INVESTIGATING THE IMPACT OF THE YEAR 2000 PROBLEM (2/24/99) - Prepared by U.S. Senate Special Committee on the Year 2000 Technology Problem - Senator Robert F. Bennett (R-Utah), Chairman

E.N.: The day the report was released (3/2/99), Senator Bennett soft-pedaled the Committees investigation by announcing that Y2k would be a bump in the road. However, two days prior, Bennett had stated on national television that "those who suggest that it will be nothing more than a 'bump in the road' are simply misinformed." This is what excerpts of the report really say (available in PDF/Adobe format at: http://www.senate.gov/~y2k/reportcontents.html). Note that one of the federal agencies most important to business continuity - the USPS - is not included in the report; Congressional testimony by the USPS on 2/23/99 confirmed that it is very unlikely the USPS will be able to function next year.

GENERAL REMARKS. The Y2K problem is very real andY2K risk management efforts must be increased to avert serious disruptions The question is not will there be disruptions, but how severe the disruptions will be Leadership at the highest levels is lacking Many organizations critical to Americans safety and well-being are still not fully engaged in finding a solution National emergency and security planning for Y2K-related systems failures is just beginning. FEMA contingency plans are in draft form, but there is no national strategic plan to assure that critical infrastructures will continue to function.

The interdependent nature of technology systems makes the severity of possible problems difficult to predict. Adding to the confusion, there are still very few overall Y2K technology compliance assessments of infrastructure or industry sectors. Consequently, the fundamental questions of risk and personal preparedness cannot be answered at this time The Committeestill cannot conclusively determine how extensive the Y2K disruptions will be. Self-reporting has yielded unreliable assessments for most industry sectors. With few exceptions, disclosure of Y2K compliance is poor Unfortunately, the results of many surveys have been kept from public and Special Committee view... Despite an SEC rule requiring Y2K disclosure of public corporations, companies are reluctant to report poor compliance levels Senate hearings, interviews, and research have not produced convincing evidence that the Y2K problem is well in hand.

UTILITIES. According to NERC (North American Electric Reliability Council), only about 50% of the utilities had completed Y2K remediation as of December 1998. [Actually, the Senate report misrepresents NERCs data which states that only 44% of overall systems were (self-reported) as ready, not that 44% of the plants were ready. Im not aware of any utility that is fully remediated.]

The highly interconnected nature of the grids raises concern about cascading failures The interconnectedness makes the grid fragile and susceptible to Y2K disruptions. An outage in one part of the grid can cascade causing ripple effects on other parts of the grid. For example, a generation plant could go out in Maine, affecting power in Florida Nuclear facilities [which supply 40% of power east of the Mississippi] are lagging behind other electric facilities in their Y2K assessment and remediation efforts... While these problems [at nuclear facilities] should not affect plant safety, they could cause serious electricity production problems.

There are no comprehensive studies concerning the number of entities that would have to fail to put the entire grid at risk, but some experts suggest that it may be a very small percentage if in key locations. While complete power grid failure and prolonged blackout is highly unlikely, failure of at least some parts of the electric power industry, e.g., local or regional outages, is possible. [Note that this statement does not rule out nationwide blackouts, just prolonged ones. It also does not address the issue of fuel shortages or cyberterrorism which the report acknowledges elsewhere in the document as potential problems. Nor does it address the issue of reliance on the grid, and the resulting problems of the loss of nuclear or other plants from the systems capacity. Nor does it address the problem that it is not possible to fully test embedded systems prior to rollover. It also ignores NERCs recommendation that contingency planning anticipate the possibility of a common mode failure which, by definition, would result in widespread problem outages, for which NERC believes that power rationing - such as damaging brownouts or rolling blackouts - may be necessary.]

OIL AND NATURAL GAS. Compliance among oil and natural gas utilities is also progressing slowly. A survey by the Committeeindicates a lack of contingency planning, overly optimistic assertions that compliance will be complete, and a lack of knowledge about suppliers Y2K status Y2K remediation in the gas and oil sector began too late and is progressing too slowly Most of the critical systems in this industry are still in the inventory and assessment phase, leaving little time for the more difficult phases of Y2K remediation and testing. As a result, the industry is not likely to complete repairs of all of its systems in time, which in turn means that disruptions in the production, transportation, and distribution of gas and oil are possible The U.S. gets nearly 50 percent of its oil from imports, and several key oil producing countries are behind in their Y2K remediation efforts. If these countries are unable to sustain the level of imports because of Y2K failures in the pumping, refining, or transportation of crude oil, the implications on the price of gasoline may be significant.

