi, a HUD General Counsel staffer during the Clinton administration who now works on Capitol Hill.

But some people continue to question whether simply smoothing out program operations and reducing abuses are all that's expected of a Cabinet secretary. When, they ask, will HUD propose some bold solutions to the very visible problems of inner-city decay, homelessness, and high housing costs?

Given Martinez' insistence that housing problems are local problems that should be solved locally, it's not likely that major new programs are being hatched on HUD's 10th floor. If good management and program execution succeed in restoring HUD's reputation, Martinez will have pulled off a difficult balancing act and could be in a position to take on a more satisfying or visible job. There are predictions that he will run for Florida governor, seeking to succeed Jeb Bush, or even get a slot on a national Republican presidential ticket-not bad for a man whose first housing in the United States was in a refugee camp.

Nancy Ferris is a Washington journalist who has covered government for more than 30 years. A former Government Executive staffer, she was the communications director for the National Low Income Housing Coalition in 2001-2002. ]]>

Cleaning Up Your E-Mail

Nancy Ferris — Thu, 01 Jun 2000 00:00:00 -0400

letters@govexec.com

ederal agencies, like their private-sector counterparts, are monitoring employee use of e-mail. If you doubt it, just ask any of the 500 Navy employees who were disciplined this year for exchanging dirty jokes and other objectionable messages with co-workers.

About a year ago, a Naval Supply Systems Command employee complained anonymously about offensive "adult humor material" on a co-worker's computer screen. When command officials investigated, they found employees were sending each other such messages, in violation of federal regulations and Navy policy. Those who simply received the messages weren't punished, but a few employees were suspended for a week or so, and hundreds more were warned or reprimanded.

At the time, NAVSUP was using an e-mail screening product called Mail Sweeper to scan messages for computer viruses, security breaches and very large files sent as attachments that could clog its networks. Since late 1999, however, the command and its activities have been doing a second pass with Mail Sweeper to detect pornographic video clips and other sexual material, racist and profane language, threats and other objectionable content.

On the Smut Trail

Mail Sweeper and its competitors can be programmed to find almost any words and concepts in messages passing through a server. It isn't simply a matter of scanning for certain words. After all, words such as "breast" or "thigh" can be used quite innocently, says Wally Boos, president of Content Technologies Inc., the Washington state company that makes Mail Sweeper and other filtering products. The best such products have built-in intelligence that lets them evaluate the context in which words are used.

Boos and spokesmen for other companies also tout their products' ability to look for content that concerns the managers who buy the software. These products can police employee dissemination of sensitive or confidential information via e-mail. Besides simply looking for sensitive words, some federal agencies embed special characters in secret documents, enabling them to be flagged as they pass through servers. Another product in this category, the Messaging Management System from Tumbleweed Communications Corp., is used at the Food and Drug Administration. Besides providing content filters, Tumbleweed MMS ensures that drugmakers' proprietary and confidential information stays secure, says Shannon Hakesley, a marketing manager at the Los Angeles company. It automatically directs sensitive messages to FDA's secure server where they can be encrypted before they reach the Internet.

Once an objectionable or unauthorized message is found, these products can be programmed to respond in various ways. Almost always, they notify the mail system administrator. Some also can send the author of the message a pop-up warning or reminder about use policies. Some customers program the software to produce periodic reports on incidents.

What happens then? Even at intelligence agencies, employees often are allowed one or two slips of the keyboard, as long as it's a matter of offensive material rather than intentional threats or disclosure of sensitive information. Then someone-most likely the system administrator or a human resources representative-will counsel them to avoid further violations. Disciplinary action-reprimand or suspension, perhaps even firing-is likely to follow if the violations continue.

Keith Thurston, an IT policy specialist at the General Services Administration's Office of Governmentwide Policy, says he's aware of at least one case in which a federal employee was fired for using e-mail as a tool for sexual harassment and to threaten a subordinate. Such cases "tend to be handled quietly," Thurston says. Employees occasionally have challenged the disciplinary actions taken against them for misuse of e-mail, but the Merit Systems Protection Board and the courts have generally upheld agency sanctions.

As a preventive measure, to avoid catching employees unaware and to solidify their legal stances, many public- and private-sector employers warn their workers that e-mail is subject to monitoring. Warnings often come when employees are hired and during periodic IT, ethics or security training. Many agencies display them on computer login screens and Web pages. But in the federal government such warnings are not mandatory, experts say, before an agency begins to monitor e-mail and to use the results of its monitoring.

Recommended Policy

At a few agencies, any personal use of e-mail is a violation of policy. But agencies increasingly are taking the position that occasional personal use is acceptable, just as with federal office telephones. Thurston, who coordinates an interagency group of federal e-mail managers, says many agencies have adopted guidance issued last year by the Chief Information Officers Council. The policy, "Recommended Executive Branch Model Policy/Guidance on 'Limited Personal Use' of Government Office Equipment Including Information Technology," is on the Web at http://cio.gov/files/peruse.pdf Agencies can adopt the policy as it stands, or with modifications, or not at all.

At its core, the recommended policy says "federal employees are permitted limited use of government office equipment for personal needs if the use does not interfere with official business and involves minimal additional expense to the government. This limited personal use of government office equipment should take place during the employee's nonwork time. This privilege to use government office equipment for non-government purposes may be revoked or limited at any time."

Similar policies-though often unwritten or de facto-are the norm in corporate America, and Thurston says he has fielded queries from private-sector managers interested in borrowing language from the recommended federal policy. There are some major private-sector exceptions. For one, banks and other financial institutions tend to restrict employees' personal use of e-mail out of concern for the confidentiality of customer accounts and other sensitive data. This tendency has a counterpart in the federal government, where the Internal Revenue Service forbids its employees to make personal use of agency e-mail systems. Other agencies that forbid personal use include the FBI and intelligence agencies.

"Misuse of networks is probably the second biggest issue" in communications security these days, says Jerry Harold, president of Network Security Technologies Inc., a Herndon, Va., company that does security work for the federal government.

And agencies that don't do e-mail monitoring may have a tough time making sure their abuse policies are being followed. A recent American Management Association survey of more than 2,000 organizations found that 38 percent of major U.S. employers are reviewing employee e-mail messages, up from 15 percent in 1997. Only 42 public-sector organizations responded to the survey, but their responses indicated that the incidence of monitoring is higher in government than in the private sector.

One agency that screens e-mail for offensive and other improper content, including gambling terms, is the Corporation for National Service. James Arroyo, the information systems security officer, enforces the agency's e-mail policy. He uses a product called Message Inspector from Elron Software Inc., in Burlington, Mass., to produce an overnight report of incidents. At least two dozen objectionable e-mails turn up on a typical report. "If it happens a couple of times," Arroyo says, "I call the employee in." He gives the employee a copy of the report and the agency's policy, and "99 percent of the time, when I talk with the employee, it stops immediately," he says. Arroyo notifies the employee's supervisor only if the improper mail use persists, and that seldom happens. He's not aware of any major discipline meted out to Corporation employees for their mail use.

An Eye on the Web

Arroyo uses another Elron product, Internet Manager, to monitor employee use of the World Wide Web. Internet Manager gives him a log of employee use, minute by minute. He looks for active use of sexually oriented sites, spikes in usage that suggest there's some item of great interest on a nongovernment site and other indicators of improper use. When he calls employees in to discuss their Web use, "they're amazed that this could happen," he says. "They're very apologetic, and it stops. These are adults."

On a couple of occasions, Arroyo says, managers have sidled into his office, red-faced with embarrassment. They've come to confess that in the course of some Web use not closely related to work, they've stumbled into a pornographic site. They know he's tracking their Web activity, and they tell him, "I'm not that type of individual." Arroyo says he understands, and there are no consequences for these employees.

Another kind of software keeps track of what files employees are downloading from the Internet. With agencies' data storage systems straining at the seams, this kind of product can be a real cost-cutter, according to Steven Toole, director of marketing for W. Quinn Associates Inc. in Reston, Va. Quinn's product Storage CeNTral, which Toole says several agencies are using, allows managers of Windows NT networks to block files of certain sizes and types from being saved on the server.

The software comes with a list of file types that tend to be nonbusiness-related, especially big movie clips and MP3 music files that have no role in the work of most offices. The network manager can modify and update the list as needed. Such software can block the receipt of business-related graphics, including PowerPoint presentations, but the products can be programmed to deny access to very large files only. When Storage CeNTral is installed, Toole says, it can free up as much as 30 percent of the server's disk capacity by deleting downloaded files that aren't needed.

Looking for another reason to block receipt and storage of multimedia files? Suggestive or pornographic files are doubly offensive if they involve sound and action. Such files were among those that turned up at NAVSUP. Employees have successfully sued employers for allowing the workers to be exposed to sexual material over a period of time. And music publishers are beginning to file suit against proprietors of servers that hold files of copyrighted music. That's a potential risk for government agencies if they tolerate storage of such files.

But GSA's Thurston says the system capacity issue should be a real consideration for agency managers when they're deciding how to control e-mail abuses. Thurston says agency e-mail gateways are getting clogged with tremendous volumes of mail and files attached to mail. At one agency, external e-mail traffic increased from 28,000 a day in March 1999 to 50,200 a day in March 2000-an annual growth rate of 79 percent. Greater rates of increase have been recorded at other agencies, Thurston says. When it comes to e-mail abuse, "only half of it is the issue of misuse of time and other resources," he says. It's equally important to make way on federal networks for the important business-related mail.

]]>

The Communications Revolution

Nancy Ferris — Mon, 01 May 2000 00:00:00 -0400

nferris@govexec.com

evolution" is not too strong a word for the ferment that's under way in electronic communications. As with most such upheavals, it's difficult to say what the landscape will look like when the smoke clears. But federal managers don't have the luxury of waiting for that to happen. They're taking steps now to meet 21st century needs. This special report takes a look at some of the ways they are upgrading their networks and making the most of the new communications environment.

One important element of that environment is demand for more connections and more kinds of connections. Demand is growing at an unprecedented rate. For example, officials at the Defense Information Systems Agency, the central telecommunications provider for the military services and Defense agencies, say that Web use of DISA's backbone data network is doubling every six months. Peter Paulson, DISA's network operations chief, says there's been an explosion of Web-based systems for all kinds of business operations throughout the Defense Department. Another indicator: According to the electronic publication Messaging Online, the number of electronic mailboxes worldwide grew 84 percent last year, and about 40 percent of the U.S. population now is connected to e-mail at home or at the office.

To meet the demand, agencies are upgrading their networks and taking advantage of new network acquisition and management strategies. They're consolidating old, single-purpose networks into multipurpose "pipes" that carry traffic more efficiently. Some, such as the Treasury Department, are looking to outsource network operations and management.

New companies offering new technological and service delivery options are emerging. In late March, for example, the General Services Administration contracted with Winstar Communications Inc., a New York company less than a decade old, to provide local phone service and data transmission services to federal agencies in Cincinnati, Ohio, over the next eight years. Winstar provides services locally over wireless networks in 60 U.S. cities and connects those cities with a fiber-optic backbone it is building. Winstar also will compete with Pacific Bell for federal phone customers in Los Angeles, under another GSA contract.

The new options and new competition for federal business can mean dramatic cost reductions for agencies. Officials at GSA's Federal Technology Service say the Winstar contract in Cincinnati calls for a 72 percent reduction in local phone rates. Long-distance rates under the government's FTS 2001 contracts are scheduled to drop to 1 cent a minute over the life of the contracts. Though data transmission prices are not dropping as much, these services are costing less too.

During this revolution, lower prices are accompanied by new possibilities. Wireless phones, video training programs, customer service systems and phone calls routed over cable TV systems or the Internet are just some of the alternative communications tactics that agencies are employing. Read about all of them in the following pages.

There's more change yet to come, and federal managers increasingly need to stay abreast of communications as the revolution proceeds. We'll continue to keep Government Executive readers informed of communications developments that can help or hinder their programs, and we'll keep focusing on what's really happening, rather than passing along the hype.

]]>

Changing Channels

Nancy Ferris — Mon, 01 May 2000 00:00:00 -0400

nferris@govexec.com

raditional communications companies, led by AT&T Corp., still supply the federal government with the bulk of the network products and services on which agencies will spend $7.4 billion this year, according to INPUT, a market research firm in Vienna, Va.

Increasingly, however, agencies are looking for new ways to move bits and bytes. They're turning to nontraditional companies and even start-ups for emerging technologies that will cut their costs or stretch the capacity of their existing systems. Sometimes the agencies are putting new technologies to work. At other times the technologies are not new, but agencies are putting them to new uses.

Take the Postal Service, for example. Its New Orleans processing and distribution center is using a wireless telephone system from an Israeli company to improve efficiency and productivity. The Coral AirEase system from ECI Telecom is attached to the center's conventional telephone switch, known as a PBX, and acts like an extension of the basic phone system. It uses radio technology.

The center, a huge factory-style facility that sorts and distributes the mail 24 hours a day, has equipped almost 100 supervisors with wireless phones so they can be reached wherever they are working on the floor. That way, when a machine shuts down or some other processing glitch occurs, the appropriate supervisor can be contacted immediately to arrange for repairs and to reassign the idled workers.

The system works better than the pagers and portable radios it replaced, says Joe Frigo, manager of maintenance operations at the plant. "When you use radios," Frigo says, "you have a lot of cross talk," or interference, and less privacy than a phone system offers. The system costs less than alternatives the center considered, such as cellular phones or a replacement PBX. "We're a factory," Frigo says. "In a factory operation, this is ideal."

He says he can't quantify the benefits, but he thinks the system had a role in helping the center achieve its 1999 productivity improvement goals.

Satellite Services

Long-distance transmission via satellite is a different form of wireless service. The General Services Administration this year awarded a new series of satellite services contracts that are available to all agencies. The seven contractors offer a range of services, such as mobile telephone service, video broadcast transmission and basic data transmission.

April Ramey, director of the innovation center in GSA's Federal Technology Service, says a half dozen agencies, including the departments of Defense and Veterans Affairs and the Internal Revenue Service, have used the contracts to arrange delivery of video training programs nationwide. DoD alone operates more than 1,100 classrooms where students engage in "distance learning."

An award-winning program in 1999 trained 2,000 employees of the Agriculture Department's Animal and Plant Health Inspection Service, simultaneously in one week. The nationwide training exercise, which relied on satellite transmissions, cost the agency less than $27 per trainee, compared with $625 for the classroom training used previously.

Besides such well-established programs, "agencies are going to be seeing new applications for satellite services," Ramey says.

For example, Hughes Global Services of El Segundo, Calif., offers a service called Orbcomm for short, simple data transmissions in standard formats. Likely applications include tracking of shipments or packages en route, plus reports from unmanned sensors in the field. The latter category could include weather readings or groundwater data, says FTS Program Manager Sabrina Crane. Orbcomm service "is very inexpensive for short data messages," she says.

Cable: More Than TV

When it comes to telephone service, television can be an alternative to business as usual. Cable television companies often have excess transmission capacity that they are happy to provide to agencies at favorable prices. In one such case, Langley Air Force Base in Hampton, Va., installed a new telephone system provided by Cox Communications of Atlanta, the local cable TV company.

Cox built a fiber-optic ring linking the facilities at Langley, headquarters of the Air Combat Command. From that ring, Cox connects the base with many other military facilities in the Tidewater area of Virginia, with the Internet and with the public telephone network.

Sam Attisha, director of federal sales for Cox, says the new system has cut Langley's phone costs by 35 percent, while improving service. New features include caller ID and desktop videoconferencing. During peak periods before the 1998 changeover, Attisha says, outside circuits sometimes were not available to all would-be callers, but that no longer happens.

Costs were cut by consolidating the residential and business switches, and eliminating some high-speed data lines that were no longer needed after the basic network was upgraded. The network now carries voice, data and video traffic to more than 15,000 telephones in offices and base housing.

Similar savings have been achieved at Tinker Air Force Base outside Oklahoma City, where Cox also is providing local phone services, Attisha says.

Calls for Service

If you've ever posed a query to an agency other than your own without the name or phone number of a specific office that can provide the information or solve your problem, you may know how difficult it can be for citizens to work with federal agencies.

That's why agencies are turning to technology that makes them more accessible to ordinary people who haven't memorized the agency's organization chart. One such agency is the Immigration and Naturalization Service, which has set up a toll-free number to provide information about citizenship, visas, work permits and other issues.

Since December, callers have been able to dial toll-free to the service at (800) 375-5283. An automated system provides six menu options in English or Spanish. During the first few months of operation, 30 percent of the callers were able to get the desired information without talking to a live operator.

Sprint Communications Co. developed the interactive voice response system and is providing the enhanced 800-number service to INS under the government's FTS 2001 long-haul telecom contract. The service routes the calls to INS customer service centers in Barbourville, Ky., and Woodlawn, Md., changing the allocation of calls to one center or the other according to the time of day and the volume of calls.

Agency officials expect the 800 number to improve customer service without commensurate increases in the INS payroll.

Internet Calls

For several years, telecommunications pundits have held out the promise of "convergence"-a rosy future in which today's separate voice and data networks will be replaced by a huge internetworking system that connects every kind of device and user. In a sense, it's already happening. In many areas, telephone signals are converted from their native "analog" format into digital data that is indistinguishable from other computer-generated information as both kinds of transmissions travel over the same local and national telephone networks.

But in another sense, convergence isn't materializing at anywhere near the predicted rates. Phone calls usually go through phone switches en route to big backbone networks, while the Internet and other data networks have their own gateways. The two kinds of transmissions are handled differently. The phone traffic moves more slowly and steadily, avoiding the volume peaks and valleys that characterize most data traffic.

Industry surveys suggest that such distinctions will persist, particularly in the communications environments of large national corporations and federal agencies. Major communications companies are preparing to offer new integrated voice and data services, but large customers will probably be among the last to take the plunge.

In the federal government, agencies have begun testing the idea of sending phone calls over the Internet. It's far less expensive to transmit large quantities of bits over the Internet than over long-distance phone lines. Yet recent analyses have begun to suggest that other costs associated with using the Internet for voice, including the cost of installing a whole new technical infrastructure for your phone system, could well offset the reductions in transmission costs.

Whether that's true will be determined in tests such as the one the Air Force has begun at Mildenhall Air Force Base in England. As an alternative to sending Mildenhall's calls through the expensive and technically incompatible British Telecom phone system, the Air Force hired Nortel Networks to set up an Internet phone system. By the end of this month, 170 of Nortel's Internet phones are supposed to be operational at the base, which has several thousand phones.

Demands Outstrip Supply

It's not news that the federal government is continually expanding its data networks. But it's a little-known fact that agencies, along with private-sector telecom users, are having to get in line for more network capacity.

In December 1998, for example, the Defense Information Systems Agency ordered a high-speed fiber-optic line for the Pentagon. A year later, the local telephone company, Bell Atlantic, still had not installed the line. "It took us almost 15 months before it was delivered," says Peter Paulson, DISA's network operations chief, adding that the situation is not unusual these days.

Such backlogs are by no means limited to Bell Atlantic, Paulson says. "This is pervasive across the continental United States," he says, and it affects corporate customers as well as government ones. For the most part, it's a local access problem rather than a shortage of long-haul capacity, Paulson says.

The emergence of alternative local phone companies (known in the business as "competitive local exchange carriers" or CLECs) was supposed to expand the supply of network capacity, or bandwidth. DISA does business with CLECs, Paulson says, but "they don't go everywhere we need to go."

As users urgently demand more bandwidth, DISA is trying to squeeze more data through its existing lines. Faced with a months-long wait for new lines into a DoD facility in North Philadelphia, for example, DISA added devices called Acclerators from Expand Networks Inc. to both ends of an existing data line. The devices have sophisticated software that allocates bandwidth intelligently among users.

The result was immediate, Paulson says. The line that had been at capacity suddenly could handle almost twice as much traffic. DISA has ordered more of the devices and plans to use them as stopgap measures, he says.

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The Technology Beast

Nancy Ferris — Sat, 01 Apr 2000 00:00:00 -0500

nferris@govexec.com

y now, it's a truism that a big information technology project has less than a 50-50 chance of achieving its goals-whether in the private sector or in government.

In fact, when the Health Care Financing Administration pulled the plug on its Medicare Transaction System development project in 1997, it almost elicited yawns around Washington. No one seemed at all surprised that the agency could spend $50 million or more over six years and then declare its most important systems project an un-fixable disaster.

What is surprising, is that hundreds of big federal IT projects have run their courses, with varying degrees of success, but the same fundamental errors keep occurring.

