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entitled 'Social Security Administration: Subcommittee Questions 
Concerning Efforts to Automate the Disability Claims Process' which was 
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September 5, 2003:

The Honorable E. Clay Shaw, Jr. Chairman, Subcommittee on Social 
Security Committee on Ways and Means House of Representatives:

Subject: Social Security Administration: Subcommittee Questions 
Concerning Efforts to Automate the Disability Claims Process:

Dear Mr. Chairman:

This letter responds to your August 12, 2003, request that we provide 
answers to questions relating to our July 24, 2003, testimony.[Footnote 
1] In that testimony, we discussed the risks that the Social Security 
Administration (SSA) faces in its efforts to automate its disability 
claims process. Your questions, along with our responses, follow.

1. The Social Security Administration (SSA) has indicated that the 
agency could potentially save $1 billion, at an estimated cost of 
approximately $900 million, by implementing an electronic disability 
folder. In your opinion, does the $900 million cost of this project 
appear to be a reasonable estimate? Is the $1 billion in savings a 
reasonable estimate? Is there a possibility that the cost of the 
project could balloon?

Our work to date on SSA's February 2003 cost-benefit analysis raises 
concerns that SSA may have underestimated its accelerated electronic 
disability (AeDib) system costs. For example, the cost-benefit analysis 
did not fully consider the costs associated with certain critical 
information technology infrastructure elements supporting the 
nationwide rollout, such as scanning and imaging by the outsourced 
vendor, telecommunications, disaster recovery, and on-site retention 
and destruction of source documents, such as medical records. Because 
SSA has not yet fully estimated these costs, we are unclear about their 
magnitude.

We are also concerned that the corresponding benefits cited in SSA's 
cost-benefit analysis may be overstated. Specifically, our review found 
that certain assumptions used in the analysis could be too optimistic. 
For example, SSA estimated benefits based on an assumption that state 
Disability Determination Services (DDS) would receive 30 percent of all 
medical evidence in electronic form by 2004. However, state DDS 
officials with whom we spoke contend that their offices currently 
receive about 11 percent or less of medical evidence electronically, 
and disagree with the 30-percent assumption.

As to whether the costs of AeDib could balloon, the possibility of cost 
increases exists for any project the size and magnitude of AeDib. As 
mentioned previously, the existing estimates do not include certain 
costs, such as some costs for outsourced scanning and imaging and the 
cost of disaster recovery. Including these could add to SSA's overall 
cost estimate. Our work analyzing the costs and benefits of AeDib is 
ongoing; the final results will be included in our report to be issued 
to you later this year.

2. According to your testimony, the SSA has developed a risk management 
plan, but is still without a comprehensive assessment of risk that 
could affect the electronic disability folder. Can you explain the 
difference between the risk management plan and a comprehensive 
assessment of risks? How does their risk management plan fall short of 
what GAO recommends? Why is this plan so important?

A risk management plan provides guidance to project management teams 
and requires them to proactively identify facts and circumstances that 
could increase the probability of failing to meet project commitments, 
and take steps to prevent this from occurring.[Footnote 2] A 
comprehensive assessment of risks, which is completed according to the 
risk management plan, is the process of identifying risks with a high 
probability and cost of failure, and developing strategies for 
mitigating those risks.[Footnote 3]

Based on our work to date, we do not have concerns about SSA's risk 
management plan, which was developed in accordance with our own and 
Office of Management and Budget (OMB) guidance. However, as mentioned 
in our testimony, we were concerned that SSA had not completed a 
subsequent comprehensive risk assessment. SSA officials agreed with the 
need for a comprehensive risk assessment, and since our testimony, the 
agency has provided us with detailed risk assessments for four of the 
five AeDib projects--the Electronic Disability Collect System, the 
Document Management Architecture, a DDS systems migration and 
electronic folder interface, and Internet disability applications. SSA 
has not yet provided us with a time frame for completing the remaining 
risk assessment for its Hearings and Appeals case processing management 
system.

A risk management plan is an essential tool used to guide the 
development of a comprehensive assessment of risks and mitigation 
strategies. A comprehensive risk assessment is equally critical. Both 
tools can help SSA avoid potential problems before they manifest 
themselves in cost, schedule, and performance shortfalls.

3. The GAO has identified a number of areas where the SSA could 
improve. For instance, the agency needs to develop risk assessment 
tools and could take additional measures to involve key stakeholders in 
the systems development process. Is there any indication that the SSA 
is acting on your recommendations?

SSA has acknowledged our concerns relative to the areas of improvement 
we identified in our testimony, and has taken some action to address 
them. However, more work remains to fully address these issues.

Specifically, we expressed the need for SSA to perform a comprehensive 
risk assessment to identify project risks and establish mitigation 
strategies for them. As noted in our response to question 2, SSA 
recently provided us with detailed risk assessments for four of the 
five AeDib projects, but has not yet provided a detailed assessment of 
risks for its remaining project.

