Legal Issues Confronting the Federal Government and State Governments due to the Year 2000 "Millennium Bug"
By Jeff Jinnett*
On September 25, 1996, Senator Daniel Patrick Moynihan (D-NY), following up on a Congressional Research Service study of the federal government's Year 2000 problem, introduced Senate Bill 2131, proposing the creation of a bipartisan National Commission on the Year 2000 Computer Problem (hereinafter, the "Year 2000 Commission"). This article is intended to highlight the critical technical, legal and regulatory issues which need to be addressed and the potential role of the Year 2000 Commission in meeting that challenge. Hopefully this will foster more widespread public sector and private sector support of the federal Year 2000 Commission, resulting in the resubmission by Senator Moynihan of his bill in the 105th Congress and its enactment into law. For ease of reference, I will continue to refer to the proposal as Senate Bill 2131.
This article will discuss (a) the scope of the Year 2000 problem at the federal government and state government levels, (b) the status of federal and state corrective efforts, (c) technical, legal and regulatory issues which may influence how the federal government and state governments should approach Year 2000 corrective efforts, including issues relating to the creation of multi-state compacts, municipal securities disclosure requirements, disclosures of Year 2000 problems required under GAAP, federal and state disaster relief procedures, federal and state mandates to the private sector as to Year 2000 compliancy and potential tort claims liability of federal and state agencies if they fail to become Year 2000 compliant, and (d) the need for coordination between the federal government and the state governments and between the federal government and the governments of other nations. The above discussion will be organized around an analysis of the six issues constituting the proposed mandate of the Year 2000 Commission.
Copyright 1996 by Jeff Jinnett
* Jeff Jinnett is Of Counsel to the law firm of LeBoeuf, Lamb, Greene & MacRae, L.L.P., practicing in the area of computer law. He also serves as President of LeBoeuf Computing Technologies, Inc., a business subsidiary of LLG&M, engaged in Year 2000 business consulting. His email address is email@example.com.
This article also recommends that certain changes be made to the text of Senate Bill 2131 prior to its reintroduction as a bill in the 105th Congress, including (1) that the Commission not terminate on December 31, 1997, but continue in existence until December 31, 2000, (2) that it issue multiple reports throughout its existence, rather than just one report, with the Commission's first report being issued in time for the passage of the fiscal 1998 federal budget, and (3) that at least one member of the fifteen member Year 2000 Commission be selected to represent the interests of the fifty states (for example, a representative could be appointed from the National Association of State Information Resource Executives (NASIRE)).
Senate Bill 2131 (the "Commission on the Year 2000 Computer Problem Act") lists the following six issues as needing to be addressed:
"(1) an analysis of the history and background concerning the reasons for the occurrence of the Year 2000 problem;
(2) the cost of reviewing and rewriting codes for both the Federal and state governments over the next three years, including a legal analysis of responsibilities for such costs and possible equitable bases for sharing them;
(3) the time it will take to get the job done and, if not by 2000, what agencies are at risk of not being able to perform basic services;
(4) the development of balanced and sound contracts with the computer industry available for use by federal agencies, and if such outside contractual assistance is needed, to assist such agencies in contracting for and effectuating Year 2000 compliance for current computer programs and systems as well to ensure year 2000 compliance for all programs and systems in the future;
(5) an analysis of what happens to the United States economy if the problem is not resolved by mid-1999;
(6) recommendations to the President and the Congress concerning lessons to be learned and policies and actions to be taken in the future to minimize the Year 2000 public and private sector costs and risks."
Discussion of the Issues To Be Addressed by the Year 2000 Commission:
This article will discuss each of the issues posed in Senate Bill 2131 in sequence and why the answers to the issues are critically important to the solution of the Year 2000 computer problem on both a federal and state level. The full text of Senate Bill 2131 proposing the Year 2000 Commission can be viewed at the Internet World Wide Web (WWW) Universal Resource Locator (URL) of "http://ftp.senate.gov:70/00/member/ny/moynihan/statements/0926.y2")
Issue No. 1: "an analysis of the history and background concerning the reasons for the occurrence of the Year 2000 problem;"
It is generally understood that software programmers beginning approximately thirty years ago used six digits to represent the date, month and year in business application software in order to save processing memory, which was expensive at the time. In more recent years, six digits were used by programmers out of habit or in order to assure that new software programs would interface smoothly with older programs using six digit date fields (for a detailed description of the history of the Year 2000 problem, see Leon Kappelman and James Cappel, "A Problem of Rational Origin That Requires a Rational Solution", Journal of Systems Management, July, 1996, Vol. 47, No. 4, at p. 6). To complicate the Year 2000 corrective effort, many business application software packages must also be modified to account for the fact that the year 2000 is a leap year.
An issue which the Year 2000 Commission could examine is the role that governmental standards played in accommodating the Year 2000 problem (also variously known as the "Millennium Bug", the "Century Date Change Problem" and the "Y2K Problem"). The Year 2000 Commission could also analyze what role the government should play in the future, if any, in mandating computer standards to avoid problems in the future similar to the Year 2000 problem.
For example, the Year 2000 Commission could examine the question of whether the American National Standards Institute (ANSI) should attempt to harmonize its Year 2000 date field standard with the standard adopted by the International Organization for Standardization (ISO) (compare ANSI X3.30-1985 (R1991) "Representation for Calendar Date and Ordinal Date for Information Interchange" with ISO 8601:1988 "Data Elements and Interchange Formats"). ANSI X3.30 was adopted as a standard by the federal government (acting through the National Institute of Standards and Technology (NIST)) for use in electronic data interchange (EDI) transactions as Federal Information Processing Standard (FIPS) 4-1 "Representation for Calendar Date and Ordinal Date for Information Interchange". A Change Notice has been issued, however, for FIPS 4-1, recommending the use of a 4-digit date field for the year, rather than the two-digit date field permitted by the ANSI X3.30 standard (see the Internet URL of "http://www.nist.gov/itl/div897/yr2000.htm").
Following the NIST example, the X12C subcommittee of the ANSI Accredited Standards Committee (ASC) will vote this month on a new standard for electronic data interchange (EDI) documents, changing the date fields used from six digits to eight digits. Other alternatives being considered, however, include breaking up the date record into two date elements (see ITAA Year 2000 Outlook, Oct. 25, 1996, at "http://www.itaa.org/scripts/dbml.exe?Template=get2klet.dbm").
The matching of ANSI, FIPS and ISO standards may become more important in the future. For example, it would be of great concern if the European Union (the "EU") were to refuse to grant European Community Mark (CE-MARK) certifications to U.S. products designed for export to the EU because of concerns about date field interface problems. In this regard, it should be remembered that many types of non-computer equipment also use date field timing devices, such as security systems, HVAC systems, traffic lights and elevators. The EU concern might be that a "MM-DD-CCYY" date field format within a U.S. product (which is one of the date field formats permitted under the ANSI standard) might cause interface problems with the ISO 8601 "YYYY-MM-DD" date field standard. ISO 8601 has been adopted in the EU as European Standard EN 28601 (see, "A Summary of the International Standard Date and Time Notation", located at the Internet URL of "http://www.ft.uni-erlangen.de/~mskuhn/iso-time.html").
Also, for purposes of EDI electronic commerce transactions involving multinational companies or crossing international borders, it might be preferable if the U.S. X12 EDI standard could be harmonized with the European UN/EDIFACT EDI standard with respect to date field usage.