HEALTH CARE. Y2K could put the healthcare industry in intensive care The health care industry lags significantly in its Y2K preparations compared to other sectors. 90% of doctors offices have yet to address the problem 64% of hospitals - primarily smaller hospitals - have no plans to test their remediation efforts.

BUSINESS. Many small- and medium-sized businesses are extremely unprepared for Y2K disruptions. As businesses review their supply chains for Y2K preparedness, we will see a flight to quality. Over 80% of small businesses are potentially exposed to Y2K problems 40%do not plan to take any action Medium-sized business may actually face the greatest overall Y2K exposure. Manual processing may no longer present a viable option for medium-sized businesses. They may also lack the appropriate resources to remediate affected systems and devices. Given that small and medium-sized businesses provide over 51% of the private sector output, the lack of action on their part may translate into a larger ripple that moves through the loosely linked supply chain.

The Gartner Groups predictions, by industry, of the percentage of companies likely to experience at least one mission-critical failure (a business interruption that could affect revenue and likely affect the continued operation of that business):

15% (insurance, investment services, banking, pharmaceuticals, computer manufacturing);

33% (heavy equipment, aerospace, medical equipment, software, semiconductor, telecom, retail, discrete manufacturing, publishing, biotechnology, consulting);

50% (chemical processing, transportation, power, natural gas, water, oil, law practices, medical practices, construction, transportation, pulp & paper, ocean shipping, hospitality, broadcast news, television, law enforcement);

66% (education, healthcare, government agencies, farming & agriculture, food processing, construction, city & town municipal services).

TRANSPORTATION. The transportation sector is the linchpin for just-in-time inventory management across most every sector. The Y2K readiness of this sector is critical to our global economy On average, the nations 670 domestic airports started Y2K compliance too late. The FAAhas a long way to go to be ready for Y2K and remains at risk. The situation with international air traffic control and airports is much more severe. The maritime shipping industry has not moved aggressively toward compliance. Disruptions to global trade are highly likely Public transit could be seriously disrupted.

GLOBAL. The biggest Y2K impact may occur internationally The U.S. is dependent on a healthy global economy Many [countries] have not even begun to address the problem. Thus, we should remain very skeptical about our ability to buy or sell goods from certain parts of the world Several U.S. trading partners are severely behind in their Y2K remediation. Canada, Australia and the United Kingdom have consistently appeared on the top of preparedness lists With the main exception of the United Kingdom, the Netherlands and Scandinavia, European countries have taken a strikingly relaxed attitude to Y2K The situation in Russia and China is even worse than in Europe... Venezuela and Saudi Arabia (two of the largest U.S. oil importers) are 12 to 18 months behind the U.S. in their Y2K remediation efforts. [The CEO of SunMicrosystems recently announced that Asia is so far behind, he expects it to affect Suns ability to manufacture computers next year. Brazil, which produces most of our ball bearings, is currently threatened with economic collapse. Euro conversion and economic turmoil in foreign countries is distracting those countries from Y2K efforts.]

-- For (what@its.worth), March 03, 1999

Answers

Wow, For, absolutely excellent compilation (and insightful commentary too). (I'm still plowing through The Whole Thing as I can between other stuff.)

Indeed, you actually read what the report says, and wonder how the media could portray (or ignore) this report.

-- Jack (jsprat@eld.net), March 03, 1999.

Thanks, FWIW, this is an excellent doc. Very glad to have it as time will not allow reading the whole ka-huna til this weekeng

-- Greybear (greybear@home.com), March 03, 1999.

Thank you, For and all the others who have taken the time to put parts of this on the board for those of us who can't download it. I, for one, don't need to read all 164 pages to know that it is all bad. Basically, it just confirms what we all,already knew, but couldn't always prove to others.

At least now I can go on without wondering if I am the lunatic and the rest of the world is right.It's a shame tho, that that the majority of people will never read it and will go on believing the spin right to the end.

Part everybody notices,I hope, is that problems will commence from July onward.I know we've all been ready for special dates like April 1, etc. but this may give us a goal date to finish our preparations (if finishing is ever possible). Alright, at least more impetus to work on it.

-- Sue (deco100@aol.com), March 04, 1999.