ITAA's Year 2000 Outlook July 23, 1999 Volume 4, No. 28 Published by the Information Technology Association of America, Arlington, VA Bob Cohen, Editor bcohen@itaa.org Read in over 80 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 create a subscription to this free publication, please visit ITAA on the web at https://www.itaa.org/transact/2ko utlooksub.htm. To cancel an existing subscription, visit https://www.itaa.org/transact/2kremove.htm. ITAA's Year 2000 Outlook is sponsored in part by CACI International Inc., DMR Consulting Group Inc and Y2Kplus. In this Issue: · Clinton Signs Y2K Bill · Bad Chemistry: Board Warns Governors About Y2K Risks · Dingell Dings SEC on Y2K Readiness · DoD Says Battle with Bug is Almost Won · Fed Opts for Bank Loan Program · Merrill Lynch Study Sees More Y2K Fear Than Reality · Business to Business · ITAA Y2K Information Center · Sponsor Advertising Clinton Signs Y2K Bill President Bill Clinton signed Y2K liability legislation into law this week. The bill had been on the President's desk since July 15, where it arrived from Congress via email. The President apparently put aside serious reservations in picking up his pen. "I hope that we find that the Y2K Act succeeds in helping to screen out frivolous claims without blocking or unduly burdening legitimate suits," he said in a statement. "We w ill be watching to see whether the bill's provisions are misused by parties who did little or nothing to remediate in order to defeat claims brought by those harmed by irresponsible conduct." To underscore his equivocal point of view, Clinton said, "This is a narrow, time-limited legislation aimed at a unique problem. My signature today in no way reflects support for the Y2K Act's provisions in other contexts." The Clinton Administration may have signaled its mixed feelings about the bill by sidestepping a formal signing ceremony. - Bad Chemistry: Board Warns Governors About Y2K Risks The Chemical Safety Board (CSB) is warning governors in all 50 states that caution is the watch word when it comes to Y2K preparedness and industrial chemical safety. In a letter to the nation's governors and to the chief executives of the Northern Maria na Islands, the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands, CSB Board Member Gerald Poje wrote, "Government surveillance of the sectors that handle high hazard chemicals is insufficient to draw detailed conclusions regarding Y2K c ompliance." Poje pointed out that large enterprises spending the necessary human and financial capital are generally "unlikely to fail," while small and mid-sized enterprises run a greater risk. But the board official didn't sound the "all clear" siren for the big c hemical crowd either: "…even at larger facilities, outcomes from multiple concurrent, sequential or cascading failures, e.g. multiple control system failures, multiple utility failures, or a combination of multiple utility and control system failures ar e uncertain." The CSB solution? A "massive effort" focused on providing easy-to-use awareness and assessment tools and training; promotion of accessible resources; and the use of attractive incentives for Y2K compliance efforts. But Poje also noted that while federal agencies are aware of and engaged in this chemical safety issue, their authority is limited. "…significant gaps in surveillance, independent verification and compliance assistance exist," Poje wrote the governors. "The largest responsibility for public health and safety will reside at the state and local level, particularly involving the emergency response community. The problem may be closer to home than people think. Poje's letter notes that in California alone there are 110,000 hazardous material handlers. State agencies have been directed by Gov. Gray Davis to prevent Y2K-related releases of hazardous materials. The state already experiences 5000 hazardous material incidents a year and, with only 62 response teams, Poje notes, "Additional hazmat incidents because of Y2K failures would threaten the capacity to respond and thereby endanger public health and the e nvironment." Along with the letter, CSB sent its March 1999 report and recommendations on the issue: The Year 2000 Issues: Technology Problems and Industrial Chemical Safety. The report is available at http://www.csb.gov/1999/news/n9919.htm. Dingell Dings SEC on Y2K Readiness Senate Commerce Committee Ranking Minority Member John Dingell (D-MI) hoisted a few red flags in response to the Securities and Exchange Commission June 1999 report on Year 2000. Dingell's July 14 letter to SEC Chairman Arthur Levitt, Jr. says that the r eport "reveals several red flags that merit special attention." Dingell specifically cited the SEC's own lack of Y2K readiness. Only 18 of 52 SEC mission-critical applications are compliant, he notes, adding that EDGAR, "the Commission's most critical system," is one of those in the yet to be category. The SEC repor t also has Dingell concerned about public companies, including better disclosure in the areas of Y2K failures abroad, internal and external deadline failures, and contingency plans. Dingell voiced his concern over Y2K risks in international financial mar kets as well as the progress being reported by transfer agents and investment advisors. In