We also commented on the need for SSA to perform end-to-end testing 
prior to implementation, to ensure that the system it is developing 
will perform as intended. To date, SSA has not yet finalized its test 
and evaluation strategy. Therefore, it is unclear whether SSA intends 
to include end-to-end testing.

Finally, we commented on the need for SSA to resolve stakeholder 
concerns to ensure program acceptance and use, and take additional 
steps to consult with the medical community. SSA acknowledged the 
importance of ensuring sound relations with stakeholders and the need 
to take additional actions, where necessary, to ensure that all 
stakeholder concerns have been adequately addressed. SSA also stated 
that additional steps would be taken to keep stakeholders involved in 
the initiative, and that plans were being made for a meeting with state 
DDS representatives to discuss the AeDib initiative. However, SSA has 
not yet provided us with a copy of its communications plan for dealing 
with stakeholder issues, including its plans for consultation with the 
medical community.

As part of our ongoing work, we will continue to monitor SSA's progress 
in addressing these issues.

4. The SSA has worked 11 years now to implement an electronic 
disability folder. The automation project started in 1992 as the 
Modernized Disability System (later renamed the Reengineered Disability 
System). After this project failed in 1999, the SSA immediately began 
work on the accelerated electronic disability initiative. Why is this 
project so difficult for the agency to complete? Has the SSA learned 
from its mistakes along the way?

Software development is one of the riskiest areas of systems 
development.[Footnote 4] We have reported that SSA's software 
development efforts have been problematic and plagued with delays 
because SSA has not consistently followed sound practices in developing 
systems designed to automate its disability claims process; thus, it 
has experienced numerous software development problems over the past 11 
years. For example, in September 1996 we reported that software 
development problems had delayed the scheduled implementation of the 
Reengineered Disability System (RDS) by more than 2 years.[Footnote 5] 
An assessment of the development activity revealed a number of factors 
as having contributed to that delay, including (1) using programmers 
with insufficient experience, (2) using software development tools that 
did not perform effectively, and (3) establishing initial software 
development schedules that were too optimistic. We reported again, in 
June 1998, that SSA had encountered performance problems during its RDS 
pilot tests.[Footnote 6] In response to these performance problems, SSA 
delayed its plans for expanding the pilot to other offices, and 
obtained a contractor to independently evaluate and recommend options 
for proceeding with the initiative.

SSA's contractor reported that RDS software had defects that would 
diminish the case-processing rate at DDS sites, and that SSA had not 
been timely in addressing software defects. For example, 90 software 
problems identified by SSA staff remained unresolved for more than 120 
days. As a result, the contractor recommended that SSA discontinue the 
RDS initiative and focus on an alternative solution involving the use 
of an electronic folder to replace the paper-based case folder in the 
disability determination process.

In another example, we reported in August 2001 on weaknesses regarding 
SSA's adherence to key software development procedures for several 
projects, including its electronic disability system.[Footnote 7] We 
noted that SSA did not consistently adhere to its software development 
procedures in the areas of requirements management, software project 
planning, software quality assurance, and software configuration 
management.

In our ongoing review, we have found that SSA has taken important steps 
to mitigate past software development problems. It has generally 
addressed its contractor's recommendations aimed at automating its 
disability claims process, and has generally been applying key software 
process improvement practices to its development of AeDib projects, 
such as developing plans to manage the projects, tracking and 
overseeing the initiatives to measure progress, performing quality 
assurance reviews to determine that the project is complying with its 
policies and procedures, and performing configuration management 
activities. While continually applying these software development 
practices is no guarantee of AeDib success, these practices 
nevertheless should improve SSA's capability to develop high-quality 
software in support of AeDib, thereby avoiding mistakes experienced in 
the past.

Agency Comments and Our Evaluation:

The Commissioner of Social Security provided comments on a draft of 
this correspondence, which are reproduced in full as the attachment. In 
her comments, the Commissioner offered clarifications to our responses 
to questions 1 through 3.

Regarding question 1, the Commissioner said that we were incorrect in 
stating that SSA's cost-benefit analysis had not considered all costs 
of certain critical IT infrastructure elements supporting the 
nationwide AeDib rollout, and that, in fact, SSA had included the costs 
of scanning and imaging by the outside vendor in its estimates.

We have revised our response to clarify that SSA's cost-benefit 
analysis considered some, but not all, of the key cost elements that 
could affect the initiative. SSA's February 2003 cost-benefit analysis 
noted, for example, that the agency had not considered as part of its 
scanning and imaging functions, the keying in of indexing information 
(for case folder identification) by the outsourced scanning vendor, 
although this is deemed critical to the implementation of SSA's 
document management capability. Further, during our review, SSA 
officials told us that certain costs associated with the scanning and 
imaging functions were not expected to be identified until the agency 
performed its pilot tests (now ongoing) for its document management 
architecture.