There's an entire industry devoted to advising chief information officers and program managers on how to succeed at this very difficult task. Whether a national accounting-consulting firm, the General Accounting Office, a technical services vendor, the Office of Management and Budget, a professional journal or any of hundreds of speakers at any month's management conferences, they all say much the same thing:

Get top management commitment to your project and stakeholder buy-in.
Have a performance plan and measure your progress. "If you're not measuring it," says National Weather Service project manager Paul Nipko, "it's getting worse. If you are measuring it, it will improve."
Be sure your IT project is aligned with the agency's mission and strategies.
Don't bite off more than you can chew. An eon ago, the General Services Administration's Frank McDonough warned us more elegantly to forsake "grand designs."
Re-engineer business processes before automating them.
Define an agency IT architecture; then use it as a management tool.

Enough. Determined not to produce another didactic management tome, we at Government Executive still felt the topic of IT project management warrants further examination. Its importance is not diminishing. In fact, given the widespread agreement on the need to embrace e-government, project management can only become more important.

So we zeroed in on five good-sized projects representing a spectrum of challenges. Some, such as the Weather Service's new digital nervous system, have millions of customers. Others, like the Army Flow Model, are internal systems for use by staff units. You'll find successes and failures, and a couple that could go either way. They're a mixed bag and, we hope, a representative (if unscientific) sample of what our readers who manage IT projects are up against.

While researching this special report, we talked to experts and came away with fresh insights into the challenges federal managers face. For example, it's hard to find people to take on these tough assignments.

In Short Supply

Paul Wohlleben, former deputy chief information officer at the Environmental Protection Agency, points out that the government does not have a corps of seasoned project managers who are available for massive IT efforts. Typically, he says, agencies turn to someone within their own walls -perhaps an IT manager who has not headed a large project before, or a mid-level program manager with little direct IT experience. It's hard to get such people trained and seasoned before the first real problems crop up.

The Senior Executive Service once was envisioned as the kind of management corps Wohlleben describes. But SES members have turned out to be much less mobile in their careers than the service's founders expected.

Now that government is outsourcing more work, especially IT, "they're going to need more project managers to manage industry," says Wohlleben, who now heads the government group at the Grant Thornton accounting and management services firm. With experienced federal managers retiring at an accelerating rate, he advises agencies to beef up their management training and development programs now.

Carol Kelly, a vice president of the META Group consulting firm and a former California state government manager, agrees. Her company predicts that DoD-style program management offices will become more common in federal IT organizations during the next couple of years.

Internal Consultants

The Information Technology Resources Board, a little-known intergovernmental body that quietly advises agencies on how to salvage troubled IT projects, has issued a series of useful publications on the issue, including "Project Management for Mission-Critical Systems."

Among its insights: Look for a program manager who can build consensus while being willing to take risks to move the program forward. Match project team competencies with the tasks at hand, then get additional expertise as needed. Balance the mix of contractor and government personnel. (This and other ITRB publications are available at www.itrb.gov.)

ITRB counsels managers to make sure they know where the risks are. For example, the organization's project management pamphlet says that "stakeholders' expectations are rarely spelled out in legislation, executive orders or formal memoranda." That certainly has been the case for the Customs Service's so-far-fruitless effort to find financial and political support for modernizing its major business systems.

Is COTS the Answer?

Another ITRB report advises agencies on how to assess the risks of the using commercial, off-the-shelf (COTS) software, as opposed to hiring a systems integrator to build a custom software system. Many agencies are choosing COTS software in hopes of reducing the risks associated with developing a system from the ground up and in the belief that COTS can be deployed faster. In this supplement, we look at how the intelligence community used COTS software in developing the new Intelink network.

Harry B. Heisler, vice president and general manager of Micron Government Computer Systems Inc., advocates the COTS approach. "The overall risk in any project," he says, "is not having enough respect for the things you do not know. The fewer of those inadvertent dark corners you leave unlit, the higher your chances of success." With standard COTS products as an element of a solution, agencies get market-tested technology, Heisler says.

What's more, he says, "your leverage is much smaller" if you find yourself locked into customized technology that's out of the mainstream. And upgrading or updating commercial products, as will always be necessary, tends to be less expensive and less technically challenging than doing the same updates for custom systems.

But the COTS route is by no means risk-free. "The majority of COTS solutions require extensive customization to meet the needs and support the business processes of the federal environment," according to an ITRB report, "Assessing the Risks of Commercial-Off-The-Shelf Applications." The report concludes that "federal agencies must make major business process reengineering changes to use COTS solutions as delivered."

Scale Matters

Perhaps more important, COTS products seldom are built to handle the huge and highly complex tasks of the federal government.

In a recent account of difficulties with installation of a new financial management system for NASA, the project manager was quoted as saying the prime contractor may have underestimated the size of the job.

Scale is an issue for many federal projects, whether the planned system will employ COTS products in only a minor role or to a great extent.

There's no way to shrink the ultimate size of a national tax processing system or weather system that collects, moves and processes thousands of bits of information every second. But it is possible to reduce the scale-related risks of big projects by breaking them into manageable modules.

That introduces another risk-the possibility that the modules won't work seamlessly together as an integrated whole at the end of the project. To guard against this, a well-thought-out architecture and plan must be in place from the start.

Reap the Rewards

But a modular development approach has rewards as well as risks. It allows the project manager to produce some results early. The experts recommend sequencing the project so that the first modules are those with customer impact. That means they'll be visible to a large, external audience. Positive response to the initial modules can be a wonderful vaccine against the inevitable arrival of the project flu-the difficult times when success is a distant memory.

"The slow, systematic, gradual approach to improvement just doesn't cut it," Wohlleben says, now that young entrepreneurs are the nation's heroes and many companies are operating on "Internet time." Like many of the other people we interviewed, he says smaller projects with narrower scope-projects that can be completed faster-are the order of the day.

In the end, the best recipe for success may be to avoid mammoth modernizations and elephantine systems development projects altogether. The Health Care Financing Administration seems to have adopted that strategy now, as it quietly proceeds to consolidate its major systems and bring them into the 21st century.

If agency executives adopt a posture of continuously refreshing the technology in their IT infrastructures and business systems, so that each year they invest a similar amount of money and upgrade an important portion of their IT, then they will never need to beg funding sources for big pots of extra money. They will never have to scour the woods for people with experience to manage a huge IT project. They will always have relatively up-to-date systems and satisfied users. And they never will have to explain to a congressional committee or a GAO auditor or a magazine reporter what went wrong with their project.

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Army Flow Model

Nancy Ferris — Sat, 01 Apr 2000 00:00:00 -0500

nferris@govexec.com

hen he was an artillery officer earlier in his career, Maj. John McKitrick would put in a personnel requisition to replace a departing member of his unit. Then he'd wait. Sometimes the soldier he requested would report for duty; sometimes the slot would go unfilled. McKitrick often wondered why one such request would be honored promptly and another put on the back burner.

Now, as a member of the Army headquarters staff, he knows a lot more about the rules that govern the complex operations of that worldwide organization. In fact, McKitrick is engaged in capturing within a set of computer systems many of the Army's business processes and practices.

McKitrick leads development of a planning and forecasting tool that's painting big pictures of military forces, now and as many as seven years in the future, for the Army's top operations managers. It's called the Army Flow Model.

The Flow Model can produce static pictures, such as a portrait of the active-duty Army in 2005 if today's funding trends continue. More usefully, it can generate a series of alternative pictures, showing the impact of alternative funding levels or recruiting strategies or other changes in resources and policies.

These are big pictures in the sense that they aggregate important management information and trends from millions of pieces of data entered at Army installations. But they're not big in another sense-they can be displayed on PC screens for any of several hundred Flow Model users on the secure Defense Department intranet.

Until recently, the information that feeds the Flow Model had to be dug out of one or more of the Army's 37 operations databases. There are separate stores of data on personnel, logistics, base facilities, budgets, and force structure. Many of these systems rely on old technology, and they store data in different computer languages.

Before the Gulf War, headquarters staff officers responded to the information needs of military decision-makers-colonels and generals-by delving into the databases and coming up with a report on say, the total costs and operational implications of fielding a new weapons system. The report would include information on training the users of the new weapons and the people who would maintain them, redistributing the previous generation of weapons, or perhaps reassigning forces.

Trouble was, the databases weren't synchronized. Some of them covered different years, and others started with different months. So the decision-makers sometimes got incomplete or inaccurate views of the situation. Two reports on related topics might present inconsistent information-"trying to answer the same question with data that's different," McKitrick says.

Resolving inconsistencies took time. These days, time is a seldom-enjoyed luxury for the armed forces. As the military's operating tempo has increased, decisions have to be made faster and faster. There's less time to debate the accuracy of numbers, to negotiate for someone else's data and to reconcile conflicting reports.

Two-Pronged Attack

Now the Army is speeding up the flow of information from its components through the staff and up to the decision-makers.

The new approach starts with a data warehouse at Army headquarters that compiles the service's major databases in a single repository. Though that seems like a simple notion, its implementation has been revolutionary within the Army, freeing many planners and analysts from time-consuming data collecting.

The Army's Director of Information Systems for Command, Control, Communications and Computers, who also is the Army's chief information officer, is building the Flow Model based on data readily available from the warehouse. The model incorporates the business rules and processes that establish relationships among the pieces of data.

For example, if a tank's engine dies and it goes out of commission for extended repairs, there are rules about how to replace it. The Army unit must first seek another tank from another unit in its own command, rather than looking for the nearest available replacement in terms of distance.

The Flow Model applies those rules to resource data, letting the Army staff organize the enormous quantity of information in the warehouse and develop projections of future situations. The model also allows analysts to test "what-if" analyses of different scenarios at a single point in time.

Force Management

The Army Flow Model is actually a set of models. Three models crunch personnel data, taking into account factors such as retirement and other attrition rates, skills and specialties, and distribution of Army personnel worldwide. Seven models produce logistics analyses, looking at such factors as the acquisition process (the Army has a seven-year procurement cycle for major weapons systems), ammunition stores and the distribution, inventory and maintenance of equipment.

Other elements build models of budgets, the Army bases that add up to the service's infrastructure, and training. At the end of the chain of models is readiness-the goal to be achieved if people, equipment and other resources are in place. "We tie everything together with a common start line," McKitrick explains.

It's obvious that such a system is a manager's dream. It does sophisticated integration of extremely complex and large data sets, producing spreadsheet-like reports. If the user wants to dig further into the information, the underlying data can be displayed with a few mouse clicks. A great deal of detail is available, based on the freshest data available. Precise equipment inventory and location information can be retrieved for 6,000 major items, such as M-1 tanks or Blackhawk helicopters.

The same information is available from the source databases, of course, but nowhere else can the analyst match up so much disparate data.

If the analyst uses the full capabilities of the model, getting a report of this kind is not instantaneous. They take hours or a couple of days. But for urgent tasks, data can be downloaded quickly to a spreadsheet and turned into a PowerPoint presentation with which to brief a general or colonel.

New Missions, New Strategies

The ultimate goal of the Flow Model's creators, McKitrick says, is to support the Army's top staff officers as they seek to reshape their fighting forces. The Army is one-third smaller than it was in 1989, and it has been engaged in overseas missions-for which it was often not fully prepared-for a decade. The deployments played havoc with some scheduled maintenance, military training and other plans for improving readiness.

These and other fundamental challenges require Army headquarters to become more flexible. It must develop new management strategies faster and more efficiently. That's why "business is getting pretty good" for the Flow Model, McKitrick says with a grin. More headquarters staff members are using it, and this summer it will be made available to some staffers in the major Army commands. An unclassified version is in the works for those without access to the secure DoD intranet.

McKitrick also hopes to provide a Web browser interface for the model soon so it will be more nearly interactive. Now it requires special software to access, although it looks to the user like a member of the Microsoft Office software family. At the technological heart of the Flow Model are Sun Microsystems Inc. Unix workstations and Oracle Corp.'s relational database management system.

Jeffrey Lerner, a logistics staff officer, is one user who says he's looking forward to being able to access the Flow Model through his Web browser. He describes the model as "the single source of information for everything we do here" and says he'd like to see it take on a new role in the future. Lerner envisions using the flow model to plan and test improvements in Army processes and business practices-that is, the rules that form the model's backbone.

The Army's Strategic and Advanced Computing Center is building the model with a staff of fewer than 20 employees and substantial support from Science Applications International Corp., a Beltway technical services contractor. The computing center began the project around 1993 with no formal funding. Funding stabilized in 1998 once the program found a sponsor: the deputy chief of staff for operations.

Now Maj. McKitrick is in charge of development, which will continue into 2005, and Maj. Lisa Keller is in charge of production. On the production side, the model is "run"-that is, updated stem to stern--several times a year. Each run can take as long as one week.

Although many of the model's benefits are in the difficult-to-quantify category of better management, it also has yielded some sizeable cost reductions. On a mainframe computer system in Huntsville, Ala., the Army used to produce updates of its 10-year Total Army Equipment Distribution Plan (TAEDP) five times a year, at an annual cost of nearly $1 million. Now the Huntsville data center staff simply loads data into a Flow Model module, a job that costs about $50,000 a year.

In fact, this year the Army expects that the measurable benefits of the Flow Model will begin to exceed its costs. As the model expands and matures, and as new requirements confront the Army's top echelons, the benefits are projected to multiply.

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Advanced Weather System

Nancy Ferris — Sat, 01 Apr 2000 00:00:00 -0500

nferris@govexec.com

hen severe weather threatened, forecasters in the National Weather Service's Pittsburgh forecasting office used to dart from one computer to another, checking on developments.

At a PC in one corner, they'd look at radar. In another corner, they'd see information collected by satellite. Still other computers displayed lightning data, groundwater readings and wind speeds and directions, often in the form of rows of numbers. "We had bits and pieces of data all over the place," says Rich Cain, the warning coordination meteorologist in Pittsburgh.

Now, with the new Advanced Weather Interactive Processing System (AWIPS), forecasters can sit down at one powerful workstation and look at the data in as many as 12 windows. More of the information is displayed graphically, and the forecasters can overlay it on a single map to get a unified picture of what's happening. Data in the new central nervous system for forecasting is updated more often than in the past.

"It's fantastic to be able to get this on one workstation," Cain says. "We can do a lot more things with AWIPS."

The "science and art of forecasting," Cain says, depends on assimilating a great deal of disparate information and detecting patterns and fluctuations promptly. AWIPS makes the information more accessible and easier to manipulate, he says.

Saving Lives

The service is improving the quality and accuracy of weather forecasts while extending their timeliness. Not long ago, forecasts were limited to three days. This year, the service plans to begin issuing seven-day forecasts.

Such improvements are largely made possible by AWIPS and the rest of the National Weather Service's $4.5 billion modernization program. The other components include supercomputers (the Weather Service recently installed a new one from IBM Corp.), sophisticated data modeling techniques, and more high-tech data collection systems such as Doppler radar, satellites and unmanned sensors that report streamwater levels.

In July 1999, Robert Mallett, deputy secretary of the Commerce Department, in which the Weather Service is located, called the installation of AWIPS "a milestone in the revolution of weather services for our country." The system has won recognition in the prestigious Computerworld Smithsonian Awards Program, Government Executive's Government Technology Leadership Awards and elsewhere.

But AWIPS wasn't always a project everyone praised. In fact, for years it was one of those notoriously troublesome, very ambitious federal system development programs that seem to operate with black clouds hanging over them.

Stormy History

The AWIPS project dates back to the mid-1980s, when service officials recognized the need to replace the obsolete and expensive-to-operate Automation of Field Operations and Services (AFOS) system. At that time, they expected the replacement to cost $350 million.

But AWIPS got off to a shaky start and fell behind schedule, which added to its cost. By 1992, the weather service was looking at a $467 million price tag and competition in 1998. After a four-year competition for the development contract, it was awarded to PRC Inc., a Beltway technical services company.

Little progress was made in 1993 and 1994 "because of an impasse with the development contractor over the AWIPS design and shortcomings in NWS' program management," Jack L. Brock, a senior official in the General Accounting Office's Accounting and Information Management Division, told a House Science subcommittee in 1996. By then, the cost had ballooned to $525 million. The General Services Administration, which then oversaw IT acquisitions governmentwide, and the Commerce inspector general were among the others who said the program was on a path to failure.

It didn't help that a newly elected Republican Congress, the first in decades, was itching to cut back the size of government-and was targeting the Commerce Department in particular. For fiscal 1994, the $43 million AWIPS annual budget narrowly escaped a $15 million cut.

Second Opinions

At the urging of critics, the weather service obtained an assessment from an independent review team under the aegis of the National Research Council. The NRC's National Weather Service Modernization Committee provided a stream of reports and advice from 1990 to 1999. Consultants from Booz-Allen & Hamilton also were called in.

Acting on the advisers' recommendations, the Weather Service restructured the program in 1994. It took over development of the meteorological software, leaving PRC to develop the communications network, supply the hardware and system software, and make all the pieces work together.

This was no small task, says Paul Nipko, the Weather Service's AWIPS program manager. Software was being written by three organizations-PRC, the Weather Service and a lab operated by the service's parent agency, the National Oceanic and Atmospheric Administration, in Boulder, Colo.-plus subcontractors.

"Each of these came with their own perspective about how to do software development," Nipko says diplomatically. A 1997 GAO report was less charitable, saying the NOAA lab "did not have the software quality assurance and configuration management processes sufficient to ensure production of stable, reliable software code."

What's more, program management and acquisition management were the responsibility of two separate Weather Service offices that didn't always see eye to eye. The divided setup meant no one was completely in charge, a situation that has since been rectified.

Crisis Time

Criticism mounted to such a degree that in 1997 The Washington Post editorialized that AWIPS was one of the government's "signal failures." That year, the program faced its biggest crisis when budget cuts threatened to cripple forecasting operations and delay AWIPS still further. Up to 200 layoffs seemed unavoidable.

One way the Weather Service was paying for AWIPS was by shutting down more than half of its 300 field offices. But in mid-1997, agency officials said they didn't have the money to pay for that year's shutdowns. Accounts of the crisis differ, but it's clear that Weather Service and NOAA officials distrusted each other and weren't communicating well.

In the end, Commerce and Congress came up with the money to keep the Weather Service and AWIPS afloat, but Weather Service chief Elbert W. "Joe" Friday lost his job. The popular director, a Senior Executive Service veteran who was Federal Executive of the Year in 1993, was reassigned to a NOAA research office.

As for AWIPS, Commerce and Congress struck a deal. The program could continue only if it adhered to a strict schedule and a spending cap of $550 million. That left little wiggle room in a troubled program that had two years yet to run.

Endgame

Yet the Weather Service pulled it off-sort of. Nipko explains that another restructuring was the key. Installation of the new systems in the field offices was accelerated. Once the system was installed, its operation and maintenance costs were no longer charged to the AWIPS program.

PRC now had to build 135 local computer systems and install them within 21 months, seven months less than originally allotted, with no increase in budget. "PRC said we can do it and took on the challenge," says Jack Hayes, the company's AWIPS program manager.

Each local office has a half-dozen scientific workstations networked with several servers and a dish antenna for satellite data. They are linked by a high-speed national data network. Faced with the deadline of July 1999, PRC concentrated on the logistical issues of getting several hundred Hewlett-Packard workstations built and delivered to the sites, along with all the related gear, including items such as equipment racks and training manuals.

Although all the systems were installed on time, the service has yet to turn off its vintage 1970s forecasting system, AFOS. It will spend almost $1.4 million to operate AFOS this year. Decommissioning AFOS is complex because each site tends to have its own unique subsystems and software.

In mid-February, the agency had decommissioned fewer than two dozen of the 139 AFOS sites. It's in a horse race to get the rest shut down by September, because there is no money in the budget to operate AFOS in fiscal 2001.

More AWIPS functionality is expected with software upgrades, and the service is upgrading some of its other systems.

Retired Air Force Brig. Gen. John J. Kelly Jr., who succeeded Friday as Weather Service director, has let it be known that the agency should not undertake such a massive modernization program again. He says continuous technology upgrades-a strategy facilitated by AWIPS' modern architecture-are a better way to go.

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Senator: No laws can fix careless computer security

Nancy Ferris — Fri, 03 Mar 2000 00:00:00 -0500

nferris@govexec.com

As members of the Senate Governmental Affairs Committee heard testimony about the government's vulnerability to cyberterrorists, hackers and information thieves Thursday, they wondered out loud whether anyone can do much to protect federal computer systems.

"You've [already] got a dozen pieces of legislation that in some ways deal with this problem," mused the committee chairman, Sen. Fred Thompson, R-Tenn. He suggested that it would take firing employees, documenting monetary losses or suffering a major embarrassment to get the attention of federal managers.

"It really is outrageous that the federal government in an area of this sensitivity cannot do more faster," Thompson added.

One of the witnesses was the renowned hacker Kevin Mitnick, who was released in January after serving almost five years in federal prison. He said the only system that had ever defeated his efforts to break in was in England. "If someone has the resources-the time, money and motivation-they can get into any computer," Mitnick said.

