EIA says cost to fix Y2K bug will hit $6B

Less than a week after the Clinton administration estimated it would cost $5.4 billion to fix the millennium bug in tens of thousands of federal computer systems, a key industry group predicted the total cost would be more than 10 percent greater.

Gerald Harvey, head of the group that conducted the five-year forecast study released by the Electronic Industries Alliance's (EIA) Government Electronics and Information Technology Group, said the cost of the government's Year 2000 effort will be $6 billion.

Harvey called the effort to fix computers for the Year 2000 problem "the most daunting of the IT challenges facing the federal government" in fiscal 1999.

In its sixth quarterly report on the government's Year 2000 efforts, the Office of Management and Budget estimated the total cost to be $5.4 billion. But that figure most likely would rise, OMB reported.

Harvey, director of strategic development at Lockheed Martin Corp., said the growing financial demands of Year 2000 remediation efforts mean that "funding for new [IT] programs will likely be shifted to fund Y2K initiatives."

Michael Kush, director of market research at Electronic Data Systems Corp. and head of the EIA team that forecasts spending on information technology in the Defense Department, said the ultimate cost of the Year 2000 is compounded by the fact that top DOD management does not completely understand the situation. He said a senior Army official summarized the service's ability to assess the impact of Year 2000 like this: "We don't know what we don't know."

Security: the Next Big Thing

Government officials surveyed by the EIA also said information system security will be their next major focus. According to the EIA forecast group, the "ubiquity of the [World Wide] Web and the need to shift government Web sites from simply an information repository to a transaction-oriented tool for the citizen is driving a need for widespread deployment of public-key infrastructure and digital signature standards.''

Civilian agency officials surveyed by the EIA had widespread praise for the streamlined acquisition vehicles developed in response to IT reform legislation and backed by OMB. But Sara DeCarlo, director of marketing for Bell Atlantic Federal and chairwoman of the civilian market study group, said top civilian agency chief information officers have started to question the utility of some of the contracting vehicles that have emerged over the past year.

CIOs take a dim view of the trend to require holders of competitively awarded blanket purchase agreement contracts to hold another round of competition for orders from those contracts, DeCarlo said. These CIOs are concerned about "the time and cost'' of extra rounds of competition, she said.

With the exception of NASA and the General Services Administration, few agencies have any intention of embracing seat management contracts, DeCarlo said. GSA and NASA this summer awarded billions of dollars worth of contracts that agencies can use to outsource the entire desktop PC, including hardware, software, upgrades, maintenance and services. "There's not a pent-up demand for seat management," she said.

The EIA predicted relatively flat growth for federal IT spending in the next five years. The overall federal budget, which does not include the cost of embedded systems or Pentagon-managed satellite and sensor systems, will hit a high of $29.9 billion in fiscal 2000 and decrease to $29 billion in fiscal 2003.

Civilian agencies will consume a greater share of IT spending. Spending at these agencies will rise from $17.3 billion in fiscal 1998 to $18.1 billion in fiscal 2003, Harvey said. In fiscal 2000, civilian agencies will spend an estimated $18.6 billion.

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AT A GLANCE

EIA's Key Findings

* Total estimated cost to fix federal systems for the Year 2000 problem: $6 billion.* The total Year 2000 cost is complicated by the uncertainty of the Year 2000 problem in the Defense Department.* After the Year 2000, agencies will focus primarily on security issues, particularly regarding the World Wide Web.* CIOs have begun to question the utility of BPAs.* There is no pent-up demand for seat management contracts.* Federal IT spending, adjusted for inflation, will remain flat through 2003.

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