The Year 2000 Commission also might be able to discover useful information on how other governments have coped with similar computer software changes in the past. For example, in 1989, when the Emperor of Japan died, the Japanese government and private sector businesses had to convert their computer date fields to reflect the end of the 64 year "Showa" period and the first year of the "Heisei" period. This and other historical "date changes" (such as the New Years Day, 1969 ABENDS date field problem (arising due to the first encounter with thirty year mortgages) and the November 16, 1989 MTS system date field computer problem) are discussed as part of the Year 2000 frequently asked questions (FAQ) located at the URL of "ftp://www.year2000.com/pub/year2000/y2kfaq.txt" (for a useful source of information on the Gregorian and Julian calendars, see the URL of "http://www.magnet.ch/serendipity/cal_stud.html"; for date conversions between different types of calendars, see "http://www.webhelp.com/calendar.htm").
Issue No. 2: "the cost of reviewing and rewriting codes for both the Federal and state governments over the next three years, including a legal analysis of responsibilities for such costs and possible equitable bases for sharing them":
Year 2000 Corrective Cost in the Billions
The Gartner Group has estimated that the cost of correcting the Year 2000 problem worldwide is approximately $300 billion to $600 billion (see the article entitled "'Year 2000 Problem' Gains National Attention", at the URL of "http://www.gartner.com/aboutgg/pressrel/pry2000.html"). In an Industry Analysis, J.P. Morgan Securities, Inc. has estimated, based on its own research, that the cost approximates $200 billion (see W. Rabin, "The Year 2000 Problem", at "http://www.jpmorgan.com/MarketDataInd/Research/Year2000/index.html"). The estimated cost of correcting all of the affected computer systems of the federal agencies is approximately $30 billion (see Richard Nunno, "The Year 2000 Computer Challenge", CRS Report for Congress, June 7, 1996).
The $30 billion estimate for the federal government is not surprising, since (a) the federal government is reportedly the largest single purchaser of information technology, spending approximately $25 billion per year on IT services and products (see, Testimony of Stephen M. Smith, Managing Partner, Federal Government Practice of Andersen Consulting, before Congress, Federal News Service, July 17, 1996) and (b) in a recent International Data Corp (IDC) study, it was reported that 83 percent of federal mainframe sites surveyed reported moderate or high degrees of date sensitivity (see John Moore, "Mainframe Readiness Falls Behind Schedule", Federal Computer Week, August 26, 1996, located at "http://www.army.mil/army-y2k/articles/agency2.htm").
It is likely that state governments also have substantial Year 2000 problems, since state governments also are significant information technology purchasers. In fact, the governments of 46 states, six cities, three counties and two school districts have greater annual revenues than Dow Corning, which ranks as number 500 on the Fortune 500 list (see the article by Jeremy Mazur and Jason Victor entitled "The Fortune 500 and America's Governments", located at the Internet URL of "'http:web.governing.com/governing/fortune.html"). As an example of the preliminary budgets some states already have adopted for their Year 2000 corrective work, Nebraska and North Carolina reportedly have each budgeted $30 million for their conversions (see, ITAA Year 2000 Outlook, Vol. 1, no. 2, August 2, 1996, located at "http://www.itaa.org/scripts/dbml.exe?Template=get2klet.dbm").
Year 2000 "Software Reengineering"
Essentially, the Year 2000 software corrective process is an example of "software reengineering". Following the Institute of Electrical and Electronic Engineers, Inc. (IEEE) definition of "software reengineering", a baseline inventory is the first step, followed by analysis and only then by the changing of the software code. Although federal and state agencies may be tempted to skip the inventory phase and start immediately with the corrective work, this short-cut should be discouraged. If software programs are missed, the computer system may not test out as being Year 2000 compliant after corrective work. Without any computer system inventory as a baseline, it may be difficult to pinpoint the reason for the testing failure.
Indeed, under the Paperwork Reduction Act of 1995, each federal agency is required to inventory its computer software assets. In many instances, the inventory can be automated by the use of scanning or parsing software, reducing the time to complete the inventory and the personnel time required. An estimate can then be made as to the total cost of making the hardware and software Year 2000 compliant. For an example of one formula for estimating this cost, see the formula at the URL of "http://cfcse.ncr.disa.mil/jexhome/y2estm8r.html".
A cost-benefit analysis must then be made by the agency as to whether it makes more sense to migrate to a newer computer system architecture which is already Year 2000 compliant, or to correct the older system currently being used. According to the Federal Aviation Administration (FAA) advisory document entitled "Guidance Document For Year 2000 Date Conversion", located at the Internet URL of "http://www.faa.gov/ait/year2000/y2kguide.htm", the inventory phase requires 25-40 percent of total effort, the corrective work phase requires 10-20 percent of the total effort and the testing phase requires 40-55 percent of the total effort.
Potential Obligation of Vendors to Absorb Year 2000 Corrective Cost
It is possible that agencies which have contracted for long-term maintenance or data processing outsourcing lasting past the year 2000 may be able to request the third party vendors to absorb part or all of the Year 2000 corrective work. For example, under some outsourcing agreements, the vendors agree to correct any "bugs" or "defects" in the computer system at the vendor's cost. An issue exists as to whether the Year 2000 problem qualifies as a system "bug" or "defect" which properly is the vendor's responsibility. Government counsel will need to review the relevant contracts to determine the parties' relative rights. However, if the federal agency simply proceeds to correct the Year 2000 problem without first making claim against the vendor, it likely will have waived its right to claim reimbursement from the vendor (see, e.g., Jeff Jinnett, "Legal Issues Concerning the Year 2000 'Millennium Bug'", located in the article archive at Peter de Jager's Year 2000 site at the URL of "http://www.year2000.com/archive/NFlegalissues.html").
Costs of Programmers Will Increase Each Year Until 2000
There are in excess of two thousand software programming languages in existence, with perhaps 500 programming languages in current usage, and date fields are sometimes used for purposes other than signifying the date (such as the use of "99" to signify the end of a file). (See, e.g., the Internet URL of "http://cuiwww.unige.ch/langlist" for a database of existing programming languages; see also, the informative article by Capers Jones entitled "The Global Economic Impact of the Year 2000 Software Problem", located at the Internet URL of "http://www.spr.com/library/y2k00.htm").
Therefore, federal and state agencies might have to locate and retain programmers skilled in many different languages to assist the agencies in correcting the non-compliant date fields. In this regard, the agencies will be competing with the private sector for an increasingly scarce supply of programmers and the cost of programming help may increase as the year 2000 draws near, with the private sector outbidding the public sector for the better programmers. In testimony before Congress, Kevin Schick, Research Director of Gartner Group, estimated that when federal, state and local governments finally get funding at the start of fiscal 1998 for their Year 2000 corrective work, the cost of that corrective work will be over two times the cost of doing the same work in 1996 (see Testimony of Kevin Schick before the House Government Reform and Oversight Committee, Subcommittee on Government Management, Information and Technology, Federal News Service, April 16, 1996).
Need to Avoid Duplication of Efforts
Given this problem, the federal government and the state governments should consider coordinating their efforts wherever possible to locate software programs which are utilized in multiple federal and/or state agencies. Programs utilized by numerous agencies could be modified to be Year 2000 compliant just once, with the new compliant version being reproduced for the benefit of all of the affected agencies. Since this may necessitate securing the consents of third party software vendors where software is licensed, this procedure will require some advance planning.
