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By Elizabeth Wasserman  |  Posted 04-05-2005

Social Uncertainty

Lengthy Presidential radio addresses. Impassioned White House press briefings. Heated Wall Street Journal editorials. It's been 70 years since Social Security was such a hot topic. And with President Bush placing the beleaguered agency at the top of his domestic agenda for his final term, the debate is only going to get hotter in the coming months.

And why not? Social Security is really about one thing that Americans hold close to their hearts: money. In 2005, an estimated 48 million Americans will receive about $509 billion in Social Security benefits. And more than ever, people are asking questions about what the future of their money will look like. Will I ever see my Social Security contribution again? Will this system even be in place when I retire? So far, the Bush Administration has succeeded in creating fear, uncertainty and doubt about the future of Social Security. But a detailed plan to fix it has yet to emerge.

In the face of all this confusion, the Social Security Administration, headquartered in Baltimore, is moving ahead with a massive IT modernization process that started more than 20 years ago. The effort includes no fewer than 100 different projects, all being worked on simultaneously, and an annual IT budget of about $1 billion. Last November, the SSA signed Lockheed Martin Corp. to a seven-year, $525 million, open-ended IT services contract to further the modernization effort. All of which begs the question: How does an organization plan for its information technology future when its overall future is so utterly in doubt?

"With the Social Security solvency issue up front and center on the President's agenda, the feeling is something could hit soon . . . or eventually something will be done," says Kay Kapoor, vice president of strategic programs at Lockheed Martin. "Our relationship with the Social Security Administration has been going on for 10 years now and we have never seen Social Security go through this much change in this short a time frame. They are under a lot of Congressional pressure. To their credit, they have done a phenomenal job readying themselves for the next thing and the next thing."

Changing government mandates, coupled with administrators that typically turn over after every election cycle (not to mention other issues unique to the federal bureaucracy), have often led to the failure of multibillion-dollar government IT projects. The Federal Bureau of Investigation announced earlier this year that a custom-built, $170 million "virtual case file" project may be shelved because it is inadequate and outdated. The IRS is in the midst of a $1.7 billion "business system modernization" program, after Congress found that the tax agency had spent $3 billion in the 1990s on an attempt at modernizing IT that produced few results. Back in 1972, Congress added a major program to SSA's roster, with the creation of the Supplemental Security Income, a welfare benefit for people with disabilities. The new program brought long lines, a backlog and a public relations nightmare to the SSA because the agency was used to dealing with retirees who could wait three months for their benefits, not needy people who needed assistance on the spot, according to "The Social Security Administration and Information Technology Special Report" by the Congressional Office of Technology Assessment in 1986.

So far, the Social Security Administration is keeping a close eye on the national debate but still continuing its IT modernization program. The agency has an Office of Legislation and Congressional Affairs that follows legislative developments and assesses their impact; in terms of Social Security reform, however, SSA officials maintain that it is too soon to tell which IT modernization projects or IT systems would be affected. "Right now, it's early in the process. There's nothing for people to react to. There's just discussion," says William Gray, SSA's deputy commissioner for systems. "We don't know what the proposal will be."

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Believe it or not, the SSA was once considered a technological pioneer in the federal government. In the 1960s, it teamed with IBM to manage the massive database of names, numbers and payouts, even though most of the systems were still paper-based. But over the ensuing two decades, the SSA's technology grew stale, and its processes became convoluted.

In 1982, Congress blamed the SSA for poor technology decision-making, and in response, the agency introduced its Systems Modernization Plan, a rolling program that has spanned more than 20 years and cost taxpayers several billion dollars. The SSA eventually undertook IT systems initiatives that moved a number of citizen interfaces onto the Internet; now people can apply for benefits, change addresses, and use retirement planning tools online. Among the major initiatives that have been underway during the past decade is a $201 million program to redesign the agency's Title II programs—its main benefits programs for Survivors and for Disability Insurance. That program sought to integrate some of SSA's two-dozen legacy systems, thereby increasing automation, and the speed with which benefits are determined and granted. Other projects included a $74 million program to develop a national 800-number call-center system, $157 million in electronic service delivery systems for Internet customer service, and a $62 million program to move employer wage reporting (or W-2 forms) to an electronic system, according to a 2001 report on SSA's IT programs by the Government Accountability Office.

But the systems that would be most affected, should President Bush persuade Congress to add voluntary private accounts to Social Security, are those of retiree benefits. The program currently consists of four main IT systems—one for issuing Social Security numbers, one for maintaining all Americans' earnings records from 1937 to the present, one for applications and adjudication, and the last for records kept post- entitlement, such as address changes and direct-deposit information. Except for the system that keeps Social Security numbers, the other three IT systems would need to be extensively modified to allow for an as yet undetermined percentage of tax funds to be transferred to private accounts.

"You can assume there would be lots of work that would have to be done," says Renato DiPentima, a systems executive at SSA for thirty years, who now serves as president and chief executive officer of SRA International Inc., a Fairfax, Va.-based IT provider to government and the healthcare industry.

In anticipation of that upheaval, the SSA hired Lockheed Martin to give them the flexibility to adapt to changes whenever they occur. Under the contract, Lockheed can be called on for support in application design, database administration, software engineering and a number of other capacities for any of the SSA's 100 different ongoing IT projects—or for new projects that may arise as a result of new legislative mandates. Since 1989, Lockheed has been selected for two previous agencywide contracts at the SSA, and the two groups work closely as they watch the debate unfold. Lockheed's Kapoor says, "They do talk to us. We have joint meetings. We brainstorm. We come up with a project management plan, a risk management plan, the infrastructure that will be needed, and what other resources will be needed." The various scenarios can be scaled up or back, depending on what, if any, legislative changes are made to Social Security.