Kenneth Watson, manager of critical infrastructure protection for the Internet technology company Cisco Systems Inc., agreed with the thrust of Mitnick's comment. He said Cisco security teams can break into 75 percent of the systems they test.

Another witness, James Adams, chief executive officer of an Alexandria, Va., security company called Infrastructure Defense Inc., castigated "the current culture of lethargy and inertia gripping the federal government" and said the government can't hope to fight back against cybercriminals unless it moves faster and more boldly.

Roberta L. Gross, inspector general at NASA, also mentioned "a culture of I don't care." She testified that "the agency heads have to make clear that the current agency cultures, which permit very simple and avoidable vulernabilities to occur and reoccur, are no longer acceptable."

Information technology "security will not happen without appropriate funding and a core capability of skilled personnel," Gross said, observing that "investment in IT security is very difficult for agencies to make."

The witnesses generally agreed that a computer security bill introduced last year by Thompson and Sen. Joe Lieberman, D-Conn., would be a step in the right direction. But in the end, most said, better management is what's really needed.

"Security program management is totally inadequate," Thompson said. "Obviously OMB [the Office of Management and Budget] has not been doing its job" of monitoring and managing federal IT security programs, he added.

Jack Brock, a General Accounting Office IT specialist, agreed that more high-level management attention would help. "In some agencies," he said, "accountability [for IT security problems] is always at the technical level," when in fact management may be at fault for failing to fund security programs or creating a culture of carelessness.

Brock applauded the pending bill, the Government Information Security Act, for its approach, which does not distinguish between national security-related systems and other systems. Sometimes vulnerabilities in civilian agencies' systems have been dismissed as not serious because the agencies handle no classified information, he said.

Thompson, meanwhile, mused about whether a new law would make much difference. Recalling all the GAO reports, IG audits and other recurring accounts of poor federal agency security, he said, "it makes you wonder what in the world it takes" to get the attention of federal managers."

Lieberman likewise blamed the situation on poor management and "cultural" deficiencies. He said "the bill would put every government agency on notice that it must implement a computer security plan subject to annual independent audits; report unauthorized intrusions; and provide security awareness training for all its workers."

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Barely Holding Its Own

Nancy Ferris — Wed, 01 Mar 2000 00:00:00 -0500

nferris@govexec.com

he oversight board was one of the more hotly debated mandates of the IRS Restructuring and Reform Act, which President Clinton signed into law July 22, 1998. Consisting of six presidential appointees from the private sector, the Treasury Secretary, an employee representative and the IRS commissioner, the board was given unprecedented powers to oversee agency operations, including selection, evaluation and compensation of senior managers. The board is required to approve the IRS budget before it can go to the Treasury, IRS' parent department, and is required to notify Congress of IRS improprieties.

These provisions give a panel dominated by private citizens wide-ranging authority over an executive branch agency. But because the board's members have yet to take their seats, no such oversight has occurred.

The reform act gave the President six months to name the board members. In May-more than four months late-Clinton nominated the employee representative and four people from the private sector. Republican members of the Senate Finance Committee promptly expressed dissatisfaction with the credentials of two nominees, and one withdrew. Two more nominations were announced, in August and October, bringing the total to six.

When Congress went home in November, it had not begun reviewing the nominations because one remained to be announced. The senators wanted to consider and confirm all the nominees as a package, a Senate source explained.

The administration's delays in nominating board members didn't sit well with Congress. During a House-Senate hearing on the IRS last May, Republicans and Democrats castigated the White House for the delays. "The administration has really dropped the ball here," said Sen. Charles Grassley, R-Iowa. Sen. Bob Kerrey, D-Neb., told Commissioner Charles O. Rossotti, "You sort of act as if you were the board right now."

On Many Fronts

Meanwhile, Rossotti is plowing ahead with a far-reaching reorganization. After proposing the new organizational structure in January 1998, Rossotti formed the first of four new divisions almost two years later, in December 1999. The remaining three units are expected to follow in the next year or so. They are organized around customer segments-small businesses, individual taxpayers, large corporations and nonprofit organizations-rather than geographically, as the old IRS was organized.

At the same time, IRS has been instituting new performance measures. Too much emphasis on enforcement and revenue collection in the old measures is believed to be one source of the widespread loss of confidence in the agency. The new, balanced scorecard has three areas of emphasis: customer satisfaction, employee satisfaction and business results.

The agency began at the top, with managers and executives, revising critical job elements. "It is important that the critical job elements that people are evaluated against are in alignment with our balanced measures," says Kelly Cables, the agency's performance management executive.

Next up are revenue agents, revenue officers and tax examiners. "We're trying to start with the people who interact with the public," Cables explains. The agency has vowed that performance of front-line employees will not be measured by the dollars they generate, although revenue collections will be one consideration in evaluating organizational performance. Another factor, not always considered in the past, will be quality of results. For example, the customer satisfaction metrics for some jobs include the employee's knowledge of his or her job. "We want people to see that their job knowledge has a direct impact on customer satisfaction," Cables says.

Employee involvement is intrinsic to the new IRS ethos. Cables says his staff interviewed more than 400 managers in the course of developing critical job elements for managers. The agency has included the National Treasury Employees Union, which represents most of the agency's 98,000 employees, in many of the planning and implementation teams. In Senate testimony in October, NTEU President Colleen M. Kelley hailed the employee involvement as a model for federal labor-management partnerships.

The High Cost of Change

Nonetheless, the reorganization and modernization is a wrenching experience for many employees. New managers and reporting channels, new laws and rules-even new job locations in some cases-are stressful. The IRS has little extra capacity with which to accommodate the change. "We're rebuilding the house while we're living here," Rossotti told the joint congressional committee in May.

The agency has won extra funding for certain modernization expenses, but there is little wriggle room. Head counts have declined by 16 percent during the last decade, the computer systems were out of date a decade ago, and the public and Congress often won't give the agency the benefit of the doubt.

One consequence of the drive for change is a significant reduction in IRS enforcement activity-and receipts. With a smaller workforce, diversion of employees to modernization projects and new rules of behavior, employees are uncertain as to how to proceed and simply can't devote as much effort to collections. IRS audited about one-third fewer tax returns in 1999 than it did in fiscal 1997, Rossotti says. The number of liens placed by the agency on taxpayers' property, preventing them from selling before they pay the IRS, dropped from about 799,000 in 1995 to 167,867 in 1999.

As a result, revenues from collection activities dropped from $29.9 billion in 1998 to $29.2 billion in 1999. That drop-off was just a tiny fraction of the $1.8 trillion the IRS took in last year. Agency officials say that 98 percent of taxes are paid voluntarily, leaving only 2 percent to be collected by persuasion, persistence and force. They predict collections will pick up as the new organization gels. Employees are stepping up their collection activities now that they're finding that senior managers won't be over zealous in enforcing the new law's provisions aimed at halting harassment of taxpayers.

But many people within IRS are concerned about the potential effects if the decline should persist. They fear voluntary compliance with the tax laws may diminish if taxpayers believe other people are getting away with tax evasion. "Never was there a better time than today to be a tax cheat in the United States," says one agency veteran.

Service Imperative

One reason for the collections drop-off is that employees have been moved into customer service jobs. Customer service is the agency's mantra these days, and it will spend an extra $13 million a year, beginning this year, to train employees in dealing with the public. "General customer service competency norms for those front-line employees who have contact with taxpayers are currently at a standard score of 30 [out of 100 points], compared to a private-sector standard score of 50," an IRS budget summary says. "The goal is to improve critical competencies by at least 10 points per year to a standard score of 80."

Other aspects of the agency's dealings with the public need improvement as well, Rossotti acknowledges. "We are still sending over 100 million notices per year to taxpayers that often only a tax lawyer could decipher," he said last fall. "When taxpayers call us to get information or to respond to one of these notices, the chances of getting through are only about 50 percent." Once on a phone line with an IRS representative, he added, the taxpayer is not out of the woods because the agency's antiquated computer systems do not provide a fast, accurate picture of the IRS' dealings with the taxpayer.

Two and a half years after former Chief Information Officer Arthur Gross produced a blueprint for modernizing those computer systems, the IRS was still struggling to produce an updated blueprint and implementation plan. The revised plan is more ambitious, says CIO Paul J. Cosgrave, adding financial and management systems to the tax-processing ones and speeding up the expansion of capacity to accept electronic tax forms and payments from taxpayers.

Uncomplicated individual tax returns such as the 1040-EZ and the returns received by telephone will be the first processed on the new systems, and it is here where Cosgrave predicts that taxpayers will see a tangible benefit-much faster refunds. The refunds will be processed in "days, not weeks," he says.

Coalition-Building

Although Cosgrave doesn't say so, some of the modernization delays have been due to team- and coalition-building to head off political problems. Almost every change the IRS has undertaken, beginning with its new mission statement, has begun with formation of a special project team and extensive consultation with those who might be affected.

One notable example: General Accounting Office representatives have attended the meetings of the executive committee overseeing development of the agency's new tax processing systems. As a consequence, GAO is less likely to demand more information or stand in the way of funding. GAO is reviewing each IRS request for modernization funds.

"GAO is an active part of this process, every step of the way," Cosgrave says. He calls the auditors' inclusion "a much healthier way of working" and says his colleagues in other agencies should give it a try.

In many ways, the new methods seem to be succeeding. The agency is getting better press and fewer bashings in Congress. But there are persistent signs that not all is well. For one, IRS' score in the American Customer Satisfaction Index survey released in December was one point lower than a year earlier, which in turn was one point lower than the year before. IRS' score of 51 out of 100 points was the lowest of any
agency, while the federal government's aggregate score of 68.6 came close to equaling the private-sector customer satisfaction average of 72.

Some employees are becoming concerned about what they see as less communication from headquarters during a time of upheaval. They say far less statistical information about agency operations is available to employees than was available a few years ago. "That makes it very difficult to assess information and deal with it," says George L. Deller, who works with the taxpayer advocate unit in New York City.

GAO continues to criticize pervasive weaknesses in financial management and the systems that track the $8 billion in annual IRS appropriations, as well as the $1.8 trillion in tax revenues that pass through the agency.

Meanwhile, the Treasury inspector general for tax administration reported in September 1999 that the agency's offices were continuing to use audit and collections statistics in evaluating the performance of individual employees, in violation of the IRS reform act. Agency officials said they believe the new performance evaluation system, training for managers and other recent actions will stop the use of quotas, but it illustrates the difficulty of cementing changes into a large, widely distributed organization.

Long-Term Commitment

Asked about the major challenges that could sink Rossotti or his modernization program, Paul R. Lawrence, a Pricewaterhouse Coopers partner who has assisted the agency with the modernization, doesn't hesitate. He says Rossotti probably is correct when he says revamping the agency and its systems will take 10 years. But whether the commissioner's program can command the needed resources, including public and political support, for an entire decade still is by no means certain.

Rossotti needs the kind of buy-in he's been achieving with the inclusion of GAO, Lawrence says, because "if it's just the sheer weight of him doing it, he'll run out of time."

The American Customer Satisfaction Index report at year's end turned up one piece of encouraging news. Although IRS achieved a customer satisfaction score of 51 among all the tax filers surveyed, the taxpayers who filed electronically gave the agency the much higher score of 74-higher than the private-sector average.

As the agency firms up the modernization plan, it has accelerated implementation of its electronic tax return filing projects, increasing its capacity to accept returns and payments over the telephone and the Internet. Electronic filing via computers increased 27 percent last year, compared with 1998, with the biggest percentage growth among individuals using home PCs.

But there are still many taxpayers who need or merely want to call IRS with a question, or perhaps send an e-mail or fax query. The availability and quality of IRS' telephone services were worse last year than in 1998, GAO reported in December (GGD-00-37). Even more alarming, only 65 percent of IRS' responses to e-mail queries were accurate.

Technology can help IRS respond better, but ultimately it is people who must provide services to the public, and people who deal with taxpayers in arrears. This year, IRS moved 580 jobs out of operations but said it would draw the line there. "Further decreases to our staffing levels would hamper our ability to implement modernization," a budget document says. "The IRS organization has exhausted its ability to do more with less, at least until" the reorganization and new information technology are in place.

Congress agreed to maintain staffing at just fewer than 98,000 full-time equivalents, but whether it will be as supportive in coming years is an open question. Rossotti says that so far, "our stakeholders' tolerance belies the conventional wisdom of Washington that instant gratification is required." But, he warns, "eventually, patience will run thin." When that happens, the outcome will be anyone's guess. GPP report card

Return to GPP home

Return to 2000 GPP issue

1999 GPP story about IRS

IRS' 1999 Report Card

Financial Management	B
Human Resources	C
Information Technology/Capital Management	D
Managing for Results	B
Agency Grade	C

A Year Later

Thumbs Up

Electronic tax filing is catching on. Fewer errors are likely. And the public likes it too.
$13 million investment in training means employees will be able to do more tasks.

Thumbs Down

IRS is doing worse responding to taxpayer queries.
Audits and enforcement down; cheating is easier.

]]>

Information Is Power

Nancy Ferris — Wed, 01 Mar 2000 00:00:00 -0500

nferris@govexec.com

oseph Thompson sits down at the paper-strewn desk in his blue-carpeted, standard-issue federal executive office and grabs the computer mouse. Clicking an icon on his computer screen, the top official at the Veterans Benefits Administration nods toward it and, clicking away, explains, "The balanced scorecard is here. And this is all of our work management information. There are thousands and thousands of pieces of data there."

Clicking again, he continues: "This is activity-based costing, and, here, our Monday Morning Workload is actually our weekly snapshot of business in all our regional offices."

Thompson, undersecretary of Veterans Affairs, is showing off his agency's brand-new Operations Center. It's a virtual center, a set of often-updated computer reports that keeps VBA managers abreast of the work being completed, or not being completed, in the agency's five lines of business, as well as updating VBA's financial situation.

VBA and many other agencies are beginning to enjoy the benefits of assembling disparate data, often from decades-old mainframe systems, in virtual warehouses and making it accessible with a familiar World Wide Web browser. Warehousing involves not only displaying the information in a connected fashion but also finding or creating common denominators so that apples are not compared directly with oranges.

In VBA's case, the PC screens give Thompson and his lieutenants fast and easy-to-digest status reports, mostly in the form of spreadsheets. "I can graph all this on the fly," he says. "I can say, I want New York, Chicago, L.A., I want all the big cities, and I want to look at their average days to complete original compensation claims. And I can graph all that out in minutes. That would have taken hours in the past."

Once the information is displayed on the computer screen, areas of deviation from the norm are easy to spot and investigate. An unexpected uptick in performance could signal a process improvement in one office that could be replicated elsewhere. A downturn may indicate a problem that needs to be resolved.

Thompson says VBA got the idea for the online data center after visiting the New York City Police Department's operations center. There, in what's been described as a model set-up, NYPD managers review operations and performance data with each squad or precinct.

The VBA staff decided that having an office or meeting space for this purpose wouldn't be necessary if the information could be made available on their internal computer network. So for about half of 1999 the agency's data management office pulled existing information into a data warehouse, where it could be integrated.

Like other large agencies, VBA has hundreds of information systems. Dissimilarities among the data sets and the structural gaps between systems make it hard to see the big picture or compare data in more than two dimensions. "Without designing new IT systems, we have enormous amounts of data in there already that we don't know about," Thompson says.

VBA's data warehouse arrays information locally and rolls it up to the regional and then the national level. Local offices can compare their performance with their peers. Information still is being refined and added to the system.

At the national level, Thompson says, the data warehouse is giving executives new insights into some of their thorniest performance issues. For example, it has shown them why their work backlogs have been intractable, even though the number of American military veterans is dwindling.

"The folks looking at our budget have always said, 'Geez, your workload is going down, down, down.' And we're saying, 'It doesn't seem like it's going down. Every time I turn around I've got a mountain of claims files sitting there. It doesn't look like it's getting smaller,' " Thompson says.

With the data warehouse, VBA officials discovered that although there are fewer veterans applying for disability benefits, they are claiming more disabilities, making their cases more complex. Disabled World War II veterans averaged 1.7 disabilities apiece. For Gulf War veterans, the average is 3.2 disabilities.

In addition to handling more complex cases, VBA claims examiners are under pressure to document each step of their work more completely and carefully than in the past, so it can withstand judicial review. The result: An initial claim for disability benefits takes 25 percent longer to process than the same claim did in 1997. "That's a big change," Thompson says, "and if you can't explain that well, it's hard to justify your budget" and persuade anyone you need more employees.

Self-Managing Employees

"The best part is that it's a very democratic system," Thompson says of the online data center. "It's there for everybody to see, and knowledge is power. And in our vision of the future, employees will be largely self-managing. The amount that supervisors need to intervene with you on operational issues should be minimal.

"Our expectation is you'll be able to manage your own operation, and in order to do that, you need to know what everybody else is doing too, and have some idea of whether you're in the ballpark on all of this, " he adds.

Thompson is not known as a cheerleader for technology. In fact, he's inclined to downplay its value. But as the top executive of an agency that will dispense more than $22 billion in benefits this year, he's beginning to see that IT can be a more useful management tool than it has been in the past. "Building the ability to explain yourself has been key to us," he says.

Once agencies like VBA put data in warehouses, users can analyze it in ways that weren't possible before, shedding new light on relationships among causes, effects, resources and results. The low cost and flexibility of these systems make them easy to develop and modify. Agencies can start small and gradually build breadth into their systems, or they can start with a large bundle of information and whittle it down to what's most useful.

As Thompson notes, most agencies are not short of data. When VBA's parent department, Veterans Affairs, began looking at ways to monitor performance in accordance with the 1993 Government Performance and Results Act, officials found "we had thousands and thousands of performance indicators throughout the department," says Thom Rockford of the department's Performance Analysis Service. The staff selected about 120 of the most useful measures and pulled them together into a single VA Performance Measurement System.

With continued whittling, the VA now has settled on about two dozen performance indicators that are updated quarterly for use in progress reviews. Rockford says development of the system is continuing. One current emphasis is on obtaining more outcome data.

Meanwhile, an executive information system tracks major indicators of progress toward VA's goals. Despite the system's name, all department employees nationwide have access to it and the other performance data on the VA intranet. This represents a remarkable culture shift. As Don Larsen, another Performance Analysis Service employee, says, "In the Department of Veterans Affairs, for many years it was frowned upon, to put it mildly, to share data" between offices and bureaus.

Larsen built the Web-based executive information system himself, without contractor help. It draws information from the existing mainframe systems, using ordinary software tools from Microsoft Corp. He estimates the cost to the department at less than $10,000, plus his time and, during the development phase, that of another VA employee who no longer works there.

Data Mining

The Coast Guard's executive information system, too, was designed to make sense out of a morass of data. Lt. Cmdr. Terance Keenan of the headquarters staff calls information "the fuel of performance management" and says data mining-the digging, slicing, dicing and analysis that turns up relationships and patterns in the data-is helping Coast Guard managers see what resources are available to them and better understand the organization's needs.

The executive information system was difficult to set up, but the hard work paid off when Coast Guard planners could easily obtain the data they needed in developing their fiscal 2000 performance plan, Keenan says. For example, they could look at relationships between Coast Guard initiatives and seizures of contraband cocaine. They can make tradeoffs between the costs of alternative strategies-stopping drug smugglers using more aircraft or more small boats, for example-and the likely effects.

The Coast Guard has numerous separate databases. Although their sources are similar and the contents overlap one another, Keenan says, "they end up being different" data sets, and often only one employee understands each database well enough to extract useful information from it.

To complicate matters further, the Coast Guard's field offices are organized geographically, while budgets are drawn up by programs that operate nationwide. This is common in other agencies too, including the Environmental Protection Agency. There, says Terry Ouverson, associate director of EPA's annual planning and budget division, "our organizational structure and our appropriations structure have nothing in common."

Ouverson says that in his agency, every office had its own information systems, and only an overlay system like the EPA's new Budget Automation System could pull together fundamental management information about the agency's budget and its spending patterns.

Those in agencies such as VA and the Coast Guard, where performance information is being widely distributed among employees, strongly defend the practice as a contemporary management technique. They contrast it with the earlier era, when only a few privileged managers and analysts had such wide access to agency data. With better information, lower-ranking employees too can make better decisions, they say. "That's the only way we're going to get better," Keenan says.

However, other agencies are choosing different approaches. At EPA, for example, the number of Budget Automation System users is limited, and a structured security scheme allows each user to view only the data he or she needs. Some authorized users can merely see the data; others have permission to change it.

Hot Products

The Coast Guard system relies on a commercial software package, PowerPlay from Cognos Inc. NASA also uses Cognos performance reporting software. Among the many other developers that provide this kind of software to federal agencies are Oracle Corp., SPSS Inc., Information Builders Inc., SAS Institute Inc., MicroStrategy Inc. and IBM Corp.