Use of Designated Processing Sites
Further, where federal and/or state agencies perform essentially similar data processing, the various agencies could agree to devote their combined efforts to make certain of the agencies fully compliant as quickly as possible, increase the processing capacity of those selected agencies and utilize them to process the data of all of the affected agencies which are unable to make their own systems compliant in time. The selected agencies therefore would act as fall-back processing sites for the other agencies. The costs of these group accommodations could be allocated amongst the agencies comprising the group, with the federal government and the involved states making an accounting to each other on a regular basis.
Coordination with States
California has created a Department of Information Technology to oversee the state agencies' Year 2000 efforts and "leverage" the experiences and expenditures of one agency for the benefit of the others (see Ellen Perlman, "On Track to Disaster", Sacramento Bee, September 22, 1996). State chief information officers (CIO's) such as California's could be the focal point for state coordination efforts with the federal government. Some states, however, have opted not to follow the state CIO structure. For example, a recent survey of states by NASIRE indicated that at least seventeen states have adopted a decentralized approach to the Year 2000 problem (see, e.g., ITAA Year 2000 Outlook, October 25, 1996, located at the URL of "http://www.itaa.org/scripts/dbml.exe?Template=get2klet.dbm"). NASIRE itself could also be helpful in disseminating information to its state members (see the URL of "http://www.state.ky.us/nasire/NASIREmain.html").
Finally, the Internet World Wide Web can act as a useful clearinghouse for information between the coordinating entities. For example, several states already maintain Web sites to distribute Year 2000 information with respect to their Year 2000 corrective programs (see, the URL's of "http://www.year2000.ca.gov" for California, "http://www.state.mn.us/ebranch/admin/ipo/2000/2000.html" for Minnesota, "http://www.das.state.ne.us/das_cdp/rfp/inet.htm" for Nebraska, "http://www.state.tx.us/year2000" for Texas and the State of Washington's site at "http://www.wa.gov/dis/2000/y2000.htm"). It is likely that other states will be adding Year 2000 Internet Web sites in the coming months. For Web sites of other states, see "http://state.ky.us/nasire/ST2000.html".
Issue No. 3: "the time it will take to get the job done and, if not by 2000, what agencies are at risk of not being able to perform basic services;"
Status of Federal and State Year 2000 Efforts
Once an agency has completed its inventory, it can estimate the number of programmer hours it will take to correct those software programs which are not being replaced. Generally, it is advised that all corrective work be completed by January 1, 1999, so that at least one year is allocated for testing to confirm compliance. The recent federal survey sent out by the House of Representatives Government Reform and Oversight Subcommittee on Government Management, Information and Technology indicates that many federal agencies are at the very beginning of their inventory stage (see the questionnaire, located at the URL of "http://www.army.mil/army-y2k/conss.htm" and the results of the survey at the URL of "http://www.year2000.com/archive/survey.html"; see also, Christopher Dorobek, "Four Agencies Earn A's on 2000 Report Card; House Panel Gives 14 Agencies D's and F's", Government Computer News, August 5, 1996, Vol. 15, No. 19, at p. 1). Also, in the IDC study cited above, about one quarter of the respondents said that their correction of software code was more than two years away and one third said the completion of testing after correction was more than two years away. (see John Moore, "Mainframe Readiness Falls Behind Schedule", Federal Computer Week, August 26, 1996, located at the URL of "http://www.army.mil/army-y2k/articles/agency2.htm").
The status of Year 2000 corrective efforts by the various state governments was the subject of a recent survey conducted by NASIRE, with forty-four states responding (see ITAA Year 2000 Outlook, Vol. 1, No. 12, October 25, 1996, located at "http://www.itaa.org/scripts/dbml.exe?Template=get2klet.dbm"). NASIRE's survey indicates that most states are still in the planning mode, with only thirteen states reporting that they are in the implementation or testing phase.
Unless software tools are discovered which can speed up the corrective process considerably, it appears possible that at least some federal and state agencies will not become fully Year 2000 compliant in time, with resulting disruptions to agency operations. In this regard, it should also be noted that some agencies have to produce projections going forward to the year 2000, which will trigger a system failure prior to January 1, 2000 (i.e., an earlier "Event Horizon") (see, Noah Ross, "The End of the Century is Nearer Than You Think," Application Development Trends, April, 1995).
Currently No Centralized Year 2000 Control at the Federal Level
So far, no federal "Year 2000 Czar" has been appointed. At the present time, each federal agency's Year 2000 corrective efforts are being directed by the CIO of the particular agency. The office of federal agency CIO was created in the Information Technology Management Reform Act of 1996 (ITMRA) and the General Accounting Office (GAO) and Office of Management and Budget (OMB) were given oversight responsibilities, repealing the Brooks Act and replacing the General Services Administration (GSA) in that role. As a result of this, GSA abolished the Federal Information Resources Management Regulation (FIRMR), effective August 8,1996. The approximately 25 affected federal agencies and departments meet in a Federal Chief Information Officer Working Group to discuss the implementation of the CIO concept.
At the request of the OMB, the Social Security Administration (SSA) has also created an informal interagency Year 2000 working group, since it began its Year 2000 efforts in 1989 and is further along in implementing its Year 2000 corrective plan than most other federal agencies. The Year 2000 Interagency Committee Internet Web site is at "http://www.itpolicy.gsa.gov/mks/yr2000/y201toc1.htm". The Year 2000 Interagency Committee has also prepared a Year 2000 Best Practices guide (at "http://www.itpolicy.gsa.gov/library/yr2000/y207best.htm", but accessible only to government and military employees at the present time) and has prepared warranty language for agencies to consider using when they contract for new software (see, "http://www.itpolicy.gsa.gov/library/yr2000/y2kfnl.htm").
Estimation of Total Year 2000 Costs
Federal agencies are expected to include their estimates of the cost of Year 2000 corrective work in the agencies' fiscal 1998 budgets and five year information technology forecasts (see Lisa Corbin, "The Year 2000 Problem", Government Executive, May 1996, at p. 18). As required by the fiscal 1997 Treasury, Postal Service and General Government Appropriations Act, federal agencies must provide information by November 15, 1996 to the OMB so that it can report on a comprehensive strategy for fixing agency systems to be included in the President's fiscal 1998 budget, which is likely to be submitted by February 1, 1997 (see Paul McCloskey, "Time is Slipping Away on Year 2000 Fix," Federal Computer Week, August 19, 1996, located at "http://www.fcw.com/pubs/fcw/0819/y2k/main.htm"; the ITAA Year 2000 Outlook, Vol. 1, no. 1, July 26, 1996 and the ITAA Year 2000 Outlook for October 4, 1996, both newsletters being located at the URL of "http://www.itaa.org/scripts/dbml.exe?Template=get2klet.dbm"). At the present time, federal agencies are being expected to undertake their Year 2000 inventories, corrective work and testing by "reprogramming" existing budgeted funds. One exception to this is that the Fiscal 1997 Senate Defense Authorization Bill sets aside $5 million for the Department of Defense (DoD) to benchmark competitively selected automated Year 2000 corrective software.