terms of the latter, Dingell complained that data in the SEC report is old and "there is no indication whether there has been improvement in the intervening six mo nths. Substantial improvement is warranted." Dingell called on the SEC to provide an interim report on the situation by October 15. His letter is available at: http://www.house.gov/commerce_democrats/press/106ltr43.htm. DoD Says Battle with Bug is Almost Won Defense Department leadership presented a united front on the Y2K readiness of the military this week in a Pentagon press conference. Defense Secretary William Cohen indicated that the nation's nuclear arsenal along with its other mission critical system s are, for the most part, Y2K ready or will be by the end of the year. "I am reassured and confident that we will defeat the Y2K attack when it comes on Jan. 1, 2000," Cohen said. Admiral Richard Mies, commander of the U.S. Strategic Command, said the date demon can't trigger an accidental launch of U.S. weapons, although he sounded less sure about the status of other nuclear powers: "Certainly I have concerns, but to some degree we've tried to reassure ourselves and we've tried to gain assurances from those countries that they are addressing the Y2K problem, and so to a certain degree our confidence is limited by the amount of assura nces we have gotten," he said. Cohen said the Russian military will act to address the Year 2000 issue in their command and control systems because it is in their self interest not to trigger a disaster. He indicated that the U.S. assumption is that China is doing likewise. Mies said that only two of the 198 computers critical to U.S. nuclear systems need additional Y2K work and added that they are scheduled for completion in October. Meanwhile, DoD's efforts to reach out to Russia on Y2K have met with a cold shoulder, a victim of the war in Kosovo. An invitation to have Russian officials visit the Strategic Command's Y2K Center in Colorado Springs has been ignored. Fed Opts for Bank Loan Program The Federal Reserve Board (FRB) voted this week to offer banks special loans in anticipation of Y2K-related woes. The loan program, or "Century Date Change Special Liquidity Facility" in FRB-speak, will be offered to financial institutions at 150 basis p oints higher than the Federal Open Market Committee's intended federal funds rate. The facility will be available from October 1 through April 7, 2000. The Fed decided to not only approve the program but also to launch it sooner, in October rather than November. According to a Fed statement, "The facility will help ensure that depository institutions have adequate liquidity to meet any unusual demands in the period around the century date change. Among other things, it should help enable institutions to more conf idently commit to supplying loans to other financial institutions and businesses through the rollover period." Merrill Lynch Study Sees More Y2K Fear Than Reality Y2K fears may be overshadowing Y2K realities. At least that is the contention of a Merrill Lynch Global Research Survey released this week. In terms of overall economic impact, Merrill Lynch says Y2K spending is likely to produce "a more efficient globa l system," while some fixes will simply be the cost of doing-and staying in-business. Fear-driven stockpiling could run up second half GDP growth, both in the U.S. and abroad, although inventories worked down in the first half of the Year 2000 could have just the opposite economic effect. The study, "Y2K: Bulls, Bears or Bugs?", also anticipates a possible rush to quality in the bond market impacting fourth quarter interest rates. Merrill Lynch predicts that fixed income investors are likely to take a more defensive posture in the second half of this year, focusing on liquidity and hedging some investment bets by selling them off. "Some expect the spreads for non-Y2K compliant issuers to widen later in 1999. Most investors expect the Y2K impact overall to be short lived and result in a bout a 5 basis point spread widening in the fourth quarter," the company says. Fund managers are also seeing more Y2K smoke than real fire. The survey finds fewer fund managers expecting Y2K to impact growth in a negative way, and only 35 percent of those surveyed consider it a significant element in stock selection. The report is on the web at http://www.research.ml.com/Marketing/. Business to Business Safetynet, Inc., Springfield, NJ, has entered into a marketing agreement with Verbatim Corporation. Under this agreement, Verbatim will be able to offer Safetynet's Yes2K at a discount to their customers. Synergy 2000 Inc., Pasadena, CA, has been awarded two large Y2K contracts by an information services supplier to the property and casualty industry. 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/year2000/legis.htm Calendar http://www.itaa.org/y2kcal.htm Vendor/User Status Questionnaires http://www.itaa.org/questmain1.htm Alternate Dispute Resolution (ADR) http://www.itaa.org/year2000/adr.htm Statement of Intention to Use ADR http://www.itaa.org/year2000/soi.htm, Y2K Mediators Seminar http://www.technologymediation.com/Y2K_seminar.htm Copyright ITAA 1999. All rights reserved. The Information Technology Association of America, 1616 N. Fort Myer Drive, Suite 1300