ITAA's Year 2000 Outlook
June 12, 1998                        Volume 3, No. 23

Published by the Information Technology Association of
America, Arlington, VA Bob Cohen, Editor
bcohen@itaa.org

Read in over 70 countries around the world

ITAA's Year 2000 Outlook is published every Friday to
help all organizations deal more effectively with the
Year 2000 software conversion.  To receive a
subscription to this free publication, please sign up
on the web at https://www.itaa.org/transact/2kout
looksub.htm.

ITAA's Year 2000 Outlook is sponsored in part by CACI
International Inc., DMR Consulting Group Inc., and
Y2Kplus

Bennett Hearing Finds Y2K Disclosure Lacking

If public companies really understand the extent of
their Year 2000 exposure, many are not saying so.  At
least that appears to be the conclusion of a hearing
held this week by Sen.  Bob Bennett (R-UT) and his
Subcommittee on Financial Services and Technol ogy.
Although Bennett said the stock market has replaced
real estate as America's "nest egg," the information
being provided by numerous public companies on the
status of their Y2K efforts is coming up goose eggs.

Is public disclosure on Y2K in danger of becoming one
big yolk?

Sen.  Bennett said that revised Security and Exchange
Commission (SEC) guidelines to provoke more meaningful
Year 2000 information from public companies has had a
limited impact and said he is disappointed with the
results to date.

Appearing before the subcommittee, SEC Commissioner
Laura Unger shared some of Bennett's dissatisfaction.
According to Unger, "the quantity of disclosures is up,
the quality is not."  In her testimony, Unger tried to
unscramble some of the confusion abo ut the
Commission's disclosure expectations.  The issue is
whether companies consider Y2K "material" to their
operations, either because costs incurred to address
the situation might cause reported financial
information "to be not necessarily indicative o f
future operating results," or because the "cost or
consequences of incomplete or untimely resolution"
constitutes a material event which could be "reasonably
expected" to affect future results or the accuracy of
financial information.

Referring to an SEC Staff Legal Bulletin revised last
January, Unger said that the Commission provided
guidance on determining whether or not Y2K should be
considered material.  According to Unger, "If a company
has not made an assessment of its Year 2000 issues or
has not determined whether it has material Year 2000
issues, the staff states that the company must disclose
this known uncertainty.  In addition, the staff states
that the determination as to whether a company should
disclose its Year 2000 iss ues should be based on
whether these issues would be material to a company's
business, operations, or financial condition
irrespective of any remediation plans or insurance
coverage."

If companies find Y2K is material, the SEC wants to
know "the nature and potential impact of these issues
as well as the countervailing circumstances."  Unger
said disclosure should include general plans to address
the issue as it pertains to business, op erations and,
as appropriate, relationships with suppliers, customers
and other constituents.  Disclosure should include the
schedule for conducting the plan, an estimate of Y2K
costs and an assessment of the material impact of such
expenditures on operat ions, liquidity and capital
resources.  Boilerplate disclosures are to be avoided,
Unger said, and information updated quarterly.

Although Unger said that 70 percent of companies now
include the term "Year 2000" in their annual reports,
she indicated that most are still walking on eggshells
when it comes to making meaningful statements.  "The
Commission is concerned," she said, "tha t while a
greater number of companies mention Year 2000 in their
annual reports, much of the disclosure is not
informative.  Perhaps many companies are not providing
the type of disclosure specified in Staff Legal
Bulletin No. 5 because companies are conc erned that
forward-looking disclosures would be a lightening rod
for the plaintiffs' bar."

Unger said an SEC review of annual reports filed by
more than 1000 public companies found many not
following the Commission's guidance for disclosure.
The SEC results indicate that 65 percent of companies
are either just starting or are in the process of
determining the seriousness of the problem if no
corrective action is taken.  Forty-three percent failed
to describe plans to remedy the situation.  Sixty-four
percent failed to provide a timetable for correction.
Fifty-one percent did not describe mate rial
relationships with outside parties.  Ninety-two percent
made no mention of amounts spent to date.
Seventy-eight percent failed to discuss future Y2K
expenditures.  Eight-six percent said the Year 2000 is
either not material as to repair costs or ope rations
or made no disclosure on materiality.