Use of the GAO or OMB as Year 2000 Audit Agency
The Year 2000 Commission could act as a central clearinghouse of information for the various federal and state agencies. It also could assist in developing an approach to auditing the progress of the various agencies in becoming Year 2000 compliant. For example, the GAO and/or the OMB could be authorized to adopt an audit methodology which would be applied to all federal agencies. At the present time, no single entity has been given formal audit responsibility for ensuring that the federal agencies become Year 2000 compliant in time. The U.S. Senate has recently directed the GAO, however, to conduct a limited audit of the DoD in connection with its Year 2000 efforts and is reportedly considering asking the GAO to conduct a government-wide survey of Year 2000 preparedness (see ITAA Year 2000 Outlook, Vol. 1, no 4, August 16, 1996, located at the URL of "http://www.itaa.org/scripts/dbml.exe?Template=get2klet.dbm"). Both the GAO and OMB have produced useful IT management guides in the past in this area (see, e.g., the GAO's "Executive Guide: Improving Mission Performance Through Strategic Information Management and Technology" (GAO/AIMD-94-115, May 1994) and the OMB's "Evaluating Information Technology Investments: A Practical Guide" (1995)).
If, for example, the GAO were designated the Year 2000 audit agency, each federal agency could be required to adopt a GAO- approved Year 2000 corrective plan and to devote the resources and personnel necessary to become compliant in time. The GAO could input these agency corrective plans into a project management software package. During the implementation of their Year 2000 plans, the agencies could be required to transmit information via modem or diskettes using electronic questionnaires to the GAO as to the corrective work completed. The GAO could use the project management software to compare this completed work against the project schedule contained in the agency's Year 2000 corrective plan submitted to the GAO. The GAO then could make periodic reports to the President and to Congress on the status of each agency's Year 2000 corrective efforts.
The alternative to designating one audit methodology and having the GAO, OMB or another single entity audit all of the federal agencies is leave the President and the Congress in the dark as to the actual state of readiness of the federal government until January 1, 2000 or such time as an earlier Event Horizon occurs for a particular agency. The Congress has held numerous hearings concerning the Year 2000 problem and the status of the federal government's corrective efforts, but the testimony produced at the hearings cannot compare with the audit reports which the GAO or OMB could produce if given proper authority by the Congress and the President (see, e.g., the hearing at "http://www.house.gov/science/year_2000_charter.htm" and the hearing transcript at "http://www.itpolicy.gsa.gov/mks/yr2000/katzen.htm").
Issue No. 4: "the development of balanced and sound contracts with the computer industry available for use by federal agencies, and if such outside contractual assistance is needed, to assist such agencies in contracting for and effectuating Year 2000 compliance for current computer programs and systems as well to ensure year 2000 compliance for all programs and systems in the future;"
Year 2000 Warranty Language
Various proposals have been made with respect to appropriate warranty language to assure the federal agencies purchasing new software that the new software will be Year 2000 compliant. For example, in the 1997 Senate Defense authorization bill, the DoD is required to ensure that all systems purchased after September 30, 1996 will comply with time and date standards for providing "fault- free" processing of data and date-related data in 2000. The Navy Operational Test and Evaluation Force (OPTEVFOR) adopts this "fault-free performance" approach (see http://www.nismc.navy.mil/horizon/year2000/optevfor.htm"; see also, ITAA Year 2000 Outlook, Vol. 1, No. 1, July 26, 1996, located at the Internet URL of "http://www.itaa.org/scripts/dbml.exe?Template=get2klet.dbm"; see also, the U. S. Department of the Navy's "Year 2000 Problem Survey and Reporting Requirements," located at "http://www.nismc.navy.mil/horizon/year2000/encl-1.htm"). The General Services Administration has developed warranty language seeking accurate processing of date data rather than "fault-free" processing (see the URL of "http://www.itpolicy.gsa.gov/library/yr2000/y2kfnl.htm").
As an example of warranty language formats currently being adopted by the state governments, the State of Minnesota has proposed warranty language which focuses on ensuring "Year 2000 compatibility" (see, e.g., the State of Minnesota's "Proposed Language for Intertech Overload RFP", located at the URL of "http://www.state.mn.us/ebranch/admin/ipo/2000/agltr.html") and warranty language ensuring "Year 2000 Compliance" (see the IRM Standard, Version 1, located at "http://www.state.mn.us/ebranch/admin/ipo/hb/document/std14-1.html").
The Mitre Corporation, a computer systems engineering company, has suggested that instead of warranty language mandating blanket Year 2000 compliancy, that agencies utilize performance standard language (see the URL of "http://www.mitre.org:80/research/cots/Y2K_QUESTIONS.html"). Companies in the private sector have also suggested criteria for Year 2000 compliance (see, e.g., "GTE 2000 Proposed Criteria for 'Century Compliance'", located at the URL of "http://www.mitre.org:80/research/cots/GTE_CRITERIA.html" and especially Table 6, which identifies the various dating standards now in use in connection with different business applications, such as with ATM cards, SQL databases and telephone systems).
One technical problem which agencies may need to avoid is taking two computer systems which interface well, but are not Year 2000 compliant, and then making the two systems Year 2000 compliant by two different techniques, resulting in the two computer systems both being compliant, but no longer interfacing properly. For example, a vendor could utilize a date field expansion technique for the first system. Another vendor might correct the second system utilizing a "100 year sliding window" technique. Both computer systems are technically Year 2000 compliant in and of themselves. But since incompatible corrective techniques were used, they no longer interface with each other as they did prior to corrective action and a "bridge" will have to be developed for the two systems to be able to interface again. The Year 2000 Commission could assist the federal government and state governments in developing appropriate warranty language to deal with this potential problem.
Use of Contract Templates/Omnibus Contracts
The Office of Federal Procurement Policy (OFFP) is reportedly considering creating a contract template for a performance-based statement of work which federal agencies could use to quickly prepare procurement documents. (see "Year 2000 Surfaces in Procurement", Federal Computer Week, April 1, 1996, located at "http://www.fcw.com/pubs/fcw/0401/side1.htm"). It appears, however, that since there may not be enough time for every agency to let out a Request For Proposal (RFP) for Year 2000 corrective work and negotiate a new contract, some agencies may decide to use existing omnibus contracts already existence, such as DISA's DEIS II contract and GSA's A and B/C Schedules (see Paul McCloskey, "Agencies to Tap Omnibus Vehicles for Year 2000 Gear", Federal Computer Week, August 19, 1996, located at "http://www.fcw.com/pubs/fcw/0819/y2k/contracts.htm"). The Year 2000 work would then be merely added to the omnibus contracts as additional work schedules. The Year 2000 Commission could examine this practice to determine what audit procedures may be advisable in order to confirm that the work is being let out to existing prime contractors and subcontractors which have sufficient Year 2000 expertise and resources. It has also been reported that the Federal Acquisition Regulation (FAR) Information Technology Committee is working to place a Year 2000 contract clause in the FAR (see, the GSA Top Five Hot Topics for the week of October 14, 1996, located at the Internet URL of "http://www.itpolicy.gsa.gov/mkm/top5.htm").
Unfortunately, state governments may not have similar omnibus contracts in existence or may be required by statute to prepare RFP's, let out the contracts for public bidding and be required to take the lowest bid. This type of complicated and slow bidding procedure may increase a state's risk of failing to become fully Year 2000 compliant in time. State legislatures may therefore need to review the state bidding procedures and implement amendments to allow fast-track bid procedures for Year 2000 work. An example of this is the California Year 2000 Master Service Agreement (MSA), developed by the Procurement Division of the Department of General Services and the Department of Information Technology to afford fast-track contracting capabilities to the California state government and local governments (see, ITAA Year 2000 Outlook, Vol. 1, No. 10, October 4, 1996, located at "http://www.itaa.org/scripts/dbml.exe?Template=get2klet.dbm").