The huge systems integrator Computer Sciences Corp. is creating the Coast Guard's new system. EPA's system was built by a 200-employee Silver Spring, Md., company, ISSI Consulting Group Inc. Hundreds of other technical and professional services companies say they can do similar work.

In fact, this is a hot category of software, under the trendy label of "business intelligence." Some of the packages can generate "executive dashboards" that show the most important performance indicators, or other data of high interest, graphically on a computer screen. Gauges resembling the odometer on your car might show the current unit cost of your agency's core work or the backlog of work to be processed.

GPRA is the impetus for much of the interest in business intelligence within the executive branch, but these products and services are selling well in the private sector, too. In both the public and private sectors, the most difficult part of the implementation is finding reliable, accurate data that's a valid performance indicator, according to Jeff Babcock, who heads the public sector division of SAS Institute in Cary, N.C.

Babcock, who has worked with several agencies on performance reporting, says agencies commonly make the mistake of starting with their data and constructing measures based on the information available. Instead, he says, they should start with their goals and objectives, decide how to measure their performance and progress, and then find data that meets their measurement needs.

More of Babcock's advice: Start with a small, manageable project and build upon that foundation. Worry about more about meeting user needs and achieving a good fit with your agency's operational and management environment than about which software technology you'll use. "Based on our experience," Babcock says, "the technology is almost irrelevant."

Y2-OK

It came as a relief to everyone in the federal IT world, as well as their bosses, when they passed their biggest test on Jan. 1. Most of the government's computer and communications systems continued working correctly when 1999 rolled over to the year 2000.

The conventional wisdom had held that some Y2K failures were inevitable because of the industry's sorry track record in major federal projects. IT professionals as a group have a history of:

Failing to define user requirements accurately, which results in systems that don't do what they were supposed to do. In one typical example, the General Accounting Office last year issued a scathing assessment of a grantee performance monitoring system at the Housing and Urban Development Department. The system is supposed to provide HUD with real-time performance data, GAO said, but it doesn't, because of major design flaws.
Automating outdated and inefficient processes. Early procurement management systems are an example of this problem. They often were designed to automate the production, distribution, review and filing of documents, but their designers would have achieved more if they had looked for ways of getting the job done with fewer documents, rather than generating more paper.
Poor project management, leading to cost overruns and delays. One famous case is the Health Care Financing Administration's program to develop a new Medicare Transaction System. The program was canceled in 1997 after HCFA spent $80 million and more than three years on it. GAO officials called it a "huge learning experience" for the agency. At VA, the inspector general reported in October 1999 that the agency had paid a contractor more than $1 million for a network performance management system, although the contractor never delivered an acceptable system.
Insufficient attention to quality and reliability. Even expensive and mission-critical systems can't be counted on to perform properly when first installed. The industry norm is to deliver software that hasn't been thoroughly tested, then issue "bug fixes" or "patches" after problems materialize.

Given this history, the betting was that the IT profession wouldn't meet the immovable Y2K deadline. Even if the work got done on time, it was likely to be riddled with faults that would cripple system operations, many thought. When those expectations proved false, IT professionals collectively experienced an unaccustomed surge of pride.

Measurement Miasma

Although they now have shown that they can get the job done, IT professionals still are at a loss when it comes to demonstrating return on IT investments or establishing the business value of implementing new technology. Some of this inability stems from trying to predict the outcome of complex process changes and infrastructure upgrades. Some of it comes from the intangible and time-dependent nature of information.

Another set of unknowns arises from what Paul Strassmann, former chief information officer at the Defense Department, calls "stealth spending" on computers. Many outlays and indirect costs associated with computing are not captured by conventional accounting systems. Some of these costs include the price of software, printer paper and other items purchased by users rather than the IT office; training expenses and lost productivity associated with introduction of new and upgraded systems; and telephone costs from individuals' modem use.

In his 1997 book, The Squandered Computer (Information Economics Press), Strassmann recommends that organizations minimize unaccounted-for and unauthorized IT spending, saving the extra costs that can accompany this spending. For example, a person who uses a word processing software package that's different from the agency standard may independently demand specialized training and support.

To keep their internal customers happy, most IT managers give users some leeway in adherence to agency standard configurations, as long as the users shoulder most of the extra cost. But there are continuing and unrecorded expenses down the road, once the standards wall is breached.

That's one of the reasons for the general agreement in recent years on the need for an IT architecture for each agency. The architecture is more than a set of standard hardware and software configurations, although they are a piece of it. The architecture should show how the IT systems relate to important business processes and map the flow of important data.

Without an architecture, IT is nearly unmanageable. It's difficult enough to manage even with an architecture in place.

Security and Performance

One increasingly important issue that an architecture can help resolve is information security. Security and privacy worries are the downside of the current push for maximum connectivity and information sharing. Every new agency Web site or electronic mail server is an invitation to malicious-and perhaps even truly sinister-hackers, virus writers, information peddlers, spies and saboteurs.

An information systems architecture makes it easier to identify points of vulnerability and put systematic protections in place. What's more, a thorough IT training program and many of the other elements of a high-performance IT program will contribute to effective information security. But, as Strassmann says, "the problem with security funding is that its payback is not apparent until it is too late."

That's also true of many other facets of information systems. To get a better handle on IT and comply with laws such as the 1996 Clinger-Cohen Act, agencies are adopting a portfolio approach to major IT investments. They are establishing IT investment review boards composed of IT, financial and program managers to select the most promising projects from among those requested.

Once funded, the systems development projects are being tracked with automated systems that are much more sophisticated than earlier models. For example, the Coast Guard in the past monitored systems projects for compliance with rules and with management controls. Now a new IT investment process at the agency will compare actual and promised performance, among other things.

Eleven agencies are using a government-owned software system called the IT Investment Portfolio System (ITIPS), developed by an Energy Department contractor and now available from the Treasury Department. The newest version of ITIPS tracks the linkages between an agency's goals and objectives and its IT initiatives, Treasury's Darren Ash says. The system long has reported on risks, implementation progress and cost and schedule variances, besides generating required budget reports. One advantage of such a tool, Ash says, is that it establishes a baseline based on initial plans.

Over the next few years, use of ITIPS and similar systems is likely to give agencies better information about the performance of new IT initiatives. Meanwhile, Y2K helped agencies get a more complete picture of their installed IT assets, because each had to be checked for readiness.

Nonetheless, says GAO's David L. McClure, "metrics are being used largely for reporting" on IT, rather than managing its performance. Patrick Plunkett of the General Services Administration, whose specialty is IT metrics, agrees. He says "very little progress is being made on IT performance measures."

One often-mentioned reason for this lack of progress in measuring the value of IT is a lack of high-level management and oversight interest in the subject. But that could change this year if Congress, as is expected, holds hearings on agencies' implementation of the Clinger-Cohen Act and their efforts to measure their overall performance. "You're going to see a lot more congressional interest," Plunkett told a group of federal managers earlier this year.

For most agencies, IT is one of the biggest expenses after their payrolls. And the federal government spends more on IT than corporations spend, if a recent survey is correct. The Gartner Group, a respected consultancy in Stamford, Conn., reports that North American enterprises spend an average of less than $8,000 per employee per year on IT, while the federal government spends $15,233 per employee.

When agencies start looking carefully at costs and benefits, the results can be striking. For example, the VA's Insurance Service maintains 2.2 million folders of paper forms and other information on its customers. The agency, a unit of the Veterans Benefits Administration, spends $1.1 million a year to store the paper, retrieve files and return them to the proper shelves.

That money will be spent in the future on operation of a paperless system that will speed up the agency's response to callers on its toll-free telephone system. The agency hopes to increase employee productivity further by adding self-service options to its Web site, reducing the need for VA intervention in records updates, such as changes of address.

"Our insurance program is one of the best programs in government," with high customer satisfaction, speed and accuracy scores, says VBA's Thompson. It's clear he views technology as a means of maintaining or increasing that level of performance despite a declining workforce.

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Benefits Balancing Act

Nancy Ferris — Wed, 01 Mar 2000 00:00:00 -0500

nferris@govexec.com

he Veterans Benefits Administration, long notorious for slow performance, ran into a whole new buzz saw in 1998 when the Veterans Affairs Department's inspector general found errors in VBA's reports of how long it took to process veterans' applications for disability and pension benefits.

The mistakes made claims processing look faster than it really was-and the incorrect figures were none too swift. For example, VBA reported that it processed disability claims in an average of 128 days-more than four months-but the actual average was nearly a month longer, 151 days, the IG said. (Today, VBA says, it's about 168 days.)

VBA officials did not dispute the IG's findings. "We've manipulated data," admits Joseph Thompson, the VA undersecretary for benefits and top VBA official. "We've in fact created a generation of managers who believe it's their first job to look good, not to do good, and that needs to change."

VBA had been pushing for years to deliver benefits more quickly to the 3.2 million veterans and their survivors the agency serves. The result: a dramatic reduction in quality. Only 64 percent of initial claims for benefits were being processed correctly, and of those appealed to the Board of Veterans Appeals, more than half were ruled incorrect or incomplete. Rework on completed claims was taking time and contributing to backlogs.

The General Accounting Office weighed in with a March 1999 report, "Veterans' Benefits Claims: Further Improvements Needed in Claims-Processing Accuracy" (HEHS-99-35), calling for improvements in processing and in the data collected about the processing system. In VBA, field offices are responsible for processing claims and reporting on what they've accomplished.

"Both the regional office reviewers and their managers have an inherent self-interest in having as high an accuracy rate as possible," Cynthia A. Bascetta of GAO's Health, Education and Human Services Division told a House subcommittee. And GAO's report said: "Unless VBA provides adequate separation of duties and organizational independence for accuracy reviewers, potential questions about the integrity of accuracy-related performance data will likely persist."

In Search of Credibility

Statements like this prompted Thompson to declare that VBA's number one challenge is restoring its credibility. On his first day on the job, late in 1997, Thompson used the agency's teleconferencing system to inform all VBA employees that he wanted the truth. "I know sometimes it's very painful," he says now. "You really want to mumble and get out of the room as quickly as you can. But we're almost always better off" for being truthful.

Just asking for the truth didn't cure the agency's problems, of course. "We've had teams reviewing the integrity of our data. We've had counseling sessions with the senior leadership where we thought they were contributing to this," Thompson says.

He also created a Data Management Office to improve the quality of VBA data and reporting. The new office is designed to not only to head off future embarrassments such as the IG's findings, but to give VBA employees more information about performance and results than has been available in the past.

The agency now is rolling out one of the most advanced systems in government for keeping everyone aware of performance. The agency's internal network, or intranet, has made available to every VBA employee a current "balanced scorecard" on performance. It reports on speed, accuracy, unit cost, customer satisfaction and employee development. Most scores are updated monthly.

The categories are weighted according to the needs of each VBA division, and perfect scores in every area would add up to 100. One day recently the VBA total was around 60. "You can see that we give ourselves a solid D-," Thompson says cheerfully.

To him, the total is less important than are continuous improvement and balance in agency operations. With the scorecard in place, Thompson says, "the way behavior has changed is that you can't go in and focus on one area. . . . We're seeing improvements in areas that . . . weren't paid as much attention to. So quality is inching up. Some of our appellate work is inching down."

Focusing on several objectives at once isn't easy, Thompson acknowledges, and it requires new kinds of working relationships and management skills. "I hear the moaning" of employees who feel they're now being asked to do it all at once, he adds. Thanks to electronic mail, employees can contact him directly, and Thompson says they do so to complain about the difficulty of balancing quality and quantity, present and future.

Richard Zimnoch sees this challenge firsthand. Zimnoch, a VBA attorney in Newark, N.J., also is the top VA employee in the VA Council of the American Federation of Government Employees, the union that represents the largest number of VBA employees. "There's a lot of frustrated employees," Zimnoch says.

Until this year, VBA has absorbed repeated cuts in its workforce. Few employees have been forced to leave, but many have been enticed to retire with buyouts or have simply taken other jobs. The results have been uneven, Zimnoch says, with some offices losing few employees and others suffering cuts of 35 percent or more. In the area of compensation and pensions, he notes, "a lot of the work is being accomplished by people working on overtime." Work weeks can be as long as 55 hours.

Besides being shorthanded, Zimnoch says, offices are struggling to achieve a balance between quality and speed. If service reps spend the time it takes to process a claim accurately, their numbers suffer and their managers want to know why. "It's almost like you can't win for losing," Zimnoch says. "To make quality really good, [claims] backlogs get worse."

Quantity Out, Quality In

Managers all the way up to Thompson would agree with that assessment. The workload reports and balanced scorecard show that claims are taking longer to process now that accuracy is the top priority in the compensation and pension (C&P) programs, where VBA will dispense $22 billion this year. Compensation programs provide disability benefits for all veterans with service-connected disabilities and their survivors; pension programs provide stipends to low-income disabled veterans and their survivors.

Over the last year, VBA has been installing a new, much more sophisticated case monitoring system called Systematic Technical Accuracy Review (STAR). STAR helps managers identify error-prone cases and alter procedures to head off errors. It also makes performance data more accessible and provides more complete information. It was the new system that reported an accuracy rate of 64 percent. The previous system was reporting accuracy rates above 95 percent, but VBA and GAO agree that the STAR accuracy figures are more realistic.

In the future, greater accuracy is supposed to reduce rework and paper shuffling, because more cases will be processed correctly and completely the first time they are tackled. An experiment at the Milwaukee regional office shows the potential effect of accuracy on workloads. Officials at that office spent time reviewing cases and identifying where problems arose. Then they developed specific procedural changes to reduce recurrences. As a result, the office cut the percentage of cases returned to it for further action from 40 percent in 1995 to 21 percent in 1998. Similar analyses and revisions are occurring on a national scale now.

The specialists at VBA's 58 regional offices take a veteran's application for benefits, collect military, medical and financial records to verify that the applicant is eligible, and determine the degree of disability. Disabilities are expressed in multiples of 10 percent. If the veteran has more than one handicap, the disabilities are rated individually and then added together.

Often a degree of judgment is required, even though the agency assigns a standard value to each kind of impairment. Not only does the claims examiner need to assess disabilities, he or she also must investigate each pension applicant's finances and update the records over time. This is some of the most time-consuming work VBA does.

In her congressional testimony last year, GAO's Bascetta revived the notion of simplifying the pension program, which provides less than $5,000 a year to a single disabled, low-income veteran. A congressional commission had proposed simplification in December 1996, pointing out that the pension program dispenses far less money than the compensation program but takes many more resources to administer. VBA officials now say they can streamline the pension program by issuing new regulations, which they are hoping to do this year.

Better Support Systems

In another move to make work easier, VBA is developing an electronic claims processing system that will automate and speed up the flow of paperwork.

For every one of millions of veterans and survivors VBA serves, the agency maintains 400 or more pages of paper in files. The piles of paper in the office have a "negative impact on employee morale," says Cheryl Deegan, deputy director of the agency's Washington, D.C., field office.

Thompson describes the situation this way: "Anything you want to do of importance requires you to get your hands on that paper. It greatly limits you in your ability to provide service. If a veteran moves, somehow you've got to get your hands on the paper and transfer it. If they call in with a question that is anything more detailed than what can be seen obviously on a payment record, you've got to get your hands on the file. Things get lost."

In April 1999, VBA won one of Vice President Al Gore's Hammer Awards for development of a pilot electronic claims processing system in the Washington office. With technical assistance and products donated by a consortium of well-known information technology companies, the office had set up a system of electronic claims folders, with paper records scanned into computer files and routed around a local network.

The project garnered headlines such as, "VBA Bids Adieu to Manual Filing with Free Program," but nationwide implementation of such a system has yet to begin. Even the Washington office has not yet converted to the system, which operates only on an experimental basis. Congress was reluctant to appropriate the money for an agencywide system-one result of VBA's credibility gap-but now the agency has funding and expects to launch a procurement this year.

Meanwhile, as Thompson says, the core systems that generate veterans benefits payments are housed in the same mainframe computers he worked on as a young claims examiner in the mid-1970s-"you know, the orange screens and archaic-looking data arrays." The agency is putting a modern face on those systems.

"I said I don't care if we have hamsters powering the thing in the back room, when we hire a 25-year-old out of college, I want them to see something that looks like Windows or looks like it was built, you know, within the last five years," Thompson says.

Thompson is fond of saying VBA is "in the 15th year now of a seven-year modernization plan" to upgrade its core IT architecture. "Thank God it continues to chug along," he says. "Every month it puts 3.3 million checks or direct deposits in people's hands." Funding cuts, year 2000 distractions and other problems have delayed the now-notorious modernization, known as VetsNet.

One reason Thompson continues to push for VetsNet is that it will permit each employee working on a case to see the big picture by pulling together all the disparate records on a single veteran's benefits. In Thompson's view, the assembly-line approach to organizing work, which has been the norm at VBA for decades, can be mind-numbing.

If an employee's job is to sit at a desk all day with piles of paper and "handle it from here to here, and it goes to the next person, and they handle it, and you never get any feedback," he says, "you get burned out doing that, after a while." The case-management approach that will be built into VetsNet will make the work more satisfying, he says, because employees will see the outcomes of their work on each case.

People Are the Key

Thompson says VBA's employees are the key to its success. "Everybody thinks it's technology, but they're mistaken," he says. "It is human beings. We are in a life-and-death struggle for the best people with every other agency in government and every other private-sector organization. In my view, you can buy all the IT you need. You can't easily get good people. You really have to work hard to get them and retain them and train them and maximize their capabilities."

One tool he's planning to use is an advanced IT system that will catalog each employee's skills and training, generate learning plans, deliver computer-based training and generate training effectiveness measures. Every employee will be able to see on the agency's intranet what skills he or she has and which ones he or she needs to acquire in order to be eligible for promotion. Managers will use the same system to direct workforce development and spot potential skills shortages. Progress in employee development will show up on the balanced scorecard.

Meanwhile, the agency is developing computer-based training modules that require employees to learn together in small teams. If one person on the team doesn't pass the test, everyone on the team must go through the course again. Today, employees don't get as much training as they want or need, according to GAO and AFGE.

All new employees nationwide must attend orientation classes at the agency's academy in Baltimore, where, Thompson says, "they don't just hear about org charts and things." Instead, they listen to veterans-"the guy who got caught in napalm fire in Vietnam," the Bataan Death March survivor, or perhaps someone whose service was more routine.

Thompson says it reminds VBA workers that at the end of the paper trail is a human being. That knowledge helps retain good employees, who find the agency's mission compelling, he says, "if we don't suck the life out of them with crazy business processes and putting them in cubicles from which they never arise."

Employee retention is a major challenge for VBA. By July, almost one-tenth of the agency's experienced claims examiners will be eligible to retire. Two years later, nearly one-fifth could be gone.

VBA officials say it takes at least two years for a new examiner to become fully productive, so it has been hiring and promoting people into those jobs. After years of personnel cutbacks, 265 new examiners joined the agency in fiscal 1999, more than the number who retired. However, the new employees still need seasoning. "We're holding our own," says Robert Epley, director of compensation and pensions.

Retirement eligibility is even more of a potential problem among Senior Executive Service members and GS-15 managers. By July 2002, fully 58 percent of SES members in VBA will reach normal retirement age. VBA was producing a workforce plan early this year and has taken other steps such as launching an SES candidate development program last year.

Leveraging Resources

One way VBA has sought to break down its organizational stovepipes, stretch its resources and increase its operational flexibility is by combining two core jobs. The benefits counselor, who accepts applications and gathers information, and the claims examiner, who decides how much a veteran is entitled to in monthly compensation and benefits, are becoming "veterans service representatives," who are supposed to be able to handle both kinds of duties.

It sounds good in theory, and AFGE's Zimnoch says it has given many of the affected employees a one-grade boost in their pay and status. But at the same time, it has left them feeling overwhelmed. They are so busy processing claims, he says, that they haven't had time to get training and learn their added tasks.

VBA also is leveraging its human resources by opening up its systems to outside organizations, including veterans service organizations-such as the Veterans of Foreign Wars, American Legion and Disabled American Veterans-and veterans bureaus of state and local governments. For several years now, these organizations have been able to check on the status of benefits claims for those veterans for whom they hold power of attorney.

Now VBA is going one step further by formally training individuals from veterans organizations to prepare claims. Usually, Thompson says, the veteran applies for benefits through an intermediary. The agency's aim is for the intermediary to get complete and accurate information on the spot, using a Web-based system, and to retrieve military service records and medical records to validate the claim. By the time the package reaches the VBA examiner, the claim should be ready for a decision. Once the claim is filed, the service organizations can help the veteran track its progress and, should it be rejected or approved at too low a monetary level, appeal it.

On the Right Path?