The SEC official said that the Commission will publish
an interpretive release in the near future to
"formalize current staff guidance…[and] remedy the
apparent misconception that the Year 2000 issue is
material…only if the costs of remediation are materi
al.  The interpretive release will clarify that
companies must, in addition to considering costs,
determine materiality based on the potential
consequences of inadequately resolving their Year 2000
issues."  She said the forthcoming release may also
form the basis of Commission enforcement actions
against companies that fail to make adequate
disclosures.

Hearing Lights Up Y2K Power Grid Issue

The Senate Special Committee on the Year 2000 held its
first public hearing today and released results of a
survey that may dim the lights of the more sanguine Y2K
prognosticators.  The survey of the ten largest oil,
gas and utilities companies found onl y 20 percent had
completed their assessments of automated systems.  Four
of these firms were not able to identify how many
embedded systems they have in service.  One firm that
had done its counting reported over 300,000 systems in
service.  The Committe e survey found that these firms
are not confident of their completeness or accuracy of
assessments to date, "making assurances of timely Y2K
compliance little more than a hope."  Moreover, the
Committee finds that the utilities' "ignorance" of
supplier an d vendor status creates "additional
uncertainty for utility consumers."  None of the
companies surveyed had contingency plans completed.

"I am genuinely concerned about the very real prospects
of power shortages as a consequence of the millennial
date change," said Committee Chairman Bob Bennett
(R-UT).  The chairman also expressed his concern that
the Y2K issues is igniting so little spa rk with the
general public.  "I am concerned that when it does
become a matter of general public concern it will be
too late to bring public pressure to bear on the timely
correction of the many Y2K problems that exist.  My
greatest fear is that when it d oes become a matter of
general public conern, it will bring with it a measure
of panic that will be deterimental to effective and
efficient remediation…"

"If tomorrow [were] January 1, 2000, it would be a 100
percent fact the power grid would fail…there's no
question about it," Bennett said.

Witnesses at the hearing were Department of Energy
(DOE) Deputy Secretary Elizabeth Moler, Federal Energy
Regulatory Commission (FERC) Chairman James Hoecker,
Nuclear Regulatory Commission Chairman Shirley Ann
Jackson, Y2K Czar John Koskinen, Consultant L ou
Marcoccia, North America Electric Reliability Council
(NERC) President Michehl Gent, Electric Power Research
Institute Y2K Program Manager Charles Siebenthal, Sonat
Inc.  Executive Vice President James Rubright, and Gary
Gardner, CIO, American Gas Assoc iation.

Government officials appearing before the Committee
generally described themselves as facilitating private
sector action on the issue.  "Let me emphasize that the
Federal government cannot solve this problem," DOE
Deputy Secretary Elizabeth Moler said.  FE RC Chairman
James Hoecker said the Year 2000 is an "unusal
challenge" for his agency because "the Commission does
not exercise direct authority over these kinds of
internal operations within regulated energy
companies…The Commission's role is primarily to act as
a facilitator and advocate, not regulator, on the Year
2000 matter."

One of the primary focus points for action will be the
network of interconnected electricity systems.  NERC
coordinates the reliability and adequacy of bulk
electric systems in North America and NERC President
Michehl Gent said "A major disturbance within one part
of an Interconnection has the potential to cascade
through the entire Interconnection.  He added, however,
that the loss of a facility or two would not trigger
such a cascading effect.  Rather, he said, the problem,
if it comes, will take the sh ape of common mode
failures "such as all generator protection relays of a
particular model failing simultaneously, or the
coincident loss of multiple facilities…" He called the
possibility of such events extremely low, but
conceivable.

He also pointed out that an individual electric utility
investing big bucks in its Y2K correction could see its
investment trip over the less than diligent efforts of
neighboring systems.  Gent said the greatest Y2K
threats for the electricity supply are power plants
with digital controls, energy management systems used
to operate transmission facilities and control
generating units, telecommunications, and relay
protection devices.

Gent called maintaining the operability of bulk
electric systems perhaps "the single most important
step toward supporting our North American
infrastructure during the Y2K transition."  NERC's
"defense-in-depth strategy" involves identifying and
fixing k nown problems, sharing information on known
and suspected problems, creating a master list of Y2K
problem areas, initiating a progress reporting process,
regional and individual system simulations to identify
moderate and worst-case scenarios, coordinatin g
development of operational preparedness and contingency
plans and coordinating efforts to operate transmission
and generation facilities in precautionary
configurations and loadings during critical Y2K
periods.