In addition, the SSA has established an in-house group called the Information Technology Advisory Board, which is chaired by CIO Thomas Hughes and composed of the SSA's eight deputy commissioners. The group meets quarterly and decides on the portfolio of projects that the agency is going to pursue in order to support modernization efforts and meet the agency's strategic goals. SSA executives use digital dashboard technology to monitor the progress of the various IT projects to determine whether they are on target and meeting objectives. Unlike most federal agencies, the SSA develops most of its software projects internally—much like financial insurance agencies in the private sector—due to very specific laws governing Social Security, in addition to stringent security rules. SSA also has an architectural review board that considers the plans for all new systems to make sure that the design fits into the agency's current or planned enterprise architecture.

Social Security by the Numbers
These figures illustrate the astounding number of transactions the SSA will process in 2005.
6 million claims for benefits

18 million new and replacement social security cards

267 million earnings items processed for workers' earnings records

52 million phone calls to SSA's 800 number

136 million social security statements

Source: Social Security Commissioner

While Gray is keeping an eye on Social Security reform, he says he is also managing the SSA IT department through this period of relative uncertainty by moving ahead aggressively with the agency's modernization plans. And his staff is taking into account the services that the agency will have to provide, with or without reform. "If you look ahead, it's very evident that no matter how reform takes place, we will still have a Social Security defined benefit," Gray says. That said, Gray added that his staff has been making sure for years that the systems undergoing modernization can be more easily modified than the legacy systems they have often replaced. "We look to make sure that when we build a system we do so with the flexibility to adapt to changes," Gray says. The first step is to select a vendor to partner with that is well established and that will be around in the future. "We look for companies that can help us with technical advice, standards and are leaders of that particular segment." Many of the services the SSA offers over the Web have been based on IBM technology for that very reason, Gray adds.

But some observers believe that the effects of the uncertainty are already taking a toll on the agency's IT planning. The SSA typically spends nearly $1 billion a year on IT infrastructure and services. But the proposed 2006 IT budget request was down 7 percent, to $958 million, fueling speculation that the agency was hesitant to take on any new projects until the questions over Social Security reform are settled. "It could be a winding down of programs or it may be a slight stay of execution," says Ray Bjorklund, senior vice president of Federal Sources Inc., a McLean, Va., government IT market intelligence firm. "It may be a slowing down on purpose because some of these projects may have to be revised."

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In the end, it seems likely that the SSA will solve whatever technology challenges are legislated into existence in the same way that so many profit-driven companies do: They'll outsource the problem. In the midst of all the political posturing, the agency's executive staff have already started meeting with vendors to discuss plans for various reform scenarios. And they do have an historical road map to follow, albeit on a much smaller scale.

In 2003, President Bush signed the Medicare Modernization Act and assigned the SSA to administer the program—that is, to determine who is eligible for the prescription drug discount card, and withhold the premiums for the program from beneficiaries' Social Security checks. Months before, however, Gray and the SSA's other deputy commissioners had gathered at their quarterly meeting to review modernization plans, and to discuss the consensus that was developing in Congress around the bill.

Before the legislation passed, Gray says his office determined the resources available and the costs of various IT options being considered. "That enabled us to look at our own business processes, at how we would carry out the new program, and determine what kinds of systems changes we needed to support those business processes."

Gray again called upon Lockheed Martin, which devoted 150 staff workers to help the SSA develop processes for calculating premiums for beneficiaries with high incomes, and for withholding fees from their Social Security checks. SSA will also determine the eligibility of low-income seniors for drug benefit subsidies.

One of the ways in which the SSA was able to respond quickly when the bill was passed was that they decided not to develop new systems or architecture to meet the goal for the Medicare prescription drug plan. "Our time frame was too short," Gray says. "We didn't want to start experimenting with something new." The agency is using applications that it has found to work, such as IBM's WebSphere infrastructure for its Internet application for the Medicare prescription plan. The one new application SSA is using is an IBM electronic folder as part of a claims file record management system. The document management architecture will allow the agency to create and access electronic images, and also to control the retention time. Gray says this is the first SSA program that is never going to be based on paper files. "It's going to be kept in electronic form from the beginning."

Should private accounts become the new standard in Social Security savings, many experts feel that the SSA will again turn to an outside agency to set up the new system. DiPentima, who served as deputy commissioner of systems until 1995, believes strongly that lawmakers should outsource the maintenance of those private accounts—to a Fidelity, or a Vanguard, or a TIAA-CREF—and set rules for how often these private tax funds could be traded. "You wouldn't want everybody with $20 worth of taxes to get on like it's eTrade and trade every day," he says.


"Elements of Systems Modernization for the Social Security Administration"

National Academics Press

"The 2004 OASDI Trustee Report"

Faced with the federal government's history of botching IT projects thanks to escalating costs, or because of technology that becomes outdated, SSA officials say that they have established disciplined systems management processes that will help their programs achieve success. And they have come a long way since being chastised by Congress in the early 1980s. In 2005, the agency was recognized by the White House for achieving the highest marks in e-government programs. Gray adds that both the disability automation and the Medicare prescription drug plan receive oversight from the highest levels of the agency.

For now, Bjorklund says there is no need for the SSA to make any major immediate IT changes. Congress is not yet considering any bills calling for private accounts; the President has yet to outline a specific proposal; and public opinion polls are starting to show that Americans are growing weary of calls for reform.

If a Social Security reform measure gains steam in Congress, Gray says his agency will be ready to modify IT systems to help put private accounts in place. "Not only do we direct how people develop systems, and make sure we understand those and understand the scope of the project," he adds, "but we've tried to make sure we put IT budget and [full-time employee] resources behind these projects."

Elizabeth Wasserman is a Washington D.C.- based writer. Formerly, she was Washington Bureau Chief for The Industry Standard.