The veterans service organizations and VBA work closely together although they don't always see eye to eye. The organizations are generally pleased with the way things are going at VBA. "They're probably doing the right things now to fix themselves," says Bill Bradshaw, a senior VFW official. "But it's going to take some time."

Among the steps the VA is taking, in keeping with the mandates of the 1993 Government Performance and Results Act, is attempting to find out more about the effects of its programs, particularly the enormous compensation and pensions effort. "Data are not currently available to measure how veterans and survivors perceive the compensation program or its impact on the quality of their lives," says the VA's fiscal 2000 performance plan. As a result of this and other shortcomings in measuring outcomes, the performance plan for VBA is incomplete.

GAO, in its review of the performance plan last spring, said it was an improvement over the preceding year. Nevertheless, GAO reported, "VA does not yet have all of the information sources and the capacity needed-through its accounting and information systems-to generate reliable data to support its performance plan and to produce credible performance reports" (HEHS-99-138R).

The VA's accounting systems, most of which are centrally operated by the department rather than by VBA, are being upgraded. A new payroll system with human resources management functions and new financial systems with activity-based costing are being installed. At VBA, however, the situation is complicated because the major function of the core compensation and pension system is to dispense and account for money. Until VetsNet and other new systems are in place, the linkage between expenditures and results will be tenuous.

The department received a qualified opinion on its 1997 and 1998 audits partly because of inadequate accounting for loans VBA had transferred to an outside servicer, information security weaknesses and poor forecasting and actuarial models. Many of these problems have been corrected, and the department is expecting an unqualified opinion for fiscal 1999.

Meanwhile, VBA has undertaken a number of data collection projects, including participating in the American Customer Satisfaction Index (ACSI) survey. The agency's C&P programs received a a score of 61 in the survey, lowest of all federal benefits programs measured and well below the 68.6 average for federal agencies. However, 57 percent of the VBA customers interviewed said their satisfaction with VBA is increasing.

Lowest grades went to claims processing; highest went to the courtesy and helpfulness of VBA employees. Almost one-third of those interviewed said they had complained formally to VBA about its service, and they filed eight complaints, on average.

VBA also does its own customer satisfaction surveys and posts results and analyses on its Web site. Results have been similar. Both VA's surveys and the ACSI found that communication with customers plays a part in their satisfaction, along with other factors. The VetsNet project is expected to help in giving applicants faster and more up-to-date information about their claims.

But VetsNet is only one of 80 major initiatives VBA has been pursuing in the last two years. Thompson says he's trying to keep the work going while rebuilding the entire agency. "The people systems, the IT, the business processes, the really fundamental organizational decisions-all of those things are being changed simultaneously while we're trying to maintain the flow of work," he says.

His own view of VBA's recent performance seems close to that of America's veterans: "We're not nearly what we need to be. We're somewhat better, but we have miles to go."

GPP report card

Return to GPP home

Return to 2000 GPP issue

VBA Report Card

Financial Management	C
Human Resources	B
Information Technology	C
Capital Management	B
Managing for Results	B
Agency Grade	B-

VBA
Veterans Benefits Administration

Created
1953

Mission
"To provide benefits adn services to veterans and their families in a responsive, timely and compassionate manner in recognition of their service to the nation."

Top official
Joseph Thompson

Did You Know?

This year VBA expects to launch the acquisition of the world's largest imaging system. When complete it will allow claims examiners to call up on a computer screen millions of pieces of paper the agency maintains today in file cabinets.
Among the 21 million veterans to whom the agency provides benefits are one Civil War widow and a dozen survivors of those who fought in the Mexican border wars of the early 1900s.
Every year VBA's field offices create roughly 150 million documents.

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Report calls for government speed-up

Nancy Ferris — Wed, 09 Feb 2000 00:00:00 -0500

nferris@govexec.com

Can the federal government pick up its pace and do its work in "Internet time"?

That's the question posed in an information technology industry association's report on its 10th annual survey of chief information officers in federal agencies. "Society is experiencing a remarkable pace of change and expects the same of its government," says the report, released Tuesday by the Information Technology Association of America (ITAA). "The deliberative, low-risk, big program approach is not likely to be a successful strategy."

The top issue for CIOs last fall, when the surveying was done, was the impending year 2000 transition. But CIOs said they expected a smooth changeover and a shift of focus to protecting their critical infrastructure and ensuring privacy and security of information as the No. 1 issue.

"The government's ability to move to the next level of technology-assisted government and commerce is closely linked to the ability to protect technology-based infrastructure against disruption," says the report, titled "Federal IT Into the New Millennium: Ready, Set, Go!"

The 34 CIOs interviewed by ITAA also listed IT workforce retention and recruitment, outsourcing and seat management, the role of CIOs in agencies, modernization of back-office systems, and IT acquisition among their top issues.

But leaders of the survey team reported that electronic government "provides the underlying imperative for addressing these other key issues." Today, the report says, the World Wide Web is what most officials mean when they talk of electronic government. "The most prevalent view that was heard from CIOs was that of 24 x 7 [24 hours a day, 7 days a week] service provided directly into the homes of citizens using secured connections into federal databases," it says.

Study leader Paul A. Wohlleben, a partner in the Grant Thornton accounting and consulting firm in Vienna, Va., and a former federal IT manager, said "the care and feeding of the IT infrastructure is going to be an important issue" as agencies move to do more business online.

They "can't turn back," he said. But to succeed in a Web-enabled environment, agencies will have to change their ways. "The slow, systematic, gradual approach to improvement just doesn't cut it in the Internet world," Wohlleben said.

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Calling In for Your Data

Nancy Ferris — Tue, 01 Feb 2000 00:00:00 -0500

nferris@govexec.com

n a typical workday, about one-third of the 2,000 employees at the General Services Administration's Washington headquarters check their e-mail and respond from somewhere other than their own offices.

They may be visiting a customer in another federal agency, meeting with colleagues in a building across town or attending a conference. Some are in training classes. Others are working at one of the 17 satellite centers GSA has opened for federal telecommuters in the Washington area. Another group is working from home. GSA permits many employees to work at home once or twice a week, and some employees have no permanent GSA desks at all but work at home most of the time.

To keep the employees productive while they're not in their offices, GSA has installed heavy-duty technology that allows employees to call in from home computers, notebook computers, telecommuting workstations or other gadgets via a toll-free telephone number.

The Cisco Systems Inc. remote access server the agency installed in 1998 is designed for use by Internet service providers and other telecommunications companies. It can accommodate more than 200 callers at any one time.

The GSA system accommodates both voice and data traffic, so employees can check their voice mail or their e-mail. It uses digital technology, which means that it handles voice traffic in the form of computer data.

Out of Control

Before installing the new server, GSA used smaller modem pools that were scattered around the agency. But they were too disparate and numerous for easy maintenance, says Jack Jackson, a GSA telecommunications specialist. Not only is the Cisco server easier to set up and maintain, Jackson says, but also it provides better security.

Security is the major worry of agencies considering providing remote access. Modems can be "dangerous back holes into an agency network," says Jackson's boss at GSA, Assistant Chief Information Officer (CIO) Donald P. Heffernan. With a central system, agencies get more control over the use of remote access channels.

Once they are in control, agencies can offer employees a wide range of opportunities to connect. At GSA, employees with home PCs, modems and Internet connections can simply check their e-mail with their Web browsers. With their modems, they can dial in for access to other kinds of services-programs that run on the agency's mainframes, for example, or the GSA intranet, which allows them to look up information, file travel expense reports and retrieve some shared files.

Employees working at home can get faster access with high-speed connections-often Integrated Services Digital Network (ISDN), but the agency is installing more digital subscriber line (DSL) connections and testing cable network hookups, Heffernan says. GSA will pay for high-speed services for employees' homes when it's in the agency's interest.

For example, some of employees in the CIO office have such hookups so they can make system repairs remotely whenever there's a malfunction. "At 2 in the morning," Heffernan says, "they may get beeped by a server. . . . They're in and out [of the system] all hours of the night and day. We want them to have robust remote access."

But GSA employees with less compelling cases for working at home also are encouraged to do so when they're not needed at the office. Administrator David J. Barram talks of the need for parity between public-sector and private-sector working conditions. He also likes to mention the trend for work to come to the employees, rather than for the employees to come to work.

The Name of the Game

In keeping with that trend, he's backing flexiplace and telecommuting options for GSA workers. It's happening more slowly than he would like, but he continues to push for what he calls "telework."

"We're all teleworkers," Barram told an electronic government conference last June. "It can range from the President working on Air Force One to any of us calling in late. This will be big in our future."

Assistant CIO Heffernan, who has his own personal computer network at home, reaches from there into GSA's systems through a virtual private network (VPN). This still-emerging form of access is widely regarded as the most likely way for future teleworkers to communicate with their organizations. With a VPN, a computer user communicates with an organization's internal network over the Internet. Security mechanisms segregate the private communications from the rest of the traffic on the Internet and permit the VPN users to tunnel through the organization's network defenses.

With a high-speed connection, using a VPN can feel very much like being at the computer in one's own office. That's an extremely appealing capability, and market analysts predict explosive growth in sales of VPN technology. Cahners In-Stat Group researchers in Scottsdale, Ariz., for example, say public and private organizations spent less than $3 billion on VPNs in 1999 and will spend more than $32 billion a year by 2003.

But the technology hasn't taken off as fast as was expected a couple of years back. Among the reasons: high operating costs, lack of industry standards for product interoperability, unreliable service quality and worries about security.

Many of the security concerns stem from revelations that Microsoft Corp.'s original Point-to-Point Tunneling Protocol (PTTP), a VPN enabler that comes with most PCs, is not secure enough to protect sensitive information on the Internet. With its new Windows 2000 operating system, Microsoft now is supplying the secure Internet protocol, IPsec, which is more trustworthy.

Add-on security can increase confidence in these Internet-based systems. The Marine Corps is building a VPN to give 120,000 Marines remote access to the corps' unclassified systems. The software from Newbridge Networks Corp. works with the Defense Department's public-key encryption infrastructure to ensure that only authorized individuals can get access.

Still Too Risky

Nonetheless, there are situations when Internet access just isn't warranted. When NASA was getting ready to repair and modernize the Hubble Space Telescope at the end of 1999, the space agency updated its Hubble operations control center at Goddard Space Flight Center in Greenbelt, Md. Microsoft's heavy-duty operating system, Windows NT, was installed to enhance the decade-old systems.

The updated ground system, which runs on relatively inexpensive but powerful Dell Computer Corp. workstations, can be maintained and repaired from anywhere on the Internet. NASA contractors are doing just that over a VPN-like network.

However, NASA officials decided not to let anyone control the space telescope itself from anywhere except the designated control console at Goddard. "It's just too risky," says John Gainsborough, the Visions 2000 manager who was in charge of the ground systems upgrade.

But the new system speeds delivery of new scientific data collected by the space telescope, while keeping costs down. The data can be distributed over the Internet for processing elsewhere, without having to go through Goddard.

The need to leverage a scanty IT workforce is driving the increase in centralized, off-site help desk and systems support centers. With current network and PC technology, a support center can deliver software updates, repair glitches and provide users with advice from a distant location.

What's more, as agencies outsource more of their operations, they are being forced to let more outsiders inside their electronic domains. At GSA, Heffernan says, contractors do not have the same system access that employees get, but they can interact with parts of GSA from sites outside the agency walls.

In the next few years, desktop videoconferencing, instant messaging and other technologies that support remote collaboration will see steady improvements in their ease of use, cost, security and availability. The next generation of federal managers may be just as comfortable attending an important meeting online as they are today when they show up for work.

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Cyberattacks likely at year's end, experts say

Joshua Dean and Nancy Ferris — Fri, 03 Dec 1999 00:00:00 -0500

nferris@govexec.com
jdean@govexec.com

Federal officials increasingly say the greatest Y2K threat will come not from date errors in software but from terrorists, particularly cyberterrorists launching hacker attacks via the Internet.

Stephen R. Northcutt, chief of information warfare at the Ballistic Missile Defense Organization, is the latest expert to warn of this threat. He told an audience of federal managers at the Government Technology Leadership Institute in Washington Thursday to expect network intrusions and other cyberattacks during the entire winter holiday period and especially around the New Year's weekend.

Why might attacks intensify then? Malicious hackers "have a lot of free time on their hands" during the holidays, Northcutt said, recalling that the notorious hacker Kevin Mitnick launched his most famous attack on Christmas Eve in 1994. What's more, he said, attackers are counting on reduced staffing in government facilities over the holidays and a concomitant relaxation of vigilance.

This year, however, the Defense Department and other agencies will be operating Y2K watch centers to make sure they are prepared for attacks as well as software flaws.

Northcutt urged his audience to make sure that only necessary connections to the Internet remain open during the holidays. "Maybe it would be prudent to turn off [less important] services for a week," he said.

Many other experts have issued similar warnings. For example, Don Jones, director of year 2000 readiness for Microsoft Corp., told reporters this fall that Y2K is likely to be a "non-issue" in the United States when it comes to software failures, but he is expecting new viruses, worms, Internet hoaxes and other such problems to arise. "The thing I'm most paranoid about is the virus and worm stuff," he said.

Northcutt also urged systems administrators to be on guard for viruses and other malicious code arriving via e-mail. He warned against a common attack known as a trojan horse. "Ninety-five percent of trojans penetrate firewalls via e-mail," said Northcutt. A firewall is the most common form of network perimeter defense. It monitors all incoming and sometimes outgoing network traffic.

Last week, Rep. Stephen Horn, R-Calif., chairman of the House Government Reform Subcommittee on Government Management, Information and Technology, said he has learned from the FBI that there might be an intensified effort by hackers to invade government computers and spread computer viruses in the days before and after Jan. 1. Horn called for "everyone to be aware of this possibility and take extra precautions to guard their computer systems."

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Targeting Jobs

Nancy Ferris — Wed, 01 Dec 1999 00:00:00 -0500

Agencies have identified 500,000 positions that could be contracted out, but exactly how many will actually be outsourced isn't clear.

ore than 400 clerks, secretaries and administrative assistants at Naval Sea Systems Command headquarters in a high-rise near Washington's Reagan National Airport watched anxiously last fall as their jobs were analyzed in preparation for packaging as a contract to be offered to the lowest bidder in February.

In a search for ways to cut costs, the command is analyzing all of its non-inherently governmental jobs for possible outsourcing. The administrative and clerical jobs at NAVSEA headquarters in Arlington, Va., were the first to go on the auction block, a command spokeswoman says, because they were the largest single group of positions there. If the employees can get the work done more efficiently than a private contractor can, the employees will get to keep their jobs, under the rules of public-private competitions established by Office of Management and Budget Circular A-76. Otherwise, a contractor will provide support services and the Navy employees will have to find work elsewhere-perhaps on the payrolls of the contractors brought in to replace them.

The NAVSEA headquarters employees are among 80,000 civilian Defense Department employees whose jobs are currently in the process of being competed under A-76. Until now, these outsourcing dramas were unfolding mostly in Defense Department organizations such as NAVSEA, rather than civilian agencies.

But that could begin to change in the coming months as the 1998 Federal Activities Inventory Reform (FAIR) Act takes root. Early in the FAIR Act implementation cycle in October, civilian agencies identified about 200,000 jobs-more than one-third of all of their jobs-as commercial in nature and potential candidates for outsourcing. With more than 300,000 commercial jobs already identified by DoD, it's likely that more than half a million federal jobs will go out for bids in the next few years.

The FAIR Act requires executive branch agencies to determine whether each federal job is inherently governmental or commercial-that is, a function being performed in the private sector. Agencies must create lists of all jobs that are not inherently governmental each year, and publish them after OMB review.

It's up to each agency to decide whether to contract out jobs on the lists or perform the work in-house, says Deidre Lee, director of the Office of Federal Procurement Policy at OMB. Some agencies indicated that certain jobs on their lists are unlikely to be contracted out, and in October, representatives of prospective contractors challenged some of those designations. The law gives affected vendors, employees and organizations representing them the right to challenge agencies' lists within 30 days after they are published.

Because OMB did not prescribe a format for the lists, the agencies came up with a variety of formats, some of them with more information than others. For example, the Centers for Disease Control reported it has 1,008 management employees and another 138 support staff in the category of Regulatory Management and Support Services at its Atlanta headquarters. These are "core" jobs in the "OD/OD"-presumably, Office of the Director-and the agency is not planning to contract them out. The list failed to further describe the jobs.

The tiny Inter-American Foundation, on the other hand, listed job titles and office assignments for 3.12 commercial positions, all of which the foundation is considering contracting out. And NASA described 7,957 commercial jobs, none of which it plans to outsource.

The variety of formats and the fact that most agencies chose not to publish their initial lists on the World Wide Web, distributing them instead by e-mail and fax or on paper in response to telephone requests, prompted considerable criticism from contractor organizations and Congress. "It is ironic that, for access to information about the government's commercial activities, the public must rely on a private-sector magazine, Government Executive, which has posted all of the inventories on its Web site," said Sen. Craig Thomas, R-Wyo., principal sponsor of the FAIR Act, at a hearing. (See www.govexec.com/fairact for the full lists.) OFPP's Lee was quick to promise improvements in the process.

The Big Question

But no amount of process improvement can help agencies (and, for that matter, contractors) answer the big question: Which jobs shouldn't be contracted out because they are inherently governmental? The FAIR Act defines an "inherently governmental function" as one "that is so intimately related to the public interest as to require performance by federal government employees." It goes on to list some clearly governmental activities, such as diplomacy, issuing orders and regulations, disbursing funds and property, and supervising federal employees. It also lists several examples of commercial activities, such as warehouse operations, building security and "gathering information for or providing advice, opinions, recommendations or ideas to federal government officials."

There is a large gray area in between those categories, OMB officials acknowledge. What about the person who supervises contractor employees handling accounts payable? Yes, the supervisor is overseeing disbursement of federal funds, but there's very little room to exercise discretion about whom or when to pay a bill. Questions about payment policies can be referred to a senior federal employee. What about issuing agency press releases after getting them approved by senior federal employees? How about deciding on the interior design for specific federal offices, within established design guidelines?

"The decision over what is inherently governmental is the most inherently governmental decision in government," says Dave Childs, a senior budget examiner at OMB who specializes in such issues. Such decisions could alter the future shape of government, and big money is involved. Childs told a group of information technology vendors in October that the Defense Department alone is considering outsourcing 230,000 jobs. "Do the arithmetic," he said: Multiply the number of employees by $70,000 in salary and related costs per employee per year, and then multiply again by 1.5 to account for materials and other costs associated with doing the work. Childs didn't supply the grand total, but it's $24 billion per year, for just the Defense Department.

It's no surprise, then, that federal contractors were eagerly calling agencies for their first FAIR Act inventories. But many of them were "profoundly disappointed" in the lists, says Bert M.Concklin, president of the Professional Services Council, which represents firms that provide professional and technical services such as consulting, accounting and architectural expertise to the government.

Some members of Congress reacted similarly. For example, Sen. Fred Thompson, R-Tenn., who chairs the Senate Governmental Affairs Committee, wanted to know why NASA doesn't expect to contract out any of its nearly 8,000 commercial jobs.

"That doesn't make sense," Thompson said. "If these jobs are commercial
activities, shouldn't we know who can do it cheaper and more efficiently? Shouldn't these functions be competed? It's time for federal agencies to look beyond the letter of the law and find ways to restore public confidence that taxpayer-funded activities are provided in the most efficient manner possible."

While members of the Professional Services Council, the Information Technology Association of America, the U.S. Chamber of Commerce and other business organizations collaborated in challenging agencies' inventories, the American Federation of Government Employees (AFGE) and other labor organizations criticized the lists as too extensive. Under OMB guidelines, agencies are supposed to respond quickly to the challenges.

What Next?

Once the inventories are final, what happens next? Not much more is required by the FAIR Act. Although some members of Congress had initially sought to require agencies to compete their commercial jobs over a certain period of time, the law reflects the view of former OMB executive G. Edward DeSeve. At a March 1998 hearing on the bill, DeSeve urged Congress not to mandate competitions but rather to "allow the forces of declining budgets and the market to require that these competitions are conducted."

Those market forces and declining budgets are real. The government is feeling the effects of the business-school philosophy that urges corporations to focus on their "core competencies" and look outside their organizations for performance of other functions. Meanwhile, agencies are expected to modernize and streamline their operations in accordance with the electronic-government and reinvention drives. And many agencies are finding it difficult to hire and retain skilled employees, increasing their reliance on contractors.

More outsourcing means more public-private competitions for jobs, as prescribed by Circular A-76 and its accompanying guidance. Under the FAIR Act and OMB rules, A-76 is the only avenue normally open to agencies that wish to use contractors to perform work that's being done in house. The circular lays out a lengthy and rather rigid process. Agencies must draw up a statement of work to be performed, organize the employees into a "most efficient organization" that can compete to retain the work in house, and then compete the in-house plan against contractors' offers to do the same work.