The Commissioner added that other AeDib-related costs associated with 
telecommunications, disaster recovery, and on-site retention and 
destruction of source documents should more appropriately be accounted 
for as part of the agency's ongoing operations, and therefore were 
covered in the agency's regular infrastructure costs, rather than the 
AeDib cost estimates. However, we disagree. OMB guidance states that 
cost-benefit analyses should include comprehensive estimates of all 
direct and indirect costs associated with a project.[Footnote 8] As 
such, a sound cost-benefit analysis for AeDib will depend on SSA's 
fully considering the project-related costs for these critical elements 
supporting the development, operation, and maintenance of the 
electronic disability system.

Further, the Commissioner expressed concern about the example that we 
provided in noting that SSA's estimate of AeDib benefits could be 
overstated. Based on our interviews with SSA and state DDS 
representatives, our response highlighted the possibility that AeDib 
benefits could be overstated because of differences in SSA's and the 
DDSs' assumptions about the extent that medical evidence may be 
received electronically. We are continuing to assess SSA's cost-benefit 
analysis as part of our ongoing review.

In commenting on our response to question 2, the Commissioner stated 
that SSA had expected to receive draft risk assessments by June 30, 
2003, and either planned to or already had shared some of its risk 
assessments with us. We have revised our response to reflect that SSA 
recently provided us with detailed risk assessments for four of the 
five AeDib projects.

Finally, regarding question 3, the Commissioner stated that SSA had 
provided us with information concerning stakeholder issues and the 
agency's plans for consulting with the medical community. She further 
noted that outreach to the medical community was occurring. We are 
encouraged that SSA is taking steps to ensure productive communications 
with its key stakeholders and the medical community, and look forward 
to reviewing documented evidence of the agency's actions. To date, 
however, we have not received the additional information on SSA's plans 
for addressing stakeholder issues or consulting with the medical 
community, that the Commissioner mentions in her letter.

:

In responding to these questions, we relied on past work and our 
ongoing review of SSA's efforts to automate its disability claims 
process. We discussed our assessment of the cost-benefit analysis with 
SSA's Office of Disability Programs, Office of Systems, and Office of 
the Chief Information Officer, and with the supporting contractor and 
key stakeholders. We reviewed and analyzed the most recent agency 
documents associated with SSA's risk management efforts. We also 
discussed with officials in the Office of Disability Programs SSA's 
efforts to develop a strategy for resolving stakeholder concerns, as 
well as a more aggressive approach for consultation with the medical 
community. Finally, we reviewed and analyzed SSA's software process 
improvement documentation, as well as past assessments of the agency's 
failed attempts to automate its disability claims process to determine 
lessons learned, and whether SSA is avoiding past software development 
problems. We conducted our work in accordance with generally accepted 
government auditing standards, during August 2003.

We are sending copies of this letter to the Honorable Jo Anne B. 
Barnhart, Commissioner of Social Security, and other interested 
parties. Copies will also be available at our Web site at [Hyperlink, 
www.gao.gov.] w [Hyperlink, http://www.gao.gov] ww.gao.gov.

If you have any questions on matters discussed in this letter, please 
contact me at (202) 512-6240 or Valerie Melvin, Assistant Director, at 
(202) 512-6304. We can also be reached by E-mail at [Hyperlink, 
koontzl@gao.gov] k [Hyperlink, koontzl@gao.gov] oontzl@gao.gov and 
[Hyperlink, melvinv@gao.gov] m [Hyperlink, melvinv@gao.gov] 
elvinv@gao.gov, respectively. Key contributors to this correspondence 
include Michael A. Alexander, Tonia B. Brown, and Mary J. Dorsey.

Sincerely yours, 

Linda D. Koontz 

Director, Information Management Issues:

Signed by Linda D. Koontz: 

[End of section]

Enclosure: Comments from Social Security:

SOCIAL SECURITY:

The Commissioner:

September 3, 2003:

Ms. Linda D. Koontz:

Director, Information Management Issues United States General 
Accounting Office 441 G Street N. W.

Washington, D.C 20548:

Dear Ms. Koontz:

This responds to your letter dated August 27, 2003, requesting our 
comments on your proposed correspondence entitled Social Security 
Administration: Subcommittee Questions Concerning Efforts to Automate 
the Disability Claims Process (GAO-03-1113R). I appreciate the 
opportunity to review and comment on the correspondence before it is 
issued. We have the following comments and clarifications on your 
proposed responses to questions 1 through 3.