In any event, both federal and state government agencies should consider seeking "turnkey" agreements from a single prime contractor where possible and appropriate, rather than acting as the general contractor themselves. The prime contractor then would be responsible for the work done by its subcontractors. This may help agencies avoid the situation where the computer system fails to operate properly as a total system, even though the individual modules of the system supposedly have been made Year 2000 compliant, and the individual contractors on the project can only engage in "fingerpointing" at each other as to where the responsibility lies for correcting the problem.
Application of FACNET, FARA and FASA
The Year 2000 Commission could also examine (a) whether full use of the Federal Acquisition Computer Network (FACNET) (designed for projects under $100,000) is being made by the federal agencies for smaller projects, and (b) whether Year 2000 products and services are being effectively acquired under the revised federal acquisition rules contained in the Federal Acquisition Reform Act of 1996 (FARA), the Federal Acquisition Streamlining Act (FASA) and the Truth in Negotiations Act (TINA).
Database of Year 2000 Upgrades and Year 2000 Compliant Software/Hardware
In addition, a central database could be maintained to keep track of the availability of Year 2000 upgrades for older hardware and software items from the private sector. A starting point for this could be the Internet database being developed by the Government Information Technology Executive Council (GITEC), formerly the Council of Federal Data Center Directors (see the URL of "http://www.ssa.gov/year2000/y2klist.htm"). Additional databases of Year 2000 compliant products and services are available from GSA (see the URL of "http://www.itpolicy.gsa.gov/mks/yr2000/advantag.htm") and by the Defense Information Systems Agency (see the DISAYear 2000 COTS Products Compliance Catalogue at "http://www.mitre.org/research/cots/COMPLIANCE_CAT.html"). The above databases could also include a listing of all vendors which have obtained the new ITAA*2000 certification that a vendor's methodology for delivery of products and services is designed to be Year 2000 compliant (see the ITAA*2000 Certification Program at "http://www.itaa.org/certpr1.htm").
The alternative is that the federal and state agencies will each have to send letters and make telephone calls to hundreds, if not thousands of vendors, in order to determine the availability of Year 2000 upgrades and Year 2000 compliant software/hardware. This duplicative effort and unnecessary expense could be avoided with coordination of efforts and the use of a centralized database accessible to all federal and state agencies over the Internet.
The GSA, DISA and/or GITEC databases could also be maintained to record the Year 2000 corrective work currently under progress at the various federal and state government agencies and to identify the vendors involved, so that other authorized federal and state agencies could better identify each vendor's work in progress and expertise. The database could also identify useful private sector information resources, such as the Year 2000 Resource Book, edited by Leland Freeman, which profiles over forty Year 2000 vendors and over 100 Year 2000 corrective tools (see "http://www.mstnet.com/year2000/yr2000.htm").
Issue No. 5: "an analysis of what happens to the United States economy if the problem is not resolved by mid-1999;"
According to one report, the U.S. private sector investment in software and data processing rose from eighteen percent (18%) of total investment in 1981 to forty-one percent (41%) in 1996, with the information processing category growing at an annual rate of twenty percent (20%) as compared to growth in total investment of only five percent. (see, Diane Coyle, "Hard Figures for a Software-Driven Economy", The Independent, June 6, 1996, at p. 26). These statistics underscore the fact that the U.S. economy is evolving into a high technology, knowledge-based economy. The disruption of the public sector's and private sector's computer networks due to the Year 2000 problem therefore is likely to have a greater negative effect than it would have ten to fifteen years ago.
Impact on Economy/Stock Markets
The impact of the Year 2000 problem on the U.S. economy and stock markets could be considerable. A good starting point for this issue is an article by Capers Jones, Chairman of Software Productivity Research, Inc., entitled "The Global Economic Impact of the Year 2000 Software Problem", located at the Internet URL of "http://www.spr.com/library/y2k00.htm". In particular, some investors and fund managers are beginning to analyze which companies may be most vulnerable to the Year 2000 problem in order to protect the value of their stock portfolios (see, e.g., "http://www.y2kinvestor.com/letter.html"; see also, William Ulrich, "The Senior Executive's Role in Addressing the Year 2000 Crisis", at "http://www.spgnet.com/CONF/LONDON/LONDONbkgnd.htm"; Al Boos, "The Year 2000 From a CFO"s Perspective", at "http://www.viasoft.com/y2k3cfo.htm").
When America Online, Inc. (AOL), the Internet service provider, went off- line for less than one day on August 7, 1996, its stock dropped approximately three points. With approximately 91 million shares outstanding, trading at approximately 34 prior to August 7th and at approximately 31 after the sell-off, the market value of outstanding AOL stock was reduced by approximately $273 million. If numerous companies were to experience a drop similar to the drop in AOL stock on or about January 1, 2000, and the negative impact on the market were to be magnified by the automatic kicking in of computerized trading programs, the loss in investor confidence could be considerable and be long-lasting. Panicked investors might divest themselves of stocks in favor of investments in gold, an investment decision which contributes little to the U.S. economy. In addition, while companies are struggling to cope with the Year 2000 problem, scarce corporate capital may be diverted from other research and development projects which produce new products and enhance the competitiveness of the U.S. economy.
Business Interruption Insurance Issue
Companies which fail to become Year 2000 compliant in time and shut down may not be covered by their business interruption insurance policies and may be uninsured in this regard, because the Year 2000 problem may not qualify as an insurable "fortuitous event" (see, Jinnett, "Legal Issues Concerning the Year 2000 'Millennium Bug'" at "http://www.year2000.com/archive/NFlegalissues.html"). The Gartner Group has estimated that approximately fifty percent (50%) of the companies with a Year 2000 problem will not become compliant in time and will have all or part of their computer systems shut down or start producing incorrect data on or after January 1, 2000 (see, Mark Evans, "The Profit Clock is Ticking on 2000 Countdown," The Financial Post, May 8, 1996, Section 2, at p. 22). If the Gartner Group is correct in its prediction, then a large segment of the U.S. economy may potentially incur significant uninsured business interruption losses.
Year 2000 Litigation Warnings
Finally, numerous articles have been published recently surmising that substantial litigation may be produced as a byproduct of the Year 2000 problem. (see, e.g., Wendy Leibowitz, "Lawyers Brace for Countdown and Out to 2000", The National Law Journal, October 28, 1996; Jay Eisenhofer, "Has Your Business Been Bitten by the $600 Billion Millennium Bug?; Outline of Potential Legal Remedies", The Legal Intelligencer, September 11, 1996; Warren Reid, "2001: A Legal Odyssey (The Millennium Bug)", The Computer Lawyer, June, 1996, Vol. 13, No. 6, at p. 15; "Lawyers Ponder Y2K Liability Concerns", ITAA Year 2000 Outlook, October 11, 1996; William Tanenbaum, "Computer Software and Year 2000 Compliance", at "http://www.comlinks.com/mag/tan1.htm"; Lawrence Siskind, "The Year 2000 Crisis", The Weekly Standard, September 23, 1996; Bruce Gaylord, "Beware the Year 2000:Defusing a Software Time Bomb", Computer Law Strategist, Vol. XIII, No. 5, September, 1996, at p. 1; Simon Halberstam, "Who Can Sue Whom", The Times, October 7, 1996, at p. 41; Thomas Hoffman, "Year 2000 Problem Comes Bundled With Legacy of Potential Litigation", Computerworld, October 14, 1996, at p. 88; Thelen, Marrin, Johnson & Bridges, L.L.P., "The Year 2000 Problem", at "http://www.comlinks.com/legal/tmjb1.htm"; Anthony Aarons, "Cinderella's Nightmare", Los Angeles Daily Journal (Cyberlawyer), October 3, 1996; Leah Nathans Spiro, "Panic in the Year Zero Zero," Business Week, August 12, 1996, at p. 72; Mary W. Holden, "Millennium Bug Threatens to Spread Mad Computer Disease", Chicago Lawyer, August, 1996, at p. 78; Jeff Jinnett, "Legal Issues Concerning the Year 2000 'Millennium Bug'", at the Internet URL of "http://www.year2000.com/archive/NFlegalissues.html"); see, also, generally, the Legal Issues section of Com.Links Magazine at "http://www.comlinks.com/legal/lmenu.htm". This flood of litigation, if it occurs, may act as a further drag on the federal and individual state economies.