To warrant outsourcing, the winning contractor's bid must be at least 10 percent less expensive than the in-house bid. That, plus the use of an arbitrary 12 percent rate for overhead costs for government operations, skew the competitions in favor of the in-house teams, in the view of many contractors. Among IT vendors who do contract work for the government, for example, a 40 percent overhead rate would be considered normal. OMB officials defend the 12 percent rate as reasonable and point out that government costs aren't entirely comparable to those in corporations.

For example, they say, agencies don't buy insurance policies to protect against accidental loss of assets, a cost that contributes to private-sector overhead. What's more, OMB officials say, overhead costs, such as rent, sometimes remain the same even if the work shifts to a contractor. In many outsourcing arrangements, for example, contractor employees work in a federal building or on a military base, so rent shouldn't be a factor in those cost comparisons.

Childs said agencies' cost accounting is based on "budgetary cost," or the amount appropriated for agency spending. Though agencies often do not have to budget for rent or pensions, these are real costs, he observed. In the current environment of inadequate federal accounting systems, he said, "it's hard to get a federal employee to understand that the taxpayer is really paying the cost" of rent, pensions and other unbudgeted items.

The government is slowly remedying the longstanding deficiencies of its accounting systems. In the meantime, the FAIR Act requires agencies to produce the most accurate possible statements of their costs for use in outsourcing competitions.

The Cost of Competition

One irony is that some technical and professional services companies-often the same companies that might bid for outsourced work-are looking to the law as a source of new revenue streams. They'll help agencies develop statements of work and reorganization plans, do cost analyses, evaluate alternative acquisition approaches and even draw up plans for communicating with the affected employees. In September, the Joint Chiefs of Staff in the Pentagon hired Performance Engineering Corp. of Fairfax, Va., to assist in outsourcing the organization's desktop network and computer support services. The price tag on the assistance contract: $327,000.

The magnitude of that sum shouldn't surprise anyone who has been through an A-76 competition. It's a time-consuming and resource-intensive process. The Air Force Reserve Command began competing operations at 13 of its bases in 1996. Until last month, it had completed only two competitions, both of which were won by the private sector.

The General Accounting Office reported this year that competitions involving a single military support function-vehicle maintenance, for example, or housing management-took 18 months, on average, while those for multiple functions took 30 months. That's an improvement over earlier GAO findings of a 51-month duration for the average competition from 1987 through 1990. But it still is a long time for employees to undergo the uncertainty and disruption associated with the process.

The cost of A-76 studies is a favorite topic among those on both sides of the process. On the government side, it's no small matter to develop a performance work statement, which describes the work now being done by federal employees. The statements typically run hundreds and sometimes thousands of pages. Agencies are required to consult with employees about these documents, a process that can consume hundreds of hours in meetings. Then there's the challenge of creating the most efficient organization (MEO)-a streamlined operation with fewer workers.

Even those employees whose jobs survive the MEO process usually must change their ways. At NAVSEA, for example, the command moved some of the clerical workers into a shared-services unit, much like the typing pool found in offices of the 1970s. Until this year, those workers were assigned to particular headquarters offices. Of course, being more efficient because of the pool organization doesn't guarantee that they will win the competition to do the work over the long term.

During such reorganizations, according to experienced observers, it's common for the most capable and adaptable employees to look elsewhere for work, leaving behind those who are unprepared for change. The process is "a terrible tax on the employees," says Stephen M. Sorett, director of government contract services for Grant Thornton, an accounting and consulting firm. "The workforce gets demoralized." A Navy employee involved in A-76 studies calls it "a real scary thing which causes more paralysis than performance."

If the human costs of the process are high, the dollar costs probably are too, but there are very few records of what agencies have spent on A-76 activities. It took the National Oceanic and Atmospheric Administration 10 staff years over a 19-month period to complete a study on privatizing the operation of a single NOAA ship, a GAO official told Congress last year. The upshot of the study? There were no bids from the private sector. "It would have required even more resources if NOAA had received offers to perform the work," said J. Christopher Mihm, associate director for federal management and workforce issues in GAO's General Government Division. Contractors, meanwhile, say it can cost them $25,000 or more to prepare a bid in an A-76 situation.

GAO's National Security and International Affairs Division reported this year that many of the military commands that would be undertaking A-76 studies were planning to spend $7,000 or more per position. In the same report, "DoD Competitive Sourcing: Questions About Goals, Pace, and Risks of Key Reform Initiative" (NSIAD-99-46), the congressional auditors said the military services had not budgeted the full amount of "separation costs" such as early retirement and severance payments for employees whose jobs are slated to be eliminated. GAO warned that "net short-term savings are unlikely to be achieved in the amounts or as quickly as DoD projected."

It is widely agreed that the A-76 process does cut costs-usually by 20 percent or so-whether or not jobs are outsourced. Most of the savings are associated with job cuts, according to GAO. The process reduces costs whether or not it ultimately results in outsourcing, because of the formation of the "most efficient organization." Of course, a private contractor can have an even more efficient organization and underbid the federal organization. That happens about 60 percent of the time.

With the government winning 40 percent of the time, more than one contractor has suggested that the competitions are bogus. "The government competes the contract against itself," a contractor complained at the meeting where OMB's Childs explained the process to contractors. Some suspicious contractors are asking whether there is any means of enforcing whether the MEO stays in place once the competition is over.

Other contractors still are chortling cynically about a GAO decision early this year involving an Air Force decision to reject all contractor proposals for base operations and maintenance work at Wright-Patterson Air Force Base, Ohio. GAO ruled that the source selection board had a conflict of interest because 14 of the 16 evaluators would lose their jobs if the work were outsourced. (In September, the Office of Government Ethics took the opposite stance, holding that the same competition was proper, but OMB's Childs says the Wright-Patterson situation "won't happen again, as a matter of policy.")

One sales executive for a company that specializes in IT outsourcing wonders whether the government is simply using contractors to force agencies to downsize and reengineer their operations, without necessarily outsourcing anything.

On the other side, employees say the process often is rigged in favor of contractors, intentionally or not. "These studies have been engineered for in-house failure," says Jerome LaLonde, president of AFGE Local 1997 in Minneapolis-St. Paul, which sought to fend off outsourcing of base operations at the Air Force Reserve base there. LaLonde questioned many of the technical aspects of the competition, such as a decision that the Davis-Bacon Act could not be applied, which held contract wage rates down. "I really don't want to make the claim that it's federal union-busting, but...," says LaLonde. The performance work statements have been riddled with flaws, he adds, noting that a comparable outsourcing contract at a New York base had to be modified 73 times after it was signed.

A non-union, senior employee involved in Navy A-76 studies says executives, rather than managers familiar with how the work is done, have shaped the competitions he has seen. In one case, they eliminated 120 jobs in the rank and file workforce while leaving every manager in place, he says. The result, as he sees it, has been an irreversible loss of in-house know-how.

Forked Tongue

Some of the cynicism expressed by those involved with A-76 can be traced back to ambivalence about outsourcing among policy-makers at the highest levels. The policy-makers are being pushed by business interests to outsource more government operations and pulled by unions to prohibit outsourcing. Congress and the White House unsteadily walk the line between the two.

Until 1994, legislative restrictions hobbled most outsourcing initiatives. Deficit reduction pressures, the drive to make government more businesslike and the ascendancy of the Republican Congress contributed to the policy shift. Current Republican ideology favors a smaller and less activist federal government, but even the most fervent advocates of less government and lower taxes wince when budget-cutting hits their own home districts. For example, the FAIR Act author, Sen. Thomas, has said that "by controlling federal spending, we will usher in a new era of growth and prosperity in America." But this fall, when the Veterans Affairs Department laid off 25 employees at its hospital in Sheridan, Wyo., citing budget pressures, Thomas joined in the Wyoming congressional delegation's effort to persuade the VA to reverse course.

Likewise, this fall, just one year after the FAIR Act was passed, the House Appropriations Committee filed a report on the fiscal 2000 Defense appropriations measure saying: "The committee harbors serious concerns about the current DoD outsourcing and privatization effort. While the committee recognizes the need to reduce DoD infrastructure costs, the cost savings benefits from the current outsourcing and privatization effort are, at best, debatable." The report said that "high-cost contractors [are] simply replacing government employees" and that "DoD appears to be moving toward a situation in which contractors are overseeing and paying one another with little DoD oversight or supervision." The appropriations act directs the department to produce by February a detailed report on implementation of A-76 since 1995, including the cost of the work before and after outsourcing.

The Clinton administration seems equally ambivalent about outsourcing. For example, OMB's Childs insists that "OMB is taking the FAIR Act extremely seriously." But at bottom, the law simply mandates compliance with a longstanding A-76 provision requiring agencies to compile lists of commercial jobs annually. OMB didn't enforce this provision consistently in the past.

What's more, the White House has stood in the way of direct outsourcing of commercial activities, requiring agencies to take the time-consuming public-private competition route in most cases. The American Consulting Engineers Council, the Professional Services Council and other business organizations say that agencies should be
allowed to outsource by offering the work directly to the private sector.

A 1998 report from the RAND organization, a think tank in Santa Monica, Calif., says administration policy and legislation "are generally predisposed to outsourcing commercial activities. They also contain many restraints and exclusions, some of which seem to have rational underpinnings and some of which seem intended simply to raise impediments."

Given the highly political nature of outsourcing, downsizing and related issues, some observers are predicting that interest in A-76 will fade during the coming presidential election year. The election results will indicate how much clout federal employee unions can exercise; wholesale outsourcing is not likely as long as the unions command the respect of the White House. While some union members object to the A-76 process, leaders like Wiley Pearson, who heads AFGE's anti-privatization campaign, say A-76 gives employees a chance to prove their worth.

The Long Haul

Will the FAIR Act make a difference in the use of the A-76 process? People on both sides of the issue say their expectations are low, but that the law could have an important impact over the long term. "There's a lot of excitement about what the potential of the FAIR Act is," says Andrew Fortin, manager of privatization policy for the U.S. Chamber of Commerce. But, he adds, "the expectations for this first round are realistic and limited."

Concklin of the Professional Services Council describes the situation as "a mid- to long-term war of attrition." Only a relentless campaign will get agencies to compete their commercial work, he says, describing the FAIR Act as an important step in the right direction.

Other observers are betting that budget pressures will increase agencies' dependence on A-76. Despite difficulties the Air Force Reserve Command encountered in competing its base operations, command officials told GAO auditors this year that the completed competitions and resulting contracts with the private sector for just two bases will reduce costs by more than $9 million over five years. The same officials acknowledged they forgot to include snowplowing and grounds maintenance activities in the performance work statement for the Niagara Falls (N.Y.) Air Reserve Station-one of the snowier places in the United States. But when they added in the requisite 7,200 hours of work, they told GAO, the private-sector bid still won the competition.

If the House Appropriations Committee is correct, those savings estimates may be illusory. But as the budget pressures intensify, it's likely that more agencies will begin to eye the 20 percent average savings achieved by the A-76 process and give it a try.

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Liberating the Laptop

Nancy Ferris — Mon, 01 Nov 1999 00:00:00 -0500

hen Vice President Al Gore's government reinvention team moved into new offices in downtown Washington in early 1998, the reinventors seized the opportunity to showcase an office of the future. They chose an open office layout with flexible furniture so that workers could be moved into new groups as their project assignments changed.

When it came to the office computer system, leaders of the National Partnership for Reinventing Government likewise "wanted to free our workers from the tyranny of hard-wired connections," recalls Andrew Boots, an information technology manager now working on student loan programs at the Education Department. The NPR workers got cellular phones and were supposed to get laptop computers with wireless hookups so that they could connect to the local area network (LAN) from anywhere in their offices.

That was the dream, but the reality didn't quite measure up, Boots says. The employees had various makes and models of laptops, and getting all the right hardware connections and software drivers proved an overwhelming job for the small support staff. What's more, the wireless network was noticeably slower than the conventional one-sometimes less than one-third as fast.

"The bandwidth was not an issue for casual users" who simply wanted to download their e-mail or store a letter, Boots says, but for heavy use such as surfing graphics-intensive pages on the World Wide Web, "it was just not acceptable."

Boots and another NPR worker got wireless connections, but in the end they reverted to conventional means of connecting to the LAN. The wireless network didn't warrant the effort needed to get it fully up and running. "We just had bigger fish to fry," he says.

Just over a year later, however, there's renewed interest in wireless LAN products among both suppliers and their customers.

This summer, for example, networking company Cabletron Systems of Ro-chester, N.H., made a series of wireless product announcements that added up to a direct assault on chief complaints about products already on the market. Cabletron lowered the price to around $300 per user, added security features that company spokesmen claim are effective and easy to manage, and increased the wireless network's standard speed by a factor of five. "We're really seeing wireless as a mainstream technology," says Frits Riep, a Cabletron marketing manager.

Catching the Wave

Meanwhile, Compaq Computer Corp.'s new president and chief executive, Michael Capellas, told a European audience in September that he expects wireless connectivity to "become the actual baseline" for future PCs.

Dell Computer Corp. also is trying to stake out a commanding position in wireless LANs. "We're very excited about it," says Leo Holland, a Dell Federal marketing manager. "We're right at the very beginning" of a trend toward more mobile computing, Holland says.

Some industry analysts agree. Jackie Fenn of Gartner Group, an IT market research firm in Connecticut, told a group of federal IT managers two months ago that wireless data transmission "will be one of the most significant discontinuities that we see happening." It will affect many kinds of networks, she said, including the wide area networks that carry federal agency data traffic across the nation.

Experts like Fenn say the issuance of a new industry standard for wireless Ethernet has been a key factor in the recent wireless LAN developments.

But others aren't sure that wireless LANs will amount to more than a specialty product. NPR's Boots is among these doubters. He expects wireless to show up in the places where it already has established a presence.

These include conference rooms, temporary office space where it doesn't make sense to install network wires, and environments such as warehouses and hospitals where workers don't spend much time at their desks.

Federal Users

At Department of Veterans Affairs hospitals, for example, wireless systems are being used to record medications administered to patients. Nurses push a cart with a notebook computer and medicines into patients' rooms. At each bedside they scan the patient's plastic ID bracelet, which has a bar code printed on it, and then the labels on the medications they will administer. The system checks the type of medicine, dosage and time interval since the last dose.

In a trial installation, one VA hospital reduced dosage errors by 84 percent. The remaining errors were attributed to individuals who bypassed the automated system.

Now all VA medical centers are under orders to install similar "point of care" medication systems by early 2000. They then will add wireless capabilities to a much more complex application, a comprehensive patient record system, so that doctors, admissions representatives, therapists and others can record their interactions with patients, wherever they occur.

"Putting [wired] PCs in the rooms is just not a good alternative," says Richard E. Moore, information resources management chief at the Carl P. Hayden VA Medical Center in Phoenix, because space is tight. The Phoenix hospital is using a system from Nortel Networks Corp. while evaluating other products.

NASA Network

Meanwhile, Intermec Technologies Corp. of Everett, Wash., has installed what it calls the world's largest wireless LAN at NASA's Kennedy Space Center. The network covers 47 square miles-an area the size of San Francisco-and links 300 buildings that house 300,000 items needed for space shuttle operations. United Space Alliance, the shuttle contractor, hired Intermec to put a unique bar code on every item and supply handheld computers and scanners along with the network and special software. With the system, shuttle ground crews can locate any item in seconds, saving nearly $1 million in downtime caused by delays in locating equipment or parts.

Although installed as a largely proprietary network, the NASA installation is being converted to a standard Ethernet, says Mark Colborn, an Intermec project manager. The adoption last year of a technical standard for wireless connections to a standard Ethernet at standard LAN speeds is one important reason wireless networks are taking off. Once the wireless network interoperates with other NASA networks, the space alliance will run its Peoplesoft inventory management system over the wireless LAN, Colborn says. Then the parts location system can be tied into the back-office procurement and financial systems at the space center.

The Postal Service is using wireless technology in similar ways. The service tracks trailer movements, mail containers, airline shipments and individual trays using handheld scanners and bar codes.

How They Work

Wireless LANs use radio frequency links between the computer and a device known as an access point. The access point is wired into a conventional data network. PCs-either desktop or portable models-are equipped with special wireless adapter cards instead of the conventional network interface card that gives them a LAN connection. Wireless adapters for laptops usually are PC card devices that slip into a special slot on the computer case.

Once the access points are installed in a workspace, computers within about 225 feet of an access point can connect to the network, just as if they had a wired connection. They can surf the World Wide Web, retrieve data from a local server, check their e-mail and so on. As with a cellular phone, there can be dead spots where the signal travels weakly or not at all, but the access points can be moved or supplemented to increase coverage and network capacity.

The cost of wireless LANs has dropped sharply this year, making them rather competitive with conventional wired LANs. Of course, cost comparisons depend on the size of the network and the area covered. But one factor it's easy to overlook is that a wireless network requires substantial wiring to link the access points.

Although wireless network adapters cost more than a standard wired device, the ability to move workers from one desk to another without changing their PCs can save substantial sums.

Several analysts say the cost of moving one user on a wired network exceeds $400. The International Facility Management Association reports that organizations typically move the equivalent of 44 percent of their employees every year. While the federal government may move fewer employees than businesses move, there is no doubt that employees are shifting locations more often than they once did, thanks to reorganization, downsizing and program changes. Furthermore, today's office workers engage in more meetings, travel and conferences.

Campus Environment

One environment in which computer users are constantly on the move is a college campus. That's why the National Defense University at Fort McNair in Washington installed a wireless LAN for its Information Resources Management College. Each student is issued a laptop computer and network user account on arrival at the college. They can use the Internet for research and keeping in touch with their home bases, downloading instructors' presentations, taking notes and producing their own papers or presentations.

The network's chief advantage is that students can roam from classroom to classroom without having to plug their computers into network ports and log in each time they do so. Donald J. Couture, the top technology executive at the IRM College, says the 5-year-old wireless network from Lucent Technologies Inc. is slower than the standard Ethernet LAN, but "it does everything I need, except if I want to do heavy graphics from the Internet."

When the students turn in their computers at the end of their terms at the college, they are given compact disks with presentations and other information from the courses they took. Couture also creates CDs to load the software on the computers for the college's 900 to 1,000 students each year. He wipes the hard disks clean and reloads the software for each new set of users, a chore that's much easier with portable computers than with those wired to the desktop.

Couture is a rare bird among his federal peers. There are few wireless LAN users in ordinary federal offices. But many believe that situation could change soon. As one indicator, software giant Microsoft Corp. is planning to switch its entire enterprise to wireless local networks, probably in 2000. Michael Fink, a technology executive at WinStar Communications Inc. in New York City, says that in view of the cost of delivering cable to a desktop-about $300 or $400 per desk-wireless LANs are starting to make economic sense. "It won't be long before it [wireless] is mainstream technology," Fink says. "All the parts are there."

Insecurity-Real or Imaginary

Fink and others says concerns about data theft or loss of privacy in a wireless environment are fast becoming less of a worry, thanks to new technologies such as encryption and the Secure Internet Protocol, which can be used in a wireless network. In fact, most of the security measures used in a wired office network are applicable as well in a wireless one, and the medium over which the data travels plays only a small role in protecting the data.

Nonetheless, at a time when concern about information systems security is high, fears of security breaches in a wireless network have slowed adoption of the technology, experts agree. What's more, other radio frequency devices and even microwave ovens can disrupt transmissions.

The popularity of cell phones (which have their own security problems) seems to underlie the current interest in wireless computing. People who make phone calls on the go and take their laptop computers with them crave the ability to make wireless data connections too.

Laptops, as an alternative to desktops, are becoming the norm for military officers, and the desire to remain connected in the field is spurring military adoption of wireless technology.

Wireless LANs, of course, link laptop users only to their own networks. That's why major phone companies, data networking companies and federally funded resarchers are exploring how to provide more expansive wireless computer connectivity, perhaps in the form of a wireless Internet.

Cellular phone and paging companies, in particular, are offering devices that deliver some text, such as short e-mail messages, to customers.

But full wireless access to the Internet is not likely to be available anytime soon, while business-quality wireless LANs are available today. Managers like the VA's Moore are enthusiastic about wireless for some situations. Wireless is not right for every situation, Moore says, but "in the future, we'll use both."

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DoD weighs ban on advanced Web technology

Nancy Ferris — Thu, 07 Oct 1999 00:00:00 -0400

nferris@govexec.com

RICHMOND, Va.-To head off network security breaches, high-ranking Pentagon officials are drafting a policy that would ban Defense Department use of the software that drives leading-edge sites on the World Wide Web. Such a ban could be a major setback for electronic government and perhaps even for commercial use of the latest Web technology.