Question 1:

In your draft note to Congressman Shaw you indicate that in the 
February 2003 cost-benefit analysis (CBA) the Social Security 
Administration (SSA) "...did not consider all costs of certain critical 
information technology infrastructure elements supporting the 
nationwide rollout, such as scanning and imaging by the outsource 
vendor, telecommunications, disaster recovery and on-site retention and 
destruction of source documents, such as medical records." This 
statement is incorrect, since we did in fact include the costs of 
scanning and imaging by the outsource vendor in the estimated costs for 
the accelerated electronic disability system (AeDib). Pages 8 and 9 of 
the CBA (Version 3.1 dated February 3, 2003) list these costs among the 
significant cost impacts for AeDib, with a pie chart showing outsource 
scanning costs as 14 percent of the total life cycle costs. We consider 
the other costs to be part of our ongoing operations, rather than 
specifically related to AeDib, and these costs are more appropriately 
covered in our regular infrastructure costs.

Your draft response also indicates that the benefits of AeDib may have 
been overestimated because the State Disability Determination Services 
(DDS) you contacted disagree with the estimate that 30 percent of all 
medical evidence will be received in electronic form by 2004. During 
the fall of 2002, we held several discussions with the DDS Systems 
Committee and the National Council of Disability Determination 
Directors leadership relative to business process and technological 
issues. One of the central topics of these discussions was how to 
gather 
information that would assist in building the electronic medical 
evidence (EME) estimates. We derived the 30 percent estimate based on 
these discussions and information received from the DDS community. This 
is a national estimate for fiscal year 2004, and we would expect that 
this level would vary from location to location. Included in the 30 
percent estimate is medical evidence received through both direct 
electronic submissions as well as through fax submittals.

Question 2:

As stated in your draft note, we have provided the comprehensive risk 
assessments for two of the five parts of AeDib. We had advised General 
Accounting Office (GAO) staff that we were to receive the draft risk 
assessments from our contractor by June 30, 2003. We then needed to 
conduct an internal review of these documents. We shared two additional 
risk assessments with you on August 28, 2003. The last one will be sent 
after we complete our internal review.

Question 3:

Our comments on Question 2 also apply to the response to Question 3. 
Additionally, we recently provided GAO staff with information regarding 
stakeholder issues and our plans for consultation with the medical 
community. Our senior executive leadership meets weekly to address 
AeDib issues, including those raised by all entities, internal as well 
as external.

Additionally, our outreach to the medical community is handled through 
our public affairs and professional relations personnel in the DDSs and 
in SSA's central office, Regional Offices, and Field Offices. The 
issues of EME and processing disability claims in an electronic 
environment are being institutionalized throughout SSA. They have been 
apart of, and will continue to be included in, our contacts and 
communication vehicles that are already in place, including 
communication plans. Furthermore, I have undertaken special efforts to 
communicate with the major medical associations by holding and 
personally chairing a series of meetings to address their issues. In 
addition, my staff has had a series of productive meetings with staff 
at the Department of Health and Human Services on these issues.

If I may be of further assistance, please do not hesitate to contact me 
or have your staff contact Mr. Robert M. Wilson, Deputy Commissioner 
for Legislation and Congressional Affairs, at (202) 358-6030.

Sincerely,

Jo Anne B. Barnhart:

Signed by Jo Anne B. Barnhart:

[End of section]

(310386):


FOOTNOTES

[1] U.S. General Accounting Office, Electronic Disability Claims 
Processing: Social Security Administration's Accelerated Strategy 
Faces Significant Risks, GAO-03-984T (Washington, D.C.: July 24, 2003).

[2] U.S. General Accounting Office, Information Technology: Greater Use 
of Best Practices Can Reduce Risks in Acquiring Defense Health Care 
System, GAO-02-345 (Washington, D.C.: September 26, 2002).

[3] Social Security Administration, SSA AeDib Risk Management Plan, 
Version 2.01 (Baltimore, MD, January 21, 2003).

[4] U.S. General Accounting Office, Social Security Administration: 
Information Technology Challenges Facing the Commissioner, GAO/T-AIMD-
98-109 (Washington, D.C.: March 12, 1998).

[5] U.S. General Accounting Office, Social Security Administration: 
Effective Leadership Needed to Meet Daunting Challenges, GAO/HEHS-96-
196 (Washington, D.C.: September 12, 1996).

[6] U.S. General Accounting Office, Social Security Administration: 
Technical and Performance Challenges Threaten Progress of 
Modernization, GAO/AIMD-98-136 (Washington, D.C.: June 19, 1998).

[7] U.S. General Accounting Office, Information Technology Management: 
Social Security Administration Practices Can Be Improved, GAO-01-961 
(Washington, D.C.: August 21, 2001).

[8] Office of Management and Budget Circular No. A-94 Revised 
(Transmittal Memo No. 64), Guidelines and Discount Rates for Benefit-
Cost Analysis of Federal Programs, October 29, 1992.