Issue No. 6: "recommendations to the President and the Congress concerning lessons to be learned and policies and actions to be taken in the future to minimize the Year 2000 public and private sector costs and risks."
In some instances, the Year 2000 Commission will be able to provide detailed proposals to the President and Congress, together with draft bill language for proposed Year 2000 governmental procedures. In other cases, the Year 2000 Commission will only be able to raise issues and outline various competing solutions to the issues. The following are examples of certain issues which could be more fully explored with the assistance of the Year 2000 Commission.
Interdependence of Systems
One conclusion which will become very apparent is that computers are like idiot savants. Computers can do incredibly complex calculations with lightning speed, but are so dumb, that they think a two digit year of "00" represents the year 1900 rather than the year 2000. Another lesson is the recognition that the more complex the computer system, the easier it is for something very simple and small to wreak havoc in the system. The federal goverment and state governments therefore have to develop more sophisticated fall-back plans to assist agencies in accomplishing their missions even in the face of computer system failures.
This idea dovetails with the recognition that just as the Internet is a network of innumerable computers around the world (essentially an immense client/server system), the federal and state government computer systems interface and communicate with each other more than one would think. The IDC study cited above found that sixty-nine percent (69%) of the federal respondents surveyed reported that their agencies exchange date-sensitive mainframe data with other agencies, and thirty-one percent (31%) said that they exchange date-sensitive data with state and local governments. (see John Moore, "Mainframe Readiness Falls Behind Schedule", supra; see also, the MITRE article entitled "Assessment on the Effects of the Two-Digit Years for the Year 2000", located at the Internet URL of "http://www.mitre.org:80/research/y2k/docs/BRIEF.html"). Similarly, the public sector and private sector computer systems are growing more and more interdependent.
Although innovation can arise from the decentralization of the federal and state public sector computer systems, overcoming the Year 2000 problem in the narrow window of opportunity left may require more centralized coordination of the federal and state public sector systems. The tension between the federal government mandating interface standards, date field standards and the like as against the state governments and the private sector handling their own Year 2000 problems free of federal government interference will require more debate and analysis. This debate and analysis could begin at the Year 2000 Commission.
Disaster Recovery "Hot Site"
Assuming that a particular federal or state agency determines in 1999 that it will not be able to correct its customized computer software to be fully Year 2000 compliant by January 1, 2000, is it possible that the agency might be able to send its data to an outside disaster recovery "hot site" for processing on a generic software system which has been previously determined to be Year 2000 compliant ? The "hot site" might not be able to process the agency's data as well as the original customized software package at the agency's computer center could, but at least the agency would not shut down. Would such a backup plan be cost-effective and what mission-critical functions could reasonably be handled at such a "hot site" ? The Veteran's Administration Austin Automation Center has offered to provide Year 2000 corrective services to other government agencies. Could the Austin processing center or other governmental facilities be adapted to act as disaster recovery "hot sites" for federal agencies and/or state agencies which fail to become Year 2000 compliant in time?
It is generally understood by Year 2000 computer experts that even if a company were to become fully Year 2000 compliant itself, if it receives data or software from a third party which is not Year 2000 compliant, the contaminated data or software can contaminate the company's own computer system. Although the Year 2000 problem may not be a "virus" in the technical sense, it can "contaminate" a computer system. In addition, in order to correct the Year 2000 problem, numerous consultants and outside programmers will have to be given access to governmental computer systems. What security measures should the federal government institute in order to defend its computer systems (especially DoD systems) from outside contamination, rogue programmers brought in as independent contractors to Year 2000 corrective vendors and hackers attempting to take advantage of the disruption of normal security safeguards ?
Special Year 2000 Taxes/Unfunded Mandates
Deficit spending is prohibited by the constitutions of many states, complicating the states' ability to raise funds for their Year 2000 corrective work. The State of Nebraska has attempted to solve this funding problem by instituting a two percent increase in its cigarette tax in order to fund an Information Technology Infrastructure Fund for four years for its Year 2000 corrrective work (see Bill Hord, "Computer Funding Bill For Year 2000 Given Wider Scope", Omaha World Herald, March 27, 1996, at p. 20). Should the U.S. Congress consider such an action on the federal level ?
In his testimony before Congress, Daniel Houlihan of NASIRE raised the additional issue of whether the federal government could provide funding for systems which were created to satisfy federal mandates. (see FDCH Political Transcripts for the September 11, 1996 Joint Hearing with the Technology Subcommittee of the House Science Committee and the Government Management, Information and Technology Subcommittee). Certainly, if new mandates are imposed on states in the next three years (such as the obligation to conduct drug testing on minors as a precondition to their obtaining driver's licenses), calls by states for federal funds for Year 2000 corrective work may increase.
The Emerging Issues Task Force of the Financial Accounting Standards Board (FASB) has decided that companies should currently deduct the cost of their Year 2000 corrective work, rather than capitalizing the costs (see Alison Bennett, "Expensing Computer Change to 4-Digit Years in 2000 is Appropriate, Practitioner Says", BNA Management Briefing, July 23, 1996). The EITF position would require companies to take an immediate "hit" to their financial statements for their Year 2000 costs. In order to encourage private sector companies to incur the Year 2000 costs and become compliant as quickly as possible, should federal and/or state tax incentives be passed into law to support Year 2000 corrective work ?
Governmental Mandates to the Private Sector
The Office of the Comptroller of the Currency has issued (jointly with the FFIEC) Advisory Letter 96-4 advising all national banks to become Year 2000 compliant by December 31, 1998, leaving one year for testing (see the URL of "http://www.occ.ustreas.gov/ftp/advisory/96-4att.txt"). Should the federal government and state governments consider issuing Year 2000 mandates for regulated industries where a failure to become Year 2000 compliant might have a serious negative impact on the public health and welfare (utilities operating nuclear power plants, for example) ?
The State of Oklahoma legislature has passed a Concurrent Resolution calling on state agencies and institutions of higher learning to become Year 2000 compliant and to report their plans to become compliant to the Legislature by November 1, 1996, with more specific plans every following November through 1999 (see, ITAA Year 2000 Outlook, Vol. 1, no. 2, August 2, 1996, located at the Internet URL of "http://www.itaa.org/scripts/dbml.exe?Template=get2klet.dbm"). Should the other states be encouraged to follow Oklahoma's example ?
The U.S. Securities and Exchange Commission (SEC) has reportedly studied the impact of the Year 2000 problem on the public securities market and has announced that it intends to include questions as to Year 2000 compliancy in SEC audits of registered broker-dealers (see, Geof Wheelwright, "SEC's Appeal to Count the Costs", The Times, September 11, 1996; Aaron Pressman, "SEC Checking on Firms' Computers for the Year 2000," Reuters Financial Report, June 17, 1996). The SEC, however, has not issued any formal Year 2000 advisory concerning the obligation of public companies to disclose in their annual reports on Form 10-K and quarterly reports on Form 10-Q their Year 2000 problem and the corrective action they intend to take.