Marvin J. Langston, deputy chief information officer for DoD, said his office is putting the finishing touches on a directive that would prohibit DoD use of JavaScript and ActiveX, two software products that enable Web sites to interact with PCs over the Internet. Turning off these capabilities could limit DoD Web sites to providing little more than documents. Without them, it would be difficult to carry out many of the current and planned uses of the Web in buying and selling, distance learning and other kinds of transactions.

JavaScript and especially ActiveX are powerful tools that permit the use of software programs within Web sites, greatly increasing their capability to handle transactions. However, the same technology that enables a site to look up a customer in a database and update records can be used maliciously to wipe out the database or alter records with little trace. The software that moves over the network in the interaction between a Web browser and a server is known as "mobile code." It can act like a computer virus, but with more devastating effects.

Microsoft Corp., maker of ActiveX, and Netscape Corp., maker of JavaScript, have included in their products controls that can be activated to limit misuse of the technology. For example, Jeff Raikes, Microsoft's vice president for worldwide sales and support, said in a speech at an IT industry conference here, an Air Force browser can be configured to accept mobile code only from an Air Force server.

But making sure that these controls are properly activated in every DoD PC and server, and then updated to keep the security policies current, is impossible, in the view of many. "JavaScript and ActiveX are security problems that we don't know how to deal with," Langston told those attending an electronic government workshop at the conference.

Later, Langston acknowledged that the proposed ban would reduce the functionality of DoD Web sites. He said the draft policy has met with great resistance within the department and agreed that "there are big issues here." But he said preparation of the draft policy is continuing and it probably will be presented to Langston's boss, DoD CIO Arthur Money, for signature before the end of the year.

Security is "the Achilles heel to everything that's going on right now" with electronic government initiatives, Langston said at the workshop. He compared today's information warfare threat to the nuclear missile threat that dominated the defense horizon in the 1950s.

Several companies offer security products to enforce protection policies and keep them up to date against threats from mobile code. However, new vulnerabilities emerge regularly, leading many in the information technology industry to liken the situation to a cat-and-mouse game. For each new security protection on the market, malicious hackers come up with a new way to attack protected systems.

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Navy plans $2 billion network

Nancy Ferris — Mon, 04 Oct 1999 00:00:00 -0400

nferris@govexec.com

Under an unprecedented program called the Navy/Marine Corps Intranet, the Navy will spend $2 billion or more to replace virtually its entire information technology infrastructure in the United States over the next two years. The program calls for a single vendor team to provide everything from personal computers to Internet nodes in a seamless IT environment where the Navy is buying services, not equipment.

The N/MCI, as it is known, will provide telephone, Internet, local and base network communications and the hardware needed to use those networks to 450,000 uniformed and civilian personnel. In a first for the military services, it will provide all services over a single set of wires and network nodes. Both classified and unclassified traffic will use the same network pipes, and the new network must be deployable overseas.

In a key portion of the draft request for proposals released last week, the Navy outlined its entire IT infrastructure and explained its needs. None of the other services has issued such a complete, cross-cutting picture of its needs in peacetime and wartime, encompassing logistics, accounting, recruiting, personnel management, acquisition and other functions along with military combat. Although the N/MCI will serve primarily U.S. sites, its communications links will extend into foreign combat zones and potentially link all 654,000 naval and marine personnel worldwide in wartime.

The 235-page document will help would-be contractors understand the current IT architectures of the Navy and Marine Corps and what they will be expected to supply. Navy officials say they expect the bidders to name their price on a per-seat, or per-user, basis, over the course of a contract that could continue for eight years. The tentative deadline for vendors' proposals is Dec. 6, and the service plans to award the contract by May.

Some vendors have complained that the scope of the acquisition will keep all but the very largest IT companies from bidding for the work. Until now, the Navy (like the other services and civilian agencies) has acquired its combat support systems, office networks, PCs, phone services and other elements of N/MCI separately. However, the Navy program executive officer for IT, Joseph R. Cipriano, says he expects substantial participation by small and disadvantaged businesses in the new program.

The Navy will use a best-value scoring system to select the N/MCI supplier. Bid evaluations will be based in part on the vendors' proposals for meeting the Navy's performance measurement needs. Security and reliability of the proposed systems are among the performance goals, along with customer satisfaction. Cipriano says he expects the Navy will hold costs down by integrating its systems, achieving greater efficiency and having a single contractor to deal with.

The N/MCI program is the latest manifestation of a number of IT procurement trends in the federal government. Several agencies are experimenting with "seat management," in which they procure local networks, PCs and support services on a per-user basis. Agencies such as the Internal Revenue Service also have chosen to select a single prime contractor to provide IT in a more systematic and coordinated way than in the past.

Meanwhile, technological developments are pointing toward the use of multipurpose network pipes that can carry all kinds of traffic, unlike the separate telephone, television and data networks that have been the norm until now.

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Battle over outsourcing lists just getting started

Nancy Ferris — Mon, 04 Oct 1999 00:00:00 -0400

nferris@govexec.com

RICHMOND, Va.-Federal and private-sector representatives discussing how the Federal Activities Inventory Reform Act will play out agreed on one thing Monday: Last week's release of 52 agencies' lists of jobs that might be outsourced is just the beginning of a long, tortuous process.

Meanwhile, the Defense Department is expected to issue new regulations to clarify for its components how to conduct the public-private competitions that normally take place under Office of Management and Budget Circular A-76. The rules will tell DoD agencies how to avoid the appearance of conflicts of interest and how to handle requests for waivers of the A-76 process, said Stan Z. Soloway, deputy undersecretary of Defense for acquisition reform.

Public-private competitions under A-76 are the means the White House has chosen to implement the FAIR Act, which is intended to encourage outsourcing. Deidre A. Lee, administrator of the Office of Federal Procurement Policy, and Stephen M. Sorett, director of government contract services for the accounting and consulting firm of Grant Thornton, agreed with Soloway that the outsourcing process is lengthy and not as clear as it could be.

Sorett predicted that lawsuits will be filed to clarify or improve the process. One complaint from vendors is that OMB decided not to issue new regulations to implement the FAIR law, he said.

Lee said civilian agencies so far have identified 120,000 of their 1.1 million jobs as potentially commercial, but she has yet to review 2,000 or 3,000 pages of listings from the Defense Department. The DoD list comprises more than 300,000 jobs that are "competable," Soloway said. Those lists will be compiled and reissued annually.

Soloway, Lee and Sorett spoke at a session of the Interagency Advisory Council's annual conference here, one of the premier gatherings of leaders of the federal information technology industry and its high-ranking customers in government.

Lee said the process of implementing the law lacks clarity in places, including the lack of a single official repository for agencies' lists that would make them easier to review. Beginning with the Sept. 30 release, vendors and other interested parties have 30 days to study the lists and lodge any challenges of omissions or unwarranted inclusions on the jobs lists. Federal employee unions can also challenge the listing of particular jobs as commercial.

Agency executives have discretion to compete the listed jobs or keep them filled with government employees, but many here, from both government and industry, were predicting that agencies would face intense congressional scrutiny if they fail to move ahead with public-private competitions that will establish the most cost-effective way to get the work done.

Soloway said the FAIR Act would have little impact on DoD's future because the department has been moving aggressively to compete its commercial-style work and has concluded that outsourcing is one useful way to get its work done within budget and time constraints. "The key issue for us comes down to how we conduct our competitions," he said.

Sorett said the long, complex A-76 process and the difficulty of obtaining firm decisions in the federal environment has discouraged some potential contractors from seeking outsourced work.

GovExec.com will continue to monitor agencies' outsourcing reports and update the results in our FAIR Act Report.

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Opening the Door to E-Commerce

Nancy Ferris — Fri, 01 Oct 1999 00:00:00 -0400

he White House and Congress agree: Agencies need to get rid of paperwork and many of the people who push that paper. Policy-makers are leaning heavily on the agencies to do more business electronically, in program areas and especially in procurement. But as agencies begin to consider doing serious business online, they run up against a harsh reality. The mechanisms that protect most agency information systems today simply are not robust enough for use in electronic commerce on the Internet.

It's not simply a question of beefing up World Wide Web sites and e-mail to keep out hackers. The bigger question is whether your agency can be sure who it's doing business with and meet the legal standards for legitimacy of the transaction, so it will withstand a challenge in court. Until now, signed and certified documents have provided these assurances. But e-commerce will not advance far if a piece of paper must back up each electronic transaction. Digital signatures are the answer.

What's needed is a system for ascertaining people's identity and their standing once and issuing an e-commerce credential that will identify the individuals online. The system must be tamper-proof and preserve privacy and confidentiality while it gives both parties confidence that they know who they are dealing with. That's a tall order in an internetworked world, but fortunately, the technology exists. It's called public-key encryption. (For an explanation of the technology, refer to the Government Information Technology Services Board Web site at http://gits-sec.treas.gov.)

Although public-key technology languished for more than a decade after its introduction in the early 1980s, it now appears headed for widespread use as federal agencies begin to adopt it en masse. Richard A. Guida, chairman of the interagency coordination committee under the aegis of the GITS Board, says more than 4 million certificates identifying authorized users of federal and contractor systems are likely to be issued in the next year or two.

The federal government is ahead of the private sector when it comes to implementing public-key encryption because of lingering concerns in the commercial world about the legality of digital signatures, says Howard Stern, a longtime proponent of electronic commerce and chair of the Federal Electronic Commerce Coalition, an industry consortium.

Under the 1998 Government Paperwork Elimination Act, digital signatures must be considered as valid as those on paper. GPEA also requires agencies to accept and keep documents from the public in electronic form and set up digital signature systems by October 2003.

With the legality of digital signatures for federal operations no longer in doubt, the missing ingredient has been the infrastructure that must undergird a public-key encryption program. A public-key infrastructure, or PKI, is now developing rapidly, particularly at the Defense Department.

What's a PKI?

The infrastructure is a combination of computer hardware, software and services. A PKI can be established in many ways, but there are four essential elements:

Policies for issuing certificates and relying on them in the course of agency operations.
A registration authority that ascertainsthe identity of individuals and authorizes them to use a system or parts of a system.
A certificate authority that anyone can check with to see if an individual is duly registered.
Software and communications systems that recognize and transmit authentication and verification codes.

Once a computer user has obtained his or her certificate, the system can be invisible. In fact, many federal computers are equipped today with PKI-aware software such as Lotus Development Corp.'s Notes and Microsoft Corp.'s Exchange and Outlook. When the user enters a password, the certificate in the system may be activated invisibly.

The typical agency may be using some of the elements of a PKI, but agencies usually lack policies and secure processes for issuing certificates and maintaining an online registry. The certification process is important to make a digital signature trustworthy. In this process, a trusted third party essentially verifies that you are who you say you are and that you are authorized to take certain actions.

When workers' job responsibilities change or even when they get a new office or computer, their certificates must be updated right away. Those agencies that have not operated rigorous computer security programs will have to change their ways.

Big Challenge

Most agencies are starting small with pilot programs for some internal users. Setting up a PKI for operations within an agency or with a defined group such as participants in a certain project is doable, but it's not easy. "Part of the difficulty we face right now is that the products are in the early maturation phase," Guida says. The government is committed to using commercial, off-the-shelf (COTS) products, but there are fewer than a dozen complete PKI systems on the market. Standards still are emerging, and business models are not yet firm.

An agency can contract with an outside company to operate its PKI, or it can do the work in-house. If it chooses the latter option, it can buy the software or lease it on a per-transaction basis. Besides the acquisition strategy, the agency must resolve a host of architectural questions that have both technical and operational implications. For example, should there be just one central certificate authority or a hierarchy of subordinate ones? Agencies will approach these issues differently and need not have the same architectures, as long as they adhere to technical standards.

Establishing what's known as a "trusted path" or "chain of trust" between your system and others isn't easy. The software and hardware from several vendors must interoperate to a greater degree than with ordinary Internet communications. Interoperability is an absolute must. "We're not going to go anywhere until we can make sure that interoperability occurs," says Patricia Booth, a senior product manager at Lotus Development Corp.

When agencies engage in e-commerce outside of their own electronic domains, how do users know that they are doing business with legitimate enterprises and not hackers' computers masquerading as something else? In the case of exchanges between two federal agencies, they will communicate through a "federal bridge certificate authority" that Guida is establishing with $530,000 in funding from the National Security Agency. It will cross-certify agencies' transactions. Guida hopes it will be operating early next year. Certificate authorities will maintain online certificate revocation lists like the lists of invalid numbers that credit card issuers publish.

As for doing business with the public, that can be accomplished through the General Services Administration's Access Certificates for Electronic Services (ACES) program. Any day now, GSA's Federal Technology Service is expected to select one or more contractors to issue certificates to the public. At no charge to individuals, they can apply to a designated registration authority and submit three proofs of identity, such as a passport, Social Security number, driver's license or employer reference.

Once ACES is in place, agencies can more comfortably use the Internet for weighty transactions such as accepting tax payments and applications for loans and financial benefits. Many people remember the controversy that erupted when the Social Security Administration tried to deliver earning and benefits statements to individuals via the Web in 1997. The agency quickly pulled the plug on its innovative service when critics pointed out how easy it might be to obtain someone else's earnings history. ACES is supposed to make such services possible. "It certainly is better than PINs [personal identification numbers] and passwords, which are very spoof-able," Guida says.

Pilot Programs

Agencies are gearing up to use the ACES services, but so far most are engaged in limited PKI pilot programs.

One major exception is the Defense Department, which has made a major commitment to going paperless by 2003. To reach that goal, the department will provide PKI services via smart cards to 4 million or so civilian and military employees and contractors by the end of 2002. "There's no question that DoD is the principal engine of change" when it comes to adopting PKI, Guida says. "Security is their business, and it's no wonder that they're good at it."

The Air Force has launched a program to issue certificates to 700,000 people, and the Navy has a comparable program under way. NSA and the Defense Information Systems Agency are coordinating the activities across DoD. The DoD infrastructure will support both classified and unclassified transactions. Under the scheme adopted by Guida's steering committee, there are four levels of security available within the federal PKI. Agencies' internal security policies must conform to these levels if they wish to use the bridge authority.

Other agencies in the vanguard, according to Guida, are the Federal Deposit Insurance Corporation, NASA, the Energy Department and the Federal Aviation Administration. FDIC and the FAA aim to use PKI to Web-enable some of their regulatory activities, he says, while the others are focusing primarily on internal operations, such as human resources and procurement.

The Veterans Affairs Department is perhaps more typical, with small PKI pilots under way in the areas of information security incident reporting, exchanging customer data with other agencies, enrollment verification for education benefits and internal agency operations. Installing a PKI is a major undertaking, says Cathie Ward, who's coordinating the effort in the Office of Information and Technology. She recommends an incremental approach.

The VA hired a McLean,Va., firm specializing in PKI, CygnaCom Solutions Inc., to advise it on the technical and policy issues it will confront. To head off interoperability issues, the VA plans to install a single utility that can be shared by its operating bureaus and offices. It's looking for the next release of Microsoft's NT operating system, called Windows 2000, which is promised for late this year with full PKI capabilities out of the box.

Some federal agencies have shown no signs of serious interest in PKI. But Guida thinks the PKI bandwagon is picking up steam. In his view, public-key encryption is "the gateway to an electronic-commerce-rich future" because of its unique ability to solve a series of security problems that otherwise must be resolved piecemeal.

Many others agree. "PKI is the only technology that is going to work in a broad scheme" for e-commerce, says the Federal Electronic Commerce Coalition's Stern. "People understand what they have to do."

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Federal business Web portal emerges

Nancy Ferris — Mon, 13 Sep 1999 00:00:00 -0400

nferris@govexec.com

WILLIAMSBURG, Va.-A substantial portion of the federal government's big procurements soon will be accessible through a single World Wide Web site being developed by the General Services Administration.

Unlike previous efforts to create a single point of contact for federal buyers and their would-be suppliers, the Electronic Posting System (EPS) at www.eps.gov seems to be winning the support and participation of most major agencies, both Defense and civilian. Developer Paul Fontaine of GSA's Office of Governmentwide Policy says commitments are close at hand from agencies that do about 90 percent of the government's buying.

Agencies not only post notices of their buying intentions on the Web site but also can make available all the procurement documents for download by vendors. When a subsystem being developed by the Air Force is added onto the site, vendors also will be able to deliver proposals to agencies securely.

The site has been in development for more than two years. GSA has worked with NASA, the Transportation Department, the Air Force and other agencies to build it. Most recently, Fontaine said, the Treasury Department and its 14 bureaus signed an agreement to use the site. Agencies can either post their solicitations on EPS or link their Web sites to it.

Because EPS has a flexible, modular architecture, it will interoperate seamlessly with CBDnet, the Web site that publishes Commerce Business Daily notices; the FACNET electronic commerce network; and agencies' existing procurement sites. Eps.gov will be a portal for accessing the information on these sites.

Although Fontaine has done little marketing to inform the public about the Electronic Posting System, more than 28,000 vendors have begun using the system to locate sales opportunities. They can sign up to receive e-mail advisories whenever a solicitation is posted in their business category. For example, a paint store could be notified each time an agency seeks to buy paint. The system already is generating some 300,000 such e-mails every day.

Vendors need not fill out elaborate registration forms nor pay to use the Web site, but the secure operations will require them to obtain registration certificates. Once the secure subsystem is in place, the military services and other agencies with classified procurements can exchange information with approved vendors. For example, military buyers do not make public the specifications for advanced weapons systems.

Demonstrating the posting system at GSA's annual IRMCO conference here, Fontaine said it will undergo reviews in the next few months and may be designated by the Office of Federal Procurement Policy as the official "single entry point" for federal procurements valued at more than $25,000. Next year, he said, it may be linked to the systems for posting federal grant opportunities on the Web, becoming a single point of access for many more billions of dollars worth of grants and acquisitions.

Agencies will pay fees for the use of the site and the software now that it is moving out of its pilot stage, but Fontaine said that "it's cheaper than anything else they've been considering."

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Using Technology to Control Technology

Nancy Ferris — Wed, 01 Sep 1999 00:00:00 -0400

ow many computers does your agency own? How about fax machines? How many copies of Microsoft Word or whatever word processing software is standard for your organization? How old is the average PC?

If your managers cannot answer these questions with precision, you work for a typical agency. For many agencies, information technology represents the largest category of assets, but little is known about those assets. Equipment dies and is replaced without much notice, upgrades are routine and unmemorable, and items are bought locally at dozens of locations nationwide with haphazard record keeping.

The situation is hardly better in the private sector. Large corporations routinely misplace hundreds of PCs, misjudge the amount of fees they
should be paying for software licenses and contract main-
tenance, and allocate IT resources inefficiently. A study by software and services supplier Micropath Inc. of Bellevue, Wash., found that the average corporation has 22 percent more PCs than the records show.

Agencies and corporations pay the cost. According to two respected IT research and consulting organizations, International Data Corp. and the Gartner Group, large organizations can shave between 5 percent and 35 percent from their annual IT expenses by improving asset management.

It's not just a question of money. Unrecorded assets are difficult to manage. Fragmented IT inventories were one of the first problems agencies encountered when they began to tackle year 2000 remediation. For example, the Air Force's first effort to assess the extent of its millennium problems overlooked 5,000 computer systems, says Robert J. Lieberman, assistant inspector general for the Defense Department.

"Our past sins in lax IT management have come back to haunt us," Lieberman told a conference audience in May. Without a clear picture of the hardware, software and communications links on which DoD relies, the department's managers were handicapped in planning and budgeting for the necessary testing and remediation work.

Lieberman said one positive outcome of the Y2K experience has been the first good inventory of DoD

systems ever compiled. But hard- ly a day goes by without a change in that inventory, as new software and computers are acquired and old ones decommissioned or updated.

New Tools

To better control IT costs and keep their inventory records current, federal agencies and large businesses are beginning
to acquire new IT asset management tools. For example, the Federal Deposit Insurance Corp. is installing a software system to track 32,000 pieces of hardware--desktop PCs and servers, laptops, printers, fax machines and the like--nationwide.

"We had a very fragmented approach to managing our inventory," explains Janet Roberson, the assistant information resources management director who is heading up the project. Much of the asset management responsibility rested with the agency's local offices, and there was little consistency or uniformity in the reports that reached headquarters in Washington.

With the help of Innovative Logistics Techniques Inc., a contractor in McLean, Va., FDIC took inventory at all its locations, placed a bar-code sticker on each item and entered the information into a database. While they were at it, contractor and FDIC employees checked every computer for Y2K compliance. By last December, they had a clear picture of what PCs had to be replaced to ensure they would keep operating accurately after Dec. 31 of this year.

Although Y2K was one of the agency's concerns, Roberson says the top issue was getting control of IT costs. The new system tracks the purchase cost of new equipment, its maintenance history, its configuration and so on. With the data in hand, she says, "we can move forward toward a total-cost-of-ownership way of looking at all our assets. We're not there yet, but we're moving in that direction."