Gent seemed to get charged up by the notion that some
companies may be holding back on their Y2K information.
"The success of the NERC Y2K program depends on
unbridled cooperation, full sharing of Y2K information,
and diligence of effort commensurate wit h the
potential consequences of failing to adequately prepare
for Y2K," he said.  Later, he added, "Public exchange
of information is a cornerstone of NERC's Y2K program
and must not be viewed by utility participants as
feeding information to potential li tigants….Any
restraint in sharing known Y2K problems and solutions
will be a direct challenge to the reliability of the
electricity supply."

He also took on the Chairman's "what if Y2K were
tomorrow" formulation.  "I have to take issue with the
stated 100 percent failure rate of utilities," Gent
said, "I know of several companies that have run tests
of their systems."  Referring to the fact th at the
date change will make its way through several time
zones before reaching the U.S., Gent said, "We have an
excellent communication system, and we can take
advantage of the natural time-lag to see and monitor
what is happening."

Sen.  Jon Kyl (R-AZ) queried the government witnesses
on the lack of a comprehensive assessment on the status
of the grid.  Some of the government executives
acknowledged that such an assessment does not exist.
Y2K Czar John Koskinen said that the governm ent has no
regulatory authority to demand this information, and he
does not propose that the federal government be granted
the power to obtain it.  Rather, Koskinen said the
utilities should be informed that government is ready
to work with them.  "Time i s the vanishing resource,"
he said.

Y2K appears to be generating a significant amount of
electricity among Washington lobbyists.  The hearing
drew an overflow crowd, forcing Committee staff to open
a second room to handle the crowd.

Speaker Says Y2K will Bug White House

House Speaker Newt Gingrich (R-GA) suggested this week
that the Year 2000 date issue could be a significant
barrier in Vice President Gore's bridge to the White
House in the next presidential election.  As first
reported by Newsbytes, Gingrich said nothin g could be
"more destructive for Gore's political future than to
talk about the information superhighway" while the
"largest wreck in history" occurs on January 1, 2000.

California CIO Says Y2K Costs Likely to Double

Speaking today at an ITAA-produced Y2K seminar in Santa
Clara, CA, California CIO John Thomas Flynn predicted
that the Golden State will be spending more gold than
expected on its Y2K correction.  He estimated that the
current $243 million budget will gro w to over $500
million before the last bad date is purged from the
state's information systems.  Flynn said that half of
the state's 3000 systems are impacted by the date
change issue, and half this 1500 are considered mission
critical.  He said that the state appropriated an
additional $55 million in Y2K fix-it funds this year,
and Flynn said he was disappointed that $4 million of
this total went unclaimed by state agencies.

Despite the anticipated increase in Y2K expenditures,
Flynn said he is sticking by the state's completion
schedule, with all mission critical systems due to be
done by the end of this year.  He called the deadline
ambitious but doable.  Testing, he said, is proving
difficult and some software considered ready for
testing has been sent back to the bench for additional
repairs.

Flynn mentioned other California government
initiatives, including a task force of state officials
meeting regularly with municipal and county
counterparts on the issue.  Noting that the state's
level of contingency planning is in need of work, Flynn
said his Department of Information Technology has
created a contingency planning template for use by
other state agencies.

California Assemblyman Mike Honda (D) also spoke at the
seminar and said he has introduced two Y2K-related
measures.  AB 2458 would provide a 20 percent tax
credit to small businesses grappling with the
Millennium Bug.  He said the measure has generated a n
apathetic response from the state's Chamber of
Commerce.  The Assemblyman has also introduced AB 1934,
a bill to create incentives for organizations acting
responsibly in their Y2K repairs; he said he solicits
input on the measure.

Business to Business

PRC Inc., Reston, VA, has received an award to perform
Year 2000 testing and IV&V services for the State of
Colorado's Department of Human Services, in partnership
with HDS Corporation.

Transformation Processing Inc., Toronto, Ontario, has
won a Y2K contract with Advanced Elastomers Systems
(AES).

Peritus Software Services, Inc., Billerica, MA, has
been awarded a Y2K contract with HCL America.