Although companies are required to disclose information about their Year 2000 plans under certain circumstances as part of the "Management's Discussion & Analysis" section of the annual and quarterly reports pursuant to Item 303 of Reg. S-K, should the SEC issue a Year 2000 advisory in order to highlight the issue ? (see, e.g., Jeff Jinnett, "Legal Issues Concerning the Year 2000 'Millennium Bug'", located at the URL of "http://www.year2000.com/archive/NFlegalissues.html") Should state securities commissions require Year 2000 disclosures to be included in offering statements for securities registered under their state "Blue Sky" laws ? Should FASB issue guidelines for independent accountants in connection with their audit of companies' financial statements with respect to Year 2000 problems ?
U.S. Export Control Laws
Many companies are reportedly considering giving all of their software applications to a third party vendor for correction of the Year 2000 problem, with corrective work being done at less expensive programming facilities in countries such as India, the Philippines and South Africa. Will companies mistakenly export encryption software and other software applications forbidden from export under the provisions of the Arms Export Control Act due to ignorance of the U.S. Munitions List and the haste with which Year 2000 compliance work is being undertaken ? Do special steps need to be taken by the federal government to guard against this problem ?
Federal Securities Laws
Although offerings of securities by municipalities are exempted from registration requirements and civil liability provisions of the Securities Act of 1933 (the "1933 Act") and from the reporting requirements under the Securities Exchange Act of 1934 (the "Exchange Act"), muncipal securities offerings are not exempt from coverage under the antifraud provisions of Section 17(a) of the 1933 Act, Section 10(b) of the Exchange Act and Rule 10b-5 promulgated by the SEC under Section 10(b). (See, e.g., Release No. 33-7049/34-33741, 17 CFR 211, 231 and 241, "Statement of the Commission Regarding Disclosure Obligations of Municipal Securities and Others"). The antifraud provisions prohibit municipal issuers and the brokers and dealers assisting the issuer from making any false or misleading statement of material fact, or omitting any material facts necessary to make statements by that person not misleading, in connection with the offer, purchase or sale of any municipal security. Also, when a municipality issues information to the public after an offering of municipal securities which is reasonably expected to reach investors and the trading markets, the above antifraud provisions also apply to those disclosures.
Municipal securities dealers are also subject to rules designed to prevent fraud and promulgated by the SEC and by the Municipal Securities Rulemaking Board. (See, e.g., Release No. 33-7049/34-33741, 17 CFR 211, 231 and 241, "Statement of the Commission Regarding Disclosure Obligations of Municipal Securities and Others"). In addition, voluntary guidelines for disclosure in connection with the issuance of municipal securities have been issued by the Government Finance Officers Association and by the National Federation of Municipal Analysts. State and local governments therefore need to consider what risk factors and other disclosures may be necessary as to their Year 2000 corrective plans in connection with the preparation of the offering documents for municipal securities (the "Official Statements") required to be distributed to underwriters pursuant to Rule 15c2-12, promulgated by the SEC under the Exchange Act.
Disclosures Required Due to Accounting Principles
It appears that the overwhelming majority of states, cities, counties and school districts currently rely on Generally Accepted Accounting Principles ("GAAP") as determined by the Government Accounting Standards Board ("GASB") in preparing their financial statements (see, SEC Release No. 33- 7049/34-33741, at section 3(C)(3)(a)). Municipal issuers will need to analyze whether Statement of Financial Accounting Standards No. 5 ("Accounting for Contingencies") requires the municipal issuer to disclose in its financial statements any risk of interruption of governmental operations due to the Year 2000 computer problem (see, e.g., Jeff Jinnett, "Legal Issues Concerning the Year 2000 'Millennium Bug'", at "http://www.year2000.com/archive/NFlegalissues.html").
Tort Claims Act/Tucker Act
Under the Federal Tort Claims Act (28 U.S.C. Sections 1346, 2671-2678, 2680), may citizens sue an agency of the federal government if they are injured as a result of the agency failing to render its computers Year 2000 compliant in time due to the negligence of the agencies' employees ? Various exceptions are listed in the Tort Claims Act where the federal government may not be sued for tort liability, such as an exception for "discretionary functions". An analysis could be made by government attorneys as to the various claims which are likely to arise due to particular Year 2000 problems and whether any of the various exceptions may apply.
Under the Tucker Act (28 U.S.C. Sections 1346(a), 1491), may citizens or companies sue the federal government for breach of contract and other monetary claims not arising in tort due to the failure of one or more federal agencies to render their computer systems Year 2000 compliant ? The Tucker Act empowers the Claims Court to hear suits against the federal government, based on any contract with the government (express or implied), so long as the suits seek primarily money damages and do not involve tort claims. A similar analysis by government attorneys could be required to anticipate the potential Tucker Act claims which might result from particular federal agencies failing to become Year 2000 compliant.
Many states have Tort Claims Acts and would face similar issues. Typically, state tort claims statutes only waive the state's sovereign immunity from suit and the qualified immunity of government officials (in some states, up to a maximum dollar limit, such as $100,000) in limited cases. Courts interpreting these statutes have held a state liable in cases where (a) the state owes a special duty to the claimant rather than a duty to the public-at-large, (b) the liability arose out of a ministerial act rather than a discretionary act by government officials, and/or (c) the tort liability involves "egregious conduct" on the part of the governmental body or official.
Thus, in some states, if a convicted criminal were to be released on parole early due to computer error and injure a citizen while on parole, the state would likely not be liable, because the state's duty was to the public-at-large. However, would the same result apply if a traffic light malfunctioned due to its internal timer not having been made Year 2000 compliant and a serious traffic accident occurred ? In some cases, a state has been held liable for traffic accidents caused by a dangerous highway condition where the state knew of the dangerous condition and failed to take action to remedy it.
Would it be advisable for the Congress to consider amending the Federal Tort Claims Act and the Tucker Act and/or for the state legislatures to amend their claims acts to exclude liability for damages caused by the failure of any agency to become Year 2000 compliant in time? The Congress and the various state legislatures may decide for reasons of public policy not to exclude claims based on the Year 2000 problem, but it might be advisable for the responsible legislators to at least consider the question, since the potential damages could be considerable.
Federal and State Disaster Relief
If a state government were to fail to become Year 2000 compliant in time with respect to mission-critical systems, how should the federal government respond if the state government were to request federal disaster assistance ?
The definition of a "Major Disaster" under the Disaster Relief Act, 42 U.S.C. Section 5122 (2), is:
It is conceivable that a computer malfunction caused by the Year 2000 problem could result in a disaster fitting the statutory definition. If a disaster were to occur such as a electric power plant explosion due to a computer malfunction caused by the Year 2000 problem, and the President were to declare the affected area a disaster area, would businesses affected negatively by the Year 2000 problem in the surrounding geographic area (but not affected by the power plant explosion) be entitled to claim federal disaster relief ? Among the other benefits, casualty losses can be deducted in the year they are incurred, after subtracting insurance proceeds and a $100 threshold for each casualty, to the extent they exceed 10% of Adjusted Gross Income.
The President may wish to consider in advance the types of disasters which can occur due to the Year 2000 problem and decide in advance whether federal disaster relief will be provided and how it can be targeted to those directly affected by the disaster. Also, the states could consider how their state disaster relief agencies should coordinate with the Federal Emergency Management Agency (FEMA) to prepare in advance for potential disasters caused by the Year 2000 problem. (see, e.g., the FEMA Web site at the URL of "http://www.fema.gov").