"Total cost of ownership" is the buzzword associated with the discovery, a few years ago, that maintaining and repairing computers, training users, supporting networks and other operating expenses far overshadow the purchase price of the hardware and software. With better data about operating costs, systems managers can make better decisions about, for example, the optimum time in their life cycle to upgrade computers, before maintenance becomes a burden.

Fewer Disappearances

Costs also are held down when fewer pieces of equipment simply disappear, as happens in most large organizations. In the past, the lack of good records made it difficult to hold anyone at FDIC responsible for disappearing items.

Such disappearances need not be thefts. Sometimes, for example, a field office discards a broken computer because the repair bill would be excessive. Without a means of easily recording that disposition, the equipment seems to have disappeared.

In fact, Roberson says, the difficulty of managing the 3,000 laptop computers used by the agency's bank examiners triggered FDIC's interest in getting a better tracking system. Now the field offices will be held accountable for the equipment their employees use. The offices, in turn, have been freed from paperwork and some other responsibilities.

The contractor, Innovative Logistics Techniques (also known as Innolog), receives new computers and related equipment on behalf of the agency, configures the laptops in accordance with FDIC standards, enters the necessary information in the asset management system, and ships the systems to the field offices. This area is one where asset management has sizable potential to cut costs, IDC reports. When repairs are needed, Innolog makes arrangements with the supplier for warranty service.

That leaves the field offices with less work but also less autonomy. Purchases no longer may be made locally, and configuration decisions are made centrally. Software updates can be delivered over the agency's network with little human intervention. The change has not been entirely welcome throughout the field offices, Roberson acknowledges. She calls it "a radical change in the culture and the environment" at FDIC and says that for all such changes, "the people part is the biggest challenge."

The new system already has begun to generate some savings, Roberson says. For example, in the past year FDIC began to manage central stores of items such as mouse pads and add-in memory chips. The agency was able to get volume discounts for the first time as its needs became predictable. What's more, these items are now readily available on short notice.

Plan Ahead

The system also will give Roberson and her staff the solid data she needs to develop a realistic budget and defend it. Computer and software upgrades can be scheduled. For example, when the agency decided to replace its slow 50-MHz and 100-MHz Pentium systems, it could determine how many new computers were needed without polling the field offices one by one.

At FDIC, Innolog implemented a software package called Maximo from PSDI, a Bedford, Mass., company. Maximo can track many kinds of assets, as can some of the competing products on the market. They include AssetCenter from Peregrine Systems Inc., which recently launched a subsidiary, Peregrine Federal Systems Inc. of Bethesda, Md., to serve the federal market, and Argis from Janus Technologies Inc. of Pittsburgh.

Other products, such as IT Ledger from NetBalance Inc. of Gaithersburg, Md., MC/EMpower from MainControl Inc. of Vienna, Va., and NetCensus from Tally Systems Corp. of Lebanon, N.H., are designed specifically for IT asset management. Such products can take advantage of new capabilities built into today's PCs that record in the computer's memory when it was acquired, its location, what software has been installed, and similar information. Once set up, such systems can use the agency network to update inventory records automatically.

For FDIC and other agencies, says Christopher Losa, director of integrated solutions at Innolog, it will make more sense to use these "auto-discovery" capabilities when nearly all the computers have that feature. With a significant number of older machines that don't report in automatically, auto-discovery isn't helpful.

Purchases of IT asset management systems will double in the next three years, IDC market researchers predict. Some of those dollars will be spent on enterprise resource planning systems, which can include asset management modules, and others will be spent on systems management products from Computer Associates International Inc., Tivoli Systems (an IBM Corp. subsidiary) and Hewlett-Packard Co.

The Army recently bought licenses to install 435,000 copies of Tivoli's enterprise management software. Once installations and commands acquire the product, they will be able to inventory PCs and networks worldwide from one or more central locations while keeping abreast of system operations and bottlenecks, says Peter J. Jacobs, a vice president of Telos Corp. of Ashburn, Va. The Army's Small Computer Program has contracted with Telos to install the management system under the licensing arrangement.

No Hands

Army installations also are using other asset management tools. For example, Fort Richardson, Alaska, and two other Alaska installations have installed software called BelAsset from Belarc Inc. of Maynard, Mass., to monitor hardware and software on 700 desks. Michelle Tonsmeire, an industrial engineer at Fort Richardson, says the product has saved time for the computer support staff. "If someone needs RAM [memory], you can easily find out what they're running, how much they have and what kind it is, without going out there" to open up the computer and check what's inside, she says.

The primary motivation for acquiring the asset management system was not to control costs or save time, Tonsmeire says, but to comply with Executive Order 13103 on computer software piracy, which President Clinton signed in September 1998. It calls for agencies to ascertain that they are authorized to use each software program installed on their computers.

At the Justice Department, there was another motive: the need to improve financial management. The department is installing Janus' Argis system nationwide in 300 U.S. attorneys' offices to track all items costing $1,000 or more, including IT, firearms, vehicles and more. At mid-year, with just 72 of the 300 offices using the system, there already were 82,954 records in the inventory. Because of the emphasis on improved financial management, the Justice system will have strong links to the department's accounting systems.

Staffing pressures, software licensing and Y2K concerns, and a pending new federal accounting standard requiring agencies to track the costs of all their internally developed software--not just purchased programs--contributed to the decision to use an asset management system, according to a mid-level manager whom Justice officials allowed to be interviewed only if her name would not be published.

IT accounts for about 80 percent of the inventory in U.S. attorneys' offices, the manager says, and the ability to manage the computer operations centrally will save substantial sums. On the other hand, the system gives each local office the ability to see and update its own inventory records, which she says is the only way to achieve accountability. Central management of so many items from Washington is impossible, the manager says.

Contracting Out

Agencies that don't want to install a distributed asset management system have an alternative for getting a handle on their desktop IT assets: outsourcing. Under the "seat management" programs that have developed some momentum recently in federal agencies, contractors are standing by to provide asset management, along with other PC and local network support services.

Asset management, help desk and repair services are the primary components of seat management, a bundle of services that can be tailored to the needs of an agency. Seat management usually means that an agency will end up leasing PCs and standard commercial software, rather than buying them, so it has fewer assets to manage.

Asset management and ancillary services, such as disposal of unwanted PCs, can be acquired from an array of IT contractors. More companies are entering the arena. For example, Dell Computer Corp. recently added to its General Services Administration schedule contract a bundle of asset management and related services called "CareFree Services." For an extra fee, computer buyers can get system customization and installation, electronic asset tagging and other services. Pedro Ferro, director of marketing for Dell's federal unit, says outsourcing is a trend, and his company is responding to customer needs.

As more computers come with built-in management features, there may be less need for these kinds of services, but software vendors are betting that the pressure for better management of IT assets, whether it's done in house or outsourced, will continue to mount.

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Agencies Look Beyond Y2K

Nancy Ferris — Sun, 15 Aug 1999 00:00:00 -0400

nferris@govexec.com

t the end of August, the Treasury Department will shut down the walk-up windows in 37 cities where members of the public buy and redeem Treasury bills, notes and bonds. It's one of the final steps along a path toward doing all Bureau of the Public Debt securities business online.

For the last two years, the bureau has been encouraging its 620,000 customers who are individual investors to use the telephone and the Internet for their purchases and other transactions. The campaign has succeeded. Fewer than 2 percent of the customers still visit the offices. About half use phone or the Internet; the other half still use mail.

"Our customers are expecting that we will use technology to provide good, solid customer services to them in the future," says Jane F. O'Brien, the bureau's assistant commissioner. The bureau will set up call centers at Federal Reserve banks in Boston, Dallas and Minneapolis next year to centralize the process of handling customer transactions via a toll-free phone number.

The call centers and the agency's Web site (www.publicdebt.treas.gov) will provide more, faster and better service while saving the bureau about $5 million a year, O'Brien says. The call center staffs will have more up-to-date and detailed information on hand for answering customers' questions and will be available 12 hours a day.

Top officials at the Bureau of the Public Debt expected at least a small public outcry when they announced the end of walk-up service in May. Instead, O'Brien says, "people are embracing it even faster than we might have thought." Customers have taken the time to write and thank the bureau for improving its services via the phone and Internet, she says, and complaints are along the lines of "why did it take you so long to do this?"

Bureau officials were expecting to release a request for proposals for the call center equipment this summer. They hope the centers can be operational early in 2000.

Y2K Under Control

A couple of years back, such a timetable would have seemed unlikely. The conventional wisdom then was that the year 2000 changeover would bring the application of new information technology to a halt by now. IT professionals and managers would be working 18-hour days to get old systems in shape for the century change and planning for new systems would take a back seat to keeping existing systems operable.

But the century date change now is viewed as manageable. That's not to say that no problems will occur after midnight on Dec. 31. But the Bureau of the Public Debt is not alone among federal agencies when it says on its Web site: "We . . . believe our systems-mission-critical and otherwise-are ready for the century date change."

It's been an impressive drive to this point, and a costly one. Agencies have spent almost $7 billion to achieve Y2K readiness. That sum has bought a level of confidence in the repairs that has been rising by the month. But agencies still have unfinished Y2K business, especially with systems they have designated as non-mission-critical. Even if an agency can keep operating without such systems, there no doubt will be some inconveniences and difficulties before all the systems are fixed.

One bug or error can bring down a system, and until the clocks strike midnight on Dec. 31, no one can be quite sure what will happen. The remaining weeks before then will be spent in last-minute testing and retesting, in hopes of minimizing the uncertainty.

Harris Miller, president of the Information Technology Association of America, says that although 95 percent of federal Y2K repairs have been completed, the last 5 percent of such projects always is the most difficult. The situation "still is a major challenge," he says, although he acknowledges being "a lot more optimistic than I was."

IT companies have been sharing the agencies' pain. Although Y2K has prompted some replacements of computer hardware and software, plus substantial purchases of systems remediation and testing services, it also has led to a drop-off in sales this year, according to many who sell IT products and services to the government. "No one is rolling out new programs," says Joe Duffy, a federal sales executive for Oracle Corp., the government's leading supplier of database software.

Pent-Up Demand

Duffy and other IT vendors are expecting government sales to pick up early in the new calendar year. "There is a pent-up demand for systems changes," says Dennis J. Fischer, who heads the General Services Administration's Federal Technology Service, "and there'll be some money freed up."

Federal IT market analysts at Federal Sources Inc. in McLean, Va., predict that the government's IT spending will grow by 4 percent, or $1.2 billion, in the coming fiscal year, reaching almost $34.5 billion. The Defense Information Systems Agency will be the top Defense Department spender, at more than $3.5 billion. The Air Force remains the spending champ among the military services, with more than $3 billion in IT expenditures budgeted for fiscal 2000.

"I think a lot of money is going to be spent to fix DoD logistics" systems and processes, says Robert A. Dornan, the top analyst at Federal Sources. Logistics will get the biggest single chunk of IT funding in the Air Force and the Navy, he says, and in the Army will get almost as much as command and control systems. The three services' logistics IT spending for fiscal 2000 will add up to more than $1 billion.

The Transportation Department will see a sharp increase in its IT spending, to about $2.6 billion, and will outspend the other civilian agencies, according to Federal Sources. Most of the increase is due to Federal Aviation Administration modernization. DOT will spend more than 20 percent of its fiscal 2000 operating budget on IT, Federal Sources says. Other agencies that will spend more than 10 percent of their budgets on IT are the Treasury and Commerce departments, NASA and the Social Security Administration.

Security: 'A Huge Item'

What will agencies be buying? It's widely believed that some of the money newly freed up from Y2K remediation will be spent on information security measures.

"Security is a huge item-particularly if you toss in privacy and the other issues that go with it," says John R. Dyer, principal deputy commissioner of the Social Security Administration. The security technology his agency needs is not available at any price, he complains.

Security concerns, which result in a lack of trust in electronic transactions, are the major impediment to doing more government business electronically, says Paul D. Grant, co-director of the federal electronic commerce program. "We're held to a higher level of expectation by the citizens," Grant adds, explaining that unavailability of Web sites or other security glitches are tolerated in commercial sites but not in government ones.

In January, the White House called for spending $1.46 billion in the coming fiscal year to finance research into protection technology, improved detection and notification of hacker attacks, more sharing of countermeasures and creation of a "cyber corps" of experts who could respond to attacks on agencies' systems. Several months earlier, in Presidential Decision Directive 63, President Clinton declared that "every department and agency of the federal government shall be responsible for protecting its own critical infrastructure, especially its cyber-based systems. Every department and agency chief information officer shall be responsible for information assurance."

The push for information security is leading agencies to acquire new hardware and software products as well as hire consultants to advise them on protecting their data and transmissions. Although the scope of Clinton's directive extends well beyond information security, many observers agree that IT is the focus of most agencies' efforts to date.

Telecom Transition

Agencies also will be making the transition to the new FTS 2001 long-distance communications services procured by the Federal Technology Service. The transition is difficult because it requires agencies to re-evaluate their need for various services and consider options they may have ignored until now. Every federal phone user will get new or upgraded long-distance service before it's over. The switchover could take another year or two, but the low rates offered under the contracts with MCI WorldCom and Sprint provide agencies with powerful incentives to get on with it once their Y2K problems are under control.

Even though agencies will cut their long-distance unit costs by two-thirds under FTS 2001, they are spending money now for management, engineering and analytical services to prepare for the transition. GSA and its Interagency Management Council have set aside $14.2 million to help agencies, but transition expenditures will far exceed this amount.

By and large, federal telecommunications spending isn't changing much from year to year, according to experts such as Fischer. He says the significant drop in rates has been offset by increases in volume. That's in keeping with his goals. "As we become a more electronic government," Fischer says, "we want to get the communications costs so low that they're not a factor" in decisions.

Product Purchases Level Off

Across government, computer hardware and software sales are level or declining slightly, according to Federal Sources Inc. One major reason for this is the increasing standardization of IT products. Buyers-even those with very sophisticated needs-expect to get commercial off-the-shelf (COTS) products and have them work together predictably and reliably. Speeded-up acquisition processes coupled with the COTS approach are giving agencies "the latest technology at super-competitive, incredible prices," says Steven Kelman, the former director of the Office of Federal Procurement Policy.

When IT products are standardized, it's easier to compare features and prices and buy wisely. Prices tend to stabilize or drop, because it's difficult for vendors to justify high prices for a product that does the same thing as a competing product costing hundreds of dollars less. Falling prices are commonplace in today's PC market, and some experts are predicting that the standard office computer will cost $500 or $600 within a year.

Within the last year, EMachines Inc. of Irvine, Calif., which sells PCs for $399 to $599, opened for business and achieved the No. 4 rank among manufacturers of PCs for retail sale, outselling Apple Computer and Packard-Bell. The company is marketing its stand-alone computers to first-time PC buyers for home use, but its systems are more powerful and fully featured than some of those in federal offices today. Such prices don't include a monitor or printer, but most federal desktops already have these accessories.

Severe price pressures are contributing to profit erosion at some established computer companies, including Compaq Computer, the nation's No. 1 PC maker. Direct-sales PC companies, led by Dell, Micron and Gateway, are doing somewhat better than those that rely on resellers, in both the federal market and the broader computer market. Dell, in fact, rose from No. 12 on the Government Executive hardware suppliers' list last year to No. 4 this year. It achieved the highest rank of any company that makes only PCs, servers and related gear.

Dell and its competitors are offering more services and custom options to their government customers as the competition intensifies. For example, Dell maintains "premier pages" for almost 60 federal agencies on its Web site. When a federal employee opens his agency's Dell page, he or she gets information about prices, configurations and other specifics that apply only to the contract or blanket purchase agreement between Dell and that agency.

These kinds of customer services go hand in glove with the deregulated IT buying that has become the norm in the last few years. A decade ago, a federal professional would have been fortunate to receive a new computer within two years after getting his or her boss to sign off on the purchase. Now delivery within weeks or even days is common, thanks to a series of procurement reforms and the push to adopt best commercial practices within government.

Low prices and easier purchasing notwithstanding, some leading federal IT executives predict that agencies soon will buy less hardware and software and instead will simply sign service contracts under which contractors provide and maintain computers, networks and other gear.

"I believe there is an inexorable trend where we are buying more services and investing less capital," GSA's Fischer says.

"Agencies are having much more difficulty getting budget dollars" for IT, Fischer says. Although he doesn't say so, agencies also are discovering how difficult it is to manage, operate and maintain their own systems, particularly in this era of labor shortages. These two pressures, along with the trend toward using COTS technology, are forcing agencies to consider alternative approaches to acquisition.

No Inventory

"I don't want to own anything," says James J. Flyzik, deputy assistant secretary of the Treasury for information systems and vice chair of the federal Chief Information Officers Council. "I want services." Flyzik's department has operated one of the world's largest private telecommunications networks, but now it is changing direction and will buy communications services, rather than switches, from service providers, rather than equipment manufacturers.

Treasury also is one of the agencies embracing a "seat management" strategy for its desktop computers at headquarters, using a GSA program to acquire a comprehensive package of local area network and PC support services for 1,600 employee "seats." Wang Government Services of McLean, Va., will manage the hardware and software and replace them on a schedule laid out in its 10-year contract.

GSA and NASA are using seat management contractors and also selling the services to other agencies. When GSA and NASA awarded their contracts more than a year ago, GSA officials predicted that seat management would take off like a rocket, but that hasn't been the case. Now, however, the concept may be catching on. The Health Care Financing Administration is among the other agencies taking the plunge.

Rent-a-Program

Seat management frees agencies from the burdens of owning PCs. Once purchased, hardware and software soon become obsolete, and require expensive maintenance and support. The procurement of desktop computers under seat management is often compared to purchasing electricity or water from utility companies. The vendor is paid according to the level of service delivered, including the number of desktops served, speed of response and frequency of upgrades.

Many in the IT industry are predicting that businesses and government agencies soon will acquire software in much the same way. It's in keeping with the trend to invest less capital and pay per transaction or unit of usage. William A. Woodard, president of Affiliated Computer Services' federal unit, ACS Government Solutions Group Inc., says his federal customers "want to pay by the drink," whether it's seat management or other kinds of services.

ACS is one of the rising stars on this year's list of the top computer services and software providers, moving up to the 10th spot on the list. In the same list, Science Applications International Corp. (SAIC) moved up from No. 10 to No. 4. Federal Sources' Dornan says the second-tier companies-those below the top 15-are the ones that have experienced the most dramatic gains, and much of their growth has come at the expense of small and minority-owned companies.

Between 1996 and 1998, according to Federal Sources, small businesses and small disadvantaged businesses lost $1 billion in annual federal business. During that period, procurement reforms made it easier for agencies to choose suppliers quickly, and lawmakers and regulation-writers removed some of the rules favoring small businesses.

New Powerhouse

SAIC announced in June that it would acquire Boeing's Information Services unit, which SAIC officials said could add $300 million to their company's federal revenues this year. Boeing is the No. 5 IT contractor on our list, and SAIC is No. 10.

Among other companies affected by mergers and acquisitions, BTG, last year's No. 8 IT contractor, sold its PC reseller business to competitor Government Technology Services Inc. and dropped to No. 32. GTE, meanwhile, was being acquired by Bell Atlantic this year, except for GTE's Government Systems unit. That unit was sold to General Dynamics., the defense contractor, which formed a new Information Systems and Technology group in 1998 from a series of acquisitions. Even before the GTE deal, General Dynamics officials projected that the group's 1999 revenues would top $1 billion. General Dynamics is likely to show up on future lists of top IT contractors if all goes as planned.

The perennial No. 1 IT contractor, Lockheed Martin, could move down on the list in future years if Lockheed Martin sheds its federal systems integration unit and some others that provide IT to the Postal Service and other agencies. The company was reviewing divestiture options this summer.

The GSA schedule program, meanwhile, continues its rapid expansion. IT schedule sales reached the $2 billion level in fiscal 1996 and were about $4.5 billion last year. "They plan to grow that program at $1 billion a year," Federal Sources' Dornan says. Oracle, the government's No. 1 database supplier, has seen its GSA schedule business quadruple in the last several years, Duffy says.

Agencies continue to get discounts and other concessions from the standard schedules through blanket purchase agreements, or BPAs. For example, ASAP Software Express, a reseller headquartered in Illinois, has a five-year BPA to supply the Navy with standard Microsoft Corp. desktop software. Company officials say the agreement calls for discounts of up to 50 percent from standard GSA pricing.

Other vehicles are giving the schedules a run for their money, however. Agencies such as the National Institutes of Health and the Transportation Department are selling IT services and products to other agencies, using benefits such as flexibility, useful Web catalogs and speed of delivery as selling points.

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