ITAA Y2K Information Center

Solution Providers Directory
http://www.itaa.org/script/2000vend.cfm

ITAA*2000 Certification Program
http://www.itaa.org/2000cert.htm

Outlook Archive
http://www.itaa.org/script/get2klet.cfm

Legislative and Litigation Table
http://www.itaa.org/Y2Klaw.htm

Calendar
http://www.itaa.org/y2kcal.htm

Vendor/User Status Questionnaires
http://www.itaa.org/questmain1.htm


Sponsor Advertising

CACI International Inc. -- Restore 2000

CACI leverages 35 years of information technology
experience and over 10 years of reengineering systems -
solving the same problems Y2K poses - to offer a total
solution to the Year 2000 challenge: Restore 2000SM.

The Restore 2000 methodology applies a comprehensive
three-phase process to your information systems:
Assess, Plan, and Remediate.  Furthermore, we give you
the option of buying our methodology or our services -
both backed by CACI experience and Y2K expe rts.

The Restore 2000 methodology is ITAA*2000 certified.
In addition, software development processes at CACI
have been independently certified as being at Level 3
of the Software Engineering Institute (SEI) Capability
Maturity Model.  Achieving SEI Level 3 p rovides
clients further assurance that CACI solutions
successfully and effectively deliver Year 2000
compliance while allowing you to save money, reduce
risk, and minimize systems disruption.

With approximately 3700 employees worldwide and FY97
revenues in excess of $270 million, CACI provides a
depth of experience and expertise you can rely on.
We've performed Year 2000 conversions for many of
America's biggest enterprises, including major he alth
insurance providers, retail clothing manufactures, gas
companies, airlines, and government agencies.

Superior functionality backed by decades of experience
- CACI's Restore 2000.

Worldwide Headquarters 1100 North Glebe Rd.  Arlington,
VA 22201 http://www.caci.com e-mail:npeters@hq.caci.com

DMR Consulting Group Inc.

DMR Consulting Group Inc.(formerly DMR TRECOM), an
Amdahl company, is a global consulting organization of
nearly 8,000 employees providing a comprehensive range
of information technology services.

Our Year 2000 Practice comprises a comprehensive
offering of consulting, assessment, remediation,
testing, and implementation services utilizing a formal
methodology (APM/2000), best-in-class software tools,
and six global conversion centers.  We have mul
ti-disciplinary experience in most mainframe,
mid-range, and client-server/desktop environments.

APM/2000 includes: · Program Management ·
Enterprise-Wide Assessment · Impact Analysis ·
Conversion Delivery · Testing and Implementation

Year 2000 Risk Management Consulting Services include:
Program Review, Stakeholder Readiness Assessment, Risk
Management and Vendor Compliance Research.

Contact: Stephen Frycki Managing Director, Year 2000
Services - US Phone: 201-200-3923 Fax: 201-200-9046
Email: fryckis@dmr.com Websites: http://www.dmr.com

Y2Kplus

Y2Kplus provides a portfolio of "best of class"
software products and outsourcing services that address
Year 2000 issues.  These offerings are available both
to IT Solution Providers and IT organizations.

Y2Kplus has offerings that address the following needs:

Our offerings include: * Year 2000 risk assessment *
Mainframe inventory verification & code remediation
(COBOL, Natural, Assembler & PL/1) * Midrange COBOL
remediation (DEC, HP, UNISYS, Wang, DG, NCR, Bull &
Tandem) * AS/400 remediation (RPG & COBOL) * Networked
PC Year 2000 Analysis tools Applications: Access,
Excel, Foxpro, Lotus 1-2-3 Languages: Basic, Visual
Basic, C, C++, dBase, Clipper, Paradox PC Hardware,
BIOS & Operating Systems * Testing: Tools: Data
Commander for future date testing, TCS (Test Control
System), Services: Test management & execution,
Facilitated Test Planning, Test strategy.

For more information, please send email to
info@y2kplus.com, visit our web site at
http://www.y2kplus.com or call Dave Ehlke at
781-863-8111.



Copyright ITAA 1998.  All rights reserved.  The
Information Technology Association of America, 1616 N.
Fort Myer Drive, Suite 1300, Arlington, VA 22209.
Internet: http:\\www.itaa.org