It may be in the best interests of the states to form multi-state "compacts" to engage in coordinated efforts on the Year 2000 problem. The activities of these compacts might involve the creation of Year 2000 databases, coordinated corrective work and joint "hot site" efforts, and coordination of Year 2000 financing activities, all in order to reduce overall costs to the participating states. It should be noted that Article 1, Section 10, clause 3 of the U. S. Constitution provides that "No State shall, without the consent of Congress, ... enter into any Agreement or Compact with another State, or with a foreign Power..." (the "Compact Clause"). Decisions of the U.S. Supreme Court, however, have generally interpreted the Compact Clause as being intended only to prohibit the formation of compacts or combinations between states which may encroach upon or interfere with the federal government's power or which grant the states powers which they would not have absent the compact.
Examples of compacts between states exist (a) which have required the approval of Congress (e.g., the New York-New Jersey Port Authority Compact, the Delaware River Port Authority Compact and the Metropolitan Washington Airports Authority Compact), and (b) which have not required Congressional approval (e.g., the Interstate Compact on Placement of Children relating to the adoption and foster care of children and the Multistate Tax Compact to facilitate the proper determination of the state tax liability of multistate corporations).
Typically, interstate compacts either (a) create a uniform process or procedure (e.g., the Interstate Agreement on Detainers between 48 states and the United States to dispose of outstanding criminal charges brought against prisoners incarcerated in other jurisdictions), (b) manage a common physical resource or develop a commonly needed man-made physical resource (e.g., the Tahoe Regional Planning Compact between California and Nevada to coordinate regional planning for the Lake Tahoe Basin), (c) determine property rights (e.g., the Arkansas River Compact between Kansas and Colorado to resolve existing disputes concerning the Arkansas River), or (d) otherwise address a common problem among the participating states (e.g., the Central Interstate Low-Level Radioactive Waste Compact, created pursuant to the federal Low-Level Radioactive Waste Policy Amendments Act of 1985).
AYear 2000 Compact among states might fall into the same category as the above-referenced Low-Level Radioactive Waste Compact as a compact designed to address a common problem among the participating states. Congressional approval might not be necessary for the creation of Year 2000 Compacts between states on the theory that the Year 2000 Compacts were not designed to take any power from the federal government, but rather to assist the states in handling a short-term computer problem. The Year 2000 Commission could examine this issue and advise Congress as to whether federal authorizing legislation might be appropriate to address this potential legal issue.
Finally, an issue might arise as to the legality of states forming a Year 2000 Compact for purposes of undertaking joint financings to raise funds for Year 2000 corrective work. In the past, some multistate compacts have allowed for the issuance of bonds to finance the purpose of the compact. For example, the New York-New Jersey Port Authority Compact authorizes the Port Authority to issue bonds. The Low-Level Radioactive Waste Policy Compact also contemplates the allocation of waste disposal costs among the participating states. Again, the Year 2000 Commission could examine whether enabling federal legislation should be enacted to resolve this legal issue if multistate Year 2000 financings appear necessary and desirable.
Coordination with Other Nations
The United States is not an island unto itself with respect to the Year 2000 problem. Our allies and trading partners face the Year 2000 problem as well and any serious damage to their economies or political systems would ultimately harm our economy and security. The EU, for example, faces the problem of not only having to correct its computer systems to become Year 2000 compliant, but also to change over its systems to recognize the new unit of currency, the ECU. Under the Maastricht Treaty, the move to the ECU is to be formally approved by the participating nations in January of 1998, with the conversion beginning in January of 1999 and being completed in 2002.
If the EU fails to render its computer systems Year 2000 compliant in time, how will this impact the U.S. economy, NATO operations, and other areas where the U.S. and members of the EU interface or cooperate ? Martin Bangemann, the EU's industry commissioner, reportedly is creating a working group to study the Year 2000 problem (see, "European Commission Investigating Millennium Bug", Newsbytes, June 28, 1996; "Clockwork Mice", Financial Times, July 1, 1996; European Report No. 2144, June, 1996). In the United Kingdom, spurred by Ian Taylor, the British Minister of Trade and Industry, the Government's Central Computer and Telecommunications Agency (CCTA) is reportedly coordinating the efforts to correct the U.K. government's Year 2000 problem. (see, "DTI: Act Early to Defuse Millennium Time Bomb", M2 Presswire, June 26, 1996; see also the CCTA Web site at "http://www.open.gov.uk/ccta/mill/mbhome.htm"). Should the U.S. Year 2000 Commission mandate include the authority to coordinate efforts with the EU working group, the CCTA in the United Kingdom and other non-U.S. governmental Year 2000 task forces ? Should the mandate include coordination with possible future United Nations efforts with respect to the Year 2000 problem ?
The above are just some of the potentially weighty questions on which the Year 2000 Commission might be able to provide additional guidance to the federal government and the state governments as they grapple with what is widely recognized by computer experts to be a major challenge to the computer industry and a major disaster in the making, if not handled correctly and efficiently. Although decentralized experimentation can be very useful, the federal government and the state governments do not have the luxury of time with respect to the Year 2000 problem. This is one deadline which cannot be extended and due to the complex interrelationship of governmental and private sector computer systems, all systems need to be made compliant in time and all system interfaces need to be tested for functionality. Further, since the Year 2000 corrective effort is so labor intensive and expensive, costs need to be reduced as much as possible.
The utmost in coordination on all federal and state public sector levels is therefore required to eliminate duplication of efforts and to ensure that the failure to implement a corrective plan by any agency is detected as early as possible. The Year 2000 Commission can serve an extremely useful purpose in identifying critical steps and devising methodologies for accomplishing the necessary interagency coordination.
Suggested Changes to Senate Bill 2131 Prior to Its Reintroduction
I recommend that certain changes be made to the text of Senate Bill 2131 prior to its reintroduction as a new bill in the 105th Congress. Due the clear interdependence of the computer network systems of the federal government and the fifty state governments, I recommend that the bipartisan Year 2000 Commission have at least one member appointed to represent the interests of the fifty states. For example, one of the fifteen members could be appointed from NASIRE. Further, due to the extremely short time period left for corrective work, it may be advisable for the Year 2000 Commission to release multiple reports as it completes individual phases of its work, on a rolling basis, throughout 1997. The budget for fiscal 1998 begins on October 1, 1997 and ends on September 30, 1998. The first Year 2000 Commission report is actually needed to support the fiscal 1998 budget and therefore might be issued too late if it issues on December 31, 1997.
Finally, instead of terminating the Year 2000 Commission at the end of 1997, it might be advisable to specify that the Year 2000 Commission will automatically continue in existence from year to year unless terminated by Congress, with the Year 2000 Commission automatically terminating on December 31, 2000. The federal government and the state governments would then have the benefit of the Year 2000 Commission's expertise throughout the entire Year 2000 corrective process and for the critical one year period after January 1, 2000. Terminating the "Millennium Bug" Year 2000 Commission on December 31, 2000 actually is quite appropriate, since the next millennium technically does not begin until January 1, 2001.
Author's Note: This article is intended to provide general information and is not intended to provide legal advice with respect to specific transactions or matters. Any questions or comments with respect to this article and any requests to copy this article onto any corporate or governmental LAN, WAN or intranet should be directed to firstname.lastname@example.org.
New York, New York
November 18, 1996